<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended April 30, 1998
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 0-8485
Grip Technologies, Inc.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
California 95-1980894
- --------------------------------------------------------------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
10 Corporate Park, Suite 130
Irvine, California 92606-5140
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(949) 252-8500
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA 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
----- -----
The number of shares outstanding of the Registrant's Common Stock as
of June 01, 1998: 6,187,592
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Condensed Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 18
</TABLE>
2
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
<TABLE>
<CAPTION>
April 30, 1998 July 31, 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 60,272 $ 107,531
Accounts receivable, net of allowance for
doubtful accounts of $27,249 at April 30, 1998
and $70,070 at July 31, 1997 338,649 357,395
Inventories 556,359 493,466
Other current assets 71,489 38,231
----------- -----------
Total current assets 1,026,769 996,623
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $1,098,693 at April 30, 1998
and $800,501 at July 31, 1997 711,198 721,021
INTANGIBLES, net of accumulated amortization
of $517,734 at April 30, 1998 and $1,123,066
at July 31, 1997 875,912 1,024,844
----------- -----------
Total assets $ 2,613,879 $ 2,742,488
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
April 30, 1998 July 31, 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term obligations $1,331,978 $1,326,019
Notes payable to stockholders 1,516,960 716,960
Short-term borrowings - 10,000
Accounts payable 555,225 515,262
Accrued liabilities 338,620 209,826
---------- ----------
Total current liabilities 3,742,783 2,778,067
LONG-TERM OBLIGATIONS, net of current portion 881,519 963,545
---------- ----------
Total liabilities 4,624,302 3,741,612
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock
Authorized -- 3,000,000 shares
Issued and outstanding -- 875,000 shares at April 30, 1998
and 887,500 shares at July 31, 1997 875,000 887,500
Common stock
Authorized -- 25,000,000 shares
Issued and outstanding -- 6,187,592 shares at April 30, 1998
and 6,061,092 shares at July 31, 1997 5,986,415 5,913,415
Accumulated deficit (8,871,838) (7,800,039)
---------- ----------
Total stockholders' equity (deficit) (2,010,423) (999,124)
---------- ----------
Total liabilities and stockholders' equity $2,613,879 $2,742,488
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
Unaudited
---------
<TABLE>
<CAPTION> Nine Months Ended April 30,
---------------------------
1998 1997
-------------- -------------
<S> <C> <C>
NET SALES $ 3,062,322 $ 3,013,230
COST OF SALES 2,382,906 2,361,189
------------ ------------
Gross profit 679,416 652,041
------------ ------------
OPERATING EXPENSES:
Selling 483,093 477,583
General and administrative 557,991 471,339
Research and development 42,207 29,405
Depreciation 298,192 311,314
Intangible amortization 148,932 148,932
------------ ------------
1,530,415 1,438,573
------------ ------------
Loss from operations (850,999) (786,532)
------------ ------------
INTEREST AND OTHER:
Interest expense, net 222,341 149,583
Other income (2,741) (22,328)
------------ ------------
219,600 127,255
------------ ------------
Loss before income taxes (1,070,599) (913,787)
PROVISION FOR INCOME TAXES 1,200 1,600
------------ ------------
Net loss $ (1,071,799) $ (915,387)
============ ============
Basic and diluted net loss per share $ (0.17) $ (0.16)
============ ============
Weighted average common shares outstanding 6,187,592 5,757,749
============ ============
</TABLE>
<TABLE>
<CAPTION>
Quarters Ended April 30,
-----------------------
1998 1997
------------- -------------
<S> <C> <C>
NET SALES $ 1,285,982 $ 838,496
COST OF SALES 997,866 690,645
------------ ------------
Gross profit 288,116 147,851
------------ ------------
OPERATING EXPENSES:
Selling 191,311 139,441
General and administrative 152,584 132,205
Research and development 13,023 8,213
Depreciation 121,979 109,089
Intangible amortization 49,644 49,644
------------ ------------
528,541 438,592
------------ ------------
Loss from operations (240,425) (290,741)
------------ ------------
INTEREST AND OTHER:
Interest expense, net 57,745 56,922
Other income - (5,798)
------------ ------------
57,745 51,124
------------ ------------
Loss before income taxes (298,170) (341,865)
PROVISION FOR INCOME TAXES 400 -
------------ ------------
Net loss $ (298,570) $ (341,865)
============ ============
Basic and diluted net loss per share $ (0.05) $ (0.06)
============ ============
Weighted average common shares outstanding 6,187,592 5,981,925
============ ============
</TABLE>
The accompanying notes are an integral part of this consolidated financial
statements.
