U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

(Mark one)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.

For the quarterly period ended August 31, 2001 or

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934.

For the transition period from __________ to __________.


                         Commission File Number: 0-22889


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


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


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


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


               (Former Name, Former Address and Former Fiscal Year
                          if Changed Since Last Report)


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 of
1934  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 the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

           Title of each class              Outstanding at October 19, 2001
           -------------------              -------------------------------
     Common Stock, par value $0.001                 5,681,711 Shares
<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (dollars in thousands, except share data)

                                                           AUGUST 31,   MAY 31,
                                                             2001        2001
                                                           --------    --------
                                     ASSETS

CURRENT ASSETS:
  Cash                                                     $     60    $     33
  Accounts receivable, net of allowance for doubtful
    accounts of $170 and $187 at August 31, 2001
    and May 31, 2001, respectively                            1,902       4,988
  Inventories                                                 5,811       5,920
  Other current assets                                          135         215
  Deferred income taxes                                          --         224
                                                           --------    --------
      Total current assets                                    7,908      11,380
                                                           --------    --------

PROPERTY, PLANT AND EQUIPMENT:
  Land                                                          123         123
  Furniture, fixtures and office equipment                      615         614
  Buildings and improvements                                    955         955
  Machinery and equipment                                     5,802       5,733
  Equipment held for sale                                       106         120
  Construction in progress                                      477         371
                                                           --------    --------
                                                              8,078       7,916
  Less - Accumulated depreciation                            (2,125)     (1,912)
                                                           --------    --------
                                                              5,953       6,004
                                                           --------    --------

GOODWILL, net                                                 1,250       7,187
                                                           --------    --------

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

OTHER ASSETS                                                     52          54
                                                           --------    --------
      Total assets                                         $ 15,163    $ 25,207
                                                           ========    ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                        $  5,755    $    768
  Accounts payable                                            1,752       1,534
  Accrued salaries and benefits                                 270         529
  Accrued pension liability                                     229         198
  Accrued environmental costs                                   248         272
  Other accrued expenses                                        363         360
                                                           --------    --------
      Total current liabilities                               8,617       3,661

LONG-TERM DEBT, net of current portion                           --       7,705
                                                           --------    --------
      Total liabilities                                       8,617      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; 10,000,000
    shares authorized (increased to 15,000,000 on
    September 25, 2001); 5,681,711 shares issued
    and outstanding at August 31, 2001 and May 31, 2001           6           6
  Additional paid-in capital                                 13,977      13,977
  Accumulated deficit                                        (7,413)       (118)
  Accumulated other comprehensive loss                          (24)        (24)
                                                           --------    --------
      Total stockholders' equity                              6,546      13,841
                                                           --------    --------
      Total liabilities and stockholders' equity           $ 15,163    $ 25,207
                                                           ========    ========

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

                                        2
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (dollars in thousands, except per share amounts)

                                                            THREE MONTHS ENDED
                                                          ----------------------
                                                          AUGUST 31,  AUGUST 31,
                                                            2001        2000
                                                          ---------   ---------
NET SALES:
  Golf club shafts                                         $ 5,858     $ 5,807
  Golf club grips                                              807       1,171
                                                           -------     -------
                                                             6,665       6,978
                                                           -------     -------
COST OF SALES:
  Golf club shafts                                           4,622       3,749
  Golf club grips                                              684         822
                                                           -------     -------
                                                             5,306       4,571
                                                           -------     -------

     Gross profit                                            1,359       2,407

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                 1,755       1,982

AMORTIZATION OF GOODWILL                                        --         110

ENVIRONMENTAL COSTS                                             30          15
                                                           -------     -------

     Operating income (loss)                                  (426)        300

INTEREST EXPENSE                                               170         178

OTHER INCOME                                                    44          87
                                                           -------     -------

     Income (loss) before provision for income taxes          (552)        209

PROVISION FOR INCOME TAXES                                     806         104
                                                           -------     -------

     Income (loss) before cumulative effect of
       change in accounting principle                       (1,358)        105

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE          5,937          --
                                                           -------     -------

     Net income (loss)                                     $(7,295)    $   105
                                                           =======     =======

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
     Income (loss) before cumulative effect of
       change in accounting principle                      $ (0.24)    $  0.02
     Cumulative effect of change in accounting principle     (1.04)         --
                                                           -------     -------
     Net income (loss)                                     $ (1.28)    $  0.02
                                                           =======     =======

WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED TO
  COMPUTE PER SHARE INFORMATION (IN THOUSANDS):
     BASIC                                                   5,682       5,679
                                                           =======     =======
     DILUTED                                                 5,682       5,861
                                                           =======     =======

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

                                       3
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

                                                           THREE MONTHS ENDED
                                                          ---------------------
                                                          AUGUST 31,  AUGUST 31,
                                                            2001        2000
                                                           -------     -------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                        $(7,295)    $   105
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
    Depreciation and amortization                              213         250
    Increase in valuation allowance on deferred tax assets     806          --
    Impairment of goodwill                                   5,937          --
    (Gain) loss on retirement or sale of fixed assets           13          (3)
    Stock based compensation                                    --          28
    Increase (decrease) in cash resulting from a change
      in operating assets and liabilities --
      Accounts receivable, net                               3,086       2,069
      Inventories                                              109        (564)
      Other assets                                              82          66
      Accounts payable and accrued expenses                    (31)       (724)
                                                           -------     -------

      Net cash provided by operating activities              2,920       1,227
                                                           -------     -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of machinery and equipment                        (188)       (371)
  Proceeds from sale of fixed assets                            13          30
                                                           -------     -------

      Net cash used in investing activities                   (175)       (341)
                                                           -------     -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of lines-of-credit, net                        (2,480)       (225)
  Repayments of long-term debt                                (238)       (227)
                                                           -------     -------

