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 November 30, 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.)


  535 Migeon Avenue, Torrington, Connecticut                       06790
(Address of Current Principal Executive Offices)             (Current Zip code)


                                 (860) 489-9254
              (Registrant's Telephone Number, Including Area Code)


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


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 January 10, 2002
    -------------------                          -------------------------------
Common Stock, par value $0.001                           5,681,711 Shares

                                       1
<PAGE>
                                     PART I
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

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

<TABLE>
<CAPTION>
                                                                               NOVEMBER 30,    MAY 31,
                                                                                  2001          2001
                                                                                --------      --------
<S>                                                                             <C>           <C>
                                     ASSETS
CURRENT ASSETS:
  Cash                                                                          $     24      $     33
  Accounts receivable, net of allowance for doubtful accounts of
    $185 and $187 at November 30, 2001 and May 31, 2001, respectively              2,412         4,988
  Inventories                                                                      6,099         5,920
  Other current assets                                                               144           215
  Deferred income taxes                                                               --           224
                                                                                --------      --------
       Total current assets                                                        8,679        11,380
                                                                                --------      --------
PROPERTY, PLANT AND EQUIPMENT:
  Land                                                                               123           123
  Furniture, fixtures and office equipment                                           610           614
  Buildings and improvements                                                         955           955
  Machinery and equipment                                                          5,769         5,733
  Equipment held for sale                                                            106           120
  Construction in progress                                                           549           371
                                                                                --------      --------
                                                                                   8,112         7,916
  Less - Accumulated depreciation                                                 (2,247)       (1,912)
                                                                                --------      --------
                                                                                   5,865         6,004
                                                                                --------      --------

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

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

OTHER ASSETS                                                                          60            54
                                                                                --------      --------
       Total assets                                                             $ 15,854      $ 25,207
                                                                                ========      ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                              $  1,550      $  1,534
  Current portion of long-term debt                                                  768           768
  Subordinated debt, net of discount of $398                                         602            --
  Accrued salaries and benefits                                                      330           529
  Accrued restructuring costs                                                        759            --
  Accrued pension liability                                                          151           198
  Accrued environmental costs                                                        242           272
  Other accrued expenses                                                             439           360
                                                                                --------      --------
       Total current liabilities                                                   4,841         3,661

LONG-TERM DEBT, net of current portion                                             5,802         7,705
                                                                                --------      --------
       Total liabilities                                                          10,643        11,366
                                                                                --------      --------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred stock, $0.001 par value; 1,000,000 shares
    authorized; no shares issued                                                      --            --
  Common stock, $0.001 par value; 15,000,000 shares authorized
    (increased from 10,000,000 on September 25, 2001); 5,681,711
    shares issued and outstanding at November 30, 2001 and May 31, 2001                6             6
  Additional paid-in capital                                                      14,433        13,977
  Accumulated deficit                                                             (9,204)         (118)
  Accumulated other comprehensive loss                                               (24)          (24)
                                                                                --------      --------
       Total stockholders' equity                                                  5,211        13,841
                                                                                --------      --------
       Total liabilities and stockholders' equity                               $ 15,854      $ 25,207
                                                                                ========      ========
</TABLE>

         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)

<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                          ---------------------------  --------------------------
                                                                          NOVEMBER 30,   NOVEMBER 30,  NOVEMBER 30,  NOVEMBER 30,
                                                                              2001          2000          2001          2000
                                                                            --------      --------      --------      --------
<S>                                                                         <C>           <C>           <C>           <C>
NET SALES:
  Golf club shafts                                                          $  3,786      $  4,757      $  9,644      $ 10,564
  Golf club grips                                                                689           735         1,496         1,906
                                                                            --------      --------      --------      --------
                                                                               4,475         5,492        11,140        12,470
                                                                            --------      --------      --------      --------
COST OF SALES:
  Golf club shafts                                                             3,237         4,203         7,859         7,952
  Golf club grips                                                                575           649         1,259         1,471
                                                                            --------      --------      --------      --------
                                                                               3,812         4,852         9,118         9,423
                                                                            --------      --------      --------      --------

      Gross profit                                                               663           640         2,022         3,047

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                   1,352         1,604         3,107         3,586

ENVIRONMENTAL COSTS                                                               15           140            45           155

RESTRUCTURING COSTS                                                              887            --           887            --

NONRECURRING EXPENSES                                                             --           556            --           556

AMORTIZATION OF GOODWILL                                                          --           111            --           221
                                                                            --------      --------      --------      --------

      Operating loss                                                          (1,591)       (1,771)       (2,017)       (1,471)
                                                                            --------      --------      --------      --------
INTEREST EXPENSE:
  Cash interest payable                                                          178           185           348           363
  Non-cash accretion of discount on subordinated debt                             35            --            35            --
                                                                            --------      --------      --------      --------
                                                                                 213           185           383           363
                                                                            --------      --------      --------      --------

OTHER INCOME                                                                      13            78            57           165
                                                                            --------      --------      --------      --------

     Loss before provision for (benefit from) income taxes                    (1,791)       (1,878)       (2,343)       (1,669)

PROVISION FOR (BENEFIT FROM) INCOME TAXES (Note 10)                               --          (676)          806          (572)
                                                                            --------      --------      --------      --------
     Loss before cumulative effect of change in accounting
        principle                                                             (1,791)       (1,202)       (3,149)       (1,097)

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

      Net loss                                                              $ (1,791)     $ (1,202)     $ (9,086)     $ (1,097)
                                                                            ========      ========      ========      ========
BASIC AND DILUTED LOSS PER SHARE:
     Loss before cumulative effect of change in accounting
        principle                                                           $  (0.32)     $  (0.21)     $  (0.55)     $  (0.19)
     Cumulative effect of change in accounting principle                          --            --         (1.05)           --
                                                                            --------      --------      --------      --------
      Net loss                                                              $  (0.32)     $  (0.21)     $  (1.60)     $  (0.19)
                                                                            ========      ========      ========      ========
WEIGHTED AVERAGE  NUMBER OF COMMON SHARES USED TO COMPUTE
  PER SHARE INFORMATION (IN THOUSANDS):
     BASIC                                                                     5,682         5,679         5,682         5,679
                                                                            ========      ========      ========      ========
     DILUTED                                                                   5,682         5,679         5,682         5,679
                                                                            ========      ========      ========      ========
</TABLE>