5
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
<TABLE>
<CAPTION>
Nine Months Ended April 30,
---------------------------
1998 1997
---------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,071,799) $ (915,387)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 298,192 311,314
Intangible amortization 148,932 148,932
Decrease in accounts receivable 18,746 239,905
Increase in inventories (62,893) (69,858)
(Increase) decrease in other current assets (33,258) 2,647
Increase in accounts payable 39,963 66,552
Increase (decrease) in accrued liabilities 179,295 (9,733)
--------------- -------------
Net cash used in operating activities (482,822) (225,628)
--------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (288,369) (234,896)
--------------- -------------
Net cash used in investing activities (288,369) (234,896)
--------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholder 800,000 46,600
Principal repayments of long-term obligations (76,067) (80,631)
Proceeds from issuance of long-term obligations - 508,500
Repayments of short-term borrowings - (30,000)
--------------- -------------
Net cash provided by financing activities 723,933 444,469
--------------- -------------
NET DECREASE IN CASH (47,258) (16,055)
CASH, beginning of period 107,531 16,975
--------------- -------------
CASH, end of period $ 60,273 $ 920
=============== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
Unaudited
---------
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Nine Months Ended April 30,
---------------------------
1998 1997
---- ----
<S> <C> <C>
Cash paid for interest $ 111,545 $ 89,555
========= =========
Cash paid for income taxes $ 0 $ 0
========== =========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING AND FINANCING ACTIVITIES:
During the first quarter of 1998, 114,000 shares of common stock were issued in
exchange for the cancellation of a $50,000 liability for endorsement fees and a
$10,500 liability for short-term borrowings and accrued interest.
During the first quarter of 1998, 12,500 shares of series A convertible
preferred stock were converted into 12,500 shares of common stock.
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
GRIP TECHNOLOGIES, INC. AND SUBSIDIARY
--------------------------------------
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
APRIL 30, 1998
--------------
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements include the
accounts of Grip Technologies, Inc. and its subsidiary (the Company). All
significant intercompany transactions have been eliminated. 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 April 30, 1998 and the consolidated
results of operations and cash flows for the quarters ended April 30, 1998
and 1997 have been included. The Company's fiscal year ends on July 31.
References made throughout these notes to consolidated financial statements
to a year without a direct reference to a quarter are references to the
entire fiscal year then ended.
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
United States Securities and Exchange Commission (SEC). These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes to consolidated financial
statements for the year ended July 31, 1997 included as part of the
Company's Annual Report on Form 10-K (File No. 0-8485) filed with the SEC
on November 13, 1997.
The consolidated results of operations for the quarter ended April 30, 1998
are not necessarily indicative of the results to be expected for the full
year.
2. Inventories
-----------
At April 30, 1998, inventories consists of the following:
<TABLE>
<S> <C>
Raw materials $ 183,036
Finished goods 373,323
---------
$ 556,359
=========
</TABLE>
3. Net Loss Per Share Information
------------------------------
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share (EPS)."
The new standard requires presentation of two new amounts, basic and
diluted earnings per share. The Company was required to retroactively
adopt this standard and restate EPS for all prior periods presented in the
quarter ended January 31, 1998.
Basic loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the periods
presented. Potential common
8
<PAGE>
shares for the periods presented were not included in the net loss per
share calculations as they were antidilutive. Accordingly, there was no
difference in basic and diluted earnings per share. Similarly, there was no
change to prior periods upon the adoption of SFAS No. 128.
