<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 January 31, 1997 or
[ ] Transition report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ________
COMMISSION FILE NUMBER 0-8485
Grip Technologies, Inc.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 95-1980894
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (I.R.S EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10 Corporate Park, Suite 130
Irvine, California 92714
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(714) 252-8500
- --------------------------------------------------------------------------------
(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
----- -----
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuer's classes of common
stock, as of January 31, 1997: 5,981,925
-2-
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 9
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II OTHER INFORMATION
Item 4 Submission of Matters to Vote of Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures
</TABLE>
-3-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
January 31, 1997 July 31, 1996
---------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,618 $ 16,975
Accounts receivable, net of allowance for
doubtful accounts of $143,053 at January 31,
1997 and $190,669 at July 31, 1996 329,619 537,445
Inventories 603,266 506,995
Prepaids and other assets 24,399 31,625
---------- ----------
Total current assets 958,902 1,093,040
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $575,813 at January 31, 1997
and $373,589 at July 31, 1996 852,481 887,242
INTANGIBLES, net of accumulated
amortization of $1,023,778 at October 31, 1996
and $924,490 at July 31, 1996 1,124,132 1,223,420
---------- ----------
$2,935,515 $3,203,702
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets
-4-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
January 31, 1997 July 31, 1996
---------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 310,000 $ 340,000
Current portion of long-term obligations 1,364,552 976,412
Amounts due stockholder 389,279 358,879
Accounts payable 474,034 528,392
Accrued liabilities 340,941 329,905
---------- ----------
Total current liabilities 2,878,806 2,533,588
LONG-TERM OBLIGATIONS, net of current portion 297,189 337,072
---------- ----------
Total liabilities 3,175,995 2,870,660
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock
Authorized -- 3,000,000 shares
Issued and outstanding -- 887,500 shares at
January 31, 1997 and 1,287,500 shares at
July 31, 1996 887,500 1,287,500
Common stock
Authorized -- 10,000,000 shares
Issued and outstanding -- 5,981,925 shares at
January 31, 1997 and 5,581,925 shares at
July 31, 1996 5,854,040 5,454,040
Accumulated deficit (6,982,020) (6,408,498)
---------- ----------
Total stockholders' equity (deficit) (240,480) 333,042
---------- ----------
$2,935,515 $3,203,702
========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets
-5-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended January 31, Quarters Ended January 31,
--------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $2,174,734 $ 958,646 $1,107,808 $ 562,029
COST OF SALES 1,670,544 726,372 880,790 427,346
---------- ---------- ---------- ----------
Gross profit 504,190 232,274 227,018 134,683
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Selling 338,143 436,684 164,885 185,510
General and administrative 339,133 393,175 166,237 205,962
Research and development 21,191 21,942 14,378 6,000
Depreciation 202,224 92,429 104,026 55,128
Intangible amortization 99,288 70,942 49,644 49,644
---------- ---------- ---------- ----------
999,979 1,015,172 499,170 502,244
---------- ---------- ---------- ----------
Loss from operations (495,789) (782,898) (272,152) (367,561)
---------- ---------- ---------- ----------
INTEREST AND OTHER
Interest expense, net 89,914 76,083 52,131 35,971
Other expense (income) (13,781) - (13,781) -
---------- ---------- ---------- ----------
76,133 76,083 38,350 35,971
---------- ---------- ---------- ----------
Loss before income taxes (571,922) (858,981) (310,502) (403,532)
PROVISION FOR INCOME TAXES 1,600 1,600
---------- ---------- ---------- ----------
Net loss $ (573,522) $ (860,581) $ (310,502) $ (403,532)
========== ========== ========== ==========
Net loss per common and equivalent share $ (0.10) $ (0.19) $ (0.05) $ (0.08)
========== ========== ========== ==========
Weighted average common shares outstanding 5,649,316 4,454,779 5,716,708 4,784,990
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements
-6-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended January 31,
----------------------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(573,522) $(860,581)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 202,224 92,429
Intangible amortization 99,288 70,942
Decrease in accounts receivable 207,826 54,881
Increase in inventories (96,271) (64,302)
(Increase) decrease in prepaids and other assets 7,226 (35,641)
Decrease in accounts payable (54,358) (38,139)
