SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K/A-2

                     AMENDMENT NO. 2 TO REPORT ON 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, 2002

[ ]  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.)

   535 Migeon Avenue, Torrington, CT                               06790
(Address of Principal Executive Offices)                         (Zip Code)

                                 (860) 489-9254
              (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 16, 2002, based on a market price of $.25 per share,
was $611,498.

     The number of shares of Common  Stock  outstanding  on August 16,  2002 was
12,718,877.

     Documents incorporated by reference:
     None

                                       1
<PAGE>
                             AMENDMENTS TO FORM 10-K

     This  Amendment No. 2 to Report on Form 10-K  ("Amendment  No. 2") is being
filed for the purposes of:

     (A) supplementing  certain  information  contained in Part II of the Annual
Report on Form 10-K for registrant's  fiscal year ended May 31, 2002, filed with
the Securities and Exchange Commission on August 22, 2002, as previously amended
by  Amendment  No.  1  thereto  (10-K/A-1)(Amendment  No.  1")  filed  with  the
Securities and Exchange Commission on September 20, 2002, specifically,  in Item
7,  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations.  Notes to the Consolidated Financial Statements contained in Item 8,
Financial Statements and Supplementary Data, Part II and Item 13 of Part III and
on the  signature  page and exhibit  index,  all in response to comment  letters
received from the Securities and Exchange Commission; and

     B. amending and restating in its entirety the Report on 10-K, as amended by
Amendment No. 1 and this Amendment No. 2.

(A) The Report on Form 10-K for the  Registrant's  year ended May 31,  2002,  as
previously amended by Amendment No. 1, is hereby further amended specifically as
follows:

ITEM 6. SELECTED FINANCIAL DATA

     The table  appearing  under  this Item is  amended  for the 2002  period as
follows:  (a) The Income  (loss)  from  continuing  operations  is changed  from
(5,783) to (6,864) and (b) the Income  (loss)  from  continuing  operations  per
share is changed from (0.30) to (1.06).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

     (a) Under the  heading  "Fiscal  Year Ended May 31,  2002  Compared  to the
Fiscal Year Ended May 31, 2001",  in the section  entitled "Cost of Sales",  the
following language is hereby added as new sentences 5 through 8:

     "Historically the Company builds and purchases inventory in anticipation of
forecasted sales for the March through July  time-period.  As the spring selling
season unfolded the Company  received  information  from several OEM's that they
would be delaying,  reducing or not issuing  purchase  orders due to uncertainty
with the  softening  economy.  The impact of this delay would not be fully known
until after the  Company's  year end, but before the  issuance of the  Company's
annual  financial  statements.  Sales for the spring and early summer season did
not  materialize  and  resulted  in the need  for a  significant  write  down of
inventory to its net realizable value as of May 31, 2002 year end."

     (b) The paragraph captioned  "Interest Expense" is amended as follows:  (a)
The amount of $1.0  million is changed to $2.0  million;  (b) $0.1 is changed to
1.1; (c) $0.2 million is changed to $0.3 million; and (d) the following language
is  added  immediately  thereafter:   ",  the  recognized  intrinsic  beneficial
conversion feature of a converted Subordinated Note of $0.9 million".

     (c)  The  following  section  entitled  "Cumulative  change  in  accounting
principle" is hereby added as follows:

     "CUMULATIVE  CHANGE IN ACCOUNTING  PRINCIPLE.  During fiscal year 2002, the
Company  adopted  Financial  Accounting  Standards  Board  "FASB"  Statement  of
Financial  Accounting  Standards "SFAS" No. 142,  "Goodwill and Other Intangible
Assets" This  adoption  resulted in an  impairment  in  accordance  with the new
guidance of SFAS No. 142. Under this guidance a fair value measurement  approach
of the grip  segment  was used,  including  applying  a market  multiple  to the
segment's projected cash flows. Professionals in the investment banking industry
were  consulted to validate  the  assumptions  used in the fair value  estimate.
Based on this analysis,  a fair value of $2,600,000,  including implied goodwill
of $1,250,000,  was calculated for the segment.  The implied  goodwill was lower
than the then recorded unamortized balance of goodwill of $7,187,000. Therefore,
during the year ended May 31, 2002, an  impairment  of  $5,937,000  was recorded
which is reflected as the cumulative effect of a change in accounting  principle
in the  accompanying  consolidated  statement  of  operations  for the year then
ended.  There was no income tax effect  applicable  to this change in accounting
principle."

     (d) In the fourth paragraph under Liquidity and Capital Resources,  (i) the
amount of $433,000 is changed to $322,000 and (ii) the following is added at the
end of such paragraph: "See note 9 to the consolidated financial statements"

                                       2
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     (a) The  Report  of Ernst & Young  is  hereby  amended  by (i)  adding  the
following  as the last  paragraph  thereof:

     "As described in Note 20 the Company restated its financial  statements for
2002 to revise the  accounting  for the amount of  interest  expense  recognized
associated with a beneficial conversion feature,"

     (ii) adding after the date of August 16, 2002 the following language.

     ", except for note 20 as to which the date is December 2, 2002"

     (b) The  Consolidated  Balance  Sheets are hereby  amended by changing  the
Additional  paid-in  capital  from  $15,491 to $16,562 and  Accumulated  deficit
amounts from $(11,848) to $(12,919) as of May 31, 2002 (dollars in thousands).

     (c) The  Consolidated  Statements  of  Operations  are  hereby  amended  as
follows:  (i) (a) the line item "Non-cash  accretion of discount on subordinated
debt" is changed to "Non-cash  interest  related to subordinated  debt", (b) the
amount  shown  therefor  is  changed  from 179 to  1,250,  and (c) the  subtotal
immediately  thereafter  is changed  from 965 to 2,037;  (ii)(Loss)  income from
continuing operations before provision for income taxes under the 2002 column is
changed from  (4,989) to (6,060);  (iii) the amount shown in the 2002 column for
"(Loss) income before  cumulative  effect of change in accounting  principle" is
changed  from  (5,793) to (6,864);  (iv) the amount shown in the 2002 column for
net (loss)  income is changed  from  $(11,730) to  $(12,801);  (v) the per share
amount shown in the 2002 column for (Loss)  income before  cumulative  affect of
change in  accounting  principle is changed from (0.90) to (1.06);  and (vi) the
per share amount shown in the 2002 column for Net (loss)  income is changed from
(1.82) to (1.98).

     (d)  Certain  amounts  in the  May  31,  2002  period  of the  Consolidated
Statements of Stockholders'  Equity and  Comprehensive  Income (Loss) are hereby
amended as follows:  (i) Grant of warrants under the Additional  Paid-In Capital
column is  changed  from 433 to 322 and the total for that line item is  changed
from 433 to 322;  (ii)  Conversion  of  subordinated  debt to  equity  under the
Additional Paid in Capital column is changed from 1,018 to 1,272,  and the total
for that  line  item is  changed  from  1,023 to  1,277;  (iii) a line  item for
Beneficial  Conversion feature is added after Conversion of subordinated debt to
equity and the amount of 928 is added to the columns  Additional Paid-In Capital
and  Total;(iv)  the number (58) is  inserted in the Total  column for line item
Minimum pension liability  adjustment;  (v) Net loss under the Retained Earnings
(Accumulated Deficit) column is changed from (11,730) to (12,801), and the total
for that line item is changed  from  (11,730)  to  (12,801);  (vi) the line item
total under the  Comprehensive  Income (loss) column is changed from (11,788) to
(12,859);  and (vii) the column totals for Additional Paid-in Capital is changed
to $16,562, Retained Earnings (Accumulated Deficit) is changed to $(12,919), and
Total is changed to $3,572.

     (e) The  Consolidated  Statements  of Cash Flows are  amended  for the year
ended May 31, 2002, as follows: (i) the Net (loss) income amount is changed from
$(11,730) to $(12,801); (ii) the line item Accretion of discount on subordinated
debt is changed to "Interest"  and the amount of 179 is changed to 1,250;  (iii)
the number for the line item  Conversion  of  subordinated  debt is changed from
1,023 to  1,277;  and (iv) the  following  line  items  and  amounts  are  added
immediately below:

Grant of warrant                         $322         $ --         $ --

Beneficial conversion feature            $928         $ --         $ --

     (f) Note 2 to Notes to  Consolidated  Statements,  Summary  of  Significant
Accounting Policies, is hereby amended as follows:

     (i) In the section entitled "Inventories",  the following language is added
as a new third sentence:

"These  charges are the result of reducing the carrying value of down graded and
out-of-spec  inventory  that  normally  sell  during the  fourth  quarter of the
Company's fiscal year."

     (ii) The section entitled "Goodwill" is hereby amended and restated to read
in its  entirety as follows in order to include,  among  other  things,  the pro
forma  disclosures  required by paragraph 61 of SFAS No. 142 for the fiscal year
ended May 31, 2000 and reads as follows:

"GOODWILL

In June 2001, the Financial  Accounting  Standards Board "FASB" issued Statement
of Financial Accounting Standards "SFAS" No. 142, "Goodwill and Other Intangible
Assets"  which 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  associated with
the goodwill.  The Company elected to early adopt SFAS No. 142 during its fiscal
quarter ended August 31, 2001. Therefore, amortization of goodwill was suspended
effective  June 1, 2001. The following  table  presents the pro-forma  financial
results on a basis  consistent  with the new accounting  principle for the years
ended May 31, 2000 and 2001, respectively (dollars in thousands except per share
amounts):

                                       3
<PAGE>
                                                            Year ended May 31,
                                                          ----------------------
                                                            2001         2000
                                                          ---------    ---------
     Reported net income (loss)                           $    (584)   $     870
     Add back amortization of goodwill                          442          486
                                                          ---------    ---------
     Adjusted net  income (loss)                          $    (142)   $   1,356
                                                          =========    =========
     Reported basic and diluted net income
     (loss) per share                                     $   (0.10)   $    0.15

     Add back effect of goodwill amortization
     per share                                                 0.08         0.09
                                                          ---------    ---------
     Adjusted basic and diluted net income (loss)
     per share                                            $   (0.02)   $    0.24
                                                          =========    =========

Goodwill  of  $10,418,000   had  been  recorded  in  conjunction   with  the  RG
Acquisition.  This  balance  was  subsequently  reduced  by  $1,392,000  due  to
utilization  of  pre-acquisition  net  operating tax loss  carryforwards  and by
amortization expense totaling $1,839,000. Goodwill was assigned to the Company's
golf club grip business segment. At the end of fiscal year 2001 the Company used
an undiscounted cash flow approach  previously allowed under APB 17 to determine
the potential  impairment.  This  approach,  which took into account  production
problems caused by an outsourcing  grip contractor at that time,  indicated that
the carrying value of goodwill was not impaired. As such, under this methodology
management believes that goodwill was not impaired.

During fiscal year 2002,  goodwill was again tested for impairment in accordance
with  the new  guidance  of SFAS No.  142.  Under  this  guidance  a fair  value
measurement  approach of the grip segment was used,  including applying a market
multiple to the segment's projected cash flows.  Professionals in the investment
banking  industry were  consulted to validate the  assumptions  used in the fair
value estimate.  Based on this analysis,  a fair value of $2,600,000,  including
implied  goodwill of $1,250,000,  was  calculated  for the segment.  The implied
goodwill  was lower than the then  recorded  unamortized  balance of goodwill of
$7,187,000.  Therefore,  during the year ended May 31, 2002,  an  impairment  of
$5,937,000 was recorded which is reflected as the cumulative  effect of a change
in accounting principle in the accompanying consolidated statement of operations
for the year then  ended.  There was no income  tax  effect  applicable  to this
change in accounting principle.

The assumptions  used to establish fair value under SFAS No. 142, was consistent
with those used under APB 17,  specifically  production  problems  caused by our
outsourcing  grip contractor were considered in our cash flow  assumptions.  The
recorded  impairment  loss is the result of a change in the evaluation  criteria
for  goodwill  from an  undiscounted  cash flow  approach  which was  previously
utilized under the guidance in Accounting Principles Board Opinion No. 17 to the
fair value approach  stipulated in SFAS No. 142. The following  table provides a
reconciliation  of goodwill  during the period from May 31, 2001 to May 31, 2002
(in thousands):

     Balance as of May 31, 2001                                         $ 7,187
     Impairment loss recorded                                            (5,937)
                                                                        -------
     Balance as of May 31, 2002                                         $ 1,250
                                                                        =======

     (g).  The last two  paragraphs  of Note 4  entitled  "Property,  Plant  and
Equipment" are hereby amended and restated to read in their entirety as follows:

     "During  the years ended May 31,  2002 and 2001,  the  Company  recorded an
impairment write-down of $133,000 and $360,000,  respectively, on equipment held
for  sale,  which  represents  rubber  injection  presses   previously  used  to
manufacture the Company's golf club grips and graphite  shafts.  The Company was
unable to resolve  quality issues in connection  with an outsourcing  contractor
who was leasing rubber injection  presses from the Company for the production of
golf club grips prior to fiscal 2001. This equipment was  subsequently  returned
to the Company and held for sale.  In fiscal year 2001 the Company  recorded the
first  impairment  write down when it become apparent that the Company would not
be able to recover the book value of these assets.  The Company  continued to be
unable to find a buyer for the equipment  during fiscal year 2002. In April 2002
the  Company  obtained a  valuation  of the  rubber  injection  presses  from an
independent  appraiser which resulted in an additional  impairment write-down of
$133,000.  Also  during the year ended May 31,  2001,  the  Company  recorded an

                                       4
<PAGE>
expense of $117,000 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 a component of nonrecurring  expenses in the
statements of operations for the fiscal year ended May 31, 2002 and 2001."

     (h). Note 8 entitled  "Bank  Borrowing  Agreements"  is hereby  amended and
restated to read in its entirety as follows:

"8. BANK BORROWING AGREEMENTS

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, limit the repayment of subordinated debt, and require the maintenance
of minimum  monthly and quarterly  earnings and quarterly debt service  coverage
ratios,  as defined.  In August 2001 and February  2002,  the Company was not in
compliance  with  certain  financial  loan  covenants,  but  was  successful  in
obtaining the necessary  waivers and amendments to its credit facility to remedy
such  defaults.  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.

On November  13, 2001 and April 10,  2002,  the Company  amended its bank credit
facilities with its lender.  In conjunction with these  amendments,  the Company
received an increase in the amounts  available and an extension of the repayment
dates of its seasonal over-advance  facility, the availability to borrow against
certain foreign  receivables,  waivers of various  financial  covenant  defaults
which existed  through  February 2002 and the  restatement of certain  financial
loan  covenants in future  periods.  The Company's  annual  interest  rates were
increased  by 1% on  all  borrowings  under  both  credit  facilities  effective
November 13, 2001 and increased by an additional 1% on all borrowings under both
credit facilities effective April 10, 2002.

In connection  with the April 10, 2002  amendments to the bank credit  facility,
the Johnston  Family Living Trust u/a dated April 11, 1994 (Johnston  Trust),  a
related party entity,  agreed to guarantee up to $400,000 of amounts  payable to
the bank,  which are  advanced  under the  seasonal  over-advance  facility.  In
consideration  for  providing  this  guarantee and another,  the Johnston  Trust
received a warrant to  purchase  145,200  shares of RP stock at a price of $0.25
per share.  The warrant may be exercised for a ten year period.  Using the Black
Scholes  option  pricing  model the  warrants  granted  for the  guarantee  were
determined to have no value.

As of August 16,  2002,  the Company  refinanced  its bank debt.  In  connection
therewith  the  Company  executed an Amended and  Restated  Credit and  Security
Agreement  (the  Agreement).  The Agreement  includes  lines-of  credit and term
loans. The  lines-of-credit  are subject to renewal in July 2003. The term loans
mature in September 2004. The effects of the refinancing have been retroactively
applied to May 31, 2002. A summary of long-term debt follows:

                                                                  MAY 31,
                                                            -------------------
                                                              2002        2001
                                                            -------     -------
       Lines-of-credit                                      $ 4,605     $ 4,520
       Term loans                                             2,475       3,385
                                                            -------     -------
                                                              7,080       8,473

       Current portion                                       (1,272)       (768)
                                                            -------     -------
       Total long-term debt                                 $ 5,808     $ 7,705
                                                            =======     =======

Scheduled annual maturities of debt for the years ending May 31, 2003, 2004, and
2005 are $1,272,000, $4,617,000 and $1,191,000, respectively.

Under  the  Agreement  a  maximum  of  $6,500,000  may  be  borrowed  under  the
lines-of-credit  using a formula based on accounts  receivable,  inventories and
letters of credit.  Amounts borrowed under the lines-of-credit  bear interest at

                                       5
<PAGE>
rates  ranging  from prime to prime plus 3.0%.  The term loans bear  interest at
rates  ranging  from prime plus 3.25% to prime  plus  3.75%.  Substantially  all
assets are pledged as collateral  for borrowings  under the  Agreement.  Related
parties provided the letters of credit.  The Agreement also provides for certain
financial covenants relating to the amounts of net losses and net assets.

As of May 31, 2002 and 2001, the carrying value of debt approximates fair market
value."

     (i). Note 9, entitled "Subordinated Debt" is hereby amended and restated to
read in its entirety as follows:

"9. SUBORDINATED DEBT

On October 26, 2001,  the Company  entered into a financing  agreement  with The
Johnston Family Charitable Foundation ("Johnston  Foundation"),  a related party
as the  founders  of the  Johnston  Foundation  are  major  stockholders  of the
Company, for a subordinated  promissory note ("Subordinated Note") in the amount
of $1,250,000.  Funding of $1,000,000 of the  Subordinated  Note was received on
October 26, 2001, and the remaining  $250,000 was received on December 14, 2001.
The interest rate on the Subordinated  Note was 13%. The  Subordinated  Note was
due in full on October 26, 2002 and was  subordinated to both the FMP an RG bank
credit facilities.  Simultaneously  with the initial funding of the Subordinated
Note,  the  Johnston  Foundation  received a warrant to  purchase  up to 300,000
shares of RP common stock at a price of $0.25 per share. An estimated fair value
of $322,000 was assigned to the warrant which was immediately  exercisable for a
ten-year  period.  Additionally,  in the event of default by the  Company on the
Subordinated  Note,  the  Johnston  Foundation  had an  option  to  convert  the
Subordinated  Note into RP common stock at an exchange  ratio of $0.25 per share
with respect to any  outstanding  principal  and accrued  interest  that was not
repaid in full. The terms of the financing  agreement were ratified at a special
meeting of  stockholders  on January 28, 2002. On February 1, 2002, the Johnston
Foundation exercised a warrant to purchase 147,808 shares of RP common stock for
a total purchase price of $37,000.

In February 2002, the Company was not in compliance with certain  financial bank
loan covenants that resulted in the Company defaulting on the Subordinated Note.
As a result of this default and in connection  with the April 10, 2002 amendment
to its bank credit  facilities  the bank  provided  that as a  condition  to the
execution by the bank of the  amendments,  the Johnston  Foundation  convert its
$1,250,000  Subordinated Note and the outstanding interest accrued through March
31,  2002  into RP  common  stock.  On April 10,  2002 the  Johnston  Foundation
converted the $1,250,000  Subordinated Note and accrued interest of $28,493 into
5,113,972 shares of RP common stock.

As referred to above, the beneficial conversion feature of the Subordinated Note
was   contingent.   Its  intrinsic  value  measured  at  October  26,  2001  was
approximately  $6,750,000.  Since the intrinsic  value  exceeded the $928,000 of
allocated  proceeds  from the  issuance  of the  Subordinated  Note,  the amount
assigned to the  beneficial  conversion  feature was limited to $928,000 and was
recognized  upon  conversion as interest  expense in accordance  with EITF 98-5,
ACCOUNTING FOR CONVERTIBLE  SECURITIES WITH  BENEFICIAL  CONVERSION  FEATURES OR
CONTINGENTLY  ADJUSTABLE CONVERSION RATIOS and EITF 00-27,  APPLICATION OF ISSUE
98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS.

On February 28, 2002 the Company  completed a private  placement of subordinated
promissory notes (the Additional  Subordinated  Notes) in the amount of $425,000
with  certain  members  of the  Board  of  Directors  of  the  Company  or  such
individuals'  affiliated entities. Of this amount, the Company received $275,000
in February  2002 and  $150,000  was  received  in March 2002.  These notes bear
interest at 13% and are due in full on October 26, 2002 and are  subordinate  to
both  the FMP and RG bank  credit  facilities.  The  holders  of the  Additional
Subordinated  Notes also  received  warrants  to purchase  102,000  shares of RP
common stock at a price of $0.25 per share.  The warrants may be exercised for a
ten-year period. Additionally,  the holders of the Additional Subordinated Notes
have an option to convert these notes into RP common stock at an exchange  ratio
of $0.25 per share.

Using the Black Scholes  option-pricing model warrants granted to the holders of
the Additional  Subordinated Notes were deemed to have no value. On February 28,
2002, the commitment  date of the  Additional  Subordinated  Notes the Company's
common  Stock  had a fair  value of $0.20 per  share,  as such,  the  conversion
feature was also deemed to have no value.