4. Going Concern
-------------
The Company has incurred significant net losses since its inception (August
1, 1993). As of April 30, 1998, the accumulated deficit was $8,871,838 and
the stockholders' deficit was $2,010,423. The net loss for the first nine
months of 1998 was $1,071,799. For the three years ended July 31, 1997,
1996 and 1995 the net loss was $1,391,541, $1,574,981 and $3,444,745,
respectively. From August 1, 1997 through April 30, 1998, the working
capital deficit increased $934,569 to $2,716,013. The net cash used in
operating and investing activities was $771,192 for the first three
quarters of 1998. The net cash used in operating and investing activities
was $777,699, $1,996,373 and $2,307,080 in 1997, 1996 and 1995,
respectively. 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, stock issuances and additional borrowings, including
loans from the Company's President, who is also a major stockholder.
The ability of the Company to meet its existing and ongoing obligations is
dependent upon raising additional capital from sources of funding, such as
private placements, public offerings, a merger or from banks and other
lenders. The Company is currently pursuing all possible avenues it can
identify to obtain additional funding. The Company has retained the
services of an investment banking firm to advise and assist the Company
regarding financing alternatives, as well as potential mergers and
acquisitions. 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 Company plans to continue to develop and
implement cost effective strategies it believes will increase sales and
gross margins, reduce other operating expenses and eventually lead to
profitability. However, the Company continues to incur losses. The
ability of the Company to continue as a going concern is dependent on
obtaining adequate financing and ultimately achieving profitable
operations. The accompanying consolidated financial statements do not
include any adjustments that might be necessary should the Company be
unable to continue as a going concern.
5. Financing Activities and Subsequent Events
------------------------------------------
Since August 1, 1997, the President has loaned the Company $850,000 in
exchange for promissory notes secured by certain assets of the Company.
Under the terms of the promissory notes, the President is currently
entitled to demand repayment of the entire amount. The promissory notes
bear interest at 10% which is being accrued.
In October 1997, the Company granted to certain officers and employees,
stock options to purchase a total of 320,000 shares of Common Stock. The
exercise price of the options is $0.4375 per share. In November 1997, the
Company granted to certain directors, stock options to purchase a total of
220,000 shares of Common Stock. The exercise price of the options is
$0.5625 per share. The options vest over three years and expire in
November 2002. Both exercise prices reflect the fair market value of the
shares on the respective dates of the grants.
In November 1997, the Company issued to the President a warrant to purchase
250,000
9
<PAGE>
shares of Common Stock. The exercise price of the warrant is $0.5625 per
share. The warrant has a term of five years.
In November 1997, the Company issued to an investment banking firm a
warrant to purchase up to 600,000 shares of Common Stock. The exercise
price of the warrant is $1.50 per share. The warrant, a portion of which
is performance based, has a term of five years and vests over two years.
The warrant also includes certain anti-dilution provisions.
6. New Accounting Pronouncements
-----------------------------
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and SFAS No. 131" Disclosures about Segments of an
Enterprise and Related Information", which will be effective for fiscal
years beginning after December 15, 1997. The Company does not expect that
the adoption of SFAS No. 130 and SFAS No. 131 will materially impact the
Company's financial statements.
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 to consolidated financial statements
included elsewhere in this Report.
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" and "Notes to Consolidated Financial
Statements" included in this Report.
Financial Condition and Results of Operations
- ---------------------------------------------
The Company incurred a net loss of $298,570 or $0.05 per common share, during
the third quarter of 1998 compared to a net loss of $341,865 or $0.06 per common
share for the third quarter of 1997. While net sales were greater and some
improvements were made in product processing, certain operating expenses, delays
in finishing tooling, rework costs and higher labor costs continue to contribute
significantly to the net loss.