         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)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                ---------------------------
                                                                NOVEMBER 30,   NOVEMBER 30,
                                                                    2001          2000
                                                                  -------        -------
<S>                                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                        $(9,086)       $(1,097)
  Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
   Depreciation and amortization                                      427            513
   Increase in valuation allowance on deferred tax assets             806             --
   Deferred income taxes                                               --           (570)
   Accretion of discount on subordinated debt                          35             --
   Impairment of goodwill                                           5,937             --
   (Gain) loss on retirement or sale of fixed assets                    7             (3)
   Stock based compensation                                            23             35
   Write-down of equipment and inventories                             --            954
   Increase (decrease) in cash resulting from a change in
    operating assets and liabilities--
     Accounts receivable, net                                       2,576          1,967
     Inventories                                                     (179)        (1,848)
     Other assets                                                      65             68
     Accounts payable and accrued expenses                            578           (334)
                                                                  -------        -------

       Net cash provided by (used in) operating activities          1,189           (315)
                                                                  -------        -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of machinery and equipment                               (317)          (585)
  Proceeds from sale of fixed assets                                   22             30
                                                                  -------        -------

       Net cash used in investing activities                         (295)          (555)
                                                                  -------        -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings (repayments) under lines-of-credit, net               (1,473)         1,381
  Proceeds from issuance of subordinated debt and warrant           1,000             --
  Repayments of long-term debt                                       (430)          (453)
                                                                  -------        -------

       Net cash provided by (used in) financing activities           (903)           928
                                                                  -------        -------

INCREASE (DECREASE) IN CASH                                            (9)            58

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

CASH, end of period                                               $    24        $    94
                                                                  =======        =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for--
    Interest                                                      $   398        $   352
                                                                  =======        =======
    Income taxes                                                  $    --        $     1
                                                                  =======        =======
</TABLE>

         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 shares of
     common stock  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 and six-month  periods ended  November 30, 2001 was
     not  affected  by  outstanding  options and  warrants to acquire  2,119,000
     shares of common stock  because  their effect was  anti-dilutive.  Loss per
     share for the three and six-month  periods ended  November 30, 2000 was not
     affected by outstanding options and warrants to acquire 1,339,000 shares of
     common stock because their effect was  anti-dilutive.  The number of shares
     used in computing loss per share for the three and six-month  periods ended
     November 30, 2001 and 2000 were as follows (in thousands):

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED             SIX MONTHS ENDED
                                             ---------------------------   ---------------------------
                                             NOVEMBER 30,   NOVEMBER 30,   NOVEMBER 30,   NOVEMBER 30,
                                                 2001           2000           2001           2000
                                                -----          -----          -----          -----
<S>                                             <C>            <C>            <C>            <C>
Basic:
  Average common shares outstanding             5,682          5,679          5,682          5,679

Diluted:
  Dilutive effect of stock options
    and warrants                                   --             --             --             --
                                                -----          -----          -----          -----
       Average common shares outstanding        5,682          5,679          5,682          5,679
                                                =====          =====          =====          =====
</TABLE>

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  11  provides  additional  discussion  regarding  the  impact  to  the
     Company's financial statements as a result of adopting these statements.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
     Impairment or Disposal of Long-Lived  Assets." SFAS No. 144 supersedes SFAS
     No.  121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and for
     Long-Lived  Assets to Be Disposed  Of," and the  accounting  and  reporting
     provisions   of  APB   Opinion   No.   30,   "Reporting   the   Results  of
     Operations--Reporting  the  Effects of Disposal of a Segment of a Business,
     and   Extraordinary,   Unusual  and   Infrequently   Occurring  Events  and
     Transactions."  SFAS No. 144 modifies the method in which companies account
     for certain asset impairment  losses. The Company will be required to adopt
     SFAS No. 144 on June 1, 2002.  Management  does not believe the adoption of
     SFAS  No.  144 will  have a  material  impact  on the  Company's  financial
     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 November 30, 2001 and
     May 31, 2001 consisted of the following (in thousands):

                                             NOVEMBER 30, 2001      MAY 31, 2001
                                             -----------------      ------------
     Raw materials                               $     668            $     814
     Work-in-process                                 1,747                1,215
     Finished goods                                  3,684                3,891
                                                 ---------            ---------
                                                 $   6,099            $   5,920
                                                 =========            =========

     During the three months  ended  November  30,  2000,  the Company  recorded
     write-downs totaling $477,000 to reduce the carrying value of certain steel
     golf  club  shafts  and golf  club  grips  finished  goods  inventories  to
     estimated  net  realizable  value.  These  write-downs  are  reflected as a
     component of cost of sales in the  statements of  operations  for the three
     and six-month periods ended November 30, 2000.

                                       6
<PAGE>
5.   EQUIPMENT WRITE-DOWNS:

     During the three months ended  November 30, 2000,  the Company  recorded an
     impairment  write-down  of  $360,000  on  equipment  held for  sale,  which
     represents  rubber  injection  presses  previously  used to manufacture the
     Company's golf club grips.  Also during the three months ended November 30,
     2000,  the  Company  recorded  an  expense of  $117,000  to  write-off  the
     accumulated  cost of  various  projects  under  development  to design  and
     construct tooling for the manufacture of golf club grips. These write-downs
     are reflected as a component of nonrecurring  expenses in the statements of
     operations for the three and six-month periods ended November 30, 2000.

