##### Table of Contents



UNITED STATESSECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 
 FORM 10-KSB
 
  x
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended June 30, 2004 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period fromto Commission File No. 0-172923 COLLEGIATE PACIFIC INC.  Delaware
    
    22-2795073(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)
 13950 Senlac Drive, Suite 100, Dallas, Texas
    
    75234(Address of Principal Executive Offices)
    
    (Zip Code)
 (972) 243-8100
(Issuers Telephone Number, Including Area Code) Securities Registered Pursuant to Section 12(b) of the Act: Name of Each ExchangeTitle of Each Class
    
    On Which RegisteredCommon Stock
    
    American Stock Exchange
 Securities Registered Pursuant to Section 12(g) of the Act:
None Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No o Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. x State
issuers revenues for its most recent fiscal year. $39,561,521. State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
Rule 12b-2 of the Exchange Act): $66,542,681. This amount was calculated by
reducing the total number of shares of voting common stock outstanding by the
total number of shares of voting common stock held by officers, directors, and
stockholders owning in excess of 10% of the registrants common stock, and
multiplying the remainder by the closing price for the registrants common
stock on September 20, 2004, as reported on the American Stock Exchange. The
information provided shall in no way be construed as an admission that any
officer, director, or more than 10% stockholder of the registrant may be deemed
an affiliate of the registrant or that such person is the beneficial owner of
the shares reported as being held by such person, and any such inference is
hereby disclaimed. On September 20, 2004, there were 10,045,399 shares of the issuers common
stock, $0.01 par value, outstanding, of which 7,443,253 were held by
non-affiliates.  o x
 DOCUMENTS INCORPORATED BY REFERENCE Portions
of the registrants Proxy Statement for the Annual Meeting of Stockholders
to be held on or about December 3, 2004 (to be filed) are incorporated by
reference into Part III of this Form 10-KSB.




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Collegiate Pacific Inc.
FORM 10-KSB
Fiscal Year Ended June 30, 2004 TABLE OF CONTENTS PagePART IItem 1.
    
    Description of Business.
    
    
    1Item 2.
    
    Description of Property.
    
    
    8Item 3.
    
    Legal Proceedings.
    
    
    8Item 4.
    
    Submission of Matters to a Vote of Security Holders.
    
    
    8PART IIItem 5.
    
    Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
    
    
    9Item 6.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
    
    
    11Item 7.
    
    Financial Statements.
    
    
    25Item 8.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
    
    
    42Item 8A.
    
    Controls and Procedures.
    
    
    42Item 8B.
    
    Other Information.
    
    
    42PART IIIItem 9.
    
    Directors and Executive Officers of the Registrant.
    
    
    43Item 10.
    
    Executive Compensation.
    
    
    43Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
    
    
    43Item 12.
    
    Certain Relationships and Related Transactions.
    
    
    43Item 13.
    
    Exhibits, List and Reports on Form 8-K.
    
    
    44Item 14.
    
    Principal Accountant Fees and Services.
    
    
    46SIGNATURES
    
    
    
    
    48Amended and Restated 1998 Stock Option PlanLease Agreement, dated July 6, 1994Amendment to Loan Agreement, dated August 26, 2004SubsidiariesConsent of Grant Thornton LLPCertification of the CEO Pursuant to Rule 13a-14(a) or 15(d)-14(a)Certification of the CFO Pursuant to Rule 13a-14(a) or 15(d)-14(a)Certification of the CEO Pursuant to 18 U.S.C. Section 1350




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FORM 10-KSB ANNUAL REPORT Forward-Looking Statements This Annual Report onForm 10-KSB, including Managements Discussion and
Analysis of Financial Condition and Results of Operations in Item 6, contains
forward-looking statements that involve risks and uncertainties, as well as
assumptions that, if they never materialize or prove incorrect, could cause the
results of Collegiate Pacific and its consolidated subsidiaries (Collegiate
Pacific, we, us, our, or the Company) to differ materially from those
expressed or implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of net sales, gross
margin, expenses, earnings or losses from operations, synergies or other
financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; any statements of expectation or belief; and any
statements of assumptions underlying any of the foregoing. The risks,
uncertainties and assumptions referred to above include Collegiate Pacifics
ability to successfully execute its acquisition plans and growth strategy,
integration of acquired businesses, global economic
conditions, product demand, financial market performance and other risks that
are described herein, including but not limited to the items discussed in
Factors that Could Affect Future Results set forth in Managements
Discussion and Analysis of Financial Condition and Results of Operations in
Item 6 of this report, and that are otherwise described from time to time in
Collegiate Pacifics Securities and Exchange Commission reports filed after
this report. Collegiate Pacific cautions that the foregoing list of important
factors is not exclusive. Any forward-looking statements included in this
report are made as of the date of filing of this report with the Securities and
Exchange Commission, and we assume no obligation and do not intend to update
these forward-looking statements. 
 PART I 
 ITEM 1. DESCRIPTION OF BUSINESS. General Collegiate Pacific is a premier marketer, manufacturer and distributor of
sporting goods and equipment, team uniforms, and physical education,
recreational and leisure products primarily to the institutional market in the
United States. The institutional market generally consists of youth sports
programs, park and recreational organizations, schools, colleges, churches,
government agencies, athletic teams, athletic clubs and dealers. We sell our
products directly to the institutional market primarily through:  
    
    our unique, informative catalogs and fliers that we
distribute to potential customers;
    
    our strategically located road sales professionals;
    
    our telemarketers;
    
    our appearance at trade shows and other sales events; and
    
    the Internet. 1




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We currently offer approximately 4,500 sports related equipment products
to approximately 80,000 customers. We market our products through the support of a customer database of over
300,000 names, our 125 person direct sales force strategically located
throughout the Mid-Western and Mid-Atlantic United States and our call centers
located at our headquarters in Dallas, Texas and Corona, California in the Los
Angeles basin. Our Chairman and Chief Executive Officer, Michael J.
Blumenfeld, who has over 30 years of experience in the sports supply industry,
personally supervised the development of our mailing list. We have subdivided
our mailing list into various customer profiles to insure that our catalogs are
directed to those individuals that make the decisions to purchase the products
we offer. The master mailing list is also subdivided by relevant product types
and seasonal demand. We regularly screen, cross check and update our customer
database to maintain its accuracy and functionality. Collegiate Pacific
intends to distribute approximately 1.5 million catalogs and fliers from this
database in fiscal 2005. We believe that over the past few years the consolidation of the
traditional team dealers and small, independent sporting goods retailers is
leading to a consolidation of the sporting goods industry. We believe this
consolidation of the sporting goods industry has contributed to the shift of
sales from traditional, retail store front sites to sales from catalogs, direct
telephone marketing and the Internet to satisfy the product and service needs
of the sporting goods market, especially the institutional market. Collegiate
Pacific believes the most successful sporting goods companies will be those
with greater financial resources and the ability to produce or source
high-quality, low cost products, deliver those products directly to customers
on a timely basis without the middleman and access distribution channels with
a broad array of products and brands. We believe we are well positioned to grow our business because of our
superior catalog design, our efficient merchandising and direct distribution
capabilities, our 125 person direct sales force, our extensive product offerings, our long-term customer
relationships, our superior customer service, and our superior sourcing
capabilities. Since commencing operations in 1998, Collegiate Pacifics annual
sales grew to approximately $39.6 million in fiscal 2004 through a combination
of internal growth and strategic acquisitions. Collegiate Pacific was originally incorporated in Pennsylvania in 1987
under the name Drug Screening Systems (DSSI). In 1997, DSSI sold
substantially all of its assets and suspended business operations. Collegiate
Pacific commenced business operations in February 1998 by selling a controlling
interest in the Company to Michael J. Blumenfeld and Adam Blumenfeld. Mr.
Michael Blumenfeld sold all of the assets of Collegiate Pacific Inc. f/k/a
Nitro Sports, Inc., a company he formed in 1997 to engage in the catalog and
mail order of sports equipment, to the Company, at cost. We changed our name
to Collegiate Pacific at that time and in July 1999 reincorporated the Company
as a Delaware corporation. We currently have three wholly owned subsidiaries,
Tomark Sports, Inc. a Delaware corporation, Kesslers Team Sports, Inc., a
Delaware corporation, and Dixie Sporting Goods Co., Inc., a Virginia
corporation. Collegiate Pacifics common stock currently trades on the American Stock
Exchange (symbol: BOO). Our executive offices are located at 13950 Senlac
Drive, Suite 100, Dallas, Texas 75234 and our telephone number at that location
is (972) 243-8100. The Companys fiscal year ends on
June 30th. References
herein to fiscal 2003, fiscal 2004, and fiscal 2005 refer to our fiscal
years ended or ending, as the case may be, June 30, 2003, 2004, and 2005,
respectively. Our Internet website is www.cpacsports.com. Collegiate Pacific makes
available, free of 2