Net sales for the third quarter of 1998 were $1,285,982, a 53% increase compared
with net sales of $838,496 for the third quarter of 1997. The increase in sales
is due in part to the completion of specific tooling, which had been delayed,
thus allowing certain backorders to be filled. Sales during the third quarter
of 1998 to Cobra Golf (Cobra) were $573,395, or 45% of net sales. This is
$456,350 greater than sales to Cobra during the third quarter of 1997, which
were $117,045 or 14% of net sales.
Cost of sales for the third quarter of 1998 was $997,866, or 78% of net sales
compared to $690,645, or 82% of net sales for the third quarter of 1997. The
increase in gross profit is directly related to the increase in net sales and
new tooling. The Company continued to experience tooling delays and other
production problems, that when resolved, Management believes will result in
improved production control and increased gross margins in subsequent quarters.
Management has developed a tooling design program that it feels will greatly
enhance new tooling production. However, grip cavity production is highly
specialized and the Company's vendors are in great demand, thus the Company
will continue to be subject to its vendors scheduling and production
limitations.
Operating expenses for the third quarter of 1998 were $528,541 compared to
$438,592 for the third
11
<PAGE>
quarter of 1997. Selling expenses for the quarter increased by $51,870 over the
expenses for the same period in 1997. This is due in a large part to increased
advertising and promotional activity over the same period last year. General and
administrative expenses increased by $20,379 over the third quarter of 1997, due
to increased professional fees and salaries. Depreciation expense increased to
$121,979 or 12% over the third quarter of 1997, which is directly related to
increases in tooling expenditures. During the third quarter the Company
redirected its sales and marketing efforts to the replacement market. The
Company has focused more on its marketing partnerships with catalog resellers
such as Golfsmith, the world's largest distributor/reseller of golf club
components. The Company has initiated new distributor programs to increase
replacement market sales to retailers and other non-original equipment
manufacture (OEM) customers. Management believes that these programs will enable
the Company to ultimately increase sales to the replacement market while
incurring less expense and risks related to servicing the replacement market
directly. The significant benefits from these programs have yet to be fully
realized.
Liquidity and Capital Resources
- -------------------------------
The Company had a significant working capital deficit of $2,716,013 at April 30,
1998 as compared to the working capital deficit at July 31, 1997 of $1,781,444.
In addition, the stockholders' deficit at April 30, 1998 was $2,010,423 compared
to $999,124 at July 31, 1997. The $934,570 increase in working capital deficit
is directly attributable to the cash used in operating activities and
investments in property and equipment (tooling). Since the beginning of 1995,
the Company has borrowed, from various sources, approximately $3,600,000 in
short-term borrowings, notes payable and long-term obligations, of which
approximately $716,000, including $535,000 of notes payable to the President,
has been converted into Common Stock. Also included in the $3,600,000 is
$850,000 loaned to the Company by the President since August 1, 1997. Also
since 1995, the Company received approximately $3,700,000 in proceeds from the
issuance of Common Stock through private placements.
Included in current liabilities at April 30, 1998 is $1,295,000 of long-term
obligations due in 1998, which are personally guaranteed and/or collateralized
by the personal assets of the President. Also, at April 30, 1998, $1,445,822
and $250,210 of the Company's current liabilities were notes payable and accrued
liabilities, respectively, to the President and another officer, who is also a
stockholder. Of the $1,331,978 current portion of long-term obligations,
$1,180,000 is owed to a bank and matures on June 15, 1998. The bank has
verbally agreed to extend this obligation for another year, but at this time no
documents have been provided or signed. The notes payable to the stockholders
permit the stockholders to demand repayment at any time. Historically, the
stockholders have obliged the Company in deferring any amounts owed to them.
However, the Company cannot ensure the stockholders will continue to accept
deferral of any amounts owed to them. Additionally, the notes payable to
stockholders bear interest at 10%. Prior to fiscal 1997, the amounts owed to
the stockholders, which were included in amounts due stockholder and accrued
liabilities, did not bear interest. The Company is not expected to generate
sufficient cash from operations necessary to repay these obligations unless they
are extended or otherwise deferred until such time as cash from operations, if
ever, is sufficient to repay these obligations. It will be necessary to either
extend the maturities, sell additional shares of the Company's equity
securities, convert some or all of these obligations into equity or obtain
alternative financing to repay them.
