GolfGear International, Inc. (GEAR)
Interview with: Michael A. Piraino, President, COO and CFO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
full line of proprietary golf clubs, including the Tsunami® drivers, fairway woods and irons; Leading Edge® Championship Putters; Diva® woods and irons for women; and Players® clubs for junior golfers.

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A strong management team and unique Forged Face Insert technology enhancing the future of GolfGear International

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Consumer Cyclical
Recreational Products

GolfGear International, Inc.

5285 Industrial Drive
Huntington Beach, CA 92649
Phone: 714-899-4274

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Michael A. Piraino
President, Chief Operating Officer
and Chief Financial Officer

Interview conducted by:
Lynn Fosse
February 2003

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Bio of CEO,
Michael Piraino, President, Chief Operating Officer, Chief Financial Officer and Director

Michael A. Piraino is president, chief operating officer, chief financial officer and a director of GolfGear International, Inc. (OTCBB:  GEAR).

A veteran chief executive officer and chief financial officer of publicly traded companies, Piraino most recently was founder and CEO of CEO Resources LLC, an executive management resources company providing interim CEO services, merger and acquisition and capital funding advisory services to clients.  His lengthy career in building a number of successful companies also has been complemented by his success in company acquisitions and integrating them into existing organizations.

In 2001, he was president and chief operating officer of ENFRASTRUCTURE, INC., Aliso Viejo, Calif.  Prior to that he was president and chief executive officer of SM&A (formerly Emergent Information Technologies, Inc.), Newport Beach, Calif.  Additionally, he has held top management positions with Data Processing Resources Corporation, Newport Beach; Syncor International Corporation, Chatsworth, Calif.; and Total Pharmaceutical Care, Inc., Torrance, Calif.  A Certified Public Accountant, he was with Deloitte & Touche for nine years.

During his career, Piraino has raised more than $350 million in equity and debt financing, and he has negotiated, closed and integrated more than 30 acquisitions.  He has taken two companies through the IPO process.

A native of Los Angeles, he is a graduate of Loyola University of Los Angeles where he earned a bachelor of science and accounting degree in 1975.  Piraino is the former president of Wilshire Country Club, Los Angeles, where he is a member and carries a mid single-digit handicap.  He has two children and resides in Newport Beach.

Company Profile:
GolfGear International, Inc., with headquarters in Huntington Beach, Calif., offers a full line of proprietary golf clubs, including the Tsunami® drivers, fairway woods and irons; Leading Edge® Championship Putters; Diva® woods and irons for women; and Players® clubs for junior golfers. The company's patent portfolio with respect to insert technology is the largest and most comprehensive in the golf industry with seven domestic and two foreign patents issued related to forged-face insert technology and additional patents pending. GolfGear's products are sold principally in the United States through pro shops and golf specialty stores, as well as in Europe, Asia, China, England, South Africa and several other countries. The Company invented "Forged Insert Technology", metal woods and irons with inserts, which is a marriage of PATENTED FORGED TITANIUM INSERTS to the state-of-the-art investment cast 'SHELLS'.

New Tsunami Irons - these irons not only feature GolfGear’s multi-patented Insert Technology, but they incorporate their new Flow Weighted Cavity System. They have re-vamped the line of Leading Edge putters, by upgrading the weight, feel, and added Winn split grips for added control and comfort.

CEOCFOinterviews: Mr. Piraino, please give us a brief history of GolfGear International?

Mr. Piraino: “The company was founded in 1989 by Don Anderson. Don had been in golf all of his life with a number of companies including; Wilson Sporting Goods Company (owned by Amer Group, PLC), and Northwestern. He started GolfGear in 1989; it was incorporated in 1990 and exists today as GolfGear International.”

CEOCFOinterviews: Your website says “The finest golf equipment” will you tell us about it?

Mr. Piraino: “Don, who is a golf-club designer, has made it a lifelong mission to create the finest golf equipment available. Over the past dozen years he has been dedicated to the technology side of golf. In fact, he has invented and patented the technology surrounding the Forged Face Insert. There are a number of patents but the cornerstone of our Tsunami equipment line is the Forged Face Insert technology, which is in the drivers, the fairway woods and throughout the iron line. That single technology has created a situation, where based on independent testing by RANKMARK.COM, an independent testing firm, GolfGear’s Tsunami driver has ranked number one in distance. The idea and the execution were great and we now have the confirmation from independent testing sources that we are now making the longest golf club. That is what translates into the claim that we make the best equipment.”

CEOCFOinterviews: Can you explain what differentiates your technology?

Mr. Piraino: “The technology essentially is a cast uni-body construction made of a specific Titanium material. The face is made out of 10-2-3 Beta Titanium; it is a special alloy that was developed by the Aerospace and Defense Industry a number of years ago, which was used initially for landing gear on jumbo jets. It is extremely strong with a very fine grain structure, and, as a result, that particular material when heated and forged and treated, creates the hardest hitting surface available. That insert is then welded robotically to the uni-cast body to create the overall club structure and then it is finished, painted and polished.

CEOCFOinterviews: Are there any issues with the golf regulatory agencies?

