U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004

                                   FORM 10-QSB
                                   (Mark One)

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

         For the quarterly period ended June 30, 1997


[   ]    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 - 22230

                                ROYAL GRIP, INC.
                                ----------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

          Nevada                                                86-0615648
          ------                                                ----------
(State or Other Jurisdiction of                               (IRS Employer 
Incorporation or Organization)                              Identification No.)


                          15170 N. Hayden Road, Suite 1
                              Scottsdale, AZ 85260
                                 (602) 627-0200
                    ----------------------------------------
                    (Address of Principal Executive Offices)

           Check whether the issuer:  (1) filed all reports required to be filed
by  Section  13 or 15(d) of the  Exchange  Act during the past 12 months (or for
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 
                                      ---      ---

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECECING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13,or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.

Yes________ No________

                      APPLICABLE ONLY TO CORPORATE ISSUERS

           State  the  number  of  shares  outstanding  of each of the  issuer's
classes of common equity,  as of the latest  practicable date (August 13, 1997).
Common stock, $.001 par value: 2,742,178.

Transitional Small Business Disclosure Format (check one):
Yes         No   x
    -----      -----
                                       1
<PAGE>
--------------------------------------------------------------------------------
                        ROYAL GRIP, INC. AND SUBSIDIARY

                                      INDEX

                                                                         Page

PART I.   FINANCIAL INFORMATION

          Item 1. Financial Statements (unaudited)

                    Condensed Consolidated Balance Sheets-                3
                         June 30, 1997 and December 31, 1996

                    Condensed Consolidated Statements of Operations-      4
                         Three Months and Six Months Ended
                         June 30, 1997 and June 30, 1996

                    Condensed Consolidated Statements of Cash Flows-      5
                         Six Months Ended
                         June 30, 1997 and June 30, 1996

                    Notes to Condensed Consolidated Financial Statements  6

          Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of Operations        10


PART II. OTHER INFORMATION

          Item 6.   None                                                 17

SIGNATURE                                                                18

EXHIBITS

          None
                                       2
<PAGE>
Part I                     ROYAL GRIP, INC. AND SUBSIDIARY
Item 1              CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                      June 30,      December 31,
                                                                        1997           1996
                                                                    ------------    ------------
<S>                                                                 <C>             <C>         
ASSETS
Current assets:
     Cash and cash equivalents                                      $       --      $     38,099
     Trade accounts receivable (net of allowance for doubtful
           accounts of  $450,140 and $549,455 as of June 30, 1997
           and December 31, 1996, respectively)                        1,563,904       1,593,554
     Inventories                                                         784,608       1,381,215
     Current portion of net investment in lease                          223,022         214,506
     Prepaid expenses and other current assets                            60,752         132,557
                                                                    ------------    ------------
     Total current assets                                              2,632,286       3,359,931
                                                                    ------------    ------------

Property and equipment, net                                            1,857,315       1,925,056
Net investment in capital lease, less current portion                  2,793,813       2,907,494
Intangible assets, net                                                   255,177         251,554
Other assets                                                              23,750          51,250
                                                                    ------------    ------------
                                                                    $  7,562,341    $  8,495,285
                                                                    ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Revolving line of credit                                       $    732,027    $     60,000
     Current portion of long-term debt and capital leases                226,500         207,230
     Accounts payable and accrued expenses                             1,147,249       1,928,037
     Supply agreement credits                                            472,393            --
                                                                    ------------    ------------
           Total current liabilities                                   2,578,169       2,195,267
                                                                    ------------    ------------

Long-term debt and capital leases, less current portion                  515,417         671,054
Other liabilities                                                          8,588           8,147

Stockholders' equity:
     Preferred stock, par value $.001 per share 
        Authorized 5,000,000 shares; none issued
     Common stock, par value $.001 per share 
        Authorized 15,000,000 shares; issued and
        outstanding 2,742,178 shares at June 30, 1997
        and 2,734,678 at December 31, 1996                                 2,742           2,735
  Additional paid-in capital                                          12,630,338      12,592,906
  Accumulated deficit                                                 (8,172,913)     (6,974,824)
                                                                    ------------    ------------
           Total stockholders' equity                                  4,460,167       5,620,817
                                                                    ------------    ------------
                                                                    $  7,562,341    $  8,495,285
                                                                    ============    ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
                                       3
<PAGE>
                         ROYAL GRIP, INC. AND SUBSIDIARY

