About EDGAR Online | Login
 
The following is an excerpt from a 10-K405 SEC Filing, filed by BOLLINGER INDUSTRIES INC on 6/30/1997.
Next Section Next Section Previous Section Previous Section
BOLLINGER INDUSTRIES INC - 10-K405 - 19970630 - PART_I

PART I

ITEM 1. BUSINESS.

Bollinger Industries, Inc. ("The Company") is a leading domestic supplier of consumer fitness accessory products. The Company manufactures and distributes, primarily to mass retailers, an extensive consumer fitness line, including barbells and dumbbells, aerobic steps and other aerobics products, trampolines, weightlifting belts and gloves, exercise mats, ankle and wrist weights, weightlifting bars, waist trimmers, compression shorts, and walking accessories.

RESULTS OF THE RESTRUCTURING OF OPERATIONS

In the fourth quarter of fiscal 1996, following a comprehensive review of the Company's marketing method, operating policies and liquidity, management formulated a plan to restructure the Company's operations. The primary elements of the restructuring plan were to promote the Bollinger brand name, dramatically reduce inventory levels and improve operating efficiency. (Please refer to the Company's Form 10K for fiscal 1996 for additional information).

Since 1993, a significant portion of the Company's fitness accessory products were sold with the use of celebrity endorsements. These endorsements carried heavy incremental costs and were subsequently abandoned in favor of the Bollinger brand. Customer acceptance of this change has been favorable but sales for fiscal 1997 have been virtually flat as the Company worked through existing inventory and marketing programs. The Company has introduced a line of products in striking packaging geared toward the female consumer that is ready for shipment in early fiscal 1998.

Inventory has been reduced from $30.1 million in 1996 to $16.2 million in 1997, or a reduction of 46%. Of the approximately $14.0 million reduction, approximately $8.0 million came from inventory targeted for expedient disposal in the restructuring plan. The inventory reduction has allowed the Company to reduce trade payables and debt. There is an additional opportunity for further reductions of inventory in fiscal 1998.

Concurrent with the inventory reductions, the Company has consolidated warehouse operations. This action resulted in the closing of two leased warehouses, the reduction of the warehouse workforce, and reduction in other operating costs through enhanced efficiency. In addition, domestic production of trampolines is in the process of being scaled down and relocated to corporate headquarters from Georgia. This action, in addition to the lower inventory levels, will allow the Company to further consolidate operations and reduce fixed overhead.

The Company has plans to review all avenues of product sourcing in order to significantly reduce product costs, thereby improving gross margin. Management expects that such cost reductions will be attained during fiscal 1998, but the full annual effect will not be achieved until fiscal 1999.

1

DISCONTINUED OPERATION

Management determined during the fourth quarter of fiscal 1996 that it would be in the best interest of the Company to dispose of its Sports Medicine and Safety Products business, known as Bollinger Healthcare (Healthcare). The Healthcare business had been unprofitable for the prior two years during which time sales had declined by 52%. The largest portion of this division was sold in September, 1996 with the remainder disposed of or abandoned in January 1997. The manufacturing facility in Lubbock ceased operation in November, 1996.

PRODUCTS AND MARKETS

Fitness Accessory Products

The Company manufactures and sells a complete line of more than 250 fitness accessory products, including barbells and dumbbells, aerobic steps and other aerobics products, trampolines, weightlifting belts and gloves, exercise mats, ankle and wrist weights, weightlifting bars, waist trimmers, compression shorts and walking accessories. Other fitness accessory products include weight sets, supports and support belts, handgrips and jump ropes. The majority of the Company's fitness accessory products retail for less than $20 but the trampolines retail for $200 to $275.

In addition to the Bollinger Fitness(TM) trademark, the Company's fitness accessories are sold under various trademarks to promote consumer identification and coordinate affiliated products. Weightlifting products include StarLock(C), SlipLock(TM) and CamLock(C) weightlifting systems, Zoom Off(C) quick release weightlifting gloves, and BrightBells(C) dumbbells. Aerobics items include the Step by Step(TM), FlexStep and SoftStep(TM) low impact aerobic steps, RibMat(TM) exercise mats, TrimRider(TM) aerobic riders, and NBF(TM) and UltraBounce(TM) trampolines. Solar(TM) trimming products, Softone(C) wrist weights, and Exergrip(TM) strengthening putty are examples of other fitness accessory products available through Bollinger.

In May 1994, as the result of an asset & business acquisition, the Company began selling NBF(TM) and Ultra Bounce(TM) trampolines through its established distribution channels for other fitness accessory products. In fiscal 1997, 1996 and 1995, trampoline sales accounted for approximately 40%, 26% and 13% respectively of the Company's total net sales.

The Company markets its fitness accessories primarily to mass retailers. The Company broadly defines mass retailers to include discount chains, department stores, sporting goods retailers and sports superstores, warehouse clubs and direct response television. In 1997, 1996, and 1995, the Company served approximately 500 accounts, although the Company's ten largest fitness accessory products customers accounted for approximately 88%, 80%,and 77% of the Company's total net sales. In fiscal 1997 Wal-Mart accounted for 32.2% of gross sales and KMart accounted for 35.7% of gross sales. Examples of discount chain customers include Wal-Mart, KMart and Target. Sears is a representative department store customer. The mass retailer category also encompasses catalog customers like J.C. Penney and catalog showroom customers such as Service Merchandise. Sporting goods retailers and sports superstore customers include chains like Oshman's Sporting Goods, H. Modell & Company, The Sports Authority, and The Academy. QVC is a shop at home cable television network that provided a direct response television outlet for Bollinger. Wal-Mart, KMart, J.C. Penney and Oshman's have been customers of the Company for approximately 20 years. The loss of one or more of the Company's major customers could have a material adverse impact on the Company.

2

Quality is an important element of the Company's merchandising strategy. To convey the image of quality to the consumer, the Company uses a merchandising approach that emphasizes quality through easily recognizable packaging and graphics. The Company's packaging style is uniform, with bright, coordinating colors. This has enabled it to increase the in-store merchandising impact of its products and awareness of the Bollinger brand name.

Bollinger believes it pioneered program marketing of fitness accessories. This approach allows the presentation and sales of the products as an integrated line rather than as stand alone items. The Company offers program management services to help retail customers maximize results from the presentation, merchandising and sale of its products. Program management assistance includes helping plan product mix, helping merchandise the product, and responsive inventory management. Through the use of distinctive marketing presentations, and its computerized Plan-O-Gram system, Bollinger is able to customize an in-store merchandising display for a customer, and quickly illustrate how the optimum selection of fitness accessory products would fit into a given amount of shelf space. Bollinger's ability to provide these program management services is enhanced by the size and diversity of its extended product line. The Company continually analyzes and validates its recommendations with product tracking and store level research.

MANUFACTURING AND PRODUCT SOURCING

During fiscal 1997, domestic production of fitness accessory items has been reviewed with the objective of becoming the low cost provider to the customer and at the same time recovering the gross margin erosion the Company has experienced in the last two years. The Company will seek and obtain the lowest cost product available, while maintaining high quality standards. These savings will enable the Company to remain competitive in the market place and will provide additional gross margin for operations. The Company is currently evaluating the cost effectiveness of continuing to manufacture certain of its product lines. Approximately 49%, 50%, and 55% of the Company's net sales for fiscal 1997, 1996 and 1995, respectively, were derived from the sale of U.S.-made products, the majority of which were manufactured by Bollinger.

Many of the Company's fitness accessory products are currently manufactured in a cut-and-sew operation in the Company's Grand Prairie, Texas, facility. The Company currently manufactures many of its NBFTM trampolines at its facility in Americus, Georgia.

The remainder of Bollinger's sales of fitness accessory products, including barbells, dumbbells, weightlifting bars and weightlifting gloves and trampolines, are attributable to products imported from China, Taiwan, and Pakistan. The Company's imported products are packaged in custom packaging designed by the Company. Depending on the particular product, the packaging materials may be printed overseas and packaging is part of the foreign manufacturing process. Bollinger's custom packaging differentiate its products from its competitors.

SALES

The Company utilizes both a network of independent sales representatives, and in-house sales management personnel. In-house management is responsible for overseeing the independent representatives and for direct sales to major customers. The independent sales representatives work on a commission only basis, and specialize in the sale of sporting goods products to mass retailers. These independent sales representatives market a variety of sporting goods, and therefore generally have strong relationships with the trade customers. The Company's in house sales management staff, and these independent representatives, coordinate with Bollinger's marketing department to produce a unified marketing and sales effort.

3

Bollinger's executive officers directly manage the accounts of the largest customers and focus on the development of new customers. Two sales managers are assigned primary responsibility for all other customers and the management of the independent sales representative firms. These sales managers also have responsibilities in new customer development. During this past year, Bollinger has consolidated its sales representation, and brought responsibility for more accounts in house. The Company believes this will give it greater flexibility in handling accounts, and improve net margins in some instances.

In a growing global economy, the Company is increasing its emphasis on the development of international sales. Through its separate International Division, it works to identify countries with significant population densities that fit the demographic profile for fitness accessory sales, and to implement programs which allow the Company to take advantage of its sourcing flexibility, its merchandising expertise, and the depth of its product line to move into those markets. It uses a variety of distributorship and trading partner arrangements to allow it access to these markets. Currently, the Company's products are sold in 40 nations and export sales in fiscal 1997 were approximately $2.8 million.

PRODUCT DEVELOPMENT

The Company's product development effort continuously focuses on creating, obtaining and developing new and innovative products and product ideas. Similar effort is given to regular reevaluation of existing products and how they may be repositioned to enhance the Company's competitive position in the marketplace. Bollinger also frequently examines many unsolicited product ideas, but generally does not make any advance commitments to purchase or license a new product submission. New products and product ideas may come from individual inventors, small companies that do not have sufficient manufacturing capability or the relationships with mass retailers needed to market a new product or consumers who submit new ideas based on personal experience. Once the Company has identified a product, it will determine appropriate sourcing for the product to attempt to ensure both quality manufacture and low costs. The Company's product lines currently include more than 250 fitness accessory products, including several trampoline items.

COMPETITION

Bollinger participates in a highly competitive industry, competing with a number of established manufacturers, importers and distributors of fitness products. Many competitors have significantly greater financial and other resources than those available to the Company. The Company believes that the principal competitive factors affecting its business include customer service, manufacturing and distribution capabilities, price, marketing and merchandising expertise, quality, brand name recognition and the ability to create and develop a broad variety of innovative products and concepts.

The Company believes its principal competitors are large fitness equipment manufacturers, which also sell fitness accessory products, and smaller importers, which offer a more limited assortment of products than Bollinger or the larger competitors. There are relatively few barriers to entry in the fitness accessory products market.

The Company believes that one of the largest fitness and exercise equipment manufacturers is Icon Health & Fitness, Inc. ("Icon"), which markets products under the brand names of Weslo, Jumpking, Healthrider, Weider and ProForm. Icon offers, among many other items, a line of packaged fitness accessory products similar to Bollinger's fitness accessory products and backyard trampolines. Although the Company believes that the majority of Icon's sales come from treadmills, exercise machines, and weight benches, Icon

4

competes directly with Bollinger for sales of a large number of handheld fitness accessories and trampoline products. The Company believes that Icon has larger net sales than the Company.

RDM Inc., formerly the Roadmaster Company, is another of the largest fitness equipment and trampoline manufacturers. The Company believes that RDM Inc. has larger net sales than the Company.

PATENTS AND TRADEMARKS

The Company has rights to a number of patented inventions, trademarks and trade names used in connection with the sale and marketing of its products. The company does not believe it infringes any patent, trademark or trade name rights.

The Company currently holds and protects the rights to a number of U.S. patents and additionally has a number of exclusive and nonexclusive licenses under various other U.S. patents. It does not hold any foreign patents. Bollinger does not view any single patent as critical to its business and none of the patents or trademarks expire (without a renewal option) in the next five years except for the exclusive rights to the name and likeness of Nolan Ryan, in connection with his endorsement of Bollinger products, which expire in May, 1997.

Bollinger owns a number of trademarks and has licensed the use of additional trademarks in the U.S. The Company intends to protect them to the fullest extent practicable. Bollinger has registered its trademark in a number of foreign countries.

EMPLOYEES

As of March 31, 1997, the Company employed approximately 350 persons on a full-time basis, of which approximately 290 employees were engaged in receiving, manufacturing, warehousing, and shipping activities. Approximately 60 employees were engaged in sales, customer service, accounting, MIS, and other administrative functions. In addition, the Company, from time to time, uses part-time workers and/or contract labor. None of the Company's employees are represented by a union. The Company believes relations with its employees are good.

REGULATIONS

The Company and its products are subject to numerous federal, state, and local laws, rules and regulations ("Regulations"). Among the more significant of such Regulations are consumer product safety laws under which a company's products can be barred from sale or subject to recall if found to be hazardous; occupational safety and health laws; and environmental laws.

The Company is not a party to any threatened or pending material regulatory action, other than as discussed below in Item 3. Legal Proceedings.

ITEM 2. PROPERTIES.

The Company leases approximately 402,000 square feet in Grand Prairie, Texas, which is currently used as the Corporate offices and houses its accounting and sales effort as well as serving as the main manufacturing, warehousing, and shipping facility. One lease for approximately 102,000 square feet expires June 30, 1999, and has a renewal option for an additional four years. The other lease for approximately 300,000 square feet expires May 1, 2004, and contains a renewal option to extend the lease an additional three years.

5

The Company also manufactures, warehouses, and ships trampolines out of a facility in Americus, Georgia, which contains approximately 60,000 square feet. The lease for this location expires on December 20, 2005, at which time the Company is obligated to purchase the facility for a nominal amount.

The Company owns a facility in Irving, Texas, which contains approximately 43,000 square feet. This facility, which held the Company's corporate offices, has been placed on the market for sale.

The Company intends to consolidate all operations to the Grand Prairie facility and to reduce the Company's space requirements to allow relinquishing or sub-leasing a significant portion of this location.

ITEM 3. LEGAL PROCEEDINGS.

The Company, Glenn D. Bollinger (Chairman & CEO), Bobby D. Bollinger (President), Curtis D. Logan (former CFO), Michael J. Beck (former CAO), John L. Maguire (Director), William Blair & Company, Rauscher Pierce Refnes, Inc. (former underwriters of initial public offering), and Grant Thornton, L.L.P. (former independent accountants), are defendants (the "Suntrust Defendants") in a suit brought in the District Courts, Dallas County, Texas, by shareholder Suntrust Bank Atlanta, as trustee for Suntrust Retirement Sunbelt Equity Fund, on behalf of themselves and all persons similarly situated. In addition, the Company, Glenn D. Bollinger, Bobby D. Bollinger, Curtis D. Logan, and Michael J. Beck, are defendants (the "STI Defendants"), in a lawsuit brought in the United States District Court for the Northern District of Texas, Dallas Division, by shareholders STI Classic Fund and STI Classic Sunbelt, on behalf of themselves and all persons similarly situated. The lawsuits purport to be class actions and allege certain misrepresentations and fraudulent actions by the Suntrust and STI Defendants. Both lawsuits seek damages, exemplary damages, interest, costs, and expenses. Management of the Company does not believe either lawsuit has merit. However, if the plaintiffs should prevail in either lawsuit, it could have a material adverse effect on the Company.

The Company has been contacted by the Department of Labor (DOL) in regard to certain questions about its former Employee Stock Ownership Plan (the "ESOP"). Assets of the ESOP are held in the Company's 401(K) plan which is the successor to the ESOP. The Company has responded to and cooperated with the DOL. The DOL has not initiated any proceeding with respect to the ESOP or any other of the Company's employee benefit plans.

On September 24, 1996, the United States Securities and Exchange Commission filed a Civil Injunctive Action in the United States Court for the District of Columbia naming Bollinger Industries, Inc., Glenn Bollinger and Ronald Bollinger, Cause No. 96-2257. The Company consented to the entry of an order of permanent injunction which directs the Company to comply with the Securities and Exchange Act of 1934 in the future in the conduct of its business. Glenn Bollinger and Ronald Bollinger also consented to the entry of orders of permanent injunction which enjoins them from future violations of the provisions of the Securities Exchange Act of 1934. and in addition, Glenn Bollinger agreed to the payment of a monetary penalty in the amount of $40,000. Ronald Bollinger also agreed to a bar from holding office as an officer or director of a publicly-held company.

The Company filed a lawsuit against Denise Austin on December 2, 1996 in the 162nd District Court of Dallas County, Texas and was subsequently removed to the United States District Court for the Northern

6

District of Texas, Dallas Division Case Number 3-97-CV-0246-G on February 6, 1997. Subsequently a suit was filed on December 30, 1996, by Denise Austin in the United States District Court, Eastern District of Virginia. The suit was filed for payment of royalties alleged to be due of approximately $655,000. The Company has filed counter claims in excess of such amount.

From time to time, the Company is a party to various legal proceedings arising in the ordinary course of business. The Company is not currently a party to any other material litigation and is not aware of any litigation threatened against the Company, arising in the ordinary course of business, that could have a material adverse effect on the Company.

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

The Company held its Annual Meeting of Stockholders on November 7, 1996. During this meeting, five directors, which constitutes the entire Board of Directors, were elected to serve until the next Annual Meeting of Stockholders or until their successors are elected and qualified. The following individuals were elected:

                            VOTING SUMMARY
                    -------------------------------
       NAME            FOR     WITHHELD  NOT VOTING
------------------  ---------  --------  ----------
Glenn D. Bollinger  3,737,336   66,834    196,040
Bobby D. Bollinger  3,736,736   67,434    196,040
John L. Maguire     3,738,536   65,634    196,040
Stephen L. Parr     3,738,536   65,634    196,040
Richard J. Tucker   3,738,536   65,634    196,040

King Griffin & Adamson P.C. were appointed as the Company's auditors for fiscal 1997.

7

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company completed its initial offering during November 1993 at a price of $12.50 per share. The Common Stock was quoted on the NASDAQ National Market under the trading symbol "BOLL." However, due to delinquency in filing certain reports with the Securities and Exchange Commission, and other matters, the NASDAQ "delisted" the Company's common stock during August 1995. The Company's common stock is currently traded over-the-counter. The following table sets forth, on a per share basis for the periods indicated, the high and low closing sale prices for the Common Stock as reported by NASDAQ for the period April 1, 1995 through August 16, 1995 and a market maker of the Company's common stock or the over-the-counter Bulletin Board for the period from August 17, 1995 through March 31, 1997.

                                      PRICE RANGE
                           ---------------------------------
                             FISCAL 1997      FISCAL 1996
                           ---------------  ----------------
                            HIGH     LOW     HIGH      LOW
                           ------  -------  -------  -------
First Quarter............  $3.00    $1.25    $9.00    $1.87
Second Quarter...........   2.37     1.31     4.25     3.00
Third Quarter............   1.69      .56     4.00     2.31
Fourth Quarter...........   1.00      .56     4.00     2.00

On June 16, 1997, the closing sale price of the Common Stock as reported by the over-the-counter Bulletin Board was $.9375 per share. As of June 16, 1997, there were approximately 54 holders of record of the Common Stock.

The Company has not paid cash dividends on its Common Stock since its inception. The Company's board of directors does not anticipate payment of any cash dividends by the Company in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA.

The selected historical financial data presented below is derived from the consolidated financial statements of the Company. The consolidated financial data of the Company for the years ended March 31, 1993 and 1994, is derived from the historical consolidated financial statements of the Company, which have been audited by Grant Thornton, L.L.P., independent certified public accountants. (The Company's historical consolidated financial statements for the years ended March 31, 1993, and 1994 are not included in this Report.) The consolidated financial data for the years ended March 31, 1995, 1996 and 1997, are derived from the historical consolidated financial statements of the Company, which have been audited by King Griffin & Adamson P.C (successor to King Burns & Company P.C.). The selected financial data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and with the Company's consolidated financial statements and related notes included elsewhere in this Report.

8

                                                                               FISCAL YEAR ENDED MARCH 31,
                                                           ------------------------------------------------------------------
                                                            1997           1996           1995           1994           1993
                                                           -------        -------        -------        -------       -------
                                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS (3)
Net Sales.............................................     $82,599        $80,300        $67,894        $38,746       $27,586
Cost of goods sold....................................      69,723         62,197         50,546         26,982        20,060
                                                           -------        -------        -------        -------       -------
    Gross profit......................................      12,876         18,103         17,348         11,764         7,526

Selling expenses......................................       6,879          7,877          6,862          4,070         2,282
Distribution, general and administrative expenses.....      11,506         12,115          8,422          4,224         3,331
Restructuring of operations...........................           -          3,960              -              -             -
                                                           -------        -------        -------        -------       -------
                                                            18,385         23,952         15,284          8,294         5,613
                                                           -------        -------        -------        -------       -------
    Operating profit (loss)...........................      (5,509)        (5,849)         2,064          3,470         1,913
Other expense (income)
  Interest expense....................................       2,552          2,252          1,167            667           320
  Other...............................................         (50)          (105)           (47)           (65)          (47)
                                                           -------        -------        -------        -------       -------
                                                             2,502          2,147          1,120            602           273
                                                           -------        -------        -------        -------       -------
  Earnings (loss) from continuing operations
      before income tax expense (benefit).............      (8,011)        (7,996)          944           2,868         1,640

Income tax expense (benefit)..........................         (92)        (1,135)           350          1,042           685
                                                           -------        -------        -------        -------       -------
  Earnings (loss) from continuing operations (1)......      (7,919)        (6,861)           594          1,826           955

Discontinued operations...............................
  Earnings (loss) from operations net of income
      tax benefit.....................................           -           (592)          (525)           550           235
  Gain (loss) on disposal, net of income tax
      benefit including a $1,199,118 and $325,380
      provision for operating losses during phase
      out period in 1996 and 1994.....................         478           (770)             -           (573)            -
                                                           -------        -------        -------        -------       -------
Earnings (loss) from discontinued operations(2).......         478         (1,362)          (525)           (23)          235
                                                           -------        -------        -------        -------       -------
Net earnings (loss)...................................     $(7,441)       $(8,223)       $    69        $ 1,803       $ 1,190
                                                           =======        =======        =======        =======       =======
Per share data:
  Earnings (loss) from continuing operations..........     $ (2.04)       $ (1.85)       $  0.15        $  0.59       $  0.36
                                                           =======        =======        =======        =======       =======

  Net earnings (loss).................................     $ (1.86)       $ (2.22)       $  0.02        $  0.59       $  0.45
                                                           =======        =======        =======        =======       =======
Weighted average common and common equivalent
  shares outstanding..................................       4,000          3,710          3,967          3,079         2,650
                                                           =======        =======        =======        =======       =======

9

                                                   MARCH 31,
                            -------------------------------------------------------
                              1997        1996        1995        1994        1993
                            -------     -------     -------     -------     -------
BALANCE SHEET DATA
Working capital........     $15,994     $ 8,322     $15,725     $18,038     $ 3,484
Total assets...........      38,389      58,381      55,422      27,632      20,663
Total long term debt...      15,642         577         223         500         690
Total debt.............      18,483      23,260      26,810       4,977       9,701
Stockholders' equity...       5,021      12,463      20,467      19,398       4,369

(1) The Company sold substantially all of the assets of its C. G. Products subsidiary effective September 13, 1993. The Company sold substantially all of the assets of the Healthcare Division during September 1996. Earnings from continuing operations does not reflect the results of operations for C. G. Products and the Healthcare Division. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Note C of "Notes to Consolidated Financial Statements."
(2) Represents results of discontinued operations of C. G. Products and the Healthcare Division. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Note C of "Notes to Consolidated Financial Statements."
(3) The Statements of Operations for fiscal 1995, 1994, and 1993 have been reclassified to reflect the discontinuance of the Healthcare operation.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto appearing elsewhere in this Report.

GENERAL

Bollinger Industries, Inc. designs, manufactures, imports, and distributes a variety of fitness equipment and accessories.

During the fourth quarter of fiscal 1996, management undertook a comprehensive review of the Company's marketing strategy, profitability and liquidity. This strategy necessitated a three point plan (refer to Form 10-K for fiscal 1996).

The components of the plan comprised: providing a restructuring charge to cover disposal of certain inventory and phase out of certain celebrity endorsed products: disposal of the Company's Sports Medicine and Safety Products business ("Healthcare Division"), and revision of certain operating policies and procedures.

RESTRUCTURING OF OPERATIONS

The significant elements of the Restructuring Plan were to substantially reduce inventory levels, which had been excessive in prior years, and to de-emphasize celebrity endorsed products. The Company expected to reduce interest costs, generate much needed capital, reduce warehousing and related costs, reduce royalty expense, improve gross profit, and increase net earnings per share.

10

Inventory levels have decreased substantially from $30.1 million in 1996 to $16.2 million in 1997 and inventory originally targeted for expedient disposal has been reduced from approximately $12.0 million in 1996 to approximately $4.0 million in 1997. This reduction in inventory has allowed the Company to consolidate operations, relocate its Corporate Offices, and reduce both short term and long term debt.

The Company did not experience the improved gross profit and related increase in net earnings per share from this restructuring due to a decline in the overall sales level of fitness accessory products and to a change in product mix from higher margined light equipment items to lower margined backyard trampolines.

DISCONTINUED OPERATIONS-HEALTHCARE DIVISION

Management of the Company determined in January of fiscal 1996 that it would be in the best interest of the Company to dispose of its Sports Medicine and Safety Products business, known as Bollinger Healthcare. The largest portion of this division was sold in September, 1996 with the remainder disposed of or abandoned in January 1997. The Company recorded a one time gain in relation to this sale of $477,000 net of income tax expense of $246,000.

PROFITABILITY

The Company has experienced several areas of improvement, due to the implementation of the Restructuring Plan, but there are many areas that need to be addressed in fiscal 1998 for the Company to return to profitability.