6.   BANK 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,  limit the repayment of  subordinated
     debt, and require the maintenance of minimum monthly and quarterly earnings
     and  quarterly  debt  service  coverage  ratios,  as  defined.  The Company
     believes that it is in compliance  with all financial  loan covenants as of
     November 30,  2001.  Most  recently in August 2001,  the Company was not in
     compliance  with certain  financial loan  covenants,  but was successful in
     obtaining  the  necessary  waivers and  amendments  to remedy such default.
     There  can be no  assurance,  however,  that the  Company  would be able to
     obtain the  necessary  waivers or  amendments  upon the  occurrence  of any
     future  events of default of financial  loan  covenants  which could have a
     material adverse effect on the Company's financial condition and results of
     operations.

     On November 13, 2001, the Company  amended its bank credit  facilities with
     the lender.  In conjunction with these  amendments,  the Company received a
     waiver of the financial  covenant  defaults  which had existed since August
     2001 and  waiver or  restatement  of  financial  loan  covenants  in future
     periods.  The Company's  annual  interest rates were increased by 1% on all
     borrowings under both credit facilities  effective November 13, 2001. A fee
     of $25,000 was incurred  related to the waiver and restatement of financial
     loan covenants which is reflected as a component of interest expense in the
     statements of operations for the three and six-month periods ended November
     30, 2001.

     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  $2,436,000  at November  30, 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  $360,000  at  November  30,  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 up to $500,000 is available  until May 31 of the  following  year. As of
     November 30,  2001,  FMP had  $3,209,000  outstanding  under its  revolving
     line-of-credit and $692,000 available for additional borrowings including a
     $400,000  available   over-advance.   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 $159,000 at November 30, 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 November 30, 2001, RG had $406,000 outstanding under its
     revolving  line-of-credit and $307,000 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 (5.0% at  November  30,  2001) plus
     3.25%.  Borrowings under the RG term loan and FMP Term 1 bear interest at a
     rate per annum equal to the prime rate plus 3.75%. Borrowings under the FMP
     seasonal  over-advance bear interest at a rate per annum equal to the prime
     rate plus 5.25%.

                                       7
<PAGE>
7.   SUBORDINATED DEBT:

     On October 26, 2001,  the Company  entered into a financing  agreement with
     The Johnston Family  Charitable  Foundation  ("Johnston  Foundation") for a
     subordinated  promissory  note  ("Subordinated  Note")  in  the  amount  of
     $1,250,000.  Funding of $1,000,000 of the Subordinated Note was received on
     October 26, 2001,  and the remaining  $250,000 was received on December 14,
     2001. The Subordinated Note bears interest at a stated fixed annual rate of
     13%, is due in full on October 26, 2002, and is subordinate to both the FMP
     and RG bank credit facilities. 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 12.

     Simultaneous  with  the  initial  funding  of the  Subordinated  Note,  the
     Johnston  Foundation received a warrant to purchase up to 300,000 shares of
     RP common stock at a price of $0.25 per share.  Additionally,  the Johnston
     Foundation  has an option to convert the  Subordinated  Note into RP common
     stock  at an  exchange  ratio  of  $0.25  per  share  with  respect  to any
     outstanding principal and accrued interest that is not repaid in full on or
     before  the  maturity  date.  Until  stockholder  approval,   the  Johnston
     Foundation may only exercise its warrant and the conversion option up to an
     aggregate of 25,000 shares.  The Company has scheduled a special meeting of
     stockholders  on January  28,  2002,  to ratify the terms of the  financing
     agreement.  Richard P.  Johnston,  the CEO and Chairman of the Board of the
     Company, a 27% stockholder and director, his spouse, Jayne A. Johnston, and
     Kenneth J. Warren,  a director  and  secretary  and general  counsel of the
     Company,  are Trustees of the Johnston  Foundation.  David E.  Johnston,  a
     director  of the  Company,  and son of  Richard  P.  Johnston  and Jayne A.
     Johnston, is President of the Johnston Foundation.

     Using the Black  Scholes  option  pricing  model,  a value of $433,000  was
     calculated for the warrant granted to the Johnston Foundation.  This amount
     is being  accounted for as a discount on the  Subordinated  Note.  The full
     amount of the  discount  was  recorded  as  Additional  Paid-In  Capital in
     October 2001 upon the execution of the financing agreement. The discount is
     being amortized  using the effective  interest method over the twelve month
     term of the Subordinated  Note.  During the three months ended November 30,
     2001, $35,000 of the discount was amortized and is reflected as a component
     of interest expense in the accompanying condensed consolidated statement of
     operations.

8.   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):

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED                              SIX MONTHS ENDED
                                                     NOVEMBER 30, 2001                              NOVEMBER 30, 2001
                                         -------------------------------------------   --------------------------------------------
                                         GOLF CLUB  GOLF CLUB    (A)                   GOLF CLUB  GOLF CLUB      (A)
                                           SHAFTS     GRIPS   UNALLOCATED    TOTAL       SHAFTS     GRIPS    UNALLOCATED     TOTAL
                                          --------   -------  -----------   --------    --------   --------  -----------   --------
<S>                                       <C>        <C>         <C>        <C>         <C>        <C>          <C>        <C>
Net sales                                 $  3,786   $   689    $    --     $  4,475    $  9,644   $  1,496    $    --     $ 11,140
Operating loss                                (589)     (115)      (887)      (1,591)       (806)      (324)      (887)      (2,017)
Depreciation                                   156        58         --          214         313        114         --          427
Interest expense                               167        11         35          213         322         26         35          383

Total assets for reportable segments                                                    $ 12,391   $  9,357    $    --     $ 21,748
Elimination of investment in subsidiary                                                                                      (5,894)
                                                                                                                           --------
Consolidated total assets                                                                                                  $ 15,854
                                                                                                                           ========

</TABLE>

(A)  Unallocated  for the three and six-month  periods  ended  November 30, 2001
     includes costs associated with a corporate  restructuring  and accretion of
     discount on  subordinated  debt which are not  allocated  to the  operating
     segments.