Increase (decrease) in accrued liabilities 11,036 (85,600)
--------- ---------
Net cash used in operating activities (196,551) (866,011)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (167,463) (193,109)
Decrease in note receivable - 50,000
Organization costs - (2,900)
--------- ---------
Net cash used in investing activities (167,463) (146,009)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on short-term borrowings (30,000) (460,000)
Net increase in amounts due stockholder 30,400 60,647
Proceeds from long-term obligations 400,000 -
Principal payments of long term obligations (51,743) (37,542)
Proceeds from issuance of stock - 1,325,913
--------- ---------
Net cash provided by financing activities 348,657 889,018
--------- ---------
NET DECREASE IN CASH (15,357) (123,002)
CASH, beginning of period 16,975 126,827
--------- ---------
CASH, end of period $ 1,618 $ 3,825
========= =========
</TABLE>
The accompanying notes are an integral part of these statements
-7-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Six Months Ended January 31,
----------------------------
1997 1996
------- -------
<S> <C> <C>
Cash paid for interest $62,514 $46,438
======= =======
</TABLE>
On September 22, 1995, the Company completed the acquisition of USGRIPS, Inc.,
in exchange for 600,000 shares of Common Stock. The fair values of the assets
acquired and liabilities assumed are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired:
Accounts receivable $ 195,877
Inventories 194,077
Prepaids and other assets 4,830
Property and equipment 315,406
Goodwill 1,390,750
----------
$2,100,940
==========
Liabilities assumed:
Short-term borrowings $ 600,000
Accounts payable 266,211
Accrued liabilities 184,729
----------
$1,050,940
==========
Fair market value of Common Stock issued $1,050,000
==========
</TABLE>
The accompanying notes are an integral part of these statements
-8-
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JANUARY 31, 1997
----------------
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements include the
accounts of Grip Technologies, Inc. (the Company) and its wholly owned
subsidiary. All significant intercompany accounts and transactions have
been eliminated in consolidation. In the opinion of the Company's
management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's consolidated
financial position at January 31, 1997, the consolidated results of
operations and cash flows for the quarters ended January 31, 1997 and 1996
have been included.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules of the
Securities and Exchange Commission (SEC). These unaudited financial
statements should be read in conjunction with the financial statements and
related footnotes for the year ended July 31, 1996 included as part of the
Company's Annual Report on Form 10-K (File No. 0-8485) filed with the SEC
on November 12, 1996.
The consolidated results of operations for the quarter ended January 31,
1997 are not necessarily indicative of the results to be expected for the
full fiscal year.
2. Acquisition of USGRIPS, Inc.
----------------------------
On September 22, 1995, the Company acquired USGRIPS, Inc. (USG). In
connection therewith, the Company issued 600,000 shares of Common Stock,
valued at $1,050,000, to the two stockholders of USG, and agreed to issue
up to an additional 400,000 shares over a three-year period pursuant to an
earn-out formula based on the gross margins achieved by the acquired USG
business. The acquisition has been accounted for as a purchase, and the
results of USG have been included in the accompanying consolidated
financial statements since the date of acquisition. The cost of the
acquisition has been allocated on the basis of the estimated fair market
value of the assets acquired and the liabilities assumed. This allocation
resulted in goodwill of $1,390,750, which is being amortized over seven
years.
In connection with the acquisition of USG, the Company elected to outsource
production and discontinue all manufacturing in its Irvine, California,
facility. Subsequent to the outsourcing of production, the Company began
purchasing sport grips from contract manufacturers who use the Company's
tooling, and in some cases, technology. Certain grips are then processed in
the Company's Vista, California facility, where the grips are painted or
engraved with custom logos, in accordance with customer requirements.
3. Going Concern
-------------
The Company has historically incurred significant losses, and incurred a
loss of $310,502 for the quarter ended January 31, 1997, and $573,522 for
the six months then ended. In addition, the Company used $196,551 of cash
for operating activities for the six months ended January 31, 1997. These
factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. In order to provide working capital to
support its operations, the Company has raised funds through trade credit
and additional borrowings and is in the process of obtaining funding
through additional private placements.