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charge, on or through the website, its annual, quarterly and current
reports, and other SEC filings, including Forms 3, 4 and 5, as well as any
amendments to those reports, as soon as reasonably practicable after
electronically filing those reports with the Securities and Exchange
Commission. This website address is intended to be an inactive textual
reference only, and none of the information contained on the website is part of
this report or is incorporated in this report by reference. 2004 Acquisitions On January 9, 2004, Collegiate Pacific completed the acquisition of
Corona, California based Tomark, Inc. (Tomark) in a merger transaction
pursuant to which the two former stockholders of Tomark, Mr. Tom White and Mr.
Mark Harpin, received a combination of cash, notes and shares of our common
stock. Tomark is a marketer, distributor, manufacturer and installer of
sporting goods and related equipment primarily to the institutional market in
the State of California. Our wholly owned subsidiary, Tomark Sports, Inc.
employs Messrs. White and Harpin. We recently acquired two team dealers, discussed below. A team dealer
sells its products primarily to schools and colleges in its local market
through a road sales force and a local sporting goods store-front operation.
We believe we are now the largest team dealer in the United States and can now
offer the local institutional customers and teams our broad product line of
sporting goods equipment, team uniforms and physical education, recreational
and leisure products and equipment. On April 1, 2004, Collegiate Pacific completed its acquisition of
substantially all of the operating assets of Richmond, Indiana based Kesslers
Sport Shop, Inc. (now known as RPD Services, Inc.) in exchange for a
combination of cash and shares of our common stock. Our wholly owned
subsidiary, Kesslers Team Sports, Inc. (Kesslers), employs the former
management team of RPD Services, Inc., Bob, Phil and Dan Dickman. Kesslers is
a leading supplier of team uniforms and sporting goods equipment throughout the
Mid-Western United States. On July 26, 2004, after the end of our fiscal 2004, we completed our
acquisition of Richmond, Virginia based Dixie Sporting Goods Co., Inc. in
exchange for a combination of cash, notes and shares of our common stock. Our
wholly owned subsidiary, Dixie Sporting Goods Co., Inc. (Dixie) now employs
the former management team of Dixie, Ken and Michael Caravati. Dixie is a
leading supplier of team uniforms and sporting goods equipment throughout the
Mid-Atlantic United States. Our operating results for fiscal 2004 do not
include the operating results for our acquisition of Dixie. See Item 6. 
Managements Discussion and Analysis of Financial Condition and Results of
Operations for details. As its primary goal, Collegiate Pacifics management seeks to optimize the
collective and individual performance of these businesses. We have strived to
identify areas in which these businesses are unique and areas in which they
overlap. In those areas where our businesses are unique, Collegiate Pacific
seeks to promote and develop those unique qualities by integrating them into
all of our distribution channels. As an example of this integration,
Collegiate Pacific has enhanced Kesslers and Dixies existing offering of
uniform related products with the infusion of approximately 2,500 Collegiate
Pacific proprietary products into their marketing mix. Collegiate Pacific has
designed catalogs for Kesslers and Dixie that showcase both uniforms and
sporting goods equipment. Likewise, certain uniform lines from Kesslers and
Dixie have been integrated into the Collegiate Pacific catalog. In those areas where our businesses overlap, Collegiate Pacific endeavors
to integrate those 3




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areas to build on inherent synergies, develop collective vision and
maximize cost efficiencies. An example of this effort is reflected in the
recent integration of the Collegiate Pacific and Tomark manufacturing and
assembly capabilities in our Dallas, Texas facility. See Item 2.
 Description of Property
for details. We believe we can more effectively monitor the quality of
products while at the same time be able to realize cost savings for our
customers. For additional information on these acquisitions, see Note 3 to Notes to
Consolidated Financial Statements. Products and Services We believe we offer a broad line of sporting goods and equipment, team
uniforms, and physical education, recreational and leisure products. We offer
over 4,500 products for sale. We manufacture approximately 15% of our
equipment-oriented products and obtain the remainder from external
manufacturers both domestically and abroad. Our product lines of sporting
goods include but are not limited to equipment and team uniforms for the
following sports: football; baseball; softball; basketball; volleyball; soccer;
tennis and other racquet sports. Our line of equipment for these sports
includes but is not limited to inflatable balls, nets, batting cages,
scoreboards, bleachers, weight lifting equipment, standards and goals. We also
offer other recreational products including fitness equipment, camping
equipment, indoor recreational games and outdoor playground equipment. We also
provide after-sale customer service through toll-free numbers. Because we believe brand recognition is important to our institutional
customers, we market most of our products under trade names or trademarks owned
by us or others. The following table lists Collegiate Pacifics principal
products and the brand names under which they are sold: Product
    
    Brand NameTeam sports apparel
    
    Nike, Russell,
Wilson, Adidas andUnder ArmourBatting cages, soccer goals, basketball goals
    
    FunNetsTennis nets and court equipment
    
    EdwardsCamping and related accessories
    
    Mark OneBaseballs, softballs, bats, gloves and accessories
    
    Wilson, Rawlings,and Mark OneFootball helmets, footballs, pads and accessories
    
    SchuttBasketballs
    
    Spaldingand Mark One
 Team Sports Apparel. Adidas, Nike, Russell, Wilson and Under Armourare
all leading suppliers of team sports apparel. Under the terms of
non-exclusive supply arrangements we have with these manufacturers, we
purchase team uniforms from these manufacturers for resale to our
customers and either complete the custom
silk screening, embroidering and other decorating work on the uniforms in-house
or through subcontractors, or arrange to have the manufacturer complete the
custom decorating of the uniforms prior to shipment. Cages, Goals and Camping Equipment. We own the registered trademarks
FunNetsand Mark Oneand manufacture or source from overseas manufacturers our
proprietary products such as batting cages, bleachers, soccer and basketball
goals and volleyball standards. We generally recognize a higher profit margin
from the sale of our proprietary products. Tennis. In February 2000, we entered into an exclusive license agreement
with Edwards Sports Products Limited to use the Edwardsname in connection with
manufacturing, selling and 4




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distributing tennis nets and court equipment worldwide, except in the
United Kingdom and Ireland. We are required to pay a royalty of 4.5% of the
net sales price of all Edwardsproducts we sell. We paid Edwards a total
royalty of approximately $20,000 in fiscal 2004. The term of this license
expires in February 2011. Baseball and Softball. Rawlingsand Wilsonare leading suppliers of
baseball and softball equipment. We have non-exclusive supply arrangements
with these manufacturers under which we acquire baseball gloves, baseballs,
softballs, batters helmets, catchers and umpires protective equipment,
aluminum and wood baseball bats, batters gloves and miscellaneous accessories
for resale to our customers. We also manufacture or source these
products from overseas manufacturers and offer them to our customers
under our Mark One brand name. Football. Schuttis a leading supplier of football equipment. Under the
terms of the non-exclusive supply arrangement we have with Schutt, we purchase
helmets, shoulder pads, faceguards, chin straps and related accessories in both
the youth and adult markets for resale to our customers. Basketball. Spaldingsells several different models of basketballs for
men and women in both the youth and adult markets. Under the terms of the
non-exclusive supply arrangement we have with Spalding, we acquire basketballs
for resale to our customers. We also manufacture or source basketballs from
overseas manufacturers and sell them under our Mark One brand name. Certain of our brand names, such as Adidas, Nike, Russell, Schutt,
Spalding, Wilson, Under Armour, Edwards, Mark Oneand FunNetsare believed by
Collegiate Pacific to be well recognized by our customers and therefore
important to the sales of these products. We do not have written supply
agreements with any of our suppliers. Registered and other trademarks and
trade names of Collegiate Pacifics products are italicized in this Form
10-KSB. Sales and Marketing We believe we are the fastest growing direct manufacturer, marketer and
distributor of sporting goods to the institutional market in the United States.
Through our recently acquired road sales professionals, we offer our complete
line of sporting goods and equipment, team uniforms, and physical education,
recreational and leisure products to our traditional accounts such as colleges,
universities, high schools, and all other levels of public and private schools
and their athletic and recreational departments. We continue to utilize our
distinctive catalogs to offer our complete line of sporting goods and
equipment, team uniforms, and physical education, recreational and leisure
products to our non-traditional accounts such as youth sports programs, park
and recreational organizations, churches, government agencies, athletic clubs
and dealers. Our master mailing list currently includes over 300,000 potential
customers, and we intend to distribute approximately 1.5 million catalogs and
fliers to this audience during fiscal 2005. Michael J. Blumenfeld, the Chairman
and Chief Executive Officer of the Company with over 30 years of experience in
the industry, supervised the development of this mailing list, which is
carefully maintained, screened, crosschecked and safeguarded. We subdivided
our mailing list into various combinations designed to place catalogs in the
hands of the individuals making the purchasing decisions. The master mailing
list is also subdivided by relevant product types, seasons, and customer
profiles. We also use other forms of solicitations such as trade shows,
telemarketing, and the Internet. We believe we have established ourselves as a market leader by combining
the direct sales of our products through our catalogs and fliers with our road
sales by our team dealer sales professionals, all of which are enhanced by the
continuous updates and additions to our product lines. 5