                                       8
<PAGE>
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED                              SIX MONTHS ENDED
                                                     NOVEMBER 30, 2000                              NOVEMBER 30, 2000
                                         -------------------------------------------   --------------------------------------------
                                         GOLF CLUB  GOLF CLUB     (B)                  GOLF CLUB  GOLF CLUB     (B)
                                           SHAFTS     GRIPS   UNALLOCATED    TOTAL       SHAFTS     GRIPS    UNALLOCATED     TOTAL
                                          --------   -------  -----------   --------    --------   --------  -----------   --------
<S>                                       <C>        <C>         <C>        <C>         <C>        <C>          <C>        <C>
Net sales                                 $  4,757   $    735   $    --     $  5,492    $ 10,564   $  1,906    $    --     $ 12,470
Operating loss                                (973)      (719)      (79)      (1,771)       (645)      (747)       (79)      (1,471)
Depreciation and amortization                  136        126        --          262         265        248         --          513
Interest expense                               161         24        --          185         325         38         --          363

Total assets for reportable segments                                                    $ 13,700   $ 16,754    $    --     $ 30,454
Elimination of investment in subsidiary                                                                                      (5,980)
                                                                                                                           --------
Consolidated total assets                                                                                                  $ 24,474
                                                                                                                           ========
</TABLE>

(B)  Unallocated  for the three and six-month  periods  ended  November 30, 2000
     includes  legal and other  professional  fees  associated  with a  proposed
     acquisition which are not allocated to the operating segments.

9.   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. A draft report has been written and the
     Company  anticipates  that a final  report from the EPA with the results of
     this work will be received  prior to April 2002.  Pursuant to the Brunswick
     Acquisition  agreement,  Brunswick has an obligation  under the Connecticut
     Transfer Act (the "Act") to remediate  any  environmental  issues that fall
     within the scope of the Act. The Company believes that, if the final report
     remains  substantially  unchanged from the draft, the environmental  issues
     identified  would fall within the scope of the Act or other  provisions  of
     the  acquisition  agreement  that would  require  them to be  addressed  by
     Brunswick.  There is not  sufficient  information at this time to determine
     what action,  if any,  the EPA may pursue and what  effect,  if any, it may
     have on the Company's financial condition and results of operations.

     In October 2000,  the Company  received a notice of violation  ("NOV") from
     the State of Connecticut  Department of  Environmental  Protection  ("DEP")
     alleging  that  various  effluent  discharge  samples  were in violation of
     authorized  limits  under an existing  permit for the  discharge of treated
     wastewater  from the FMP plant.  The Company  submitted its response to the
     NOV in December 2000 and received drafts of a consent order from the DEP in
     April 2001 and October  2001.  Terms of the draft  consent  order  include,
     among other things,  that the Company pay a civil penalty of  approximately
     $225,000,  submit to various  compliance audits, and complete a feasibility
     study to determine  if the  discharge  of treated  wastewater  from the FMP
     plant can be reduced,  diverted to another  source or eliminated  entirely.
     The Company is currently  negotiating with the DEP prior to entering into a
     final consent order. Management has determined that capital expenditures in
     excess of  $300,000  will be made at the FMP plant  during the fiscal  year
     ending May 31, 2002 to ensure  compliance  with the  applicable  wastewater
     regulations  and to comply with the terms of the consent order.  Management
     believes that, with the installation of this new system, the proposed civil

                                       9
<PAGE>
     penalty  may be  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.

     Environmental  costs related to the various matters discussed above totaled
     $15,000 and $140,000 during the three-month periods ended November 30, 2001
     and 2000,  respectively,  and $45,000  and  $155,000  during the  six-month
     periods ended November 30, 2001 and 2000, respectively.

10.  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 six months ended  November 30, 2001 and the additional
     costs remaining for a corporate restructuring (see Note 12), it is unlikely
     that the Company will generate  positive  taxable  income during the fiscal
     year ending May 31, 2002. Therefore,  the valuation allowance was increased
     to fully offset the  recorded  deferred tax assets based on the more likely
     than not criteria for  realizability of deferred tax assets  established in
     SFAS 109. This  increase in the valuation  allowance on deferred tax assets
     is  reflected as a provision  for income  taxes of $806,000  during the six
     months ended November 30, 2001 in the accompanying  condensed  consolidated
     statement of operations.

11.  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  fiscal  quarter  ended  August 31,  2001.
     Therefore,  amortization of goodwill was suspended  effective June 1, 2001.
     The following table presents the pro-forma  financial results for the three
     and six-month  periods ended November 30, 2000 on a basis  consistent  with
     the new  accounting  principle  (dollars  in  thousands  except  per  share
     amounts):


<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED    SIX MONTHS ENDED
                                                NOVEMBER 30, 2000     NOVEMBER 30, 2000
                                                -----------------     -----------------
<S>                                                 <C>                  <C>
Reported net loss                                   $  (1,202)            $  (1,097)
Add back amortization of goodwill                         111                   221
                                                    ---------             ---------
Adjusted net loss                                   $  (1,091)            $    (876)
                                                    =========             =========

Reported basic and diluted net loss per share       $   (0.21)            $   (0.19)
Add back goodwill amortization per share                 0.02                  0.04
                                                    ---------             ---------
Adjusted basic and diluted net loss per share       $   (0.19)            $   (0.15)
                                                    =========             =========
</TABLE>

     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 tax 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  the  recorded   goodwill  of  $7,187,000.
     Therefore,  an impairment 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 six
     months  ended  November  30,  2001.  There was no income tax effect of this
     change in accounting principle.

     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

                                       10
<PAGE>
     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 November 30, 2001 (in thousands):

          Balance as of May 31, 2001                                   $  7,187
          Impairment loss recorded                                       (5,937)
                                                                       --------
          Balance as of November 30, 2001                              $  1,250
                                                                       ========

12.  CORPORATE RESTRUCTURING:

     In  September   2001,   the  Company's   board  of  directors   approved  a
     restructuring  plan designed to streamline  operations and reduce expenses.
     The  restructuring  includes staff reductions and anticipates a decrease in
     operating  expenses  resulting  from  the  consolidation  of the  corporate
     headquarters  leased in Scottsdale,  Arizona to the manufacturing  facility
     which the Company owns in Torrington,  Connecticut.  The Company expects to
     incur expenses of  approximately  $1,100,000  related to the  restructuring
     during  the  current   fiscal  year.   The  Company   estimates   that  the
     restructuring  will  provide  annualized  savings  in excess of  $1,000,000
     subsequent to the completion of all phases of the plan.