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
                                                        Three Months Ended              Six Months Ended
                                                              June 30,                      June 30,
                                                              --------                      --------

                                                         1997           1996           1997           1996 
                                                     -----------    -----------    -----------    -----------
<S>                                                  <C>            <C>            <C>            <C>        
Net sales                                            $ 3,365,417    $ 5,094,490    $ 5,837,100    $ 9,452,111
Cost of goods sold                                     2,312,604      3,953,154      4,385,424      7,192,700
                                                     -----------    -----------    -----------    -----------
    Gross profit                                       1,052,813      1,141,336      1,451,676      2,259,411
Selling, general and administrative expenses           1,185,668      1,703,910      2,403,617      3,375,365
Merger Costs                                             279,861           --          279,861           --
                                                     -----------    -----------    -----------    -----------
    Loss from operations                                (412,716)      (562,574)    (1,231,802)    (1,115,954)
Other income (expenses), net                              18,042        (12,709)        33,713        (28,576)
                                                     -----------    -----------    -----------    -----------
    Loss before income taxes                            (394,674)      (575,283)    (1,198,089)    (1,144,530)
Income taxes                                                --             --             --             --
                                                     -----------    -----------    -----------    -----------
    Net loss                                         $  (394,674)   $  (575,283)   $(1,198,089)   $(1,144,530)
                                                     ===========    ===========    ===========    ===========
Net loss per share                                   $     (0.14)   $     (0.21)   $     (0.44)   $     (0.42)
                                                     ===========    ===========    ===========    ===========
Weighted average shares used in net loss per share     2,740,928      2,734,678      2,740,101      2,734,678
                                                     ===========    ===========    ===========    ===========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       4
<PAGE>
                         ROYAL GRIP, INC. AND SUBSIDIARY
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                        Six Months Ended
                                                                            June 30,
                                                                       -------------------
                                                                       1997           1996
                                                                       ----           ----
<S>                                                                <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                      $(1,198,089)   $(1,144,530)
     Adjustments to reconcile net loss to net cash
        used by operating activities:
         Depreciation and amortization                                 263,811        835,131
         Compensatory stock option grants                               16,813         14,504
         (Gain) Loss on disposition of property and equipment              (30)        22,175
         (Increase) decrease in trade accounts receivable               29,650     (1,048,856)
         Decrease in income tax refund receivable                         --          101,139
         Decrease in inventories                                       596,607        252,337
         Decrease in prepaid expenses and other current assets          71,805         97,575
         (Increase) decrease in other assets and intangibles            16,341        (21,354)
         Increase in supply agreement credits                          472,393           --
         Decrease in trade accounts payable and accrued expenses      (780,788)       (45,634)
                                                                   -----------    -----------
              Net cash used by operating activities                   (511,487)      (937,513)
                                                                   -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                              (188,534)      (578,075)
     Principal payments received on capital lease receivable           105,165           --
     Proceeds from sale of property and equipment                           30        788,919
                                                                   -----------    -----------
     Net cash provided by (used in) investing activities               (83,339)       210,844
                                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Principal payments under capital lease obligations                   --          (15,161)
     Net payments on notes payable                                    (136,367)       (65,528)
     Exercise of employee options                                       20,626           --
     Increase in revolving line of credit                              672,027        425,000
     Increase in other liabilities                                         441           --
                                                                   -----------    -----------
     Net cash provided by financing activities                         556,727        344,311
                                                                   -----------    -----------
     Net decrease in cash                                              (38,099)      (382,358)
     Cash at beginning of period                                        38,099        413,345
                                                                   -----------    -----------
     Cash at end of period                                         $      --      $    30,987
                                                                   ===========    ===========
</TABLE>
     See accompanying notes to condensed consolidated financial statements.
                                       5
<PAGE>
                         ROYAL GRIP, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1)      Basis of Presentation
         ---------------------