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Customers We do not depend upon any one or a few major customers for our revenues
because we enjoy a very large and diverse customer base. Since commencing
operations, we have sold our products to approximately 80,000 customers. Our
customers include all levels of public and private schools, youth sports
programs, park and recreational organizations, churches, clubs, camps,
government agencies, military facilities, athletic teams, athletic clubs and
team dealers. Many of our institutional customers typically receive annual
appropriations for sports related equipment, which are generally spent in the
period preceding the season in which the sport or athletic activity occurs.
Although institutions are subject to budget constraints, once allocations have
been made, aggregate levels of expenditures are typically not reduced. Approximately 4.0% and 3.0% of our sales in fiscal 2003 and 2004,
respectively, were to agencies of the United States Government. We have a
contract with the General Services Administration that grants us an approved
status when attempting to make sales to military installations or other
governmental agencies. The existing contract with the General Services
Administration expires in August 2009. Under this contract, we agree to sell
approximately 250 products to United States government agencies and departments
at catalog prices or at prices consistent with any discount provided to our
other customers. Products sold to the United States Government under the
General Services Administration contract are always sold at our lowest offered
price. Seasonal Nature of Business; Backlog Sales of our sporting goods are generally seasonal, although we have
reduced this seasonality by acquiring our Kesslers Team Sports and Dixie
Sporting Goods team dealers. This seasonality causes our financial results to
vary from quarter to quarter, which usually results in lower sales and earnings
in the second quarter of our fiscal year (October through December) and higher
sales and earnings in the first and fourth quarters of our fiscal year (July
through September and April through June, respectively). We attribute this
seasonality primarily to the budgeting procedures of many of our institutional
customers and the seasonal demand for our products. Generally, between the
months of October and December of each fiscal year, there is a lower level of
sports activities at our institutional customers, a higher degree of adverse
weather conditions and a greater number of school recesses and major holidays. Our sales are primarily pursuant to standard purchase orders. We ship
products within 30 days of receiving an order, and for most orders, within 24
hours. Unshipped orders at the end of a fiscal year (backlog) are not material
and, therefore, not an indicator of future results. However, with the acquisition of
Kesslers and Dixie, our backlog will increase because our team
uniform sales orders have a longer lead time for delivery; generally
six to eight weeks between order placement and delivery. These goods are either shipped
directly from our manufacturing partners to the customers or directly to our
customers by us upon our completion of all decorating work. Consequently, we
expect our backlog will be higher in future periods. Manufacturing; Foreign Sourcing and Raw Materials We outsource the manufacturing of most of our products to domestic and
international vendors. Outsourcing enables us to reduce our cost of goods,
reduce our manufacturing facility costs, and enables us to focus on the
marketing and distribution of our products. In addition, we believe that many
of the products we purchase from our domestic suppliers are manufactured
overseas and we derive a significant portion of our revenues from the sale of
products purchased directly from suppliers in the Far East. Accordingly, we are
subject to the risks of this international component that may affect our
ability to deliver products in a timely and 6




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competitive manner. These risks include:  
    
    shipment delays;
    
    fluctuation in exchange rates;
    
    increase in import duties;
    
    changes in customs regulations;
    
    adverse economic conditions in foreign countries; and
    
    political turmoil. As a result, we attempt to maintain a three to six week supply of critical
inventory items. We are not dependent on any single source of supply.
Although the vast majority of products we distribute are purchased in final
form, a small percentage of the items require minor fabrication to complete. We
own welding machines and an assortment of tools to aid in this fabrication
process. The raw materials used in this process are in the form of shipping
supplies, nuts and bolts, and other commercially available products. We believe
multiple suppliers exist for these products nationwide. Competition We compete principally in the institutional market with local sporting
goods dealers and other direct mail companies, which collectively dominate the
institutional market. We compete on a number of factors, including price,
relationships with customers, name recognition, product availability and
quality of service. We believe we have an advantage on the institutional
market over traditional sporting goods retailers because our selling prices do
not include comparable price markups attributable to wholesalers,
manufacturers, and distributors. In addition, we believe we have an advantage
over other direct mail marketers and team dealers of sporting goods because we
offer superior products, coupled with prompt and accessible service, at the
most competitive prices. Government Regulation Some of our products are subject to regulation by the Consumer Product
Safety Commission. The Consumer Products Safety Commission has the authority to
exclude from the market certain items that are found to be hazardous and can
require a manufacturer to refund the purchase price of products that present a
substantial product hazard to consumers. Similar laws exist in some states and
cities in the United States. The Company believes it is in full compliance
with all applicable regulations. Employees We currently employ approximately 400 people on a full-time basis. In
addition, we may hire temporary employees as seasonal increases in demand
occur. None of our employees are represented by any organized labor
organization or union, and we believe our relations with our employees are
generally good. 7




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ITEM 2. DESCRIPTION OF PROPERTY. Collegiate Pacifics facilities for its management and operations are
generally adequate for its current and anticipated future needs. Collegiate
Pacifics facilities generally consist of executive and administrative offices,
warehouses, a call center, production and distribution facilities and sales
offices. All of Collegiate Pacifics leases are at prevailing market, or most
favorable rates and, except as noted, with unaffiliated parties. Collegiate
Pacific believes that the duration of each lease is adequate. Collegiate
Pacific believes that its principal properties, all of which are leased, are
adequate for the purposes for which they are used and are suitably maintained
and insured for these purposes. Collegiate Pacific does not anticipate any
future problems renewing or obtaining suitable leases for its principal
properties. The table below provides information with respect to the principal
warehouse, production and distribution facilities of the Company: Location
    
    Type of Facility
    
    Square FootageDallas, Texas
    
    Warehouse, Production and Distribution
    
    
    88,000Richmond, Indiana
    
    Warehouse, Production and Distribution
    
    
    76,000Richmond, Virginia
    
    Warehouse, Production and Distribution
    
    
    20,000Corona, California
    
    Warehouse, Production and Distribution
    
    
    27,700
 The corporate headquarters of Collegiate Pacific and its call center is
located within the approximately 88,000 square feet of leased space located at
13950 Senlac Drive, Suite 100, Dallas, Texas. The terms of Collegiate
Pacifics leases range from two to five years and most are renewable for
additional periods. The Richmond, Indiana location is owned by RPD Services,
Inc., an Indiana corporation f/k/a Kesslers Sport Shop, Inc., from which we
acquired substantially all of its operating assets in April 2004. RPD
Services, Inc. is owned by Bob Dickman, Phil Dickman and Dan Dickman, all of
whom are employed by our wholly owned subsidiary, Kesslers Team Sports, Inc.
We also lease small sales offices or storage areas ranging in size from 500 to
10,000 square feet in the following locations: Cleveland and Columbus, Ohio;
Gulfport, Mississippi; Crown Point, Fort Wayne, Indianapolis, KoKomo, and
Portland, Indiana; Knoxville and Memphis, Tennessee; Little Rock, Arkansas;
Norcross and Woodstock, Georgia; Springfield, Illinois; and Tulsa, Oklahoma.
Most of the leases have lease terms ranging from one to five years. 
 ITEM 3. LEGAL PROCEEDINGS. None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 8




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PART II 
 ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES. Market Our common stock trades on the American Stock Exchange under the symbol
BOO. The following table sets forth the high and low sale prices for our
common stock during each of the periods indicated, as reported on the American
Stock Exchange. Fiscal 2004
    
    Fiscal 2003Calendar Period
    
    Low
    
    High
    
    Low
    
    HighJuly 1  September 30
    
    $
    6.50
    
    
    $
    8.10
    
    
    $
    4.70
    
    
    $
    6.15October 1  December 31
    
    
    7.50
    
    
    
    9.27
    
    
    
    5.75
    
    
    
    6.35January 1  March 31
    
    
    8.75
    
    
    
    10.30
    
    
    
    4.15
    
    
    
    5.92April 1  June 30
    
    
    8.95
    
    
    
    11.30
    
    
    
    4.56
    
    
    
    6.65
 Holders As of September 20, 2004, there were approximately 335 holders of record
of our common stock, and there were 10,045,399 shares of common stock issued
and outstanding. Dividends We began paying a cash dividend of $0.02 per share on October 11, 2002, to
all shareholders of record on September 30, 2002. We also declared a quarterly
cash dividend of $0.02 per share on outstanding common stock for the fiscal
quarters ended December 31, 2002 and March 31, 2003. The quarterly dividend
for the quarters ended June 30, 2003, September 30, 2003, December 31, 2003,
March 31, 2004 and June 30, 2004, was increased to $0.025 per share. Since
commencing cash dividends, we have paid approximately $829,448 to our
shareholders. Future dividends may be paid only when, as, and if declared by
our Board of Directors in its sole discretion, and will be dependent upon then
existing conditions, including the Companys financial condition, results of
operations, contractual restrictions, capital requirements, business prospects,
and such other factors as the Board deems relevant. Transfer Agent, Registrar and Dividend Disbursing Agent for Common Stock Continental Stock Transfer and Trust Company     
17 Battery Place     
New York, NY 10004 9