     During the three months ended  November  30, 2001,  the Company  recorded a
     restructuring   charge  of  $887,000  for  various  costs  related  to  the
     restructuring as detailed in the following table. Of the amount expensed to
     date, $854,000  represents  estimated cash costs, of which $95,000 has been
     paid through November 30, 2001.

          Employee severance                                 $648,000
          Lease obligation                                    117,000
          Employee hiring and relocation costs                 64,000
          Other                                                58,000
                                                             --------
                                                             $887,000
                                                             ========

     The   employment   of    approximately   25   individuals   who   performed
     administrative, sales, marketing, customer service and accounting functions
     at  the  Company's  corporate  headquarters  in  Scottsdale,   Arizona  was
     terminated as a result of the  restructuring.  The affected  employees will
     receive severance benefits totaling $648,000.

     The  lease  term  of  the  Company's  former   corporate   headquarters  in
     Scottsdale,  Arizona continues through May 2004. The Company's monthly rent
     is  approximately  $17,000,  net of  sub-leases,  and the aggregate  rental
     obligation over the remaining term of the lease is approximately  $650,000.
     The Company has engaged a listing agent to sub-lease or assign its interest
     in the property for the remaining  lease term to another party.  Management
     believes that this process may take several months to complete.  Therefore,
     an expense of $117,000  was  recorded to reserve for the  estimated  rental
     payments and listing agent fees that the Company will pay before its rental
     obligation is eliminated.

     The Company estimates that expenses totaling approximately $213,000 will be
     recorded  during the fiscal quarter ending February 28, 2002 for additional
     employee relocation, hiring, training, and travel costs associated with the
     restructuring.

13.  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.

                                       11
<PAGE>
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 the
Company's manufacturing facility and expectations regarding future environmental
reports;  and the  Company's  ability  to  generate  sufficient  cash  flow from
operations to repay indebtedness and fund operations.  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;
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  ability to  successfully  launch new  products;  the
willingness  of the  Company's  lenders to modify the terms of  existing  credit
facilities;  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 year ended May 31, 2001.

OVERVIEW --

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 NOVEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED NOVEMBER
30, 2000 --

NET  SALES.  Net  sales  for the  three  months  ended  November  30,  2001 were
$4,475,000,  a decrease of $1,017,000 or 19% from net sales of $5,492,000 during
the  corresponding  period in 2000.  Net sales of golf club shafts  decreased by
$971,000 or 20% and net sales of golf club grips decreased by $46,000 or 6%. The
Company has  experienced  an overall  decline in sales and a shift in the mix of
products sold which management  attributes to the softening  economy and a lower
demand for high-end sports and leisure consumer products. Sales of the Company's
higher priced,  pro grade golf club shafts decreased 34% during the three months
ended  November  30,  2001  compared  to  the  corresponding   period  in  2000.
Alternatively,  sales of the Company's lower priced,  commercial grade golf club
shafts  increased  96%  during  the  period.  This  change  in  product  mix has
negatively  impacted the Company's  average  selling prices and profit  margins.
Additionally,  sales of golf club  shafts and grips to the  Company's  exclusive
Japanese  distributor  declined  significantly  during  the three  months  ended
November 30, 2001  compared to the  corresponding  period in 2000.  The Japanese

                                       12
<PAGE>
distributor has experienced a decline in its business which it attributes to the
slow general economic  conditions in Asia and declines in orders from certain of
its OEM customers.

COST OF SALES.  Cost of goods sold for the three months ended  November 30, 2001
was  $3,812,000,  a  decrease  of  $1,040,000  or 21% from cost of goods sold of
$4,852,000  during the  corresponding  period in 2000  primarily  as a result of
lower total net sales.  The cost of golf club shafts sales decreased by $966,000
or 23% and the cost of golf  club  grips  sales  decreased  by  $74,000  or 11%.
Included in cost of sales during the three  months  ended  November 30, 2000 are
write-downs totaling $477,000 to reduce the carrying value of certain steel golf
club shafts and golf club grips  finished  goods  inventories  to estimated  net
realizable  value.  The  Company  has  experienced  an  increase  in the cost to
manufacture  its steel  golf club  shafts due to  reduced  production  following
declining demand from several significant  customers.  Reduced production at the
Company's manufacturing facility during the three months ended November 30, 2001
compared to the corresponding  period last year resulted in fixed  manufacturing
costs being  spread over a decreased  number of units and a higher unit cost for
the shafts manufactured.

GROSS  PROFIT.  Gross profit for the three  months  ended  November 30, 2001 was
$663,000,  an increase of $23,000 or 4% over gross profit of $640,000 during the
corresponding  period in 2000.  Gross  profit  from  sales of golf  club  shafts
decreased by $5,000 or 1% to $549,000.  Expressed as a percentage of sales,  the
gross  profit  from  sales of golf club  shafts  increased  from 12% to 15%.  As
discussed  above,  gross profit from sales of golf club shafts  during the three
months ended November 30, 2000 was negatively  impacted by a $410,000 write-down
to reduce finished goods inventories to estimated net realizable value and gross
profit during the three months ended November 30, 2001 was  negatively  impacted
by a change in the mix of products sold and a reduction in manufacturing output.
Gross  profit  from  sales of golf club  grips  increased  by  $28,000 or 33% to
$114,000.  Expressed  as a percentage  of sales,  the gross profit from sales of
golf club grips increased from 12% to 17%. As discussed above, gross profit from
sales of golf club grips  during the three  months  ended  November 30, 2000 was
negatively impacted by a $67,000 write-down to reduce finished goods inventories
to estimated net realizable value.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  for the three  months  ended  November  30,  2001 were
$1,352,000,   a  decrease  of  $252,000  or  16%  from   selling,   general  and
administrative  expenses of $1,604,000 during the corresponding  period in 2000.
This  decrease is  primarily  due to reduced  spending on  television  and print
advertising during the current fiscal year.