                                       6
<PAGE>
In connection with the August 16, 2002 refinancing,  the Additional Subordinated
Notes and accrued  interest of $16,070 were converted  into 1,764,280  shares of
common  stock.   Accordingly,   the  Additional  Subordinated  Notes  have  been
classified as long-term debt as of May 31, 2002."

     (j) The amounts in the 2002  column in the last table under Note 11,  Stock
Option  Plans and  Warrants,  are changed to  (12,801),  (12,947),  (1.98),  and
(2.01).

     (k) The table under Note 16,  Information  on Segments,  for the year ended
May 31, 2002 is amended by changing the amounts  shown for  Interest  expense in
the  Unallocated  and  Total  columns  from  179 to  1,250  and  966  to  2,037,
respectively.

     (l) The table under Note 16,  Information  on Segments is hereby amended to
revise the amounts shown under Operating  income (loss) and Interest  expense to
read in its entirety as follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED MAY 31, 2000
                                                 ---------------------------------------------------
                                                 GOLF CLUB     GOLF CLUB
                                                   SHAFTS        GRIPS      UNALLOCATED      TOTAL
                                                 ---------     ---------    -----------    ---------
<S>                                              <C>           <C>          <C>            <C>
Net sales                                        $  25,559     $   4,540     $             $  30,099
Operating income (loss)                             (2,004)          141                      (1,863)
Depreciation and amortization                          384           774                       1,158
Interest expense                                       575            69                         644

Total assets for reportable segments             $  13,488     $  17,475                   $  30,963
Assets of discontinued operations                                                                 43
Elimination of investment in subsidiary                                                       (6,064)
                                                                                           ---------
Consolidated total assets                                                                  $  24,942
                                                                                           =========
</TABLE>

     (m) The first  table under Note 19,  Quarterly  Financial  Data,  is hereby
amended as follows:  (i) for the line item,  Net loss,  the amount in the fourth
quarter  column has been changed from (1,837) to (2,908) and the line item total
is changed  from  (11,730) to  (12,801);  and (ii) for the line item,  Basic and
diluted - Net loss,  the amount in the  fourth  quarter  column is changed  from
(0.08) to (0.24) and the line item total is changed from (1.82) to (1.98).

     (n) A new Note 20,  Subsequent  Event - Correction of Error is hereby added
immediately following Note 19 to read as follows:

"20. REVISION FOR BENEFICIAL CONVERSION FEATURE

The Company  restated its previously  filed  financial  statements to revise its
accounting for the  Subordinated  Note that was converted  during the year ended
May 31, 2002 (see note 9). In connection therewith,  additional interest expense
of $1,071,000 was recognized,  including  $928,000  applicable to the beneficial
conversion feature of the Subordinated Note and $143,000 of unamortized discount
associated with the detached warrants,  in accordance with EITF 98-5, ACCOUNTING
FOR CONVERTIBLE  SECURITIES WITH BENEFICIAL  CONVERSION FEATURES OR CONTINGENTLY
ADJUSTABLE  CONVERSION  RATIOS  and EITF  00-27,  APPLICATION  OF ISSUE  98-5 TO
CERTAIN CONVERTIBLE  INSTRUMENTS.  As such, the net loss previously reported for
the year ended May 31, 2002 of  $(11,730,000) or $(1.82) per share was increased
to $(12,801,000) or $(1.95) per share.


     (o)  Schedule II is hereby and restated in its entirety to read as follows,
adding  information for the year ended May 31, 2001 under the heading "Allowance
for slow-moving and obsolete inventories":

                                       7
<PAGE>
                     "ROYAL PRECISION, INC. AND SUBSIDIARIES

                                   SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                 FOR THE YEARS ENDED MAY 31, 2002, 2001 AND 2000
                             (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, 2000                            $   433         $    40          $    --          $  (199)         $   274
     Year ended May 31, 2001                                274              14               --             (101)             187
     Year ended May 31, 2002                                187              24                               (17)             194

Deferred tax asset valuation allowance:
     Year ended May 31, 2000                            $ 2,649         $  (162)         $    --          $ (742) (a)      $ 1,745
     Year ended May 31, 2001                              1,745              --               --               --            1,745
     Year ended May 31, 2002                              1,745           4,797               --               --            6,542

Allowance for slow-moving and obsolete inventories:
     Year ended May 31, 2002                            $    70         $ 1,435          $    --          $(1,355)         $   150
     Year ended May 31, 2001                            $    --         $   477          $    --          $  (407)         $    70
</TABLE>

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  fourth  paragraph  under  this  heading  has been  revised  to include
language  related to an  extraordinary  loss on the  extinguishment  of debt and
reads in its entirety as follows:

     "In  a  privately  negotiated  transaction,  the  Company  entered  into  a
Conversion  Agreement dated March 11, 2002 with the Foundation pursuant to which
the  Foundation  converted its principal  debt of $1,250,000  represented by the
Subordinated  Note into equity and, upon request of the Company's  institutional
lender,  the  conversion  was  deemed to have  occurred  on March 11,  2002.  In
connection therewith,  additional interest expense of $1,071,000 was recognized,
including $928,000 applicable to the contingent beneficial conversion feature of
the Subordinated Note and $143,000 of unamortized debt discount  associated with
the detached warrants. The conversion also covered shares issuable on conversion
in respect of interest  accruing  through  March 31, 2002.  The shares  issuable
under the terms of the Conversion  Agreement are included in the shares reported
as  beneficially  owned by Richard P.  Johnston.  The Foundation and the Company
have entered into a Designation Agreement described under "Item 10" above."

PART IV.

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

EXHIBIT INDEX

Exhibit 10.62. The description of Exhibit 10.62, and the text of footnote ** are
fhereby amended to read as follows:

     "10.62 Royal Precision Executive Bonus Program for Fiscal Year 2003**

     ** Certain portions of this  compensatory  plan for executive  officers and
     directors  publicly  filed  have been  omitted  based  upon a  request  for
     confidential treatment filed with the Commission.  The confidential portion
     has been omitted and filed separately with the Commission."

                                       8
<PAGE>
                         AMENDED AND RESTATED FORM 10-K:

     The  following  sets forth the amended and restated  Annual  Report on Form
10-K for the year  ended  May 31,  2001,  giving  effect  to all of the  changes
contained  in  Amendment  No. 1 to the Form 10-K filed on August 20, 2002 and in
this Amendment No. 2 to the Form 10-K:

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              AMENDED AND RESTATED

                                    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, 2002

[ ]  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.)

   535 Migeon Avenue, Torrington, CT                               06790
(Address of Principal Executive Offices)                         (Zip Code)

                                 (860) 489-9254
              (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 16, 2002, based on a market price of $.25 per share,
was $611,498.

     The number of shares of Common  Stock  outstanding  on August 16,  2002 was
12,718,877.

     Documents incorporated by reference:
     None

                                       9
<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
hereto.  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. 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").

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 81%, 86% and 84% of total revenues
during the fiscal years ended May 31, 2002,  2001, and 2000,  respectively.  The
Company developed and patented the "Rifle", the first modern stepless steel golf
club shaft in the industry  (see  "Patents and  Trademarks"  below).  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 3% and 0.5% of total revenues during the fiscal years ended
May 31, 2002 and 2001,  respectively.  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.

                                       10
<PAGE>
     GOLF CLUB GRIPS. The Company designs and distributes golf club grips, sales
of which  represented 16%, 13% and 15% of total revenues during the fiscal years
ended May 31, 2002, 2001 and 2000, 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.

     Additional  information about the Company's reportable business segments is
included in Note 16 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.

     The Company's top ten customers  during the fiscal year ended May 31, 2002,
2001 and 2000 represented 76%, 78% and 75% of total net sales, respectively. The
Company's exclusive Japanese distributor is its largest customer and is the only
international  customer  of the  Company's  top ten  customers.  See  "Principal
Suppliers and Customers".  The Company also has a presence in Europe, Australia,
and Canada through other distributor relationships.

BACKLOG

     As of May 31,  2002,  the Company had open orders from  customers  totaling
$5.3  million for  shipment  during the fiscal year  ending May 31,  2003.  Open
orders as of May 31, 2001 for shipment during the fiscal year ended May 31, 2002
were $4.0 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

                                       11
<PAGE>
Acushnet  terminated  their  relationship.  The Company has  identified  several
alternative  manufacturers and currently purchases its grip inventory from three
primary  suppliers.  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 one manufacturer 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 of
inventory  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 has two primary suppliers for strip steel. Although the Company
has elected to use two primary  suppliers  of strip steel,  management  believes
that there are other acceptable  supply sources at comparable prices and quality
and that the loss of a supplier would not have a material  adverse effect on the
Company's financial condition and results of operations.

     The  Company has a  three-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's  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,  was set to expire in July 2002;  however, a six-month  extension was
signed.  Precision FM and Precision are  subsidiaries of Marubeni  (collectively
"Precision  Japan").  The grip  agreement  with  Precision  Japan will expire in
February  2005.  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.  The  Company  expects  a  five-year
extension to be signed in the near future.  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 44%, 60% and 50% of the Company's total net
sales for the fiscal  years  ended May 31,  2002,  2001 and 2000,  respectively.
Precision  Japan accounted for 19%, 20% and 27% of total net sales during fiscal
2002, 2001 and 2000, respectively.  TaylorMade accounted for 19%, 21% and 18% of
total net sales  during  the fiscal  years  ended May 31,  2002,  2001 and 2000,
respectively.  Callaway  accounted  for 6%, 19 and 9% of total net sales  during
fiscal 2002, 2001 and 2000, 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 principal
shaft patents material to its future success are the following:

     *    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

                                       12
<PAGE>
     *    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.

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  of  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, 2002, 2001 and 2000, the Company
spent approximately $0.5 million,  $0.8 million and $0.7 million on research and
development, respectively.

EMPLOYEES

     As  of  May  31,  2002,  the  Company  had   approximately  200  employees.
Approximately  65% 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 principal executive, administrative and sales offices and its
golf club shaft  manufacturing and its golf club shaft and golf grip warehousing
facility are located at 535 Migeon Avenue, Torrington, Connecticut consisting of
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 8 to the consolidated financial statements.

     The Company's principal  executive and administrative  offices were located
at 15170 North Hayden Road, Suite 1, Scottsdale,  Arizona until January 1, 2002.
The Company has a lease obligation on this property through May 2004. See Note 7
to the consolidated financial statements.

     The  Company  also  formerly  leased  approximately  9,000  square  feet of
warehouse  space  located at 7861 East Gray Road,  Suites  107-111,  Scottsdale,
Arizona.  This facility  served as a  distribution  point from which product was
shipped to the Company's  West Coast  customers.  The monthly  payment under the
lease was  approximately  $9,000 and the term of the lease  expired in  November
2001.

                                       13
<PAGE>
     In the opinion of management,  the  Torrington  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
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.  A report has been issued  setting
out the  results  of that  assessment.  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 believes that the  environmental  issues  identified would fall
within the scope of the Act or other  provisions  of the  acquisition  agreement
that would  require them to be addressed by Brunswick.  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 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 were in violation of authorized limits
under an existing  permit for the discharge of treated  wastewater  from the FMP
plant to the Naugatuck River.  The Company  submitted its response to the NOV in
December 2000 and received  drafts of a consent order from the DEP in April 2001
and October 2001. Terms of the draft consent order include,  among other things,
that the  Company  pay a civil  penalty  of  approximately  $225,000,  submit to
various  compliance audits, and complete a feasibility study to determine if the
discharge  of treated  wastewater  from the FMP plant can be  diverted  from the
Naugatuck River. As a result of this study, the Company spent approximately $0.3
million for capital  expenditures  to comply with the terms of the consent order
during the fiscal year ended May 31,  2002.  A provision  was  recorded  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.  However,  management  believes it is possible  that the proposed
civil penalty may be reduced when the final consent order is executed.

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.

                                       14
<PAGE>
                                     PART II

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

     The common stock has been traded on The OTC Bulletin Board  ("OTCBB") under
the trading symbol "RIFL.OB" since February 25, 2002. Prior thereto,  the common
stock was traded on the National  Market System of the NASDAQ Stock Market.  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 National Market System or OTCBB, respectively, for the relevant period.

                                          HIGH     LOW
                                         ------   ------
     FISCAL YEAR ENDED MAY 31, 2002
     First Quarter                       $ 2.53   $ 2.00
     Second Quarter                        2.58     0.70
     Third Quarter                         1.50     0.20
     Fourth Quarter                        0.75     0.10

     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

     As of August 16, 2002, the Company had  approximately  89 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 (in thousands, except per share data).

<TABLE>
<CAPTION>
                                                       2002        2001        2000       1999       1998
                                                     --------    --------    --------   --------   --------
<S>                                                  <C>         <C>         <C>        <C>        <C>
Net sales                                            $ 23,562    $ 29,997    $ 30,099   $ 23,395   $ 24,973
Income (loss) from continuing operations               (6,864)       (584)        870        276        268
Income (loss) from continuing operations per share      (1.06)      (0.10)       0.15       0.05       0.05
Total assets                                           15,168      25,207      24,942     24,610     25,886
Long-term debt, less current portion                    6,233       7,705       6,027      6,191      3,171
Total liabilities                                      11,596      11,366      10,530     11,158     11,559
</TABLE>

                                       15
<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.

     Operating results may be affected by certain accounting estimates. The most
significant  accounting  estimates in the financial  statements  relate to asset
valuation   allowances   (slow   moving  and  obsolete   inventories,   accounts
receivables,  property  plant and  equipment  and  goodwill)  and  accruals  for
restructuring  and  environmental  fees.  Management  critically  evaluates  the
Companies estimates to establish its reserves and needed accruals. To the extent
these estimates change,  net income will be affected in the period these changes
are determined.

FISCAL YEAR ENDED MAY 31, 2002 COMPARED TO THE FISCAL YEAR ENDED MAY 31, 2001 --

     NET  SALES.  Net sales for the fiscal  year  ended May 31,  2002 were $23.6
million,  a decrease of $6.4 million or 21.5% from net sales of $30.0 million in
2001.  Net sales of golf club shafts  decreased  by $6.2  million or 24% and net
sales of golf club grips  decreased  by $0.2 million or 5%. The decrease in golf
club shaft sales  represents  a decline due to reduced  sales to a single  "OEM"
customer  from  $5.7  million  or 22% of net  golf  shaft  sales in 2001 to $1.4
million  or 7% of net  golf  shaft  sales in 2002  and due to a  decline  in the
normally  strong  seasonal net sales in the fourth  quarter of each year.  Shaft
sales for the fourth quarter of 2002 were $5.6 million or 28% of annual net golf
shaft sales as compared to $8.7 million or 33% of annual net golf shaft sales in
the fourth  quarter of 2001.  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,  2002 was
$20.5  million,  a  decrease  of $1.5  million or 7% over cost of sales of $22.0
million  in  2001.  As  discussed  in  Note  2  to  the  consolidated  financial
statements,  the Company  recorded  write-downs  totaling  $1.4 million and $0.5
million to reduce the carrying value of finished goods  inventories to estimated
net  realizable  value  during the  fiscal  years  ended May 31,  2002 and 2001,
respectively.  The  write-downs  related  to golf  shaft  inventories  were $1.2
million and $0.4 million in fiscal 2002 and 2001, respectively.  The write-downs
for golf  shafts and golf grips in fiscal  2002 were  primarily  a result of the
production  of  inventory  for  anticipated  fourth  quarter  sales that did not
materialize due to a slowing of the economy. Historically the Company builds and
purchases  inventory in anticipation  of forecasted  sales for the March through
July  time-period.  As the spring selling season  unfolded the Company  received
information  from  several  OEM's that they would be  delaying,  reducing or not
issuing  purchase  orders due to  uncertainty  with the softening  economy.  The
impact of this delay would not be fully known  until  after the  Company's  year
end, but before the issuance of the Company's annual financial statements. Sales
for the spring and early summer season did not  materialize  and resulted in the
need for a significant write down of inventory to its net realizable value as of
May 31,  2002 year end. To  mitigate  this risk in the  future,  the Company has
instituted  a policy that  reduces the  exposure of building  excess  inventory.
Excluding  the  write-downs  of $1.2 million and $0.4  million  related to shaft
inventories in fiscal 2002 and 2001,  respectively,  the cost of golf club shaft
sales decreased by $2.4 million or 13% primarily as a result of lower total golf
shaft net  sales,  and  increased  cost of wages  and  benefits.  Excluding  the
write-down  of $0.2  million and $0.1  million  related to grip  inventories  in
fiscal 2002 and 2001  respectively,  the cost of golf club grips sales decreased
by $0.1 million or 2% as a result of product mix.

     GROSS PROFIT.  Gross profit for the fiscal year ended May 31, 2002 was $3.1
million,  a decrease of $4.9 million or 62% from gross profit of $8.0 million in
2001.  Gross profit from sales of golf club shafts  decreased by $4.7 million or
6% to $2.4 million. Excluding the inventory write-downs of $1.2 million and $0.4
million in fiscal 2002 and 2001,  respectively,  gross profit from sales of golf
club  shafts  decreased  by $3.9  million to 18% of sales from 29% of sales last
year.  This decline in margin is a result of reduced  average  selling price per
shaft,  lower  total  golf  shaft  net  sales  and  increased  cost of wages and
benefits.

     Gross profit from sales of golf club grips decreased by $0.2 million or 23%
to $0.7 million.  Excluding the inventory  write-downs  of $0.2 million and $0.1
million in fiscal 2002 and 2001,  respectively,  gross profit from sales of golf
grips  decreased  by $0.1  million to 23% of net golf grip sales from 25% of net
golf grip sales last year.  This decline in margin  relates to a  difference  in
sales mix.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses  for the  fiscal  year  ended  May 31,  2002  were $5.7
million,  a  decrease  of  $0.9  million,  or 14%,  from  selling,  general  and
administrative  expenses of $6.6  million in 2001.  This  decrease is  primarily

                                       16
<PAGE>
attributable  to a reduction  in spending on  advertising  and  marketing in the
current year, and on reduced administrative and support personnel as a result of
the Company's restructure, which took place in January 2002.

     AMORTIZATION OF GOODWILL.  The Company elected to early adopt SFAS no. 142,
"Goodwill and Other  Intangible  Assets"  during its fiscal quarter ended August
31, 2001.  Therefore,  amortization of goodwill was suspended  effective June 1,
2001 and  amortization  expense was $0.0  million for fiscal 2002 as compared to
$0.4 million in fiscal 2001.

     RESTRUCTURING  COSTS. As discussed in note 7 to the consolidated  financial
statements,  costs totaling $1.3 million were recorded  during fiscal year ended
May 31, 2002 relating to the consolidation of the corporate  headquarters leased
in Scottsdale,  Arizona to the manufacturing  facility which the Company owns in
Torrington, Connecticut.

     ENVIRONMENTAL COSTS. As discussed in Note 18 to the consolidated  financial
statements,  costs  totaling  $20,000 and $0.4 million were incurred  related to
various  environmental  matters  during the fiscal  years ended May 31, 2002 and
2001,  respectively.  The amount  for fiscal  2001  includes a  provision  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 4 to the consolidated financial
statements,  expenses  totaling $0.1 and $0.5 million were  recorded  during the
fiscal year ended May 31, 2002 and 2001,  respectively,  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 to $2.0 million during the
fiscal year ended May 31, 2002 from $0.9 million in 2001.  The $1.1  increase is
the net result of the Subordinated Note discount of $0.3 million, the recognized
beneficial  conversion feature of a converted  Subordinated Note of $0.9 million
and  a  reduction  in  the  prime   lending   rate,   of  which  the   Company's
lines-of-credit  and  term  loans  use as a base of  prime  plus 3.0 to 3.75% in
fiscal  2002.  The prime  rate at May 31,  2002 and 2001 was  4.75%  and  7.00%,
respectively.

     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 $0.1 million and $0.3 million during each of
the fiscal  years  ended May 31,  2001 and 2000,  respectively,  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 $0.8  million and
$33,000  were  recorded  during the fiscal  years  ended May 31,  2002 and 2001,
respectively.  As of May 31, 2001, the Company had recorded  deferred tax assets
of $0.8 million,  net of a valuation allowance of $1.7 million.  Due to the loss
recognized  during the fiscal year ending May 31, 2002 the  valuation  allowance
was increased to fully offset the recorded deferred tax assets based on the more
likely than not criteria for realizability of deferred tax assets established in
SFAS 109. No adjustments to the valuation  allowance on deferred tax assets were
recorded during the fiscal year ended May 31, 2001.