         The accompanying  condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting  principles,  pursuant
to rules and  regulations  of the  Securities  and Exchange  Commission.  In the
opinion of management,  the accompanying  condensed financial statements include
all  adjustments (of a normal  recurring  nature) which are necessary for a fair
presentation  of  the  results  for  the  interim  periods  presented.   Certain
information and footnote  disclosures have been condensed or omitted pursuant to
such rules and  regulations.  It is suggested that these condensed  consolidated
financial  statements  be read in  conjunction  with  the  financial  statements
included in the Company's annual report on Form 10-K for the year ended December
31,  1996,  as filed with the  Securities  and Exchange  Commission.  Results of
operations in interim  periods are not  necessarily  indicative of results to be
expected for a full year. In February 1997, Financial Accounting Standards Board
issued Statement No. 128 "Earnings Per Share" which is required to be adopted on
December  31,  1997.  At that time,  the Company  will be required to change the
method  currently  used to compute  earnings  per share and to restate all prior
periods.  Under the new requirements for calculating primary earnings per share,
the dilutive  effect of stock options will be excluded.  The impact of Statement
No. 128 on the  calculation  of primary and fully diluted  earnings per share is
not expected to be material for the three and six months ended June 30, 1997 and
June 30, 1996.

(2)      Inventories
         -----------

         Inventories consist of the following:

                                                  June 30,         December 31,
                                                    1997               1996
                                                 ----------         ----------
Finished goods                                   $  219,186         $  804,769
Work in process                                     102,634            100,092
Raw materials                                       462,788            476,354
                                                 ----------         ----------
                                                 $  784,608         $1,381,215
                                                 ==========         ==========
                                       6
<PAGE>
(3)      Manufacturing and Supply Agreement
         ----------------------------------

                  In December 1996, the Company outsourced all of its production
of non-cord grips to Acushnet Rubber Company.  During the first quarter of 1997,
Acushnet  experienced  startup  delays in the  production of grips.  In light of
these difficulties,  the Company and Acushnet  renogotiated their agreement.  In
connection with this renegotiation,  Acushnet agreed to provide the Company with
a credit of $400,000  against future  purchases of grips,  to be applied against
current  accounts payable due to Acushnet,  and additional  credits in the event
Acushnet  fails to meet future  production  requirements.  These  credits may be
reduced,  during 1997 only,  depending upon Acushnet's  production beyond levels
specified in the amendment to the Manufacturing  and Supply Agreement,  but only
to the extent that the Company  orders grips above such  specified  levels.  The
credits  may also be reduced as a result of the  cancellation  of stock  options
granted  to  Acushnet.  Because of the  contingent  nature of this  credit,  the
Company recorded this amount as a liability under the Supply  Agreement  Credits
line item and a reduction in accounts  payable to Acushnet.  The Company intends
to  recognize  these  credits  as a  reduction  in cost of sales when it becomes
probable and  estimable  that Acushnet will not be able to earn back the credits
by either increasing its production or by virtue of a reduction in the Company's
orders below levels  specified in the  amendment.  At June 30, 1997, the Company
has not  recorded any of the credits as a reduction of cost of sales as Acushnet
can still earn back the credits and such amounts, if earned back, are payable in
cash.

         During the  quarter  ended  June 30,  1997,  the  Company  recorded  an
additional $72,000 of credits related to Acushnet's production  shortfalls.  The
total credit recorded as a liability at June 30, 1997 is approximately $472,000.
                                       7
<PAGE>
(4)      Revolving line of credit and term debt
         --------------------------------------

         In  February  1997,  the  Company  entered  into a new  line of  credit
facility  of $1.75  million and term loan of $700,000  with a  commercial  bank.
These  credit  arrangements  mature on  February  10, 2000 and contain net worth
requirements,  prohibit  dividend  payments and limit capital  expenditures.  At
March 31, 1997, the Company was not in compliance  with its quarterly net income
(loss),  debt service,  and net worth debt covenants and anticipated not meeting
many of its quarterly  and monthly  covenants  during 1997.  In April 1997,  the
Company  obtained an amended bank agreement which waived the existing net income
(loss),  debt  service,  and net worth  covenant  defaults  and amended the debt
agreement  whereby the net income  (loss) limits have been modified to a loss of
no more than $1 million for the quarter  ending  March 31, 1997 and a cumulative
loss of no more than $1.6 million for the quarter  ending June 30, 1997, and for
each month thereafter in 1997. The agreement  amended the net worth covenants to
correlate  with the net loss  covenants  above.  The quarterly  debt service and
monthly loss limit covenants were waived by the bank for 1997. In addition,  the
interest  rate was amended to the bank's  prime rate plus 3.0 percent  effective
April 1, 1997,  subject to change based on the operating results of the Company.
The Company was in compliance  with the amended debt covenants at June 30, 1997.
At June 30, 1997, the Company believes that it is probable that the Company will
comply with the debt  covenants  at the  measurement  dates over the next twelve
months;  therefore,  the  long-term  portion  of  the  Company's  term  loan  is
classified as non-current in the balance sheet.