NET SALES: The Company has suffered with Customer returns and allowances over the last 2 1/2 years but is beginning to see an improvement in the number and dollar amount of these returns and deductions. The controls surrounding the prompt handling of returns has been improved and the response time and tracking of these returns and related deductions has improved substantially. Customer deductions from payments improved approximately $3.0 million dollars from fiscal 1996 to 1997 but the Company believes even more progress can be made in this area, the effect of which is a higher net sales dollar and improved gross margin.

COST OF SALES: During the year, as inventory was sold and warehouses consolidated, the Company saw improvements in the fixed costs associated with warehousing and storing goods, but these improvements were not enough to counteract the deteriorating margins due to freight demurrage charges, scrapping of many of the returns from previous periods that were not cost effective to repair, and the cost of contract labor to handle the start up of trampoline production in the Grand Prairie facility.

The Company is currently in the process of examining the need to maintain domestic production of several line items. Due to the highly competitive nature of the overseas market it has become cost advantageous to source more items from overseas. Additionally, there are potential savings to be negotiated with steamship lines, freight forwarders and U.S. Customs as well as major reductions in product costs previously referred to Part I, Item 1, of this form 10-K.

GROSS MARGIN: The Company experienced a down turn in sales of the Fitness Accessory line (excluding trampolines) in fiscal 1997, primarily due to the ebbing popularity of the light equipment items such as Trimriders(TM) and Powerriders(TM), many of which were celebrity endorsed. These items traditionally carried a higher margin than the majority of the Fitness Accessory line because they were sold through the televised shopping clubs. Additionally, $5.0 million dollars of sales on the targeted inventory were at a 9% gross margin, causing an overall erosion of margin of one half of a percentage point for the year. Historically

11

there has been an 11% deferential between the gross margin on Fitness items and trampolines. The Company experienced a sales shift of $12.8 million from accessories to trampolines. This had a negative gross margin effect, on a consolidated basis, of two percentage points for the year.

The Company believes that sourcing their products from the lowest cost, high quality provider, in addition to strengthening the controls and response time surrounding customer deductions, will enable it to substantially improve gross margins in fiscal 1998.

WAREHOUSING EXPENSES: The Company plans to continue to consolidate warehouse facilities in fiscal 1998 thereby lowering fixed costs. The Company is also exploring the use of freight expediters on the west coast to receive the product from the orient, unload and inspect it, and repack it for shipment to the customer. Using the west coast facilities, as opposed to the Grand Prairie operation, should save additional manpower and freight. Other improvements include establishing more rigid quality standards for our imported products to pass back to the supplier the cost of repackaging items with incorrect or faulty labeling, resorting items grouped by the wrong size or color, etc. The Company has, in the past, absorbed these costs as part of its operating expenses.

SELLING, GENERAL AND ADMINISTRATIVE: Selling, General and Administrative expenses have continued to decline as Company management is constantly challenged to find innovative ways to produce results with limited funds. Staffing levels are monitored closely and expenses continue to be scrutinized.

FINANCING: The Company experienced an increase in the cost of financing from fiscal 1996 to 1997 of $300,000 primarily due to higher interest paid in the first two quarters.

ACQUISITIONS

Effective May 24, 1994, the Company, through a newly formed and wholly owned subsidiary, NBF, Inc., a Georgia Corporation, acquired substantially all the assets, liabilities and business of NBF, Inc., a Florida Corporation, in exchange for 138,000 shares of the Company's restricted Common Stock. The purchase price was approximately $2.8 million, including the assumption of certain liabilities. Additionally, the Company acquired from an individual all of the intellectual property rights to the products manufactured by NBF, Inc., a Florida Corporation, for $150,000 in cash. NBF, Inc. is a manufacturer of trampolines and other outdoor playground equipment. The acquisition was accounted for as a purchase and accordingly, results of operations have been included in the Consolidated Statement of Earnings since the acquisition date.

SALE OF ASSETS

In September of 1996, the Company sold substantially all of the assets of its Healthcare Division. The Healthcare division supplied sports medicine and safety products to the medical markets. The Company realized a net gain from the sale of this division of $477,000 net of income tax expense of $246,000. The results of operations of the Healthcare Division are reflected in the Company's consolidated financial statements as discontinued operations.

12

RESULTS OF OPERATIONS

The following table presents for the periods indicated, certain items derived from the Company's consolidated statements of operations expressed as a percentage of net sales. The trends in sales or earnings illustrated in the following table may not be indicative of future results.

                                                                  PERCENTAGE INCREASE
                                   PERCENTAGE OF NET SALES            (DECREASE)
                                ------------------------------  ------------------------
                                 FISCAL YEAR ENDED MARCH 31,      FISCAL       FISCAL
                                                                   1997         1996
                                                                      OVER FISCAL
                                  1997       1996       1995        1996         1995
                                --------   --------   --------  -----------  -----------
Net sales......................   100.0      100.0      100.0        3           18
Cost of goods sold.............    84.4       77.5       74.4       12           23
                                -------    -------    -------
  Gross profit.................    15.6       22.5       25.6      (29)          (4)

Selling expenses...............     8.4        9.8       10.1      (13)         (15)
Distribution, general and
  administrative expenses......    13.9       15.1       12.4       (5)          44
Restructuring of operations....     0.0        4.9        0.0      (100)          0
                                -------    -------    -------
                                   22.3       29.8       22.5      (23)          57
                                -------    -------    -------
  Operating profit (loss)......    (6.7)      (7.3)       3.0       (6)         (383)

Interest expense...............     3.1        2.8        1.7       13           93
Other expense (income) - net...    (0.1)      (0.1)      (0.1)     (52)         (78)
                                -------    -------    -------
                                    3.0        2.7        1.6       16           92
Earnings (loss) from
  continuing operations
  before income taxes..........    (9.7)     (10.0)       1.4        0          (947)

Income tax expense (benefit)...     0.0       (1.4)        .5       114         (424)
                                -------    -------    -------
  Earnings (loss) from
  continuing operations........    (9.7)      (8.5)        .9      (19)        (1,255)
                                =======    =======    =======

(1) The percentages for 1995 have been recalculated to reflect the discontinuance of the Healthcare Division. See Management's Discussion of Financial Condition and Results of Operations and Note C to "Notes to Consolidated Financial Statements."

FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996

The Company's fitness accessory products (Fitness Accessory Products) consist of two major product categories - trampoline products (Trampoline Products) and other fitness accessory products (Other Fitness Accessory Products).

Net sales of Fitness Accessory Products in fiscal 1997 increased by approximately $2.3 million from fiscal 1996, an increase of 2.9%. Approximately $12.8 million of this growth is attributable to net sales of Trampoline Products which increased 62.2%. The reduction of approximately $10.5 million is attributable to net sales of Other Fitness Accessory products, which decreased 17.6%. The Company introduced Trampoline Products to its Fitness Accessory Product line during May 1994. Since that time net sales of Trampoline Products has increased rapidly due to placement of trampolines at several of the Company's high volume mass merchant customers. The Company expects net sales of Trampoline Products will continue to grow at a high rate. However, it is unlikely that the prior year percentage increase in net sales can be maintained. The decrease in net sales of Other Fitness Accessory Products resulted from a continuing trend of a slow down of purchases of the Company's light equipment items.

13

In fiscal 1995 and 1996 the Company had experienced a high rate of product returns and customer chargebacks. The Company's method for recording and analyzing chargebacks, including returned merchandise deductions, has improved substantially over the last 2 1/2 years. The Company has developed internal procedures for receiving and reworking product returns as they arrive in the warehouse, increased the number and talent of the accounts receivable staff, and included a full review of customer deductions and payment practices in the management review process.

Returns and deductions from customers was reduced in fiscal 1997 from a high of approximately 11% of sales in the first quarter to approximately 6% by year end.

Gross profit for Fitness Accessory Products in fiscal 1997 decreased by approximately $5.2 million over fiscal 1996, and decreased as a percentage of net sales from 22.5% in 1996 to 15.6% in fiscal 1997. This is due, in part, to trampoline products earning a lower gross margin than other Fitness Products and comprising a higher proportion of sales in 1997. Gross margins of the other Fitness Accessory Products were lower in 1997 than 1996 due primarily to the sales of $5 million of targeted inventory at a gross margin of 9% and the loss of the light equipment sales which carry higher gross margin percentage that other fitness accessories. Management expects the impact of selling targeted inventory will be less in fiscal 1998.

Selling expenses for Fitness Accessory Products in fiscal 1997 decreased by approximately $1.0 million compared to fiscal 1996 and decreased as a percentage of net sales of Fitness Accessory Products from 9.8% in fiscal 1996 to 8.3% in fiscal 1997. The dollar decrease and percentage decrease in selling expenses is attributed to the decrease in celebrity commissions, sales commissions and royalties, as a result of discontinuing celebrity endorsements, which will continue in fiscal 1998.

Distribution, general and administrative expenses for Fitness Accessory Products decreased by $600,000 compared to fiscal 1996 and decreased as a percentage of net sales of Fitness Accessory Products from 15.1% in fiscal 1996 to 13.9% in fiscal 1997. The decrease in distribution, general and administrative expenses in dollars is attributed to the reduction of excess warehouse rent and labor costs. In addition, distribution, general and administrative expenses were lower than previous year due to a decrease in the use of temporary employees in the office, and better cost controls.

Operating loss from continuing operations in fiscal 1997 as compared to fiscal 1996 decreased by $300,000. As a percentage of net sales, operating losses decreased from a 7.3% operating loss in 1996 to a 6.7% operating loss in fiscal 1997.

Interest expense for continuing operations in fiscal 1997 increased approximately $300,000 from fiscal 1996 primarily due to fees associated with obtaining alternative financing. The average loan balance was lower in fiscal 1997 due to substantially lower inventory levels and decreases in accounts payable. Interest rates improved from 11.75% to 10.0% in fiscal 1997.

FISCAL YEAR ENDED MARCH 31 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31,1995

Net sales of Fitness Accessory Products in fiscal 1996 increased by approximately $12.4 million from fiscal 1995, an increase of 18.3% Approximately $11.5 million of this growth is attributable to net sales of Trampoline Products which increased 127.9%. The balance of approximately $900,000 is attributable to net sales of Other Fitness Accessory products, which increased 1.4%. The relatively flat net

14

sales of Other Fitness Accessory Products resulted from weak demand and a high level of product returns. The high returns were a result of both defective product and accommodations to certain of the Company's larger customers. Returns and other customer deductions were particularly high in the fourth quarter of fiscal 1996.

Gross profit for Fitness Accessory Products in fiscal 1996 increased by approximately $800,000 over fiscal 1995, but decreased as a percentage of net sales from 25.6% in 1995 to 22.5% in fiscal 1996. This is due to the fact that trampoline products earn a lower gross margin than other Fitness Products and were a higher proportion of sales in 1996. Gross margins of the other Fitness Accessory Products were lower in 1996 than 1995 due primarily to a higher level of customer returns and chargebacks.

Selling expenses for Fitness Accessory Products in fiscal 1996 increased by approximately $1.0 million compared to fiscal 1995 and decreased as a percentage of net sales of Fitness Accessory Products from 10.1% in fiscal 1995 to 9.8% in fiscal 1996. The dollar increase in selling expenses is attributed to the overall increase in net sales of Fitness Accessory Products. The decrease in selling expenses as a percentage of net sales of Fitness Accessory Products is attributable to increased sales volume.

Distribution, general and administrative expenses for Fitness Accessory Products increased by $3.7 million compared to fiscal 1995 and increased as a percentage of net sales of Fitness Accessory Products from 12.4% in fiscal 1995 to 15.1% in fiscal 1996. The increase in distribution, general and administrative expenses in dollars is attributed to the increase in net sales; excessive warehouse rent and labor costs associated with product returns. In addition, distribution, general and administrative expenses were higher than anticipated due to increased consulting and temporary employee expenses to address problems with the Company's computer system; increased legal expenses and audit fees; expenses associated with taking extra physical inventories; and certain other expenses.

In particular, the fourth quarter of fiscal 1996 was impacted by significant temporary storage charges associated with in-transit inventory, legal expenses, and insurance costs associated with product liability.

Operating profit from continuing operations in fiscal 1996 as compared to fiscal 1995 decreased by $7.9 million including a restructuring charge of $4.0 million. As a percentage of net sales, operating profit decreased from a 3.0% operating profit to a 7.3% operating loss.

Interest expense for continuing operations in fiscal 1996 increased approximately $1.0 million from fiscal 1995 primarily due to a higher interest rate on the Company's borrowings. In addition, the average loan balance was higher in fiscal 1996 due to increased working capital required to support increased sales volume partially offset by higher accounts payable.

Due to a loss from continuing operations the Company recorded an income tax benefit of $1.0 million which is based on an effective tax rate of 14.2%. The tax benefit was reduced to reflect the amount expected to be realized.

SEASONALITY; QUARTERLY RESULTS

In the past, the Company's net sales and earnings have been higher in the last six months of the fiscal year compared to the first six months of the fiscal year. This trend has been mitigated by the seasonality of trampoline sales which tend to be higher in the spring and Christmas selling seasons. Net earnings for the Company will generally rise and fall with sales volume although not directly in proportion to the change in net sales due to certain of the Company's expenses being relatively fixed while others are variable. The

15

Company's quarterly operating results may also vary depending on such other factors as the timing of significant customer orders, the mix of products sold, and the efficiency of operations.

The following table sets forth selected quarterly unaudited information for the 1997, 1996, and 1995 fiscal years. In the opinion of the Company, such information reflects all adjustments, consisting only of normal recurring adjustments necessary to present fairly the information set forth below. The operating results for any quarter are not necessarily indicative of the results for any future period.

                                                       THREE MONTHS ENDED
                                        FISCAL 1997                                FISCAL 1996
                       ----------------------------------------  -----------------------------------------
                        JUNE 30,  SEPT. 29,  DEC. 29,  MAR. 31,   JUNE 30,   SEPT. 30,  DEC. 31,  MAR. 31,
                          1996      1996       1996      1997       1995       1995       1995      1996
                       ---------  ---------  --------  --------  ----------  ---------  --------  --------
Net Sales.............  $22,434    $19,093   $24,609   $16,463     $12,762    $21,489    $31,648   $14,401

Operating Profit
  (loss)..............     (124)      (440)   (1,300)   (3,645)       (748)     1,434      1,683    (8,218)
Earnings (loss)
  from continuing
  operations..........     (765)    (1,074)   (2,017)   (4,308)       (703)       694        701    (7,553)
Earnings (loss) per
  share from
  continuing
  operations..........    (0.19)     (0.27)    (0.50)    (1.08)      (0.19)      0.18       0.18     (2.03)

                                         FISCAL 1995
                       -----------------------------------------
                        JUNE 30,   SEPT. 30,  DEC. 31,  MAR. 31,
                          1994       1994       1994      1995
                       ----------  ---------  --------  --------
Net Sales.............   $12,760    $16,245   $23,256   $15,633
Operating Profit
  (loss)..............       953        898     1,569    (1,355)
Earnings (loss)
  from continuing
  operations..........       572        465       744    (1,187)
Earnings (loss) per
  share from
  continuing
  operations..........      0.15       0.12      0.19     (0.32)

The above table for Fiscal 1995 has been reclassified to retroactively recognize the discontinued Healthcare Division.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of financing in the past several years have been short-term borrowings from banks, asset based lenders and an IPO. The Company's cash flow from operations was approximately $5.0 million for fiscal 1997 and approximately $4.0 million in fiscal 1996. The improvement in cash flow from operations is due primarily to the sell down of inventory, the collection of an income tax refund and the collection of receivables offset by a decrease in trade payables and continuing losses.

In fiscal 1997 the Company successfully secured a revolving credit facility with a financial institution providing a maximum line of credit of $25.0 million, subject to certain borrowing base requirements and covenants. As of March 31, 1997 the outstanding balance was $15.5 million. This facility matures August 16, 2000. As of March 31, 1997 the Company was in default or out of compliance with certain of the covenants or other provisions of the Credit Line. The financial institution has agreed to forebear exercising any of its rights and remedies regarding these defaults or non compliance items through year end and has restated the financial covenants for the periods covering fiscal 1998, 1999, and beyond. The Company is currently in compliance with the new terms and covenants.

The outstanding balance under the Credit Line is collateralized by substantially all of the Company's assets including accounts receivable, inventory and real estate. The Company also has a note payable to a bank of $1.7 million which is collateralized by a building in Irving, Texas.

From April 1, 1996 to August 16, 1996 the outstanding balances under the previous credit facility bore interest at the bank's prime interest plus 3% or approximately 11.75%. The new credit facility, as acquired August 16, 1996, bore interest at the rate of 10.00% through March 26, 1997, at which time it increased to 10.25%.

16

The Company expects to be able to raise funds from operations, the additional sell down of inventory and the collection of accounts receivable. Improved liquidity is crucial to the future success and growth of the Company. There is no guarantee the Company will be successful in raising adequate funds from any of these sources and the failure to raise adequate funds from any of these sources and failure to raise adequate alternative and additional funds will have a materially adverse effect on the Company.

Capital expenditures during fiscal 1997 were approximately $621,000. The Company has budgeted approximately $250,000 for capital expenditures for fiscal 1998.

INFLATION AND FOREIGN CURRENCY FLUCTUATIONS

To date, inflation and foreign currency fluctuations have not had a material impact on the Company's operations. There can be no assurance, however, that future inflation or foreign currency fluctuations will not have a material adverse effect on the Company, or that the Company will be able to pass on resulting cost increases without experiencing a reduction in demand for its products. A substantial portion of the Company's existing indebtedness bears, and future indebtedness may bear, interest that fluctuates with the prime rate.

FACTORS THAT COULD AFFECT FUTURE PERFORMANCE

Certain statements contained in this Annual Report on Form 10-K, including without limitation, statements containing the words "believes", "anticipates", "intends", "expects", and words of similar import, constitute "forward-looking statements". Such forward-looking statements involve numerous assumptions about known and unknown risks, uncertainties and other factors which may ultimately prove to be inaccurate. Certain of these factors are discussed in more detail elsewhere in this Annual Report, including without limitation under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and include the Company's ability to reverse the erosion of gross margin efficiencies, to reduce general and administrative expenses, including those associated with litigation, and to achieve profitability. Actual results may differ materially from any future results expressed or implied by such forward looking statements. The Company disclaims any obligation to update any forward-looking statements or publicly revise any of the forward-looking statements contained herein to reflect future events or developments.

ONGOING OPERATIONAL LOSSES AND LIQUIDITY

The changes mentioned here and elsewhere in this report were implemented in late fiscal 1997 and the other additional improvements are continuing to be implemented in fiscal 1998. Management believes that based on fully implementing these plans in fiscal 1998, and realizing the benefit of these improvements in fiscal 1998 and 1999, the Company's operating losses will be reversed and its liquidity improved.

17

LEGAL PROCEEDINGS

The Company and certain officers and directors are defendants in two separate lawsuits that purport to be class actions and allege certain misrepresentations and fraudulent actions by the defendants. While the Company believes both actions are without merit, a negative outcome would have a material adverse effect upon the Company's business, operating results and financial condition. See Item 3. Legal Proceedings.

The Company is involved in several other legal issues, particularly with Denise Austin, a former celebrity endorsement representative, that may be difficult to resolve and may continue to absorb Company management time and resources.

PRODUCTS AND MARKETS

The Company believes there will continue to be a strong market for its products and product lines but a substantial change in consumer preference away from a particular product, particularly trampolines, could seriously effect the Company's ability to produce sales at the same level as is currently enjoyed.

The Company's customer base is highly concentrated with a few key mass merchandisers. Insolvency, or a slow down in payments or a change in buying habits, of any of these customers would have a material adverse impact on the Company.

VENDOR PRICING

The Company plans to continue to negotiate better prices from its vendors in fiscal 1998. The Company has had initial success and plans to explore all avenues of product sourcing. However, there are no guarantees that it will have additional success in this regard. Failure to negotiate lower prices would have a material adverse on the Company's future earnings.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.

The consolidated financial statements and schedules of the Company as of March 31, 1997, and 1996, and for each of the years in the three-year period ended March 31, 1997, are included as part of this Report beginning on page F-1 hereof.

18

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of the Company are as follows:

       NAME          AGE                         POSITION
-------------------  ---  ------------------------------------------------------
Glenn D. Bollinger   46   Chairman of the Board and Chief Executive Officer

Bobby D. Bollinger   44   Vice Chairman of the Board and President

Rose Turner          40   Senior Vice President - Finance, Chief Financial
                          Officer, Treasurer and Secretary

James A. Burgin      55   Executive Vice President - Sales

Jack P. Carrithers   49   Executive Vice President - Marketing

Dell K. Bollinger    70   Senior Vice President - Administration

David Barr           38   Executive Vice President - Product Acquisition

Floyd DePauw         46   Controller and Chief Accounting Officer

John L. Maguire      66   Director

Stephen L. Parr      43   Director

Richard J. Tucker    49   Director

Set forth below is a description of the backgrounds of each of the directors and executive officers of the Company.

Glenn D. Bollinger is a co-founder of the Company and has served as Chairman of the Board and Chief Executive Officer since 1979. Mr. Bollinger is primarily responsible for the Company's overall operations, including inventory, manufacturing and warehousing.

Bobby D. Bollinger is a co-founder of the Company and has served as Vice Chairman of the Board and President since 1979. Mr. Bollinger is primarily responsible for sales, marketing and product development. Mr. Bollinger is Glenn Bollinger's brother.

Rose Turner became Senior Vice President - Finance, Chief Financial Officer, Treasurer and Secretary of the Company in January 1997 after joining the Company on a contract and full time basis starting in November 1995. Ms. Turner is a certified public accountant. Ms. Turner was most recently employed by Mission Foods, a Division of Gruma Corporation, a privately held company headquartered in Los Angeles, California. Mission Foods is a food manufacturing firm with operations throughout the United States. Ms. Turner served as Regional Controller, Southwest Region, for the past four years. She was employed by a variety of food manufacturing companies for approximately seventeen years in increasing roles of responsibility.

19

James A. Burgin became Vice President - Sales in December 1993. He became Executive Vice President of Sales in November 1994. Before joining the Company, Mr. Burgin was Executive Vice President of Dynamic Classics, Ltd., distributor of fitness products. Mr. Burgin was employed by Dynamic for approximately three years. Prior to Dynamic, Mr. Burgin was employed by various companies in the fitness and toy industries for approximately twenty years.

Jack P. Carrithers became acting Vice President - Marketing in December 1993 and was elected Vice President - Marketing in May 1994. He became Executive Vice President in November 1994. Before joining the Company, Mr. Carrithers was a Vice President and Creative Director of Penny & Speier Advertising Agency from July 1991 to November 1993. Prior to that employment, he was an Executive Vice President and Creative Director of Evans Communications for six years. In these past positions, Mr. Carrithers had responsibility for developing marketing and advertising programs and materials for a broad range of products and services.

Dell K. Bollinger became involved in the Company's business when it was founded by her sons, Glenn and Bobby Bollinger, in 1974. Mrs. Bollinger has served as a Vice President of the Company since 1979.

David Barr became Vice President - Product Development in July 1994 and became Executive Vice President of New Products and Product Acquisition in August 1996. Prior to joining the Company Mr. Barr was President and Owner of New Zone Corporation, a privately held distributor of children's safety and related products. Prior to that employment Mr. Barr held various positions at Tandy Corporation, Fort Worth Texas, including Director of Marketing for Computer City.

Floyd DePauw became Controller and Chief Accounting Officer in October 1996. Mr. DePauw is a certified public accountant. Before joining the Company, Mr. DePauw was most recently the controller of Taylor Publishing Company, a subsidiary of Insilco Corporation, a publicly owned company. He was employed by Taylor in a variety of accounting positions for approximately 16 years. Prior to Taylor, Mr. DePauw was employed by Zoecon Industries, Inc., a chemical manufacturer, for approximately five years.

John L. Maguire became a director in September 1993 and served as interim Chief Financial Officer from August 1992 to August 1993. In addition, the Company employs Mr. Maguire as a salaried consultant on certain financial matters and acquisitions. Mr. Maguire is a certified public accountant. Since 1982, he has been self-employed, concentrating on private family investments. He was previously Chief Financial Officer of Tyson Foods, Inc., for 12 years. Mr. Maguire was a director of Arkansas Equity Growth Fund, Inc., a publicly held investment company which was liquidated in July 1993 and subsequently dissolved.

Stephen L. Parr became a Director of the Company in November 1995. Mr. Parr is currently President of Navigator Capital Management, LLC. Mr. Parr was previously a Vice President of Goldman Sachs where he was an international specialist. Mr. Parr was with Goldman Sachs from 1977 to 1995. Mr. Parr serves on the Board of Directors of DayStar Digital, a Georgia computer company, Nextek, Inc., an Alabama electronics company, and Corphealth, Inc., a Texas behavioral healthcare company.

Richard J. Tucker was retained by the Company in July of 1995 as a consultant on certain financial and other matters, and shortly thereafter became a director. He is the Chairman and Chief Executive Officer of First Fidelity Acceptance Corp., a nationwide automobile finance company headquartered in Plano, Texas. Mr. Tucker has been employed by First Fidelity since 1992. Prior to First Fidelity, Mr. Tucker was President of two holding companies, EntreCap International, Inc. and International Asset Management Group, Inc.

20

The Company's board of directors is currently composed of five directors, two of whom are not employees of the Company. However, one of the non-employee directors is currently retained as a consultant to the Company. All of the current directors serve until the next annual shareholder's meeting or until their successors have been duly elected and qualified. Certain of the directors and officers are defendents to lawsuits as discussed in part 1, item 3 of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

The following table summarizes the compensation paid to the Company's chief executive officer and the Company's three other most highly compensated executive officers for services rendered in all capacities to the Company during fiscal 1997, 1996 and fiscal 1995.