      Net cash used in financing activities                 (2,718)       (452)
                                                           -------     -------

INCREASE IN CASH                                                27         434

CASH, beginning of period                                       33          36
                                                           -------     -------

CASH, end of period                                        $    60     $   470
                                                           =======     =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for --
    Interest                                               $   167     $   177
                                                           =======     =======
    Income taxes                                           $     2     $     1
                                                           =======     =======

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

                                       4
<PAGE>
                     ROYAL PRECISION, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.   OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

     BASIS OF PRESENTATION --

     The condensed  consolidated  financial statements of Royal Precision,  Inc.
     and subsidiaries  presented herein have been prepared pursuant to the rules
     of the  Securities and Exchange  Commission  for quarterly  reports on Form
     10-Q  and  do not  include  all of the  information  and  note  disclosures
     required by accounting  principles generally accepted in the United States.
     These  condensed  consolidated  financial  statements  should  be  read  in
     conjunction with the Company's  consolidated financial statements and notes
     thereto for the fiscal year ended May 31,  2001  included in the  Company's
     Annual Report on Form 10-K. In the opinion of management,  the accompanying
     unaudited   condensed   consolidated   financial   statements  include  all
     adjustments,  consisting of only normal recurring adjustments, necessary to
     present fairly the consolidated  financial position,  results of operations
     and  cash  flows  of the  Company.  Quarterly  operating  results  are  not
     necessarily  indicative  of the results that would be expected for the full
     year.

     ORGANIZATION --

     The accompanying  condensed consolidated financial statements include Royal
     Precision,   Inc.   ("RP")   and  its   three   wholly-owned   subsidiaries
     (collectively  the  "Company"),  which are FM Precision Golf  Manufacturing
     Corp.  ("FMP"), FM Precision Golf Sales Corp. ("FMP Sales") and Royal Grip,
     Inc. ("RG"). RP acquired RG on August 29, 1997 ("the RG Acquisition").

     BUSINESS --

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

     USE OF ESTIMATES --

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

2.   EARNINGS (LOSS) PER SHARE:

     The Company  accounts for earnings  (loss) per share in accordance with the
     Financial  Accounting  Standards  Board  ("FASB")  Statement  of  Financial
     Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Basic earnings
     (loss) per share are based on the weighted  average number of common shares
     outstanding during the period. Diluted earnings (loss) per share considers,
     in addition to the above,  the dilutive effect of common share  equivalents
     during the  period.  Common  share  equivalents  represent  dilutive  stock
     options and warrants  using the treasury  stock method.  Loss per share for
     the three  months  ended  August 31, 2001 was not  affected by  outstanding
     options to acquire  1,502,000  shares of common stock  because their effect
     was  anti-dilutive.  For the three months ended August 31, 2000, options to
     acquire  621,000 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.
     The number of shares used in  computing  earnings  (loss) per share for the
     three-month  periods  ended  August 31,  2001 and 2000 were as follows  (in
     thousands):

                                       5
<PAGE>
                                                    THREE MONTHS ENDED
                                                  ----------------------
                                                  AUGUST 31,   AUGUST 31,
                                                    2001          2000
                                                   ------        ------
          Basic:
            Average common shares outstanding       5,682         5,679

          Diluted:
            Dilutive effect of stock options           --           182
                                                   ------        ------
            Average common shares outstanding       5,682         5,861
                                                   ======        ======

3.   NEW ACCOUNTING PRONOUNCEMENTS:

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

     In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and
     SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
     companies  to apply the  purchase  method of  accounting  for all  business
     combinations  initiated  after June 30, 2001 and  prohibits  the use of the
     pooling-of-interest  method.  SFAS No.  142  changes  the  method  by which
     companies may recognize intangible assets in purchase business combinations
     and  generally  requires  identifiable  intangible  assets to be recognized
     separately from goodwill.  In addition,  it eliminates the  amortization of
     all  existing  and  newly  acquired  goodwill  on a  prospective  basis and
     requires  companies to assess goodwill for  impairment,  at least annually,
     based on the fair value of the reporting unit associated with the goodwill.
     The Company  elected to early adopt SFAS Nos.  141 and 142 on June 1, 2001.
     Note 9 provides additional discussion regarding the impact to the Company's
     financial statements as a result of adopting these statements.

4.   INVENTORIES:

     Inventories  are valued at the lower of cost or market.  Cost is determined
     on the first-in,  first-out  method.  Inventories as of August 31, 2001 and
     May 31, 2001 consisted of the following (in thousands):

                                         AUGUST 31, 2001    MAY 31, 2001
                                         ---------------    ------------
          Raw materials                      $  833            $  814
          Work-in-process                     1,542             1,215
          Finished goods                      3,436             3,891
                                             ------            ------
                                             $5,811            $5,920
                                             ======            ======

5.   BORROWING ARRANGEMENTS:

     The Company's  primary  borrowing  arrangement  consists of two bank credit
     facilities.  Borrowings  under the FMP and RG bank  credit  facilities  are
     secured by  substantially  all of the Company's  assets and contain certain
     financial  and other  covenants  which,  among other  things,  limit annual
     capital  expenditures  and dividends and require the maintenance of minimum
     monthly and quarterly  earnings and quarterly debt service coverage ratios,
     as defined.  Due to the loss incurred  during the three months ended August
     31, 2001,  the Company is not in  compliance  with several  financial  loan
     covenants  and is in  default  of its  credit  facilities.  Therefore,  all
     amounts  borrowed at August 31, 2001 are classified as current  liabilities
     in the condensed consolidated balance sheet as of that date. The Company is
     currently  negotiating  with its  lender  to  modify  the FMP and RG credit
     facilities  and to obtain waivers of the covenant  violations.  The Company
     believes that this financing  agreement will be completed during the fiscal
     quarter  ending  November  30,  2001.  Upon  completion  of  the  financing
     agreement and waiver of the covenant  violations by the lender, the Company
     anticipates   that  $4,987,000  of  the  outstanding   bank  debt  will  be
     reclassified  from a current  obligation to long-term debt.  Failure by the
     Company to obtain the necessary waivers of financial loan covenant defaults
     could have a material adverse effect on the Company's  financial  condition
     and results of operations.