(5)      Merger
         ------

         In May 1997,  the Company  entered into a definitive  merger  agreement
with FM Precision Golf Corp. During the quarter ended June 30, 1997, the Company
expensed  $280,000 in investment  banking,  legal and accounting fees related to
this  transaction.  The Company will also record  merger costs of  approximately
$400,000  (which  approximates  its fair value) for warrants to be issued to its
investment banker upon consummation of the merger. There can be no assurances as
to whether the merger will occur, or if it occurs, whether the ultimate terms of
the merger will be the same as those currently anticipated. 
                                       8
<PAGE>
(6)      Deferred Income Taxes
         ---------------------

         The Company  accounts  for income  taxes under the asset and  liability
method  of  Statement  of  Financial   Accounting   Standards  (SFAS)  No.  109,
"Accounting for Income Taxes."

         No tax benefit is available in the second quarter of 1997 due to a l00%
valuation allowance on a deferred tax asset. The Company recorded this valuation
allowance  because it believed that it is more likely than not that the deferred
tax assets will not be realized.
                                       9
<PAGE>
Part I

Item 2

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

Forward Looking Statements

         The Private  Securities  Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. The Company's Form 10-K, this Form 10-Q,
any other Form 10-Q, any Form 8-K, or any other written or oral  statements made
by or on behalf of the Company  may include  forward  looking  statements  which
reflect the Company's  current views with respect to future events and financial
performance.   These  forward   looking   statements   are  subject  to  certain
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, uncertainties relating to economic conditions,  customer
plans and  commitments,  the Company's  cost of raw materials,  the  competitive
environment in which the Company operates,  and changes in the financial markets
relating to the Company's capital  structure and cost of capital.  Statements in
this Form 10-Q,  including  the Notes to the  Condensed  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
detailed in the Company's Securities and Exchange Commission filings,  including
the Company's  Annual Report on Form 10-K for the year ended  December 31, 1996.
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.
                                       10
<PAGE>
Results of Operations

         The following table sets forth for the periods indicated the percentage
of net  sales  represented  by each  line item in the  Company's  statements  of
operations:
<TABLE>
<CAPTION>
                                                             Three Months Ended                Six Months Ended
                                                                  June 30,                          June 30,
                                                                  ---------                         --------
                                                             1997           1996               1997            1996
                                                             ----           ----               ----            ----
<S>                                                          <C>            <C>              <C>               <C>   
Net sales                                                    100.0%         100.0%           100.0%            100.0%
Cost of goods sold                                            68.7           77.6             75.1              76.1
                                                              ----           ----             ----              ----
        Gross profit                                          31.3           22.4             24.9              23.9
Selling, general and administrative expenses                  35.2           33.4             41.2              35.7
Merger Costs                                                   8.3            0.0              4.8               0.0
                                                              ----           ----             ----              ----
        Loss from operations                                 (12.2)         (11.0)           (21.1)            (11.8)
Other income (expenses) net                                    0.5           (0.3)             0.6              (0.3)
                                                              ----           ----             ----              ----
        Loss before income taxes                             (11.7)         (11.3)           (20.5)            (12.1)
Income taxes                                                   0.0            0.0              0.0               0.0
                                                              ----           ----             ----              ----
        Net loss                                             (11.7)%        (11.3)%          (20.5)%           (12.1)%
                                                             =======        =======          =======           =======
</TABLE>
         Net Sales.  Net sales for the three  months ended June 30, 1997 (second
quarter) were $3.4  million,  a decrease of 33.3% over net sales of $5.1 million
for the  corresponding  period in the prior year.  For the six months ended June
30,  1997,  net sales were $5.8  million,  a decrease of 39.0% over net sales of
$9.5 million. The decrease in net sales of $1.7 million and $3.7 million for the
three and six months ended June 30, 1997, respectively,  as compared to the same
periods of the prior year is primarily  attributable to a decrease in grip sales
of $1.5 million and $3.4 million, respectively. The Company's grip sales for the
three and six  months  ended  June 30,  1997 of $2.1  million  and $3.3  million
compared to $3.6 million and $6.7 million,  respectively,  for the corresponding
periods in 1996. This decrease in grip sales is due to a lack of grip production
resulting   from  the   transition  of  the  Company's   entire   non-cord  grip
manufacturing operation to Acushnet Rubber Company ("Acushnet").