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##### Table of Contents



The table below shows information related to our equity compensation plans
as of September 20, 2004: Equity Compensation Plan Information Number of SecuritiesRemaining Available forNumber of Securities
    
    
    
    
    
    Future Issuance Underto be Issued Upon
    
    Weighted-Average
    
    Equity CompensationExercise of
    
    Exercise Price of
    
    Plans (excludingOutstanding Options,
    
    Outstanding Options
    
    Securities Reflected inWarrants and Rights
    
    Warrants and Rights
    
    Column (a))Plan Category
    
    (a)
    
    (b)
    
    (c)Equity Compensation
Plans Approved by
Security Holders
    
    
    1,025,800
    
    
    $
    7.24
    
    
    
    224,300Equity Compensation
Plans Not Approved
by Security Holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,025,800
    
    
    $
    7.24
    
    
    
    224,300
 10




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##### Table of Contents



ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. Certain statements in Managements Discussion and Analysis are
forward-looking as defined in the Private Securities Litigation Reform Act of
1995. These statements are based on current expectations that are subject to
risks and uncertainties. Actual results may differ materially from expectations
as of the date of this filing because of the factors discussed below under the
Factors That Could Affect Future Results section and elsewhere in this Annual
Report. Collegiate Pacific Inc. (Collegiate Pacific, we, us, our, or the
Company) is a premier marketer, manufacturer and distributor of sporting
goods and equipment, team uniforms, physical education, recreational and
leisure products primarily to the institutional market in the United States.
The institutional market generally consists of youth sports programs, park and
recreational organizations, schools, colleges, churches, government agencies,
athletic teams, athletic clubs and dealers. We sell our products directly to
our customers primarily through the distribution of our unique, informative
catalogs and fliers, our strategically located road sales professionals, our
telemarketers and the Internet. We offer a broad line of sporting goods and
equipment and other recreational products, as well as provide after-sale
customer service. We currently market approximately 4,500 sports related
equipment products, team uniforms and recreational related equipment and
products to over 300,000 potential institutional, retail, Internet, sports
teams and sporting good dealer type customers. Since commencing operations in
early 1998, we have sold our products to approximately 80,000 customers.
References herein to fiscal 2003, fiscal 2004 and fiscal 2005 refer to
our fiscal years ended or ending, as the case may be, June 30, 2003, 2004 and
2005, respectively. Overview We believe that over the past few years the consolidation of the
traditional team dealers and the small, independent sporting goods retailers is
leading to a consolidation of the sporting goods industry. We believe this
consolidation of the sporting goods industry has contributed to the shift of
sales from traditional, retail store front sites to sales from catalogs, direct
telephone marketing and the Internet to satisfy the product and service needs
of the sporting goods market, especially the institutional market. Collegiate
Pacific believes the most successful sporting goods companies will be those
with greater financial resources and the ability to produce or source
high-quality, low cost products, deliver those products directly to customers
on a timely basis without the middleman and access distribution channels with
a broad array of products and brands. As a result of this market trend, Collegiate Pacific has embarked upon an
aggressive program to leverage its existing operations and to complement and
diversify its product offerings within the sporting goods and recreational
products. We intend to implement our internal growth strategy by continuing to
improve operating efficiencies, extending our product offerings through new
product launches and maximizing our distribution channels. In addition,
Collegiate Pacific will seek strategic acquisitions and relationships with
other sporting goods companies with well established brands and with
complimentary distribution channels. During fiscal 2004, Collegiate Pacific made significant progress towards
achieving its strategic objectives as follows:  
    
    Acquiring by merger Corona, California based Tomark Inc., a
leading distributor and installer of sporting goods and related
equipment, establishing Collegiate Pacifics presence on the west
coast; 11




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##### Table of Contents




    
    Acquiring substantially all of the operating assets of
Richmond, Indiana based Kesslers Sport Shop, Inc., one of the
largest team dealers in the United States, establishing Collegiate
Pacifics presence as a team dealer and adding team uniforms to its
product line;
    
    Balancing the seasonality of its business and strengthening
its customer relationships by acquiring the team dealer discussed
above;
    
    Expanding its football and baseball product offerings through
the acquisitions discussed above, which provides the Company with an
additional platform for future growth opportunities;
    
    Introducing a number of new products during fiscal 2004 as a
means to drive organic growth; and
    
    Replacing its revolving line of credit with a new revolving
credit facility of $12 million, which provides the Company with more
opportunity and flexibility to make progress towards its strategic
objectives. Collegiate Pacific has begun to see results from its efforts reflected in
its financial performance. Net sales for fiscal 2004 improved 87.7% to $39.6
million from fiscal 2003 due primarily to the acquisitions Collegiate Pacific
completed during fiscal 2004, as well as organic growth from the sale of the
Companys existing products. Gross profit improved to $14.2 million, or 35.9%
of net sales, in fiscal 2004 compared to $7.8 million, or 37.0% of net sales,
in fiscal 2003. The decrease in gross margin for fiscal 2004, compared to
fiscal 2003, was mainly due to the increase in sales of soft good
products, which
generally have slightly lower gross margins. Other factors which affect gross
margin are the cost of freight, which is influenced by oil prices, the cost of
raw materials used in the manufacturing process and the Companys ability to
timely pass these changes to variable costs on to its customers. Operating
profit for fiscal 2004 increased to $3.2 million, or 8.1% of net sales, as
compared to operating profit of $968 thousand, or 4.6% of net sales, in fiscal
2003. The increase in operating profit reflects higher sales volume, partially
offset by higher selling and general and administrative expenses. The increase
in selling, general and administrative expenses in fiscal 2004 was attributable
to Collegiate Pacifics acquisitions during fiscal 2004, an increase in
personnel related costs incurred in connection with additional sales personnel
and a slight increase in general insurance costs incurred in connection with
the Companys growth. Unlike our operating results for fiscal 2003 that
included an income tax benefit, our operating results for fiscal 2004 included
a provision for income taxes. Matters Affecting Comparability Collegiate Pacifics operating results for fiscal 2004 include the
operating results for its acquisitions completed during fiscal 2004, beginning
with the date of each acquisition. Approximately $13.8 million of the $18.5
million increase in net sales, when compared to fiscal 2003, is attributable to
Collegiate Pacifics acquisitions during fiscal 2004 as discussed below.
However, our operating results for fiscal 2004 do not include any operating
results for our acquisition of all of the outstanding stock of Dixie Sporting
Goods Co., Inc., which we completed in July 2004. Our acquisition of Dixie will
be reflected in the operating results we report in our quarterly report on Form
10-QSB for the first three months of fiscal 2005 ending on September 30, 2004. 12




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##### Table of Contents



Consolidated Results of Operations The following table compares selected financial data from the Consolidated
Statements of Operations for fiscal 2004 and fiscal 2003: Fiscal 2004 vs. Fiscal 2003Increase/(Decrease)Fiscal 2004
    
    Fiscal 2003
    
    Dollars
    
    Percentage(dollars in thousands, except per share amounts)Net sales
    
    $
    39,562
    
    
    $
    21,076
    
    
    $
    18,486
    
    
    
    87.7
    %Gross profit
    
    
    14,189
    
    
    
    7,807
    
    
    
    6,382
    
    
    
    81.7
    %Operating profit
    
    
    3,204
    
    
    
    968
    
    
    
    2,236
    
    
    
    230.9
    %Net income
    
    
    1,884
    
    
    
    1,254
    
    
    
    630
    
    
    
    50.2
    %Diluted earnings per share
    
    $
    0.25
    
    
    $
    0.27
    
    
    $
    (0.02
    )
    
    
    (7.4
    )%
 Expressed as a percentage of sales: Fiscal 2004
    
    Fiscal 2003Gross margin (a)
    
    
    35.9
    %
    
    
    37.0
    %Selling, general and administrative expense
    
    
    27.5
    %
    
    
    32.2
    %Operating
profit
    
    
    8.1
    %
    
    
    4.6
    %
   (a)
    