                                       6
<PAGE>
     FMP's bank  credit  facility  consists  of two term  loans and a  revolving
     line-of-credit.  The  outstanding  principal  balance of the first FMP term
     loan ("FMP  Term 1") of  $2,577,000  at August  31,  2001 is due in monthly
     principal  installments  of $46,850  plus  interest  until its  maturity in
     September  2004. The outstanding  principal  balance of the second FMP term
     loan  ("FMP  Term 2") of  $380,000  at August  31,  2001 is due in  monthly
     principal  installments  of $6,667  plus  interest  until its  maturity  in
     September 2004. The amount available for borrowings under the FMP revolving
     line-of-credit is based upon the levels of eligible FMP accounts receivable
     and  inventories,  as  defined,  subject  to a  maximum  borrowing  base of
     $6,500,000.  Beginning on November 1 of each year, a seasonal  over-advance
     of $500,000 is available  until May 31 of the following  year. As of August
     31, 2001, FMP had $2,550,000 outstanding under its revolving line-of-credit
     and $424,000  available for additional  borrowings.  The FMP line-of-credit
     expires in September 2004.

     RG's  bank  credit  facility  consists  of a  term  loan  and  a  revolving
     line-of-credit.  The RG term loan of  $190,000 at August 31, 2001 is due in
     monthly  principal  installments  of $10,500 plus interest until it is paid
     off in  July  2003.  The  amount  available  for  borrowings  under  the RG
     revolving  line-of-credit  is based upon the levels of eligible RG accounts
     receivable and inventories,  as defined,  subject to a maximum borrowing of
     $1,500,000.  As of August 31, 2001,  RG had $58,000  outstanding  under its
     revolving  line-of-credit and $475,000 available for additional borrowings.
     The RG line-of-credit expires in September 2004.

     Borrowings  under both  lines-of-credit  and FMP Term 2 bear  interest at a
     rate per annum  equal to the prime  rate  (6.5% at August  31,  2001)  plus
     2.25%.  Borrowings under the RG term loan and FMP Term 1 bear interest at a
     rate per annum equal to the prime rate plus 2.75%. Borrowings under the FMP
     seasonal  over-advance bear interest at a rate per annum equal to the prime
     rate plus 4.25%.

     In October 2001, the Company  secured a commitment of additional  financing
     from the Johnston Family Charitable Foundation ("Johnston Foundation") with
     agreement on terms of a subordinated  promissory note ("Subordinated Note")
     in the amount of $1,250,000.  The Company anticipates that execution of the
     Subordinated  Note and funding of  $1,000,000  will occur during the fiscal
     quarter  ending  November 30, 2001 upon approval of the  transaction by the
     Company's bank lender.  The Company  anticipates that an additional funding
     of the  Subordinated  Note in the amount of $250,000 will be received prior
     to December  31,  2001.  The  Subordinated  Note bears  interest at a fixed
     annual rate of 13%, is due 12 months after  funding and is  subordinate  to
     both the FMP and RG bank credit  facilities.  Upon  funding,  the  Johnston
     Foundation  will receive  warrants to purchase  300,000 shares of RP common
     stock at a price of $0.25 per share. Additionally,  the Johnston Foundation
     will have an option to convert the indebtedness  into RP common stock at an
     exchange ratio of $0.25 per share with respect to any outstanding principal
     and accrued  interest  that is not repaid in full on or before the maturity
     date. Until stockholder approval, the Johnston Foundation may only exercise
     its warrants and the conversion option up to an aggregate of 25,000 shares.
     The Company  anticipates  presenting this  transaction to stockholders  for
     approval no later than the next annual  meeting of  stockholders  scheduled
     for  September  2002.  The Company  intends to use the  proceeds  from this
     financing  agreement for working capital to support the ongoing  operations
     of the  Company  and to  fund  the  cost  of  the  corporate  restructuring
     discussed  in Note 10.  Richard P.  Johnston,  a  director  and the CEO and
     Chairman of the Board of the Company, and Kenneth J. Warren, a director and
     secretary and general  counsel of the Company,  are members of the Board of
     Trustees of the Johnston  Foundation,  and David E. Johnston, a director of
     the Company, is President of the Johnston Foundation.

6.   INFORMATION ON SEGMENTS:

     The Company  has two  reportable  segments:  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 in the Annual
     Report on Form 10-K for the fiscal  year ended May 31,  2001.  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):

                                       7
<PAGE>
                                                      THREE MONTHS ENDED
                                                        AUGUST 31, 2001
                                                 -----------------------------
                                                GOLF CLUB  GOLF CLUB
                                                 SHAFTS      GRIPS      TOTAL
                                                 -------    -------    -------
     Net sales                                   $ 5,858    $   807    $ 6,665
     Operating loss                                 (217)      (209)      (426)
     Depreciation                                    157         56        213
     Interest expense                                155         15        170

     Total assets for reportable segments        $11,721    $ 9,347    $21,068
     Elimination of investment in subsidiaries                          (5,905)
                                                                       -------
     Consolidated total assets                                         $15,163
                                                                       =======

                                                      THREE MONTHS ENDED
                                                        AUGUST 31, 2000
                                                 -----------------------------
                                                GOLF CLUB  GOLF CLUB
                                                  SHAFTS     GRIPS      TOTAL
                                                 -------    -------    -------
     Net sales                                   $ 5,807    $ 1,171    $ 6,978
     Operating income                                239         61        300
     Depreciation and amortization                   128        122        250
     Interest expense                                164         14        178