         The Company's headwear  subsidiary,  Roxxi Inc., reported a decrease in
sales of $181,000, or 12.1%, for the quarter ended June 30, 1997, as compared to
the same period of the prior year.  For the six months ended June 30, 1997,  net
sales of headwear have decreased $333,000 or 11.9%. These decreases in net sales
are due primarily to a reduction in  production  staffing in 1997 as compared to
1996.  In the first two  quarters of 1996,  the Company  still had two  headwear
production  facilities,  the existing Oklahoma City facility and the Tempe plant
that was closed in June 1996. 
                                       11
<PAGE>
         Roxxi accounted for $1.3 million, or 38.2%, and $2.5 million, or 43.1%,
of the  Company's  total net sales for the three and six  months  ended June 30,
1997 as compared to $1.5 million or 29.4%,  and $2.8  million or 29.5%,  for the
corresponding periods in 1996.

         Gross Profit. Gross profit for the quarter ended June 30, 1997 was $1.1
million, or 31.3% of sales, compared to $1.1 million, or 22.4% of sales, for the
corresponding  quarter in 1996.  For the six months ended June 30,  1997,  gross
profit was $1.5  million,  or 24.9% of sales,  as compared to $2.3  million,  or
23.9% of net sales,  for the same period in 1996. The decline in gross profit of
$808,000 for the six months ended June 30, 1997 was  primarily  attributable  to
Acushnet's  production  delays  resulting in  significantly  lower grip sales as
compared  to the same  period in 1996.  In  connection  therewith,  the  Company
incurred  significant  expenses associated with facilitating the transition such
as travel  costs for its  employees  and  overnight  shipping  costs in order to
satisfy  customer  needs.  The decrease in grip sales resulted in a reduction of
higher-margin grip sales as a percentage of the total sales mix. The increase in
the gross profit percentage for the three months ended June 30, 1997 as compared
to the  three  months  ended  June 30,  1996,  is  primarily  the  result of the
improvement  in the gross  profit  percentage  for Roxxi.  For the three and six
months ended June 30, 1997, Roxxi reported a gross profit of $312,000, or 24.0%,
and $447,000, or 17.9%, respectively, of Roxxi's net sales as compared to losses
on gross  profit  of  ($121,000)  or (8.1%)  and  ($56,000)  or  (2.0%)  for the
corresponding periods of 1996. This improvement in gross profit is the result of
closing the Tempe  headwear  facility in June of 1996,  further  elimination  of
manufacturing overhead and improved production processes.

         The  gross  profit  on grip  sales was  $741,000,  or  35.3%,  and $1.0
million,  or 30.3%,  of total grip sales for the three and six months ended June
30, 1997, respectively, as compared to $1.2 million, or 33.3%, and $2.4 million,
or 35.8%,  for the same  periods in 1996.  The  improvement  in the gross profit
percentage  for the three months ended June 30, 1997 is primarily  the result of
the lower cost fixed pricing structure.
                                       12
<PAGE>
         During the quarter  ended  March 31,  1997,  the  Company and  Acushnet
renegotiated their agreement in light of Acushnet's production difficulties.  In
connection with this renegotiation,  Acushnet agreed to provide the Company with
a credit of $400,000 against future  purchases of grips, and additional  credits
in the event Acushnet fails to meet future production  requirements.  During the
quarter  ended June 30,  1997,  the Company  recorded an  additional  $72,000 of
credits related to additional Acushnet production shortfalls.  These credits may
be reduced  depending upon Acushnet's  production beyond levels specified in the
amendment  to the  Manufacturing  and  Supply  Agreement  or as a result  of the
cancellation of stock options granted to Acushnet.  These credits may be reduced
only to the extent that the Company  orders grips above such  specified  levels.
Because of the contingent  nature of the $472,000  credit,  the Company recorded
the credit as a liability  under the Supply  Agreement  Credits  line item and a
reduction  in accounts  payable due  Acushnet.  The Company  reduces its current
payment of invoices to Acushnet by the amount of such credits  when issued.  The
Company  intends to recognize these credits as a reduction in cost of sales when
it becomes  probable and  estimable  that Acushnet will not be able to earn back
the credits by either  increasing  its production or by virtue of a reduction in
the Company's orders below levels specified in the Amendment.  At June 30, 1997,
the Company has not  recorded any of the credits as a reduction in cost of sales
as Acushnet  can still earn back the credits and such  amounts,  if earned back,
are payable in cash.