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION

                                                             OTHER ANNUAL                   ALL OTHER
         NAME AND                          SALARY   BONUS    COMPENSA-        OPTIONS        COMPENSA-
    PRINCIPAL POSITION              YEAR    ($)      ($)     TION ($)(1)        (#)          TION ($)
--------------------------          ----  --------  ------  --------------  -----------  -----------------
                                                            C>                               
Glenn D.  Bollinger.............    1997  $275,717    -           -             -               -
  Chairman of the Board and         1996   275,717
  Chief Executive Officer.......    1995   275,735    -           -             -               -

Bobby D.  Bollinger.............    1997   275,717    -           -             -               -
  Vice Chairman of the Board        1996   275,717
  and President.................    1995   275,735    -           -             -               -

James A. Burgin.................    1997   118,120   3,008        -             -               -
  Executive Vice President -        1996   118,024    -           -             -               -
  Sales.........................    1995    78,462  18,748        -           5,000             -

John T. Pryor...................    1997   109,723    -           -          25,000             -
  Former CFO -                      1996         -    -           -             -               -
  Senior Vice President.........    1995         -    -           -             -               -


(1) Certain of the Company's executive officers receive personal benefits in addition to salary and cash bonuses. The aggregate amount of the personal benefits, however, do not exceed the lesser of $50,000 or 10% of the total of the annual salary and bonus reported for the named executive.

OPTIONS EXERCISES AND HOLDINGS

The following table sets forth information with respect to the named executives concerning exercise of options during fiscal 1997 and unexercised options held as of the end of fiscal 1997.

21

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

                                                                                                VALUE OF UNEXERCISED
                                                             NUMBER OF UNEXERCISED                 IN-THE MONEY
                                                                  OPTIONS AT                      OPTIONS AT FISCAL
                      SHARES                                  FISCAL YEAR-END (#)                  YEAR-END ($) (1)
                      ACQUIRED                           ------------------------------  ----------------------------------
                        ON                VALUE
     NAME           EXERCISE (#)       REALIZED ($)        EXERCISABLE    UNEXERCISABLE      EXERCISABLE      UNEXERCISABLE
---------------  ------------------  ------------------  ---------------  -------------  -------------------  -------------
James A. Burgin          -                   -                8,500           6,500               -                 -


(1) Based on the closing sale price of the common stock on March 31, 1997, of $.75 per share as reported by the over-the-counter Bulletin Board and a weighted average exercise price per share of $10.30.

DIRECTOR'S COMPENSATION

Each independent director receives a fee of $10,000 annually and is reimbursed for out-of-pocket expenses incurred in connection with attendance at board of directors and committee meetings. Each independent director was granted options to purchase 8,333 shares of Common Stock at the time he became a director.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information with respect to the beneficial ownership of the shares of Common Stock of the Company, as of June 16, 1997, by (i) each director, (ii) the Company's chief executive officer and two other most highly compensated executive officers in fiscal 1997, (iii) all officers and directors of the Company as a group, and (iv) each person deemed to beneficially own more than five percent of the outstanding shares of Common Stock. Except as otherwise indicated, each stockholder identified in the table has sole voting and investment power with respect to its or his shares.

                                               SHARES OWNED
                                           ---------------------
NAME                                        NUMBER    PERCENTAGE
----                                       ---------  ----------
Glenn D.  Bollinger (1)(2)                 1,885,563     47.1
Bobby D.  Bollinger (1)(3)                 1,885,563     47.1
James A. Burgin (4)                            8,500      *
John L.  Maguire (5)                          62,333         1.6
Richard J.  Tucker                             -          *
Stephen L. Parr                                2,500      *
All directors and executive officers as a
  group (11 persons) (6) (7) (8)           2,413,281     60.3


* Less than 1% of the outstanding shares of Common Stock. (1) Business mailing address is 602 Fountain Parkway, Grand Prairie, Texas 75050.
(2) Includes (i) 425,069 shares over which Glenn Bollinger has sole voting and investment control; (ii) 436,000 shares held by Glenn Bollinger Family Enterprises, Ltd., a Texas limited partnership, over which Glenn Bollinger has shared voting and investment power because he and his brother Bobby Bollinger each own 49.5% of the outstanding stock of the sole general partner; (iii) 436,000 shares held by Bob Bollinger Family Enterprises, Ltd., a Texas limited partnership, over which Glenn Bollinger has shared voting and investment

22

power because he and his brother Bobby Bollinger each own 49.5% of the outstanding stock of the sole general partner; and (iv) 588,494 shares held by the trustees of the Company's 401(K) Plan successor to the Company's Employee Stock Ownership Plan (the "401(K) Plan"), including Glenn Bollinger, and over which he has shared voting and investment power. Neither the inclusion of shares owned by Bob Bollinger Family Enterprises, Ltd., nor the inclusion of any 401(K) Plan shares not allocated to Glenn Bollinger's 401(K) participant account is to be construed as an admission that he is the beneficial owner of such shares.
(3) Includes (i) 425,069 shares over which Bobby Bollinger has sole voting and investment control; (ii) 436,000 shares held by Bob Bollinger Family Enterprises, Ltd., a Texas limited partnership, over which Bobby Bollinger has shared voting and investment power because he and his brother Glenn Bollinger each own 49.5% of the outstanding stock of the sole general partner; (iii) 436,000 shares held by Glenn Bollinger Family Enterprises, Ltd., a Texas limited partnership, over which Bobby Bollinger has shared voting and investment power because he and his brother Glenn Bollinger each own 49.5% of the outstanding stock of the sole general partner; and
(iv) 588,494 shares held by the trustees of the 401(K) Plan, including Bobby Bollinger over which he has shared voting and investment power. Neither the inclusion of shares owned by Glenn Bollinger Family Enterprises, Ltd., nor the inclusion of any 401(K) Plan shares not allocated to Bobby Bollinger's 401(K) participant account is to be construed as an admission that he is the beneficial owner of such shares.
(4) Includes options to purchase 8,500 shares of Common Stock that are currently exercisable or will be exercisable within sixty days.
(5) Includes options to purchase 54,999 shares of Common Stock that are currently exercisable or will be exercisable within sixty days. Does not include 1,000 shares of Common Stock held in trust for which the reporting person is the trustee and is a contingent beneficiary. The reporting person disclaims beneficial ownership of these shares.
(6) Includes options to purchase 86,499 shares of Common Stock that are currently exercisable or will be exercisable within sixty days.
(7) Shares which are included beneficially under both Glenn and Bobby Bollinger are only included once in the group total.
(8) Includes 1,300 and 100 shares of Common Stock, respectively, beneficially owned by two executive officers of the Company, which are held by brokers as custodians for the officers' individual retirement accounts.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In April 1993, an independent sales representative of the Company, advanced $500,000 to the Company for working capital. The loan was evidenced by the Company's real estate lien note bearing interest at 10% per annum due March 31, 1996, and secured in part by a lien on the Company's Irving facility. In connection with this loan, the Company issued 34,405 shares of Common Stock. In December 1993, Messrs. Glenn and Bobby Bollinger and Mrs. Dell Bollinger purchased the note and received an assignment of the real estate lien in consideration of payment of the outstanding principal balance of the note. On March 29, 1996, the Company paid each of Messrs. Glenn and Bobby Bollinger $110,000 against the note. The proceeds of the note payments were used by Messrs. Glenn and Bobby Bollinger to exercise certain stock options granted in 1991. The Company extended the maturity of the $100,000 note to March 31, 1998 and remaining notes of $180,000 to August 16, 2000. In May 1996, a priority lien on the real estate was granted to a bank to secure the Company's credit facility.

The Company believes that the terms of the above transaction were at least as favorable to the Company as those which could have been obtained in an arm's length transaction with an unaffiliated party.

During July, 1995, the Company retained Mr. Richard Tucker as a consultant. Shortly after his retention, Mr. Tucker became a director of the Company. Pursuant to the consulting agreement, Mr. Tucker received $75,000 per year for 2 years, of which $75,000 was paid in fiscal 1997 and $56,250 was paid in fiscal 1996. The remaining $18,750 was paid in the first quarter of fiscal 1998.

23

All transactions, if any, between the Company and any of its directors, officers, principal stockholders, employees and other affiliates of the Company are subject to the approval of a majority of the independent directors of the Company who are disinterested in the transactions. All such transactions and loans must be on terms no less favorable to the Company than those generally available from unaffiliated third parties.

24

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) The following documents are filed as a part of this report:

1. - Consolidated financial statements to this Report are listed in the "Index to Consolidated Financial Statements and Schedules" at page F-1.

2.   -    Consolidated financial statement schedules to this Report are listed
          in the "Index to Consolidated Financial Statements and Schedules" at
          page F-1.  All other schedules are omitted because they are
          inapplicable or the requested information is shown in the financial
          statements or noted therein.

3.   -    Exhibits.

3.1  -    Certificate of Incorporation of the Company (incorporated by
          reference to Exhibit 3.1 to the Company's Form S-1 Registration
          Statement No. 33-69708)

3.2  -    By-Laws of the Company (incorporated by reference to Exhibit 3.2 to
          the Company's Form S-1 Registration Statement No.  33-69708)

4.1  -    Form of certificate representing shares of the Company's Common Stock
          (incorporated by reference to Exhibit 4.1 to the Company's Form S-1
          Registration Statement No. 33-69708)

10.1 -    Bollinger Industries 1993 Stock Option Plan (incorporated by
          reference to Exhibit 10.1 to the Company's Form S-1 Registration
          Statement No. 33-69708)

10.2 -    Bollinger Industries Employee Stock Ownership Plan and Trust
          (incorporated by reference to Exhibit 10.2 to the Company's Form
          S-1 Registration Statement No. 33-69708)

10.3 -    Form of Indemnification Agreement with independent director
          (incorporated by reference to Exhibit 10.3 to the Company's Form
          S-1 Registration Statement No. 33-69708)

10.4 -    Bollinger Industries, Inc.  1991 Incentive Stock Option Plan
          (incorporated by reference to Exhibit 10.4 to the Company's Form
          S-1 Registration Statement No. 33-69708)

10.5 -    Lease Agreement dated April 4, 1991, between William A.  McCarty,
          Jr., and Elinor F.  McCarty and Bollinger Sports, Inc., formerly
          known as Bollinger Industries, Inc. ("Bollinger-Texas")
          (incorporated by reference to Exhibit 10.8 to the Company's Form
          S-1 Registration Statement No. 33-69708)

10.6 -    Assignment and Assumption Agreement dated as of October 1, 1993,
          between Bollinger-Texas as Assignor and Bollinger Industries, L.P.,
          as Assignee with respect to such lease (incorporated by reference
          to Exhibit 10.8.1 to the Company's Form S-1 Registration Statement
          No. 33-69708)

10.7 -    Lease Agreement dated August 30, 1992, between Reba McPherson,
          individually and as Trustee of the Reba McPherson Trust u/w/o
          Harold Lynn McPherson, and Tarbox, Inc., as extended by an
          Agreement dated August 9, 1993 (incorporated by reference to
          Exhibit 10.9 to the Company's Form S-1 Registration Statement No.
          33-69708)

25

10.8  -    Assignment and Assumption Agreement dated as of October 1, 1993,
           between Tarbox, Inc., as Assignor and Bollinger Industries, L.P.,
           as Assignee with respect to such lease (incorporated by reference
           to Exhibit 10.9.1 to the Company's Form S-1 Registration Statement
           No. 33-69708)

10.9  -    Standard Industrial Lease dated March 17, 1993, between National
           Life Insurance Company and Bollinger-Texas (incorporated by
           reference to Exhibit 10.10 to the Company's Form S-1 Registration
           Statement No. 33-69708)

10.10 -    Assignment and Assumption Agreement dated as of October 1, 1993,
           between Bollinger-Texas as Assignor and Bollinger Industries, L.P.,
           as Assignee with respect to such lease (incorporated by reference
           to Exhibit 10.10.1 to the Company's Form S-1 Registration Statement
           No. 33-69708)

10.11 -    $500,000 Real Estate Lien Note dated March 18, 1993, in favor of
           Sid Reisman and executed by Bollinger-Texas, as modified by a
           Renewal, Extension, and Modification Agreement dated as of April 6,
           1993, and subsequently assigned to Glenn, Bobby and Dell Bollinger
           (incorporated by reference to Exhibit 10.10 to the Company's Form
           S-1 Registration Statement No. 33-69708)

10.12 -    Asset Purchase and Sale Agreement dated as of September 13, 1993,
           by and between California Gym Equipment Company, S. G. Equipment,
           Inc. and, for limited purposes, Bollinger-Texas and Sherman Grider
           (incorporated by reference to Exhibit 10.13 to the Company's Form
           S-1 Registration Statement No. 33-69708)

10.13 -    Standard Sublease dated as of September 13, 1993, between
           California Gym Equipment Company and S. G. Equipment, Inc.,
           together with the Industrial Real Estate Lease dated June 1, 1992,
           between New England Mutual Life Insurance Company and
           Bollinger-Texas attached thereto (incorporated by reference to
           Exhibit 10.14 to the Company's Form S-1 Registration Statement No.
           33-69708)

10.14 -    Assignment and Assumption Agreement dated as of September 1, 1993,
           between Bollinger-Texas and California Gym Equipment Company with
           respect to Industrial Real Estate Lease dated June 1, 1992
           (incorporated by reference to Exhibit 10.15 to the Company's Form
           S-1 Registration Statement No. 33-69708)

10.15 -    Letter agreement dated May 19, 1992, between Bollinger-Texas,
           Denise Austin and Jeff Austin (incorporated by reference to Exhibit
           10.16 to the Company's Form S-1 Registration Statement No.
           33-69708)

10.16 -    Letter agreement dated April 13, 1994, between Bollinger
           Industries, L.P., Denise Austin and Jeff Austin (incorporated by
           reference to Exhibit 10.16 to the Company's form 10-K for the
           fiscal year ended March 31, 1994)

10.17 -    Endorsement Agreement dated September 1, 1993, between
           Bollinger-Texas and Nolan Ryan (incorporated by reference to
           Exhibit 10.17 to the Company's form 10-K for the fiscal year ended
           March 31, 1994)

10.18 -    Loan Agreement dated as of January 4, 1994, between Bollinger
           Industries, L.P., the Company, and First Interstate (incorporated
           by reference to Exhibit 10.18 to the Company's form 10-K for the
           fiscal year ended March 31, 1994)

26

10.19 -    Standard Office/Warehouse Lease dated May 11, 1994, between
           Fountain Parkway, Ltd., and Bollinger Industries, L.P.
           (incorporated by reference to Exhibit 10.19 to the Company's form
           10-K for the fiscal year ended March 31, 1994)

10.20 -    Lease dated December 21, 1990, between Americus/Sumter Payroll
           Development Authority and N.B.F., Inc.  and R.  Wayne Rich
           (incorporated by reference to Exhibit 10.20 to the Company's form
           10-K for the fiscal year ended March 31, 1994)

10.21 -    Assignment and Assumption of Lease dated May 1, 1994, between
           Americus/Sumter Payroll Development Authority, NBF, Inc., a Florida
           corporation, and NBF, Inc., a Georgia corporation (incorporated by
           reference to Exhibit 10.21 to the Company's form 10-K for the
           fiscal year ended March 31, 1994)

10.22 -    Amendment to Lease between Americus-Sumter Payroll Development
           Authority and NBF, Inc., a Georgia corporation and R.  Wayne Rich
           amending the lease dated December 21, 1990 reflected at exhibit No.
           10.20 above (incorporated by reference to Exhibit 10.2 to the
           Company's form 10-Q for the quarter ended June 30, 1994)

10.23 -    Asset Purchase Agreement dated May 24, 1994, and effective as of
           May 1, 1994, between NBF, Inc., a Florida corporation, and NBF,
           Inc., a Georgia corporation (incorporated by reference to Exhibit
           10.3 to the Company's form 10-Q for the quarter ended June 30,
           1994)

10.24 -    First Amendment to Loan Agreement dated as of June 22, 1994,
           between Bollinger Industries, L.P., the Registrant, Bollinger
           Holding Corp., NBF and First Interstate Bank of Texas, N.A.
           (incorporated by reference to Exhibit 10.5 to the Company's form
           10-Q for the quarter ended June 30, 1994)

10.25 -    Loan and Security Agreement dated September 9, 1994, between
           Bollinger Industries, L.P. and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.1 to the Company's form
           10-Q for the quarter ended September 30, 1994)

10.26 -    First Amendment to Loan and Security Agreement dated September 9,
           1994, between Bollinger Industries, L.P. and NationsBank of Texas,
           N.A.  (incorporated by reference to Exhibit 10.2 to the Company's
           form 10-Q for the quarter ended September 30, 1994)

10.27 -    Second Amendment to Loan and Security Agreement dated December 8,
           1994, between Bollinger Industries, L.P. and NationsBank of Texas,
           N.A.  (incorporated by reference to Exhibit 10.1 to the Company's
           form 10-Q for the quarter ended December 31, 1994)

10.28 -    Lease Agreement dated November 16, 1994, between John Wilkerson,
           individually and Bollinger Industries (incorporated by reference to
           Exhibit 10.2 to the Company's form 10-Q for the quarter ended
           December 31, 1994)

10.29 -    Modification and Ratification of Lease dated November 1, 1994,
           between Fountain Parkway, Ltd.  and Bollinger Industries, L.P.
           (incorporated by reference to Exhibit 10.3 to the Company's form
           10-Q for the quarter ended December 31, 1994)

27

10.30 -    Third Amendment to Loan and Security Agreement dated March 3, 1995
           between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.30 to the Company's Form
           10-K for the fiscal year ended March 31, 1995)

10.31 -    Fourth Amendment to Loan and Security Agreement dated May 15, 1995
           between Bollinger Industries, L.P.  and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.31 to the Company's Form
           10-K for the fiscal year ended March 31, 1995)

10.32 -    Modification and Ratification of Lease dated February 22, 1995,
           between Fountain Parkway, Ltd.  and Bollinger Industries, L.P.
           (incorporated by reference to Exhibit 10.32 to the Company's Form
           10-K for the fiscal year ended March 31, 1995)

10.33 -    Fifth Amendment to Loan and Security Agreement dated September 9,
           1995, between Bollinger Industries, L.P. and NationsBank of Texas,
           N.A. (incorporated by reference to Exhibit 10.1 to the Company's
           Form 10-Q for the quarter ended December 31, 1995)

10.34 -    Sixth Amendment to Loan and Security Agreement dated December 29,
           1995, between Bollinger Industries, L.P. and NationsBank of Texas,
           N.A. (incorporated by reference to Exhibit 10.2 to the Company's
           Form 10-Q for the quarter ended December 31, 1995)

10.35 -    Seventh Amendment to Loan and Security Agreement dated March 8,
           1996, between Bollinger Industries, L.P. and NationsBank of Texas,
           N.A. (incorporated by reference to Exhibit 10.35 to the Company's
           Form 10K for the year ended March 31, 1996)

10.36 -    Eighth Amendment to Loan and Security Agreement dated May 8, 1996,
           between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.36 to the Company's
           Form 10K for the year ended March 31, 1996)

10.37 -    Deed of Trust, Assignment, Security Agreement and Financing
           Statement dated May 8, 1996, between Bollinger Industries, L.P. and
           NationsBank of Texas, N.A. (incorporated by reference to Exhibit
           10.37 to the Company's Form 10K for the year ended March 31, 1996)

10.38 -    Ninth Amendment to Loan and Security Agreement dated May 17, 1996,
           between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.38 to the Company's
           Form 10K for the year ended March 31, 1996)

10.39 -    Amended and Restated Promissory Note dated March 29, 1996, between
           Bollinger Industries, L.P., and Glenn D. Bollinger (incorporated by
           reference to Exhibit 10.39 to the Company's Form 10K for the year
           ended March 31, 1996)

10.40 -    Amended and Restated Promissory Note dated March 29, 1996, between
           Bollinger Industries, L.P., and Bobby D. Bollinger (incorporated by
           reference to Exhibit 10.40 to the Company's Form 10K for the year
           ended March 31, 1996)

10.41 -    Amended and Restated Promissory Note dated March 29, 1996, between
           Bollinger Industries, L.P., and Dell Bollinger (incorporated by
           reference to Exhibit 10.41 to the Company's Form 10K for the year
           ended March 31, 1996)

10.42 -    Second Amendment to standard industrial lease dated January 31,
           1996, between National Life Insurance Company and Bollinger
           Industries, L.P., as assignee (incorporated by reference to Exhibit
           10.42 to the Company's Form 10K for the year ended March 31, 1996)

10.43 -    U.S. Trademark License Agreement between International Apparel
           Marketing Corp. dba Nautilus Wear International and Bollinger
           Industries, Inc. dated May 1, 1995  (incorporated by reference to
           Exhibit 10.43 to the Company's Form 10K for the year ended March 31,
           1996)

10.44 -    Amendment to U.S. Trademark License Agreement between International
           Apparel Marketing Corp. and Bollinger Industries, Inc. dated March
           1, 1996 (incorporated by reference to Exhibit 10.44 to the Company's
           Form 10K for the year ended March 31, 1996)

28

10.45 -    Intercreditor and Subordination Agreement dated May 8, 1996,
           between NationsBank of Texas, N.A. and Glenn D. Bollinger, Bobby D.
           Bollinger, and Dell Bollinger (incorporated by reference to Exhibit
           10.45 to the Company's Form 10K for the year ended March 31, 1996)

10.46 -    Eleventh Amendment to Loan and Security Agreement dated July 8, 1996,
           between Bollinger Industries, LP, and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.46 to the Company's form
           10-Q for the quarter ended September 29, 1996)

10.47 -    Loan and Security Agreement dated August 16, 1996 between Bollinger
           Industries, Inc., Bollinger Industries, LP and NBF, Inc. and
           Foothill Capital Corporation and related schedules. (incorporated
           by reference to Exhibit 10.47 to the Company's form 10-Q for the
           quarter ended September 29, 1996)

10.48 -    Collateral Assignment of Patents and Trademarks dated August 16,
           1996 between Bollinger Industries, LP and Foothill Capital
           Corporation. (incorporated by reference to Exhibit 10.48 to the
           Company's form 10-Q for the quarter ended September 29, 1996)

10.49 -    Subordination Agreement dated August 16, 1996 between Glenn D.
           Bollinger, Bobby D. Bollinger, Dell Bollinger and Foothill Capital
           Corporation. (incorporated by reference to Exhibit 10.49 to the
           Company's form 10-Q for the quarter ended September 29, 1996)

10.50 -    Deed of Trust dated August 16, 1996 executed by Bollinger
           Industries, LP (incorporated by reference to Exhibit 10.50 to the
           Company's form 10-Q for the quarter ended September 29, 1996)

10.51 -    Asset Purchase Agreement dated August 29, 1996 between Bollinger
           Industries, LP, and Rehab Plus Therapeutic Products, Inc.
           (incorporated by reference to Exhibit 10.51 to the Company's form
           10-Q for the quarter ended September 29, 1996)

10.52 -    Tenth Amendment to Loan and Security Agreement dated July 8,1996,
           between Bollinger Industries, LP, and NationsBank of Texas, N.A.
           (incorporated by reference to Exhibit 10.1 to the Company's form
           10-Q for the quarter ended June 30, 1996)

10.53 -    Asset Purchase Agreement dated August 29, 1996 between Bollinger
           Industries, LP, and Rehab Plus Therapeutic Products, Inc.
           (incorporated by reference to Exhibit 2.01 to the Company's form
           10-Q for the quarter ended September 29, 1996)

10.54 -    Asset Purchase Agreement dated November 7, 1996, between Bollinger
           Industries, LP, and SST Acquisition Corporation (incorporated by
           reference to Exhibit 2.01 to the Company's form 10-Q for the
           quarter ended December 29, 1996)

10.55 -    First Amendment to Loan and Security Agreement dated August 16,
           1996, between Bollinger Industries, Inc., Bollinger Industries, LP
           and NBF, Inc. and Foothill Capital Corporation.

10.56 -    Second Amendment to Loan and Security Agreement dated August 16,
           1996, between Bollinger Industries, Inc., Bollinger Industries, LP
           and NBF, Inc. and Foothill Capital Corporation.

10.57 -    Lease Agreement dated December 1, 1996 between Southwest Properties
           Group, Inc. and Bollinger Industries, LP

11.1  -    Statement re Computation of Per Share Data

21.1  -    List of the Company's subsidiaries (incorporated by reference to
           Exhibit 21.1 to the Company's Form 10-K for the fiscal year ended
           March 31, 1995)

29

27.1   -    Financial Data Schedule


        (b) Reports on Form 8-K.

            None.

30

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, on the 16th day of June, 1997.

BOLLINGER INDUSTRIES, INC.

By: /S/ Glenn D. Bollinger
   ------------------------------------
    Glenn D.  Bollinger
    Chairman of the Board and Chief
    Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of the 16th day of July, 1996.

/S/ Glenn D. Bollinger  Chairman of the Board, President, and Chief
----------------------  Executive Officer (principal executive officer)
 Glenn D.  Bollinger

/S/ Bobby D. Bollinger  Vice Chairman of the Board and President
----------------------
 Bobby D.  Bollinger

   /S/ Rose Turner      Senior Vice President - Finance, Chief Financial
----------------------  Officer, Treasurer, and Secretary
     Rose Turner        (principal financial officer)


   /S/ Floyd DePauw     Controller and Chief Accounting Officer (principal
----------------------  accounting officer)
     Floyd DePauw

 /S/ John L. Maguire    Director
----------------------
   John L.  Maguire

 /S/ Stephen L. Parr    Director
----------------------
   Stephen L. Parr

/S/ Richard J. Tucker   Director
----------------------
  Richard J.  Tucker

S-1

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES

F-1

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                                                                           Page
Report of Independent Certified Public Accountants                          F-3

Consolidated Balance Sheets as of March 31, 1997 and 1996                   F-4

Consolidated Statements of Operations for each of the three
years ended March 31, 1997                                                  F-6

Consolidated Statements of Changes in Stockholders' Equity
for each of the three years ended March 31, 1997                            F-7

Consolidated Statements of Cash Flows for each of the three
years ended March 31, 1997                                                  F-8

Notes to Consolidated Financial Statements                                  F-9

Report of Independent Certified Public Accountants on Schedule              F-24

Schedule II                                                                 F-25

F-2

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

BOARD OF DIRECTORS AND STOCKHOLDERS
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

We have audited the accompanying consolidated balance sheets of Bollinger Industries, Inc. and Subsidiaries as of March 31, 1997, and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bollinger Industries, Inc. and Subsidiaries as of March 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years ended March 31, 1997, in conformity with generally accepted accounting principles.