    Gross margin is defined as gross profit divided by net sales as presented
in the Consolidated Statements of Operations. Acquisitions On January 9, 2004, Collegiate Pacific completed the acquisition of
Tomark, Inc. (Tomark), in a merger transaction. Tomark, a privately held
company founded in 1985, is a marketer, distributor, manufacturer and installer
of sporting goods and related equipment primarily to the institutional market
in the State of California. We paid the former stockholders of Tomark, a total
of $5.25 million (excluding transaction costs), which consisted of $2.5 million
in cash, $250 thousand in promissory notes and 270,562 shares of our common
stock valued at $2.5 million. Our wholly owned subsidiary, Tomark Sports, Inc.
employs the two former Tomark stockholders. The results of operations of
Tomark, since the date of acquisition, have been included in our consolidated
financial statements for the fiscal year ended June 30, 2004. On April 1, 2004, Collegiate Pacific completed the acquisition of
substantially all of the operating assets of Kesslers Sport Shop, Inc. (now
known as RPD Services, Inc.; Kesslers), in exchange for cash and shares of
our common stock. Kesslers, a privately held company founded in 1964, is one
of the nations largest team dealers of sporting goods, team apparel and
related equipment. We paid Kesslers a total of approximately $13.75 million
(excluding transaction costs and the assumption of approximately $4.7 million
of existing debt), which consisted of 906,250 shares of our common stock valued
at $7.25 million and a cash payment of $6.5 million. We also agreed to
repurchase from Kesslers for cash on the two year anniversary of the effective
date of the registration statement covering the 906,250 shares (August 20,
2006), any of those shares that have not been sold by Kesslers as of that
two-year anniversary for a per share price of $8.00 (the same price we used to
determine the number of shares of our common stock to issue to Kesslers), but
only so long as Kesslers (a) sells at least 2,000 shares of our common stock on
each 13




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##### Table of Contents



trading day after August 20, 2004, and (b) does not reject any offer to
purchase any of our shares from Kesslers at or above a price that is not less
than 10% below the then current market price of
our common stock as reported on AMEX, if the number of shares subject to
the offer is more than 50,000 shares, or at or above a price that is not less
than 7% below the then current market price as reported on AMEX, if the number
of shares subject to the offer is equal to or less than 50,000 shares.
Alternatively, if all 906,250 shares have been sold by Kesslers as of August
20, 2006, and Kesslers has complied with the terms of (a) and (b) above, we
agreed to pay Kesslers an amount in cash equal to the difference between $7.25
million and the total sales proceeds received by Kesslers from sales of our
common stock. Our wholly owned subsidiary, Kesslers Team Sports, Inc., employs the three
former managers of Kesslers. We also entered into a lease with RPD Services,
Inc. for its 76,000 square foot warehouse and distribution facility in
Richmond, Indiana. The term of the lease runs through early 2009 and the
monthly rental rate is $11,400. See Item 2.  Description
of Property above. The results
of operations of Kesslers, since the date of acquisition, have been included in
our consolidated financial statements for the fiscal year ended June 30, 2004. On July 26, 2004, after the end of our fiscal 2004, we completed our
acquisition of Richmond, Virginia based Dixie Sporting Goods Co., Inc. in
exchange for a combination of cash, notes and shares of our common stock. Our
wholly owned subsidiary, Dixie Sporting Goods Co., Inc. (Dixie) now employs
the former management team of Dixie. Dixie is a
leading supplier of team uniforms and sporting goods equipment throughout the
Mid-Atlantic United States. Our operating results for fiscal 2004 do not
include the operating results for our acquisition of Dixie. Fiscal Year Ended June 30, 2004 Compared to Fiscal Year Ended June 30, 2003 Net Sales.Net sales for fiscal 2004 totaled $39.6 million compared to
$21.1 million in fiscal 2003, an increase of $18.5 million, or 87.7%. Net
sales grew by a combined $13.8 million from the businesses acquired during
fiscal 2004 and the growth in our existing catalog operations of approximately
$4.7 million. The increase in sales for our existing catalog operations was
due to our expanded product offerings and the overall growth in our customer
base. We believe future net sales will continue to rise from current levels,
however, no assurances can be made that any future increases in net sales will
be at the same rate. We also believe that seasonality in our net sales will
continue to be a factor in future periods because of the budgeting procedures
of our customers and the seasonal demand for our products. We
believe, however, we
have reduced this seasonality of our net sales by acquiring Kesslers and Dixie.
As a result, we continue to see an increase in demand for our products during
the first and fourth quarters of our fiscal year (July through September and
April through June, respectively). Gross Profit.Gross profit for fiscal 2004 was $14.2 million, or 35.9% of
net sales, compared with $7.8 million, or 37.0% of net sales, in fiscal 2003.
The improvement in gross profit dollars for the year was attributable to the
increase in sales volume. The decrease in gross margin for fiscal 2004,
compared to fiscal 2003,was mainly due to the increase in
sales of soft good products,
which generally have slightly lower gross margins. In fiscal 2004, Tomark and
Kesslers contributed a combined gross profit of $4.7 million and gross profit
percentage of 34.1%. Other factors which affect gross profit are the cost of
freight, which is influenced by oil prices, the cost of raw materials used in
the manufacturing process and the Companys ability to timely pass these
changes to variable costs on to its customers. Selling, General and Administrative Expense.Selling, general and
administrative expenses for fiscal 2004 were $10.9 million, or
27.5% of net
sales, compared with $6.8 million, or 32.2% of net sales, in fiscal 2003. The
increase in fiscal 2004 was attributable to Collegiate Pacifics 14




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##### Table of Contents



acquisitions
in fiscal 2004, which resulted in increased expenses of $3.3 million, an
increase in personnel related costs incurred in connection with additional
sales personnel and a slight increase in general insurance costs incurred in
connection with the Companys growth. Operating Profit.Operating profit for fiscal 2004 increased to $3.2
million, or 8.1% of net sales, compared to operating profit of $968 thousand,
or 4.6% of net sales, in fiscal 2003. The increase in operating profit is
mainly attributable to higher sales volume, partially offset by higher selling
and general and administrative expenses. Interest Expense.Interest expense for fiscal 2004 decreased to $52
thousand, or 38.0%, compared with $85 thousand in fiscal 2003. The decrease in
interest expense was primarily attributable to lower average borrowing levels
during fiscal 2004, which can be attributed to the funds received from the
exercise of the warrants, and lower interest rates. See Liquidity and Capital
Resources. Income Taxes.Income tax expense for fiscal 2004 increased to $1.3
million. The Company eliminated its valuation allowance on net deferred tax
assets at the end of fiscal 2003 and recorded an income tax benefit of $350
thousand during fiscal 2003. Income tax expense for fiscal 2003, would have
been approximately $330 thousand had the Company not reversed the valuation
allowance. The Company expects to record tax expense on all future net income
at the Companys effective tax rate, which was 41.0% for fiscal 2004. Net Income.Net income for fiscal 2004 increased to $1.9 million, or 4.8%
of net sales, compared to net income of $1.3 million, or 6.0% of net sales, in
fiscal 2003. The increase in net income was attributable to increased sales
activity, as well as a decrease in selling, general and administrative expenses
as a percentage of net sales, all of which was offset by the increase in income
tax expense. Liquidity and Capital Resources Cash and cash equivalents totaled approximately $7.5 million at June 30,
2004, compared to $366 thousand at June 30, 2003. Collegiate Pacifics
operating activities provided $151 thousand in cash during fiscal 2004 compared
to approximately $214 thousand in fiscal 2003. The decrease in cash provided
by operating activities is due to an increase in accounts receivable and
inventories during the year. Net cash used in investing activities was $12.9 million, compared to $222
thousand in fiscal 2003. The increase in cash used in fiscal 2004 was due to
cash used for acquisition activities during fiscal 2004 of $12.6 million, which
is net of the amount of cash acquired in connection with acquisition
activities. No material commitments for capital expenditures existed as of
June 30, 2004. Cash provided by financing activities in fiscal 2004 was $19.8 million
compared with $106 thousand for fiscal 2003. The cash provided by financing
activities in fiscal 2004 compared to cash provided in the prior fiscal year
was due to an increase in cash of $21.3 million from the exercise of
outstanding options and warrants, partially offset by the payment of cash
dividends in the amount of $573 thousand, repayments of long-tem debt in the
amount of $865 thousand and the purchase of treasury shares in the amount of
$41 thousand. On April 14, 2004, the Company announced its Board of Directors had
unanimously authorized the Company to call all outstanding warrants for
cancellation effective as of May 21, 2004. Any warrant that was not exercised
by the close of business on May 20, 2004, was cancelled and became entitled to
receive $0.05 for each share of Collegiate Pacifics common 15