-9-
<PAGE>
The ability of the Company to meet its existing and ongoing obligations is
dependent upon raising additional capital from sources of funding, such as,
banks and other lenders, additional private offerings, public offerings or
through a merger. However, there can be no assurances that any of these
transactions may be consummated in a timely manner or on terms reasonably
acceptable to the Company. The ability of the Company to continue as a
going concern is ultimately dependent, in part, on achieving profitable
operating levels and obtaining adequate financing. The accompanying
financial statements do not include any adjustments that might be necessary
should the Company be unable to continue as a going concern.
4. Common Stock Transactions
-------------------------
On December 31, 1996, a holder of 400,000 shares of Series A Convertible
Preferred Stock elected to convert the shares into 400,000 shares of Common
Stock of the Company.
5. Stock Options
-------------
In December 1996, the Board of Directors approved an amendment to the 1994
Stock Option Plan (the Plan) increasing the number of shares of Common
Stock set aside for grant to key employees, officers, directors and
consultants to 900,000. The amendment was subsequently approved by the
shareholders.
6. Subsequent Events
-----------------
In March 1997, the Company funded an $87,500 convertible note. The note
matures in March 1999, pays interest at 8% per annum, and is convertible
into common stock at $1.50 per share. The note is part of a $250,000
offering, which is not fully subscribed.
7. New Accounting Pronouncement
----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, which will require a
basic earnings-per-share (EPS) disclosure, rather than the primary EPS
currently disclosed. This disclosure will be required commencing with
fiscal 1998. The significant difference between the two calculations is the
inclusion, if dilutive, of common stock equivalents in the calculation of
primary EPS. Since such equivalents have been anti-dilutive due to the
Company's recurring losses, the adoption of SFAS No. 128 would have no
effect on the Company's reported EPS.
-10-
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read together with the
consolidated financial statements and notes thereto set forth elsewhere herein.
Forward-Looking Statements
- --------------------------
From time to time, the Company may publish forward-looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the date
hereof. The Company undertakes no obligation to republish revised forward-
looking statements to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. Readers are also urged to
carefully review and consider the various disclosures made by the Company in
this Report, as well as the Company's other periodic reports on Forms 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause the Company's actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company's
forward-looking statements. The risks and uncertainties that may affect the
operations, performance, development and results of the Company's business
include, but are not limited to, those factors set forth under the caption
"Liquidity and Capital Resources" appearing below.
Financial Condition and Results of Operations
- ---------------------------------------------
On September 22, 1995, the Company completed the acquisition of USGRIPS, Inc.
(USG), in exchange for 600,000 shares of Common Stock. Accordingly, the
financial information discussed herein includes the operations of USG from that
date forward.
Net sales for the quarter and six months ended January 31, 1997 were $1,107,808
and $2,174,734, a 97% and 127% increase when compared with $562,029 and $958,646
in net sales for the comparable periods for fiscal 1996. Even though the
Company's second quarter overlaps the golf industry's traditionally slow season,
sales during the quarter exceeded management forecasts due to stronger than
expected demand from key original equipment manufacturers (OEMs). During the
quarter and six months ended January 31, 1997, 71% and 63% of sales were to a
single OEM customer.
Cost of sales for the second quarter of fiscal 1997 was $880,790, as compared to
$427,346, for the corresponding period of fiscal 1996. Gross profit margin
decreased from 26.0% to 20.5% from the previous quarter as the Company incurred
excessive labor costs in November and December 1996, which were necessary to
meet unusually tight delivery schedules required by the Company's largest
customer. In addition, the Company incurred additional costs in streamlining the
flow of production through the plant, which Management believes will result in
improved production control and increased gross margins in subsequent quarters.
Selling expenses for the quarter and six months ended January 31, 1997 decreased
11% and 23%, from comparable periods in fiscal 1996, as the Company focused on
its marketing partnerships with catalog resellers such as Golfsmith
International, the world's largest reseller of golf club components. Management
believes that its focus on such relationships will enable the Company to serve
the replacement market with less overhead and risk related to servicing that
market directly.
General and administrative expenses for the quarter and six months ended January
31, 1997 decreased 19% and 13%, from comparable periods in fiscal 1996, as the
Company successfully integrated the acquired USG operation and eliminated
duplicate functions. The Company's efforts at increasing efficiencies has
resulted in reductions in legal and professional fees, and credit management
efforts have reduced bad debt expense.
The Company's research and development efforts are in line with past periods,
and continue to focus on development of prototype grip products for new
customers, as well as the development of technologies the Company owns or has
licensed.