ENVIRONMENTAL COSTS. Costs related to various environmental matters were $15,000
and $140,000 during the  three-month  periods ended November 30, 2001, and 2000,
respectively (see Note 9 to the condensed consolidated financial statements).

RESTRUCTURING COSTS. An expense of $887,000 was recorded during the three months
ended November 30, 2001 related to a corporate restructuring (see Note 12 to the
condensed consolidated financial statements).

NONRECURRING  EXPENSES.  Nonrecurring  expenses  during the three  months  ended
November 30, 2000 include an impairment write-down of $360,000 on equipment held
for sale and an expense of $117,000 to write-off the accumulated cost of various
projects under  development to design and construct  tooling for the manufacture
of  golf  club  grips  (see  Note  5 to  the  condensed  consolidated  financial
statements).  Additionally, during the three months ended November 30, 2000, the
Company  incurred  nonrecurring  legal and other  professional  fees of  $79,000
associated with the due diligence efforts of a proposed acquisition.

AMORTIZATION OF GOODWILL. As discussed in Note 11 to the condensed  consolidated
financial  statements,  the Company  adopted  Statement of Financial  Accounting
Standards  ("SFAS")  No.  142  effective  June 1, 2001 and  eliminated  goodwill
amortization  expense as of that  date.  Amortization  expense  during the three
months ended November 30, 2000 was $111,000.

INTEREST  EXPENSE.  Interest expense  increased from $185,000 to $213,000 during
the  three-month  periods ended  November 30, 2000 and 2001,  respectively.  The
increase is  attributable  to a fee of $25,000  incurred in  conjunction  with a
recent  amendment to the  Company's  bank credit  facilities  (see Note 6 to the
condensed  consolidated financial statements) and non-cash accretion of discount
on subordinated debt totaling $35,000 (see Note 7 to the condensed  consolidated
financial  statements)  offset by a  significant  decline in the prime  interest
rate.

OTHER INCOME.  Other income of $13,000 and $78,000 for the  three-month  periods
ended  November 30, 2001 and 2000,  respectively,  is  principally  comprised of
royalties  earned on sales of  headwear  products  as well as royalty  fees from

                                       13
<PAGE>
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 November 30, 2001.

BENEFIT  FROM INCOME  TAXES.  A tax benefit of $676,000 was recorded on the loss
during the three months ended  November 30, 2000.  Taxes were provided  based on
the  estimated  effective tax rate for the year which  considered  the effect of
nondeductible  goodwill  amortization.  No tax benefit has been  provided on the
loss during the three  months  ended  November 30, 2001 based on the more likely
than not criteria for  realizability of deferred tax assets  established in SFAS
109 (see Note 10 to the condensed consolidated financial statements).

SIX MONTHS ENDED NOVEMBER 30, 2001 COMPARED TO THE SIX MONTHS ENDED NOVEMBER 30,
2000 --

NET  SALES.  Net  sales  for  the  six  months  ended  November  30,  2001  were
$11,140,000,  a  decrease  of  $1,330,000  or 11% from net sales of  $12,470,000
during the corresponding period in 2000. Net sales of golf club shafts decreased
by $920,000 or 9% and net sales of golf club grips decreased by $410,000 or 22%.
The Company has  experienced an overall  decline in sales and a shift in the mix
of products sold which  management  attributes  to the  softening  economy and a
lower demand for high-end  sports and leisure  consumer  products.  Sales of the
Company's higher priced, pro grade golf club shafts decreased 17% during the six
months ended  November 30, 2001  compared to the  corresponding  period in 2000.
Alternatively,  sales of the Company's lower priced,  commercial grade golf club
shafts  increased  35%  during  the  period.  This  change  in  product  mix has
negatively  impacted the Company's  average  selling prices and profit  margins.
Additionally,  sales of golf club  shafts and grips to the  Company's  exclusive
Japanese distributor declined significantly during the six months ended November
30, 2001 compared to the corresponding  period in 2000. The Japanese distributor
has  experienced  a decline  in its  business  which it  attributes  to the slow
general  economic  conditions in Asia and declines in orders from certain of its
OEM customers.

COST OF SALES. Cost of goods sold for the six months ended November 30, 2001 was
$9,118,000,  a decrease of $305,000 or 3% from cost of goods sold of  $9,423,000
during the corresponding period in 2000 primarily as a result of lower total net
sales.  The cost of golf club shafts  sales  decreased  by $93,000 or 1% and the
cost of golf club grips sales decreased by $212,000 or 14%.  Included in cost of
sales during the six months ended  November  30, 2000 are  write-downs  totaling
$477,000 to reduce the carrying value of certain steel golf club shafts and golf
club grips finished goods  inventories  to estimated net realizable  value.  The
Company has  experienced an increase in the cost to  manufacture  its steel golf
club shafts due to reduced  production  following  declining demand from several
significant  customers.   Reduced  production  at  the  Company's  manufacturing
facility  during  the  six  months  ended  November  30,  2001  compared  to the
corresponding  period  last year  resulted  in fixed  manufacturing  costs being
spread  over a  decreased  number of units and a higher unit cost for the shafts
manufactured.

