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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 15, 1998
Commission file number 0-8485
Grip Technologies, Inc.
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(Exact name of Registrant as specified in its charter)
California 95-1980894
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10 Corporate Park, Suite 130
Irvine, California 92606
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(Address of principal executive offices) (Zip Code)
(949) 252-8500
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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Item 5. Other Events
The filing due date for Registrant's Form 10-K for its fiscal year
ended July 31, 1998 was October 31, 1998. On October 29, 1998, Registrant filed
with the U.S. Securities and Exchange Commission a Form 12b-25, Notification of
Late Filing. The Notification indicated, among other things, as follows:
"Registrant was unable to complete its Form 10-K for its fiscal
year ended July 31, 1998 and to cause said report to be filed timely.
To meet more immediate obligations the Registrant has had to marshal
its limited financial resources and as such has chosen not to pay its
accountants for prior audit services, which is a condition precedent
to that accounting firm initializing Registrant's current audit.
There is no dispute regarding the fees or services, only a matter of
liquidity. Registrant anticipates that the funds required for
initiating and completing its annual audit will be raised through
pending private placements of debt and/or equity pursuant to verbal
commitments obtained by Registrant, shortly after which time
Registrant's Form 10-K will be completed and filed. Reasonable
efforts have been taken to address Registrant's liquidity constraints,
but no long-term solutions have been obtained."
Filing by Registrant of its Form 10-K will be further delayed, pending
initiation and completion of its fiscal year-end audit and preparation of the
report. Financial constraints in paying for last year and the current year's
annual audit have been the sole obstacle to timely compliance by Registrant with
its filing obligation. As of the date of this report, Registrant is not aware
of any dispute with its auditors.
Registrant continues to experience severe liquidity problems. Sales
for the recently completed fiscal year were flat. Registrant has developed a
contingency plan to further reduce expenses and to consolidate facilities,
however, even the fully implemented plan will not be enough for Registrant to
reach cash flow break-even levels for at least the first two quarters of fiscal
1999. Although staffing requirements have been reviewed and, in certain
circumstances, salary reductions have been put into effect, but the contingency
plan has not been fully implemented.
In addition, Registrant's cash flow has been directly and adversely
affected by the overall drop in sales and general market downturn in the golf
OEM business.
Further compounding Registrant's liquidity problems are the
substantial start-up and inventory expenses incurred by Registrant in connection
with the introduction of "E-Z Grips," Registrant's new, proprietary easy-to-
install golf grip. Prior to the end of Registrant's most recently completed
fiscal year, Registrant negotiated an agreement with E-Z Sport Grip Co. for the
right to market and distribute "E-Z Grips." "E-Z Grips" are manufactured for
Registrant by ARC Industries, Inc. under Registrant's existing contract
manufacturing agreement. The finished grips are delivered to Contech Systems,
Inc. in Vista, California for treatment with a patented, licensed process which
causes the grips
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to dilate. The dilated grips are packaged by Contech in foil pouches, placed in
display boxes, and packed in shipping cartons for delivery to distributors,
catalogue houses and specialty golf retailers.
Sales of "E-Z Grips" through October 1998 have been less than $74,000.
Registrant had projected sales of $207,000 over the same period. Registrant
contracted for the manufacture of, and had manufactured, untreated grip in order
to meet projected demand. As a result, Registrant has incurred product
development and inventory expenses in excess of $325,000 at the same time sales
have been less than one-third of projections.
Pursuant to Registrant's understanding with E-Z Sport Grip Co., E-Z
Sport Grip Co. was responsible for generating the initial sales volumes based on
its contacts within the golf specialty retail and mass merchandise sporting
goods markets. Those anticipated sales provided the basis for Registrant's
projections and the timing for its inventory build-up of untreated grips. As of
October 31, 1998, Registrant had on hand an inventory of approximately $215,000
of untreated "E-Z Grips" with no sales order backlog for such grips.
Although initial sales have been disappointing, the concept of "E-Z
Grips" has been well received in certain golf industry trade journals and by
certain golf equipment retailers. However, Registrant recognizes that
additional advertising and marketing efforts and expense will be necessary to
help push through this innovative product and to create market awareness. A
commercial for "E-Z Grips" featuring Gary McCord, a well-recognized golf
announcer, has been made and is scheduled to begin airing in late November 1998
on the Golf Channel.
As an interim measure to address the rapidly increasing short-term
payables and other liquidity problems, Registrant has been working with its
financial advisor (which is affiliated with one of Registrant's directors) to
secure interim bridge financing. Through this effort, Registrant has recently
received a preliminary commitment from an investor group for an amount totaling
approximately $450,000. The form and terms and conditions of the loan and/or
equity investment are yet to be determined, pending negotiation of a definitive
agreement. Registrant's financial advisor continues to look for additional
equity capital for Registrant and is exploring strategic relationships and other
options.
As of November 15, 1998, Registrant owed Sam G. Lindsay, its President
and Chief Executive Officer, $2,191,679 (exclusive of interest) for loan
advances, including $520,000 advanced since July 31, 1998. These loan advances
are payable on demand, bear interest at the rate of 10% per annum, and are in
addition to other financial accommodations provided by Mr. Lindsay to
Registrant, including, without limitation, a personal guarantee of $1,180,000
owed to Registrant's bank.
No assurances can be given that the negotiations regarding the
proposed interim bridge financing will be successfully concluded, or that the
terms and conditions for the interim bridge financing will be acceptable to
Registrant. Based on internal projections, Registrant believes that net
proceeds from the interim bridge financing will cover anticipated expenses for
approximately four to six months and that additional financing may be required
until Registrant achieves cash flow break-even sales levels. In addition, at
this early stage of the "E-Z Grips" product introduction, no assurances can be
given regarding its ultimate commercial success.
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This report includes statements which may be forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These statements are subject to certain risks
and uncertainties which could cause actual results to differ materially from the
forward-looking statements, including, but not limited to, risks related to the
golf equipment business in general and market acceptance of the Registrant's
product in particular; liquidity issues and constraints affecting Registrant;
seasonality of the golf equipment business; Registrant's dependence on a few
major customers; scheduling, deliver and cost of tooling; use of third party
manufacturers and suppliers; supply delays; and other factors detailed in the
Company's other periodic reports on Forms 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission. 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.
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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 hereunto duly authorized.
GRIP TECHNOLOGIES, INC.
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(Registrant)
Date: November 20, 1998 /s/Sam G. Lindsay
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Sam G. Lindsay
President and
Chief Executive Officer
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