     CUMULATIVE  CHANGE IN ACCOUNTING  PRINCIPLE.  During fiscal year 2002,  the
Company  adopted  Financial  Accounting  Standards  Board  "FASB"  Statement  of
Financial  Accounting  Standards "SFAS" No. 142,  "Goodwill and Other Intangible
Assets" This  adoption  resulted in an  impairment  in  accordance  with the new
guidance of SFAS No. 142. Under this guidance a fair value measurement  approach
of the grip  segment  was used,  including  applying  a market  multiple  to the
segment's projected cash flows. Professionals in the investment banking industry
were  consulted to validate  the  assumptions  used in the fair value  estimate.
Based on this analysis,  a fair value of $2,600,000,  including implied goodwill
of $1,250,000,  was calculated for the segment.  The implied  goodwill was lower
than the then recorded unamortized balance of goodwill of $7,187,000. Therefore,
during the year ended May 31, 2002, an  impairment  of  $5,937,000  was recorded

                                       17
<PAGE>
which is reflected as the cumulative effect of a change in accounting  principle
in the  accompanying  consolidated  statement  of  operations  for the year then
ended.  There was no income tax effect  applicable  to this change in accounting
principle.

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.

                                       18
<PAGE>
     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  2  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
workers'  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 18 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
2000,  respectively.  The amount  for fiscal  2001  includes a  provision  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 4 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.

                                       19
<PAGE>
     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 12 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.

INFLATION --

     The Company  believes that  inflation has not had a material  impact on its
financial condition and results of operations for any of the period presented.

LIQUIDITY AND CAPITAL RESOURCES --

     At May 31,  2002,  the Company had  working  capital of $3.1  million and a
current  ratio of 1.6 to 1 as compared to working  capital of $7.7 million and a
current ratio of 3.1 to 1 at May 31, 2001.

     As of August 16, 2002 the Company  refinanced its bank debt. The effects of
the refinancing  have been  retroactively  applied to May 31, 2002. The interest
rates on the refinanced  debt are 1% to 4% lower than the prior rates.  Prior to
the August  2002  refinancing  the Company was not in  compliance  with  certain
financial  covenants,  but was successful in obtaining the necessary waivers and
amendments in August 2001,  February 2002 and May 2002, to remedy such defaults.
Although the Company  believes it will be in compliance with the covenants under
the  refinancing,  there can be no assurance  that the Company  would be able to
obtain any  necessary  waivers or amendments  upon the  occurrence of any future
incidence  of  noncompliance  with loan  covenants.  As such,  any  instance  of
noncompliance  could have a material  adverse effect on the Company's  financial
condition.

     As  refinanced,  the Company's bank credit  facility  includes two lines of
credit and two term loans. The outstanding  principal  balance of the term loans
at May 31, 2002 was $2.5  million.  The term loans are due in monthly  principal
installments  of $53,517  until  August 2004 with a final  principal  payment of
$1,030,150 at their maturity in September  2004. The term loans bear interest at
rates ranging from prime plus 3.25% to prime plus 3.75%. The outstanding balance
on the lines of credit at May 31, 2002 was $4.6  million and the lines of credit
are subject to renewal in July 2003.  Amounts borrowed under the lines of credit
bear interest at rates ranging from prime to prime plus 3.0%.

     During  the fiscal  year  ended May 31,  2002,  the  Company  issued to The
Johnston Family Charitable Foundation ("Johnston  Foundation"),  a related party
entity, a subordinated  promissory note (the "Subordinated Note") for $1,250,000
and  warrants  to  purchase  up to 300,000  shares of common  stock at $0.25 per
share.  An  estimated  fair value of  $322,000  was  assigned  to the  warrants.
Subsequently,  during the  remainder of the current  fiscal  year,  the Johnston
Foundation  exercised  warrants to purchase  147,808  shares of common stock for
$37,000 and converted the $1,250,000  Subordinated  Note and accrued interest of
$28,493 into 5,113,972  shares of common stock.  See note 9 to the  consolidated
financial statements.

     Also,  during  the fiscal  year  ended May 31,  2002,  the  Company  issued
additional subordinated  promissory notes (the "Additional  Subordinated Notes")
of $425,000 to certain  members of the Board of Directors of the Company or such
individuals'  affiliated  entities.  These notes bore interest at a stated fixed
annual  rate of 13%.  The  holders  of the  Additional  Subordinated  Notes also
received warrants to purchase 102,000 shares of common stock at $0.25 per share.
The warrants  granted to the holders of the Additional  Subordinated  Notes were
determined to have no value. In connection with the August 12, 2002 refinancing,
the Additional Subordinated Notes and accrued interest of $16,070 were converted
into 1,764,280 shares of common stock. Accordingly,  the Additional Subordinated
Notes have been classified as long-term debt as of May 31, 2002.

                                       20
<PAGE>
     The Company  believes that its existing  lines of credit are  sufficient to
fund the planned  operating  needs for its business over the next twelve months.
Existing  lines of credit  enable the Company to borrow a maximum of  $6,500,000
using a formula based on accounts receivable, inventories and letters of credit.
The letters of credit were  provided by Richard P. Johnston and  Christopher  A.
Johnston.

     During the fiscal year ended May 31, 2002,  net cash  provided by operating
activities  was $0.2 million.  The net loss in fiscal 2002 included  significant
non-cash  charges  as  shown  in  the  consolidated   statement  of  cash  flows
aggregating $9.4 million, including a $5.9 million impairment loss. In addition,
the  Company  delayed  paying  certain  liabilities  and  accelerated   accounts
receivable collections.

     Net cash used in investing  activities  of $0.5 million for the fiscal year
ended May 31, 2002 was primarily for the purchase of machinery and equipment. Of
this $0.5 million,  $0.3 million was related to the  installation of a new waste
water system.  The Company  estimates that capital  expenditures  for the fiscal
year ending May 31, 2003 will be approximately $0.7 million.

     Net cash provided by financing activities for the fiscal year ended May 31,
2002, was $0.3 million resulting from proceeds from the issuance of subordinated
debt of $1.7 million,  offset by net repayments of lines-of-credit and long term
debt of $1.4 million.

ENVIRONMENTAL MATTERS --

     Environmental  Costs related to various  matters  totaled  $20,000 and $0.4
million, net of recoveries, during the fiscal years ended May 31, 2002 and 2001,
respectively. See note 18 to the consolidated financial statements.

                                       21
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Sales of the Company's  products  outside the United States are denominated
in U.S.  dollars.  The Company does not participate in any market risk sensitive
financial  instruments or other financial and commodity instruments and holds no
investments.

     The  Company's  primary  market  risk  relates  to its  variable  rate debt
obligations  which  are  described  in  Note  8 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 the fiscal year ending May 31, 2003.

                                       22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors and Stockholders of Royal Precision, Inc.

We have audited the accompanying  consolidated balance sheet of Royal Precision,
Inc.  and  subsidiaries  as of  May  31,  2002,  and  the  related  consolidated
statements of operations,  stockholders' equity and comprehensive income (loss),
and cash flows for the year then ended.  Our audit also  included the  financial
statement  schedule for 2002 listed in the index at item 14(d).  These financial
statements and schedule are the responsibility of the Company's management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of Royal Precision,
Inc. and subsidiaries at May 31, 2002 and the results of their  operations,  and
their  cash  flows  for the year  then  ended,  in  conformity  with  accounting
principles  generally accepted in the United States.  Also, in our opinion,  the
related  financial  statement  schedule for 2002, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.

Effective June 1, 2001, the Company  adopted  Statement of Financial  Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

As described in NOte 20, the Company restated its financial  statements for 2002
to  revise  the  accounting  for  the  amount  of  interest  expense  recognized
associated with a beneficial conversion feature.

                                        /s/ Ernst & Young LLP

Hartford, Connecticut
August 16, 2002, except for note 20 as
to which the date is December 2, 2002

                                       23
<PAGE>
THIS IS A COPY OF THE AUDIT REPORT  PREVIOUSLY  ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION  WITH ROYAL  PRECISION  INC.'S FILING ON FORM 10-K FOR THE YEAR ENDED
MAY 31, 2001.  THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THIS FILING ON FORM 10-K. THE  CONSOLIDATED  BALANCE SHEET AS OF
MAY 31, 2000, THE CONSOLIDATED  STATEMENTS OF OPERATION,  STOCKHOLDERS'  EQUITY,
COMPREHENSIVE  INCOME  (LOSS) AND CASH FLOWS FOR THE YEAR ENDED MAY 31, 1999 AND
THE  INFORMATION  IN THE SCHEDULE  FOR 1999  REFERRED TO IN THIS REPORT HAVE NOT
BEEN INCLUDED IN THE ACCOMPANYING  FINANCIAL STATEMENTS OR SCHEDULE. SEE EXHIBIT
23.2 TO THIS REPORT ON FORM 10-K FOR INFORMATION REGARDING ARTHUR ANDERSEN LLP.

                    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, 2001and 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 audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of 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

                                       24
<PAGE>
                     Royal Precision, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                           MAY 31
                                                                    --------------------
                                                                      2002        2001
                                                                    Restated
                                                                    --------    --------
<S>                                                                 <C>         <C>
ASSETS
Current assets:
    Cash                                                            $      6    $     33
    Accounts receivable, net of allowance of $194 and
       $187 at May 31, 2002 and 2001, respectively                     3,518       4,988
    Inventories                                                        4,363       5,920
    Other current assets                                                 387         215
    Deferred income taxes                                                 --         224
                                                                    --------    --------
Total current assets                                                   8,274      11,380
Property, plant and equipment, net                                     5,543       6,004
Goodwill                                                               1,250       7,187
Deferred income taxes                                                     --         582
Intangible pension and other assets                                      101          54
                                                                    --------    --------
Total assets                                                        $ 15,168    $ 25,207
                                                                    ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                $  2,197    $  1,534
    Accrued salaries and benefits                                        520         529
    Accrued pension                                                      364         198
    Accrued restructuring costs                                          376          --
    Accrued environmental costs                                          212         272
    Other accrued expenses                                               422         360
    Current portion of long-term debt                                  1,272         768
                                                                    --------    --------
Total current liabilities                                              5,363       3,661
Long-term debt, less current portion                                   5,808       7,705
Subordinated debt                                                        425          --
                                                                    --------    --------
Total liabilities                                                     11,596      11,366

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; 15,000,000 shares authorized;
       10,954,597 and 5,681,711 shares issued and outstanding
       at May 31, 2002 and 2001, respectively                             11           6
    Additional paid-in capital                                        16,562      13,977
    Accumulated deficit                                              (12,919)       (118)
    Accumulated other comprehensive loss                                 (82)        (24)
                                                                    --------    --------
Total stockholders' equity                                             3,572      13,841
                                                                    --------    --------
Total liabilities and stockholders' equity                          $ 15,168    $ 25,207
                                                                    ========    ========
</TABLE>

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

                                       25
<PAGE>
                     Royal Precision, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                             YEAR ENDED MAY 31
                                                                                  -----------------------------------------
                                                                                      2002           2001           2000
                                                                                    Restated
                                                                                  -----------    -----------    -----------
<S>                                                                               <C>            <C>            <C>
Net sales:
    Golf club shafts                                                              $    19,833    $    26,070    $    25,559
    Golf club grips                                                                     3,729          3,927          4,540
                                                                                  -----------    -----------    -----------
                                                                                       23,562         29,997         30,099
Cost of sales:
    Golf club shafts                                                                   17,430         18,927         17,562
    Golf club grips                                                                     3,058          3,056          3,137
                                                                                  -----------    -----------    -----------
                                                                                       20,488         21,983         20,699
                                                                                  -----------    -----------    -----------
Gross profit                                                                            3,074          8,014          9,400

Selling, general and administrative expenses                                            5,676          6,589          6,946
Restructuring costs                                                                     1,313             --             --
Environmental costs                                                                        20            409            105
Amortization of goodwill                                                                   --            442            486
Nonrecurring expenses                                                                     133            477             --
                                                                                  -----------    -----------    -----------
Operating (loss) income                                                                (4,068)            97          1,863

Interest expense
    Cash interest expense                                                                 787            888            644
    Non-cash interest related to subordinated debt                                      1,250             --             --
                                                                                  -----------    -----------    -----------
                                                                                        2,037            888            644
                                                                                  -----------    -----------    -----------

Terminated merger expenses                                                                 --             79             --
Other income                                                                              (45)          (319)          (267)
                                                                                  -----------    -----------    -----------
(Loss) income from continuing operations before
    provision for income taxes                                                         (6,060)          (551)         1,486
Provision for income taxes                                                                804             33            616
                                                                                  -----------    -----------    -----------
(Loss) income before cumulative effect of change in
    accounting principle                                                               (6,864)          (584)           870
Cumulative effect of change in accounting principle                                    (5,937)            --             --
                                                                                  -----------    -----------    -----------
Net (loss) income                                                                 $   (12,801)   $      (584)   $       870
                                                                                  ===========    ===========    ===========
Basic and diluted (loss) earnings per share:

    (Loss) income before cumulative effect of change in
       accounting principle                                                       $     (1.06)   $     (0.10)   $      0.15
    Cumulative effect of change in accounting principle                                 (0.92)            --             --
                                                                                  -----------    -----------    -----------
Net (loss) income                                                                 $     (1.98)   $     (0.10)   $      0.15
                                                                                  ===========    ===========    ===========
Weighted average number of common shares used to
    compute per share information:
       Basic                                                                        6,448,928      5,679,077      5,672,580
                                                                                  ===========    ===========    ===========
       Diluted                                                                      6,448,928      5,679,077      5,814,862
                                                                                  ===========    ===========    ===========
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       26
<PAGE>
                     Royal Precision, Inc. and Subsidiaries
 Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                         ACCUMULATED
                                                                             RETAINED       OTHER
                                          COMMON STOCK         ADDITIONAL    EARNINGS   COMPREHENSIVE
                                     -----------------------    PAID-IN    (ACCUMULATED     INCOME                   COMPREHENSIVE
                                       SHARES       AMOUNT      CAPITAL      DEFICIT)      (LOSS)(1)       TOTAL     INCOME (LOSS)
                                     ----------   ----------   ----------   ----------    ----------    ----------   -------------
<S>                                  <C>          <C>          <C>          <C>           <C>           <C>          <C>
BALANCE, MAY 31, 1999                 5,667,375   $        6   $   13,897   $     (404)   $      (47)   $   13,452
Exercise of common stock
   options                               11,581           --            4           --            --             4
Tax benefit from exercise
   of common stock options                   --           --           11           --            --            11
Stock based compensation                     --           --           28           --            --            28
Minimum pension liability
   adjustment, net of tax
   benefit of $31                            --           --           --           --            47            47    $       47
Net income                                   --           --           --          870            --           870           870
                                                                                                                      ----------
Comprehensive income                                                                                                         917
                                     ----------   ----------   ----------   ----------    ----------    ----------    ==========
BALANCE, MAY 31, 2000                 5,678,956            6       13,940          466            --        14,412

Exercise of common stock
   options                                2,755           --            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                 5,681,711            6       13,977         (118)          (24)       13,841
Restated
Exercise of common stock
   options                               11,106           --            3           --            --             3
Grant of warrants                            --           --          322           --            --           322
Exercise of warrants                    147,808           --           37           --            --            37
Conversion of subordinated
   debt to equity                     5,113,972            5        1,272           --            --         1,277
Beneficial conversion feature                --           --          928           --            --           928
Stock based compensation                     --           --           23           --            --            23
Minimum pension liability
   adjustment                                --           --           --           --           (58)          (58)          (58)
Net loss                                     --           --           --      (12,801)           --       (12,801)      (12,801)
                                                                                                                      ----------
Comprehensive loss                           --           --           --           --            --            --    $  (12,859)
                                     ----------   ----------   ----------   ----------    ----------    ----------    ==========
BALANCE, MAY 31, 2002                10,954,597   $       11   $   16,562   $  (12,919)   $      (82)   $    3,572
                                     ==========   ==========   ==========   ==========    ==========    ==========
</TABLE>

(1)  Relates exclusively to minimum pension liability.

    The accompanying notes are an integral part of these financial statements

                                       27
<PAGE>
                     Royal Precision, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED MAY 31
                                                                               --------------------------------
                                                                                 2002        2001        2000
                                                                               Restated
                                                                               --------    --------    --------
<S>                                                                            <C>         <C>         <C>
OPERATING ACTIVITIES
Net (loss) income                                                              $(12,801)   $   (584)   $    870
Adjustments to reconcile net (loss) income to net cash provided (used) by
    operating activities of continuing operations:
       Depreciation and amortization                                                854       1,106       1,158
       Increase in valuation allowance for deferred income tax assets               806          --          --
       Deferred income taxes                                                         --          17         592
       Impairment of goodwill                                                     5,937          --          --
       Interest                                                                   1,250          --          --
       (Gain) loss  on retirement or sale of machinery and equipment                 (7)         (3)         14
       Stock based compensation                                                      23          35          28
       Tax benefit from exercise of common stock options                             --           1          11
       Write-down of equipment and inventories                                    1,568         962          --
       Changes in operating assets and liabilities:
              Accounts receivable, net                                            1,470         112        (293)
              Inventories                                                           122      (1,273)       (110)
              Other assets                                                         (132)        (36)         79
              Accounts payable and accrued expenses                               1,081        (744)        110
                                                                               --------    --------    --------
Net cash provided (used) by operating activities of continuing operations           171        (407)      2,459

INVESTING ACTIVITIES
Purchases of machinery and equipment                                               (550)     (1,187)     (2,165)
Proceeds from sale of machinery and equipment                                        31          50          15
                                                                               --------    --------    --------
Net cash (used) by investing activities of continuing operations                   (519)     (1,137)     (2,150)
FINANCING ACTIVITIES

Proceeds from exercise of common stock options and warrants                          39           1           4
Proceeds from issuance of long-term debt                                             --       1,204          --
Proceeds from issuance of subordinated debt                                       1,675       1,000          --
Borrowings (repayments) under lines-of-credit, net                                 (483)      1,243         742
Repayments of subordinated debt                                                      --      (1,000)         --
Repayments of long-term debt                                                       (910)       (907)     (1,203)
                                                                               --------    --------    --------
Net cash provided (used) by financing activities of continuing operations           321       1,541        (457)
                                                                               --------    --------    --------

Change in cash                                                                      (27)         (3)       (148)
Cash, at beginning of year                                                           33          36         184
                                                                               --------    --------    --------
Cash, at end of year                                                           $      6    $     33    $     36
                                                                               ========    ========    ========

SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
    Interest                                                                   $    911    $    819    $    633
    Income taxes                                                               $     --    $      5    $     48
Non-cash investing and financing transactions:
   Conversion of subordinated debt                                             $  1,277    $     --    $     --
   Grant of warrant                                                            $    322    $     --    $     --
   Beneficial conversion feature                                               $    928    $     --    $     --
   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
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       28
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  MAY 31, 2002

1. ORGANIZATION AND BUSINESS

ORGANIZATION

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

BUSINESS

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  manufactures  ("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 Japan, Australia, Europe and Canada.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

All significant  inter-company 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 of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting  period.  On an ongoing  basis,  the Company  evaluates its
estimates,  including  its  allowance  for bad debts,  allowances  for excess or
obsolete inventories,  the net realizable value of its assets held for sale, its
liabilities for warranty  obligations,  and  restructuring  activities,  and its
valuation allowance for deferred income tax assets.  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.  The  Company  recorded  charges of  approximately
$1,435,000 in 2002 and $477,000 in 2001 to adjust  inventory to its expected net
realizable value. These charges are the result of reducing the carrying value of
down-graded  and  out-of-spec  inventory  that  normally  sell during the fourth
quarter of the Company's fiscal year. In addition,  as of May 31, 2002 and 2001,
the  Company  has  inventory  valuation  allowances  of  $150,000  and  $70,000,
respectively,  for obsolete items.  Related charges are reflected as a component
of cost of sales.

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  operations.  Depreciation  of plant  and  equipment  is
provided  for,  commencing  when such  assets are placed in  service,  using the
straight-line method over the assets estimated useful life as follows:

                                                              USEFUL LIVES
                                                              ------------

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

                                       29
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

In June 2001, the Financial  Accounting  Standards Board "FASB" issued Statement
of Financial Accounting Standards "SFAS" No. 142, "Goodwill and Other Intangible
Assets"  which 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  associated with
the goodwill.  The Company elected to early adopt SFAS No. 142 during its fiscal
quarter ended August 31, 2001. Therefore, amortization of goodwill was suspended
effective  June 1, 2001. The following  table  presents the pro-forma  financial
results on a basis  consistent  with the new accounting  principle for the years
ended May 31, 2000 and 2001, respectively (dollars in thousands except per share
amounts):

                                                    Year ended May 31,
                                                 ------------------------
                                                   2001           2000
                                                 ---------      ---------
      Reported net income (loss)                 $    (584)     $     870
      Add back amortization of goodwill                442            486
                                                 ---------      ---------
      Adjusted net  income (loss)                $    (142)     $   1,356
                                                 =========      =========

      Reported basic and diluted net income
      (loss) per share                           $   (0.10)     $    0.15

      Add back effect of goodwill amortization
      per share                                       0.08           0.09
                                                 ---------      ---------
      Adjusted basic and diluted net income
      (loss) per share                           $   (0.02)     $    0.24
                                                 =========      =========

Goodwill  of  $10,418,000   had  been  recorded  in  conjunction   with  the  RG
Acquisition.  This  balance  was  subsequently  reduced  by  $1,392,000  due  to
utilization  of  pre-acquisition  net  operating tax loss  carryforwards  and by
amortization expense totaling $1,839,000. Goodwill was assigned to the Company's
golf club grip business segment. At the end of fiscal year 2001 the Company used
an  undiscounted  cash  flow  approach   previously   allowed  under  Accounting
Principles Board Opinion No. 17 "Intangible  Assets" ("APB 17") to determine the
potential impairment.  This approach, which considered the effects on cash flows
of production  problems  caused by an outsourcing  grip contractor at that time,
indicated that the carrying value of goodwill was not impaired.  As such,  under
this methodology management believes that goodwill was not impaired.