Mr. Piraino: ”Yes, the USGA (United States Golf Association) is the governing body of golf in the U.S., and internationally it is the Royal and Ancient. Those two bodies regulate golf rules, etiquette and equipment. Every driver that is made and sold in the U.S. must be tested and conformed to USGA regulations - the C.O.R. (co-efficient of restitution regulation). There are regulations so the golf ball doesn’t travel too far. Every driver on the market today must pass those very stringent regulations. All of our drivers have been tested and passed. Just last month, we introduced our 360CC and 400CC driver at the PGA show in Orlando, and those received USGA approval in December of last year.”

CEOCFOinterviews: What is the difference between the new ones and the old ones?

Mr. Piraino: “There are some structural differences. On the sole, for example, we incorporate a weight port, which allows us to weight the head. The weighting of golf clubs is a key component to how the club feels in one’s hand; it can’t be too heavy or too light. By designing the weight port into the sole of the club, we have created a situation where we can weight the overall club head, to within one gram, so it is very precise. The other feature of the club is the unique wave design on the dome of the club itself; that is not only pleasing to look at but also it actually provides structural reinforcement to the head.

When a golf ball hits a club, a puffing affect occurs where the club contracts and expands, and this wave design on the top allows the golf club to store more energy. Less energy is released at impact therefore delivering more force to the golf ball. The final change is the very sleek “SPEED SLOT TOE”, which has some structural consequences where it makes the overall head stronger and creates a more aero-dynamic golf club as it is traveling through the air. Those three things are the most significant changes from our other products in the line, in addition to them just being bigger. Originally, our Tsunami line was 300CCs; we came out with a 340 just over 2 years ago and in December, we have gone to the 360 and the 400.  We think bigger is better and more forgiving.”

CEOCFOinterviews: How does this compare price-wise with other items out there and is price a factor for your customers?

Mr. Piraino: “Price is always a factor.  Let’s face it, we are dealing with a fairly selective group of buyers; there are about 25-26 million golfers in the market place. One would say the demographics suggest that they are a little more affluent group than the U.S. average; as a result, they are discriminatory about the selection process. We have found that if you give them the performance and reasonable value for the money, price is not going to be an issue. We have priced our product to be in the mid upper-end of the range; the MSRP (Manufacturers Suggested Retail Price) of our product is $399.00, which is consistent with the top clubs on the market today.”

CEOCFOinterviews: I know you are rolling out a sales and marketing strategy, what is changing?

Mr. Piraino: “A lot of things are changing. The biggest news is the addition of Chris Holiday as Senior Vice President of Sales and Marketing. Chris was the head of U.S. sales at Callaway Golf Company (NYSE: ELY), and spent a dozen years at Callaway. He was hired as a field sales rep by Mr. Callaway back in the early 90’s and prior to that he ran a successful chain of golf retail outlets in Colorado. Here is a guy with thirty years of golf experience, including the retail side, which is our customer’s perspective. He was with the biggest and most successful golf company in the world for the last dozen years. We are just delighted to have someone like that, with those kinds of credentials, on our team. He will lead the sales and marketing effort.

We will essentially sell, in a very traditional way, where we have an inside sales team and customer service/telemarketing group. Their job, day in and day out, is just to take calls, make calls, travel to retailers when necessary and perform the customer service aspects of their job, making sure we have the right product displayed in the right way and the inventory levels at our retailers are where they want them to be. In addition to that, we currently sell through independent sales reps. throughout the country. One of Chris’s jobs will be to focus heavily on rebuilding our independent sales force and make sure that we hit the key  ten - fifteen markets in the country. We will expect to see quite a few changes in the next few months, in terms of the independent sales rep arena. Finally, we will have a number of international distribution agreements, where we will be selling into key international golf markets, such as Canada, Europe and the Far East. We also have some distribution in South Africa, which is a good golf market. That covers the traditional channel.

The new channel that we are in the process of developing is the direct response channel; we ran the direct response program trailer at the PGA show last week and it was well received. We have created a thirty-minute direct response program which features our driver product. We are expected to test that program in southern California in the next few weeks and make whatever changes are necessary to the program and the offer itself. We will then roll it out nationally, through the Golf Channel, The Fox channel, east and west, and ESPN. We will hopefully roll it out before March 1st(2003). That is a new channel for us, but other companies have been very successful with good product and with a good value for that product.”

CEOCFOinterviews: Please tell us about the manufacturing process of your golf clubs.

Mr. Piraino: “Our manufacturing process is quite involved.  We have excellent and reliable sources.  We have master club makers and a special tour department and we can custom make anything, whether it is weight, angle, shaft or grip. Our basic materials come from a couple of different places. The heads are cast, finished, manufactured and finished in Taiwan and they come over as completed components. The shafts are manufactured by Graphite Design, Inc., which is located in San Diego, and all the minor components are ordered from suppliers here in the United States. We do all the final assembly here in Huntington Beach.”

CEOCFOinterviews: Do you need to maintain much inventory?