     Total assets for reportable segments        $12,925    $16,990    $29,915
     Elimination of investment in subsidiaries                          (6,016)
                                                                       -------
     Consolidated total assets                                         $23,899
                                                                       =======

7.   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 has performed  site  assessments  and taken 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 October 2000,  the Company  received a notice of violation  ("NOV") from
     the State of Connecticut  Department of  Environmental  Protection  ("DEP")
     alleging that various  effluent  discharge  samples  during the period from
     January 2000 to September 2000 were in violation of authorized limits under
     an existing  permit for the  discharge of treated  wastewater  from the FMP
     plant. The Company  submitted its response to the NOV in December 2000 and,
     in April 2001,  the  Company  received a draft  consent  order from the DEP
     related to this matter.  The Company is currently  negotiating with the DEP
     prior  to  entering  into a final  consent  order.  The  Company  does  not
     anticipate, however, that the conditions of the draft consent order will be
     significantly  modified.  Terms of the draft consent order  include,  among
     other things,  that the Company pay a civil penalty of $206,000,  submit to
     various compliance audits, and complete a feasibility study to determine if
     the  discharge  of treated  wastewater  from the FMP plant can be  reduced,

                                       8
<PAGE>
     diverted to another source or eliminated  entirely.  Management believes it
     is possible that the proposed  civil penalty will be slightly  reduced when
     the final  consent order is executed.  A provision  for the proposed  civil
     penalty was recorded in the amount of $150,000 during the fiscal year ended
     May  31,  2001.   Management   believes  that  significant  future  capital
     expenditures  in excess of $300,000 may be made at the FMP plant during the
     fiscal  year  ending May 31,  2002 to comply  with the terms of the consent
     order.

     Environmental  costs related to the various matters discussed above totaled
     $30,000 and $15,000  during the  three-month  periods ended August 31, 2001
     and 2000, respectively.

8.   VALUATION ALLOWANCE ON DEFERRED TAX ASSETS:

     As of May 31,  2001,  the  Company  had  recorded  deferred  tax  assets of
     $806,000  net of a  valuation  allowance  of  $1,745,000.  Due to the  loss
     incurred  during the three months ended August 31, 2001 and the  additional
     costs  anticipated  for a  corporate  restructuring  (see Note  10),  it is
     unlikely that the Company will generate  positive taxable income during the
     fiscal year ending May 31, 2002.  Therefore,  the  valuation  allowance has
     been  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.  This  increase  in the  valuation  allowance  on
     deferred  tax  assets is  reflected  as a  provision  for  income  taxes of
     $806,000 during the three months ended August 31, 2001 in the  accompanying
     condensed consolidated statement of operations.

9.   ACCOUNTING FOR GOODWILL:

     In June 2001, the FASB issued 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 quarter  ended  August 31,  2001.  Therefore,
     amortization  of  goodwill  was  suspended  effective  June  1,  2001.  The
     following  table  presents the  pro-forma  financial  results for the three
     months ended August 31, 2000 on a basis  consistent with the new accounting
     principle (dollars in thousands except per share amounts):

          Reported net income                                  $   105
          Add back amortization of goodwill                        110
                                                               -------
          Adjusted net income                                  $   215
                                                               =======

          Reported basic and diluted net income per share      $  0.02
          Add back goodwill amortization per share                0.02
                                                               -------
          Adjusted basic and diluted net income per share      $  0.04
                                                               =======

     In accordance with the transitional guidance of SFAS No. 142, the Company's
     previously  recognized  goodwill  was tested for  impairment  as of June 1,
     2001.  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 loss  carryforwards  and by
     amortization  expense  totaling  $1,839,000.  Goodwill  was assigned to the
     Company's golf club grip business segment.  A fair value measurement of the
     grip  segment was computed by applying a market  multiple to the  projected
     segment 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 $1,250,000 was calculated for the
     segment which was lower than recorded goodwill of $7,187,000. Therefore, an
     impairment  of goodwill was recorded in the amount of  $5,937,000  which is
     reflected as the cumulative effect of change in accounting principle in the
     accompanying  condensed  consolidated statement of operations for the three
     months  ended  August 31,  2001.  The  income tax effect of this  change in
     accounting principle was $0.

     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  which is stipulated in SFAS No.
     142. The following table provides a reconciliation of the recorded goodwill
     during the period from May 31, 2001 to August 31, 2001 (in thousands):

                                       9
<PAGE>
          Balance as of May 31, 2001                          $ 7,187
          Impairment loss recorded                             (5,937)
                                                              -------
          Balance as of August 31, 2001                       $ 1,250
                                                              =======

10.  CORPORATE RESTRUCTURING:

     In  September   2001,   the  Company's   board  of  directors   approved  a
     restructuring  plan designed to streamline  operations and reduce expenses.
     The restructuring plan includes staff reductions and anticipates a decrease
     in operating  expenses  resulting  from the  consolidation  of the existing
     corporate  headquarters leased in Scottsdale,  Arizona to the manufacturing
     facility  which the Company owns in  Torrington,  Connecticut.  The Company
     expects  to incur  expenses  of  approximately  $1,100,000  related  to the
     restructuring  during the current fiscal year.  The Company  estimates that
     costs totaling  $800,000 will be expensed  during the fiscal quarter ending
     November  30,  2001,  for  severance  and  retention   bonuses  payable  to
     terminated employees,  lease termination costs, employee hiring, travel and
     training,  and modification of stock options held by terminated  employees.
     An estimated  $300,000  additional  expense is  anticipated  to be recorded
     during the fiscal quarter ending February 28, 2002 for employee relocation,
     hiring,  training,  and travel.  Approximately  25 individuals  who perform
     administrative, sales, marketing, customer service and accounting functions
     are  currently  employed  at  the  Company's  corporate  headquarters.  The
     affected  employees are entitled to receive severance  benefits pursuant to
     established   severance  policies  or  by  governmentally   mandated  labor
     regulations.  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.