During fiscal year 2002,  goodwill was again tested for impairment in accordance
with  the new  guidance  of SFAS No.  142.  Under  this  guidance  a fair  value
measurement  approach of the grip segment was used,  including applying a market
multiple  to the  segment's  projected  cash  flows.  There was no change to the
projected  cash flows used in the  impairment  analysis  performed as of May 31,
2001  under  APB 17.  Professionals  in the  investment  banking  industry  were
consulted to validate the assumptions used in the fair value estimate.  Based on
this  analysis,  a fair  value of  $2,600,000,  including  implied  goodwill  of
$1,250,000,  was calculated for the segment. The implied goodwill was lower than
the then  recorded  unamortized  balance of goodwill of  $7,187,000.  Therefore,
during the year ended May 31, 2002, an  impairment  of  $5,937,000  was recorded
which is reflected as the cumulative effect of a change in accounting  principle
in the  accompanying  consolidated  statement  of  operations  for the year then
ended.  There was no income tax effect  applicable  to this change in accounting
principle.

The assumptions used to establish fair value under SFAS No. 142, were consistent
with those used under APB 17,  specifically  production  problems  caused by our
outsourcing  grip contractor were considered in our cash flow  assumptions.  The
recorded  impairment  loss is the result of a change in the evaluation  criteria
for  goodwill  from an  undiscounted  cash flow  approach  which was  previously
utilized under the guidance in APB 17 to the fair value  approach  stipulated in
SFAS No. 142. The following table provides a  reconciliation  of goodwill during
the period from May 31, 2001 to May 31, 2002 (in thousands):

     Balance as of May 31, 2001                                 $ 7,187
     Impairment loss recorded                                    (5,937)
                                                                -------
     Balance as of May 31, 2002                                 $ 1,250
                                                                =======

                                       30
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS

Under SFAS No. 121,  "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," the Company reviews  long-lived assets and
certain  identifiable  intangibles for impairment at least annually based on the
expected  future cash flows of the assets  compared to the carrying value of the
assets.  To the extent that such  carrying  value exceeds  expected  future cash
flows, a writedown is recorded.

INCOME TAXES

The  Company  recognizes  deferred  income 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.  Deferred income 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  expected to  reverse.  A valuation
allowance is recorded for deferred income 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  FASB   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
collectibility  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  $0.5  million,  $0.8  million and $0.7
million for the fiscal years ended May 31, 2002, 2001 and 2000, respectively.

ADVERTISING

The  Company  expenses  production  costs  of  advertising  the  first  date the
advertisements  take place.  Advertising and marketing costs were  approximately
$1.3  million,  $2.1 million and $2.3 million for the fiscal years ended May 31,
2002, 2001 and 2000, respectively.

NET INCOME (LOSS) PER SHARE

Basic income (loss) per share amounts are based on the weighted  average  number
of common shares  outstanding  during the fiscal year. Diluted income (loss) per
share amounts consider,  in addition to the above, the dilutive effect of common
share equivalents during the fiscal year. Common share equivalents include stock
options using the treasury stock method.

Loss per  share  for the  fiscal  years  ended  May 31,  2002 and 2001  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 and, as such, their effect was also anti-dilutive.

                                       31
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the FASB issued SFAS No. 144,  "Accounting for the Impairment or
Disposal of Long-Lived  Assets"  which will be effective for the Company's  year
beginning  June 1, 2002.  SFAS 144  supercedes  the guidance under SFAS 121 with
respect to accounting  for  impairment of long-lived  assets as well as changing
the presentation and accounting for certain  operations that may be discontinued
by an entity.  The Company does not believe the impact of adopting SFAS 144 will
have a significant effect on the Company's financial statements.

RECLASSIFICATIONS

Certain  prior year amounts have been  reclassified  to conform with the current
year's presentation.

3. INVENTORIES

Inventories,  net  of  valuation  allowances,  consisted  of the  following  (in
thousands):

                                                                   MAY 31,
                                                             -----------------
                                                               2002      2001
                                                             -------   -------
     Raw materials                                           $   315   $   814
     Work-in-process                                           1,304     1,215
     Finished goods                                            2,744     3,891
                                                             -------   -------
                                                             $ 4,363   $ 5,920
                                                             =======   =======

4. PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following (in thousands):

                                                                   MAY 31,
                                                             -----------------
                                                               2002      2001
                                                             -------   -------
     Land                                                    $   123   $   123
     Furniture, fixtures and office equipment                    599       614
     Buildings and improvements                                  912       955
     Machinery and equipment                                   5,832     5,733
     Equipment held for sale                                      45       120
     Construction in progress                                    625       371
                                                             -------   -------
                                                               8,136    7, 916
     Accumulated depreciation                                 (2,593)   (1,912)
                                                             -------   -------
                                                             $ 5,543   $ 6,004
                                                             =======   =======

Depreciation expense was $0.8 million,  $0.7 million and $0.7 million during the
fiscal years ended May 31, 2002, 2001 and 2000, respectively.

                                       32
<PAGE>
During the years ended May 31, 2002 and 2001, the Company recorded an impairment
write-down of $133,000 and $360,000,  respectively,  on equipment held for sale,
which  represents  rubber injection  presses  previously used to manufacture the
Company's golf club grips and graphite shafts. The Company was unable to resolve
quality  issues in connection  with an  outsourcing  contractor  who was leasing
rubber injection  presses from the Company for the production of golf club grips
prior to fiscal 2001.  This equipment was  subsequently  returned to the Company
and held for sale. In fiscal year 2001 the Company recorded the first impairment
write down when it become apparent that the Company would not be able to recover
the book value of these  assets.  The Company  continued  to be unable to find a
buyer for the  equipment  during  fiscal  year 2002.  In April 2002 the  Company
obtained  a  valuation  of the  rubber  injection  presses  from an  independent
appraiser  which  resulted in an additional  impairment  write-down of $133,000.
Also  during the year ended May 31,  2001,  the  Company  recorded an expense of
$117,000 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 a component of nonrecurring  expenses in the
statements of operations for the fiscal year ended May 31, 2002 and 2001.

                                       33
<PAGE>
5. SUPPLY CONTRACTS

The Company has contracts for steel strip,  graphite shafts,  and golf grips. In
general, these contracts contain customary supply terms for periods ranging from
one to three  years.  As of May 31, 2002,  the Company was not  dependent on any
single supplier for steel strip and grips.

6. TERMINATED MERGER AGREEMENT

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 $79,000 and are
reflected  as  terminated  merger  expenses  in the  consolidated  statement  of
operations for the fiscal year ended May 31, 2001.

7. CORPORATE RESTRUCTURING

In September  2001, the Company's  board of directors  approved a  restructuring
plan designed to streamline  operations and reduce expenses.  The  restructuring
included staff reductions and anticipated decreased operating expenses resulting
from the  consolidation  of the  corporate  headquarters  leased in  Scottsdale,
Arizona to the  manufacturing  facility  which the Company  owns in  Torrington,
Connecticut.   The  Company  estimates  that  the  restructuring   will  provide
annualized  savings in excess of $1,000,000  subsequent to the completion of all
phases of the plan.

During the fiscal year ended May 31, 2002, the Company  recorded a restructuring
charge  of   approximately   $1,313,000   for  various   costs  related  to  the
restructuring  as shown  below.  Of the  amount  expensed  to  date,  $1,290,000
represents cash costs, of which $914,000 has been paid through May 31, 2002.

      Employee severance                     $  752,000
      Lease obligation                          347,000
      Employee hiring and relocation costs      166,000

      Other                                      48,000
                                             ----------
                                             $1,313,000
                                             ==========

The employment of  approximately  25 individuals  who performed  administrative,
sales,  marketing,  customer  service and accounting  functions at the Company's
corporate headquarters in Scottsdale,  Arizona was terminated as a result of the
restructuring. The affected employees are to receive severance benefits totaling
$752,000. Unpaid severance as of May 31, 2002 is $103,000.

The lease term of the Company's  former  corporate  headquarters  in Scottsdale,
Arizona  continues through May 2004. The Company's monthly rent is approximately
$18,000,  net of  sub-leases,  and the  aggregate  rental  obligation  over  the
remaining  term of the lease as of May 31,  2002 is  $547,000.  The  Company has
retained a real estate broker to assist in the sub-leasing of the property.  The
Company  expects that an agreement will be made with a sub-tenant or the current
landlord  within  the next  twelve  months to  sublease  the space or buyout the
current  lease  agreement.  The Company has  accrued the net  estimated  expense
associated  with this lease of  $347,000 as part of the  restructuring  of which
$273,000 remains unpaid as of May 31, 2002.

                                       34
<PAGE>
8. BANK BORROWING AGREEMENTS

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, limit the repayment of subordinated debt, and require the maintenance
of minimum  monthly and quarterly  earnings and quarterly debt service  coverage
ratios,  as defined.  In August 2001 and February  2002,  the Company was not in
compliance  with  certain  financial  loan  covenants,  but  was  successful  in
obtaining the necessary  waivers and amendments to its credit facility to remedy
such  defaults.  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.

On November  13, 2001 and April 10,  2002,  the Company  amended its bank credit
facilities with its lender.  In conjunction with these  amendments,  the Company
received an increase in the amounts  available and an extension of the repayment
dates of its seasonal over-advance  facility, the availability to borrow against
certain foreign  receivables,  waivers of various  financial  covenant  defaults
which existed  through  February 2002 and the  restatement of certain  financial
loan  covenants in future  periods.  The Company's  annual  interest  rates were
increased  by 1% on  all  borrowings  under  both  credit  facilities  effective
November 13, 2001 and increased by an additional 1% on all borrowings under both
credit facilities effective April 10, 2002.

In connection  with the April 10, 2002  amendments to the bank credit  facility,
the Johnston  Family Living Trust u/a dated April 11, 1994 (Johnston  Trust),  a
related party entity,  agreed to guarantee up to $400,000 of amounts  payable to
the bank,  which are  advanced  under the  seasonal  over-advance  facility.  In
consideration  for  providing  this  guarantee and another,  the Johnston  Trust
received a warrant to  purchase  145,200  shares of RP stock at a price of $0.25
per share.  The warrant may be exercised for a ten year period.  Using the Black
Scholes  option  pricing  model the  warrants  granted  for the  guarantee  were
determined to have no value.

As of August 16,  2002,  the Company  refinanced  its bank debt.  In  connection
therewith  the  Company  executed an Amended and  Restated  Credit and  Security
Agreement  (the  Agreement).  The Agreement  includes  lines-of  credit and term
loans. The  lines-of-credit  are subject to renewal in July 2003. The term loans
mature in September 2004. The effects of the refinancing have been retroactively
applied to May 31, 2002. A summary of long-term debt follows:

                                                            MAY 31,
                                                      ------------------
                                                        2002       2001
                                                      -------    -------
     Lines-of-credit                                  $ 4,605    $ 4,520
     Term loans                                         2,475      3,385
                                                      -------    -------
                                                        7,080      8,473

     Current portion                                   (1,272)      (768)
                                                      -------    -------
     Total long-term debt                             $ 5,808    $ 7,705
                                                      =======    =======

Scheduled annual maturities of debt for the years ending May 31, 2003, 2004, and
2005 are $1,272,000, $4,617,000 and $1,191,000, respectively.

Under  the  Agreement  a  maximum  of  $6,500,000  may  be  borrowed  under  the
lines-of-credit  using a formula based on accounts  receivable,  inventories and
letters of credit.  Amounts borrowed under the lines-of-credit  bear interest at
rates  ranging  from prime to prime plus 3.0%.  The term loans bear  interest at
rates  ranging  from prime plus 3.25% to prime  plus  3.75%.  Substantially  all
assets are pledged as collateral  for borrowings  under the  Agreement.  Related
parties provided the letters of credit.  The Agreement also provides for certain
financial covenants relating to the amounts of net losses and net assets.

As of May 31, 2002 and 2001, the carrying value of debt approximates fair market
value.

                                       35
<PAGE>
9. SUBORDINATED DEBT

On October 26, 2001,  the Company  entered into a financing  agreement  with The
Johnston Family Charitable Foundation ("Johnston  Foundation"),  a related party
as the  founders  of the  Johnston  Foundation  are  major  stockholders  of the
Company, for a subordinated  promissory note ("Subordinated Note") in the amount
of $1,250,000.  Funding of $1,000,000 of the  Subordinated  Note was received on
October 26, 2001, and the remaining  $250,000 was received on December 14, 2001.
The interest rate on the Subordinated  Note was 13%. The  Subordinated  Note was
due in full on October 26, 2002 and was subordinated to both the FMP and RG bank
credit facilities.  Simultaneously  with the initial funding of the Subordinated
Note,  the  Johnston  Foundation  received a warrant to  purchase  up to 300,000
shares of RP common stock at a price of $0.25 per share. An estimated fair value
of $322,000 was assigned to the warrant which was immediately  exercisable for a
ten-year  period.  Additionally,  in the event of default by the  Company on the
Subordinated  Note,  the  Johnston  Foundation  had an  option  to  convert  the
Subordinated  Note into RP common stock at an exchange  ratio of $0.25 per share
with respect to any  outstanding  principal  and accrued  interest  that was not
repaid in full. The terms of the financing  agreement were ratified at a special
meeting of  stockholders  on January 28, 2002. On February 1, 2002, the Johnston
Foundation exercised a warrant to purchase 147,808 shares of RP common stock for
a total purchase price of $37,000.

In February 2002, the Company was not in compliance with certain  financial bank
loan covenants that resulted in the Company defaulting on the Subordinated Note.
As a result of this default and in connection  with the April 10, 2002 amendment
to its bank credit  facilities  the bank  provided  that as a  condition  to the
execution by the bank of the  amendments,  the Johnston  Foundation  convert its
$1,250,000  Subordinated Note and the outstanding interest accrued through March
31,  2002  into RP  common  stock.  On April 10,  2002 the  Johnston  Foundation
converted the $1,250,000  Subordinated Note and accrued interest of $28,493 into
5,113,972 shares of RP common stock.

As referred to above, the beneficial conversion feature of the Subordinated Note
was   contingent.   Its  intrinsic  value  measured  at  October  26,  2001  was
approximately  $6,750,000.  Since the intrinsic  value  exceeded the $928,000 of
allocated  proceeds  from the  issuance  of the  Subordinated  Note,  the amount
assigned to the  beneficial  conversion  feature was limited to $928,000 and was
recognized  upon  conversion as interest  expense in accordance  with EITF 98-5,
ACCOUNTING FOR CONVERTIBLE  SECURITIES WITH  BENEFICIAL  CONVERSION  FEATURES OR
CONTINGENTLY  ADJUSTABLE CONVERSION RATIOS and EITF 00-27,  APPLICATION OF ISSUE
98-5 TO CERTAIN CONVERTIBLE INSTRUMENTS.

On February 28, 2002 the Company  completed a private  placement of subordinated
promissory notes (the Additional  Subordinated  Notes) in the amount of $425,000
with  certain  members  of the  Board  of  Directors  of  the  Company  or  such
individuals'  affiliated entities. Of this amount, the Company received $275,000
in February  2002 and  $150,000  was  received  in March 2002.  These notes bear
interest at 13% and are due in full on October 26, 2002 and are  subordinate  to
both  the FMP and RG bank  credit  facilities.  The  holders  of the  Additional
Subordinated  Notes also  received  warrants  to purchase  102,000  shares of RP
common stock at a price of $0.25 per share.  The warrants may be exercised for a
ten-year period. Additionally,  the holders of the Additional Subordinated Notes
have an option to convert these notes into RP common stock at an exchange  ratio
of $0.25 per share.

Using the Black Scholes  option-pricing model warrants granted to the holders of
the Additional  Subordinated Notes were deemed to have no value. On February 28,
2002, the commitment  date of the  Additional  Subordinated  Notes the Company's
common  Stock  had a fair  value of $0.20 per  share,  as such,  the  conversion
feature was also deemed to have no value.

In connection with the August 16, 2002 refinancing,  the Additional Subordinated
Notes and accrued  interest of $16,070 were converted  into 1,764,280  shares of
common  stock.   Accordingly,   the  Additional  Subordinated  Notes  have  been
classified as long-term debt as of May 31, 2002.

10. OPERATING LEASES

Prior to January 1, 2002,  the Company  leased its  corporate  headquarters  and
certain  equipment under operating  lease  agreements.  Rental expense under the
leases totaled approximately $0.1 million, $0.2 million and $0.3 million for the
fiscal years ended May 31, 2002, 2001 and 2000, respectively. In connection with
the  restructuring,  the  Company  vacated the leased  headquarters.  Future net
minimum  lease  payments  associated  with the  remaining  term of the lease are
included in the restructuring charge for the fiscal year ended May 31, 2002.

                                       36
<PAGE>
11. STOCK OPTION PLANS AND WARRANTS

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, 2002,  76,447  shares of common  stock are  reserved  for issuance  upon the
exercise of the remaining options outstanding, which expire through May 2005.

Also, 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,  2002,  245,874  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 1,500,000. As of May 31, 2002, 1,500,000
shares of common stock are  reserved  for issuance  upon the exercise of options
outstanding  under the RP Plan.  As of May 31,  2002,  no  additional  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, has been exercised as of May 31, 2002.

During the year ended May 31,  2002,  warrants to purchase  402,000  shares were
granted in  conjunction  with the  issuance of  subordinated  debt.  Warrants to
purchase  147,808  shares were  exercised.  The  remaining  warrants will expire
during fiscal year 2012. Stock option and warrant activity is as follows:

<TABLE>
<CAPTION>
                                        FM
                                     PRECISION                                                TOTAL       WEIGHTED-
                                     GOLF CORP.       RG                                     OPTIONS      AVERAGE
                                     CONVERTED     CONVERTED      RP PLAN                      AND        EXERCISE
                                      OPTIONS       OPTIONS       OPTIONS      WARRANTS      WARRANTS      PRICE
                                    ----------    ----------    ----------    ----------    ----------    ---------
<S>                                 <C>           <C>           <C>           <C>           <C>           <C>
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
   Granted                                  --            --       594,000       402,000       996,000         .42
   Exercised                           (11,106)           --            --      (147,808)     (158,914)        .25
   Cancelled                                --            --       (31,583)           --       (31,583)       2.35
   Expired                                  --       (20,250)           --            --       (20,250)      16.58
                                    ----------    ----------    ----------    ----------    ----------
Outstanding at May 31, 2002             76,447       245,874     1,508,190       279,192     2,109,703        2.23
                                    ==========    ==========    ==========    ==========    ==========
</TABLE>

                                       37
<PAGE>
11.  STOCK OPTION PLANS AND WARRANTS (CONTINUED)

A summary of information  about stock options  outstanding at May 31, 2002 is as
follows:

<TABLE>
<CAPTION>
                        OPTIONS AND WARRANTS OUTSTANDING          OPTIONS AND WARRANTS EXERCISABLE
                  ---------------------------------------------   --------------------------------
                                      WEIGHTED-       WEIGHTED-                          WEIGHTED-
                      NUMBER           AVERAGE         AVERAGE        NUMBER              AVERAGE
   RANGE OF       OUTSTANDING AT      REMAINING       EXERCISE    EXERCISABLE AT         EXERCISE
EXERCISE PRICES    MAY 31, 2002    CONTRACTUAL LIFE     PRICE      MAY 31, 2002            PRICE
---------------   --------------   ----------------   ---------   --------------         ---------
<S>               <C>              <C>                <C>         <C>                    <C>
$0.24 - $ 0.99        330,639            5.3            $ 0.25        330,639              $ 0.25
$1.00 - $ 1.99        390,740            5.9            $ 1.77         65,740              $ 1.83
$2.00 - $ 2.74        811,700            7.3            $ 2.31        538,922              $ 2.31
$2.75 - $ 6.75        565,874            6.0            $ 3.42        523,809              $ 3.46
$8.00 - $24.50         10,750            0.5            $11.70         10,750              $11.70
                   ----------                                      ----------
                    2,109,703                                       1,469,860
                   ==========                                      ==========
</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:

                                                    YEAR ENDED MAY 31
                                                ------------------------
                                                  2002            2001
                                                --------        --------
     Risk free interest rate                      5.1%            5.4%
     Expected dividend yield                      None            None
     Expected life                              10 years        10 years
     Expected volatility                          188%            61%

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,

                                                  YEAR ENDED MAY 31
                                           --------------------------------
                                             2002        2001        2000
                                           --------    --------    --------
     Net income (loss):
       As reported                         $(12,801)   $   (584)   $    870
       Pro forma                            (12,947)     (1,130)        555

     Basic and diluted net income
       (loss) per share:
       As reported                            (1.98)      (0.10)       0.15
       Pro forma                              (2.01)      (0.20)       0.10

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.