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##### Table of Contents



stock that could
have been acquired upon the exercise of the warrant prior to cancellation. The
per share exercise price of the warrants was $5.00 per share. Of the 4,244,607 warrants that were originally issued by us as a
dividend to our stockholders in May 2000, a total of 4,199,599 warrants were
exercised during fiscal 2004 before the cancellation date and approximately
45,008 were cancelled, which required the Company to pay those former holders a
total of approximately $2,250 upon cancellation. As a result, the Company
received a total of $20.9 million from the exercise of warrants during fiscal
2004. Of that amount, the Company received approximately $5.0 million, before
commissions and expenses, in a single transaction from the exercise of 1.0
million warrants by Roth Capital Partners, LLC (Roth). Roth purchased the
1.0 million warrants from Michael J. Blumenfeld, the Companys Chairman and
Chief Executive Officer. In October 2003, Mr. Blumenfeld completed an offering
on a firm commitment basis directly to Roth of 1.0
million warrants held by Mr. Blumenfeld at a per warrant price of $1.95. Under
the terms of the offering, Roth immediately exercised the Warrants and
the Company issued 1.0 million shares of its common stock directly to Roth. Roth sold these shares to institutional investors at a price
of $6.95 per share. The Company paid a commission to Roth of $480
thousand in connection with the sale of the warrants in the offering and the
issuance to Roth of the shares of common stock upon Roths
exercise of the warrants. The Company used the net proceeds it received from
the exercise of the warrants for working capital and general corporate
purposes, as well as to finance the acquisitions we completed during fiscal
2004. Current assets as of June 30, 2004, totaled approximately $28.0 million,
thereby providing the Company with working capital of approximately $20.7
million. The Companys principal external source of liquidity is its $12.0 million
revolving line of credit with Merrill Lynch Business Financial Services Inc.
(the Credit Facility) collateralized by all of the assets of Collegiate
Pacific and its subsidiaries. Total availability under the Credit Facility is
determined by a borrowing formula based on eligible trade receivables and
inventories that provides for borrowings against up to 80% of its eligible
trade receivables and 50% of its eligible inventories, but not to exceed $12
million. The Credit Facility expires on December 31, 2005. Borrowings under
the Credit Facility bear interest at the rate of 2.25% plus the one-month LIBOR
rate (1.35% at June 30, 2004). As of June 30, 2004, there was no balance
outstanding under the Credit Facility, leaving the Company with approximately
$12 million of availability under the terms of the borrowing base formula of
the Credit Facility. The Credit Facility contains customary covenants and the
Company must maintain certain financial ratios pertaining to its fixed charges
and total debt to (a) total net worth and (b) earnings before interest, taxes,
depreciation and amortization. The Company entered into an amendment to the
Credit Facility in August 2004 to clarify the calculations of its financial
ratios after taking into account the Companys recent acquisitions. The Company
is currently in compliance with all financial covenants and management does not
believe that the financial covenants set forth in the Credit Facility will have
an adverse impact on its operations or future plans. The following table summarizes the outstanding borrowings and long-term
contractual obligations of the Company at June 30, 2004, and the effects such
obligations are expected to have on liquidity and cash flow in future periods. 16




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##### Table of Contents



Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    1 year
    
    1 - 3 years
    
    4 - 5 years
    
    5 years(dollars in thousands)Long-term debt (1)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating Leases (2)
    
    
    2,614
    
    
    
    823
    
    
    
    1,342
    
    
    
    449
    
    
    
    Redeemable common stock (3)
    
    
    7,250
    
    
    
    
    
    
    
    7,250
    
    
    
    
    
    
    
    Total contractual cash
obligations
    
    $
    9,864
    
    
    $
    823
    
    
    $
    8,592
    
    
    $
    449
    
    
    $
    
   (1)
    
    See Note 7 to Notes to Consolidated Financial Statements for
additional information on Collegiate Pacifics long-term debt
obligations.(2)
    
    See Note 11 to Notes to Consolidated Financial Statements for
additional information on Collegiate Pacifics operating leases.(3)
    
    See Note 3 to Notes to Consolidated Financial Statements for
additional information on Collegiate Pacifics redeemable common stock
liabilities. We believe the Company will satisfy its short-term and long-term liquidity
needs from borrowings under the Credit Facility and cash flows from operations.
We may experience periods of higher borrowing under the Credit Facility due to
the seasonal nature of our business cycle. We are actively seeking expansion
through acquisitions and/or joint ventures, and the success of such efforts may
require additional bank debt, equity financing, or private financing. Subsequent Events In July 2004, the first month of fiscal 2005, we completed the acquisition
of Dixie Sporting Goods Co., Inc. (Dixie) in exchange for cash, notes and
shares of our common stock. Dixie, a privately held company founded in 1965,
is one of the nations largest team dealers of sporting goods and related
equipment. We acquired all of the outstanding shares of Dixies common stock
in exchange for 148,662 shares of our common stock valued at $1.5 million, a
cash payment of $4.0 million, $0.5 million of notes and up to an additional
$1.0 million in the form of an earnout if the net income of Dixie exceeds
certain target levels in the 17 month period ending December 31, 2005,
resulting in a total purchase price of approximately $7.0 million (excluding
transaction costs). Our wholly owned subsidiary, Dixie Sporting Goods Co.,
Inc., employs the two former Dixie shareholders. The results of operations of
Dixie have not been included in our consolidated financial statements for the
fiscal year ended June 30, 2004. See Note 13 to Notes to Consolidated
Financial Statements. Newly Adopted Accounting
Standards None. Critical Accounting Policies Collegiate Pacifics discussion and analysis of its financial condition
and results of operations are based upon the Companys consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, expenses, and related disclosures
of contingent assets and liabilities. Discussed below are several significant accounting policies, which require
the use of judgments and estimates that may materially affect the consolidated
financial statements. The estimates described below are reviewed from time to
time and are subject to change if the circumstances so indicate. The effect of
any such change is reflected in results of operations for the period in which
the change is made. Establishment of the reserves affecting inventories and 17




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the
allowance for doubtful accounts are among the most important. Our significant
accounting policies are more fully described in Note 2 to Notes to Consolidated
Financial Statements. Inventories.Inventories are valued at the lower of cost or market value.
Cost is determined using the standard cost method for
items manufactured by us and the weighted-average cost method for items purchased for
resale. We record adjustments to our inventories
for estimated obsolescence or diminution in market value equal to the
difference between the cost of inventory and the estimated market value, based
on market conditions from time to time. These adjustments are estimates, which
could vary significantly, either favorably or unfavorably, from actual
experience if future economic conditions, levels of customer demand or
competitive conditions differ from expectations. Because valuing our
inventories requires significant management judgment and our failure to
write-down obsolete inventory could have an impact on our future results of
operations, we believe that the accounting estimate related to our inventories
is a critical accounting estimate. Management of the Company has discussed
the development and selection of this critical accounting estimate with the
audit committee of our Board of Directors and the audit committee has reviewed
the Companys disclosure relating to it in this Annual Report on Form 10-KSB. Allowance for Doubtful Accounts.We evaluate the collectibility of
accounts receivable based on a combination of factors. In circumstances where
there is knowledge of a specific customers inability to meet its financial
obligations, a specific reserve is recorded against amounts due to reduce the
net recognized receivable to the amount that is reasonably believed to be
collected. For all other customers, reserves are established based on
historical bad debts, customer payment patterns and current economic
conditions. The establishment of these reserves requires the use of judgment
and assumptions regarding the potential for losses on receivable balances. If
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required resulting in an additional charge to expenses when made. Because
estimating our uncollectible accounts requires significant management judgment
and our use of different estimates that we reasonably could have used would
have an impact on our reported accounts receivable balance, we believe the
accounting estimate related to our allowance for doubtful accounts is a
critical accounting estimate. Management of the Company has discussed the
development and selection of this critical accounting estimate with the audit
committee of our Board of Directors and the audit committee has reviewed the
Companys disclosure relating to it in this Annual Report on Form 10-KSB. At June 30,
2004, our total allowance for doubtful accounts was approximately $636
thousand, an increase of $514 thousand from fiscal 2003. The increase in the
amount of our allowance for doubtful accounts for fiscal 2004 is mainly
attributable to allowances for doubtful accounts that arose from business acquisitions completed
during fiscal 2004, as well as an increase in accounts receivable at June 30,
2004 compared to June 30, 2003. See Note 2 to Notes to Consolidated Financial
Statements. Intangible Assets.We assess the recoverability of the carrying value of
long-lived assets periodically. If circumstances suggest that long-lived
assets may be impaired, and a review indicates that the carrying value will not
be recoverable, the carrying value is reduced to its estimated fair value. As
of June 30, 2004, the balance sheet includes approximately $17.7 million of
goodwill and intangible assets, net, and $831 thousand of fixed assets, net.
The Company has concluded that no impairment exists. Because estimating the
recoverability of the carrying value of long-lived assets requires significant
management judgment and that our use of different estimates that we reasonably
could have used would have an impact on our reported net long- 18