11.  AUTHORIZED SHARES OF COMMON STOCK:

     The  Company's  annual  meeting of  stockholders  was held on September 25,
     2001. At the meeting, stockholders approved an amendment to the Amended and
     Restated  Certificate of Incorporation to increase the aggregate authorized
     number of shares of common stock from 10,000,000 to 15,000,000.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

FORWARD-LOOKING STATEMENTS --

This Report on Form 10-Q contains forward-looking  statements within the meaning
of the Private Securities  Litigation Reform Act of 1995. These  forward-looking
statements are often  characterized by the terms "may," "believes,"  "projects,"
"expects,"  or  "anticipates,"   and  do  not  reflect  historical  facts.  Such
statements include, but are not limited to, statements  concerning the Company's
future results from operations;  the adequacy of existing capital  resources and
credit lines; the ability to modify the terms of existing credit  facilities and
to obtain additional financing;  anticipated future customer orders; anticipated
future capital  expenditures;  anticipated costs of environmental matters at our
manufacturing   facilities  and  expectations   regarding  future  environmental
reports;  our ability to generate  sufficient cash flow from operations to repay
indebtedness  and fund  operations;  and  expectations  regarding  the costs and
benefits of our  restructuring  plan.  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.

Forward-looking  statements are based on the current beliefs and expectations of
the Company's management and are subject to significant risks, uncertainties and
other factors, which may cause actual results,  performance,  or achievements of
the Company to be materially  different from those  expressed or implied by such
forward-looking statements.  Factors that could affect the Company's results and
cause  them  to  be   materially   different   from  those   contained   in  the
forward-looking  statements include:  uncertainties relating to general economic
conditions;  the Company's  dependence on discretionary  consumer spending;  the
Company's dependence on demand from original equipment  manufacturers  ("OEMs");
the Company's  dependence on  international  sales; the cost and availability of
raw materials; the timeliness and market acceptance of the Company's new product
introductions;  the  competitive  environment  in which  the  Company  operates;

                                       10
<PAGE>
seasonality of sales,  which results in fluctuations in operating  results;  the
Company's  ability to protect its intellectual  property  rights;  the Company's
reliance on third party suppliers;  changes in the financial markets relating to
the Company's capital structure and cost of capital;  increased costs related to
environmental  regulations  and/or the failure of third parties to fulfill their
indemnification  and remediation  obligations to the Company;  work stoppages or
slowdowns;  the Company's  limited operating  history;  the Company's ability to
successfully  launch new products;  the  willingness of our lender to modify the
terms of existing  credit  facilities;  the  willingness  of certain  terminated
employees to continue with the Company through the restructuring;  the continued
listing of the Company's  stock on the Nasdaq  National Market and other factors
that  management is currently  unable to identify or quantify,  but may arise or
become known in the future.  A discussion  of these and other factors that could
cause the Company's  results to differ  materially  from those  described in the
forward-looking  statements can be found in Exhibit 99.1 of the Company's Annual
Report on Form 10-K for the period ended May 31, 2001.

OVERVIEW --

Royal Precision,  Inc. ("RP") is a holding company which carries on 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").

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 OEMs and to distributors and retailers for use in the replacement market. The
Company's   products  are  sold   throughout   the  United  States  as  well  as
internationally, primarily in Japan, Australia, Europe and Canada.

The  Company  principally  operates  in the golf  equipment  industry  which has
historically  been seasonal in nature with consumer demand for product being the
strongest during the spring and summer months.

THREE MONTHS ENDED AUGUST 31, 2001 COMPARED TO THE THREE MONTHS ENDED AUGUST 31,
2000 --

NET SALES. Net sales for the three months ended August 31, 2001 were $6,665,000,
a  decrease  of  $313,000  or  4%  from  net  sales  of  $6,978,000  during  the
corresponding period in 2000. Net sales of golf club shafts increased by $51,000
or 1% and net sales of golf club grips  decreased  by $364,000 or 31%.  Sales of
grips to the Company's exclusive Japanese  distributor declined $314,000 or 34%.
The  Japanese  distributor  has  experienced  a  decline  in  business  which it
attributes to the slow general  economic  conditions in Asia and reduced  orders
from certain of its Japanese OEM customers.

COST OF SALES. Cost of goods sold for the three months ended August 31, 2001 was
$5,306,000, an increase of $735,000 or 16% over cost of goods sold of $4,571,000
during  the  corresponding  period in 2000.  The cost of golf club  shaft  sales
increased  by  $873,000  or  23%.  This  increase   primarily  reflects  reduced
production  at the  Company's  manufacturing  facility in reaction to  declining
demand from several  significant  customers.  Production during the three months
ended August 31, 2001 was reduced  approximately 25% compared to the same period
last year.  The lower  production  resulted in fixed  manufacturing  costs being
spread  over a  decreased  number of units and a higher  unit cost basis for the
shafts  manufactured.  The cost of golf club grip sales decreased by $138,000 or
17% primarily as a result of lower total net sales.