As of May 31, 2002 and 2001, 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.

                                       38
<PAGE>
12. INCOME TAXES

The components of the provision for income taxes from continuing  operations are
as follows (in thousands):

                                                        YEAR ENDED MAY 31
                                                   ---------------------------
                                                    2002       2001      2000
                                                   ------     ------    ------
      Current (credit)                             $   (2)    $   16    $   13
      Deferred                                        806         17       603
                                                   ------     ------    ------
                                                   $  804     $   33    $  616
                                                   ======     ======    ======

The  Company's  effective  income tax rate,  as a percent of pretax  income from
continuing operations, differs from the statutory federal rate as follows:

                                                        YEAR ENDED MAY 31
                                                   ---------------------------
                                                    2002       2001      2000
                                                   ------     ------    ------
     Statutory federal income tax rate                (34)%      (34)%      34%
     State taxes, net of federal benefit               (4)        (6)        6
     Nondeductible goodwill amortization               --         29        11
     Nondeductible environmental civil penalty         --         14
     Change in valuation allowance                     45                  (11)
     Other                                              1          3         1
                                                   ------     ------    ------
     Effective income tax rate                          8%         6%       41%
                                                   ======     ======    ======

The components of deferred  income tax assets  (liabilities)  are as follows (in
thousands):

                                                                   MAY 31
                                                             ------------------
                                                               2002       2001
                                                             -------    -------
     Current asset (liability):
       Financial allowances and accruals
         not currently deductible                            $ 1,228    $   523
       Valuation allowance                                    (1,228)      (299)
                                                             -------    -------
                                                                   0        224
     Long-term asset (liability):
       Tax effect of net operating loss carryforwards          5,862      2,309
       Property, plant and equipment                            (680)      (585)
       Compensation related to grant of stock options             94         94
       Other                                                      38        210
       Valuation allowance                                    (5,314)    (1,446)
                                                             -------    -------
                                                                   0        582
                                                             -------    -------
                                                             $     0    $   806
                                                             =======    =======

As of May 31,  2002,  the Company has  federal  and state NOL  carryforwards  of
approximately  $15.9  million  and $10.7  million,  respectively,  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,  2002,
approximately $2.7 million of  Pre-Acquisition  NOLs are available under Section
382. The NOLs,  if unused,  expire  beginning  in 2009 and ending  2021.  Future
realization of both Pre-Acquisition and Post Acquisition NOLs is uncertain.

                                       39
<PAGE>
13. OTHER RELATED PARTY TRANSACTIONS

Professional  fees of approximately  $122,000,  $68,000 and $28,000 were paid to
certain stockholder  affiliates during the fiscal years ended May 31, 2002, 2001
and 2000, respectively.

14. FOREIGN SALES

The Company has export sales to customers  located  primarily  throughout Japan,
Australia,  the United Kingdom and Canada. Foreign sales were approximately 29%,
23% and 32% of the Company's sales for the fiscal years ended May 31, 2002, 2001
and 2000,  respectively.  The following table  summarizes the Company's sales by
major worldwide regions (in thousands):

                                                         YEAR ENDED MAY 31,
                                                    ---------------------------
                                                      2002      2001      2000
                                                    -------   -------   -------
     United States                                  $16,736   $23,144   $20,334
     Japan                                            4,486     5,869     8,210
     Other                                            2,340       984     1,555
                                                    -------   -------   -------
     Total                                          $23,562   $29,997   $30,099
                                                    =======   =======   =======

15. 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.

PENSION PLAN

Approximately  75% 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.  Changes in the accumulated  benefit obligation follows
(in thousands):

                                                           YEAR ENDED MAY 31,
                                                           ------------------
                                                             2002       2001
                                                           -------    -------
     Beginning of year accumulated benefit obligation      $   549    $   368
     Service costs                                             108         92
     Interest cost                                              45         29
     Actuarial (gain) loss                                     101         60
     Benefit payments                                          (28)        --
                                                           -------    -------
     End of year accumulated benefit obligation            $   775    $   549
                                                           =======    =======

                                       40
<PAGE>
15. BENEFIT PLANS (CONTINUED)

The  reconciliation  of the funded  status of the Union Plan to amounts shown in
the consolidated balance sheets follows (in thousands):

                                                          MAY 31,
                                                      ---------------
                                                       2002      2001
                                                      -----     -----
     Accumulated benefit obligation                   $(775)    $(549)
     Plan assets at fair value                          411       351
                                                      -----     -----
     Funded status (accrued benefit cost)             $(364)    $(198)
                                                      =====     =====

The  reconciliation  of the  changes  in the fair  value of  assets of the Union
follows (in thousands):

                                                     YEAR ENDED MAY 31,
                                                     ------------------
                                                       2002      2001
                                                      -----     -----
     Beginning of year fair value of assets           $ 351     $ 265
     Employer contributions                             108       114
     Actual return on plan assets                       (20)      (28)
     Benefit payments                                   (28)       --
                                                      -----     -----
     End of year fair value of assets                 $ 411     $ 351
                                                      =====     =====


The components of net pension cost were (in thousands):

                                                          YEAR ENDED MAY 31,
                                                      -------------------------
                                                       2002      2001      2000
                                                      -----     -----     -----
     Service cost                                     $ 108     $  92     $  98
     Interest cost                                       45        29        22
     Expected return on assets                          (29)      (17)       (4)
     Net amortization and deferral                        4        (2)       --
                                                      -----     -----     -----
     Net periodic pension cost                        $ 128     $ 102     $ 116
                                                      =====     =====     =====


A summary of the Company's key actuarial assumptions follows:

                                                       2002      2001      2000
                                                      -----     -----     -----
     Discount rate                                     7.16%     7.16%     7.75%
     Expected long-term rate of return on assets       9.00%     9.00%     9.00%

                                       41
<PAGE>
16. 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
expenses  to  segments.  The  amounts in this  illustration  are the  amounts in
reports used by the chief operating officer (in thousands):

<TABLE>
<CAPTION>
                                                      YEAR ENDED MAY 31, 2002
                                          ------------------------------------------------
                                          GOLF CLUB    GOLF CLUB       (A)
                                            SHAFTS       GRIPS     UNALLOCATED     TOTAL
                                          ---------    ---------   -----------   ---------
<S>                                       <C>          <C>         <C>           <C>
Net sales                                 $  19,833    $   3,729    $            $  23,562
Operating income (loss)                      (2,337)        (418)      (1,313)      (4,068)
Depreciation                                    625          229                       854
Interest expense                                728           59        1,250        2,037

Total assets for reportable segments      $  11,528    $   8,105                 $  19,633
Elimination of investment in subsidiary                                             (4,465)
                                                                                 ---------
Consolidated total assets                                                        $  15,168
                                                                                 =========
</TABLE>

(A) Unallocated for the year ended May 31, 2002 includes costs associated with a
corporate restructuring and accretion of discount on subordinated debt which are
not allocated to the segments operating results.

<TABLE>
<CAPTION>
                                                      YEAR ENDED MAY 31, 2001
                                          ------------------------------------------------
                                          GOLF CLUB    GOLF CLUB
                                            SHAFTS       GRIPS     UNALLOCATED     TOTAL
                                          ---------    ---------   -----------   ---------
<S>                                       <C>          <C>         <C>           <C>
Net sales                                 $  26,070    $   3,927    $            $  29,997
Operating income (loss)                       1,042         (945)                      97
Depreciation and amortization                   564          542                     1,106
Interest expense                                799           89                       888

Total assets for reportable segments      $  14,560    $  16,563                 $  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     UNALLOCATED     TOTAL
                                          ---------    ---------   -----------   ---------
Net sales                                 $  25,559    $   4,540    $            $  30,099
Operating income (loss)                      (2,004)         141                    (1,863)
Depreciation and amortization                   384          774                     1,158
Interest expense                                575           69                       644

Total assets for reportable segments      $  13,488    $  17,475                 $  30,963
Assets of discontinued operations                                                       43
Elimination of investment in subsidiary                                             (6,064)
                                                                                 ---------
Consolidated total assets                                                        $  24,942
                                                                                 =========
</TABLE>

                                       42
<PAGE>
17. CONCENTRATION OF CREDIT RISK

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of trade receivables.  Concentrations of credit risk with
respect to these  receivables  are a result of sales to  significant  customers.
During the fiscal  years ended May 31,  2002 and 2001,  the  Company's  top five
customers  accounted  for  58%  and  72%  of  total  sales,  respectively.   Two
significant  customers during the 2002 fiscal year  represented  amounts greater
than 10%, each at 19% of total sales.  Three  significant  customers  during the
2001 fiscal year  represented  amounts  greater  than 10%, at 21%,  20% and 19%,
respectively.

18. 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 of 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 SPA
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, most of which was reimbursed by Brunswick.

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 were in violation of authorized limits
under an existing  permit for the discharge of treated  wastewater  from the FMP
plant to the Naugatuck River.  The Company  submitted its response to the NOV in
December 2000 and received  drafts of a consent order from the DEP in April 2001
and October 2001. Terms of the draft consent order include,  among other things,
that the  Company  pay a civil  penalty  of  approximately  $225,000,  submit to
various  compliance audits, and complete a feasibility study to determine if the
discharge  of treated  wastewater  from the FMP plant can be  diverted  from the
Naugatuck River. As a result of this study, the Company spent approximately $0.3

                                       43
<PAGE>
million for capital  expenditures  to comply with the terms of the consent order
during the fiscal year ended May 31,  2002.  A provision  was  recorded  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.  However,  Management  believes it is possible  that the proposed
civil penalty may be reduced when the final consent order is executed.

Environmental  Costs  related to the various  matters  discussed  above  totaled
$20,000 and $0.4 million,  net of recoveries,  during the fiscal years ended May
31, 2002 and 2001, respectively.

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected  unaudited  quarterly  financial  data (in thousands  except per s hare
data) follows:

<TABLE>
<CAPTION>
                                                        YEAR ENDED MAY 31, 2002
                                        --------------------------------------------------------
                                          FIRST      SECOND       THIRD      FOURTH       TOTAL
                                        --------    --------    --------    --------    --------
<S>                                     <C>         <C>         <C>         <C>         <C>
     Net sales                          $  6,665    $  4,475    $  5,606    $  6,816    $ 23,562
     Gross profit                          1,359         663       1,067         (15)      3,074
     Net loss                             (7,295)     (1,791)       (807)     (2,908)    (12,801)

     Per share information:
       Basic and diluted -
         Net loss                          (1.28)      (0.32)      (0.14)      (0.24)      (1.98)

                                                        YEAR ENDED MAY 31, 2001
                                        --------------------------------------------------------
                                          FIRST      SECOND       THIRD      FOURTH       TOTAL
                                        --------    --------    --------    --------    --------
     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)       0.02        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
</TABLE>

                                       44
<PAGE>
20. REVISION FOR BENEFICIAL CONVERSION FEATURE

The Company has restated its previously  issued  financial  statements to revise
its  accounting  for the  Subordinated  Note that was converted  during the year
ended May 31, 2002 (see note 9). In connection  therewith,  additional  interest
expense of  $1,071,000  was  recognized,  including  $928,000  applicable to the
beneficial   conversion  feature  of  the  Subordinated  Note  and  $143,000  of
unamortized  discount associated with the detached warrants,  in accordance with
EITF 98-5,  ACCOUNTING FOR CONVERTIBLE  SECURITIES  WITH  BENEFICIAL  CONVERSION
FEATURES  OR  CONTINGENTLY   ADJUSTABLE   CONVERSION   RATIOS  and  EITF  00-27,
APPLICATION OF ISSUE 98-5 TO CERTAIN CONVERTIBLE  INSTRUMENTS.  As such, the net
loss  previously  reported for the year ended May 31, 2002 of  $(11,730,000)  or
$(1.82) per share was increased to $(12,801,000) or $(1.98) per share.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

                                       45
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Richard P.  Johnston,  age 71, has been a director of the Company since its
organization  in 1996 and  served as  Chairman  of the  Board,  Chief  Executive
Officer,  of the Company  from May 1996 to October 1997 and from October 1999 to
the  present.  Mr.  Johnston  was  Chairman of the Board of  Merbanco,  Inc.,  a
merchant banking company, from 1991 to 1998. Mr. Johnston is a director of Myers
Industries,  Inc.  (MYE:  NYSE),  a plastic  and rubber  products  manufacturer,
Results  Radio LLC,  a radio  broadcasting  company,  and Hotel  Online.com,  an
Internet service provider for hotels.  On February 28, 2002, the Johnston Family
Living  Trust u/a dtd.  April 11, 1994 (the  "Trust"),  was granted the right to
designate  one person to be nominated  for election to the Board of Directors of
the Company  pursuant  to a  Designation  Agreement  between the Company and the
Trust for so long as the Trust owns of record or beneficially at least 1% of the
outstanding  shares of common stock of the Company.  Pursuant to the Designation
Agreement,  such  designee is to  initially be Richard P.  Johnston.  Richard P.
Johnston  is the  father  of David E.  Johnston  and  Christopher  A.  Johnston,
directors of the Company.

     Charles S. Mechem,  Jr., age 71, has served as a director since March 2000.
Mr.  Mechem  retired  as  Chairman  of  Convergys  Corporation,  a  provider  of
outsourced customer management services in May 2000, a post he was elected to in
January   1999.   He  served  as   Chairman   of   Cincinnati   Bell   Inc.,   a
telecommunications  services holding  company,  from April 1996 to December 1998
and has been a consultant with Arnold Palmer  Enterprises  since March 1996. Mr.
Mechem retired in December 1995 as Commissioner of the Ladies  Professional Golf
Association and is now Commissioner Emeritus of that organization. Mr. Mechem is
a director of J. M. Smucker & Co., a maker of jams and jellies.

     Christopher A. Johnston,  age 41, served as a director and President of the
Company from its  inception in 1996 until October 1997 and director and Chairman
of the Board and Treasurer from October 1997 until August 1998. Mr. Johnston was
elected again as a director to fill a vacancy on the Board in January 2001.  Mr.
Johnston  has been  President  of  Merbanco,  Inc.  since 1991.  Christopher  A.
Johnston is the son of Richard P. Johnston and the brother of David E. Johnston.

     David E. Johnston, age 47, served as Vice President of the Company from its
organization  in 1996  until  October  1997,  Executive  Vice  President,  Chief
Operating  Officer  from October 1997 until  August  1998,  and  Executive  Vice
President,  Special  Projects from August 1998 to October 1999. Mr. Johnston has
been a director of the Company since June 1996. Mr. Johnston is President of the
Johnston Family  Charitable  Foundation,  a private  charitable  foundation (the
"Foundation").  On March 1,  2002,  the  Foundation  was  granted  the  right to
designate  one person to be nominated  for election to the Board of Directors of
the Company  pursuant  to a  Designation  Agreement  between the Company and the
Foundation for so long as the Foundation owns of record or beneficially at least
10% of the  outstanding  shares of common stock of the Company.  Pursuant to the
Designation  Agreement,  such designee is to initially be David E. Johnston.  At
such date, the Foundation  acknowledged  that David E. Johnston would thereafter
be  serving  on the  Board of  Directors  of the  Company  as the  deputy of the
Foundation,  thereby making the Foundation a director by deputization.  David E.
Johnston is the son of Richard P.  Johnston  and the brother of  Christopher  A.
Johnston.

     Kenneth J.  Warren,  age 59,  served as  Secretary  of the Company and as a
director from its  organization in 1996 to August 1999, and was elected again as
Secretary  and a  director  in March  2001.  Mr.  Warren  has been a  practicing
attorney for over 35 years.  Prior to 1996, he was a partner in Schwartz,  Kelm,
Warren & Ramirez and during 1996, he was of counsel to its successor,  Schwartz,
Warren & Ramirez  L.L.C.  in Columbus,  Ohio. In January 1997, he opened his own
office for the practice of law in Dublin, Ohio.

     John C.  Lauchnor,  age 39, has served as a director and  President,  Chief
Operating Officer, since September 2001.. From 1996 until 1998, Mr. Lauchnor was
Vice  President-Operations,  of HPM Corporation,  an injection molding machinery
company,  and from 1998 to 2001,  was President of PCC Olofsson,  a machine tool
manufacturing and metal fabrication company.

     Raymond  J.  Minella,  age 52,  was a  director  of the  Company  from  its
organization  in 1996 (and  served as  Chairman of the Board from August 1998 to
October 1999) until his  resignation as a director on July 24, 2002. The vacancy
on the Board created by Mr. Minella's resignation has not been filled.

                                       46
<PAGE>
EXECUTIVE OFFICERS

     The principal occupation of each other executive officer of the Company for
the past five years is as follows:

     Ronald L.  Chalmers,  age 58,  served as  Director  of  Sales/Marketing  of
Brunswick  Corporation  from 1992 to May 1996. From May 1996 until October 1997,
he served as President of FM Precision Golf  Manufacturing  Corp., the Company's
golf club shaft manufacturing  subsidiary. He was a director of the Company from
June  1996  to  August   1999  and  served  as   Executive   Vice   President  -
Administration/Manufacturing  of the Company from October 1997 to October  1999,
served  as  Executive  Vice  President  -  Manufacturing  from  October  1999 to
September 2001, and now serves as Executive Vice President International Sales.

     Frank  Mertes,  age 44, has served as Vice  President  - Finance  and Chief
Financial  Officer since January 2002.  From May 1997 until  September  1999, he
served as Director of Finance for  Perstorp  Compounds,  Inc, a producer of Urea
and Melimine  Compounds.  From October 1999 until  December  2001,  he served as
corporate controller of Telaxis  Communications  Corp., a developer and supplier
of broadband wireless access products.

     James  Davidson,   age  38,  has  served  as  Executive  Vice  President  -
Manufacturing  since  September  2001.  From April 1996 until  December 1998, he
served as plant  manager  for True  Temper  Sports,  producer of steel golf club
shafts.  From January 1999 until  September  2001, he served as plant manager of
Mueller Copper Tube, a manufacturer of copper tube products.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Based  solely  on  its  review  of  Forms  3 and 4 and  amendments  thereto
furnished  to the Company  pursuant to Rule  16a-3(e)  received by it during its
most recent fiscal year, and written  representations from the reporting persons
that no Forms 5 were  required  for those  persons,  the Company  believes  that
during  its fiscal  year ended May 31,  2002,  all  filing  requirements  of the
executive  officers,  directors and greater than 10% stockholders as required by
Section  16(a) of the  Securities  Exchange Act were  complied  with in a timely
fashion  except that (a) in a single joint Form 4 report of Richard P.  Johnston
and related parties for the month of March 2002 which had been timely filed, two
components of a transaction were inadvertently omitted and such report was later
amended to report (i) the acquisition of a related warrant and (ii)  acquisition
of  beneficial  ownership  of shares  issuable  in  connection  with a  guaranty
agreement;  and (b) a Form 4 report of Richard P.  Johnston and related  parties
for the month of November 2001 was incorrect and subsequently amended to reflect
that 1,000  shares shown as having been  purchased  by the  Johnston  Charitable
Remainder  Unitrust #3 ("CRT#3") were not purchased and 300 shares that had been
purchased were not reported,  resulting in an  overstatement of 700 shares owned
by CRT#3.