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lived assets, we
believe that the accounting estimates related to our impairment testing are
critical accounting estimates. Management of the Company has discussed the
development and selection of this critical accounting estimate with the audit
committee of our Board of Directors and the audit committee has reviewed the
Companys disclosure relating to it in this MD&A. Factors that Could Affect Future Operating Results Because of the following factors, as well as other factors affecting our
business, financial position, results of operations and prospects, past
financial performance may not be a reliable indicator of future performance,
and historical trends should not be used to anticipate results or trends in
future periods. Our success depends upon our ability to develop new and enhance our existing
relationships with customers and suppliers. Our success depends upon our ability to develop new and enhance our
existing relationships with customers and suppliers. Our prospects must be
considered in light of the risk, expenses, and difficulties frequently
encountered by companies in the marketing industry. To address these risks, we
must, among other things:  
    
    effectively develop new relationships and maintain existing
relationships with our suppliers, advertisers and customers;
    
    provide products at competitive prices;
    
    respond to competitive developments; and
    
    attract, retain, and motivate qualified personnel. We cannot assure you that we will succeed in addressing such risks. Our
failure to do so could have a material adverse effect on our business,
financial condition, or results of operations in the form of lower revenues and
operating profit and higher operating costs. Our strategic plan, involving growth through the acquisition of other
companies, may not succeed. Collegiate Pacifics strategic plan involves rapid growth through the
acquisition of other companies. Such growth involves a number of risks,
including:  
    
    the difficulties related to combining previously separate
businesses into a single unit;
    
    the substantial diversion of managements attention from
day-to-day operations;
    
    the assumption of liabilities of an acquired business,
including unforeseen liabilities;
    
    the failure to realize anticipated benefits, such as cost
savings and revenue enhancements;
    
    the dilution of existing stockholders due to the issuance
of equity securities, utilization of cash reserves, or incurrence
of debt in order to fund the 19




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acquisitions;
    
    the potential to have to write-down or write-off the value of acquired assets;
    
    the potentially substantial transaction costs associated with acquisitions; and
    
    the difficulties related to assimilating the products,
personnel and systems of an acquired business and to integrating
distribution and other operational capabilities. Our success depends on our ability to manage our growth. During recent years, we have experienced a period of rapid and significant
growth and our continued expansion may significantly strain our management,
financial, and other resources. We believe that improvements in management and
operational controls, and operations, financial and management information
systems could be needed to manage future growth. We cannot assure you that:  
    
    these resources will be available or in a cost-effective
form to us which will allow us to sustain growth at the same
levels;
    
    our current personnel, systems, procedures, and controls
will be adequate to support our future operations;
    
    we will identify, hire, train, motivate or manage required
personnel; or
    
    we will successfully identify and exploit existing and
potential market opportunities. Our failure to have these resources in sufficient form or quantity during
a period of significant growth could have an adverse affect on our operating
results. Collegiate Pacific faces intense competition and potential competition from
companies with greater resources and our inability to effectively compete with
these companies could harm our business . The market for sporting goods and related equipment in which we compete is
highly competitive, especially as to product innovation and availability,
performance and styling, price, customer relationships, name recognition,
marketing, delivery and quality of service. We compete principally in the
institutional market with local sporting goods dealers and other direct mail
companies. Some of our competitors have:  
    
    substantially greater financial resources;
    
    a larger customer base;
    
    a broader line of product offerings; and
    
    greater name recognition within the industry. In addition, our competitors may have larger technical, sales and
marketing resources. Further, there is no significant technological or capital
barriers to entry into the markets for many 20




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sporting goods and recreational products. We cannot give you assurance
that we will compete successfully against our competitors in the future. We are dependent on competitive pricing from our suppliers. The general economic conditions in the U.S. or international countries
with which we do business could affect pricing of raw materials such as metals
and other commodities used by suppliers of our finished goods. We cannot
assure you that any price increase we incur for our products can be passed on
to our customers without adversely affecting our operating results. The weak financial conditions of some of our customers may adversely impact our
business. We monitor the credit worthiness of our customer base on an ongoing basis,
and we have not experienced an abnormal increase in losses in our accounts
receivable portfolio. We believe that allowances for losses adequately reflect
the risk of loss. However, a change in the economic condition or in the
make-up of our customer base could have an adverse affect on losses associated
with the credit terms that we give to our customers that would adversely affect
our cash flow and involve significant risks of nonpayment. Our financial results vary from quarter to quarter, which could hurt our
business and the market price of our stock. Various factors affect the Companys quarterly operating results and some
of them are not within our control. They include, among others:  
    
    weather conditions;
    
    the timing and introduction of new products;
    
    the mix of products sold;
    
    the timing of significant orders from and shipments to customers;
    
    product pricing and discounts;
    
    the timing of our acquisitions of other companies and businesses; and
    
    general economic conditions. These and other factors are likely to cause our financial results to
fluctuate from quarter to quarter. If revenue or operating results fall short
of the levels expected by public market analysts and investors, the trading
price of our common stock could decline dramatically. Based on the foregoing,
Collegiate Pacific believes that quarter-to-quarter comparisons of its results
of operations may not be meaningful. Therefore, purchasers of our common stock
should not view our historical results of operations as reliable indications of
our future performance. Seasonality of our business may adversely affect our net sales and operating
income. We anticipate our net sales will peak in the first and fourth quarters of
each fiscal year (July 1  September 30 and April 1  June 30) due primarily to
the budgeting procedures of many of our customers and the seasonal demand for
our products. We generally experience lower net sales and higher expenses as a
percentage of sales in the second and third quarters of each fiscal 21




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##### Table of Contents



year (October 1  March 31) due to lower customer demand during those
periods of decreased sports activities, adverse weather conditions inhibiting
customer demand, holiday seasons, and school recesses. We depend on key personnel for our future success. Our performance is substantially dependent on the skills, experience, and
performance of our Chief Executive Officer, Michael J. Blumenfeld, as well as
our ability to retain and motivate other officers and key employees, certain of
whom would be difficult to replace. We do not have an employment agreement
with Michael J. Blumenfeld. We do not have a key person life insurance
policy on any of our officers or other employees. The loss of services of certain of these executives and personnel could
have a material adverse effect on the Company. We cannot assure you that the
services of our personnel will continue to be available to us. In addition, we
believe that our inability to attract and retain additional qualified
employees, as needed, could have a material adverse effect on the Company. Risks related to international and domestic suppliers. A significant amount of our revenues are dependent upon products purchased
from foreign suppliers, which are located primarily in the Far East. In
addition, we believe that many of the products we purchase from our domestic
suppliers are manufactured overseas. Accordingly, we are subject to the risks of international business,
including:  
    
    shipment delays;
    
    fluctuation in exchange rates;
    
    increases in import duties;
    
    changes in customs regulations;
    
    adverse economic conditions in foreign countries;
    
    social, political and economic instability; and
    
    acts of war and terrorism. Further, we are dependent on a growing number of domestic suppliers for
our finished goods. Any significant delay in the delivery of products by our
domestic suppliers could significantly increase our backlog. The occurrence of any one or more of the events described above could
adversely affect our business, financial condition, and results of operations
due to an inability to make timely shipments to our customers or by utilizing
other more costly carriers or means of shipping. We depend on third party carriers. Our operations depend upon third party carriers to deliver our catalogs
and products to our customers. We ship our products using common carriers,
primarily UPS. The operations of such 22




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##### Table of Contents



carriers are outside the Companys control. Accordingly, our business
reputation and operations are subject to many risks, including:  
    
    shipment delays caused by such carriers;
    
    labor strikes by the employees of such carriers;
    
    increases in delivery cost, postage rate increase; and
    
    other adverse economic conditions. The occurrence of any one or more of the foregoing could adversely affect
our business, financial condition, and results of operations due to any
inability to make timely shipment to our customers or by utilizing other more
costly carriers or means of shipping. Our stock price could be subject to significant volatility. The price of our common stock is determined in the marketplace and may be
influenced by many factors, including:  
    
    the depth and liquidity of the market for our common stock;
    
    investor perception of the Company and the industry within
which we compete;
    
    quarterly variations in operating results; and
    
    general economic and market conditions. Historically, the weekly trading volume of our common stock has been
relatively small. Any material increase in public float could have a
significant impact on the price of our common stock. In addition, the stock
market has occasionally experienced extreme price and volume fluctuations that
often affect market prices for smaller companies. These extreme price and
volume fluctuations often are unrelated or disproportionate to the operating
performance of the affected companies. Accordingly, the price of our common
stock could be affected by such fluctuations. Outstanding stock options. Outstanding options may have an effect on the price of our common stock.
We currently have 1,025,800 outstanding options, each to purchase one share of
our Common Stock, issued to key employees, officers, and directors under our
1998 Collegiate Pacific Inc. Stock Option Plan. The options have exercise
prices ranging from $3.88 per share to $9.48 per share. These outstanding
options could have a significant adverse effect on the trading price of our
common stock, especially if a significant volume of the options was exercised
and the stock issued was immediately sold into the public market. Further, the
exercise of these options could have a dilutive impact on other shareholders by
decreasing their ownership percentage of the Companys outstanding common
stock. If we attempt to raise additional capital through the issuance of
equity or convertible debt securities, the terms upon which we will be able to
obtain additional equity capital, if at all, may be negatively affected since
the holders of outstanding options can be expected to exercise them, to the
extent they are able, at a time when we would, in all likelihood, be able to
obtain any needed capital on terms more favorable than those provided in such
options. 23




