x
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Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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Delaware
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75-2320087
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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2801
E. Plano Pkwy, Plano, Texas
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75074
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(Address
of principal executive offices)
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(Zip
Code)
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Page
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||||
PART
I
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FINANCIAL
INFORMATION
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Item
1.
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Financial
Statements
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|||
Condensed
Consolidated Balance Sheets -
|
||||
March
31, 2010 (unaudited) and December 31, 2009
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3
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|||
Unaudited
Condensed Consolidated Statements of Operations -
|
||||
Three
months ended March 31, 2010 and 2009
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4
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|||
Unaudited
Condensed Consolidated Statement of Stockholders' Equity -
|
||||
Three
months ended March 31, 2010
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5
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|||
Unaudited
Condensed Consolidated Statements of Cash Flows -
|
||||
Three
months ended March 31, 2010 and 2009
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6
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|||
Notes
to Unaudited Condensed Consolidated Financial Statements
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7-14
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|||
Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
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15-22
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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22
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Item
4T.
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Controls
and Procedures
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23
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PART
II
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OTHER
INFORMATION
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|||
Item
1.
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Legal
Proceedings
|
24-25
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||
Item
1A.
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Risk
Factors
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25
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||
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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N/A
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||
Item
3.
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Defaults
Upon Senior Securities
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N/A
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||
Item
4.
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(Removed
and Reserved)
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N/A
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||
Item
5.
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Other
Information
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N/A
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||
Item
6.
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Exhibits
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25
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||
Signatures
|
25
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March
31,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 6,922 | $ | 12,562 | ||||
Trade
receivables, net of allowance for doubtful accounts of $1,803 (unaudited)
and $1,625 in 2010 and 2009, respectively
|
22,945 | 13,136 | ||||||
Inventories,
net
|
17,314 | 19,721 | ||||||
Prepaid
expenses
|
733 | 378 | ||||||
Other
current assets
|
22 | 22 | ||||||
Total
current assets
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47,936 | 45,819 | ||||||
Property
and equipment, net
|
841 | 934 | ||||||
Deferred
tax assets, net
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10,228 | 10,228 | ||||||
Other
assets, net
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211 | 238 | ||||||
$ | 59,216 | $ | 57,219 | |||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 6,852 | $ | 5,479 | ||||
Accrued
expenses and other current liabilities
|
10,124 | 11,228 | ||||||
Total