-11-
<PAGE>
Depreciation expense for the quarter and six months ended January 31, 1997 has
increased 89% and 118% over the comparable periods in fiscal 1996. These
increases reflect the increased investment in tooling required to accommodate
new OEM customers, as well as the introduction of new proprietary grip products.
The investments made at the Company's Vista, California facility to increase
capacity and meet key delivery deadlines during the quarter resulted in
improvements in customer service, higher consistent quality and improved
customer relationships, but directly affected profitability. Even so, the net
loss for the quarter and six month ended January 31, 1997 was reduced by 23% and
33% over the comparable periods of fiscal 1996. The Company incurred a loss of
$310,502 or $0.05 per share and $573,522 or $0.10 per share during the quarter
and six months ended January 31, 1997, as compared to a loss of $403,532 or
$0.08 per share and $860,581 or $0.19 per share for the comparable fiscal 1996
periods.
The investments in streamlining production have begun to pay dividends in
improved management reporting, which will in turn allow better analysis and
evaluation of operating results.
Receivables decreased during the second quarter due to continually improving
collections, which have also resulted in a corresponding decrease in bad debt
expense.
Inventories have decreased by 19% since October 31, 1996 as a result of
increased shipments and improved inventory management, but remain above July 31,
1996 levels.
During the quarter and six months ended January 31, 1997, the Company invested
$70,160 and $167,463 in tooling for new products, as compared with $71,603 and
$193,109 during the comparable periods of fiscal 1996.
Liquidity and Capital Resources
- -------------------------------
The Company had a working capital deficit of $1,919,904 at January 31, 1997,
compared to a working capital deficit at July 31, 1996 of $1,440,548. The
increase in working capital deficit from July 31, 1996 is attributable to the
net cash used in operating activities, which was funded primarily by the
$400,000 line of credit described below.
Included in current liabilities at January 31, 1997, are $565,053 due to two
shareholders who are also officers of the Company, short-term borrowings of
$310,000 which are due through May 31, 1997, and the Company's term loans with a
bank in the amount of $780,000, which were due on December 31, 1996, but have
been verbally extended to September 15, 1997. Short-term borrowings of $300,000
are in the process of being extended. Repayment of the amounts due the
shareholders have historically been deferred, but further deferral is not
assured. The Company is not expected to generate sufficient cash from operations
necessary to repay these obligations as they come due. It will be required to
either extend the maturities, sell additional equity to generate funds to repay
them, or seek alternative financing.
The Company funded a portion of projected cash needs in September 1996, by
entering into a $400,000 revolving line of credit arrangement with a bank.
Interest is payable monthly at the bank's prime rate plus 2.5%, and is partially
secured by assets of a shareholder, who is the co-maker on this line of credit.
In March 1997, the Company funded an $87,500 convertible note. The note matures
in March 1999, pays interest at 8% per annum, and is convertible into common
stock at $1.50 per share. The note is part of a $250,000 offering, which is not
fully subscribed.
The Company anticipates it will require an additional $2,000,000 to fund
operating losses, as well as the expected continued sales growth and tooling
purchases and to meet certain obligations as they come due. The Company intends
to pursue all available options, including, the initiation of another private
placement of its equity securities, a secondary offering by the Company of its
Common Stock, or a private placement of a convertible or other debt instrument;
seeking loans from other sources not yet identified; or pursuing a merger,
consolidation or other similar corporate transaction. None of these sources or
alternatives may be available to the Company and, if they become available, they
may not occur within the timeframe required by the Company or they may require
terms which management finds unacceptable. The inability of the Company to
locate additional capital prior to the end of the fiscal 1997 raises substantial
doubt about the Company's ability to continue operating as a going concern.
-12-
<PAGE>
PART II
ITEM 4 SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
On December 17, 1996, Registrant held its annual meeting of shareholders. At the
meeting, Sam G. Lindsay, James E. McCormick III, David W. Hardee and J. Barrie
Ogilvie were elected as directors of Registrant. Each nominee for director
received 3,843,352 affirmative votes, or 69% of the total issued and outstanding
shares of Common Stock of Registrant, with 22,032 shares abstaining.
In addition, the shareholders approved certain amendments to Registrant's 1994
Stock Option Plan, including an amendment to increase the number of authorized
shares of Common Stock reserved for issuance thereunder from 600,000 to 900,000.