         Selling,    General   and   Administrative.    Selling,   general   and
administrative  expenses decreased to $1.2 million and $2.4 million in the three
and six months  ended June 30, 1997,  respectively,  as compared to $1.7 million
and $3.4  million  in the  comparable  periods  of 1996.  Selling,  general  and
administrative  expenses decreased due to several factors. During the second and
third quarters of 1996, the Company  eliminated many  administrative and selling
employees  resulting  in a reduction in salaries of $99,000 and $197,000 for the
three and six months  ended June 30,  1997 as  compared  to the same  periods of
1996.  As a result of lower  sales  caused  by the  production  difficulties  at
Acushnet and reduced  headwear  production as a result of the elimination of the
headwear  production  facility in Tempe,  the Company paid $107,000 and $184,000
less in commission  for the three and six months ended June 30, 1997 as compared
to the same periods  last year.  The Company has also  improved  its  collection
procedures  which has resulted in a reduction of bad debt expense of $69,000 and
$104,000  for the three and six months  ended June 30,  1997 as  compared to the
corresponding  periods in 1996. The Company also has reduced many of its selling
expenses related to the advertising and promotion of its products.
                                       13
<PAGE>
         Merger Costs. In May 1997, the Company entered into a definitive merger
agreement with FM Precision  Golf Corp.  During the quarter ended June 30, 1997,
the Company expensed $280,000 in investment  banking,  legal and accounting fees
related to this  transaction.  The  Company  will also  record  merger  costs of
approximately  $400,000 (which  approximates  its fair value) for warrants to be
issued to its investment banker upon consummation of the merger.

         Other Income (Expense).  Other income was $18,000 in the second quarter
of 1997 compared to other expense of $13,000 in the same period of 1996. For the
six months ended June 30,  1997,  the Company  recorded  other income of $34,000
compared  to other  expense  of  $29,000  in the  same  period  of  1996.  These
differences  are  primarily  due to  recording  interest  income of $60,000  and
$122,000  related to the capital lease  receivable  from Acushnet.  For the same
periods,  this  interest  income has been  netted  against  interest  expense of
$45,000 and $73,000 that was incurred on the  Company's  line of credit and term
loan. The expense in 1996 resulted primarily from interest expense incurred on a
revolving line of credit and a loss on fixed asset dispositions.

         Deferred Income Taxes.  The Company accounts for income taxes under the
asset and liability method of Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes."

         No tax benefit is  available in the first two quarters of 1997 due to a
100%  valuation  allowance on a deferred tax asset.  The Company  recorded  this
valuation allowance because it believed that it is more likely than not that the
deferred tax assets will not be realized. 
                                       14
<PAGE>
Liquidity and Capital Resources

         During the six months ended June 30, 1997, the Company used $511,000 to
fund  operating  activities  as a  result  of a net  loss  of  $1,198,000  and a
reduction  in trade  accounts  payable and other  accrued  expenses of $780,000.
These factors were partially  offset by a significant  reduction in inventory of
$597,000 and an increase in supply  agreement  credits of $472,000.  The Company
attributes  the  reduction  in trade  accounts  payable  to the  application  of
Acushnet  credits to  payments  due  Acushnet  and the  elimination  of its grip
manufacturing   operation  thus  eliminating  purchases  of  raw  material.  The
inventory  levels  decreased  substantially  due to the Company ceasing its grip
manufacturing  operation.  Many of the grip shipments occurring in the first six
months  of  1997  were  from  inventory  produced  prior  to the  transition  of
manufacturing to Acushnet. As a result of the Acushnet transaction,  the Company
intends to maintain  substantially lower grip inventory levels in future periods
as compared to 1996.