KING GRIFFIN & ADAMSON, PC

Dallas, Texas
June 16, 1997

F-3

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31,

                    ASSETS                         1997             1996
                                                 -----------  ---------------
CURRENT ASSETS
  Cash                                           $     3,481     $    408,871
  Accounts receivable
    Trade, net of allowance for doubtful
      accounts of $844,312 and $457,829           16,804,959       18,344,827
    Other                                            177,208          229,735
  Income tax refund                                        -        2,307,235
  Inventories                                     16,201,780       30,112,934
  Current assets of discontinued
    operations - net                                       -        1,601,954
  Prepaid expenses                                   533,215          525,272
  Deferred income taxes                                    -           66,309
                                                 -----------  ---------------
      Total current assets                        33,720,643       53,597,137

PROPERTY, PLANT AND EQUIPMENT - NET                2,083,402        2,015,282

NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS              -          161,999

OTHER ASSETS
  Goodwill, net of accumulated amortization of
    $213,346 and $157,884                          1,138,654        1,233,482
  Notes receivable and other                         951,085        1,373,003
  Deferred financing fees, net of accumulated
    amortization of  $140,385                        495,568                -
                                                 -----------  ---------------
      Total other assets                           2,585,307        2,606,485
                                                 -----------  ---------------
TOTAL ASSETS                                     $38,389,352      $58,380,903
                                                 ===========  ===============

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

F-4

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - CONTINUED

                                                                      MARCH 31,
           LIABILITIES AND STOCKHOLDERS' EQUITY                  1997           1996
                                                             ------------   -----------
CURRENT LIABILITIES
  Current portion of long-term debt and other debt
    (including $100,000 note payable to officer and
    shareholder in 1997)                                     $  2,841,645   $22,683,575
  Accounts payable - trade                                     11,620,367    16,913,821
  Federal income tax payable                                            -        43,847
  Other current liabilities                                     1,104,318     1,674,046
  Provision for restructuring of operations                     2,160,169     3,960,000
                                                             ------------   -----------
    Total current liabilities                                  17,726,499    45,275,289
LONG-TERM LIABILITIES
  Long-term debt, net of current portion (including $180,000
  and $280,000 notes payable to officers and shareholders in
  1997 and 1996)                                               15,641,720       576,777
Deferred income taxes                                                   -        66,309
                                                             ------------   -----------
    Total long-term liabilities                                15,641,720       643,086
                                                             ------------   -----------
    Total liabilities                                          33,368,219    45,918,375
                                                             ------------   -----------
COMMITMENTS AND CONTINGENCIES (Notes B, E and N)

STOCKHOLDERS' EQUITY
  Preferred stock - $.01 par value;
    1,000,000 shares authorized; none issued                            -             -
  Common stock - $.01 par value; 8,000,000 shares authorized;
    4,000,210 shares issued and outstanding                        40,002        40,002
  Capital in excess of par                                     15,323,058    15,323,058
  Accumulated deficit                                         (10,341,927)   (2,900,532)
                                                             ------------   -----------
    Total stockholders' equity                                  5,021,133    12,462,528
                                                             ------------   -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 38,389,352   $58,380,903
                                                             ============   ===========

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

F-5

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED MARCH 31,

                                                  1997           1996            1995
                                               -----------    -----------     -----------
Net sales                                      $82,598,593    $80,300,431     $67,894,489
Cost of goods sold                              69,723,015     62,197,227      50,546,515
                                               -----------    -----------     -----------
    Gross profit                                12,875,578     18,103,204      17,347,974

Selling expenses                                 6,878,803      7,876,538       6,861,621
Distribution, general and
  administrative expenses (including $75,000
  and $56,250 in 1997 and 1996 to a Director)   11,505,641     12,115,284       8,421,762
Restructuring of operations                              -      3,960,000               -
                                               -----------    -----------     -----------
                                                18,384,444     23,951,822      15,283,383
                                               -----------    -----------     -----------
    Operating profit (loss)                     (5,508,866)    (5,848,618)      2,064,591
Other expense (income)
  Interest expense                               2,551,703      2,251,807       1,166,794
  Other                                            (50,243)      (103,921)        (46,795)
                                               -----------    -----------     -----------
                                                 2,501,460      2,147,886       1,119,999
                                               -----------    -----------     -----------
  Earnings (loss) from continuing operations
    before income tax expense (benefit)         (8,010,326)    (7,996,504)        944,592

Income tax expense (benefit)                       (91,964)    (1,135,098)        350,416
                                               -----------    -----------     -----------
  Earnings (loss) from continuing operations    (7,918,362)    (6,861,406)        594,176

Discontinued operations
  Gain (loss) from operations, net of income
    tax benefit                                          -       (591,886)       (524,914)
  Gain (loss) on disposal, net of income tax
    expense (benefit) including a $1,199,118
    provision for operating losses during the
    phase-out period in 1996.                      476,967       (770,068)              -
                                               -----------    -----------     -----------
  Earnings (loss) from discontinued operations     476,967     (1,361,954)       (524,914)
                                               -----------    -----------     -----------
  Net earnings (loss)                          $(7,441,395)   $(8,223,360)    $    69,262
                                               ===========    ===========     ===========
Per Share Data:
  Earnings (loss) from continuing operations   $     (2.04)   $     (1.85)    $       .15
                                               ===========    ===========     ===========
  Net earnings (loss)                          $     (1.86)   $     (2.22)    $       .02
                                               ===========    ===========     ===========
Weighted average common and common
  equivalent shares outstanding                  4,000,210      3,710,484       3,966,631
                                              ============    ===========     ===========

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

F-6

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                                                    RETAINED
                                COMMON STOCK         CAPITAL IN     EARNINGS
                           ----------------------     EXCESS OF   (ACCUMULATED
                            SHARES       AMOUNT          PAR         DEFICIT)       TOTAL
                           ---------   ----------   ------------  -------------  -----------
Balance at March 31, 1994  3,592,551     $35,926     $14,108,142   $  5,253,566  $19,397,634

Shares issued in
  connection with
  acquisition                138,000       1,380         999,120              -    1,000,500

Shares retired               (22,461)       (225)            225              -            -

Net earnings                       -           -               -         69,262       69,262
                           ---------     -------     -----------   ------------   ----------
Balance at March 31, 1995  3,708,090      37,081      15,107,487      5,322,828   20,467,396

Shares issued on
  exercise of stock
  options                    292,120       2,921         215,571              -      218,492

Net loss                           -           -               -     (8,223,360)  (8,223,360)
                           ---------     -------     -----------   ------------   ----------
Balance at March 31, 1996  4,000,210      40,002      15,323,058     (2,900,532)  12,462,528
                           ---------     -------     -----------   ------------   ----------
Net loss                           -           -               -     (7,441,395)  (7,441,395)
                           ---------     -------     -----------   ------------   ----------
Balance at March 31, 1997  4,000,210     $40,002     $15,323,058   $(10,341,927)  $5,021,133
                           =========     =======     ===========   ============   ==========

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

F-7

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31,

                                                    1997             1996           1995
                                                ------------    ------------  ------------
Cash flows from operating activities
  Net earnings (loss)                           $(7,441,395)    $(8,223,360)  $    69,262
  Adjustments to reconcile net earnings
    (loss) to net cash provided by (used in)
    operating activities
    (Gain) loss on disposal of assets              (476,967)              -        (5,341)
    Deferred income tax benefit                    (245,709)      1,148,050      (655,005)
    Depreciation and amortization                   891,417         651,500       442,926
    Provision for restructuring of operations             -       3,960,000             -
    Other                                                 -               -        74,000
    Provision for doubtful accounts                 236,483        (311,514)      793,931
    Provision for obsolete inventory                325,991         365,795       852,204
    Changes in operating assets and liabilities
      Trade accounts receivable                   1,153,385      (1,513,464)   (5,175,131)
      Other receivables                              52,527          81,476      (159,247)
      Inventories                                12,880,151         581,275   (18,906,836)
      Income tax refund                           2,307,235      (2,307,235)            -
      Prepaid expenses                               58,366         658,348      (393,078)
      Notes receivable, deposits and other          405,611         (44,161)     (599,000)
      Current assets of discontinued operations   1,601,954      (1,601,954)            -
      Accounts payable                           (5,309,916)     10,274,464     3,944,881
      Federal income tax payable                    (43,847)       (389,849)     (160,166)
      Other current liabilities                     233,323         660,813       284,644
      Provision for restructuring operation      (1,799,831)              -             -
      Non-Current assets from discontinued
        operations                                  161,999               -             -
                                                -----------     -----------   -----------
    Net cash provided by (used in) operating
      activities                                  4,990,777       3,990,184   (19,591,956)

Cash flows from investing activities
  Purchases of property and equipment              (621,146)       (425,041)   (1,268,970)
  Payments made on notes receivable                 187,097               -             -
  Proceeds from sale of assets                    1,418,129          58,329        36,205
                                                -----------     -----------   -----------
    Net cash provided by (used in) investing
    activities                                      984,080        (366,712)   (1,232,765)

Cash flows from financing activities
  Proceeds from long-term debt                      287,774         395,449        21,298
  Payments made on long term debt                (1,030,116)       (445,018)     (687,223)
  Net change in lines of credit                  (5,001,951)     (3,500,000)   21,580,607
  Net advance from (payments to) officers                 -               -             -
  Proceeds from issuance of common stock                  -         218,492             -
  Deferred financing fees                          (635,954)              -             -
                                                -----------     -----------   -----------

    Net cash provided by (used in) financing
    activities                                   (6,380,247)     (3,331,077)   20,914,682
                                                -----------     -----------   -----------
    Net increase (decrease) in cash                (405,390)        292,395        89,961

Cash at beginning of year                           408,871         116,476        26,515
                                                -----------     -----------   -----------
Cash at end of year                             $     3,481     $   408,871   $   116,476
                                                ===========     ===========   ===========

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

F-8

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

BUSINESS ACTIVITY

The Company is a supplier of consumer fitness equipment and accessories.


(See Note C for a discussion of discontinued operations.)

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Bollinger Industries, Inc. (Bollinger) which was reincorporated in Delaware in September 1993, its wholly-owned subsidiaries and Bollinger Industries, L.P., a partnership wholly-owned by Bollinger's subsidiaries (collectively "the Company"). All significant intercompany accounts and transactions have been eliminated.

INVENTORIES

Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or market (determined product by product on management knowledge of current market conditions and existing stock levels).

The provision for obsolete and slow moving inventory is adjusted based on current inventory levels, historical and expected future sales levels.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using straight-line and accelerated methods for financial reporting purposes over the following useful lives:

Buildings and improvements      5-20 years
Equipment                        3-7 years
Automobiles                        3 years
Furniture and fixtures           3-5 years

Maintenance and repairs are expensed as incurred. Major renewals and improvements are capitalized.

ADVERTISING COSTS

Advertising and promotional costs are expensed as incurred. The advertising expense amounted to $1,627,464, $1,558,397, and $1,790,521 in fiscal 1997, 1996 and 1995, respectively.

FAIR VALUE

The Company believes that the carrying amounts of its current assets and current liabilities approximate the fair value of such items due to their short-term nature. The carrying amount of long-term debt approximates its fair value because interest rates approximate market.

F-9

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Continued

INCOME TAXES

Deferred income taxes are determined using the asset and liability method, under which deferred tax assets and liabilities are calculated based on differences between financial accounting and tax basis of assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the payable or refund for the period plus or minus the change during the period in deferred tax assets and liabilities.

EARNINGS (LOSS) PER COMMON SHARE

Net earnings (loss) per common share is based on the net earnings (loss) applicable to the weighted average number of common shares and common stock equivalents outstanding. Common stock equivalents include the dilutive effect of all stock options outstanding (except in the case of a net loss, in which case they would be anti-dilutive), as though they had been outstanding for all periods presented.

GOODWILL AND COVENANT NOT TO COMPETE

The excess of the purchase price of acquired companies over the fair value of net identifiable assets at the date of acquisition has been recorded as goodwill and is being amortized on a straight line basis over a twenty year period. The Company periodically evaluates the net balance of goodwill based on the projected operating income of the respective businesses on an undiscounted cash flow basis. If necessary, the goodwill would be written down to fair market value.

A covenant not to compete in the amount of $206,633 net of accumulated amortization of $146,367 is included in "Notes receivable and other" and is being amortized on a straight-line basis over its duration of 41 months.

USE OF ESTIMATES AND ASSUMPTIONS

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. In particular, the provision for chargebacks and buybacks is subject to estimation. The actual chargebacks and buybacks could vary from the estimate.

REVENUE RECOGNITION AND PROVISIONS FOR CHARGEBACKS AND BUYBACKS

The Company recognizes sales revenue at the time the products are shipped to its customer. Provision is made currently for estimated product returns and deductions which may occur. These returns are generally for products that are salable with minor reworking of packaging or replacement of missing components. The provision for returns is estimated based on current trends and historical experience of returns. Additionally, provision is made for chargebacks from the customer for marketing programs, volume discounts and other items.

F-10

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES - Continued

In certain circumstances, the Company has followed a "buyback" policy whereby the Company purchases competitors' product from a new customer in order to obtain shelf space for the Company's product lines. The cost of such "buybacks" is amortized over the life of the program, which typically has been two to three years.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform with the 1997 presentation and to retroactively recognize the discontinued Healthcare Division.

STOCK OPTIONS

Prior to April 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On April 1, 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation", which permits entities to recognize as expense over the vesting period the fair value of all stock-based awards on the date of the grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock options grants made in 1996 and future years as if the fair value based method defined in SFAS No. 123 had been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123 commencing in its March 31, 1997 financial statements. The effect of applying the requirements of SFAS No. 123 is not considered to be material to the financial statements.

ADOPTION OF NEW ACCOUNTING STANDARDS

The Company intends to adopt SFAS No. 128, "Earnings per Share" ("SFAS 128") effective December 15, 1997. This statement requires the replacement of primary earnings per share with basic earnings per share and fully diluted earnings per share with diluted earnings per share. Management of the Company does not expect the adoption of this statement will have a material impact on the earnings per share computation.

F-11

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - ONGOING OPERATIONAL LOSSES AND LIQUIDITY

As indicated in the accompanying financial statements, the Company has suffered losses of $7,441,395 and $8,223,360 during the years ended March 31, 1997 and 1996.

Funds provided by operating activities for fiscal 1997 were generated primarily by the reduction of inventory, the sale of discontinued operations and the receipt of an income tax refund. These funds were used to fund operating losses and to decrease outstanding accounts payable and long term debt. Management intends to further decrease inventory levels in fiscal 1998 but does not expect the impact of those reductions to be as significant. Funds provided by operating activities for fiscal 1996 were generated primarily by an increase in accounts payable.

In fiscal 1998, management intends to substantially improve operating gross margins on all product lines. Due to the highly competitive nature of the overseas market it has become cost advantageous to source more items from overseas. There are potential savings to be negotiated with steamship lines, freight forwarders and U.S. Customs as well as major reductions in product costs. The Company has actively pursued and negotiated directly with overseas suppliers and factories. Additionally, the domestic manufacturing operations have been analyzed and will be maintained only where it is cost advantageous to do so. The Company believes that sourcing their product from the lowest cost, high quality provider, in addition to strengthening the controls and response time surrounding customer deductions, which have been a drain on gross margin in fiscal 1995 and 1996, will enable it to substantially improve gross margin in 1998.

The Company plans to continue to consolidate warehouse facilities in fiscal 1998 thereby lowering fixed costs. The Company is also exploring the use of freight expediters on the west coast, to receive product from the orient, unload and inspect, and repack for shipment to the customer. The Company intends to reduce warehouse space, outside facilities, staffing levels and related overhead expenses.

Some of these changes were implemented in late fiscal 1997 and the other additional improvements are continuing to be implemented in fiscal 1998. Management believes that based on fully implementing these plans in fiscal 1998, and realizing the benefit of these improvements in fiscal 1998 and 1999, the Company's operating losses will be reversed and its liquidity improved.

NOTE C - ACQUISITION, DISCONTINUED OPERATIONS, AND RESTRUCTURING OF OPERATIONS

ACQUISITION

On May 24, 1994, in exchange for 138,000 shares of its restricted common shares, the Company acquired substantially all of the assets and liabilities of NBF, Inc. (a Florida Corporation) which manufactures trampolines and other outdoor playground equipment. The total consideration for the assets and liabilities acquired including liabilities assumed was approximately $2,762,472. Additionally, for cash of $150,000, the Company acquired from an individual, all of the intellectual property rights to the products manufactured. If the acquisition had occurred as of April 1, 1994, consolidated results would not have been materially effected. The acquisition was accounted for as a purchase and accordingly the consolidated financial statements include the results of operations from the acquisition date.

DISCONTINUED OPERATIONS

The Company determined during January 1996 to dispose of its Healthcare Division which manufactured a line of sports medicine and safety products. The Company sold the largest portion of the Healthcare Division in September 1996 with the balance sold or disposed of through January 1997. A gain on the sale of $722,676 was recorded in fiscal 1997. Result of operations in prior years have been restated to reclassify the Healthcare Division as discontinued operations.

Interest expense has been allocated to discontinued operations based on the proportion of average net assets of the discontinued Healthcare operations as compared to consolidated average net assets of the Company.

Following is a summary of the discontinued operations:

F-12

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                                                                                YEARS ENDED MARCH 31,
                                                                       1997                   1996               1995
                                                                    ----------           ------------         ----------
NET SALES OF DISCONTINUED OPERATIONS:
  Healthcare Division                                               $1,398,400 (1)         $3,327,893 (2)     $5,170,521
                                                                    ----------           ------------         ----------
  Total net sales of discontinued operations                        $1,398,400             $3,327,893         $5,170,521
                                                                             -
                                                                    ==========             ==========         ==========
LOSS (GAIN) FROM DISCONTINUED OPERATIONS (PRIOR TO THE
  MEASUREMENT DATE):
  Healthcare Division                                                                      $  689,784 (2)     $  795,324
  Less: Tax (expense) benefit                                                                  97,898            270,410
                                                                                           ----------         ----------
  Net loss (gain) from discontinued operations - Healthcare
    Division                                                                               $  591,886         $  524,914
                                                                                           ==========         ==========

(1) April 1, 1996, to December 31, 1996 (final disposition)
(2) April 1, 1995, to December 31, 1995

                                                                       1997                   1996
                                                                    ----------             ----------
LOSSES ON DISPOSAL, INCLUDING PROVISION FOR OPERATING
  LOSSES DURING PHASE-OUT PERIOD:
  Healthcare Division                                               $        -             $  897,574
  Less:  Tax benefit                                                         -                127,506
                                                                    ----------             ----------
  Net loss on disposal - Healthcare Division                        $        -             $  770,068
                                                                    ==========             ==========
OPERATING LOSSES DURING PHASE-OUT PERIOD (AFTER
  MEASUREMENT DATE) APRIL 1, 1996 TO SEPTEMBER 1996:
  Healthcare Division - January 1, 1996 to December 31, 1996        $        -             $1,397,574
  Less:  Tax benefit                                                         -                198,456
                                                                    ----------             ----------
  Total operating losses during phase-out period included
  above                                                             $        -             $1,199,118
                                                                    ==========             ==========

NET LOSS FROM DISCONTINUED OPERATIONS (AFTER MEASUREMENT
  DATE) APRIL, 1996 TO DECEMBER 31, 1996 AND JANUARY 1,
  1996, TO MARCH 31, 1996:
  Operating loss from discontinued operations - Healthcare
  Division                                                          $        -             $  497,574
  Less:  Tax benefit                                                         -                 70,656
                                                                    ----------             ----------
  Net loss from discontinued operations January 1, 1996, to
  March 31, 1996                                                    $        -             $  426,918
                                                                    ==========             ==========

F-13

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

ESTIMATED NET LOSS ON DISPOSAL OF HEALTHCARE DIVISION:                         1996
                                                                             --------
  Estimated operating loss during phase-out period April 1,
  1996 to December 31, 1996                                                  $900,000
  Less:  Estimated gain on sale of assets                                     500,000
                                                                             --------
                                                                              400,000
  Less: Tax Benefit                                                            56,850
                                                                             --------
  Estimated Net loss on disposal of Healthcare Division                      $343,150
                                                                             ========

                                                            YEAR ENDED MARCH 31,
NET GAIN ON DISPOSAL  OF HEALTHCARE DIVISION:                     1997
                                                                --------
  Loss during phase out period net of provision (April 1996     $      -
  to December 1997)
                                                                 722,676
  Add:   Gain on Sale of assets                                 --------
                                                                 722,676
  Less: Tax expense                                              245,709
  Net gain on disposal of Healthcare Division                   $476,967
                                                                ========

Proceeds upon sale of the Healthcare Division were as follows; $1,418,130 in cash and $293,547 as a note receivable.

F-14

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - Continued

RESTRUCTURING OF OPERATIONS

During the fourth quarter of 1996, the Company implemented a plan ("the Plan") to reorganize and restructure its operations. The significant portion of this Plan has been completed. In accordance with the Plan, management disposed of its Healthcare Division, and sold a significant portion of the excess inventory which it used to reduce accounts payable and debt, and fund operations.

The Company also obtained a new credit facility. At March 31, 1997, the Company still has approximately $4.0 million of inventory which it intends to sell rapidly. The provisions for restructuring of operations at March 31, 1997 of $2,160,169 is the remaining provision against inventory identified for sale in connection with the restructuring.

NOTE D - CONSOLIDATED STATEMENTS OF CASH FLOWS

Supplemental disclosures are as follows:

                                           YEAR ENDED MARCH 31,
                                  --------------------------------------
                                    1997          1996           1995
                                -----------    ----------     ----------
Interest paid                   $ 2,470,054    $2,213,613     $1,400,146
Income taxes paid
  (refund received)             $(2,100,611)   $  200,000     $  865,507
Noncash financing
  and investing
  transactions:
Purchase of assets
  financed by debt              $    66,381    $   42,488              -
Purchase of NBF, Inc.           $         -    $        -     $2,762,472
Notes receivable in
  connection with sale
  of Healthcare
  Division                      $   293,547    $        -     $        -

For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

NOTE E - CREDIT RISK

The Company's assets which are subject to potential credit risk consist of trade accounts receivable and cash. The Company sells its products primarily to retailers, including national chains, geographically dispersed throughout the United States on an unsecured basis. Risks associated with extension of credit to customers are affected by the economic condition of the retail industry. The Company performs ongoing credit evaluations of its customers' financial condition to reduce credit risk. The Company has provided an allowance for doubtful accounts which reflects its estimate of uncollectible accounts.

Cash is at risk to the extent that it exceeds Federal Deposit Insurance Corporation ("FDIC") insured amounts (approximately $575,000 at March 31, 1997). To minimize risk, the Company places its cash with high credit quality institutions.

F-15

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - INVENTORIES

                                               MARCH 31,
                                       -------------------------
                                           1997          1996
                                       -----------   -----------
Raw materials                          $ 9,013,914   $ 9,858,597
Work-in-process                            328,436       305,777
Finished goods                           8,419,200    23,117,280
Reserve for Obsolescence                (1,559,770)   (1,166,766)
                                       -----------   -----------
                                        16,201,780    32,114,888
Less:  Discontinued operations - net             -     2,001,954
                                       -----------   -----------
                                       $16,201,780   $30,112,934
                                       ===========   ===========

NOTE G - PROPERTY, PLANT AND EQUIPMENT

                                               MARCH 31,
                                       -------------------------
                                           1997          1996
                                        ----------   ----------
Land, buildings and improvements        $1,915,305   $1,835,658
Equipment                                1,699,103    1,585,146
Automobiles                                 53,860       53,860
Furniture and fixtures                   1,453,910    1,238,752
                                        ----------   ----------
                                         5,122,178    4,713,416
  Less accumulated depreciation          3,038,776    2,536,135
                                        ----------   ----------
                                         2,083,402    2,177,281
  Less: Discontinued Operations - Net            -      161,999
                                        ----------   ----------
                                        $2,083,402   $2,015,282
                                        ==========   ==========

Depreciation expense for the years ended March 31, 1997, 1996, and 1995 was approximately $558,000, $554,000, and $407,000, respectively.

F-16

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE H - NOTES PAYABLE AND LONG TERM DEBT

                                                             MARCH 31,
                                                      --------------------------
                                                        1997           1996
                                                      -----------    -----------
Note payable under a line of credit for
$2,000,000 ($22,500,000 in 1996) with a bank,
bearing interest at the prime rate (8.50% at
March 31, 1997) plus 3% in 1997  (8.25% at March
31, 1996) plus 3% in 1996; principal and interest
payable monthly; collateralized by land and
building located in Irving, Texas in 1997
(collateralized by receivables and inventory in
1996). (1)                                            $ 1,700,000    $22,500,000

Loan with a financial institution providing a
maximum line of credit of $25,000,000, bearing
interest at the Reference Rate (8.50% at March
31, 1997) plus 1.75% in 1997.  Interest payable
monthly; collateralized by receivables and
inventory.(2)                                          15,498,049              -

Notes to certain officers and shareholders of the
Company bearing interest at 10%, due in March
1998, as extended; collateralized by real estate
note (purchased by officers and shareholders from
an individual in December 1993).                          280,000        280,000

Other                                                   1,005,316        480,352
                                                      -----------    -----------
                                                       18,483,365     23,260,352

Less current portion                                    2,841,645     22,683,575

                                                      $15,641,720    $   576,777
                                                      ===========    ===========

(1) The loan agreement with the bank provides that borrowings are reduced monthly by the amount of required principal payments (approximately $25,000 per month) in terms of an agreement reached in June, 1997. The balance is payable on the loan expiration date of September 15, 1998.