As a result of cash flow constraints, compounded by the increased operating cash
flow deficit, the Company had to prioritize its payments to vendors, debt
holders and others. Management has identified payroll, rent, utilities and
certain office expenses, suppliers, tooling and certain debt holders as the most
critical obligations. While Management tries to maximize credit opportunities
through trade payables, its major vendors (i.e. the grip manufacturers) have
stringent payment requirements. Since June 1997, the Company has agreed to
formalized payment arrangements with certain vendors for amounts owed to them in
the normal course of business, totaling
12
<PAGE>
approximately $100,000, of which a balance of approximately $56,014 remained
owing at the end of the third fiscal quarter for 1998.
Management anticipates the Company will require additional funding of
approximately $175,000 through July 31, 1998 in addition to the $850,000 loaned
to the Company since July 31, 1997 by the President to fund operating losses and
tooling requirements. Furthermore, Management estimates that the Company will
require an additional $500,000 through 1998 and beyond to make the appropriate
investments in tooling, marketing and advertising, research and development it
deems necessary to effectively compete with the Company's key competitors.
In November 1997, the Company retained the services of an investment banking
firm to advise and assist the Company regarding financing alternatives and
potential mergers and acquisitions. As a result, the Company is currently
pursuing a private placement through the investment banking firm. The Company
will continue to identify and pursue other opportunities to meet these
requirements. Additional bank financing is not expected to be an option unless
credit enhancements, such as guarantees, are available, or until such time the
Company has at least one fiscal quarter of profitability. None of these sources
or alternatives may be available to the Company and, if they become available,
may not occur within the time frame required by the Company or may require terms
which Management finds unacceptable. The continued losses, the existing debt
obligations due in 1998 and the need for additional capital raises substantial
doubt about the Company's ability to continue operating as a going concern.
13
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
On December 18, 1997, Registrant and Sam G. Lindsay ("Lindsay") were served
with a summons and complaint by Donald Poulin ("Poulin") and Don and Olivine
Associates, Inc. (formerly Poulin Progrip, Inc.) ("PPG") in an action filed in
the Los Angeles County Superior Court. The Complaint seeks damages related to
claims arising out of the original acquisition by Registrant of certain assets
from PPG and obligations of Registrant to pay Poulin and PPG consulting fees and
compensation for non-competition covenants. The amount alleged to be owed is
$271,000. Poulin and PPG also claim that Registrant improperly disposed of
certain equipment which collateralized Registrant's obligation to pay the
consulting and covenant fees. In addition, Poulin seeks to perfect his rights
to 100,000 shares of Registrant's stock which were pledged to him by Lindsay as
part of the acquisition transaction to secure payment of the consulting and
covenant amounts.
As of February 11, 1998, Registrant, Lindsay, Poulin and PPG entered into a
written Settlement Agreement pursuant to which the action has been settled, on a
conditional basis, upon payment of $25,000 by Registrant to Poulin and an
agreement by Registrant to pay Poulin an additional $175,000 from the proceeds
of a private placement. As part of the settlement, Poulin and PPG have
dismissed the action, without prejudice, with the right to refile the action if
Registrant has not paid off the additional $175,000 by September 30, 1998.
On April 27, 1998, Registrant received a letter from legal counsel to Robert
W. Taylor, Registrant's former Chief Financial Officer, claiming that Mr. Taylor
had been wrongfully discharged as an employee and demanding, among other things,
$100,000 in severance pay. Mr. Taylor was discharged by Registrant for cause on
March 12, 1998. Registrant declined Mr. Taylor's demand. Registrant is
confident that it can support its decision to terminate Mr. Taylor.