GROSS  PROFIT.  Gross  profit for the six months  ended  November  30,  2001 was
$2,022,000,  a decrease of  $1,025,000  or 34% from gross  profit of  $3,047,000
during the  corresponding  period in 2000.  Gross profit from sales of golf club
shafts decreased by $827,000 or 32% to $1,785,000.  Expressed as a percentage of
sales,  the gross  profit from sales of golf club shafts  decreased  from 25% to
19%. As discussed above,  gross profit from sales of golf club shafts during the
six  months  ended  November  30,  2000 was  negatively  impacted  by a $410,000
write-down to reduce  finished  goods  inventories  to estimated net  realizable
value and gross  profit  during  the six  months  ended  November  30,  2001 was
negatively  impacted by a change in the mix of products  sold and a reduction in
manufacturing  output.  Gross profit from sales of golf club grips  decreased by
$198,000 or 46% to  $237,000.  Expressed  as a  percentage  of sales,  the gross
profit from sales of golf club grips  decreased  from 23% to 16%.  As  discussed
above,  gross  profit from sales of golf club grips  during the six months ended
November  30, 2000 was  negatively  impacted by a $67,000  write-down  to reduce
finished goods  inventories to estimated net  realizable  value.  The decline in
gross  margin  during  the six  months  ended  November  30,  2001 is  primarily
attributable to fixed costs being spread over lower unit sales volume.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  for  the six  months  ended  November  30,  2001  were
$3,107,000,   a  decrease  of  $479,000  or  13%  from   selling,   general  and
administrative  expenses of $3,586,000 during the corresponding  period in 2000.
This  decrease is  primarily  due to reduced  spending on  television  and print
advertising during the current fiscal year.

ENVIRONMENTAL COSTS. Costs related to various environmental matters were $45,000
and $155,000  during the six-month  periods ended  November 30, 2001,  and 2000,
respectively (see Note 9 to the condensed consolidated financial statements).

                                       14
<PAGE>
RESTRUCTURING  COSTS.  An expense of $887,000 was recorded during the six months
ended November 30, 2001 related to a corporate restructuring (see Note 12 to the
condensed consolidated financial statements).

NONRECURRING  EXPENSES.  Nonrecurring  expenses  during  the  six  months  ended
November 30, 2000 include an impairment write-down of $360,000 on equipment held
for sale and an expense of $117,000 to write-off the accumulated cost of various
projects under  development to design and construct  tooling for the manufacture
of  golf  club  grips  (see  Note  5 to  the  condensed  consolidated  financial
statements).  Additionally,  during the six months ended  November 30, 2000, the
Company  incurred  nonrecurring  legal and other  professional  fees of  $79,000
associated with the due diligence efforts of a proposed acquisition.

AMORTIZATION OF GOODWILL. As discussed in Note 11 to the condensed  consolidated
financial  statements,  the Company  adopted SFAS No. 142 effective June 1, 2001
and  eliminated  goodwill  amortization  expense as of that  date.  Amortization
expense during the six months ended November 30, 2000 was $221,000.

INTEREST  EXPENSE.  Interest expense  increased from $363,000 to $383,000 during
the  six-month  periods  ended  November  30, 2000 and 2001,  respectively.  The
increase is  attributable  to a fee of $25,000  incurred in  conjunction  with a
recent  amendment to the  Company's  bank credit  facilities  (see Note 6 to the
condensed  consolidated financial statements) and non-cash accretion of discount
on subordinated debt totaling $35,000 (see Note 7 to the condensed  consolidated
financial  statements)  offset by a  significant  decline in the prime  interest
rate.

OTHER  INCOME.  Other income of $57,000 and  $165,000 for the six month  periods
ended  November 30, 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 six months ended November 30, 2001.

PROVISION  FOR  (BENEFIT  FROM)  INCOME  TAXES.  A tax benefit of  $572,000  was
recorded on the loss during the six months ended  November 30, 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 10 to
the condensed  consolidated  financial  statements,  the valuation allowance was
increased to fully offset the recorded deferred tax assets during the six months
ended  November  30,  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 six months ended November 30, 2001.

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.  As discussed in Note 11 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 condensed consolidated statement
of operations for the six months ended November 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES --

At November  30,  2001,  the Company had  working  capital of  $3,838,000  and a
current  ratio of 1.8 to 1 as compared to working  capital of  $7,719,000  and a
current ratio of 3.1 to 1 at May 31, 2001. The Company historically  experiences
a decline in working  capital during the second fiscal quarter  resulting from a
seasonal reduction in sales during the fall and winter months.

During the six months ended  November 30, 2001,  net cash  provided by operating
activities was $1,189,000  which primarily  resulted from a decrease in accounts
receivable  of  $2,576,000  and an  increase  in  accounts  payable  and accrued
expenses  of  $578,000.  The net loss of  $9,086,000,  was  reduced  by  several
non-cash expenses including an impairment of goodwill of $5,937,000, an increase
in the valuation  allowance on deferred tax assets of $806,000 and  depreciation
of $427,000.

Net cash used in investing  activities  during the six months ended November 30,
2001 was $295,000  primarily for the purchase of property,  plant and equipment.
The Company  estimates that capital  expenditures for the fiscal year ending May

                                       15
<PAGE>
31, 2002 will be approximately  $750,000  including $300,000 for improvements to
the  wastewater  treatment  system  at  the  Company's  steel  golf  club  shaft
manufacturing facility.

Net cash used in financing  activities  during the six months ended November 30,
2001 was $903,000 resulting from net repayments of lines-of-credit of $1,473,000
and  repayments of long-term  debt of $430,000  offset by proceeds of $1,000,000
from the issuance of  subordinated  debt. The Company is  investigating  certain
potential  acquisitions.  Any  potential  acquisitions  may  require  the use of
existing  capital  resources,  assumption  of  debt  or  issuance  of  new  debt
instruments,  any of which could  adversely  impact the Company's  liquidity and
capital resources.

The  Company's  bank  borrowing  arrangements  are  described  in  Note 6 to the
condensed consolidated financial statements contained herein.

A description of the Company's October 26, 2001 subordinated note financing with
The  Johnston  Family  Charitable  Foundation  is  contained  in  Note  7 to the
condensed consolidated financial statements contained herein.