3,494,371 shares were voted in favor of the amendments, representing 63% of the
total issued and outstanding shares of Common Stock of Registrant. 344,070
shares voted against the amendments and 26,943 shares abstained.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
---------
2.1 Agreement and Plan of Reorganization, dated
September 20, 1995, by and among Registrant, USG
Acquisition Corporation and USGRIPS, Inc., as
amended - incorporated by reference to exhibit 2.1
to Registrant's Form 10-K for the year ended July
31, 1996
3.1(i) Restated Articles of Incorporation of Registrant -
incorporated by reference to exhibit 3.1(i) to
Registrant's Form 10-K for the year ended July 31,
1996
3.1(ii) Amended and Restated Bylaws of Registrant -
incorporated by reference to exhibit 3.1(ii) to
Registrant's Form 10-K for the year ended July 31,
1996
4.1 Fixed Rate Note, dated January 24, 1995, made
payable by Registrant to First Interstate Bank in
the original principal sum of $300,000, as amended
by Modification of Note Agreement, dated February
8, 1995 (increasing principal amount of note to
$400,000), Modification of Note Agreement, dated
February 22, 1995 (increasing principal amount of
note to $500,000), Modification of Note Agreement,
dated March 22, 1995 (increasing principal amount
of note to $600,000 and extending maturity date to
December 31, 1995), and Change in Terms Agreement,
dated July 31, 1995 (extending maturity date to
December 31, 1996) - incorporated by reference to
exhibit 4.2 to Registrant's Form 10-K for the year
ended July 31, 1996
4.2 Promissory Note, dated January 11, 1996, made
payable by Registrant to First Interstate Bank in
the original principal sum of $100,000, as amended
in Change in Terms Agreement, dated May 20, 1996
(increasing principal amount of note to $180,000
and extending maturity date to July 8, 1996) and
Letter Agreement, dated July 17, 1996 (extending
maturity date to December 31, 1996) - incorporated
by reference to exhibit 4.3 to Registrant's Form
10-K for the year ended July 31, 1996
4.3 Revolving Line of Credit Note, dated September 23,
1996, made payable by Registrant to Wells Fargo
Bank N.A. in the original principal sum of
$400,000 - incorporated by reference to exhibit
4.4 to Registrant's Form 10-K for the year ended
July 31, 1996
4.4 Form of Convertible Note issued by Registrant to
the following lenders in the following amounts:
$ 21,000 Z-Fund, a Maryland limited
partnership (May 1996)
229,000 Third Century II, a Colorado general
partnership (May 1996)
-13-
<PAGE>
87,500 The Caroline Company, a South
Carolina Limited Liability Company
(March 1997)
Incorporated by reference to exhibit 4.5 to
Registrant's Form 10-K for the year ended July
31, 1996
10.1 1994 Stock Option Plan - incorporated by
reference to exhibit 10.1 to Registrant's Form
10-K for the year ended July 31, 1996
10.2 Employment Agreement, dated as of September 22,
1995, between Registrant and Paul Herber -
incorporated by reference to exhibit 10.2 to
Registrant's Form 10-K for the year ended July
31, 1996
10.3 Noncompetition Agreement, dated September 22,
1995, between Registrant and J. Barrie Ogilvie -
incorporated by reference to exhibit 10.3 to
Registrant's Form 10-K for the year ended July
31, 1996
10.4 Security Agreement, dated July 31, 1995, between
Registrant and Sam G. Lindsay - incorporated by
reference to exhibit 10.4 to Registrant's Form
10-K for the year ended July 31, 1996
10.5 Letter Agreement, dated August 1, 1995, between
Registrant and Sam G. Lindsay re: deferral of
compensation - incorporated by reference to
exhibit 10.5 to Registrant's Form 10-K for the
year ended July 31, 1996
10.6 Request to Convert and Investment Letter, dated
July 31, 1996, between Registrant and Sam G.
Lindsay - incorporated by reference to exhibit
10.6 to Registrant's Form 10-K for the year
ended July 31, 1996
10.7 Agreement, dated September 22, 1995, between
Registrant and ARC Equipment, Inc. -
incorporated by reference to exhibit 10.7 to
Registrant's Form 10-K for the year ended July
31, 1996
10.8 Amendments to 1994 Stock Option Plan - adopted
by Shareholders on December 17, 1996
21.1 Subsidiaries of Registrant - incorporated by
reference to exhibit 21.1 to Registrant's Form
10-K for the year ended July 31, 1996
27 Financial data schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed with the
Securities and Exchange Commission during the
Registrant's fiscal quarter ended January 31,
1997
-14-
<PAGE>
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.