                                       47
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

     The following  table sets forth certain  information  concerning the annual
and long term  compensation  of the chief  executive  officer  and the four most
highly paid executive ("Named Executives"), for the three fiscal years ended May
31, 2002:

<TABLE>
<CAPTION>
                                                                                                    Long Term
                                                                                                   Compensation
                                                           Annual Compensation                        Awards
                                          ---------------------------------------------------    ----------------
                                                                                                    Securities
                                                                                                    Under-lying
                                                                                 Other Annual    Options/Warrants
Name and Principal Position               Year        Salary           Bonus     Compensation        (shares)
---------------------------               ----       ---------       ---------   ------------        --------
<S>                                       <C>        <C>             <C>         <C>             <C>
Richard P. Johnston, Chairman of the      2000       $  10,000              --          --             5,000
Board, Chief Executive Officer (a)        2001       $  10,000              --          --                --
                                          2002       $  10,000              --          --            20,000

John C. Lauchnor, President and           2002 (b)   $ 128,077       $  30,000   $  19,097 (c)       250,000
Chief Operating Officer

Ronald L. Chalmers, Executive Vice        2000       $  95,000       $  73,625   $  15,435 (d)        35,000
President                                 2001       $ 101,354              --   $  14,905 (d)            --
                                          2002       $ 102,000              --   $  16,904 (d)            --

James Davidson, Executive Vice            2002 (e)   $  78,269              --   $  25,000 (c)        75,000
President

Frank W. Mertes, Vice President -         2002 (f)   $  45,692              --          --            75,000
Finance and Chief Financial Officer

Thomas A. Schneider, President and        2000       $ 146,462       $  82,500          --           120,000
Chief Operating Officer                   2001       $ 165,077              --          --           100,000
                                          2002 (g)   $ 170,000 (h)          --          --            20,000

Anthony J. Montgomery, Executive Vice     2000       $ 135,577       $  77,000          --           100,000
President                                 2001       $ 158,154              --          --            80,000
                                          2002 (i)   $ 213,493 (j)          --          --            15,000
</TABLE>

(a)  The  Chairman of the Board,  by reason of his  position,  functions  as the
     chief executive officer of the Company.  The Chairman of the Board receives
     no  compensation  (other  than an  initial  grant of an option to  purchase
     20,000  shares,  his normal  director fees of $2,500 per quarter and annual
     grant of an option to  purchase  5,000  shares)  for  serving as such chief
     executive officer. (b) Elected September 25, 2001.
(c)  Relocation expenses
(d)  Club dues and automobile expenses.
(e)  Elected September 1, 2001.
(f)  Elected January 2, 2002.
(g)  Mr.  Schneider   resigned   effective   October  2,  2001.  See  "Severance
     Agreements" below.
(h)  Includes severance payments of $111,154.
(i)  Mr.  Montgomery  resigned  effective  November  15,  2001.  See  "Severance
     Agreements" below.
(j)  Includes severance payments of $126,154.

                                       48
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth certain  information with respect to options
to purchase  securities from the Company granted to the named executives  during
fiscal year 2002 (excludes warrants issued in financings described in Item 13):

<TABLE>
<CAPTION>
                                  Number of       % of Total
                                  Securities       Options
                                  Underlying      Granted to
                                    Options      Employees in    Exercise Price                          Grant Date
       Name                       Granted (#)     Fiscal Year      ($/Share)       Expiration Date    Present Value (c)
       ----                       -----------     -----------      ---------       ---------------    -----------------
<S>                               <C>             <C>            <C>               <C>                <C>
Richard P. Johnston                 20,000(a)         3.3%           $2.25             7/24/11              $2.24
                                     5,000(a)         0.8%           $2.40             9/25/11              $2.39

John C. Lauchnor                   250,000(b)        40.7%           $1.90             9/24/11              $1.89

Ronald L. Chalmers                     -0-             --               --                  --

James Davidson                      75,000(b)        12.2%           $2.50             9/10/11              $2.49

Frank Mertes                        75,000(b)        12.2%           $1.26              1/2/12              $1.26

Thomas A. Schneider                 20,000            3.3%           $2.25             7/24/11              $2.24

Anthony J. Montgomery               15,000            2.4%           $2.25             7/24/11              $2.24
</TABLE>

----------
(a)  Options vest one-quarter on each annual stockholder  meeting date held more
     than six months after grant.
(b)  Options vest  one-quarter  on each of the first four  anniversaries  of the
     date of grant.
(c)  The Grant Date Present Value was determined using the standard  application
     of the  Black-Scholes  option  pricing model using the  following  weighted
     average assumptions:  volatility 187.5%, dividend yield 0%, and a risk free
     interest  rate  of  5.08%  based  on  the  options  being  outstanding  for
     approximately  10 years.  The Grant  Date  Present  Values do not take into
     account   risk   factors   such  as   non-transferability   and  limits  on
     exercisability. In assessing the Grant Date Present Values indicated in the
     above  table,  it should be kept in mind  that no matter  what  theoretical
     value is placed on an option on the date of grant,  the  ultimate  value of
     the option is dependent on the market value of the Common Stock at a future
     date,  and the  extent,  if any,  by which such  market  value  exceeds the
     exercise price on the date of exercise.

AGGREGATED  OPTION  EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

     The following  table sets forth certain  information  concerning the number
and value of unexercised  Options held by the Named Executives at the end of the
fiscal year ended May 31, 2002:

<TABLE>
<CAPTION>
                                                                     Value of Unexercised
                                 Number of Securities Underlying    In-the-Money Options at
                                  Unexercised Options at Fiscal         Fiscal Year-End:
                                           Year-End:                     Exercisable*/
             Name                  Exercisable*/Unexercisable            Unexercisable
     ---------------------       -------------------------------    -----------------------
<S>                              <C>                                <C>
     Richard P. Johnston                 26,302/28,750                      $0/$0

     John C. Lauchnor                      0/250,000                        $0/$0

     Ronald L. Chalmers                   45,453/5,100                      $0/$0

     James Davidson                         0/75,000                        $0/$0

     Frank Mertes                           0/75,000                        $0/$0

     Thomas A. Schneider                   310,228/0                        $0/$0

     Anthony J. Montgomery                 200,000/0                        $0/$0
</TABLE>

----------
*    at May 31, 2002 and within 60 days thereafter.

                                       49
<PAGE>
COMPENSATION OF DIRECTORS

     Non-employee  directors  receive a quarterly  retainer of $2,500 as well as
reimbursement  for certain travel expenses incurred in connection with attending
meetings.  Pursuant  to the  Royal  Precision,  Inc.  Stock  Option  Plan,  each
non-employee  member of the Board of  Directors  receives  (i) upon his  initial
election,  an option to purchase  20,000  shares and (ii) an annual  grant of an
option to purchase 5,000 shares if he has completed at least one year of service
as a  director  and if he  attends  75% of the  meetings  of the  directors  and
committees  upon which he serves,  at a price equal to the fair market  value of
such shares on the day  preceding the date of grant.  On July 24, 2001,  options
for 20,000 shares were granted to the following directors:  Richard P. Johnston,
David E.  Johnston,  Kenneth J. Warren,  Christopher  A. Johnston and Raymond J.
Minella.  Mr.  Mechem did not  receive  such a grant  because  he was  granted a
similar option upon his first becoming a director. On November 25, 2001, options
for 5,000  shares  for  services  during  fiscal  year 2001 were  granted to the
following directors:  Richard P. Johnston, David E. Johnston, Raymond J. Minella
and  Charles S.  Mechem,  Jr. No annual  grant of  options  to Board  members to
purchase 5,000 shares was made for fiscal year 2002. Mr. Lauchnor's compensation
is  independently  reviewed and he received an option to purchase 250,000 shares
under the Royal  Precision,  Inc. Stock Option Plan on September 24, 2001. For a
description  of future cash  compensation  to be paid to Richard P. Johnston and
Christopher A. Johnston indirectly through Royal Associates,  Inc. commencing in
January 2003, see "Item 13. Certain Relationships and Related Transactions".

EMPLOYMENT AGREEMENTS

     On September  1, 2001,  the Company  entered  into an Executive  Employment
Agreement  with John C. Lauchnor  whereby the Company would employ Mr.  Lauchnor
effective  September  24, 2001 as President and Chief  Operating  Officer of the
Company.  Among other things, the Executive  Employment Agreement provided for a
term of three years,  subject to termination in certain  events.  As payment for
the services to be rendered by Mr.  Lauchnor,  Mr. Lauchnor is to receive a Base
Salary initially at $185,000  annually together with a bonus that would equal up
to 50% of his Base Salary if key  objectives  are  accomplished.  The  Agreement
provided  that Mr.  Lauchnor  would  participate  in all employee  benefit plans
maintained by the Company,  insurance programs, paid vacations and similar plans
or programs.  In lieu of other life insurance  benefits,  the Company was to use
reasonable efforts in good faith to secure a $500,000 term life insurance policy
on the life of Mr.  Lauchnor  which  would be  owned  by the  Company,  with Mr.
Lauchnor  selecting the  beneficiary  of such policy.  Mr.  Lauchnor  received a
signing  bonus in the amount of $30,000,  $15,000 of which was paid November 15,
2001 and $15,000 of which was paid December 15, 2001.  Mr.  Lauchnor was also to
receive reimbursement for normal moving expenses, closing costs and realtor fees
on both the sale and  purchase  of his old and new homes  upon  presentation  of
appropriate  documentation,  together with taxes that may be due by Mr. Lauchnor
as a result of the  receipt of such  reimbursement,  and  reimbursement  for the
initiation fee for one country club up to $25,000,  which  reimbursement has not
been paid.

     On March 18, 2002,  the Company  entered into an Employment  Agreement with
James Davidson who was currently employed by the Company in consideration of his
remaining with the Company which provided, among other things, that in the event
that  prior  to the  second  anniversary  of the  date  of  the  agreement,  Mr.
Davidson's  employment is terminated other than for "Cause",  Mr. Davidson would
be paid as severance  pay an amount equal to his then base salary for the period
commencing on the date that his employment is terminated and ending on the later
of (a) the second  anniversary  of the date of the  agreement,  or (b) 12 months
from  the  termination  date,  payable  in  accordance  with the  customary  pay
practices of the Company (the "Employment Package").

SEVERANCE AGREEMENTS

     The Company had  entered  into  severance  agreements  with former  Company
executive  officers,  Thomas A.  Schneider,  Anthony J.  Montgomery and Kevin L.
Neill, which would take effect when the employee's  employment was terminated by
the Company (or any purchaser or successor to the Company) for any reason, other
than  cause,  or there was a change in the  terms of the  employee's  employment
resulting in his relocation from the Phoenix area or travel requirements by such
employee of more than 10 days per month; a reduction in pay; demotion, or change
in authority or duties.  These  agreements  provided for severance pay of twelve
months,  nine months and seven months,  respectively,  to be paid at the time of
termination of employment,  paid coverage under the Company's  existing  medical

                                       50
<PAGE>
and dental  plans for like  terms,  acceleration  of vesting of all  outstanding
options  held by the  employee  and  extension  of the  exercise  period of such
options for one year.  The  termination  of the  employment  of these  employees
occurred  on  October  2,  2001,  November  15,  2001,  and  January  16,  2002,
respectively.

     On  October 1, 2001,  Thomas A.  Schneider  entered  into an  Agreement  to
Terminate  Employment with the Company which provided that,  among other things,
Mr. Schneider would receive $170,000, without interest, payable according to his
existing bi-weekly payment cycle from October 3, 2001 to October 2, 2002 and all
employee stock options  previously  granted to Mr.  Schneider would  immediately
vest and Mr. Schneider would be entitled to exercise all such options during the
respective  option  terms  prior  to the  respective  expiration  dates  of such
options.

     On November 15, 2001,  Anthony J.  Montgomery  entered into an Agreement to
Terminate  Employment with the Company which provided that,  among other things,
Mr.  Montgomery  would receive  $132,154  payable from November 23, 2001 through
June 2002  according  to the second  monthly  salaried  pay cycle,  and existing
health and dental insurance through August 2002. The terms of all options having
a strike price equal to or less than the closing price of the  Company's  common
stock on the date of execution  of the  agreement  would  remain in effect.  The
terms for all options that have a strike price greater than the closing price of
the Company's  common stock on the date of execution of the  agreement  would be
immediately  vested and Mr.  Montgomery  would be entitled to exercise  all such
options  during the respective  option terms prior to the respective  expiration
dates of such options.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Raymond J. Minella  (Chair),  Charles S.  Mechem,  Jr. and  Christopher  A.
Johnston, outside directors,  served on the Personnel and Compensation Committee
in fiscal year 2002.  Mr.  Minella  resigned as a director for personal  reasons
unrelated  to the  Company in July 2002.  Christopher  A.  Johnston  is a former
officer of the Company and entered into a transaction  with the Company in March
2002  whereby  Mr.  Johnston  loaned to the  Company  $150,000  and  received in
exchange  therefor the Company's  subordinated  promissory note and a warrant to
purchase 36,000 shares of the Company's common stock at $.25 per share. The note
has since been converted to common stock. See "Certain Relationships and Related
Transactions"  below. No director or executive  officer of the Company serves on
the  compensation  committee  of the board of directors of any company for which
Messrs. Mechem and Johnston serve as directors.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     During  fiscal  year  2002,  Raymond J.  Minella  (Chair),  Christopher  A.
Johnston and Charles S. Mechem, Jr. functioned as the Personnel and Compensation
Committee (the  "Committee").  Mr. Minella  resigned as a director in July 2002.
This Committee  reviews and approves the Company's  compensation  philosophy and
policies  and  the  application  of such  policies  to the  compensation  of the
executive  officers.  The  Company's  philosophy  is to  link  executive  pay to
performance  that  enhances  stockholder  value.  The goals of the  compensation
program  are to provide  compensation  levels  necessary  to attract  and retain
exceptional talent, to motivate the executives to achieve the Company's business
goals,  and to recognize  individual  contributions  as well as overall business
results.

     The key elements of the Company's  executive  compensation are base salary,
performance  based bonus and long-term  incentives in the form of stock options.
The Committee does not use a formula to weight the various factors it considers.
The Company's policies with respect to each of the elements are discussed below.

BASE SALARIES

     Base salaries for  executive  officers are  determined  by  evaluating  the
responsibilities  of the position and the experience of the  individual,  and by
reference to the  competitive  marketplace  for  executive  talent,  including a
comparison to base salaries for comparable positions at other companies included
in the Company's peer group. Base salary adjustments are determined  annually by
evaluating   the  financial   performance   and,  where   appropriate,   certain
non-financial   performance   measures  of  the  Company,   and  the  individual
performance of each executive officer.

     Richard P. Johnston is the Chief  Executive  Officer and served as Chairman
of the Board during fiscal year 2002. The Chairman of the Board has not received
compensation in such capacity but is reimbursed for all travel and out of pocket
costs incurred in connection with his duties.  John C. Lauchnor is the President
and Chief Operating  Officer and in the fiscal year ended May 31, 2002, his base
salary was determined  based on both his past individual  performance and market
comparisons, including companies in the Peer Index referred to below.

                                       51
<PAGE>
     For a  description  of future  cash  compensation  to be paid to Richard P.
Johnston and Christopher A. Johnston  indirectly through Royal Associates,  Inc.
commencing  in January 2003,  see "Item 13.  Certain  Relationships  and Related
Transactions".

EXECUTIVE BONUSES

     The  Company's  executive  officers  were eligible for an annual cash bonus
under an incentive compensation plan for management established and monitored by
the Board of Directors.  Individual  and corporate  performance  objectives  are
established at the beginning of each year by the Committee.  Eligible executives
are assigned target bonus levels.  The corporate  performance  measure for bonus
payments  for the  fiscal  year  ended May 31,  2002 was based on the  Company's
pre-tax  profitability.  In fiscal  2002,  the  Company did not meet its primary
profitability  goals and no bonuses were awarded under the plan. The Company has
adopted an  Executive  Bonus  Program  for Fiscal  Year 2003 which will  include
managers and executives who are continuously employed from the beginning of each
fiscal year  through the date of bonus.  If  employment  is for less than a full
year,  those persons are eligible only if approved by the Chairman of the Board.
Bonus  opportunity  levels are assigned to each participant based on competitive
rates  of pay,  internal  equity  and the  ability  to  influence  results.  The
Executive  Bonus  Program  for Fiscal  Year 2003 has been filed as an Exhibit to
this Form 10-K Report.

     The Committee established a plan outlining how the bonus provided for under
Mr.  Lauchnor's  Employment  Agreement was to be earned for fiscal year 2002 and
the years thereafter.  Initially,  for fiscal year 2002, 75% of the bonus was to
be based upon net income  before tax of the Company for the period  September 1,
2001 and May 31, 2002 and 25% of the bonus was to be based upon cash flow of the
Company from operations for the same period.

STOCK OPTIONS

     The purpose of the Company's  stock option plan is to enable the Company to
attract and retain capable employees, officers, directors and consultants and to
provide them with long-term incentives to continue their service to the Company,
align their interests with those of the  stockholders,  to maximize the value of
the  Company  to its  stockholders  and to aid  the  employee  in  acquiring  an
ownership interest in the Company.

     In fiscal 2002, Messrs. Lauchnor,  Davidson and. Mertes received options to
purchase 250,000, 75,000 and 75,000 shares of common stock, respectively,  at an
exercise  price equal to the fair market  value of a share on the day  preceding
the date of grant.  The stock option  grants to Messrs.  Lauchnor,  Davidson and
Mertes were  negotiated as part of the terms of their  employment  and took into
account  the duties and  responsibilities  of the  individual,  their  potential
impact on the performance of the Company,  individual performance,  and years of
work experience.

POLICY ON DEDUCTIBILITY OF COMPENSATION

     The Budget  Reconciliation Act of 1993 amended the Internal Revenue Code to
add Section 162(m) which bars a deduction to any publicly held  corporation  for
compensation  paid to a "covered  employee"  in excess of $1  million  per year.
Generally, the Company intends that compensation paid to its "covered employees"
shall be deductible to the fullest extent permitted by law.

CONCLUSION

     Through  the  programs  described  above,  a  significant  portion  of  the
Company's executive  compensation is linked directly to corporate and individual
performance and stock price appreciation.  The Compensation Committee intends to
continue the policy of linking executive  compensation to corporate  performance
and returns to stockholders.

                                        PERSONNEL AND COMPENSATION COMMITTEE
                                        Charles S. Mechem, Jr.
                                        Christopher A. Johnston

                                       52
<PAGE>
PERFORMANCE GRAPH

     The performance graph compares the cumulative total  shareholder  return on
the Company's Common Stock with the cumulative total return for the NASDAQ Stock
Market (the "Market  Index") and an index of NASDAQ Stocks (SIC 3949) - Sporting
and Athletic Goods (the "Peer Index"), assuming an investment of $100 on May 31,
1998 in each of the Company's  Common  Stock,  the stock  comprising  the Market
Index and the stock comprising the Peer Index.

                         5/31/1998  5/31/1999  5/31/2000  5/31/2001  5/31/2002
                         ---------  ---------  ---------  ---------  ---------
Royal Precision            $100       $ 58       $ 57       $ 39       $  4
Market Index               $100       $139       $191       $119       $ 91
Peer Index                 $100       $ 78       $ 68       $ 77       $ 74

                                       53
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

EQUITY COMPENSATION PLAN INFORMATION

     The following table gives information about the Company's common stock that
may be issued upon the exercise of options, warrants and rights under all of the
Company's existing equity  compensation plans as of May 31, 2002,  including the
1997 Stock Option Plan.

<TABLE>
<CAPTION>
                                                                               (c) Number of  Securities
                       (a) Number of  Securities                               Remaining  Available  for
                       to   be    Issued    Upon   (b)   Weighted    Average   Future   Issuance   Under
                       exercise  of  Outstanding   Exercise     Price     of   Equity Compensation Plans   (d)  Total of  Securities
                       Options,   Warrants   and   Outstanding      Options,   (Excluding     Securities   Reflected  in Columns (a)
                       Rights                      Warrants and Rights         Reflected in Column (a)     and (c)
                       -------------------------   -------------------------   -------------------------   -------------------------
<S>                    <C>                         <C>                         <C>                         <C>
Equity Compensation
Plans Approved by
Stockholders                   1,850,511                  $2.51                           None                     1,850,511

Equity Compensation
Plans Not Approved by
Stockholders                      None
</TABLE>

     The following table sets forth, as of August 12, 2002, certain  information
with respect to the  beneficial  ownership of shares of Common Stock by (i) each
person known to the Company to be the beneficial owner of more than five percent
of the  outstanding  shares of Common  Stock,  (ii) each director or nominee for
director of the  Company,  (iii) each of the Named  Executives  (see  "EXECUTIVE
COMPENSATION; Summary Compensation Table"), and (iv) the Company's directors and
executive officers as a group.

                                                       NUMBER OF       PERCENT
     BENEFICIAL OWNER                                  SHARES (A)      OF CLASS
     ----------------                                  ----------      --------
     Ronald L. Chalmers (c)                             170,714          1.3%
     Anthony J. Montgomery (d)                          236,265          1.9%)
     Frank Mertes (e)                                        -0-          --
     James Davidson (f)                                  18,750 (f)       --
     Thomas A. Schneider (g                             310,228 (g)      2.4%
     John C. Lauchnor (h)                               359,781 (h)      2.8%
     Kenneth J. Warren (i)                            1,430,617 (i)     11.2%
     David E. Johnston (j)                              234,875 (j)      1.8%
     Richard P. Johnston (k)                          9,236,656 (k)     66.0%
     Charles S. Mechem, Jr. (l)                         288,262 (l)      2.3%
     Christopher A. Johnston (m)                      2,356,235 (m)     18.4%
     Raymond J. Minella (n)                             526,828          4.1%
     Johnston Family Charitable Remainder
      Unitrust # 3 (o)                                1,384,135 (o)     10.9%
     Johnston Family Living Trust (p)                 1,786,916 (p)     13.0%
     Johnston Family Charitable Foundation (q)        5,413,972 (q)     42.1%
     All directors and officers as a group
       (9 persons)                                   12,108,375 (r)     87.0%

                                       54
<PAGE>
----------
(a)  Unless  otherwise  indicated,  the  beneficial  owner has sole  voting  and
     dispositive  power over these shares subject to the spousal rights, if any,
     of the spouses of those beneficial owners who have spouses.