GROSS  PROFIT.  Gross  profit for the three  months  ended  August 31,  2001 was
$1,359,000,  a decrease of  $1,048,000  or 44% from gross  profit of  $2,407,000
during the  corresponding  period in 2000.  Gross profit from sales of golf club
shafts decreased by $822,000 or 40% to $1,236,000 primarily due to a higher cost
of units produced resulting from lower absorption of fixed manufacturing  costs.
Additionally,  the mix of products sold during the three months ended August 31,
2001 was weighted more heavily toward lower priced, commercial grade shafts than
the comparable  period of the prior year.  Average shaft selling prices declined
approximately 5% as a result in this change in mix. Expressed as a percentage of
sales,  the gross profit on sales of golf club shafts decreased from 35% to 21%.
Gross  profit  from sales of golf club grips  decreased  by  $226,000  or 65% to
$123,000  due  primarily  to the  decline  in total net  sales.  Expressed  as a
percentage of sales, the gross profit on sales of golf club grips decreased from
30% to 15%. This decline in margin is also  attributable to fixed overhead costs
being spread over lower unit sales volume.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  for the  three  months  ended  August  31,  2001  were
$1,755,000,   a  decrease  of  $227,000  or  11%  from   selling,   general  and
administrative  expenses of $1,982,000 during the corresponding  period in 2000.
The decrease is primarily  attributable  to reduced  spending on television  and

                                       11
<PAGE>
print  advertising.  Expressed as a percentage  of sales,  selling,  general and
administrative  expenses  declined from 28% during the three months ended August
31, 2000 to 26% in 2001.

AMORTIZATION OF GOODWILL.  As discussed in Note 9 to the condensed  consolidated
financial  statements,  the Company  adopted SFAS No. 142 effective June 1, 2001
and eliminated amortization expense as of that date. Amortization expense during
the three months ended August 31, 2000 was $110,000.

ENVIRONMENTAL COSTS. Costs related to various environmental matters were $30,000
and $15,000 for the three-month periods August 31, 2001, and 2000,  respectively
(see Note 7 to the condensed consolidated financial statements).

INTEREST  EXPENSE.  Interest  expense was  consistent  at $170,000  and $178,000
during the three-month periods ended August 31, 2001 and 2000, respectively.

OTHER INCOME.  Other income of $44,000 and $87,000 for the  three-month  periods
ended  August 31,  2001 and 2000,  respectively,  is  principally  comprised  of
royalties  earned on sales of  headwear  products  as well as royalty  fees from
other contracts which license certain  Company  technologies  and products.  The
royalty stream on one headwear  contract expired in May 2001 which resulted in a
decrease in reported income during the three months ended August 31, 2001.

PROVISION FOR INCOME  TAXES.  A tax provision of $104,000 was recorded on income
during the three months ended August 31, 2000.  Taxes were provided based on the
estimated  effective  tax rate for the  year  which  considered  the  effect  of
nondeductible  goodwill  amortization.  As discussed in Note 8 to the  condensed
consolidated  financial  statements,  the  valuation  allowance  on deferred tax
assets was  increased to fully  reserve the recorded tax assets during the three
months  ended  August 31, 2001 based on the more likely  than not  criteria  for
realizability  of deferred tax assets  established in SFAS 109. This increase in
the  valuation  allowance  resulted in a provision  for income taxes of $806,000
during the three months ended August 31, 2001.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING  PRINCIPLE.  As discussed in Note 9 to
the condensed  consolidated  financial statements,  the Company adopted SFAS No.
142 effective June 1, 2001. In accordance with the transitional guidance of SFAS
No. 142, the Company's previously  recognized goodwill was tested for impairment
under the newly established guidelines. A charge in the amount of $5,937,000 was
recorded for the  calculated  impairment  which is  reflected as the  cumulative
effect  of  change  in  accounting  principle  in  the  accompanying   condensed
consolidated statement of operations for the three months ended August 31, 2001.

LIQUIDITY AND CAPITAL RESOURCES --

At August 31, 2001, the Company had a negative working capital of $709,000 and a
current  ratio of 0.9 to 1 as compared to working  capital of  $7,719,000  and a
current  ratio of 3.1 to 1 at May 31, 2001.  This decline in working  capital is
primarily the result of a  reclassification  of $4,987,000 in long-term  debt to
current liabilities due to various loan covenant violations discussed below.

The  Company's  primary  borrowing  arrangement  consists  of  two  bank  credit
facilities.  Borrowings under the FMP and RG bank credit  facilities are secured
by substantially  all of the Company's assets and contain certain  financial and
other covenants which, among other things, limit annual capital expenditures and
dividends and require the maintenance of minimum monthly and quarterly  earnings
and quarterly debt service coverage ratios, as defined. Due to the loss incurred
during the three months ended August 31, 2001,  the Company is not in compliance
with  several  financial  loan  covenants  and  is  in  default  of  its  credit
facilities. Therefore, all amounts borrowed at August 31, 2001 are classified as
current liabilities in the condensed consolidated balance sheet as of that date.
The Company is  currently  negotiating  with its lender to modify the FMP and RG
credit facilities and to obtain waivers of the covenant violations.  The Company
believes  that this  financing  agreement  will be  completed  during the fiscal
quarter ending November 30, 2001. Upon completion of the financing agreement and
waiver of the covenant  violations by the lender,  the Company  anticipates that
$4,987,000  of the  outstanding  bank debt will be  reclassified  from a current
obligation  to long-term  debt.  Failure by the Company to obtain the  necessary
waivers of financial loan covenant defaults could have a material adverse effect
on the Company's financial condition and results of operations.

FMP's  bank  credit  facility  consists  of  two  term  loans  and  a  revolving
line-of-credit.  The  outstanding  principal  balance of the first FMP term loan
("FMP  Term 1") of  $2,577,000  at August 31,  2001 is due in monthly  principal
installments  of $46,850 plus interest until its maturity in September 2004. The
outstanding  principal  balance  of the  second  FMP term loan ("FMP Term 2") of

                                       12
<PAGE>
$380,000 at August 31, 2001 is due in monthly  principal  installments of $6,667
plus interest  until its maturity in September  2004.  The amount  available for
borrowings  under the FMP revolving  line-of-credit  is based upon the levels of
eligible FMP  accounts  receivable  and  inventories,  as defined,  subject to a
maximum  borrowing base of  $6,500,000.  Beginning on November 1 of each year, a
seasonal  over-advance  of $500,000 is available  until May 31 of the  following
year. As of August 31, 2001, FMP had $2,550,000  outstanding under its revolving
line-of-credit  and  $424,000  available  for  additional  borrowings.  The  FMP
line-of-credit expires in September 2004.