GRIP TECHNOLOGIES, INC.
_______________________
(Registrant)
Date: March 17, 1997
/s/ Sam G. Lindsay
-----------------------
Sam G. Lindsay
President and
Chief Executive Officer
Date: March 17, 1997
/s/ Michael R. Friedl
-----------------------
Michael R. Friedl
Chief Financial Officer
-15-
<PAGE>
EXHIBIT 10.8
AMENDMENT NO. 1 TO
GRIP TECHNOLOGIES, INC.
1994 STOCK OPTION PLAN
THIS AMENDMENT NO. 1 TO GRIP TECHNOLOGIES, INC. 1994 STOCK OPTION PLAN
("Amendment") has been adopted by the Board of Directors of Grip Technologies,
Inc., a California corporation ("Company"), and is subject to approval by the
shareholders of the Company.
RECITALS
A. On January 25, 1994, the Company adopted the Grip Technologies, Inc.
1994 Stock Option Plan ("Plan"), which Plan was approved by the Company's
shareholders on December 29, 1994.
B. On October 2, 1996, the Board of Directors of the Company adopted this
Amendment, subject to the approval by the shareholders of the Company.
C. The Amendment will be submitted to the shareholders of the Company for
approval at the Annual Meeting of Shareholders presently scheduled to be held on
December 17, 1996.
TERMS AND CONDITIONS
NOW, THEREFORE, the Plan is amended in the following respects:
1. Definitions.
-----------
1.1 Revised Definitions. The following defined terms, as set forth
-------------------
in the Plan, are hereby amended in full to read as follows:
"1.3 Committee. A committee of two (2) or more members of the
---------
Board appointed to administer the Plan, which members shall be independent
and qualify as such under Code Section 162(n) and which Committee must
comply with the disinterested administration requirements set forth in Rule
16b-
<PAGE>
3 promulgated under the 1934 Act, to the extent applicable or required."
"1.7 Fair Market Value. The fair market value of the Stock, as
-----------------
determined by the Committee; provided, however, that (i) if the Stock is
admitted to trading on a national securities exchange on the date the
Option is granted, Fair Market Value shall not be less than the last sale
price reported for the Stock on such exchange on such date or, if no sales
are reported on the date the Option is granted, on the date next preceding
such date on which a sale was reported, or (ii) if the Stock is not
admitted to trading on a national securities exchange on the date the
Option is granted but the Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation system on the date
the Option is granted, Fair Market Value shall not be less than the average
of highest bid and lowest asked prices of the Stock on such system on such
date."
1.2 New Definitions. The following new definitions are hereby added
---------------
to the Plan:
"1.17 Domestic Relations Order. Any judgment, decree or order
------------------------
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable state domestic relations laws
(including community property laws), marital property rights to any spouse
or former spouse of the Optionee.
"1.18 Qualified Domestic Relations Order. A Domestic Relations Order
----------------------------------
which substantially complies with the requirements of Code Section 414(p).
The Committee shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order."
"1.19 1934 Act. The Securities Exchange Act of 1934, as amended."
--------
2
<PAGE>
"1.20 Insider. Any person who is an officer or director of the
-------
Company within the meaning of Section 16 of the 1934 Act."
2. Administration of the Plan. Section 4.1 of the Plan is amended to
--------------------------
provide that notwithstanding any provision of the Plan to the contrary, the
Plan shall be administered by the Committee.
3. Stock Subject to Plan. Section 3.1 of the Plan is amended to increase
---------------------
the number of shares of Stock of the Company which may be issued and sold
under the Plan from 600,000 to 900,000 shares.