(2) The loan agreement with the financial institution provides that borrowings under the line of credit are subject to limitations based on the borrowing base, as defined in the agreement, with a maximum facility of $25.0 million. The terms of the agreement require the Company to maintain specific current ratio levels, levels of debt to net worth, levels of tangible net worth and other financial covenants as defined in the loan agreement. At December 31, 1996 and March 31, 1997, the Company was not in compliance with all covenants. The financial institution has waived such defaults through March 31, 1997 and restated those covenants on a going forward basis. At March 31, 1997 the Company had $447,000 available in additional borrowing capacity under the loan agreement. The loan agreement has an extended expiration date of August 16, 2000.

F-17

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE H - NOTES PAYABLE AND LONG TERM DEBT - Continued

Future maturities of notes payable and long-term debt at March 31, 1997 are as follows:

Year ending March 31, 1998      $ 2,841,645

                      1999        1,720,255

                      2000        1,044,099

                      2001       12,698,020

                      2002           21,203

                Thereafter          158,143
                                -----------
                                $18,483,365
                                ===========

NOTE I - RELATED PARTY TRANSACTIONS

In 1993 certain officers of the Company purchased third party notes payable of $500,000 with interest payable at 10% per annum (see Note H). The officers assumed the same terms of the notes which matured on March 31, 1996. On March 29, 1996 the Company paid each of two shareholders $110,000 on the notes. The Company extended the maturity of the $100,000 note to March 31, 1998 and remaining notes of $180,000 to August 16, 2000.

The Company retains a director of the Company as a consultant on certain matters. Consulting fee expense recorded by the Company was $75,000 and $56,250 for the years ended March 31, 1997 and 1996.

NOTE J - EMPLOYEE STOCK OWNERSHIP PLAN AND 401(K) PLAN

The Company had an employee stock ownership plan which provided for discretionary contributions by the Company. During 1995, the Company amended and restated the plan to qualify as a 401(k) employee deferred compensation plan under the terms of which employees who have been employed for one year or more are entitled to contribute up to the lesser of $9,500 or 15% of their annual compensation. The Company may at its discretion contribute to the 401(k) plan. No Company contributions were made under either plan for any of the three years in the period ended March 31, 1997.

F-18

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE K - STOCK OPTIONS

1991 PLAN

The 1991 Stock Option Plan provides for options covering a total of 542,820 common shares, all of which were issued to the Chief Executive Officer and the President of the Company. The exercise price of the options granted must be at least 110% of the fair value of the common stock at date of grant. The remaining options were exercised on March 29, 1996. At March 31, 1997, there were no options outstanding or available for grant.

Following is a summary of option activity under the 1991 Plan:

                                              OPTION PRICE
                                          ---------------------
                                SHARES    PER SHARE    TOTAL
                               --------   ---------  ---------
Outstanding at March 31, 1995   292,120     $.74795  $ 218,492
  Granted                             -           -          -
  Canceled                            -           -          -
  Exercised                    (292,120)     .74795   (218,492)
                               --------   ---------  ---------
Outstanding at March 31, 1996         -           -          -
  Granted                             -           -          -
  Canceled                            -           -          -
  Exercised                           -           -          -
Outstanding at March 31, 1997         -           -          -
                               ========   =========  =========

1993 PLAN

The 1993 Stock Option Plan provides for options covering a total of 500,000 common shares to be issued to key employees and directors other than the Chief Executive Officer and the President. Under the Plan, incentive stock options (ISO's) and non-qualified stock options may be granted at prices no less than 100% and 50%, respectively, of the fair value of the Company's common stock. Options granted expire in ten years and will generally vest in annual installments. At March 31, 1997, options for 246,501 shares were available for grant.

F-19

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

Following is a summary of option activity under the 1993 Plan:

                                                  OPTION PRICE
                                          ----------------------------
                                SHARES       PER SHARE        TOTAL
                               --------   ---------------  -----------
Outstanding at March 31, 1994   262,666   $10.00 -  12.50  $ 2,958,537
  Granted                        50,000     9.00 -  13.00      560,000
  Canceled                      (46,000)   10.00 -  12.50     (550,000)
                               --------   ---------------  -----------
Outstanding at March 31, 1995   266,666     9.00 -  13.00    2,968,537
  Granted                       110,999     3.00 -   7.50      424,621
  Canceled                     (109,666)    3.63 -  12.50   (1,148,079)
                               --------   ---------------  -----------
Outstanding at March 31, 1996   267,999     3.00 -  13.00    2,245,079
  Granted                       110,000      .56 -   6.00      329,439
  Canceled                     (124,500)     .56 -  12.50     (644,877)
                               --------   ---------------  -----------
Outstanding at March 31, 1997   253,499   $  .56 -  13.00  $ 1,929,641
                               ========   ===============  ===========

All the options are considered compensatory. The outstanding stock options expire from November 1999 through January 2003.

The following summarizes information about compensatory options outstanding at March 31, 1997:

                             Options Outstanding                                  Options Exercisable
                                          Weighted Avg.
Range of Exercise                          Remaining          Weighted           Number       Weighted Avg.
Prices             Number Outstanding   Contractual Life  Avg. Exercise Price  Exercisable   Exercisable Price
-----------------  ------------------   ----------------  -------------------  -----------   -----------------
$0.56-$13.00           253,499               2.59 Years        $7.48              87,715         $10.30

The options granted in Fiscal 1997, 1996 and 1995 have exercise prices which approximate fair value and accordingly, no compensation cost has been recognized for compensatory stock options in the consolidated financial statements.

F-20

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - INCOME TAXES

Income tax expense (benefit) from continuing operations consists of the following:

                1997        1996         1995
              --------  ------------  ----------
Federal
  Current    $ 137,331  $ (2,031,628) $ 848,220
  Deferred    (245,709)      891,354   (497,804)
State           16,414         5,176          -
             ---------  ------------  ---------
             $ (91,964) $ (1,135,098) $ 350,416
             =========  ============  =========

The Company's effective income tax rate from continuing operations differed from the Federal statutory rate as follows:

                                              YEARS ENDED MARCH 31,
                                            -------------------------
                                             1997     1996     1995
                                            -------  -------  -------
U.S.  Federal statutory rate                 34.0 %   34.0 %    34.0%
Amortization of goodwill                      (.3)%    (.5)%     1.8%
Meals and entertainment                       (.1)%    (.1)%      .9%
Change in prior tax estimates                 2.3 %    (.7)%       -
Valuation allowance                         (35.4)%  (17.6)%       -
Other, net                                   (0.4)%    (.9)%      .4%
                                            -----    -----    ------
                                              0.1 %   14.2 %    37.1%
                                            =====    =====    ======

F-21

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

Following are the components of deferred tax assets and deferred tax liabilities:

                                                  MARCH 31,
                                          -----------------------
                                              1997         1996
                                          ------------  ---------
Net current deferred tax assets
  Inventories                             $   463,534   $ 753,188
  Allowance for doubtful accounts             179,129      96,110
  Inventory reserves                          376,171       3,208
  Accrued expenses                             67,895      42,500
  Provision for discontinued operation              -     136,000
  Less valuation allowance                 (1,086,729)   (964,697)
                                          -----------   ---------
                                          $         -   $  66,309
                                          ===========   =========
Noncurrent deferred tax assets
  Net operating loss                      $ 3,724,596   $ 725,917
  Less valuation allowance                 (3,677,150)   (725,917)
                                          -----------   ---------
                                          $    47,466   $       -
Noncurrent deferred tax liabilities
  Accumulated depreciation                $   (47,446)  $ (66,309)
Net Noncurrent deferred taxes             $         -   $ (66,309)
                                          ===========   =========

At March 31, 1997, the Company has net operating losses available to offset future taxable income of approximately $10,950,000 which begin expiring in 2011. The valuation allowance increased by $3,073,265 during the year ended March 31, 1997.

NOTE M - MAJOR CUSTOMERS

Customers accounting for 10% or more of total net sales from continuing operations are as follows:

YEAR ENDED MARCH 31,

                      PERCENTAGE
                      ----------
1997
    KMart                38%
    Wal-Mart             34%

1996
    KMart                31%
    Wal-Mart             25%

1995
    KMart                32%
    Wal-Mart             13%

F-22

BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED

NOTE N - COMMITMENTS AND CONTINGENCIES

The Company leases certain manufacturing and warehouse space; manufacturing and computer equipment; and other items. These leases are operating leases and have future minimum lease payments, excluding sublease income, as follows:

YEAR
----
1998          $1,125,757
1999             879,809
2000             330,887
2001              65,000
2002              65,000
Thereafter       672,000
              ----------
              $3,138,453
              ==========

Total lease expense for the years ended March 31, 1997, 1996, and 1995 was approximately $1,449,000, $1,552,000 and $793,000, respectively.

The Company, certain of its officers and directors, former officers, former independent auditor, and the underwriters of the Company's initial IPO are defendants in certain shareholder lawsuits. The Company believes the lawsuits are without merit. However, if the plaintiffs prevail, the lawsuits could have a material adverse effect on the Company. The Company is unable to estimate the range of loss, if any.

The Company filed a lawsuit against Denise Austin on December 2, 1996 in the 162nd District Court of Dallas County, Texas and was subsequently removed to the United States District Court for the Northern District of Texas, Dallas Division Case Number 3-97-CV-0246-G on February 6, 1997. Subsequently a suit was filed on December 30, 1996, by Denise Austin in the United States District Court, Eastern District of Virginia. The suit was filed for payment of royalties alleged to be due of approximately $655,000. The Company has accrued all amounts which it believes may be due.

In the normal course of business, the Company is involved in various litigation. Management believes that the aggregate effect of any liability arising from such items would not be material to the consolidated statements of operations or financial position at March 31, 1997.

F-23

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE

BOARD OF DIRECTORS AND STOCKHOLDERS
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

In connection with our audit of the consolidated financial statements of Bollinger Industries, Inc. and Subsidiaries referred to in our report dated June 16, 1997, we have also audited Schedule II for the years ended March 31, 1997, 1996 and 1995. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein.

King Griffin & Adamson PC

Dallas, Texas
June 16, 1997

F-24

Schedule II
BOLLINGER INDUSTRIES, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

YEARS ENDED MARCH 31, 1995, 1996 AND 1997

                                                           ADDITIONS
                                         -------------------------------------------
                                         Balance at      Charged to         Charged
                                         beginning       costs and          to other                          Balance at
         Description                      of year         expenses          accounts         Deductions       end of year
------------------------------           -----------  ----------------      --------         ----------       -----------
Year ended March 31, 1995
  Allowance for doubtful
    accounts                            $ 476,675        $ 793,931             $   -          $(350,391)       $  920,215
  Inventory obsolescence reserve          112,217          852,204                 -           (163,449)          800,972

Year ended March 31, 1996
  Allowance for doubtful
    accounts                            $ 920,215        $(311,514)            $   -          $(150,872)       $  457,829
  Inventory obsolescence reserve          800,972          365,794                 -                  -         1,166,766

Year ended March 31, 1997
  Allowance for doubtful
    accounts                            $ 457,829        $ 464,407             $   -          $ (77,924)       $  844,312

Inventory obsolescence reserve          1,166,766          585,900                 -           (192,896)        1,559,770

Note - Deductions represent uncollectible accounts or inventories written off.

F-25

EXHIBIT INDEX

       EXHIBITS
       --------
 3.1 - Certificate of Incorporation of the Company (incorporated by reference to
       Exhibit 3.1 to the Company's Form S-1 Registration Statement No.
       33-69708)

 3.2 - By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the
       Company's Form S-1 Registration Statement No. 33-69708)

 4.1 - Form of certificate representing shares of the Company's Common Stock
       (incorporated by reference to Exhibit 4.1 to the Company's Form S-1
       Registration Statement No.  33-69708)

10.1 - Bollinger Industries 1993 Stock Option Plan (incorporated by reference
       to Exhibit 10.1 to the Company's Form S-1 Registration Statement No.
       33-69708)

10.2 - Bollinger Industries Employee Stock Ownership Plan and Trust
       (incorporated by reference to Exhibit 10.2 to the Company's Form S-1
       Registration Statement No.  33-69708)

10.3 - Form of Indemnification Agreement with independent director
       (incorporated by reference to Exhibit 10.3 to the Company's Form S-1
       Registration Statement No. 33-69708)

10.4 - Bollinger Industries, Inc. 1991 Incentive Stock Option Plan
       (incorporated by reference to Exhibit 10.4 to the Company's Form S-1
       Registration Statement No.  33-69708)

10.5 - Lease Agreement dated April 4, 1991, between William A. McCarty, Jr.,
       and Elinor F. McCarty and Bollinger Sports, Inc., formerly known as
       Bollinger Industries, Inc. ("Bollinger-Texas")(incorporated by
       reference to Exhibit 10.8 to the Company's Form S-1 Registration
       Statement No. 33-69708)

10.6 - Assignment and Assumption Agreement dated as of October 1, 1993,
       between Bollinger-Texas as Assignor and Bollinger Industries, L.P., as
       Assignee with respect to such lease (incorporated by reference to
       Exhibit 10.8.1 to the Company's Form S-1 Registration Statement No.
       33-69708)

10.7 - Lease Agreement dated August 30, 1992, between Reba McPherson,
       individually and as Trustee of the Reba McPherson Trust u/w/o Harold
       Lynn McPherson, and Tarbox, Inc., as extended by an Agreement dated
       August 9, 1993 (incorporated by reference to Exhibit 10.9 to the
       Company's Form S-1 Registration Statement No. 33-69708)

II-1


        EXHIBITS
        --------
10.8  - Assignment and Assumption Agreement dated as of October 1, 1993,
        between Tarbox, Inc., as Assignor and Bollinger Industries, L.P., as
        Assignee with respect to such lease (incorporated by reference to
        Exhibit 10.9.1 to the Company's Form S-1 Registration Statement No.
        33-69708)

10.9  - Standard Industrial Lease dated March 17, 1993, between National Life
        Insurance Company and Bollinger-Texas (incorporated by reference to
        Exhibit 10.10 to the Company's Form S-1 Registration Statement No.
        33-69708)

10.10 - Assignment and Assumption Agreement dated as of October 1, 1993,
        between Bollinger-Texas as Assignor and Bollinger Industries, L.P., as
        Assignee with respect to such lease (incorporated by reference to
        Exhibit 10.10.1 to the Company's Form S-1 Registration Statement No.
        33-69708)

10.11 - $500,000 Real Estate Lien Note dated March 18, 1993, in favor of Sid
        Reisman and executed by Bollinger-Texas, as modified by a Renewal,
        Extension, and Modification Agreement dated as of April 6, 1993, and
        subsequently assigned to Glenn, Bobby and Dell Bollinger (incorporated
        by reference to Exhibit 10.10 to the Company's Form S-1 Registration
        Statement No. 33-69708)

10.12 - Asset Purchase and Sale Agreement dated as of September 13, 1993, by
        and between California Gym Equipment Company, S. G. Equipment, Inc.
        and, for limited purposes, Bollinger-Texas and Sherman Grider
        (incorporated by reference to Exhibit 10.13 to the Company's Form S-1
        Registration Statement No.  33-69708)

10.13 - Standard Sublease dated as of September 13, 1993, between California
        Gym Equipment Company and S. G. Equipment, Inc., together with the
        Industrial Real Estate Lease dated June 1, 1992, between New England
        Mutual Life Insurance Company and Bollinger-Texas attached thereto
        (incorporated by reference to Exhibit 10.14 to the Company's Form S-1
        Registration Statement No.  33-69708)

10.14 - Assignment and Assumption Agreement dated as of September 1, 1993,
        between Bollinger-Texas and California Gym Equipment Company with
        respect to Industrial Real Estate Lease dated June 1, 1992
        (incorporated by reference to Exhibit 10.15 to the Company's Form S-1
        Registration Statement No.  33-69708)

10.15 - Letter agreement dated May 19, 1992, between Bollinger-Texas, Denise
        Austin and Jeff Austin (incorporated by reference to Exhibit 10.16 to
        the Company's Form S-1 Registration Statement No.  33-69708)

II-2


        EXHIBITS
        --------
10.16 - Letter agreement dated April 13, 1994, between Bollinger Industries,
        L.P., Denise Austin and Jeff Austin (incorporated by reference to
        Exhibit 10.16 to the Company's form 10-K for the fiscal year ended
        March 31, 1994)

10.17 - Endorsement Agreement dated September 1, 1993, between Bollinger-Texas
        and Nolan Ryan (incorporated by reference to Exhibit 10.17 to the
        Company's form 10-K for the fiscal year ended March 31, 1994)

10.18 - Loan Agreement dated as of January 4, 1994, between Bollinger
        Industries, L.P., the Company, and First Interstate (incorporated by
        reference to Exhibit 10.18 to the Company's form 10-K for the fiscal
        year ended March 31, 1994)

10.19 - Standard Office/Warehouse Lease dated May 11, 1994, between Fountain
        Parkway, Ltd., and Bollinger Industries, L.P. (incorporated by
        reference to Exhibit 10.19 to the Company's form 10-K for the fiscal
        year ended March 31, 1994)

10.20 - Lease dated December 21, 1990, between Americus/Sumter Payroll
        Development Authority and N.B.F., Inc.  and R.  Wayne Rich
        (incorporated by reference to Exhibit 10.20 to the Company's form 10-K
        for the fiscal year ended March 31, 1994)

10.21 - Assignment and Assumption of Lease dated May 1, 1994, between
        Americus/Sumter Payroll Development Authority, NBF, Inc., a Florida
        corporation, and NBF, Inc., a Georgia corporation (incorporated by
        reference to Exhibit 10.21 to the Company's form 10-K for the fiscal
        year ended March 31, 1994)

10.22 - Amendment to Lease between Americus-Sumter Payroll Development
        Authority and NBF, Inc., a Georgia corporation and R. Wayne Rich
        amending the lease dated December 21, 1990 reflected at exhibit No.
        10.20 above (incorporated by reference to Exhibit 10.2 to the Company's
        form 10-Q for the quarter ended June 30, 1994)

10.23 - Asset Purchase Agreement dated May 24, 1994, and effective as of May 1,
        1994, between NBF, Inc., a Florida corporation, and NBF, Inc., a
        Georgia corporation (incorporated by reference to Exhibit 10.3 to the
        Company's form 10-Q for the quarter ended June 30, 1994)

10.24 - First Amendment to Loan Agreement dated as of June 22, 1994, between
        Bollinger Industries, L.P., the Registrant, Bollinger Holding Corp.,
        NBF and First Interstate Bank of Texas, N.A.  (incorporated by
        reference to Exhibit 10.5 to the Company's form 10-Q for the quarter
        ended June 30, 1994)

II-3


        EXHIBITS
        --------
10.25 - Loan and Security Agreement dated September 9, 1994, between Bollinger
        Industries, L.P. and NationsBank of Texas, N.A. (incorporated by
        reference to Exhibit 10.1 to the Company's form 10-Q for the quarter
        ended September 30, 1994)

10.26 - First Amendment to Loan and Security Agreement dated September 9, 1994,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.2 to the Company's form 10-Q
        for the quarter ended September 30, 1994)

10.27 - Second Amendment to Loan and Security Agreement dated December 8, 1994,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.1 to the Company's form 10-Q
        for the quarter ended December 31, 1994)

10.28 - Lease Agreement dated November 16, 1994, between John Wilkerson,
        individually and Bollinger Industries (incorporated by reference to
        Exhibit 10.2 to the Company's form 10-Q for the quarter ended December
        31, 1994)

10.29 - Modification and Ratification of Lease dated November 1, 1994, between
        Fountain Parkway, Ltd.  and Bollinger Industries, L.P. (incorporated
        by reference to Exhibit 10.3 to the Company's form 10-Q for the quarter
        ended December 31, 1994)

10.30 - Third Amendment to Loan and Security Agreement dated March 3, 1995
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.30 to the Company's Form 10-K
        for the fiscal year ended March 31,1995)

10.31 - Fourth Amendment to Loan and Security Agreement dated May 15, 1995
        between Bollinger Industries, L.P.  and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.31 to the Company's Form 10-K
        for the fiscal year ended March 31, 1995)

10.32 - Modification and Ratification of Lease dated February 22, 1995, between
        Fountain Parkway, Ltd.  and Bollinger Industries, L.P. (incorporated by
        reference to Exhibit 10.32 to the Company's Form 10-K for the fiscal
        year ended March 31, 1995)

10.33 - Fifth Amendment to Loan and Security Agreement dated September 9, 1995,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q
        for the quarter ended December 31, 1995)

II-4


        EXHIBITS
        --------
10.34 - Sixth Amendment to Loan and Security Agreement dated December 29, 1995,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q
        for the quarter ended December 31, 1995)

10.35 - Seventh Amendment to Loan and Security Agreement dated March 8, 1996,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.35 to the Company's Form 10K
        for the year ended March 31, 1996)

10.36 - Eighth Amendment to Loan and Security Agreement dated May 8, 1996,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.36 to the Company's Form 10K
        for the year ended March 31, 1996)

10.37 - Deed of Trust, Assignment, Security Agreement and Financing Statement
        dated May 8, 1996, between Bollinger Industries, L.P. and NationsBank
        of Texas, N.A. (incorporated by reference to Exhibit 10.37 to the
        Company's Form 10K for the year ended March 31, 1996)

10.38 - Ninth Amendment to Loan and Security Agreement dated May 17, 1996,
        between Bollinger Industries, L.P. and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.38 to the Company's Form 10K
        for the year ended March 31, 1996)

10.39 - Amended and Restated Promissory Note dated March 29, 1996, between
        Bollinger Industries, L.P., and Glenn D. Bollinger (incorporated by
        reference to Exhibit 10.39 to the Company's Form 10K for the year
        ended March 31, 1996)

10.40 - Amended and Restated Promissory Note dated March 29, 1996, between
        Bollinger Industries, L.P., and Bobby D. Bollinger (incorporated by
        reference to Exhibit 10.40 to the Company's Form 10K for the year
        ended March 31, 1996)

10.41 - Amended and Restated Promissory Note dated March 29, 1996, between
        Bollinger Industries, L.P., and Dell Bollinger (incorporated by
        reference to Exhibit 10.41 to the Company's Form 10K for the year
        ended March 31, 1996)

10.42 - Second Amendment to standard industrial lease dated January 31, 1996,
        between National Life Insurance Company and Bollinger Industries, L.P.,
        as assignee (incorporated by reference to Exhibit 10.42 to the Company's
        Form 10K for the year ended March 31, 1996)

10.43 - U.S. Trademark License Agreement between International Apparel
        Marketing Corp. dba Nautilus Wear International and Bollinger
        Industries, Inc. dated May 1, 1995 (incorporated by reference to
        Exhibit 10.43 to the Company's Form 10K for the year ended March 31,
        1996)

10.44 - Amendment to U.S. Trademark License Agreement between International
        Apparel Marketing Corp. and Bollinger Industries, Inc. dated March 1,
        1996 (incorporated by reference to Exhibit 10.44 to the Company's
        Form 10K for the year ended March 31, 1996)

II-5


        EXHIBITS
        --------
10.45 - Intercreditor and Subordination Agreement dated May 8, 1996, between
        NationsBank of Texas, N.A. and Glenn D. Bollinger, Bobby D. Bollinger,
        and Dell Bollinger (incorporated by reference to Exhibit 10.45 to the
        Company's Form 10K for the year ended March 31, 1996)

10.46 -  Eleventh Amendment to Loan and Security Agreement dated July 8, 1996,
        between Bollinger Industries, L.P., and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.46 to the Company's form 10-Q
        for the quarter ended September 29, 1996)

10.47 - Loan and Security Agreement dated August 16, 1996 between Bollinger
        Industries, Inc., Bollinger Industries, L.P. and NBF, Inc. and
        Foothill Capital Corporation and related schedules. (incorporated by
        reference to Exhibit 10.47 to the Company's form 10-Q for the quarter
        ended September 29, 1996)

10.48 - Collateral Assignment of Patents and Trademarks dated August 16, 1996
        between Bollinger Industries, L.P. and Foothill Capital Corporation.
        (incorporated by reference to Exhibit 10.48 to the Company's form 10-Q
        for the quarter ended September 29, 1996)

10.49 - Subordination Agreement dated August 16, 1996 between Glenn D.
        Bollinger, Bobby D. Bollinger, Dell Bollinger and Foothill Capital
        Corporation. (incorporated by reference to Exhibit 10.49 to the
        Company's form 10-Q for the quarter ended September 29, 1996)

10.50 - Deed of Trust dated August 16, 1996 executed by Bollinger Industries,
        L.P. (incorporated by reference to Exhibit 10.50 to the Company's form
        10-Q for the quarter ended September 29, 1996)

10.51 - Asset Purchase Agreement dated August 29, 1996 between Bollinger
        Industries, L.P., and Rehab Plus Therapeutic Products, Inc.
        (incorporated by reference to Exhibit 10.51 to the Company's form 10-Q
        for the quarter ended September 29, 1996)

10.52 - Tenth Amendment to Loan and Security Agreement dated July 8,1996,
        between Bollinger Industries, L.P., and NationsBank of Texas, N.A.
        (incorporated by reference to Exhibit 10.1 to the Company's form 10-Q
        for the quarter ended June 30, 1996)

10.53 - Asset Purchase Agreement dated August 29, 1996 between Bollinger
        Industries, L.P., and Rehab Plus Therapeutic Products, Inc.
        (incorporated by reference to Exhibit 2.01 to the Company's form 10-Q
        for the quarter ended September 29, 1996)

10.54 - Asset Purchase Agreement dated November 7, 1996, between Bollinger
        Industries, L.P., and SST Acquisition Corporation (incorporated by
        reference to Exhibit 2.01 to the Company's form 10-Q for the quarter
        ended December 29,1996)

10.55 - First Amendment to Loan and Security Agreement dated August 16, 1996,
        between Bollinger Industries, Inc., Bollinger Industries, L.P. and NBF,
        Inc. and Foothill Capital Corporation.