current liabilities
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16,976 | 16,707 | ||||||
Other
liabilities
|
1 | 2 | ||||||
Total
liabilities
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16,977 | 16,709 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $0.01 par value; authorized 1,250,000 shares; none
issued
|
— | — | ||||||
Common
stock, $0.001 par value; authorized 12,500,000 shares; 7,399,809 and
7,387,309 shares issued and 6,988,872 and 6,976,372 shares outstanding at
March 31, 2010 (unaudited) and December 31, 2009,
respectively
|
7 | 7 | ||||||
Additional
paid-in capital
|
93,824 | 93,576 | ||||||
Accumulated
other comprehensive income
|
1,903 | 2,074 | ||||||
Accumulated
deficit
|
(48,741 | ) | (50,393 | ) | ||||
Treasury
stock, 410,937 common shares at March 31, 2010 and December 31, 2009, at
cost
|
(4,754 | ) | (4,754 | ) | ||||
Total
stockholders' equity
|
42,239 | 40,510 | ||||||
$ | 59,216 | $ | 57,219 | |||||
Contingencies
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2010
|
2009
|
|||||||
Net
sales
|
$ | 22,358 | $ | 23,475 | ||||
Cost
of goods sold
|
12,291 | 14,467 | ||||||
Gross
profit
|
10,067 | 9,008 | ||||||
Operating
expenses:
|
||||||||
Research
and development expenses
|
628 | 853 | ||||||
Selling
and marketing expenses
|
5,693 | 5,951 | ||||||
General
and administrative expenses
|
2,105 | 1,841 | ||||||
Total
operating expenses
|
8,426 | 8,645 | ||||||
Operating
income
|
1,641 | 363 | ||||||
Other
income (expense):
|
||||||||
Interest
expense, net
|
(9 | ) | (16 | ) | ||||
Other
income, net
|
— | 47 | ||||||
Income
before income taxes
|
1,632 | 394 | ||||||
Income
tax expense (benefit)
|
(20 | ) | 28 | |||||
Net
income
|
$ | 1,652 | $ | 366 | ||||
Net
income per common share - basic
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$ | 0.24 | $ | 0.06 | ||||
- diluted
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$ | 0.21 | $ | 0.05 |
Shares of
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Additional
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Accumulated Other
|
Cost of
|
Total
|
||||||||||||||||||||||||||||
Common
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Common
|
Paid-in
|
Comprehensive
|
Accumulated
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Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||||
Stock
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Stock
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Capital
|
Income
|
Deficit
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Income (Loss)
|
Stock
|
Equity
|
|||||||||||||||||||||||||
Balance,
December 31, 2009
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7,387,309 | $ | 7 | $ | 93,576 | $ | 2,074 | $ | (50,393 | ) | $ | (4,754 | ) | $ | 40,510 | |||||||||||||||||
Comprehensive
income:
|
||||||||||||||||||||||||||||||||
Net
income
|
— | — | — | — | 1,652 | $ | 1,652 | — | 1,652 | |||||||||||||||||||||||
Foreign
currency translation
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— | — | — | (171 | ) | — | (171 | ) | — | (171 | ) | |||||||||||||||||||||
Comprehensive
income
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— | — | — | — | — | $ | 1,481 | — | — | |||||||||||||||||||||||
Stock
options exercised
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12,500 | — | — | — | — | — | — | |||||||||||||||||||||||||
Compensatory
stock and stock options
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— | — | 248 | — | — | — | 248 | |||||||||||||||||||||||||
Balance,
March 31, 2010
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7,399,809 | $ | 7 | $ | 93,824 | $ | 1,903 | $ | (48,741 | ) | $ | (4,754 | ) | $ | 42,239 |
Three
Months Ended
|
||||||||
March
31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
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$ | 1,652 | $ | 366 | ||||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
134 | 158 | ||||||
Amortization
of deferred compensation
|
248 | 217 | ||||||
Provision
for doubtful accounts
|
382 | 238 | ||||||
Provision
for inventory reserve
|
59 | — | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
receivables
|
(10,191 | ) | (9,922 | ) | ||||
Inventories
|
2,348 | 365 | ||||||
Prepaid
expenses
|
(355 | ) | (629 | ) | ||||
Other
current assets
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— | (20 | ) | |||||
Accounts
payable
|
1,373 | 190 | ||||||
Accrued
expenses and other current liabilities
|
(1,101 | ) | 129 | |||||
Net
cash used in operating activities
|
(5,451 | ) | (8,908 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Purchases
of equipment
|
(8 | ) | (196 | ) | ||||
Net
cash used in investing activities
|
(8 | ) | (196 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Principal
payments under capital lease obligation
|
(4 | ) | (5 | ) | ||||
Debt
financing costs
|
(6 | ) | — | |||||
Proceeds
from debt