RG's  bank   credit   facility   consists   of  a  term  loan  and  a  revolving
line-of-credit.  The RG term  loan of  $190,000  at  August  31,  2001 is due in
monthly principal  installments of $10,500 plus interest until it is paid off in
July  2003.  The  amount   available  for  borrowings  under  the  RG  revolving
line-of-credit  is based upon the levels of eligible RG accounts  receivable and
inventories,  as defined,  subject to a maximum  borrowing of $1,500,000.  As of
August 31, 2001, RG had $58,000  outstanding under its revolving  line-of-credit
and $475,000 available for additional borrowings.  The RG line-of-credit expires
in September 2004.

Borrowings under both lines-of-credit and FMP Term 2 bear interest at a rate per
annum equal to the prime rate (6.5% at August 31,  2001) plus 2.25%.  Borrowings
under the RG term loan and FMP Term 1 bear interest at a rate per annum equal to
the prime rate plus 2.75%.  Borrowings under the FMP seasonal  over-advance bear
interest at a rate per annum equal to the prime rate plus 4.25%.

In October 2001, the Company  secured a commitment of additional  financing from
the Johnston Family Charitable Foundation ("Johnston Foundation") with agreement
on terms of a subordinated  promissory note ("Subordinated  Note") in the amount
of $1,250,000.  The Company  anticipates that execution of the Subordinated Note
and funding of $1,000,000  will occur during the fiscal quarter ending  November
30, 2001 upon  approval of the  transaction  by the Company's  bank lender.  The
Company  anticipates that an additional  funding of the Subordinated Note in the
amount of $250,000 will be received prior to December 31, 2001. The Subordinated
Note  bears  interest  at a fixed  annual  rate of 13%,  is due 12 months  after
funding and is subordinate to both the FMP and RG bank credit  facilities.  Upon
funding,  the  Johnston  Foundation  will receive  warrants to purchase  300,000
shares  of RP  common  stock at a price of $0.25 per  share.  Additionally,  the
Johnston  Foundation  will have an option to convert  the  indebtedness  into RP
common  stock at an  exchange  ratio of $0.25  per  share  with  respect  to any
outstanding  principal  and  accrued  interest  that is not repaid in full on or
before the maturity date. Until stockholder  approval,  the Johnston  Foundation
may only exercise its warrants and the  conversion  option up to an aggregate of
25,000  shares.   The  Company   anticipates   presenting  this  transaction  to
stockholders  for approval no later than the next annual meeting of stockholders
scheduled for September  2002. The Company intends to use the proceeds from this
financing agreement for working capital to support the ongoing operations of the
Company and to fund the cost of the  corporate  restructuring  discussed in Note
10. Richard P. Johnston, a director and the CEO and Chairman of the Board of the
Company,  and Kenneth J. Warren, a director and secretary and general counsel of
the Company,  are members of the Board of Trustees of the  Johnston  Foundation,
and David E. Johnston,  a director of the Company,  is President of the Johnston
Foundation.

The Company  believes  that its  existing  capital  resources  and credit  lines
available, together with the anticipated funding of additional subordinated debt
of $1,250,000, are sufficient to fund its operations and capital requirements of
current business segments as presently planned over the next twelve months.

In  September  2001,  the Company  received  notification  from the Nasdaq Stock
Market  ("Nasdaq")  that the  Company's  common  stock had failed to  maintain a
minimum  market  value of  public  float of  $5,000,000  over the  preceding  30
consecutive  trading  days.  The Company was given 90 days to regain  compliance
with this  continued  listing  requirement  of the Nasdaq  National  Market.  In
October  2001,  the  Company  was  advised  that the  Nasdaq had  implemented  a
moratorium  on the market value of public  float  requirement  until  January 2,
2002. There is not sufficient information at this time to determine what action,
if any, the Nasdaq will pursue subsequent to January 2, 2002 and what effect, if
any, it may have on the Company's financial condition and results of operations.
Should the  Company's  common  stock  continue to fall below the minimum  market
value of public float  requirement for continued  listing on the Nasdaq National
Market,  the Company  will  consider  all  available  options  which may include
applying for listing on the Nasdaq SmallCap Market.

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

                                       13
<PAGE>
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").  In November 2000 and
April 2001, a contractor for the EPA performed site assessments 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 October  2000,  the Company  received a notice of violation  ("NOV") from the
State of Connecticut  Department of  Environmental  Protection  ("DEP") alleging
that various effluent  discharge  samples during the period from January 2000 to
September 2000 were in violation of authorized  limits under an existing  permit
for the  discharge  of  treated  wastewater  from  the FMP  plant.  The  Company
submitted  its  response  to the NOV in December  2000 and,  in April 2001,  the
Company received a draft consent order from the DEP related to this matter.  The
Company is  currently  negotiating  with the DEP prior to entering  into a final
consent order. The Company does not anticipate,  however, that the conditions of
the draft  consent  order  will be  significantly  modified.  Terms of the draft
consent order include,  among other things, that the Company pay a civil penalty
of $206,000,  submit to various  compliance  audits,  and complete a feasibility
study to determine if the discharge of treated wastewater from the FMP plant can
be  reduced,  diverted  to another  source or  eliminated  entirely.  Management
believes it is possible that the proposed civil penalty will be slightly reduced
when the final  consent order is executed.  A provision  for the proposed  civil
penalty was recorded in the amount of $150,000  during the fiscal year ended May
31, 2001.  Management  believes that significant future capital  expenditures in
excess of  $300,000  may be made at the FMP plant  during the fiscal year ending
May 31, 2002 to comply with the terms of the consent order.