10.56 - Second Amendment to Loan and Security Agreement dated August 16, 1996,
        between Bollinger Industries, Inc., Bollinger Industries, L.P. and NBF,
        Inc. and Foothill Capital Corporation.

10.57 - Lease Agreement dated December 1, 1996 between Southwest Properties
        Group, Inc. and Bollinger Industries, L.P.

11.1  - Statement re Computation of Per Share Data

21.1  - List of the Company's subsidiaries (incorporated by reference to
        Exhibit 21.1 to the Company's Form 10-K for the fiscal year ended
        March 31,  1995)

27.1  - Financial Data Schedule

II-6


EXHIBIT 10.55

AMENDMENT NO. ONE TO THE LOAN
AND SECURITY AGREEMENT
BOLLINGER INDUSTRIES, INC., BOLLINGER INDUSTRIES, L.P. and
NBF, INC.

This Amendment No. One To The Loan And Security Agreement (the "Amendment") is entered into as of the 30th day of January, 1997, by and between BOLLINGER INDUSTRIES, INC., a Delaware corporation ("Inc."), BOLLINGER INDUSTRIES, L.P., a Texas limited partnership ("L.P.") and NBF, INC., a Georgia corporation ("NBF"), jointly and severally, (collectively "Borrower"), with their chief executive office located at 222 West Airport Freeway, Irving, Texas 75062 and FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, in light of the following facts:

FACTS

FACT ONE: Foothill and Borrower have previously entered into that certain Loan And Security Agreement, dated August 16, 1996 (the "Agreement").

FACT TWO: Foothill and Borrower desire to amend the Agreement as provided herein. Terms defined in the Agreement which are used herein shall have the same meanings as set forth in the Agreement, unless otherwise specified.

NOW, THEREFORE, Foothill and Borrower hereby modify and amend the Agreement as follows:

1. Section 1.1(g) of the Agreement is hereby amended in its entirety to read as follows: "(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts (or, in the case of Service Merchandise and Dayton-Hudson, fifteen percent (15%)), to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, however, in the case of Wal-Mart or K-Mart, such percentage shall be seventy-five percent (75%) as to both combined from January 15, 1997 through March 31, 1997; and effective April 1, 1997, said percentage shall be:

(i)  From March 1 - September 30       (i)  thirty percent (30%)
     of each year                           as to each

(ii) From October 1 - February 28      (ii) seventy percent
     of each year                           (70%) as to both combined."

2. The last sentence of Section 2.1(a) of the Agreement is hereby amended in its entirety to read as follows: "The advance rate of forty-seven percent (47%)

1

against Eligible Inventory and Inventory In-transit shall be reduced by one percent (1%) on April 1, 1997 and by one percent (1%) on May 1, 1997."

3. Effective February 14, 1997, Section 5.6 of the Agreement is hereby amended to reflect the new Chief Executive Office of Borrower to read as follows:

"602 Fountain Parkway
Grand Prairie, Texas 75050"

4. Foothill shall charge Borrower's loan account an accommodation fee in the amount of Fifteen Thousand Dollars ($15,000.00) and a documentation fee in the amount of Eight Hundred Fifty Dollars ($850.00). Said fee shall be fully-earned, non-refundable, and due and payable on the date Borrower's loan account is charged.

5. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as supplemented, amended and modified, shall remain in full force and effect.

IN WITNESS WHEREOF, Borrower and Foothill have executed this Amendment as of the day and year first written above.

FOOTHILL CAPITAL CORPORATION             BOLLINGER INDUSTRIES, L.P.

                                         By: Bollinger Operating Corp, its
                                             General Partner

By   /s/ LISA M. GONZALES                By  /s/ GLENN D. BOLLINGER
     -----------------------------           ---------------------------------
     Lisa M. Gonzales                        Glenn D. Bollinger

Its  Assistant Vice President            Its
     -----------------------------           ---------------------------------


                                         BOLLINGER INDUSTRIES, INC.

                                         By  /s/ GLENN D. BOLLINGER
                                             ---------------------------------
                                             Glenn D. Bollinger

                                         Its
                                             ---------------------------------


                                         NBF, INC.

                                         By  /s/ GLENN D. BOLLINGER
                                             ---------------------------------
                                             Glenn D. Bollinger

                                         Its
                                             ---------------------------------

2

REAFFIRMATION OF GUARANTORS

By its acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms its Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

BOLLINGER OPERATING CORP.,
a Nevada corporation

By  /s/ BOBBY D. BOLLINGER
    -----------------------------------
    Bobby D. Bollinger

Its

By its acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms its Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

BOLLINGER HOLDING CORP.,
a Delaware corporation

By  /s/ BOBBY D. BOLLINGER
    -----------------------------------
    Bobby D. Bollinger

Its

By its acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms its Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

BOLLINGER SPORT, INC.,
a Texas corporation

By  /s/ BOBBY D. BOLLINGER
    -----------------------------------
    Bobby D. Bollinger

Its

3

By its acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms its Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

C.G. PRODUCTS, INC.,
a California corporation

By  /s/ GLENN D. BOLLINGER
    -----------------------------------
    Glenn D. Bollinger

Its

By its acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms its Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

TARBOX, INC.,
a Texas corporation

By  /s/ GLENN D. BOLLINGER
    -----------------------------------
    Glenn D. Bollinger

Its

By his acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms his Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

/s/ GLENN D. BOLLINGER
-----------------------------------
Glenn D. Bollinger,
an individual

By his acceptance below this ___ day of February, 1997, the undersigned guarantor hereby reaffirms his Continuing Guaranty dated August 16, 1996 and consents to the above-stated terms.

/s/ BOBBY D. BOLLINGER
-----------------------------------
Bobby D. Bollinger,
an individual

4

EXHIBIT 10.56

AMENDMENT NO. TWO TO THE LOAN
AND SECURITY AGREEMENT
BOLLINGER INDUSTRIES. INC., BOLLINGER INDUSTRIES. L.P.
AND NBF. INC.

THIS AMENDMENT NO. TWO TO THE LOAN AND SECURITY AGREEMENT (the "Amendment"), dated as of May __, 1997, is entered into between FOOTHILL CAPITAL CORPORATION, a California Corporation ("Foothill"), with a place of business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, and Bollinger Industries, Inc., a Delaware corporation ("Inc."), Bollinger Industries, L.P., a Texas limited partnership ("L.P."), and NBF, Inc., a Georgia corporation ("NBF"), jointly and severally (collectively, "Borrower"), with their chief executive office located at 602 Fountain Parkway, Grand Prairie, Texas 75050.

RECITALS

A. Borrower and Foothill have previously entered into that certain Loan and Security Agreement dated as of August 16, 1996, as amended by Amendment No. One dated as of January 30, 1997 (the "Loan Agreement"), pursuant to which Foothill has made certain loans and financial accommodations available to Borrower. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.

B. Due to developments in Borrower's business, Borrower has requested that the Loan Agreement be amended in certain respects.

C. Foothill is willing to amend the Loan Agreement under the terms and conditions set forth in this Amendment. Borrower is entering into this Amendment with the understanding and agreement that, except as specifically provided herein, none of Foothill's rights or remedies as set forth in the Loan Agreement is being waived or modified by the terms of this Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follow:

1. Modification of Concentrations. The definition of "Eligible Accounts" contained in Section 1.1 of the Loan Agreement is amended at Subsection (g) to read as follows:


"(g) Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed ten percent (10%) of all Eligible Accounts (or, in the case of Service Merchandise and Dayton-Hudson, fifteen percent (15%), to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, however, in the case of Wal-Mart or K-Mart, such percentage shall be seventy-five percent (75%) as to both combined from January 15, 1997 through May 31, 1997, and effective June 1, 1997, such percentage shall be:

(i) From March - September 30 (i) thirty percent (30%) of each year thereafter as to each

(ii) From October 1 - February 28 (ii) seventy percent (70%) of each year thereafter as to both combined"

2. Additional Advances. A new Section 2.1(d) is added to the Loan Agreement to read as follows:

"(d) In addition to the amounts available under Section 2.1(a), subject to the terms and conditions of this Agreement, Foothill agrees to make revolving advances to Borrower in an amount at any one time outstanding not to exceed $1,000,000 between the date of this Amendment and May 31, 1997.

3. Change in Clearance Days. Section 2.5 of the Loan Agreement is amended so that every reference to "two (2) Business Days of clearance," "two
(2) Business Day clearance charge: and the like is changed to substitute "two and one-half (2.5)" in place of "two (2)."

4. Change in Fees.

4.1 Section 2.7(d) of the Loan Agreement is amended to change the reference to Foothill's customary appraisal fee which currently reads "One Thousand Dollars ($1,500) per day per appraiser, "to read "One Thousand Five Hundred Dollars ($1,500) per day per appraiser," and to change the reference which currently reads "One Thousand Hundred Dollars ($1,000) per year for its loan documentation review" to read "One Thousand Dollars ($1,000) per year for its loan documentation review."

4.2 Section 2.7(e) of the Loan Agreement is amended to read in its entirety as follows:

"(a) Servicing Fee. From the date of this Amendment, on the first day of each month during the term of this Agreement, and thereafter so long as any Obligations are outstanding, a servicing fee in an amount equal to Seven Thousand Dollars ($7,000) per month; provided, however, that such fee will be reduced to Five Thousand Dollars ($5,000) per month if Borrower's operating income is at least Two Million Seven Hundred Thousand Dollars

2

($2,700,000) for the fiscal year ended March 31, 1998 as reflected on the audited financial statements for the year."

4.3 Section 2.7 of the Loan Agreement is amended to add the following subsections at the end:

"(h) Overadvance Fee. A fee for the extension of credit described in the new Section 2.1(b) in the amount of $20,000 payable in four equal monthly installments of $5,000 each beginning June 1, 1997.

"(i) Waiver and Amendment Fee. A fee in the amount of $20,000 payable in four equal monthly installments of $5,000 each beginning June 1, 1997."

5. Extension of Term. The first sentence of Section 3.3 of the Loan Agreement is amended to read, "This Agreement shall become effective upon the execution and delivery hereof by Borrower and Foothill and shall continue in full force and effect until August 20, 2000 (the "Renewal Date"), unless sooner terminated pursuant to the terms hereof."

6. Modification of Early Termination Premium. The chart presented in Section 3.5 of the Loan Agreement is amended to read as follows:

Period of Time During Which
Termination Occurs                  Percent of Maximum Amount
---------------------------         -------------------------
Prior to August 20, 1997                        4.0%
August 21, 1997 to August 20, 1998              4.0%
August 21, 1998 to August 20, 1999              1.5%
August 21, 1999 to August 20, 2000              1.0%

7. Modification of Certain Financial covenants: Waiver.

7.1 Sections 6.13(b) an 6.13(c) are amended to read in their entirety as follows:

"(b) Total Liabilities to Tangible Net Worth Ratio. A ratio of Borrower's total liabilities divided by Tangible Net Worth measured on a fiscal quarter-end basis of not more than:

Date of Fiscal Quarter-End               Ratio
--------------------------               -----
 9/30/96                                4.75:1.0
12/31/96                                4.50:1.0
 3/31/97                                4.00:1.0
 6/30/97                               13.50:1.0
 9/30/97                               15.00:1.0
12/31/97                               10.50:1.0

3

 3/31/98                               10.50:1.0
 6/30/98                                9.50:1.0
 9/30/98                                9.50:1.0
12/31/98 and thereafter                 9.00:1.0

"(c) Tangible Net Worth. Tangible Net Worth measured on a fiscal quarter-end basis of at least:

Date of Fiscal Quarter-End              Tangible Net Worth
--------------------------              ------------------
 9/30/96                                $ 9,300,000
12/31/96                                $10,250,000
 3/31/97                                $10,250,000
 6/30/97                                $ 2,600,000
 9/30/97                                $ 2,300,000
12/31/97                                $ 3,300,000
 3/31/98                                $ 3,300,000
 6/30/98                                $ 3,750,000
 9/30/98                                $ 3,750,000
12/31/98 (and thereafter)               $ 4,000,000

7.2 Foothill hereby waives the existing violations of the covenants contained in Sections 6.13(b) and 6.13(c) for the third and fourth fiscal quarters of 1997. This waiver is limited to its particular circumstances and shall not constitute a waiver of any other provision of the Loan Agreement or a future waiver of Section 6.13(b), Section 6.13(c) or any other provision of the Loan Agreement.

8. Effectiveness of this Amendment. Foothill must have received the following items, in form and content acceptable to Foothill, before this Amendment is effective and before Foothill is required to extend any credit to Borrower as provided for by this Amendment. The date on which all of the following conditions have been satisfied is the "Closing Date".

(a) Amendment. This Amendment fully executed in a sufficient number of counterparts for distribution to Foothill and Borrower.

(b) Authorizations. Evidence that the execution, delivery and performance by Borrower and each guarantor or subordinating creditor of this Amendment and any instrument or agreement required under this Amendment have been duly authorized.

(c) Representations and Warranties. The Representations and Warranties set forth in the Loan Agreement and this Amendment must be true and correct.

(d) Consent. The Consent appended hereto (the "Consent") executed by each of the Guarantors.

4

(e) Other Required Documentation. All other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered or executed or recorded and shall be in form and substance satisfactory to Foothill.

9. Choice of Law. The validity of this Amendment, its construction, interpretation and enforcement, the rights of the parties hereunder, shall be determined under, governed by, and construed in accordance with the internal laws of the State of California governing contracts only to be performed in that State.

10. Counterparts. This Amendment may be executed in any number of counterparts and by different parties and separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument.

11. Due Execution. The execution, delivery and performance of this Amendment are within the power of Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding on Borrower.

12. Effect of Amendment. Except as set forth expressly herein, all terms of the Loan Agreement and the other Loan Documents shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of Borrower to Foothill. To the extent that any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Loan Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified and amended accordingly to reflect the terms and conditions of the Loan Agreement as modified and amended hereby.

13. Ratification. Borrower hereby restates, ratifies and reaffirms each and every term and condition set forth in the Loan Agreement, as amended hereby, and the Loan Documents effective as of the date hereof.

14. Estoppel. To induce Foothill to enter this Amendment and to continue to make advances to Borrower under the Loan Agreement, Borrower hereby acknowledges and agrees that, after giving effect to this Amendment, as of the date hereof, there exists no Event of Default and no right of offset, defense, counterclaim or objection in favor of Borrower as against Foothill with respect to the Obligations.

5

EXHIBIT 10.57

STANDARD OFFICE SHOWROOM/WAREHOUSE COMMERCIAL LEASE

ARTICLE 1.00 BASIC LEASE TERMS

1.01 PARTIES. This lease agreement ("Lease") is entered into by and between the following Lessor and Lessee:

Fountain Parkway, Ltd. ("Lessor") Bollinger Industries, L.P. ("Lessee")

1.02 LEASED PREMISES. In consideration of the rents, terms, provisions and covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the following described premises ("leased premises"):

300,000 (Approximate sq. ft.) at

602 Fountain Parkway
Grand Prairie, Texas 75050

1.03 TERM. Subject to and upon the conditions set forth herein, the term of this Lease shall commence on December 1, 1996 (the "commencement date") and shall terminate May 1, 2004 (89) months thereafter.

1.04 SECURITY DEPOSIT. Security deposit is $46,500.

1.05 ADDRESSES.

         Lessor's Address:                             Lessee's Address:

         Fountain Parkway Ltd.                         602 Fountain Parkway
         C/O Southwest Properties Group, Inc.          Grand Prairie, TX 75050
         701 Commerce St., Suite 200
         Dallas, TX 75202

         1.06    PERMITTED USE: Warehouse Storage, Assembly, and Light
Manufacturing.

ARTICLE 2.00 RENT

2.01 BASE RENT. Lessee agrees to pay monthly as base rent during the term of this Lease the sum of money set forth this section of the Lease, which amount shall be payable to Lessor at the address shown above. One monthly installment of rent shall be due and payable on the date of execution of this Lease by Lessee for the first month's rent and a like monthly installment shall be due and payable on or before the first day of each calendar month succeeding the commencement date or completion date during the term of this Lease; provided, if the commencement date or the completion date should be a date other than the first day of a calendar month, the monthly rental set forth above shall be prorated to the end of that calendar month, and all succeeding installments of rent shall be payable on or before the first day of each succeeding calendar month during the term of this Lease. Lessee shall pay, as additional rent, all other sums due under this Lease.

BASE RENT. Lessee agrees to pay monthly as base rent during the term of this lease the following sums of money:

Months  1-12:  $ 35,593.11  per month or   $1.42   per square foot per year
Months 13-29:  $ 39,760.31  per month or   $1.59   per square foot per year
Months 30-41:  $ 47,500.00  per month or   $1.90   per square foot per year
Months 42-53:  $ 50,000.00  per month or   $2.00   per square foot per year
Months 54-65:  $ 52,500.00  per month or   $2.10   per square foot per year
Months 66-77:  $ 55,000.00  per month or   $2.20   per square foot per year
Months 78-89:  $ 57,500.00  per month or   $2.30   per square foot per year

2.02 LESSEE'S PROPORTIONATE SHARE. For the purpose of this lease, the total area of the Building is 300,000 rentable square feet. The relationship between the area of the demised premises and the area of the Building as aforesaid is 100 percent which percentage should be used throughout this lease in determining the portions of additional rent related thereto.

2.03 OPERATING EXPENSES. In the event Lessor's operating expenses for the building and/or project of which the leased premises are a part shall, in any calendar year during the term of this Lease, exceed the sum of the actual 1995 Base Year Operating Expenses (the "Base Year Expense Stop"), Lessee agrees to pay as additional rent Lessee's pro rata share of such excess operating expenses. Lessor may invoice Lessee monthly for Lessee's pro rata share of the estimated operating expenses for each calendar year, which amount shall be adjusted each year based upon anticipated operating expenses. Within nine months following the close of each calendar year, Lessor shall provide Lessee an accounting showing in reasonable detail all computations of additional rent due under this section. In the event the accounting shows that the total of the monthly payments made by the Lessee exceeds the amount of additional rent due by Lessee under this section, the accounting shall be accompanied by a refund. In the event the accounting shows that the total of the monthly payments made by Lessee is less than the amount of additional rent due by Lessee under this section, the account shall be accompanied by an invoice for the additional rent. Notwithstanding any other provision in this Lease, during the year in which the Lease terminates, Lessor, prior to the termination date, shall have the option to invoice Lessee for Lessee's pro rata share of the excess operating expenses based upon the previous year's operating expenses. If this Lease shall terminate on a day other than the last day of a calendar year, the amount of any additional rent payable by Lessee applicable to the year in which such termination shall occur shall be prorated on the ratio that the number of days from the commencement of the calendar year to and including the termination date and its relationship to three hundred sixty-five
(365) days. Lessee shall have the right, at its own expense and within a reasonable time, to audit Lessor's books relevant to the additional rent payable under this section. Lessee agrees to pay any additional rent due under this section within ten (10) days following receipt of the invoice or accounting showing additional rent due.

2.04 DEFINITION OF OPERATING EXPENSES. The term "operating expenses" includes all real property taxes and installments of special assessments, including dues and assessments by means of deed restrictions and/or owners' associations which accrue against the building of which the leased premises are a part during the term of this lease; and all insurance premiums Lessor is required to pay or deems necessary to pay, including public liability insurance, with respect to the building. The term operating expenses does not include the following: repairs; restoration or other work occasioned by fire, wind, the elements or other casualty; income and franchise taxes of Lessor; expenses incurred in leasing to or procuring of Lessees, leasing commissions, advertising expenses and expenses for the renovating of space for new lessees; interest or principle payments on any mortgage or other indebtedness of Lessor; compensation paid to any employee of

Page 1 of 8

Lessor above the grade of property manager; any depreciation allowance or expense; or operating expenses which are the responsibility of Lessee.

2.05 LATE PAYMENT CHARGE. Other remedies for nonpayment notwithstanding, if the monthly rental payment is not received by Lessor on or before the fifth (5th) day of the month for which the rent is due, or if any other payment due Lessor by Lessee is not received by Lessor on or before the fifth (5th) day of the month for which such payment is due, a late payment charge of ten percent (10%) of such past due amount shall become due and payable in addition to such amounts owed under this Lease.

2.06 INCREASE IN INSURANCE PREMIUMS. If an increase in any insurance premium paid by Lessor for the building is caused by Lessee's use of the leased premises in a manner other than as set forth in section 1.06, or if Lessee vacates the leased premises and causes an increase in such premiums, then Lessee shall pay as additional rent the amount of such increase to Lessor.

2.07 SECURITY DEPOSIT. The security deposit set forth above shall be held by Lessor for the performance of Lessee's covenants and obligations under this Lease, it being expressly understood that the deposit shall not be considered an advance payment of rental or a measure of Lessor's damage in case of default by Lessee. Upon the occurrence of any event of default by Lessee or breach by Lessee of Lessee's covenants under this Lease, Lessor may, from time to time, without prejudice to any other remedy, use the security deposit to the extent necessary to make good any arrears of rent, or to repair any damage or injury, or pay any expense or liability incurred by Lessor as a result of the event of default or breach of covenant, and any remaining balance of the security deposit shall be returned by Lessor to Lessee upon termination of this Lease. If any portion of the security deposit is so used or applied, Lessee shall upon ten (10) days written notice from Lessor, deposit with Lessor by cash or cashier's check an amount sufficient to restore the security deposit to its original amount.

2.08 HOLDING OVER. In the event that Lessee does not vacate the leased premises upon the expiration or termination of this Lease, Lessee shall be a lessee at will for the holdover period and all of the terms and provisions of this Lease shall be applicable during that period, except that Lessee shall pay Lessor as base rental for the period of such holdover an amount equal to two times the base rent which would have been payable by Lessee had the holdover period been a part of the original term of this Lease. Lessee agrees to vacate and deliver the leased premises to Lessor upon Lessee's receipt of notice from Lessor to vacate. The rental payable during the holdover period shall be payable to Lessor on demand. No holding over by Lessee, whether with or without the consent of Lessor, shall operate to extend the term of this Lease. Lessee shall not, without Lessor's prior written consent holdover after one hundred twenty (120) days from the expiration of this lease.

ARTICLE 3.00 OCCUPANCY AND USE

3.01 USE. Lessee warrants and represents to Lessor that the leased premises shall be used and occupied only for the purpose as set forth in section 1.06. Lessee shall occupy the leased premises, conduct its business and control its agents, employees, invitees and visitors in such a manner as is lawful, reputable and will not create a nuisance. Lessee shall not permit any operation which emits any odor or matter which intrudes into other portions of the building, use any apparatus or machine which makes undue noise or causes vibration in any portion of the building or otherwise interfere with, annoy or disturb any other lessee in its normal business operations or Lessor in its management of the building. Lessee shall neither permit any waste on the leased premises nor allow the leased premises to be used in any way which would, in the opinion of Lessor, be extra hazardous on account of fire or which would in any way increase or render void the fire insurance on the building. If at any time during the term of this Lease, the State Bureau of Insurance or other insurance authority disallows any of Lessors sprinkler credits or imposes an additional penalty or surcharge in Lessors insurance premiums because of Lessee's original or subsequent placement or use of storage racks or bins, method of storage or nature of Lessee's inventory or any other act of Lessee, Lessee agrees to pay as additional rent the increase (between fire walls) in Lessor's insurance premiums.

3.02 SIGNS. No sign of any type or description shall be erected, placed or painted in or about the leased premises or project except those signs submitted to Lessor in writing and approved by Lessor in writing, and which signs are in conformity with Lessor's sign criteria established for the project.

3.03 COMPLIANCE WITH LAWS, RULES AND REGULATIONS. Lessee, at Lessee's sole cost and expense shall comply with all laws, ordinances, orders, rules and regulations of state, federal, municipal or other agencies or bodies having jurisdiction over use, condition and occupancy of the leased premises. Lessee will comply with the rules and regulations of the building adopted by Lessor which are set forth on a schedule attached to this Lease. Lessor shall have the right at all times to change and amend the rules and regulations in any reasonable manners may be deemed advisable for the safety, care, cleanliness, preservation of good order and operation or use of the building or the leased premises. All changes and amendments to the rules and regulations of the building will be sent by Lessor to Lessee in writing and shall thereafter be carried out and observed by Lessee.

3.04 WARRANTY OF POSSESSION. Lessor warrants that it has the right and authority to execute this Lease, and Lessee, upon payment of the required rents and subject to the terms, conditions, covenants and agreements contained in this Lease, shall have possession of the leased premises during the full term of this Lease as well as any extension or renewal thereof. Lessor shall not be responsible for the acts or omissions of any other lessee or third party that may interfere with Lessee's use and enjoyment of the leased premises.