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 from
Exhibit 2.1 to Registrant's Form 10-K for its fiscal year
ended July 31, 1996
3.1(i) Restated Articles of Incorporation of Registrant -incorporated
by reference from Exhibit 3.1(i) to Registrant's Form 10-K for
its fiscal year ended July 31, 1996
3.1(ii) Amended and Restated Bylaws of Registrant - incorporated by
reference from Exhibit 3.1(ii) to Registrant's Form 10-K for
its fiscal year ended July 31, 1996
4.1 Promissory Note, dated December 10, 1993, made payable by
Registrant to Kwang Soo Kim and In Ho Kim in the original
principal sum of $50,000 - incorporated by reference from
Exhibit 4.1 to Registrant's Form 10-K for its fiscal year
ended July 31, 1996
14
<PAGE>
4.2 Loan documents for $780,000 loan from Wells Fargo Bank, including
Loan Commitment Note, dated January 14, 1997; Addendum to
Promissory, dated February 12, 1997; Third Party Security
Agreement: Securities Account, dated January 14, 1997; Addendum
to Third Party Security Agreement: Securities Account, dated
February 12, 1997; and Securities Account Control Agreement,
dated February 12, 1997; and Securities Account Control
Agreement, dated February 14, 1997 - incorporated by reference
from Exhibit 4.1 to Registrant's Form 10-Q for its fiscal quarter
ended April 30, 1997
4.3 Loan Extension letter, dated September 15, 1997, to Registrant
from Wells Fargo Bank extending that certain $780,000 Promissory
Note included in Item 4.2 above - incorporated by reference from
Exhibit 4.3 to Registrant's Form 10-K for its fiscal year ended
July 31, 1997
4.4 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 from
Exhibit 4.4 to Registrant's Form 10-K for its fiscal year ended
July 31, 1996
4.5 Loan Extension Letter, dated September 15, 1997, to Registrant
from Wells Fargo Bank extending that certain $400,000 Revolving
Line of Credit Note included in Item 4.4 above - incorporated by
reference from Exhibit 4.5 to Registrant's Form 10-K for its
fiscal year ended July 31, 1997
4.6 Secured Promissory Note, made payable by Registrant to Sam G.
Lindsay in the following amounts on the following dates -
incorporated by reference from Exhibit 4.6 to Registrant's Form
10-K for its fiscal year ended July 31, 1997:
<TABLE>
<S> <C>
$ 100,000 July 31, 1997, or thereafter on demand
$ 100,000 September 19, 1997, or thereafter on demand
$ 50,000 October 16, 1997, or thereafter on demand
$ 200,000 October 20, 1997, or thereafter on demand
$ 50,000 November 7, 1997, or thereafter on demand
$ 50,000 November 28, 1997, or thereafter on demand
$ 50,000 December 15, 1997, or thereafter on demand
$ 50,000 December 18, 1997, or thereafter on demand
$ 10,000 December 19, 1997, or thereafter on demand
$ 50,000 January 31, 1997, or thereafter on demand
$ 90,000 February 20, 1998, or thereafter on demand
$ 100,000 March 25, 1998, or thereafter on demand
$ 50,000 May 19, 1998, or thereafter on demand
</TABLE>
4.7 Promissory Note, dated July 31, 1997, made payable by Registrant
to Sam G. Lindsay in the principal amount of $421,679 -
incorporated by reference from Exhibit 4.7 to Registrant's Form
10-K for its fiscal year ended July 31, 1997
4.8 Convertible Promissory Note, dated March 12, 1997, made payable
by Registrant to the Caroline Companies LLC in the principal
amount of
15
<PAGE>
$137,500 and accrued interest of $4,726 - incorporated by
reference from Exhibit 4.8 to Registrant's Form 10-K for its
fiscal year ended July 31, 1997
4.9 Convertible Note issued by Registrant in May 1997 to the
following lenders in the following amounts - incorporated by
reference from Exhibit 4.9 to Registrant's Form 10-K for its
fiscal year ended July 31, 1997:
$ 21,000 Z-Fund, a Maryland limited partnership