4. Payment of the Option Price.
---------------------------
4.1 Delivery of Shares. Section 5.4 of the Plan is hereby amended by
------------------
the addition of the following at the end of the third sentence:
"...; provided however, that the Stock so surrendered is valued at
Fair Market Value; and, provided further, in the case an Option Price
is paid by an Insider in whole or in part by the delivery of shares of
Stock, the Stock acquired in the exercise of such Option shall not be
disposed of by the Insider for a six (6) month period commencing on
the date on which the Insider last purchased Stock (including the
Stock tendered in connection with such exercise) so long as and only
to the extent such restriction is required under Section 16 of the
1934 Act and any rules or regulations promulgated thereunder."
4.2 Financing the Exercise of an Option. In addition to the
-----------------------------------
provisions of Section 5.4 of the Plan regarding payment of the Option Price upon
exercise of an Option, the Committee may permit an Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including interest rate and
the terms of repayment) shall be established by the Committee, in its sole
discretion. Any such promissory note must be on a full recourse basis and, to
the extent required under applicable law, adequately secured by property other
than the shares acquired upon exercise of such Option. In all events, the
maximum credit available to the Optionee may not exceed the sum of (i) the
---
aggregate option exercise price plus (ii) any federal, state and local income
and employment tax liability incurred by the Optionee in connection with the
exercise of the Option.
3
<PAGE>
5. Option Exercise Limitation Upon Qualification. Section 5.6 of the
---------------------------------------------
Plan is amended by the addition of the following sentence at the end of said
Section:
"To the extent the exercisability of an ISO is deferred by reason of
the foregoing limitation, the deferred portion shall become
exercisable in the first calendar year or years thereafter in which
the one hundred thousand dollars ($100,000) limitation in this Section
would not be contravened, but such deferral shall in all events end
thirty (30) days immediately prior to the effective date of a
transaction described in Section 3.2(c) of the Plan in which the ISO
is not to be assumed, whereupon the ISO shall become immediately
exercisable as a Non-ISO for the deferred portion of the Option
shares."
6. Limited Transferability of Options. Section 5.7 of the Plan is hereby
----------------------------------
amended by the addition of the following sentences at the end of said Section:
"However, if an Option is a Non-ISO, then such Option may be assigned
in whole or in part during the Optionee's lifetime in accordance with
the terms of a Qualified Domestic Relations Order. The assigned
portion shall be exercisable only by the person or persons who
acquired a proprietary interest in the Option pursuant to such
Qualified Domestic Relations Order. The terms applicable to the
assigned portion shall be the same as those in effect for the Option
immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Committee may deem
appropriate."
7. Additional Limitation on Option Grants. A new Section 5.12 is hereby
--------------------------------------
added to the Plan to read as follows:
"5.12 Limitation on Option Grants. Notwithstanding any other
---------------------------
provision of the Plan, no Optionee may be granted Options under the
Plan covering more than 100,000 shares in any one calendar year."
4
<PAGE>
8. Withholding. A new Section 6.5 is hereby added to the Plan to read as
-----------
follows:
"6.5 Withholding. The Company's obligation to deliver shares of
-----------
Common Stock upon the exercise of any Option under the Plan shall be
subject to satisfaction of all applicable federal, state and local
income and employment tax withholding requirements. In addition, an
Optionee making a "disqualifying disposition" of an ISO shall also be
responsible for payment of his or her share of all applicable federal,
state and local income and employment tax withholding requirements
caused as result thereof. The Company, the Board of Directors or the
Committee, as the case may be, may take whatever steps it deems
necessary, appropriate or expedient to assure the prompt collection
from the Optionee of all such taxes."
9. Shareholder Approval. This Amendment is subject to and conditioned
--------------------
upon approval by the shareholders of the Company as required by applicable
laws.
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 1,618
<SECURITIES> 0
<RECEIVABLES> 472,672
<ALLOWANCES> (143,053)
<INVENTORY> 603,266
<CURRENT-ASSETS> 958,902
<PP&E> 1,428,294
<DEPRECIATION> 575,813
<TOTAL-ASSETS> 2,935,515
<CURRENT-LIABILITIES> 2,878,806
<BONDS> 0
0
887,500
<COMMON> 5,854,040
<OTHER-SE> (6,982,020)
<TOTAL-LIABILITY-AND-EQUITY> (240,480)
<SALES> 1,107,808
<TOTAL-REVENUES> 1,107,808
<CGS> 880,790
<TOTAL-COSTS> 499,170
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,131
<INCOME-PRETAX> (310,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (310,502)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (310,502)
<EPS-PRIMARY> ($.05)
<EPS-DILUTED> ($.05)
</TABLE>