3.05 INSPECTION. Lessor or its authorized agents shall at any and all reasonable times have the right to enter the leased premises to inspect the same, to supply janitorial service or any other service to be provided by Lessor, to show the leased premises to prospective purchasers or lessees, and to alter, improve or repair the leased premises or any other portion of the building. Lessee hereby waives any claim for damages for injury or inconvenience to or interference with Lessee's business, any loss of occupancy or use of the leased premises, and any other loss occasioned thereby. Lessor shall at all times have and retain a key with which to unlock all of the doors in, upon and about the leased premises. Lessee shall not change Lessor's lock system or in any other manner prohibit Lessor from entering the leased premises. Lessor shall have the right to use any and all means which Lessor may deem proper to open any door in an emergency without liability therefore.

ARTICLE 4.00 SERVICES

4.01 Lessee accepts building services as adequate for its intended use. Lessor agrees to make available to the premises at Lessor's sole cost and expense: (1) water, (2) air conditioning and heating, (3) electric service, (4) electrical lighting service for all common areas in the manner and to the extent deemed by Lessor to be standard.

4.02 Lessee shall pay for the electricity and gas utilized in operating any and all facilities serving the leased premises.

4.03 Failure to any extent to furnish of or any stoppage or interruption of these defined services resulting from any cause shall not render Lessor liable in any respect for damages to either person, property or business; nor be construed as an eviction of Lessee or work an abatement of rent; nor relieve Lessee from fulfillment of any covenant or agreement hereof. Lessee shall have no claim for abatement of rent or damages on account of any interruptions in service occasioned thereby or resulting therefrom.

4.04 REPAIRS AND MAINTENANCE. By Lessor: Lessor shall at its expense maintain only the roof, foundation, underground or otherwise concealed plumbing, outside of the building and the structural soundness of the exterior walls (excluding all windows, window glass, plate glass, and all doors) of the Building and keep in good repair and condition, except for reasonable wear and tear. However, in no event shall Lessor be responsible for repair of any damage caused by any act of negligence of the Lessee, its employees, agents or invitees.

Page 2 of 8

Lessee shall give immediate written notice to Lessor of the need for repairs or corrections and Lessor shall proceed promptly to make such repairs or corrections. Lessor's liability hereunder shall be limited to the cost of such repairs or corrections. In addition, Lessor shall maintain the paving outside the building.

4.05 By Lessee: Lessee shall at its expense and risk maintain all other parts of the building and other improvements on the demised premises in good repair and condition, including but not limited to repairs including all necessary replacements to the interior plumbing, windows, window glass, plate glass doors, heating system, air-conditioning equipment, fire protection sprinkler system, elevators, and the interior of the building in general. All warranties and guarantees in effect on any of the items mentioned above will be for Lessee or Lessor's use as applicable. Lessee shall be responsible for maintaining the landscaping and regular mowing of grass.

4.06 In the event Lessee should neglect to maintain the demised premises and the equipment located therein, Lessor shall have the right (but not the obligation) to cause repairs or corrections to be made and any reasonable costs therefor shall be payable by Lessee to Lessor as additional rental on the next rental installment date.

ARTICLE 5.00 LESSEE RESPONSIBILITIES

5.01 Lessee shall make no alteration or additions to the electrical equipment and/or appliances without the prior written consent of the Lessor in each instance. Lessee covenants and agrees that at all times its use of electric current shall never exceed the capacity of existing feeders to the building or the risers or wiring installation. Lessee warrants and agrees that there will not be installed or used in the demised premises such machines or appliances which exceed the existing electrical capacity within the building.

5.02 No additional heating, ventilating or air-cooling unit or equipment shall be installed or used in the suite except with the Lessor's prior written consent and Lessee hereby expressly grants to the Lessor permission to enter the premises demised hereunder, upon Lessee's breach of the provisions hereof and after notice to Lessee of such breach and Lessee expressly grants permission to Lessor to remove the equipment or appliance causing the non-compliance or breach of such provisions without liability of any sort on the part of the Lessor to the Lessee or any other.

5.03 The Lessee shall keep the demised premises and the fixtures and equipment therein in clean, safe and sanitary condition, will take good care thereof, will suffer no waste or injury thereto, and will, at the expiration or other termination of the term of this Lease, surrender the same, broom clean, in the same order and condition in which they were on the commencement of the term of this Lease.

5.04 The Lessee shall commit no violations of and abide by the Building's rules and/or regulations (as may be promulgated from time to time by the Lessor), building code violations, violations of Fire Department or local authorities, violations of any and all laws governing the operation or occupancy of this building. The cost of removing the violations including the damages the Lessor may suffer as a result of Lessee's acts, shall be borne solely by the Lessee and such cost, expenses, losses and damages which the Lessor incurs or will incur, will be billed to Lessee as additional rent in accordance with the terms and conditions of this Lease.

5.05 Lessee will not conduct or permit to be conducted any activity, or place any equipment in or about the demised premises, which will, in any way, increase the rate of fire insurance or other insurance on the Building; and if any increase in the rate of fire insurance or other insurance is stated by any insurance company or by the applicable Insurance Rating Bureau to be due to any activity or equipment in or about the demised premises, such shall be conclusive evidence that the increase in such rate is due to any such activity or equipment, and, as a result thereof, Lessee shall be liable for such increase and shall reimburse Lessor thereafter.

5.06 In case of the failure of Lessee to comply with any provision or terms of this Lease, Lessor shall have the right, but shall not be obligated, to effect such compliance on behalf of Lessee, and, in such event, all expenses Incurred or monies spent by Lessor in effecting such compliance shall be deemed to be additional rental and shall be paid by Lessee to Lessor at the time for payment of the next monthly payment of rental hereunder following notice to Lessee from Lessor of the said additional rent to be paid hereunder.

ARTICLE 6.00 ALTERATIONS AND IMPROVEMENTS

6.01 LESSOR IMPROVEMENTS. If construction to the leased premises is to be performed by Lessor prior to or during Lessee's occupancy, Lessor will complete the construction of the improvements to the leased premises, in accordance with plans and specifications agreed to by Lessor and Lessee, which plans and specifications are made a part of this Lease by reference. Lessee shall execute a copy of the plans and specifications and change orders, if applicable, setting forth the amount of any costs to be borne by Lessee within seven (7) days of receipt of the plans and specifications. In the event Lessee fails to execute the plans and specifications and change order within the seven
(7) day period, Lessor may, at its sole option, declare this Lease canceled or notify Lessee that the base rent shall commence on the completion date even though the improvements to be constructed by Lessor may not be complete. Any changes or modifications to the approved plans and specifications shall be made and accepted by written change order or agreement signed by Lessor and Lessee and shall constitute an amendment to this Lease.

6.02 LESSEE IMPROVEMENTS. Lessee shall not make or allow to be made any alterations or physical additions in or to the leased premises without first obtaining the written consent of Lessor, which consent may in the sole and absolute discretion of Lessor be denied. Any alterations, physical additions or improvements to the leased premises made by Lessee shall at once become the property of Lessor and shall be surrendered to Lessor upon the termination of this Lease; provided, however, Lessor, at its option, may require Lessee to remove any physical additions and/or repair any alterations in order to restore the leased premises to the condition existing at the time Lessee took possession, all costs of removal and/or alterations to be borne by Lessee. This clause shall not apply to moveable equipment or furniture owned by Lessee, which may by removed by Lessee at the end of the term of this Lease if Lessee is not then in default and if such equipment and furniture are not then subject to any other rights, liens and interest of Lessor.

6.03 MECHANICS LIEN. Lessee will not permit any mechanic's or materialman's lien's or other lien to be placed upon the leased premises or the building and nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Lessor, express or implied, by inference or otherwise, to any person for the performance of any labor or the furnishing of any materials to the leased premises, or any part thereof, nor as giving Lessee any right, power, or authority to contract for or permit the rendering of any services or the furnishing of any materials that would give rise to any mechanic's, materialman's or other lien against the leased premises, In the event any such lien is attached to the leased premises, then, in addition to any other right or remedy of Lessor, Lessor may, but shall not be obligated to, obtain the release of or otherwise discharge the same. Any amount paid by Lessor for any of the aforesaid purposes shall be paid by Lessee to Lessor on demand as additional rent.

ARTICLE 7.00 CASUALTY AND INSURANCE

7.01 SUBSTANTIAL DESTRUCTION. If the leased premises should be totally destroyed by fire or other casualty, or if the leased premises should be damaged so that rebuilding cannot reasonably completed within ninety (90) working days after the date of written notification by Lessee to Lessor of the destruction, this Lease shall terminate and the rent shall be abated for the unexpired portion Lease, effective as of the date of the written notification.

Page 3 of 8

7.02 PARTIAL DESTRUCTION. If the leased premises should be partially damaged by fire or other casualty, and the rebuilding or repairs can reasonably be completed within ninety (90) working days from the date of written notification by Lessee to Lessor of the destruction, this Lease shall not terminate, and Lessor shall at its sole risk and expense proceed with reasonable diligence to rebuild or repair the building or other improvements to substantially the same condition in which they existed prior to damage. If the leased premises are to be rebuilt or repaired and are untenantable in whole or in part following the damage, and the damage or destruction was not caused or contributed to by act or negligence of Lessee, its agents, employees, invitees or those for whom Lessee is responsible, the rent payable under this Lease during the period for which the leased premises are untenantable shall be adjusted to such an extent as may be fair and reasonable under the circumstances. In the event that Lessor fails to complete the necessary repairs or rebuilding within ninety (90) working days from the date of written notification by Lessee to Lessor of the destruction, Lessee may at its option terminate this Lease by delivering written notice of termination to Lessor, whereupon all rights and obligations under this Lease shall cease to exist.

7.03 PROPERTY INSURANCE. Lessor shall at all times during the term of this Lease maintain a policy or policies of insurance with the premiums paid in advance, issued by and binding upon some solvent insurance company, insuring the building against all risk of direct physical loss in an amount equal to at least ninety percent (90%) of the full replacement cost of the building structure and its improvements as of the date of the loss; provided, Lessor shall not be obligated in any way or manner to insure any personal property (including, but not limited to, any furniture, machinery, goods or supplies) of Lessee upon or within the leased premises, any fixtures installed or paid for by Lessee upon or within the leased premises, or any improvements which Lessee may construct on the leased premises. Lessee shall have no right in or claim to the proceeds of any policy of insurance maintained by Lessor even though the cost of such insurance is borne by Lessee as set forth in Article 2.00.

7.04 WAIVER OF SUBROGATION. Anything in this Lease to the contrary notwithstanding, Lessor and Lessee hereby waive and release each other of and from any and all right of recovery, claim, action or cause of action, against each other, their agents, officers and employees, for any loss or damage that may occur to the leased premises, improvements to the building of which the leased premises are a part, or personal property within the building, by reason of fire or the elements, regardless of cause or origin, including negligence of Lessor or Lessee and their agents, officers and employees. Lessor and Lessee agree immediately to give their respective insurance companies which have issued policies of insurance covering all risk of direct physical loss, written notice of the terms of the mutual waivers contained in this section, and to have the insurance policies properly endorsed, if necessary, to prevent the invalidation of the insurance coverages by reason of the mutual waivers.

7.05 HOLD HARMLESS. Lessor shall not be liable to Lessee's employees, agents, invitees, licensees or visitors, or to any other person, for an injury to person or damage to property on or about the leased premises caused by any act or omission of Lessee, its agents, servants or employees, or of any other person entering upon the leased premises under express or implied invitation by Lessee, or caused by the improvements located on the leased premises becoming out of repair, the failure or cessation of any service provided by Lessor (including security service and devices), or caused by leakage of gas, oil, water or steam or by electricity emanating from the leased premises. Lessee agrees to defend, indemnify and hold harmless Lessor of and from any loss, attorney's fees, expenses or claims arising out of any such damage or injury.

ARTICLE 8.00 CONDEMNATION

8.01 SUBSTANTIAL TAKING. If all or a substantial part of the leased premises are taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by purchase in lieu thereof, and the taking would prevent or materially interfere with the use of the leased premises for the purpose for which it is then being used, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease effective on the date physical possession is taken by the condemning authority. Lessee shall have no claim to the condemnation award or proceeds in lieu thereof.

8.02 PARTIAL TAKING. If all or a substantial part of the leased premises are taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by purchase in lieu thereof, and this Lease is not terminated as provided in section 8.01 above, Lessor shall at Lessor's sole risk and expense, restore and reconstruct the building and other improvements on the leased premises to the extent necessary to make it reasonably tenantable. The rent payable under this Lease during the unexpired portion of the term shall be adjusted to such an extent as may be fair and reasonable under the circumstances. Lessee shall have no claim to the condemnation award or proceeds in lieu thereof.

ARTICLE 9.00 ASSIGNMENT OR SUBLEASE

9.01 LESSOR ASSIGNMENT. Lessor shall have the right to sell, transfer or assign, in whole or in part, its rights and obligations under this Lease and in the building. Any such sale, transfer or assignment shall operate to release Lessor from any and all liabilities under this Lease arising after the date of such sale, assignment or transfer.

9.02 LESSEE ASSIGNMENT. Lessee shall not assign, in whole or in part, this Lease or allow it to be assigned, in whole or in part, by operation of law or otherwise, including without limitation, a transfer of a majority interest of stock or merger. Nor shall Lessee sublet the leased premises in whole or in part, without the prior written consent of Lessor. No event of an assignment or sublease shall ever release Lessee or any guarantor from any obligation or liability hereunder. No assignee or sublessee of the leased premises may assign or sublet the premises or any portion thereof.

9.03 CONDITIONS OF ASSIGNMENT. If Lessee desires to assign or sublet all OR any part of the leased premises, it shall so notify Lessor, in writing, at least thirty (30) days in advance of the date on which Lessee desires to make such assignment or sublease. Lessee shall provide Lessor with a copy of the proposed assignment or sublease and such information as Lessor might request concerning the proposed sublessee or assignee to allow Lessor to make informed judgements as to the financial condition, reputation, operations and general desirability of the proposed sublessee or assignee. Within fifteen
(15) days after Lessor's receipt of Lessee's proposed assignment or sublease and all required information concerning the proposed sublessee or assignee, Lessor shall have the following options: (1) cancel this Lease as to the leased premises or portion thereof proposed to be assigned or sublet; (2) consent to the proposed assignment or sublease, and, if the rent due and payable by assignee or sublessee under any such permitted assignment or sublease (or a combination of the rent payable under such assignment or sublease plus any bonus or any other consideration or any payment incident thereto) exceeds the rent payable under this Lease for such space, Lessee shall pay to Lessor all such excess rent and other excess consideration within ten (10) days following receipt thereof by Lessee; or (3) refuse, in its sole and absolute discretion and judgement, to consent to the proposed assignment or sublease, which refusal shall be deemed to have been exercised unless Lessor gives Lessee written notice providing otherwise. Upon the occurrence of an event of default, if all or any part of the leased premises are then assigned or sublet, Lessor, in addition to any other remedies provided by this Lease or provided by Law, may, at its option, collect directly from the assignee or sublessee all rents becoming due to Lessee by reason of the assignment or sublease, and Lessor shall have a security interest in all properties on the leased premises to secure payment of such sums. Any collection directly by Lessor from the assignee or sublessee shall not be construed to constitute a novation or a release of Lessee or any guarantor from the further performance of its obligations under this Lease.

9.04 SUBORDINATION. Lessee accepts this Lease subject and subordinate to any recorded mortgage or deed of trust lien presently existing or hereafter created upon the building or project. Lessor is hereby irrevocably vested with full power and authority to subordinate Lessee's interest under this Lease to any first mortgage or deed of trust lien hereafter placed on the leased premises, and Lessee agrees upon demand to execute additional instruments subordinating this Lease as Lessor may require. If the interests of Lessor under this Lease shall be transferred by reason of foreclosure or other proceedings for enforcement of any first mortgage or deed of trust lien on the leased premises, Lessee shall be bound to the transferee (sometimes called the "Purchaser") at the option of the Purchaser, under the terms,

Page 4 of 8

covenants and conditions of this Lease for the balance of the term remaining, including any extensions or renewals, with the same force and effect as if the Purchaser were Lessor under this Lease, and, if requested by the Purchaser, Lessee agrees to attorn to the Purchaser, including the first mortgagee under any such mortgage if it be the Purchaser, as its Lessor.

9.05 ESTOPPEL CERTIFICATES. Lessee agrees to furnish, from time to time, within five (5) days after receipt of a request from Lessor or Lessor's mortgagee, a statement certifying, if applicable, the following: Lessee is in possession of the leased premises; the leased premises are acceptable; the Lease is in full force and effect; the Lease is unmodified; Lessee claims no present charge, lien, or claim of offset against rent; the rent is paid for the current month, but is not prepaid for more than one month and will not be prepaid for more than one month in advance: there is no existing default by reason of some act or omission by Lessor; and such other matters as may be reasonably required by Lessor or Lessors mortgagee. Lessee's failure to deliver such statement, in addition to being a default under this Lease, shall be deemed to establish conclusively that this Lease is in full force and effect except as declared by Lessor, that Lessor is not in default of any of its obligations under this Lease, and that Lessor has not received more than one month's rent in advance.

ARTICLE 10.00 LIENS

10.01 LESSOR'S LIEN. As security for payment of rent, damages and all other payments required to be made by this Lease, Lessee hereby grants to Lessor a lien upon all property of Lessee now or subsequently located upon the leased premises. If Lessee abandons or vacates any substantial portion of the leased premises or is in default in the payment of any rentals, damages or other payments required to be made by this Lease or is in default of any other provision of this Lease, Lessor may enter upon the leased premises, by picking or changing locks if necessary, and take possession of all or any part of the personal property, and may sell all or any part of the personal property at a public or private sale, in one or successive sales, with or without notice, to the highest bidder for cash, and, on behalf of Lessee; sell and covey ALL or part of the proceeds of the sale of the personal property shall be applied by Lessor towards the reasonable costs and expenses of the sale, including attorney's fees, and then toward the payment of all sums then due by Lessee to Lessor under the terms of this Lease. Any excess remaining shall be paid to Lessee or any other person entitled thereto by law.

10.02 UNIFORM COMMERCIAL CODE. This Lease is intended as and constitutes a security agreement within the meaning of the Uniform Commercial Code of the state in which the leased premises are situated. Lessor, in addition to the rights prescribed in this Lease, shall have all of the rights, titles, liens and interests in and to Lessee's property, now or hereafter located upon the leased premises, which may be granted a secured party, as that term is defined, under the Uniform Commercial Code to secure to Lessor payment of all sums due and the full performance of all Lessee's covenants under this Lease. Lessee will on request execute and deliver to Lessor a financing statement for the purpose of perfecting Lessor's security interest under this Lease or Lessor may file this Lease or a copy thereof as a financing statement. Unless otherwise provided by law and for the purpose of exercising any right pursuant to this section, Lessor and Lessee agree that reasonable notice shall be met if such notice is given by ten (10) days written notice, certified mail, return receipt requested, to Lessor or Lessee at the addresses specified herein.

ARTICLE 11.00 DEFAULT AND REMEDIES

11.01 DEFAULT BY LESSEE, The following shall be deemed to be events of default by Lessee under this Lease: (1) Lessee shall fail to pay when due any installment of rent or any other payment required pursuant to this Lease and the failure is not cured within ten (1O) days after written notice to Lessee; (2) Lessee shall abandon any substantial portion of the leased premises; (3) Lessee shall fail to comply with any term, provision or covenant of this Lease, other than the payment of rent, and the failure is not cured within twenty (20) days after written notice to Lessee; (4) Lessee shall file a petition or be adjudged bankrupt or insolvent under any applicable federal or state bankruptcy or insolvency law or admit that it cannot meet its financial obligations as they become due; or a receiver or trustee shall be appointed for all or substantially all of the assets of Lessee; or Lessee shall make a transfer in fraud of creditors or shall make an assignment for the benefit of creditors, or (5) Lessee shall do or permit to be done any act which results in a lien being filed against the leased premises or the building and/or project of which the leased premises are a part.

11.02 REMEDIES FOR LESSEE'S DEFAULT. Upon the occurrence of any event of default set forth in this Lease, Lessor shall have the option to pursue any one or more of the remedies set forth herein without any notice or demand. (1) Lessor may enter upon and take possession of the leased premises, by picking or changing locks if necessary, and lock out, expel or remove Lessee and any other person who may be occupying all or part of the leased premises without being liable for any claim for damages, and relet the leased premises on behalf of Lessee and receive the rent directly by reason of the reletting. Lessee agrees to pay Lessor on demand any deficiency that may arise by reason of any reletting of the leased premises; further, Lessee agrees to reimburse Lessor for any expenditures made by it in order to relet the leased premises, including, but not limited to, remodeling and repair costs. (2) Lessor may enter upon the leased premises, by picking or changing locks if necessary, without being liable for any claim for damages, and can do whatever Lessee is obligated to do under the terms of this Lease. Lessee agrees to reimburse Lessor on demand for any expenses which Lessor may incur effecting compliance with Lessee's obligations under this Lease caused by the negligence of Lessee or otherwise. (3) Lessor may terminate this Lease, in which event Lessee shall immediately surrender the leased premises to Lessor, and if Lessee fails to surrender the leased premises, Lessor may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the leased premises, by picking or changing locks if necessary and lock out, expel or remove Lessee and any other person who may be occupying all or any part of the leased premises without being liable for any claim for damages. Lessee agrees to pay on demand the amount of all loss and damage which Lessor may suffer by reason of the termination of this Lease under this section, whether through inability to relet the leased premises on satisfactory terms or otherwise. Notwithstanding any other remedy set forth in this Lease, in the event Lessor has made rent concessions of any type or character, or waived any base rent, and Lessee fails to take possession of the leased premises on the commencement or completion date or otherwise defaults at any time during the term of this Lease, the rent concessions, including any waived base rent, shall be canceled and the amount of the base rent or other rent concessions shall be due and payable immediately as if no rent concessions or waiver of any base rent had ever been granted. A rent concession or waiver of the base rent shall not relieve Lessee of any obligation to pay any other charge due and payable under this Lease including without limitation any sum due under section 2.02. In addition to the remedies set forth in this paragraph, upon occurrence of any event or events of default by Lessee under this Lease, Lessor may, at Lessors option, upon written notice to Lessee, accelerate the remaining sums due from Lessee pursuant to this Lease, for the remaining term of this Lease, at which time all such sums shall be immediately due and payable by Lessee. Notwithstanding anything contained in this Lease to the contrary, this Lease may be terminated by Lessor only by mailing or delivering written notice of such termination to Lessee, and no other act or omission of Lessor shall be construed as a termination of this Lease.

ARTICLE 12.00 DEFINITIONS

12.01 ABANDON. "Abandon" means the vacating of all or a substantial portion of the leased premises by Lessee, whether or not Lessee is in default of the rental payments due under this Lease.

12.02 ACT OF GOD OR FORCE MAJEURE. An "act of God" or "force majeure" is defined for purposes of this Lease as strikes, lockouts, sitdowns, material or labor restrictions by any governmental authority, unusual transportation delays, riots, floods, washouts, explosions, earthquakes, fire, storms, weather (including wet grounds or inclement weather which prevents construction), acts of the public enemy, wars, insurrections and any other cause not reasonably within the control of Lessor and which by the exercise of due diligence Lessor is unable, wholly or in part, to prevent or overcome,

Page 5 of 8

12.03 BUILDING OR PROJECT. "Building" or "project" as used in this Lease means the building and/or project described in section 1.02, including the leased premises and the land upon which the building or project is situated.

12.04 COMMENCEMENT DATE. "Commencement date" shall be the date set forth in section 1.03. The commencement date shall constitute the commencement of the term of this Lease for all purposes, whether or not Lessee has actually taken possession.

12.05 COMPLETION DATE. "Completion date" shall be the date on which the improvements erected and to be erected upon the leased premises shall have been completed in accordance with the plans and specifications described in article 6.00. The completion date shall constitute the commencement of the term of this Lease for all purposes, whether or not the Lessee has actually taken possession. Lessor shall use its best efforts to establish the completion date as the date set forth in section 1.03. In the event that the improvements have not in fact been completed as of that date, Lessee shall notify Lessor in writing of its objections. Lessor shall have a reasonable time after delivery of the notice in which to take such corrective action as may be necessary and shall notify Lessee in writing as soon as it deems such corrective action has been completed and the improvements are ready for occupancy. Upon completion of construction, Lessee shall deliver to Lessor a letter accepting the leased premises as suitable for the purposes for which they are let and the date of such letter shall constitute the commencement of the term of this Lease. Whether or not Lessee has executed such letter of acceptance, taking possession of the leased premises by Lessee shall be deemed to establish conclusively that the improvements have been completed in accordance with the plans and specifications, are suitable for the purposes for which the leased premises are let, and that the leased premises are in good and satisfactory condition as of the date possession was so taken by Lessee, except for latent defects, if any.

12.06 SQUARE FEET. "Square Feet" or "square foot"as used in this Lease includes the area contained within the leased premises together with a common area percentage factor of the leased premises proportionate to the total building area.

ARTICLE 13.00 MISCELLANEOUS

13.01 WAIVER. Failure of Lessor to declare an event of default immediately upon its occurrence, or delay in taking action in connection with an event of default, shall not constitute a waiver of default, but Lessor shall have the right to declare the default at any time and take such action as is lawful or authorized under this Lease. Pursuit of any one or more of the remedies set forth in article 11.00 above shall not preclude pursuit of any one or more of the other remedies provided elsewhere in this Lease or provided by law, nor shall pursuit of any remedy constitute forfeiture or waiver of any rent or damages accruing to Lessor by reason of the violation of any of the terms, provisions or covenants of this Lease. Failure by Lessor to enforce one or more of the remedies provided upon an event of default shall not be deemed or construed to constitute a waiver of the default or of any other violation or breach of any of the terms, provisions and covenants contained in this Lease.

13.02 ACT OF GOD. Lessor shall not be required to perform any covenant or obligation in this Lease, or be liable in damages to Lessee, so long as the performance or non-performance of the covenant or obligation is delayed, caused or prevented by an act of God, force majeure or by Lessee.