$ 500,000 Third Century II, a Colorado general
partnership
4.10 Promissory Note, dated July 31, 1997, made payable by Registrant
to James E. McCormick III in the principal amount of
$195,281.02 - incorporated by reference from Exhibit 4.10 to
Registrant's Form 10-K for its fiscal year ended July 31, 1997
10.1 1994 Stock Option Plan - incorporated by reference from Exhibit
10.1 to Registrant's Form 10-K for its fiscal year ended July 31,
1996
10.2 Amendment No. 1 to Stock Option Plan - incorporated by reference
from Exhibit 10.8 to Registrant's Form 10-Q for its fiscal
quarter ended January 31, 1997
10.3 Noncompetition Agreement, dated September 22, 1995, between
Registrant and J. Barrie Ogilvie - incorporated by reference from
Exhibit 10.3 to Registrant's Form 10-K for its fiscal year ended
July 31, 1996
10.4 Security Agreement, dated July 31, 1995, between Registrant and
Sam G. Lindsay - incorporated by reference from Exhibit 10.4 to
Registrant's Form 10-K for its fiscal year ended July 31, 1996
10.5 Amendment No. 1 to Security Agreement, dated July 31, 1997,
between Registrant and Sam G. Lindsay - incorporated by reference
from Exhibit 10.5 to Registrant's Form 10-K for its fiscal year
ended July 31, 1997
10.6 Request to Convert and Investment Letter, dated July 31, 1996,
between Registrant and Sam G. Lindsay - incorporated by
reference from Exhibit 10.6 to Registrant's Form 10-K for the
fiscal year ended July 31, 1996
10.7 Agreement, dated September 22, 1995, between Registrant and ARC
Equipment, Inc. - incorporated by reference from Exhibit 10.7 to
Registrant's Form 10-K for its fiscal year ended July 31, 1996
10.8 Employment Agreement, dated September 26, 1997, between
Registrant and Victor Afable - incorporated by reference from
Exhibit 10.8 to Registrant's Form 10-K for its fiscal year ended
July 31, 1997
10.9 Financial Advisor Agreement, dated November 14, 1997, and
Indemnification Agreement, dated November 14, 1997, between
Registrant and Christman, Peters & Madden - incorporated by
reference from Exhibit 10.9 to Registrant's Form 10-Q for its
quarter ended October 31, 1997
16
<PAGE>
10.10 Warrant For the Purchase of Shares of Common Stock, dated
November 14, 1997, issued by Registrant to Christman, Peters &
Madden - incorporated by reference from Exhibit 10.10 to
Registrant's Form 10-Q for its quarter ended October 31, 1997
10.11 Stock Purchase Warrant, dated November 12, 1997, issued by
Registrant to Sam G. Lindsay, incorporated by reference from
exhibit 10.11 to Registrant's Form 10-Q for its quarter ended
January 31, 1998.
21.1 Subsidiaries of Registrant - incorporated by reference from
Exhibit 21.1 to Registrant's Form 10-K for its fiscal 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, 1998
17
<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: June 10, 1998 /s/ Sam G. Lindsay
---------------------------
Sam G. Lindsay
President,
Chief Executive Officer,
Chief Financial Officer and
Chief Accounting Officer
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM APRIL 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<CASH> 60,272
<SECURITIES> 0
<RECEIVABLES> 365,898
<ALLOWANCES> 27,249
<INVENTORY> 556,359
<CURRENT-ASSETS> 1,026,769
<PP&E> 1,809,897
<DEPRECIATION> 1,098,693
<TOTAL-ASSETS> 2,613,879
<CURRENT-LIABILITIES> 3,742,783
<BONDS> 0
0
875,000
<COMMON> 5,986,415
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,613,879
<SALES> 1,285,982
<TOTAL-REVENUES> 1,285,982
<CGS> 997,866
<TOTAL-COSTS> 997,866
<OTHER-EXPENSES> 528,541
<LOSS-PROVISION> (240,425)
<INTEREST-EXPENSE> 57,745
<INCOME-PRETAX> 0
<INCOME-TAX> 400
<INCOME-CONTINUING> (298,570)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298,570)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