The Company  believes that its existing  capital  resources and available credit
lines are sufficient to fund its operations and capital  requirements of current
business  segments  as  presently  planned  over the  next  twelve  months.  The
Company's  future  cash  requirements  will  depend  upon a number  of  factors,
including its costs and  productivity  in  maufacturing  and procuring,  and its
success in selling during the upcoming  spring and summer seasonal sales period.
Management  anticipates an improvement in sales, operating income and cash flows
during this period  similar to that which the Company has  experienced  in prior
years.  Additionally,  management  anticipates that cost savings will be derived
from its ongoing corporate restructuring.  If these anticipated improvements and
cost  savings  fail to occur,  the Company  may be  required to seek  additional
sources  of  financing  to meet  its  current  debt  obligations  which  include
repayment of the subordinated promissory note in the amount of $1,250,000 due in
full on October 26, 2002.  The Company  recently  sought  additional  sources of
financing and found that  availability  is limited.  The Company lacks financial
flexibility in the form of excess assets to convert into cash. If the Company is
required to seek additional  financing and encounters similarly limited sources,
it may be required to issue debt or equity  instruments  which may include terms
less  favorable than those in the Company's  existing  capital  structure.  Such
developments could adversely impact the Company's profitability and liquidity or
dilute the ownership interests of existing stockholders.

In  September  2001,  the Company  received  notification  from The Nasdaq Stock
Market,  Inc.  ("Nasdaq")  that the  Company's  common  stock did not 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 instructed to disregard this notification  because
the Nasdaq had  implemented  a  moratorium  on the market  value of public float
requirement  until January 2, 2002. Nasdaq announced that it has reinstated this
requirement  effective  January  3,  2002.  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 --

For a discussion of relevant environmental issues, please refer to Note 9 to the
condensed consolidated financial statements contained herein.

                                       16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

QUANTITATIVE INFORMATION REGARDING MARKET RISK.

At  November  30,  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  except  for  The  Johnston  Family  Charitable
Foundation   subordinated   promissory   note  (see  Note  7  to  the  condensed
consolidated  financial  statements)  for which  management  believes  it is not
practical to estimate fair value.  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 6 to the condensed consolidated financial
statements.  A one-percent change in the prime lending rate would have an effect
of  approximately  $16,000  and  $33,000 on  interest  expense for the three and
six-month periods ended November 30, 2001, respectively.

                                       17
<PAGE>
                                     PART II
                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

     None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

     On October 26, 2001, in a private  transaction exempt under Section 4(2) of
the  Securities  Exchange  Act of 1933,  as amended,  the Company  issued to The
Johnston Family Charitable Foundation a warrant to purchase up to 300,000 shares
of common stock of the Company and a subordinated note in exchange for a loan of
$1,250,000,  without sales commissions. The transaction,  including the terms of
conversion of the subordinated note and of exercise of the warrant, is described
in Note 7 to the condensed  consolidated  financial statements contained in this
report.

     The November 13, 2001 amendments to the Company's bank borrowing facilities
described in Note 6 to the condensed consolidated financial statements contained
in this report  continue to subject the Company to financial and other covenants
which,  among other  things,  limit the repayment of  subordinated  debt and the
payment of dividends.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

     None.

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

     None.

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)  (incorporated by reference to Exhibit 3.1 to
Form 10-Q for the quarter ended August 31, 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. Eighth Amendment to Credit and Security  Agreement between FM
Precision  Golf  Manufacturing  Corp.,  FM Precision  Golf Sales Corp. and Wells
Fargo Business Credit, Inc. dated November 13, 2001.

                                       18
<PAGE>
     Exhibit 10.2.  Ninth  Amendment to Amended and Restated Credit and Security
Agreement  between Royal Grip, Inc., Royal Grip Headwear Company and Wells Fargo
Business Credit, Inc. dated November 13, 2001.

     Exhibit 10.3. Subordinated Promissory Note in the amount of $1,250,000 from
Royal Precision, Inc. to The Johnston Family Charitable Foundation dated October
26, 2001 (incorporated by reference to Annex I of the Company's Definitive Proxy
Statement dated January 2, 2002 filed with the Commission on December 28, 2001).

     Exhibit 10.4. Warrant No. 001 dated October 26, 2001 issued to The Johnston
Family Charitable Foundation to purchase 300,000 shares of Royal Precision, Inc.
common stock (incorporated by reference to Annex II of the Company's  Definitive
Proxy  Statement dated January 2, 2002 filed with the Commission on December 28,
2001).

     Exhibit 10.5.  Subordination Agreement dated as of October 26, 2001 made by
The  Johnston  Family  Charitable  Foundation  for the  benefit  of Wells  Fargo
Business Credit, Inc.

     Exhibit 10.6.  Agreement to Terminate Employment with Anthony J. Montgomery
dated as of November 8, 2001.

     (b) Reports on Form 8-K.

     A Report  on Form 8-K was  filed  by the  Registrant  on  October  1,  2001
relating to a press release issued in connection with a corporate  restructuring
in response to Item 5, Other Events.


                                   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: January 10, 2002                  By: /s/ John C. Lauchnor
      ----------------                      ------------------------------------
                                            John C. Lauchnor, President
                                            (duly authorized officer)

                                        By: /s/ Frank W. Mertes
                                            ------------------------------------
                                            Frank W. Mertes, Vice President -
                                            Finance (chief financial officer)

                                       19
<PAGE>
                                  EXHIBIT INDEX

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)  (incorporated
            by  reference  to  Exhibit  3.1 to Form 10-Q for the  quarter  ended
            August 31, 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        Eighth  Amendment  to  Credit  and  Security  Agreement  between  FM
            Precision Golf  Manufacturing  Corp.,  FM Precision Golf Sales Corp.
            and Wells Fargo  Business  Credit,  Inc.  dated November 13, 2001 --
            filed herein.

10.2        Ninth   Amendment  to  Amended  and  Restated  Credit  and  Security
            Agreement  between Royal Grip, Inc., Royal Grip Headwear Company and
            Wells Fargo Business  Credit,  Inc. dated November 13, 2001 -- filed
            herein.

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

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

10.5        Subordination  Agreement  dated as of October  26,  2001 made by The
            Johnston  Charitable  Foundation  for the  benefit  of  Wells  Fargo
            Business Credit, Inc -- filed herein.

10.6        Agreement to Terminate  Employment with Anthony J. Montgomery  dated
            as of November 8, 2001 -- filed herein.

*    Incorporated by reference.

                                    20