(b)  Less than 1%.

(c)  Mr. Chalmers' address is 535 Migeon Avenue,  Torrington, CT 06790. Pursuant
     to Rule  13d-3(d)(1).  This amount includes 45,453 shares issuable upon the
     exercise of options which are  exercisable  within 60 days.  Mr.  Chalmers'
     shares are  subject  to an  agreement  with the  Company  which  grants the
     Company a right of first refusal and a call right upon  termination  of his
     employment  with the Company.  These rights are not  currently  exercisable
     within 60 days.

(d)  Mr.  Montgomery's  address is 9762 East Palm Ridge  Drive,  Scottsdale,  AZ
     85260.  Pursuant to Rule  13d-3(d)(1).  This amount includes 200,000 shares
     issuable upon the exercise of options which are exercisable within 60 days.

(e)  Mr. Mertes' address is 535 Migeon Avenue, Torrington, CT 06790.

(f)  Mr.  Davidson's  address is 535 Migeon Avenue,  Torrington,  CT 06790. This
     amount  includes  18,750 shares issuable upon the exercise of options which
     are exercisable within 60 days.

(g)  Mr.  Schneider's  address  is 4111 East  Becker  Lane,  Phoenix,  AZ 85028.
     Pursuant to Rule 13d-3(d)(1).  This amount includes 310,228 shares issuable
     upon the exercise of options which are exercisable within 60 days.

(h)  Mr.  Lauchnor's  address is 535 Migeon Avenue,  Torrington,  CT 06790. This
     amount  includes  (i) 6,000  shares  currently  exercisable  pursuant  to a
     warrant dated  February 28, 2002 and (ii) 62,500  shares  issuable upon the
     exercise of an option (the "JCL Option")  which are  exercisable  within 60
     days and (iii)  pursuant  to the proviso to Rule 13d-3  (d)(1)(i),  187,500
     shares subject to the JCL Option which are not exercisable  within the next
     60 days .

(i)  Mr. Warren's address is 5134 Blazer Parkway,  Dublin, OH 43017. This amount
     includes  (a)(i)12,000 shares currently  exercisable  pursuant to a warrant
     dated  February 28, 2002 (the "KJW  Warrant")  held by DWR,  Custodian  for
     Kenneth  Warren,  Attorney at Law, fbo Kenneth J.  Warren,  VIP Plus Profit
     Sharing Plan (the "Profit Sharing  Plan");  (ii) 207,862 shares held by the
     Profit  Sharing  Plan;  (iii) 20,323  shares  issuable upon the exercise of
     options  which are  exercisable  within 60 days (the "KJW  Options");  (iv)
     622,687  shares held by RIFL  Holdings,  LLC ("RIFL LLC") in which KJW is a
     50.1% member, (v) 6,000 shares owned by CRT#3 (see note (o)) subject to the
     currently  exercisable  portion of an option dated July 24, 2001 granted by
     CRT#3 to purchase such shares from CRT#3 (the "KJW-CRT#3 Option") which are
     currently  exercisable;(vi)  121,750  shares  subject to a one-year  option
     (renewable for four successive years) granted to Christopher A. Johnston on
     February 28, 2002 to purchase such shares from Mr. Warren,  which option is
     currently  exercisable  and (vii) 344,472 shares which have been pledged to
     RPJ/JAJ  Partners,  Ltd.  under a pledge  agreement  pursuant  to which the
     pledgee will only acquire voting power or dispositive power over the shares
     upon the  occurrence  of certain  contingencies  which has not yet occurred
     and,  (b)  pursuant to the proviso to Rule  13d-3(d)(1)(i),  the  following
     which  are not  exercisable  within  the next 60 days:  (i)  24,000  shares
     subject  to the  KJW-CRT#3  Option  ; (ii)  20,000  shares  subject  to the
     non-exercisable portion of the KJW Options and (iii) 41,753 shares owned by
     Sherry  Rothfield and 131,513  shares owned by David Lyon which are subject
     to a right of first  refusal  in favor of Mr.  Warren  and  Christopher  A.
     Johnston pursuant to the terms of a Stockholders  Agreement dated as of May
     29, 1996 among Christopher A. Johnston,  Mr. Warren, Mrs. Rothfield and Mr.
     Lyon (the  "Right of First  Refusal").  Does not include any shares held by
     the  Foundation  of which Mr. Warren is a trustee but as to which he shares
     no voting or dispositive power. Mr. Warren disclaims  beneficial  ownership
     of any shares  owned by the  Foundation,  any  shares  owned by RIFL LLC in
     excess of his 50.1% interest therein and any shares owned by Mrs. Rothfield
     or Mr. Lyon.

(j)  David Johnston's  address is 1935 West Muirhead Loop, Suite 128, Tucson, AZ
     85737. Pursuant to Rule 13d-3(d)(1)(i),  this amount includes 36,106 shares
     issuable upon the exercise of options which are exercisable within 60 days.
     Does not include any shares held by the Foundation of which Mr. Johnston is
     President  but as to which he shares no voting or  dispositive  power.  Mr.
     Johnston  disclaims  beneficial  ownership  of  any  shares  owned  by  the
     Foundation.

                                       55
<PAGE>
(k)  Richard  Johnston's  address is 4350 Greens Place,  Wilson,  WY 83014. This
     amount  includes (a) (i) 1,384,135  shares owned by Richard P. Johnston and
     Jayne A. Johnston,  as Trustees of the Johnston Family Charitable Remainder
     Unitrust #3  ("CRT#3"),  over which shares Mr.  Johnston and his wife share
     voting and  dispositive  power;  (ii)  775,935  shares  owned by Richard P.
     Johnston and Jayne A. Johnston,  as Trustees of the Johnston  Family Living
     Trust u/a dated  April  11,  1994 (the  "Trust"),  over  which  shares  Mr.
     Johnston and his wife share voting and dispositive  power;  (iii) 5,261,780
     shares held by the Johnson Family Charitable  Foundation (the "Foundation")
     of which Mr. Johnston serves as a Trustee; (iv) 26,302 shares issuable upon
     the exercise of employee stock options (the "Employee Stock Options") which
     are  exercisable  within 60 days; (v) 152,192 shares issuable upon exercise
     of a  warrant  dated  October  26,  2001  held by the  Foundation  (the "JF
     Warrant");  (vi) 36,000  shares  issuable  upon exercise of a warrant dated
     April 10, 2002 (the "Trust Warrant 1"); and (vii) 145,200 shares covered by
     a warrant  dated April 10,  2002 held by the Trust ( see "Item 13.  Certain
     Relationships and Related Transactions)" and (b) pursuant to the proviso to
     Rule  13d-3(d)(1)(i),  the following which are not  exercisable  within the
     next 60 days: (i) 200,000  shares held by  Christopher A. Johnston  ("CAJ")
     which  CRT#3  may be  required  to  purchase  from  CAJ  pursuant  to a Put
     Agreement dated August 31, 2001 (the "Put  Agreement"),  (ii) 28,750 shares
     subject to the RPJ Stock  Options,  (iii) up to 820,000 shares which may be
     issued to the Trust pursuant to the terms of the Amended Guaranty Agreement
     upon  enforcement  of guaranties  issued by the Trust and conversion of the
     underlying  guaranteed  debt of  $205,000,  (iv)  343,812  shares  owned by
     Kenneth J. Warren  ("KJW") of which  334,031  shares are pledged to RPJ/JAJ
     Partners,  Ltd., of which Mr.  Johnston is a partner,  and 9,781 shares are
     pledged to the Trust, to secure certain notes issued by KJW, and (v) 62,550
     shares subject to employee  stock options held by Danny Edwards  which,  if
     exercised by Mr. Edwards,  could be acquired by Mr. Johnston or his nominee
     pursuant to the terms of a Stock Option  Purchase  Agreement dated February
     28, 2001. Mr. Johnston disclaims  beneficial ownership of all shares of the
     Company except (a) the Employee  Stock Options;  (b) any shares held by the
     Trust; and (c) any shares held by CRT#3 in excess of 13.6% of the aggregate
     shares owned by CRT#3.

(l)  Mr.  Mechem's  address is 2803 Teton Pines Drive,  Wilson,  WY 83014.  This
     amount  includes (a)(i) 10,000 shares issuable upon the exercise of options
     currently  exercisable;  (ii) 12,000  shares  issuable  upon  exercise of a
     warrant dated February 28, 2002;  and (iii) 6,000 shares  issuable upon the
     exercisable  portion of an option  from the CRT#3  dated July 24, 2001 (the
     "CSM-CRT  Options") (see note (o)) which are exercisable within 60 days and
     (b) pursuant to the proviso to Rule 13d-3  (d)(1)(i),  the following  which
     are not  exercisable  within the next 60 days: (i) 15,000 shares subject to
     the CSM Options and (ii) 24,000 shares subject to the CSM-CRT#3 Option. See
     also "Item 13. Certain Relationships and Related Transactions."

(m)  Christopher  Johnston's address is 3490 Clubhouse Drive, Suite 102, Jackson
     Hole, WY 83001.  This amount  includes  (a)(i) 36,000 shares  issuable upon
     exercise of a warrant  dated  March 8, 2002;  (ii)  121,750  shares held by
     Kenneth J. Warren  subject to an option dated  February 28, 2002 granted by
     Mr. Warren to Mr. Johnston to purchase such shares from Mr. Warren which is
     currently  exercisable;  and (iii) 622,687 shares held by RIFL LLC in which
     Mr.  Johnston is a 49.9%  member,  and (b)  pursuant to the proviso to Rule
     13d-3 (d)(1)(i), the following which are not exercisable within the next 60
     days:  (i) 20,000  shares  subject to employee  stock  options  held by Mr.
     Johnston (the "CAJ Options"), (ii) 121,510 shares sold on February 25, 2002
     by him for a promissory note secured by a pledge  agreement on such shares.
     This amount does not include  403,478 shares owned by Mr. Warren and others
     subject to a stockholders  agreement  which grants Mr.  Johnston a right of
     first refusal and a call right, which rights are not currently exercisable,
     and (iii) 41,753 shares owned by Mrs. Rothfield, 10,003 shares owned by Mr.
     Lyon and 344,479  shares owned by Mr. Warren which are subject to the Right
     of First Refusal (which  includes the 121,750 shares subject to the CAJ-KJW
     Option in clause  (a)(ii)).  See also "Item 13. Certain  Relationships  and
     Related  Transactions..  See "Item 13.  Certain  Relationships  and Related
     Transactions."  Mr. Johnston disclaims  beneficial  ownership of any shares
     owned by RIFL LLC in excess of his 49.9%  interest  therein  and any shares
     owned by Mrs. Rothfield, Mr. Lyon or Mr. Warren.

                                       56
<PAGE>
(n)  Mr.  Minella's  address is c/o Jefferies,  Inc., 520 Madison  Avenue,  12th
     floor,  New York, NY 10022.  Pursuant to Rule  13d-3(d)(1)(i),  this amount
     includes (i) 9,600 shares subject to options which are  exercisable  within
     60 days and (ii) 9,781 shares owned by Berenson  Minella & Company,  LLC of
     which Mr. Minella was a member.

(o)  The address of the Johnston Family Charitable Remainder Unitrust #3 is 4350
     Greens Place,  Wilson,  WY 83014.  (See note (j).) This amount includes (i)
     60,000  shares  subject to options  granted to Messrs.  Warren and  Mechem,
     12,000  shares of which are  exercisable  within 60 days (see notes (i) and
     (l);  and (ii)  pursuant  to the  proviso to Rule  13d-3(d)(1)(i),  200,000
     shares which CRT#3 may be required to purchase from CAJ pursuant to the Put
     Agreement (see note (k).

(p)  The address of the  Johnston  Family  Living  Trust is 4350  Greens  Place,
     Wilson,  WY 83014.  This amount  includes (i) 145,200 shares  issuable upon
     exercise of the Amended Trust  Warrant 2, (ii) 36,000 shares  issuable upon
     Trust Warrant 1, (iii) pursuant to the proviso to Rule 13d-3 (d)(1)(i),  up
     to 820,000 shares which may be issued to the Trust pursuant to the terms of
     the Amended  Guaranty  Agreement  and (iv) 9,781 shares owned by Kenneth J.
     Warren and pledged to the Trust (see note (k)).

(q)  The address of the Johnston  Family  Charitable  Foundation  is 4350 Greens
     Place,  Wilson, WY 83014.  Pursuant to the proviso to Rule 13d-3 (d)(1)(i),
     this  amount  includes  152,192  shares  issuable  upon  exercise of the JF
     Warrant (see (note (k)).

(r)  This  amount  includes  1,255,252  shares  issuable  upon the  exercise  of
     options, warrants and other conversion rights.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The Company paid legal fees of $209,704 to Kenneth J.  Warren,  a director,
Secretary and general counsel, during the fiscal year ended May 31, 2002.

     On  October  26,  2001,   the   Johnston   Family   Charitable   Foundation
("Foundation")  lent to the Company  $1,250,000  in exchange for a  subordinated
note ("Subordinated  Note") convertible into common stock at $0.25 per share and
a warrant for 300,000 shares  exercisable at $0.25 per share, as reported in the
Company's proxy statement for the Special Meeting of Stockholders which occurred
on January  28,  2002.  Richard  P.  Johnston,  Chairman  of the Board and chief
executive  officer,  beneficial  owner  of  69.5%  of the  Company's  stock  and
director; his spouse, Jayne A. Johnston; and Kenneth J. Warren, Secretary of the
Company and director and beneficial owners of a 9.8% of the Company's stock, are
Trustees of the Foundation.  David E. Johnston, director of the Company, and son
of Richard P. Johnston and Jayne A. Johnston, is President of the Foundation.

     On February 28, 2002, in a privately negotiated  transaction,  the Johnston
Family  Living Trust (the  "Trust")  lent to the Company the sum of $150,000 and
received  therefor  Trust  Warrant 1 providing  for the purchase of up to 36,000
shares at a price of $.25 per share and the Trust Note  convertible into 600,000
shares at a price of $.25 per share based on its original principal amount (plus
additional  shares for interest),  which is not convertible until the occurrence
of a default.  The Trust has agreed in principle to a subordination  arrangement
with the Company's lender on substantially the same terms as are contained in an
existing  subordination  agreement  between the Foundation,  the Company and the
Company's lender. In connection with this transaction,  the Trust entered into a
Registration  Rights  Agreement.  The Trust and the Company  have entered into a
Designation Agreement described under "Item 10" above.

     In  a  privately  negotiated  transaction,   the  Company  entered  into  a
Conversion  Agreement dated March 11, 2002 with the Foundation pursuant to which
the  Foundation  converted its principal  debt of $1,250,000  represented by the
Subordinated  Note into  equity  upon  request  of the  Company's  institutional
lender.  The  conversion  was  deemed to have  occurred  on March 11,  2002.  In
connection therewith,  additional interest expense of $1,071,000 was recognized,
including  $928,000  applicable  to the  beneficial  conversion  feature  of the
Subordinate Note and $143,000 of unamortized  debt discount  associated with the
detached warrants.  The conversion also covered shares issuable on conversion in
respect of interest  accruing  through March 31, 2002. The shares issuable under
the terms of the  Conversion  Agreement  are included in the shares  reported as
beneficially  owned by Richard P. Johnston.  The Foundation and the Company have
entered into a Designation Agreement described under "Item 10" above.

     In a  privately  negotiated  transaction,  on March 19,  2002,  the Company
entered into a Guaranty Agreement with the Trust,  whereby,  the Trust agreed to
provide a guarantee of the repayment of certain  amounts of money the Company is
obligated to pay to the Issuer's  institutional  lender and others. If the Trust
was  required  to  provide  the  maximum  amount  of funds  under  the  Guaranty

                                       58
<PAGE>
Agreement,  $605,000,  and the Trust  elected to convert the amount of such debt
into  shares at the rate of $.25 per share,  the Trust would  receive  2,420,000
shares, excluding any shares that may be obtainable by converting any additional
amounts of interest  that may be either paid by the Trust on behalf of debt owed
by the Issuer,  or owed to the Trust. In exchange for entering into the Guaranty
Agreement,  the Trust was granted  Trust Warrant 2 providing for the purchase of
up to 59,200  shares at a price of $.25 per share,  and the right to purchase an
additional  86,000  shares at the same  price  upon the  occurrence  of  certain
events.  On April 10, 2002,  the  Guaranty  Agreement  and Trust  Warrant 2 were
amended. Under the amended agreements, the guaranteed indebtedness was decreased
from $605,000 to $205,000 and the Trust would receive 820,000 shares,  excluding
any shares  that may be  obtainable  by  converting  any  additional  amounts of
interest  that may be  either  paid by the  Trust on  behalf of debt owed by the
Company,  or owed to the Trust but now would  immediately  receive  the right to
purchase  145,200 shares at a price of $.25 per share. The shares issuable under
the terms of the  Guaranty  Agreement  and Trust  Warrant 2 are  included in the
shares reported as beneficially owned by Richard P. Johnston.

     In a  privately  negotiated  transaction,  the Company  entered  into Trust
Conversion  Agreement  II dated as of August 9, 2002 with the Trust  whereby the
Trust converted the entire  indebtedness  of $155,571.81  evidenced by the Trust
note into 622,687  shares at the price of $.25 per share on August 9, 2002.  The
conversion  covered shares issuable on conversion in respect of interest accrued
through  August 9, 2002.  These  shares are  included in the shares  reported as
beneficially owned by Richard P. Johnston.

     On August 9, 2002, Richard P. Johnston entered into an agreement concerning
letter of credit with the Company's  lending bank and  delivered an  irrevocable
letter of credit to the lending  bank to secure up to $1.0 million of certain of
the Company's indebtedness to the lending bank.  Concurrently  therewith, RA has
agreed to issue to Mr.  Johnston 2,000 shares of RA stock.  No  compensation  in
respect of the  agreement  concerning  letter of credit is to be provided to Mr.
Johnston by the Company other than the expenses  incurred relating to the letter
of credit ($15,000).

     Richard P.  Johnston  has  guaranteed  the full and  timely  payment by the
Company to James Davidson of Mr. Davidson's Employment Package.

     On February 28, 2002, in a privately negotiated transaction, DWR, Custodian
for Kenneth  Warren,  Attorney at Law,  fbo Kenneth J.  Warren,  VIP Plus Profit
Sharing Plan (the "Profit  Sharing Plan") lent to the Company the sum of $50,000
and received therefor the KJW Warrant to purchase up to 12,000 shares at a price
of $.25 per share and the KJW Note convertible into 200,000 shares at a price of
$.25 per share based on its original  principal amount (plus  additional  shares
for interest),  which is not convertible until the occurrence of a default.  Mr.
Warren has agreed in principle to a subordination arrangement with the Company's
lender  on  substantially  the  same  terms  as  are  contained  in an  existing
subordination  agreement  between the Foundation,  the Company and the Company's
lender.  In connection  with this  transaction,  the Profit Sharing Plan entered
into a Registration  Rights  Agreement with the Company.  On August 9, 2002, the
Profit Sharing Plan entered into a Conversion Agreement with the Company whereby
the Profit Sharing Plan converted the entire  indebtedness  evidenced by the KJW
Note into 207,562 shares at the price of $.25 per share. The conversion  covered
shares  issuable on conversion in respect of interest  accrued through August 9,
2002. These shares are included in the shares reported as beneficially  owned by
Mr. Warren.

     On March 8, 2002, in a privately  negotiated  transaction,  Christopher  A.
Johnston  lent to the Company the sum of $150,000 and received  therefor the CAJ
Warrant to purchase up to 36,000 shares at a price of $.25 per share and the CAJ
Note  convertible  into 600,000 shares at a price of $.25 per share based on its
original  principal amount (plus additional  shares for interest),  which is not
convertible until the occurrence of a default.  Mr. Johnston agreed in principle
to a subordination  arrangement with the Company's  lender on substantially  the
same terms as are contained in an existing  subordination  agreement between the
Foundation,  the Company  and the  Company's  lender.  In  connection  with this
transaction,  Mr. Johnston entered into a Registration Rights Agreement with the
Company.

     On August 9, 2002,  Christopher A. Johnston,  as a 49.9% owner, and Kenneth
J.  Warren,  as a 50.1%  owner,  formed  RIFL LLC.  Thereafter,  in a  privately
negotiated transaction,  RIFL LLC purchased from Mr. Johnston's IRA the CAJ Note
(to which Mr.  Johnston  had assigned the CAJ Note) in exchange for a promissory
note of RIFL LLC in the original  principal  amount of $150,000 plus accrued and
unpaid  interest on the CAJ Note.  In a privately  negotiated  transaction,  the
Company entered into a Conversion Agreement dated as of August 9, 2002 with RIFL
LLC pursuant to which RIFL LLC converted the entire  indebtedness of $155,671.81
evidenced  by the CAJ Note  into  622,687  shares at $.25 per share on August 9,
2002.  The  conversion  covered  shares  issuable  on  conversion  in respect of
interest accrued through August 9, 2002. These shares are included in the shares
reported as beneficially owned by Messrs. Warren and Johnston.