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— | 6,013 | ||||||
Net
cash provided by (used in) financing activities
|
(10 | ) | 6,008 | |||||
Effects
of exchange rate changes
|
(171 | ) | (245 | ) | ||||
Net
decrease in cash and cash equivalents
|
(5,640 | ) | (3,341 | ) | ||||
Cash
and cash equivalents at beginning of period
|
12,562 | 5,960 | ||||||
Cash
and cash equivalents at end of period
|
$ | 6,922 | $ | 2,619 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Interest
paid
|
$ | 9 | $ | 20 | ||||
Income
taxes paid
|
$ | 3 | $ | 28 |
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Finished
goods
|
$ | 10,799 | $ | 13,057 | ||||
Component
parts
|
8,619 | 8,708 | ||||||
Allowance
for inventory obsolescence
|
(2,104 | ) | (2,044 | ) | ||||
Total
inventory
|
$ | 17,314 | $ | 19,721 |
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Payroll
and commissions
|
$ | 1,047 | $ | 284 | ||||
Product
warranty and sales returns and allowances
|
3,485 | 2,209 | ||||||
Professional
services
|
35 | 25 | ||||||
Accrued
settlement expense
|
— | 5,000 | ||||||
Accrued
sales promotions
|
1,439 | 1,060 | ||||||
Deferred
revenue
|
1,691 | 1,273 | ||||||
Other
|
2,427 | 1,377 | ||||||
Total
accrued expenses
|
$ | 10,124 | $ | 11,228 |
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
United
States
|
$ | 18,244 | $ | 19,583 | ||||
Rest
of World
|
4,114 | 3,892 | ||||||
Total
net sales
|
$ | 22,358 | $ | 23,475 |
Weighted
|
Aggregate
|
|||||||||||
Number
of
|
Average
|
Intrinsic
|
||||||||||
Options
|
Exercise Price
|
Value of Options
|
||||||||||
Options
outstanding at December 31, 2009
|
891,044 | $ | 0.52 | — | ||||||||
Options
granted
|
— | — | — | |||||||||
Options
forfeited / expired
|
— | — | — | |||||||||
Options
exercised
|
(12,500 | ) | 0.04 | 37,000 | ||||||||
Options
outstanding at March 31, 2010
|
878,544 | 0.53 | 2,125,564 | |||||||||
Options
exercisable at March 31, 2010
|
800,419 | 0.28 | 2,136,344 |
Weighted
|
||||||||
Number
of
|
Average
|
|||||||
Shares
|
Grant Date Price
|
|||||||
Stock
unvested at December 31, 2009
|
336,870 | $ | 4.12 | |||||
Stock
granted
|
— | — | ||||||
Stock
vested
|
(12,626 | ) | 3.02 | |||||
Stock
unvested at March 31, 2010
|
324,244 | $ | 4.16 |
Period of Exercise
|
Total Options to be
Exercised
|
|||
2010
|
15,000 | |||
2011
|
27,500 | |||
2012
|
28,209 | |||
2013
|
13,750 | |||
Beyond
2013
|
15,000 | |||
Total
Options
|
99,459 |
Beginning
Balance
|
Charges
for
Warranty
Claims
|
Estimated
Accruals
|
Ending
Balance
|
|||||||||||||
Quarter
ended December 31, 2009
|
$ | 407 | (97 | ) | 55 | $ | 365 | |||||||||
Quarter
ended March 31, 2010
|
$ | 365 | (72 | ) | 198 | $ | 491 |
|
—
|
The
impact of operational restructuring on operating results and liquidity and
one-time events and other factors detailed under "Risk Factors", Item 1A
of our Annual Report on Form 10-K filed with the SEC on March 9,
2010.
|
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Net
sales
|
100.0 | % | 100.0 | % | ||||
Cost
of goods sold
|
55.0 | 61.6 | ||||||
Gross
profit
|
45.0 | 38.4 | ||||||
Operating
expenses:
|
||||||||
Research
and development expenses
|
2.8 | 3.6 | ||||||
Sales
and marketing expenses
|
25.5 | 25.4 | ||||||
General
and administrative expenses
|
9.4 | 7.8 | ||||||
Total
operating expenses
|
37.7 | 36.8 | ||||||
Interest
income (expense), net
|
— | (0.1 | ) | |||||
Other
income, net
|
— | 0.2 | ||||||
Income
before income taxes
|
7.3 | 1.7 | ||||||
Income
tax expense (benefit)
|
(0.1 | ) | 0.1 | |||||
Net
income
|
7.4 | % | 1.6 | % |
ADAMS
GOLF, INC.
|
||
Date: May
11, 2010
|
By:
|
/S/ OLIVER G. BREWER
III
|
Oliver
G. Brewer, III
|
||
Chief
Executive Officer and President
|
||
(Principal
Executive Officer)
|
||
Date: May
11, 2010
|
By:
|
/S/ PAMELA
HIGH
|
Pamela
J. High
|
||
Interim
Chief Financial Officer
|
||
(Principal
Financial Officer)
|
||
Exhibit
3.1
|
Amended
and Restated Certificate of Incorporation
|
Incorporated
by reference to Form S-1 File No. 333-51715 (Exhibit
3.1)
|
||
Exhibit
3.2
|
Certificate
of Amendment to the Restated
Certificate
of Incorporation filed on February 14, 2008
|
Incorporated
by reference to the Annual Report on Form 10-K for the year ended December
31, 2007 File No. 001-33978 (Exhibit 3.2)
|
||
Exhibit
3.3
|
Amended
and Restated By-laws
|
Incorporated
by reference to Form S-1 File No. 333-51715 (Exhibit
3.2)
|
||
Exhibit
4.1
|
1998
Stock Incentive Plan of the Company dated February 26, 1998, as
amended
|
Incorporated
by reference to Form S-8 File No. 333-68129 (Exhibit
4.1)
|
||
Exhibit
4.2
|
1996
Stock Option Plan dated April 10, 1998
|
Incorporated
by reference to Form S-1 File No.333-51715 (Exhibit
4.2)
|
||
Exhibit
4.3
|
Adams
Golf, Ltd. 401(k) Retirement Plan
|
Incorporated
by reference to Form S-1 File No.333-51715 (Exhibit
4.3)
|
||
Exhibit
4.4
|
1999
Non-Employee Director Plan of Adams Golf, Inc.