13.03 ATTORNEYS FEES. In the event Lessee defaults in the performance of any of the terms, covenants, agreements or conditions contained in this Lease and Lessor places in the hands of an attorney the enforcement of all or any part of this Lease, the collection of any rent due or to become due or recovery of the possession of the leased premises, Lessee agrees to pay Lessor's cost of collection, including reasonable attorney's fees for the services of the attorney, whether suit is actually filed or not.

13.04. SUCCESSORS. This Lease shall the binding upon and inure to the benefit of Lessor and Lessee and their respective heirs, personal representatives, successors and assigns. It is hereby covenanted and agreed that should Lessor's interest in the leased premises cease to exist for any reason during the term of this Lease, then notwithstanding the happening of such event this Lease nevertheless shall remain unimpaired and in full force and effect, and Lessee hereunder agrees to attorn to the then owner of the leased premises.

13.05 RENT TAX. If applicable in the jurisdiction where the leased premises are situated, Lessee shall pay and be liable for all rental, sales and use taxes or other similar taxes, if any, levied or imposed by any city, state, county or other governmental body having authority, such payments to be in addition to all other payments required to be paid to Lessor by Lessee under the terms of this Lease. Any such payment shall be paid concurrently with the payment of the rent, additional rent, operating expenses or other charge upon which the tax is based as set forth above. See Article 16.00 Other Provisions.

13.06 CAPTIONS. The captions appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of any section.

13.07 NOTICE. All rent and other payments required to be made by Lessee shall be payable to Lessor at the address set forth in section 1.05. All payments required to be made by Lessor to Lessee shall be payable to Lessee at the address set forth in section 1.05, or at any other address within the United State as Lessee may specify from time to time by written notice. Any notice or document required or permitted to be delivered by the terms of this Lease shall be deemed to be delivered (whether or not actually received) when deposited in the United States Mail, postage prepaid, certified mail, return receipt requested, addressed to the parties at the respective addresses set forth in section 1.05.

13.08 SUBMISSION OF LEASE. Submission of this Lease to Lessee for signature does not constitute a reservation of space or an option to lease. This lease is not effective until execution by and delivery to both Lessor and Lessee.

13.09 CORPORATE AUTHORITY. If Lessee executes this Lease as a corporation, each of the persons executing this Lease on behalf of Lessee does hereby personally represent and warrant that Lessee is duly authorized and existing corporation, the Lessee is qualified to do business in the state in which the leased premises are located, that the corporation has full right and authority to enter into this Lease, and that each person signing on behalf of the corporation is authorized to do so. In the event any representation or warranty is false, all persons who execute this Lease shall be liable, individually, as Lessee.

13.10 SEVERABILITY. If any provision of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

13.11 LESSOR'S LIABILITY. If Lessor shall be in default under this Lease and, if as a consequence of such default, Lessee shall recover a money judgement against Lessor, such judgment shall be satisfied only out of the right, title and interest of Lessor in the building as the same may then be encumbered and neither Lessor not any person or entity that comprises Lessor shall be liable for any deficiency. In no event shall Lessee have the right to levy execution against any property of Lessor nor any person or entity comprising Lessor other than its interest in the building as herein expressly provided.

13.12 INDEMNITY. Lessor agrees to indemnify and hold harmless Lessee from and against any liability or claim, whether meritorious or not, arising with respect to any broker whose claim arises by through or on behalf of Lessor. Lessee agrees to indemnify and hold harmless Lessor from and against any liability or claim, whether meritorious or not, arising with respect to any broker whose claim arises by, through or on behalf of Lessee.

13.13 Upon request, Lessee shall furnish Lessor with annual financial statements and reports in a timely manner.

Page 6 of 8

ARTICLE 14.0 AMENDMENT AND LIMITATION OF WARRANTIES

14.01 ENTIRE AGREEMENT. IT IS EXPRESSLY AGREED BY LESSEE, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE.

14.02 AMENDMENT, THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LESSOR AND LESSEE.

14.03 THIS LEASE AGREEMENT SUPERSEDES ANY AND ALL PREVIOUS AGREEMENTS BETWEEN THE PARTIES HERETO. AND ANY AND ALL PREVIOUS AGREEMENTS SHALL BECOME NULL AND VOID UPON EXECUTION OF THIS AGREEMENT.

ARTICLE 15.00 OTHER PROVISIONS

15.01 LESSEE INSURANCE. Lessee shall procure and maintain throughout the term of this lease a policy or policies of insurance, at its sole cost and expense, causing Lessee's fixtures and contents to be insured under standard fire and extended coverage insurance and, with regard to liability insurance, insuring both Lessor, Lessor's Agents, and Lessee against all claims, demands or actions arising out of or in connection with Lessee's use or occupancy of the Demised Premises, or by the condition of the Demised Premises. The limits of Lessee's liability policy or policies shall be in an amount of not less than $1,000,000.00 per occurrence, and shall be written by insurance companies satisfactory to Lessor. Lessee shall obtain a written obligation on the part of each insurance company to notify Lessor at least twenty (20) days prior to cancellation of such insurance. Such policies and renewals thereof as required shall be delivered to Lessor at least thirty (30) days prior to the expiration of the respective policy terms. If Lessee should fail to comply with the foregoing requirement relating to insurance, Lessor may obtain such insurance and Lessee shall pay to Lessor on demand as additional rental hereunder the premium cost thereof plus interest at the maximum contractual rate (but in no event to exceed 1 1/2% per month) from the date of payment by Lessor until repaid by Lessee.

15.02 TAXES. The Lessee covenants to pay all Taxes (whether imposed upon the Lessor or the Lessee) attributable to the personal property, trade fixtures, business, income, occupancy or sales of the Lessee or any other occupant of the Leased Premises, and to any Leasehold Improvements or fixtures installed by or on behalf of the Lessee within the Leased Premises, and to the use by the Lessee of any of the Property.

Lessee covenants to pay the amount by which Taxes (whether imposed upon the Lessor or the Lessee) are increased above the Taxes which would have otherwise been payable as a result of the Leased Premises or the Lessee or any other occupancy of the Leased Premises being taxed or assessed in support of separate schools.

15.03 ENVIRONMENTAL MATTERS. Lessee agrees that it shall not allow or permit the Premises to be used for the handling, transportation, storage, treatment or other usage of hazardous or toxic substances. Lessee does hereby agree to indemnify, defend and hold Lessor and its officers, employees and agents harmless from any claims, judgements, damages, fines, penalties, costs, liabilities (including sums paid in settlement of claims) or loss, including attorneys' fees, consultant fees, and expert fees which arise in connection with the presence or suspected presence of toxic or hazardous substances in the Premises, the soil, groundwater or soil vapor on or under the premises, the building in which the premises is located or in the surrounding property which arise as a result of Lessee's operation of its business. Any failure by Lessee to comply with the terms of this Paragraph 16.03 within ten (10) days of delivery of written notice to Lessee by Lessor of such failure shall constitute an event of default under this Lease. For purposes of this Paragraph 16.03, the term "hazardous or toxic substances" shall mean any substance which is subject to regulation by the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA") as authorized and amended by the Superfund Amendment and Re-authorization Act of 1986 substance which may be reasonably determined to cause a risk to the environment as determined by the Environmental Protection Agency or other governmental agency.

15.04 BROKERAGE COMMISSION. Lessee represents and warrants that there are no claims for brokerage commissions or finders' fees in connection with the execution of this Lease except for Sovereign Commercial Realty ("SCR") or separate agreement. Lessee agrees to indemnify and hold harmless Lessor against all liabilities and costs arising from such claims, including without limitation attorney's fees in connection therewith. In addition, Lessor hereby agrees to pay SCR a commission equal to four and one half percent (4 1/2%) of the gross rentals to be paid upon execution for any expansions, extensions, or renewals pertaining to this Lease.

15.05 ARBITRATION. The parties wish to provide for a rapid and efficient means of resolving any dispute relating to this Lease. Accordingly, any dispute arising out of or relating to this Lease may be referred by either party to arbitration, in which case it shall be decided by a single arbitrator of the American Arbitration Association sitting in Dallas, Texas, providing that any issues relating to allocation of Operating Costs shall be referred first to the parties auditors for resolution. The American Arbitration Association and the arbitrator shall be instructed to use the most expedited rules then available, and the parties agree to cooperate to make the arbitration as rapid and inexpensive as possible. Once an arbitrator has been used to resolve one dispute, the parties stipulate that the same arbitrator shall be used, unless the parties mutually agree otherwise, to resolve any subsequent disputes. In the event of a default or claimed default on the part of Lessee, Lessor shall be entitled to file an unlawful detainer action under the relevant laws of the State of Texas, but any issue of fact or lease interpretation thereunder shall be referred to arbitration as set forth above, and the decision of the arbitrator shall be final and binding upon the parties and the court. In any arbitration under this Section, the prevailing party shall recover its attorneys fees and costs, and the non-prevailing party shall pay the cost of the arbitrator.

Page 7 of 8

ARTICLE 16.00 SCHEDULES

16.01 The provisions of the following Schedules attached hereto shall form part of this Lease as if the same were embodied herein:

Schedule "A" - Legal Description of Lands Schedule "B" - Outline of Leased Premises Schedule "C" - Rules and Regulations Schedule "D" - Leasehold Improvements Schedule "F" - Renewal Option Schedule "G" - Subordination Agreement

ARTICLE 17.00 SIGNATURES

EXECUTED at Dallas, Texas this 1st day of December 1996.

LESSOR                                            LESSEE
Fountain Parkway, Ltd.
By: Inner Fountain, Inc, its general partner      /s/ Bollinger Industries, L.P.
   -------------------------------------------    ------------------------------


By: /s/ CLIFFORD A. BOOTH                          By: /s/ GLENN D. BOLLINGER
   -------------------------------------------        --------------------------
   Clifford A. Booth, President

Page 8 of 8

SCHEDULE "A"

(Legal Description of Lands)


EXHIBIT "A"
(Legal Description of Land)

FOUNTAIN PARKWAY

BEING a tract of land in the J.J. Goodwin Survey, Abstract No. 589, and being that tract of land known as SITE 12, GREAT SOUTHWEST INDUSTRIAL DISTRICT, INDUSTRIAL COMMUNITY NO. 5, City of Grand Prairie, Texas as recorded in Volume 388-46, Page 735, Plat Records, Tarrant County, Texas, and being more particularly described as follows:

BEGINNING at the 5/8-inch iron rod found at land southeast corner of said Site 12, said iron rod being in the north line of Fountain Parkway (100-foot right-of-way);

THENCE West, along said north line, a distance of 597.74 feet to a 1/2-inch iron rod with yellow plastic cap stamped "A.H. HALFF ASSOC." (hereafter referred to as "with cap") set in the east line of the Chicago, Rock Island and Pacific Railroad (50-foot right-of-way);

THENCE North 0 degrees 24 minutes 08 seconds East, departing said north line and along said east line, a distance of 1234.40 feet to a 1/2-inch iron rod with cap set for the point of curvature of a circular curve to the left having a radius of 482.28 feet and whose long cord bears South 57 degrees 30 minutes 48 seconds East, a distance of 518.07 feet and being on the south line of Lead Track Number 23 (60-foot right-of-way);

THENCE Southeasterly, departing said east line, along said south line and along said curve, through a central angle of 64 degrees 58 minutes 25 seconds, an arc distance of 546.91 feet to a 1/2-inch iron rod with cap set for the point of tangency;

THENCE East, continuing along said south line, a distance of 145.73 feet to a set 1/2-inch iron rod with cap for corner;

THENCE South, departing said south line, a distance of 245.75 feet to a point for corner in the interior of a building;

THENCE South 0 degrees 50 minutes 47 seconds East (Plat - South 0 degrees, 45 minutes 06 seconds East), a distance of 237.53 feet (Plat - 236.67 feet) to a fence post found for corner at the northwest corner of the Ford Cemetery;

THENCE South 0 degrees 46 minutes 16 seconds East (Plat - South 1 degrees 47 minutes 20 seconds East), along the west line of said cemetery and along a chain link fence, a distance of 106.52 feet (Plat - 103.94 feet) to a fence post found for the southwest corner of said cemetery;

THENCE South 0 degrees 13 minutes 12 seconds East (Plat - South), a distance of 366.34 feet (Plat - 369.82 feet) to the POINT Of BEGINNING AND CONTAINING 599,733 square feet (Plat - 600,003 square feet) or 13.7680 acres (Plat - 13.774 Acres) of land.


SCHEDULE "C"

SCHEDULE "B"

(Outline of Leased Premises)


SCHEDULE "B"

(Outline of Leased Premises)

[SITE PLAN]


SCHEDULE "C"

Rules and Regulations

1. The sidewalks, entry passages, elevators (if installed in the building) and common stairways shall not be obstructed by the Lessee or used for any other purposes than for ingress and egress to and from the Leased Premises. The Lessee will not place or allow to be placed in the Building corridors or public stairways any waste paper, dust, garbage, refuse or anything whatever.

2. The washroom plumbing fixtures and other water apparatus shall not be used for any purpose other than those for which they were constructed, and no sweepings, rubbish, rags, ashes or other substances shall be thrown therein. The expense of any damage resulting by misuse by the Lessee shall be borne by the Lessee.

3. No one shall use the Leased Premises for residential purposes, or for the storage of personal effects or articles other than those required for business purposes.

4. No dangerous or explosive materials shall be kept or permitted to be kept in the Leased Premises.

5. The Lessee shall not and shall not permit any cooking in the Leased Premises except in a microwave oven. The Lessee shall not install or permit the installation or use of any machine dispensing goods for sale in the Leased Premises without the prior written approval of the Lessor. Only persons authorized by the Lessor shall be permitted to deliver or to use the elevators (if installed in the Building) for the purpose of delivering food or beverages to the Leased Premises.

6. The Lessee shall not bring in or take out, position, construct, install or move any safe, business machine or other heavy office equipment without the prior consent of the Lessor. In giving such consent, the Lessor shall have the right in its sole discretion, to prescribe the weight permitted and the position thereof, and the use and design of planks, skids or platforms to distribute the weight thereof. All damages done to the Building by moving or using any such heavy equipment or other office equipment or furniture shall be repaired at the expense of the Lessee. The moving of all heavy equipment or other office equipment or furniture shall occur only at times consented to by the Lessor and the persons employed to move the same in and out of the Building must be acceptable to the Lessor. Safes and other heavy office equipment will be moved through the halls and corridors only upon steel bearing plates. No freight or bulky matter of any description will be received into the Building or carried in the elevators (if installed in the Building) except during hours approved by the Lessor.

7. The parking of automobiles shall be subject to the charges and the reasonable regulations of the Lessor. The Lessor shall not be responsible for damage to or theft of any car, its accessories or contents whether the same be the result of negligence of otherwise. Parking may be regulated and/or assigned by Lessor.

8. The Lessee shall not mark, drill into or in any way deface the walls, ceilings, partitions, floors or other parts of the Leased Premises and the Building unless Lessor has provided consent to do so.

9. If the Lessee desires any electrical or communications wiring, the Lessor reserves the right to direct qualified persons as to where and how the wires are to be introduced, and without such directions, no borings or cutting for wires shall take place. No other wires or pipes of any kind shall be introduced without the prior written consent of the Lessor,

10. The Lessee shall not place or cause to be placed any additional locks upon any doors of the Leased Premises without the approval of the Lessor and subject to any conditions imposed by the Lessor. Additional keys may be obtained from the Lessor at the cost of the Lessee.

11. The Lessee shall take care of the rugs and window treatments in the Leased Premises and shall arrange for the carrying-out of regular cleaning and shampooing of carpets and cleaning of window treatments in a manner acceptable to the Lessor.

12. The Lessee shall permit the periodic closing of lanes, driveways and passages for the purpose of preserving the Lessor's rights over such lanes, driveways and passages.

13. The Lessee shall not place or permit to be placed any sign, advertisement, notice or other display on any part of the exterior of the Leased Premises or elsewhere if such sign, advertisement, notice or other display is visible from outside the Leased Premises without the prior written consent of the Lessor which may be arbitrarily withheld. The Lessee, upon request of the Lessor, shall immediately remove any sign, advertisement, notice or other display which the Lessee has placed or permitted to be placed which, in the opinion of the Lessor, is objectionable, and if the Lessee shall fail to do so, the Lessor may remove the same at the expense of the Lessee.

14. The Lessor shall have the right to make such other and further reasonable rules and regulations and to alter the same as in its judgment may from time to time be needed for the safety, care, cleanliness and appearance of the Leased Premises and the Building and for the preservation of good order therein and the same shall be kept and observed by the lessees, their employees and servants. The Lessor also has the right to suspend or cancel any or all of these rules and regulations herein set out.

15. Lessor will not be responsible for lost or stolen personal property, money or jewelry from Lessee's leased area or public area regardless of whether such loss occurred when area is locked against entry or not.


SCHEDULE "D"

(Leasehold Improvements)

Lessor agrees to provide Lessee with the demised premises in an "as is" condition. Lessor shall provide Lessee a leasehold improvement allowance equal to fifty thousand dollars ($50,000) within 30 days of completion of the improvements and submission of original invoices to Lessor.

UNLESS OTHERWISE NOTED, ANY ADDITIONAL LEASEHOLD IMPROVEMENTS REQUIRED BY LESSEE SHALL BE THE FISCAL RESPONSIBILITY OF LESSEE.

AGREED AND ACCEPTED THIS 1st DAY OF DECEMBER, 1996.



EXHIBIT G

SUBORDINATION AGREEMENT

THIS AGREEMENT is entered into among Fountain Parkway LTD. (hereinafter referred to as "Landlord"). Bollinger Industries, L.P. (hereafter referred to as "Tenant"), and Foothill Capital Corporation hereinafter referred to as "Lender") effective the 1st day of December, 1996.

WHEREAS, that certain lease ("Original Lease") dated December 1st, 1996, covering approximately 300,000 square feet of space at 602 Fountain Parkway, Grand Prairie, Tarrant County, Texas, a copy of which is attached hereto between Fountain Parkway, Ltd. as ("Lessor") and Bollinger Industries, L.P, ("Lessee").

WHEREAS, the fact that Foothill Capital Corporation ("Lender") (11111 Santa Monica Blvd., Suite 1500, Los Angeles, CA. 90025-3333, Attn: Suzanne Witkowsky), has made a loan (as amended, increased, extended or otherwise changed from time to time, the Loan") to the Lessee to be guaranteed by the Company and secured in part by any and all inventory and accounts receivable, and any records relating thereto, owned or held by Bollinger Industries, L.P. (the "Collateral") stored or otherwise located on the premises demised under said Lease.

WHEREAS, the fact that Lender would not be willing to make said Loan but for the consent and waiver of Lessor, all as herein provided.

NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good valuable consideration by Lessee in hand this day paid to the undersigned, the receipt does hereby agree and represent as follows:

1. In the event of default under the proposed Loan, Lender or its successors or assigns, may, prior to the expiration or termination of the Lease, upon prior written notice to Lessor, enter upon the premises at the time specified by Lessor and remove said Collateral from the premises without the consent of, or accounting to, the undersigned Lessor, conditioned, however, upon any damage caused to the premises by reason of the removal of the Collateral being repaired without cost or expense to Lessor promptly after such removal. Upon written notification by Lessor of the Termination of the Lease or the exercise of its rights to possession of the premises by virtue thereof, Lender shall have the license for a period of up to 30 days after such notice to enter upon the premises to remove the Collateral and shall cause any damage caused to the premises by reason of the removal of the Collateral to be repaired without cost or expenses to Lessor promptly after such removal. Lender shall pay Lessor a daily license fee equivalent to one-thirtieth (1/30th) of the holdover monthly rental provided for in the Lease. In the event Lender does not intend to exercise its rights with regard to the Collateral and to remove the Collateral from the premises, Lender shall so notify Lessor in writing on or prior to Midnight CST time on the date which is 7 days after the date of Lender's receipt of such notice from Lessor, and Lessor may thereafter remove the Collateral from the premises and otherwise deal with the Collateral as permitted by applicable law and the Lease. It is expressly understood and agreed that Lessor shall have no obligation whatsoever to preserve or protect the Collateral after the expiration or termination of the Lease. Lessor hereby subordinate to Lender any and all landlord's lien and other lien rights on security interests, whether statutory or contractual, perfected or unperfected, respecting the Collateral until the Loan is repaid in full and all of Lessee's and Lender's obligations under the Loan have terminated.

2. Except as provided above, the Lease has not been modified, changed, altered, or amended by any written instrument in any respect and is the only agreement between the Lessor and the Lessee affecting the premises demised under the Lease.


3. To the best of our knowledge, the Lease is not in default by either the Lessor or the Lessee and is in full force and effect.

4. In the event of the occurrence of a default under the Lease, the Lessor will use Lessor's best efforts to provide a copy of any written notice of such default sent to Lessee to the Lender at the respective address set forth above, or at such other addresses as the Lender may provide in writing to the Lessor.

5. Any and all notices hereunder to the Lender or the Lessor shall be sent by registered or certified mail, return receipt requested, or via hand delivery, to their respective addresses set forth herein.

6. It is specifically understood and agreed that this Subordination Agreement shall be binding upon the undersigned and its successors in interest.

The foregoing is hereby approved and agreed to this 1st day of December, 1996.

LESSOR: FOUNTAIN PARKWAY, LTD.
By: Inner Fountain, Inc., Its General Partner

/s/ CLIFFORD A. BOOTH
---------------------------------------
Clifford A. Booth, President

LESSEE: Bollinger Industries, L.P.

/s/ GLENN D. BOLLINGER
---------------------------------------
Glenn D. Bollinger
Chief Executive Officer


EXHIBIT "F"

RENEWAL OPTION (MARKET)

Lessee (but not any assignee or sublessee of Lessee, even if Lessor's consent is obtained as required by Article 9.00 of this Lease) is granted the option(s) to extend the term of this lease for ONE consecutive extended term of THREE year(s) each, provided (a) Lessee is not in default at the time of the exercise of the respective option, and (b) Lessee gives written notice of its exercise of the respective option at least ninety (90) days prior to the expiration of the original term or the expiration of the then existing term. Each extension term shall be upon the same terms and conditions, except (i) Lessee shall have no further right of renewal after the last extension term prescribed above, and
(ii) the Monthly Guaranteed Rental will be equal to whatever monthly Minimum Guaranteed Rental (plus whatever periodic adjustments) Lessor is then quoting to prospective lessees for new leases of comparable space in Dallas, Fort Worth for comparable terms (as confirmed by written statement to Lessee by a representative of Lessor), or comparable space in comparable office showroom tech projects located in the same general area as this project (also as confirmed by written statement to Lessee by a representative of Lessor). Notwithstanding the above provisions to the contrary: (A) in no event will the adjusted monthly Minimum Guaranteed Rental for any option period be lower than the monthly Minimum Guaranteed Rental for the immediately preceding period; and (B) in the event Lessee has not agreed in writing to accept the monthly Minimum Guaranteed Rental before ninety (90) days prior to the expiration of the then existing term, Lessor at its option may terminate this lease as of the

expiration of the then existing term.


EXHIBIT 11.1

STATEMENT REGARDING COMPUTATION OF PER SHARE DATA

                                                           YEARS ENDED MARCH 31,
                                                ----------------------------------------------
                                                   1997                1996             1995
                                                -----------        -----------      ----------
Earnings (loss) from continuing operations      $(8,164,071)       $(6,861,406)     $  594,176

Loss from discontinued operations                   722,676         (1,361,954)       (524,914)
                                                -----------        -----------      ----------
Net earnings (loss)                             $(7,441,395)       $(8,223,360)     $   69,262
                                                ===========        ============     ==========

Weighted average number of common shares          4,000,210          3,710,484       3,669,577

Net effect of dilutive stock options
  based on the treasury stock method (using
  the initial public offering price of
  $12.50 per share and assuming that all
  options had been outstanding for all
  periods prior to the IPO on November 17,
  1993) (1)                                               -                  -         297,054
                                                -----------        -----------      ----------

Shares used for computation                       4,000,210          3,710,484       3,966,631
                                                ===========        ===========      ==========
Per Share Data:
  Earnings (loss) from continuing operations      $   (2.04)       $     (1.85)     $      .15
                                                ===========        ===========      ==========

  Net earnings (loss)                             $   (1.86)       $     (2.22)     $      .02
                                                ===========        ===========      ==========

Note - fully diluted and primary calculations are the same.

(1) Dilutive stock options for the fiscal years ended March 31, 1997 and March 31, 1996, were not included because of the net loss.


ARTICLE 5
This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheets, Consolidated Statements of Earnings, and Schedule II Valuation and Qualifying Accounts as of and for the fiscal year ended March 31, 1997 shown elsewhere in this report and is qualified in it's entirety by reference to such financial statements.


PERIOD TYPE YEAR
FISCAL YEAR END MAR 31 1997
PERIOD END MAR 31 1997
CASH 3,481
SECURITIES 0
RECEIVABLES 16,804,959
ALLOWANCES 844,312
INVENTORY 16,201,780
CURRENT ASSETS 33,720,643
PP&E 4,986,867
DEPRECIATION 2,903,465
TOTAL ASSETS 38,389,352
CURRENT LIABILITIES 17,726,499
BONDS 0
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 40,002
OTHER SE 4,981,131
TOTAL LIABILITY AND EQUITY 38,389,352
SALES 82,598,593
TOTAL REVENUES 82,598,593
CGS 69,723,015
TOTAL COSTS 6,878,803
OTHER EXPENSES 0
LOSS PROVISION 236,483
INTEREST EXPENSE 2,551,703
INCOME PRETAX (8,010,326)
INCOME TAX (91,964)
INCOME CONTINUING (8,164,071)
DISCONTINUED 476,967
EXTRAORDINARY 0
CHANGES 0
NET INCOME (7,441,395)
EPS PRIMARY (1.86)
EPS DILUTED (1.86)