                                       59
<PAGE>
     On August 9,  2002,  Christopher  A.  Johnston  entered  into an  agreement
concerning  letter of credit with the  Company's  lending bank and  delivered an
irrevocable letter of credit to the lending bank to secure up to $1.0 million of
the Company's indebtedness to the lending bank.  Concurrently  therewith, RA has
agreed to issue to Mr.  Johnston 2,000 shares of RA stock.  No  compensation  in
respect of the  agreement  concerning  letter of credit is to be provided to Mr.
Johnston by the Company other than the expenses  incurred relating to the letter
of credit ($38,500).

     On February 28, 2002,  in a privately  negotiated  transaction,  Charles S.
Mechem, Jr. lent to the Company the sum of $50,000 and received therefor the CSM
Warrant to purchase up to 12,000 shares at a price of $.25 per share and the CSM
Note  convertible  into 200,000 shares at a price of $.25 per share based on its
original  principal amount (plus additional  shares for interest),  which is not
convertible  until  the  occurrence  of a  default.  Mr.  Mechem  has  agreed in
principle  to  a  subordination   arrangement   with  the  Company's  lender  on
substantially  the same  terms as are  contained  in an  existing  subordination
agreement  between the  Foundation,  the Company and the  Company's  lender.  In
connection with this transaction,  Mr. Mechem entered into a Registration Rights
Agreement  with the  Company.  On August 9,  2002,  Mr.  Mechem  entered  into a
Conversion   Agreement  with  the  Company   whereby  he  converted  the  entire
indebtedness  evidenced by the CSM Note into 207,562 shares at the price of $.25
per share.  The conversion  covered shares  issuable on conversion in respect of
interest accrued through August 9, 2002. These shares are included in the shares
reported as beneficially owned by Mr. Mechem.

     On February  28,  2002,  in a  privately  negotiated  transaction,  John C.
Lauchnor  lent to the Company the sum of $25,000 and  received  therefor the JCL
Warrant to purchase up to 6,000  shares at a price of $.25 per share and the JCL
Note  convertible  into 100,000 shares at a price of $.25 per share based on its
original  principal amount (plus additional  shares for interest),  which is not
convertible  until the  occurrence  of a  default.  Mr.  Lauchnor  has agreed in
principle  to  a  subordination   arrangement   with  the  Company's  lender  on
substantially  the same  terms as are  contained  in an  existing  subordination
agreement  between the  Foundation,  the Company and the  Company's  lender.  In
connection  with this  transaction,  Mr.  Lauchnor  entered into a  Registration
Rights Agreement with the Company.  On August 9, 2002, Mr. Lauchnor entered into
a  Conversion  Agreement  with the  Company  whereby  he  converted  the  entire
indebtedness  evidenced by the JCL Note into 103,781 shares at the price of $.25
per share.  The conversion  covered shares  issuable on conversion in respect of
interest accrued through August 9, 2002. These shares are included in the shares
reported as beneficially owned by Mr. Lauchnor.

     On April 17, 2002, Royal Associates, Inc. ("RA"), a corporation, the shares
of which are owned by Richard P. Johnston,  Christopher  A.  Johnston,  David E.
Johnston,  Kenneth J. Warren,  John C.  Lauchnor,  Charles S.  Mechem,  Jr., all
directors of the Company,  and Robert Jaycox,  presented an offer to the Company
whereby the Company would be merged with RA or a subsidiary  thereof and certain
parties  affiliated  with RA and shares held by  stockholders  perfecting  their
dissenting  rights under  Delaware  law,  would be  converted  into the right to
receive cash upon surrender of the certificate representing such shares. On June
11, 2002, RA orally amended its April 17 proposal to the Company  increasing the
proposed merger consideration from $.30 per share to $.37 per share. On the same
day, the Company and a Special  Committee then consisting of Raymond J. Minella,
an outside  director,  received the oral opinion from a financial  advisor as to
the fairness of the offer.  The  transaction  remains subject to the negotiation
and  execution  of a  definitive  merger  agreement,  approval of the  Company's
stockholders and certain other conditions.  If the merger is consummated,  after
the merger, RA will be a holding company with the Company as its  majority-owned
subsidiary.

     Commencing  in January 2003,  the Company  proposes to begin paying to RA a
management fee of $240,000 per year for services  rendered and to be rendered to
the Company. In turn, substantially all of such fee is expected to be paid by RA
to Richard P. Johnston and  Christopher A. Johnston as salary for performing the
services RA is to perform for the Company.  Richard P.  Johnston is an executive
officer,  director and beneficial  owner of 69.59% of the Company's common stock
and is an officer,  director and beneficial owner of approximately  61.2% of the
common stock of RA.  Christopher A. Johnston is a director and beneficial  owner
of  16.3%  of the  Company's  common  stock  and  is an  officer,  director  and
beneficial owner of approximately 14.2 % of the common stock of RA..

                                       60
<PAGE>
PART IV

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

     (a)  Financial Statements.

          Report of Ernst & Young LLP Independent Auditors....................14
          Report of Independent Public Accountants............................15
          Consolidated Balance Sheets.........................................16
          Consolidated Statements of Operations...............................17
          Consolidated Statements of Stockholders' Equity and
            Comprehensive Income (Loss).......................................18
          Consolidated Statements of Cash Flows...............................19
          Notes to Consolidated Financial Statements..........................20

     (b)  Reports on Form 8-K.

          The following  current  reports on Form 8-K were filed during the last
          quarter of the period covered by this report:

          (i)  Current Report on Form 8-K filed March 2, 2002;
          (ii) Amendment  No. 1 dated April 25,  2002 to Current  Report on Form
               8-K filed February 1, 2002; and
          (iii) Current Report on Form 8-K filed May 24, 2002.

     (c)  Exhibits.

          The Index to Exhibits and required Exhibits are included following the
Financial Statement Schedule beginning on page 51 of this report.

     (d)  Financial Statement Schedule.

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

                                       61
<PAGE>
                                   SIGNATURES

                            [INTENTIONALLY OMITTED]

        [SEE SIGNATURES TO AMENDMENT NO. 2 TO FORM 10-K SET FORTH BELOW]





                                       62
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES

                                   SCHEDULE II
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                 FOR THE YEARS ENDED MAY 31, 2002, 2001 AND 2000
                             (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, 2000                            $   433         $    40        $    --        $  (199)         $   274
     Year ended May 31, 2001                                274              14             --           (101)             187
     Year ended May 31, 2002                                187              24                           (17)             194

Deferred tax asset valuation allowance:
     Year ended May 31, 2000                            $ 2,649         $  (162)       $    --        $  (742) (a)     $ 1,745
     Year ended May 31, 2001                              1,745              --             --             --            1,745
     Year ended May 31, 2002                              1,745           4,797             --             --            6,542

Allowance for slow-moving and obsolete inventories:
     Year ended May 31, 2002                            $    70         $ 1,435        $    --        $(1,355)         $   150
     Year ended May 31, 2001                            $    --         $   477        $    --        $  (407)         $    70
</TABLE>

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

                                       63
<PAGE>
                                  EXHIBIT INDEX

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

     3.1       Second  Amended and  Restated  Certificate  of  Incorporation  of             *
               registrant  (incorporated  by  reference  to  Exhibit  3.1 to the
               registrant's  Form 8-K dated  January 28, 2002 (the "January 2002
               8-K").

     3.2       Amended   and   Restated   Bylaws   of  Royal   Precision,   Inc.             *
               (incorporated by reference to Exhibit 3 to the January 2002 8-K).

     (4)       Instruments defining the rights of holders                                    *

     4.1       See  Articles  FOUR,  FIVE and SEVEN of the  Second  Amended  and             *
               Restated   Certificate   of   Incorporation   of  the  registrant
               (incorporated  by  reference  to Exhibit 3.1 to the January  2002
               8-K).

     4.2       See Article I, Sections 2.1 and 2.2 of Article II and Section 7.3             *
               of  Article  VII of the  Amended  and  Restated  Bylaws  of Royal
               Precision,  Inc. (incorporated by reference to Exhibit 3.2 to the
               January 2002 8-K).

     (10)      Material Contracts                                                            *

     10.1      Asset  Purchase  Agreement  dated  May 31,  1996  with  Brunswick             *
               Corporation  (incorporated by reference to Exhibit 10.1.1 of Form
               S-4, No. 333-28841; 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).
</TABLE>

                                       64
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     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).

     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).
</TABLE>

                                       65
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     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").

     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).
</TABLE>

                                       66
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     10.34     Amendment,  Assignment and Assumption of Lease  Agreement by Bell             *
               Sports,  Inc.,  Royal Grip,  Inc.  and Howard Lake Ranch,  L.L.C.
               dated April 27, 2001  (incorporated by reference to Exhibit 10.34
               of the Form 10-K for fiscal year end 2001; the "2001 10-K").

     10.35     Seventh  Amendment  to Credit and Security  Agreement  between FM             *
               Precision Golf Manufacturing Corp., FM Precision Golf Sales Corp.
               and  Wells  Fargo  Business  Credit,  Inc.  dated  May  30,  2001
               (incorporated by reference to Exhibit 10.35 of the 2001 10-K).

     10.36     Eighth  Amendment  to Amended and  Restated  Credit and  Security             *
               Agreement  between Royal Grip,  Inc., Royal Grip Headwear Company
               and  Wells  Fargo  Business  Credit,  Inc.  dated  May  30,  2001
               (incorporated by reference to Exhibit 10.36 of the 2001 10-K).

     10.37     Amendment No. 1, dated July 11, 2001, to Agreement  between Royal             *
               Grip,  Inc.  and  Precision  FM Japan,  Ltd.  dated July 12, 1991
               (incorporated by reference to Exhibit 10.37 of the 2001 10-K).

     10.38     Agreement to Terminate  Employment  dated October 1, 2001 between             *
               the Company and Thomas A. Schneider (incorporated by reference to
               Exhibit 10.1 of Form 10-Q for quarter  ended August 31, 2001 (the
               "August 2001 10-Q").

     10.39     Executive  Employment  Agreement  dated September 1, 2001 between             *
               the Company  and John  Lauchnor  (incorporated  by  reference  to
               Exhibit 10.2 of the August 2001 10-Q).

     10.40     Eighth  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 13, 2001
               (incorporated  by reference  to Exhibit 10.1 of the  registrant's
               Form 10-Q for the quarter ended  November 30, 2001; the "November
               2001 10-Q").

     10.41     Ninth  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 13, 2001
               (incorporated  by reference to Exhibit 10.2 of the November  2001
               10-Q).

     10.42     Subordinated  Promissory  Note in the amount of  $1,250,000  from             *
               Royal   Precision,   Inc.  to  The  Johnston  Family   Charitable
               Foundation  dated October 26, 2001  (incorporated by reference to
               Annex I of the Company's definitive Proxy Statement dated January
               2, 2002 filed with the Commission on December 28, 2001).

     10.43     Warrant No. 001 dated  October  26,  2001 issued to The  Johnston             *
               Family Charitable  Foundation to purchase 300,000 shares of Royal
               Precision,  Inc. common stock (incorporated by reference to Annex
               II of the Company's  definitive  Proxy Statement dated January 2,
               2002 filed with the Commission on December 28, 2001).

     10.44     Subordination  Agreement dated as of October 26, 2001 made by The             *
               Johnston  Charitable  Foundation  for the  benefit of Wells Fargo
               Business Credit, Inc.  (incorporated by reference to Exhibit 10.5
               of the November 2001 10-Q).

     10.45     Agreement to  Terminate  Employment  with  Anthony J.  Montgomery             *
               dated as of  November  8,  2001  (incorporated  by  reference  to
               Exhibit 10.6 of the November 2001 10-Q.**
</TABLE>

                                       67
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     10.46     Ninth  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.
               dated April 10, 2002  (incorporated  by reference to Exhibit 10.1
               of the registrant's  Form 10-Q for the quarter ended February 28,
               2002; the "February 2002 10-Q").

     10.47     Tenth  Amendment  to Amended  and  Restated  Credit and  Security             *
               Agreement and Waiver of Defaults  between Royal Grip, Inc., Royal
               Grip Headwear Company and Wells Fargo Business Credit, Inc. dated
               April 10, 2002  (incorporated by reference to Exhibit 10.2 of the
               February 2002 10-Q).

     10.48     Form of Subordination  Agreement dated April 10, 2002 between the             *
               Company and Christopher A. Johnston, John C. Lauchnor, Charles S.
               Mechem, Jr., DWR, Custodian for Kenneth Warren,  Attorney at Law,
               fbo Kenneth J.  Warren,  VIP Plus Profit  Sharing  Plan,  and the
               Johnston  Family  Living  Trust for the  benefit  of Wells  Fargo
               Business  Credit,  Inc.  (see Exhibit 10.48 which was included as
               Exhibit  A  to  the  Subordination  Agreement)  (incorporated  by
               reference to Exhibit 10.3 of the February 2002 10-Q).

     10.49     Guaranty dated April 10, 2002 of the Johnston Family Living Trust             *
               (incorporated  by reference to Exhibit 10.4 of the February  2002
               10-Q).

     10.50     Form of  Subordinated  Promissory  Note of the Company  issued to             *
               several lenders with schedule  setting forth material  details in
               which such documents differ from the form attached  (incorporated
               by  reference  to  Exhibit  15 of  Schedule  13D  of  Richard  P.
               Johnston, et al, dated March 28, 2002 (the "March 28 13D").

     10.51     Form of Warrant issued to various  persons with schedule  setting             *
               forth material  details in which such  documents  differ from the
               form  (incorporated  by  reference  to Exhibit 16 of the March 28
               13D).

     10.52     Conversion  Agreement  between  the  Johnston  Family  Charitable             *
               Foundation and the Company dated March 11, 2002  (incorporated by
               reference to Exhibit 3 of Schedule 13D of Richard P. Johnston, et
               al, filed March 22, 2002 ("13D Amendment No. 3").

     10.53     Designation  Agreement  between the  Johnston  Family  Charitable             *
               Foundation and the Company dated March 1, 2002 which entitles the
               Foundation  to  appoint  a  director  designee  to the  Board  of
               Directors of the Company  (incorporated by reference to Exhibit 2
               of 13D Amendment No. 3).

     10.54     Guaranty  Agreement  dated March 19, 2002 between the Company and             *
               the  Johnston  Family  Living  Trust   (incorporated   herein  by
               reference  to Exhibit 13 to  Amendment  No. 4 of Schedule  13D of
               Richard P. Johnston,  et al, dated March 28, 2002 ("13D Amendment
               No. 4").

     10.55     Warrant  issued to the Johnston  Family  Living Trust dated March             *
               19,  2002  (incorporated  by  reference  to  Exhibit  14  to  13D
               Amendment No. 4).

     10.56     Registration  Rights  Agreement dated February 26, 2002 among the             *
               Johnston  Family  Living Trust,  Christopher  A.  Johnston,  DWR,
               Custodian  for Kenneth  Warren,  Attorney at Law,  fbo Kenneth J.
               Warren,  VIP Plus Profit Sharing Plan, John C. Lauchnor,  Charles
               S.  Mechem,  Jr., and the Company  (incorporated  by reference to
               Exhibit 23 to the March 28 13D.

     10.57     Designation  Agreement  between the Johnston  Family Living Trust             *
               and the Company dated June 12, 2002 (incorporated by reference to
               Exhibit  30 to  Amendment  No. 2 of  Schedule  13D of  Richard P.
               Johnston, et al, dated June 12, 2002).
</TABLE>

                                       68
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     10.58     Form of  Conversion  Agreement  between  the  Company and several             *
               lenders  dated as of August 9, 2002 with  schedule  setting forth
               material  details in which such  documents  differ  from the form
               attached  (incorporated  by  reference to Exhibit 32 to Amendment
               No. 3 of Schedule 13D of Richard P. Johnston, et al, dated August
               12, 2002; the "13D Amendment No. 3").

     10.59     Agreement concerning Letter of Credit between Richard P. Johnston             *
               and  Wells  Fargo  Business  Credit,  Inc.  dated  August 9, 2002
               (incorporated by reference to Exhibit No. 33 of 13D Amendment No.
               3).

     10.60     Agreement  concerning  Letter of Credit  between  Christopher  A.             *
               Johnston and Wells Fargo  Business  Credit,  Inc. dated August 9,
               2002  (incorporated  by  reference  to  Exhibit  No.  34  of  13D
               Amendment No. 3).

     10.61     Employment Agreement dated March 18, 2001 between the Company and           _____
               James Davidson

     10.62     Royal Precision Executive Bonus Program for Fiscal Year 2003 **             _____

     10.63     Amended and Restated  Credit and Security  Agreement dated August           _____
               9, 2002 among FM Precision Golf Manufacturing Corp., FM Precision
               Sales Corp. and Wells Fargo Business Credit, Inc.

     10.64     Second Amended and Restated  Credit and Security  Agreement dated           _____
               August 9, 2002  among  Royal  Grip,  Inc.,  Royal  Grip  Headwear
               Company and Wells Fargo Business Credit, Inc.

     10.65     Amendment to Mortgage Deed and Security Agreement dated August 9,           _____
               2002  between FM Precision  Golf  Manufacturing  Corp.  and Wells
               Fargo Business Credit, Inc.

     10.66     Form of Support  Agreement  dated  August 9, 2002 between John C.           _____
               Lauchnor and Frank W. Mertes  (which  agreement is identical  for
               both  parties  except for the name of the  individual  party) and
               Wells Fargo Business Credit, Inc.

     (16)      Letter re Change of Certifying Accountant

     16.1      Letter  of  Arthur   Andersen   regarding  its   concurrence   or             *
               disagreement  with the statements  made by registrant  concerning
               the  resignation  or  dismissal  as  the  registrant's  principal
               accountant  (incorporated  by  reference  to Exhibit  99.1 to the
               registrant's  Form 8-K dated  January 25, 2002 and filed with the
               Commission  on  February  1,  2002  and to  Exhibit  99.2  to the
               registrant's  Form  8-K/A  dated  April 24,  2002  filed with the
               Commission on April 24, 2002).

     21        Subsidiaries of the Registrant.                                             _____

     (23)      Consents

     23.1      Consent of Ernst & Young LLP, Independent Auditors                          _____

     23.2      Notice Regarding Absence of Consent of Arthur Andersen LLP                  _____

     (24)      Powers of Attorney

     24.1      Powers of Attorney                                                          _____
</TABLE>

                                       69
<PAGE>
<TABLE>
<S>            <C>                                                                         <C>
     24.2      Certified  resolution  of the  Registrant's  Board  of  Directors           _____
               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           _____
               compliance statement for forward-looking statements.
</TABLE>

----------
*    Incorporated by reference.

**   Certain  portions of this  compensatory  plan for  executive  officers  and
     directors  publicly  filed  have been  omitted  based  upon a  request  for
     confidential treatment filed with the Commission.  The confidential portion
     has been omitted and filed separately with the Commission.

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) per page.

                                       70
<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 Amendment No. 2 to be
signed on its behalf by the undersigned, thereunto duly authorized.

Dated: December 3, 2002                 ROYAL PRECISION, INC.
                                        (the "Registrant")

                                        By /s/ John C. Lauchnor
                                           -------------------------------------
                                           John C. Lauchnor, President and Chief
                                           Executive Officer (Principal
                                           Executive Officer)

                                        By /s/ Frank Mertes
                                           -------------------------------------
                                           Frank Mertes, Vice President-Finance
                                           Principal Financial Officer and
                                           Principal Accounting Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
amendment  has been  signed  below by the  following  persons  on  behalf of the
registrant  and in the  capacities  indicated on the 3rd day of December,  2002.

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

/s/ John C. Lauchnor                 President and Chief Executive Officer
-----------------------------        (Principal Executive Officer)
John C. Lauchnor

/s/ Frank W. Mertes *                Vice President-Finance, Chief Financial
-----------------------------        Officer (Principal Financial Officer and
Frank W. Mertes                      Principal Accounting Officer)

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

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

/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

*    John C.  Lauchnor,  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/ John C. Lauchnor
     -------------------------------------
     John C. Lauchnor, Attorney in Fact

                                       71
<PAGE>
                                 CERTIFICATIONS

I, John C. Lauchnor, certify that:

1. I have reviewed this annual report on Form 10-K of Royal Precision, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

Date: December 3, 2002                  /s/ John C. Lauchnor
                                        ----------------------------------------
                                        John C. Lauchnor, President,
                                        Chief Executive Officer

I, Frank Mertes, certify that:

1. I have reviewed this annual report on Form 10-K of Royal Precision, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

Date: December 3, 2002                  /s/ Frank Mertes
                                        ----------------------------------------
                                        Frank Mertes, Vice President-Finance,
                                        Principal Financial Officer and
                                        Principal Accounting Officer

                                       72