|
Incorporated
by reference to 1999 Form 10-K File No. 000-24583 (Exhibit
4.4)
|
||
Exhibit
4.5
|
1999
Stock Option Plan for Outside Consultants of Adams Golf,
Inc.
|
Incorporated
by reference to Form S-8 File No. 333-37320 (Exhibit
4.5)
|
||
Exhibit
4.6
|
2002
Stock Incentive Plan for Adams Golf, Inc.
|
Incorporated
by reference to Annex A of the 2002 Proxy Statement File No. 000-24583
(Annex A)
|
||
Exhibit
4.7
|
Form
of Option Agreement under the 2002 Stock Option Plan of Adams Golf,
Inc.
|
Incorporated
by reference to Form S-8 File No. 333-112622 (Exhibit
4.7)
|
||
Exhibit
10.1
|
Amendment
dated September 1, 2003 to the Commercial Lease Agreement dated April 6,
1998, between Jackson-Shaw Technology Center II and the
Company
|
Incorporated
by reference to 2003 Form 10-K File No. 000-24583 (Exhibit
10.12)
|
||
Exhibit
10.2*
|
Golf
Consultant Agreement - Thomas S. Watson
|
Incorporated
by reference to 2004 Form 10-K File No. 000-24583 (Exhibit
10.17)
|
||
Exhibit
10.3*
|
Asset
Purchase Agreement of Women's Golf Unlimited
|
Incorporated
by reference to 2006 Form 10-K File No. 000-24583 (Exhibit
10.11)
|
||
Exhibit
10.4
|
Revolving
line of Credit between Adams Golf, Inc and Wachovia Bank, National
Association
|
Incorporated
by reference to the Report on From 8-K dated November 13, 2007 (Exhibit
10.1)
|
||
Exhibit
10.5
|
Commercial
Lease Agreement dated December 15, 2007, between MDN/JSC -II Limited and
the Company
|
Incorporated
by reference to 2007 Form 10-K File No 001-33978 (Exhibit
10.9)
|
Exhibit
10.6
|
Commercial
Lease Agreement dated April 10, 2008, between CLP Properties Texas, L.P.
and the Company
|
Incorporated
by reference to the Report on From 8-K dated April 15, 2008 File No.
001-33978 (Exhibit 10.1)
|
||
Exhibit
10.7
|
Employment
Agreement - Byron (Barney) H. Adams
|
Incorporated
by reference to the Report on From 8-K dated January 12, 2009 File No.
001-33978 (Exhibit 10.1)
|
||
Exhibit
10.8
|
Employment
Agreement - Oliver G. (Chip) Brewer
|
Incorporated
by reference to the Quarterly Report on From 10-Q for the quarter ended
March 31, 2009 File No. 001-33978 (Exhibit 10.9)
|
||
Exhibit
10.9
|
Amendment
to Revolving line of Credit between Adams Golf, Inc and Wachovia Bank,
National Association
|
Incorporated
by reference to Third quarter 2009 Form 10-Q File No 001-33978 (Exhibit
10.9)
|
||
Exhibit
10.10
|
Stipulation
of Settlement of In Re Adams Golf, Inc. Securities Litigation, dated
December 9, 2009
|
Incorporated
by reference to 2009 Form 10-K File No 001-33978 (Exhibit
10.10)
|
||
Exhibit
31.1
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|
||
Exhibit
31.2
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|
||
Exhibit
32.1
|
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Included
in this filing
|