Mr. Piraino: “Inventory is always an issue; we are a small company and we have to manage our working capital extremely carefully. You can certainly get into a situation where you have over-bought and have too much inventory; it is easy to over order and it takes a level of precision and study to make sure that your ordering levels are inline with your sales forecast. The thing that makes this more complicated is that the lead time involved with getting heads, grips and shafts which can be six to ten weeks sometimes. There is a level of science or maybe even more of an art to look ahead and forecast 90 to 120 days and then back that up into a manufacturing forecast and further back up into what components we need to make those particular inventory items. We try to keep some inventory on hand because some retailers would like to have the product the next day, but we try to keep that to a minimum just to minimize our investment in working capital.”

CEOCFOinterviews: In addition to your Tsunami line, tell me about your other products and how big a part they play for you?

Mr. Piraino: “They have been a big part of the company’s past; I don’t expect they will be a huge part of the company’s future. We are building the marketing program around the Tsunami line. The other lines that the company has are the Players junior line, which is broken down by age group. The lengths of the clubs vary by age group and they are very high-quality sets, which we sell in sets or as individual clubs complete with bag, glove and a hat. The idea is to get kids started.  A younger golfer will be an adult golfer and, hopefully, they will be somewhat loyal to the brand. In addition to the players equipment, we have a line of women’s clubs called Diva that sells as a complete set (woods and irons). We have had some success with the Diva line, which some of our customers stock as part of their regular line; it is a very competitively priced and a high quality product. Finally, we have the Leading Edge® Championship Putter line. The product itself has had quite a bit of success. That is a line of standard length putters, plus belly length putters and what is becoming more popular; the very long putter. We really offer a complete line when you look at the Tsunami line, special clubs for women, special clubs for juniors and our putter line.”

CEOCFOinterviews: Can you tell us about your agreement with Nike Golf?

Mr. Piraino: “The Nike Golf (Nike, Inc. NYSE: NKE) agreement is a very significant development in the history of the company. The most important thing it does is lend credibility to the technology claims that the company has under its ten patents. I think it is the recognition by an independent group that is known for innovation and marketing, that this is a technology that actually means something. Our agreement with Nike Golf grants them a non-exclusive long-term worldwide license to manufacture and sell golf clubs under the patents that we have covering our Forged Face Insert technology. Should they manufacture a line of clubs that incorporates the GolfGear technology that they have licensed, we would then enjoy a royalty stream from the sale of those products. That is a significant development; it occurred in August of last year (2002) and we are having on-going discussions with a number of other companies in hopes of striking similar agreements.”

CEOCFOinterviews: What is the cash and credit position of the company?

Mr. Piraino: “I would say, frankly, that the company in the past has been under-funded. It remains in that situation today; But, at the same time, we have several hundred thousand dollars of cash on hand, a small bank line and we have had continuing support from our investor group. Last summer, the company was successful at raising a couple million dollars in convertible debentures. It has had to rely on private markets, private equity and private debt instruments in order to continue to sustain itself. From that standpoint, it is a challenge. We are working through those details. We are in the market today looking for additional financing and we are hoping that will come-to-pass over the next several months.”

CEOCFOinterviews: Why is this the right time for the big marketing push?

Mr. Piraino: “I think you want to roll out the products when you are absolutely confident that they are working. Three years ago, it was working but it didn’t have the independent testing verification, and the tour validation that we have today and there was additional technology that we wanted to introduce. There is an old golf expression “drive for show and putt for dough”. It used to be years ago that the people who were the excellent putters were the top money winners; today that situation is reversed where the long-hitters of the world are ‘ruling the roost’ in terms of the money list and major victories. I think our clubs play right into that and the market is very receptive.

Everyone has been chasing our technology, and I believe we have an opportunity to claim the title for ourselves. We invented the Forged Face Insert technology and it is producing the longest distance out there. As we see the competition, we are still a step ahead, and from that perspective, we think it is good opportunity to get out there and shine.”

CEOCFOinterviews: What should shareholders and potential investors know about GolfGear?

Mr. Piraino: “I think the company is poised for growth here in 2003. We have what we believe is the best product in the market, and we are rebuilding the management team. I joined the company at the end of last year and now I see us attracting people like Chris Holiday. We are attracting some investment capital and last week’s PGA show attracted the interest of the industry. We are quite excited about the prospects for “2003.”

CEOCFOinterviews: In closing, what would you like to say about the future of GolfGear?

Mr. Piraino: “My view is that given the proprietary nature of the technology, I think our current stock price is an attractive stock price, relative to the market place. But, of course, buyers would have to make that decision on their own. We are not resting on our laurels with the Tsunami line; we have a full development pipeline  where we are working on the next generation of Tsunami products.  We are also working on some forged carbon steel wedges.

Our Chairman is Peter Pockington, who owned  the Edmonton Oilers when they won all the Stanley Cups up in Canada.  He is an investor and a very shrewd businessman; he was instrumental in raising money for the company last year. Peter provides the visionary perspective for the company and we are delighted to work with someone of Peter’s caliber as well as other members of our Board of Directors. Dean Reinmuth, who is one of the world’s best instructors and is featured on the Golf Channel all the time, provides great advice and counsel, along with Don Anderson our CEO and Founder.  This gives GolfGear a terrific brain trust with which to deal with the golf market. We are very excited about where we are headed.”


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