Environmental  costs  related to the various  matters  discussed  above  totaled
$30,000 and $15,000  during the  three-month  periods  ended August 31, 2001 and
2000, respectively.

                                       14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

QUANTITATIVE INFORMATION REGARDING MARKET RISK.

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

QUALITATIVE INFORMATION REGARDING MARKET RISK.

The Company's  primary  market risk  exposure  relates to its variable rate debt
obligations that are described in Note 5 to the condensed consolidated financial
statements.  A one percent change in the prime lending rate would have an effect
of  approximately  $18,000 on interest expense for the three months ended August
31, 2001.

                                       15
<PAGE>
                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

     None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     Due to the loss incurred during the three months ended August 31, 2001, the
Company is not in compliance  with several  financial  loan  covenants and is in
default  of its  bank  credit  facilities.  These  covenant  violations  include
covenants  requiring the maintenance of minimum  monthly and quarterly  earnings
and minimum quarterly debt service coverage ratios,  as defined.  These covenant
violations   impact   all  of  the   Company's   outstanding   term   loans  and
lines-of-credit which, in the aggregate,  totaled $5,755,000 at August 31, 2001.
Therefore,  all amounts  borrowed at August 31, 2001 are  classified  as current
liabilities  in the  consolidated  balance sheet as of that date. The Company is
currently  negotiating  with its lender to modify the credit  facilities  and to
obtain  waivers of the  covenant  violations.  The  Company  believes  that this
financing  agreement will be completed during the fiscal quarter ending November
30, 2001. Upon completion of the financing  agreement and waiver of the covenant
violations  by the  lender,  the  Company  anticipates  that  $4,987,000  of the
outstanding  bank  debt  will  be  reclassified  from a  current  obligation  to
long-term debt.

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

     (a) The annual meeting of stockholders was held on September 25, 2001.

     (b) Richard P. Johnston, Charles S. Mechem, Jr. and Christopher A. Johnston
were elected as directors,  each to serve a term of three years. Other directors
whose terms of office  continued after the annual meeting are David E. Johnston,
Kenneth J. Warren,  Raymond J. Minella and Thomas A.  Schneider.  Mr.  Schneider
subsequently  resigned  as a director  and  officer of the  Company  and John C.
Lauchnor was elected by the board as a director and officer.

     (c) The only  matters  voted on at the annual  meeting were the election of
directors  and approval of an amendment to the Amended and Restated  Certificate
of Incorporation to increase the aggregate authorized number of shares of common
stock from 10,000,000 to 15,000,000. Results of the voting were as follows:

     Total  number of shares  entitled  to vote  present or  represented  at the
annual meeting: 5,356,968

     Election of Directors:
                                                For       Authority Withheld
                                             ---------    ------------------
          Richard P. Johnston                5,354,901          2,067
          Charles S. Mechem, Jr.             5,354,901          2,067
          Christopher A. Johnston            5,354,901          2,067

     Approval of amendment to Amended and Restated Certificate of Incorporation:

                                        For         Against       Abstain
                                     ---------      -------       -------
                                     5,354,776       1,475          717

     (d) Not applicable.

                                       16
<PAGE>
ITEM 5. OTHER INFORMATION.

     None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a) Exhibits.

     (3) Certificate of Incorporation and Bylaws

     Exhibit 3.1.  Amended and Restated  Certificate of  Incorporation  of Royal
Precision, Inc. (restated to reflect amendment filed with the Secretary of State
of Delaware on September 28, 2001).

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

     (4) Instruments Defining the Rights of Security Holders

     Exhibit 4.1. See Articles FOUR,  FIVE and SEVEN of the Amended and Restated
Certificate of Incorporation at Exhibit 3.1.

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

     (10) Material Contracts

     Exhibit 10.1.  Agreement to Terminate  Employment  with Thomas A. Schneider
dated as of October 1, 2001.

     Exhibit 10.2. Executive Employment Agreement with John Lauchnor dated as of
September 1, 2001.

     (b) Reports on Form 8-K.

     There  were no  reports  on Form 8-K  filed by the  Registrant  during  the
quarter ended August 31, 2001.

                                   SIGNATURES

     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, thereunto duly authorized.


                                     ROYAL PRECISION, INC.


Date October 19, 2001                By /s/ John C. Lauchnor
     ----------------                   ----------------------------------------
                                        John C. Lauchnor, President
                                        (duly authorized officer)


                                     By /s/ Kevin L. Neill
                                        ----------------------------------------
                                        Kevin L. Neill, Vice President - Finance
                                        (chief financial officer)

                                       17
<PAGE>
                                  EXHIBIT INDEX

                                                                       PAGE IN
                                                                    SEQUENTIALLY
                                                                      NUMBERED
EXHIBIT                                                                 COPY
-------                                                                 ----

3.1       Amended and Restated  Certificate of  Incorporation  of        19
          Royal Precision,  Inc.  (restated to reflect  amendment
          filed  with  the  Secretary  of State  of  Delaware  on
          September 28, 2001).

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

4.1       See  Articles  FOUR,  FIVE and SEVEN of the Amended and         *
          Restated Certificate of Incorporation of the registrant
          at Exhibit 3.1.

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

10.1      Agreement  to  Terminate   Employment  with  Thomas  A.        25
          Schneider dated as of October 1, 2001.

10.2      Executive Employment Agreement with John Lauchnor dated        28
          as of September 1, 2001.


* Incorporated by reference