         The Company funded its shortfall in cash from borrowings under its line
of credit.  Borrowings on the Company's line of credit totaled  $732,000 at June
30, 1997. On July 31, 1997, the Company had $490,000 drawn on its line of credit
of  $1.75  million.  See  Note  (4)  to  the  Condensed  Consolidated  Financial
Statements.  Available  borrowings  on the line of credit at June 30,  1997 were
$546,000.

         During the six  months  ended June 30,  1997,  RG used  $83,000 to fund
investing  activities  consisting  of $188,000  of  purchases  of  property  and
equipment  offset  by  $105,000  of  payments  received  on  the  capital  lease
receivable.  RG  estimates  that  its  capital  expenditures  for  1997  will be
approximately $500,000.

         In  February  1997,  the  Company  entered  into a new  line of  credit
facility  of $1.75  million and term loan of $700,000  with a  commercial  bank.
These  credit  arrangements  mature on  February  10, 2000 and contain net worth
requirements,  prohibit  dividend  payments and limit capital  expenditures.  At
March 31, 1997, the Company was not in compliance  with its quarterly net income
(loss),  debt service,  and net worth debt covenants and anticipated not meeting
many of its quarterly  and monthly  covenants  during 1997.  In April 1997,  the
Company  obtained an amended bank agreement which waived the existing net income
(loss),  debt  service,  and net worth  covenant  defaults  and amended the debt
agreement  whereby the net income  (loss) limits have been modified to a loss of
no more than $1 million for the quarter  ending  March 31, 1997 and a cumulative
loss of no more than $1.6 million for the quarter  ending June 30, 1997, and for
each month thereafter in 1997. The agreement  amended the net worth covenants to
correlate  with the net loss  covenants  above.  The quarterly  debt service and
monthly loss limit covenants were waived by the bank for 1997. In addition,  the
interest  rate was amended to the bank's  prime rate plus 3.0 percent  effective
April 1, 1997,  subject to change based on the operating results of the Company.
The Company was in compliance  with the amended debt covenants at June 30, 1997.
At June 30, 1997, the Company believes that it is probable that the Company will
comply with the debt  covenants  at the  measurement  dates over the next twelve
months;  therefore,  the  long-term  portion  of  the  Company's  term  loan  is
classified as non-current in the balance sheet.

         The  Company's  inability to meet its current or future loan  covenants
could result in an  acceleration  of its  indebtedness or restrict the Company's
access to such  loans,  which  would  impair the  Company's  ability to fund its
operations,  unless  or until  the  Company  secures  an  alternative  source of
funding, of which there can be no assurance.

         The Company  believes its available  borrowings and expected cash flows
from  operations  will  satisfy  its working  capital  and  capital  expenditure
requirements  for  the  foreseeable  future.  However,  if  operations  were  to
deteriorate,  or the Company were unable to borrow under its line of credit, the
Company would need to seek alternative  sources of financing for its operations.
There can be no  assurance  that such  sources  would be  available on terms and
conditions favorable or acceptable to the Company, if at all.
                                       15
<PAGE>
Part II

Other Information

Item 6.

  (a)     Exhibits

Exhibit
Number        Description of Exhibit
------        ----------------------

  2       Agreement  and  Plan  of  Merger        Incorporated  by  reference to
          dated as of May 14,  1997  among        Annex  I   of   the  Form  S-4
          Company, FM Precision Golf Corp.        Proxy/Registration   Statement
          and FMPSUB, INC.                        of  Company  and  FM Precision
                                                  Golf Corp., No. 333-28841.

 27       Financial Data Schedule                 Filed herewith


  (b)     Reports  on Form 8-K.  During the  second  quarter of the 1997  fiscal
          year,  the  Company  filed one  Current  Report on Form 8-K on May 27,
          1997,  wherein the Company  reported that it had executed a definitive
          agreement to combine with FM Precision Golf Corp. 
                                       16
<PAGE>
                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                          ROYAL GRIP, INC.




Date:    August 15, 1997           By:    /s/ Thomas A. Schneider
                                      --------------------------------
                                          Thomas A. Schneider
                                          Vice President - Finance
                                          (Principal Financial and
                                          Accounting Officer)
                                       17