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##### Table of Contents



One principal stockholder owns a significant amount of our outstanding common
stock. Mr. Michael J. Blumenfeld, our Chairman and Chief Executive Officer, owns
2,067,276 shares of our common stock (or 21% based on the number of shares
outstanding as of September 20, 2004). As a result, he is in a position to
significantly influence the outcome of elections of our directors, the
adoption, amendment or repeal of our bylaws and any other actions requiring the
vote or consent of our stockholders. 24




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##### Table of Contents



ITEM 7. FINANCIAL STATEMENTS. PageIndex to Consolidated Financial Statements
    
    
    25Report of Independent Registered Public Accounting Firm
    
    
    26Consolidated Balance Sheets as of June 30, 2004 and 2003
    
    
    27Consolidated Statements of Income for the years ended June 30, 2004
and 2003
    
    
    28Consolidated Statement of Stockholders Equity for the years ended
June 30, 2004 and 2003
    
    
    29Consolidated Statements of Cash Flows for the years ended June 30, 2004
and 2003
    
    
    30Notes to Consolidated Financial Statements
    
    
    31
 25




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Stockholders and Board of Directors of Collegiate Pacific Inc. We have audited the accompanying consolidated balance sheets of Collegiate
Pacific Inc. and its subsidiaries as of June 30, 2004 and 2003, and the related
consolidated statements of income, stockholders equity and cash flows for the
years then ended. These consolidated 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 auditing standards of the Public
Company Accounting Oversight Board (United States). 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 that 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 consolidated financial position of
Collegiate Pacific Inc. and its subsidiaries as of June 30, 2004 and 2003, and
the consolidated results of their operations and their consolidated cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America. /s/ Grant Thornton LLP Dallas, Texas
August 24, 2004 26




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##### Table of Contents



COLLEGIATE PACIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2004 and 2003 2004
    
    2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    7,473,145
    
    
    $
    365,713Accounts receivable, net of allowance for doubtful accounts of $635,531 and
$121,139, respectively
    
    
    10,683,860
    
    
    
    2,702,551Inventories
    
    
    9,214,063
    
    
    
    3,691,615Current portion of deferred taxes
    
    
    149,414
    
    
    
    102,171Prepaid expenses and other current assets
    
    
    496,912
    
    
    
    218,030Total current assets
    
    
    28,017,394
    
    
    
    7,080,080PROPERTY AND EQUIPMENT, net of accumulated depreciation of $870,394 and
$629,205, respectively
    
    
    831,205
    
    
    
    541,055INTANGIBLE ASSETS, net of accumulated amortization of $346,238 and
$227,305, respectively
    
    
    429,833
    
    
    
    339,066GOODWILL
    
    
    17,308,487
    
    
    
    544,375DEFERRED INCOME TAXES
    
    
    100,812
    
    
    
    304,646OTHER ASSETS, net
    
    
    259,012
    
    
    
    16,102Total assets
    
    $
    46,946,743
    
    
    $
    8,825,324LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    4,983,603
    
    
    $
    1,642,732Accrued liabilities
    
    
    1,283,553
    
    
    
    205,505Dividends payable
    
    
    247,128
    
    
    
    107,704Current portion of long-term debt
    
    
    124,800
    
    
    
    Income taxes payable
    
    
    700,850
    
    
    
    54,789Total current liabilities
    
    
    7,339,934
    
    
    
    2,010,730REDEEMABLE COMMON STOCK (see Note 3)
    
    
    7,250,000
    
    
    
    LONG-TERM DEBT
    
    
    73,200
    
    
    
    800,000COMMITMENTS
    
    
    
    
    
    
    STOCKHOLDERS EQUITY:Common stock, $0.01 par value, 50,000,000 shares authorized; 9,884,142
and 4,308,169 shares issued, respectively
    
    
    98,842
    
    
    
    43,082Additional paid-in capital
    
    
    31,469,423
    
    
    
    6,387,090Retained earnings
    
    
    1,372,795
    
    
    
    201,065Treasury stock at cost, 86,026 and 80,326 shares, respectively
    
    
    (657,451
    )
    
    
    (616,643
    )Total stockholders equity
    
    
    32,283,609
    
    
    
    6,014,594Total liabilities and stockholders equity
    
    $
    46,946,743
    
    
    $
    8,825,324
 The accompanying notes are an integral part of these financial statements. 27




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended June 30, 2004 and 2003 2004
    
    2003Net sales
    
    $
    39,561,521
    
    
    $
    21,075,893Cost of sales
    
    
    25,372,325
    
    
    
    13,268,532Gross profit
    
    
    14,189,196
    
    
    
    7,807,361Selling, general and administrative expenses
    
    
    10,866,254
    
    
    
    6,780,705Amortization expense
    
    
    119,232
    
    
    
    58,300Operating profit
    
    
    3,203,710
    
    
    
    968,356Other income (expense):Interest income
    
    
    22,388
    
    
    
    3,200Interest expense
    
    
    (52,415
    )
    
    
    (84,525
    )Other
    
    
    18,376
    
    
    
    17,186Total other expense
    
    
    (11,651
    )
    
    
    (64,139
    )Income before income taxes
    
    
    3,192,059
    
    
    
    904,217Income tax provision (benefit)
    
    
    1,308,367
    
    
    
    (349,632
    )Net income
    
    $
    1,883,692
    
    
    $
    1,253,849Weighted average number of shares outstanding:Basic
    
    
    6,324,950
    
    
    
    4,225,784Diluted
    
    
    7,571,910
    
    
    
    4,669,574Net income per share common stock  basic
    
    $
    0.30
    
    
    $
    0.30Net income per share common stock  diluted
    
    $
    0.25
    
    
    $
    0.27
 The accompanying notes are an integral part of these consolidated financial statements. 28




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the years ended June 30, 2004 and 2003 COMMON STOCK
    
    ADDITIONALPAID-IN
    
    RETAINED EARNINGS(ACCUMULATED
    
    TREASURY STOCKSHARES
    
    AMOUNT
    
    CAPITAL
    
    DEFICIT)
    
    SHARES
    
    AMOUNT
    
    TOTALBalances at July 1, 2002
    
    
    4,300,659
    
    
    $
    43,007
    
    
    $
    6,607,546
    
    
    $
    (945,080
    )
    
    
    59,526
    
    
    $
    (496,413
    )
    
    $
    5,209,060Issuance of stock for cash
    
    
    7,510
    
    
    
    75
    
    
    
    36,455
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,530Cash dividends
    
    
    
    
    
    
    
    
    
    
    (256,911
    )
    
    
    (107,704
    )
    
    
    
    
    
    
    
    
    
    
    (364,615
    )Purchase of stock for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,800
    
    
    
    (120,230
    )
    
    
    (120,230
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,253,849
    
    
    
    
    
    
    
    
    
    
    
    1,253,849Balances at June 30, 2003
    
    
    4,308,169
    
    
    
    43,082
    
    
    
    6,387,090
    
    
    
    201,065
    
    
    
    80,326
    
    
    
    (616,643
    )
    
    
    6,014,594Issuance of stock for cash,net of offering costs of $589,721
    
    
    4,399,161
    
    
    
    43,992
    
    
    
    21,252,851
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,296,843Issuance of stock for
business acquisitions
    
    
    1,176,812
    
    
    
    11,768
    
    
    
    3,829,482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,841,250Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (711,962
    )
    
    
    
    
    
    
    
    
    
    
    (711,962
    )Purchase of stock for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,700
    
    
    
    (40,808
    )
    
    
    (40,808
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,883,692
    
    
    
    
    
    
    
    
    
    
    
    1,883,692Balances at June 30, 2004
    
    
    9,884,142
    
    
    $
    98,842
    
    
    $
    31,469,423
    
    
    $
    1,372,795
    
    
    
    86,026
    
    
    $
    (657,451
    )
    
    $
    32,283,609
 The accompanying notes are an integral part of these consolidated financial statements. 29




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 2004 and 2003 2004
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    1,883,692
    
    
    $
    1,253,849Adjustments
to reconcile net income to cash provided by operating activities:Depreciation expense
    
    
    241,167
    
    
    
    183,571Amortization expense
    
    
    119,233
    
    
    
    58,300Provision for uncollectible accounts receivable
    
    
    194,620
    
    
    
    78,373Deferred income taxes
    
    
    170,805
    
    
    
    (406,817
    )Changes in
operating assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (1,225,153
    )
    
    
    (789,927
    )Inventories
    
    
    (1,222,431
    )
    
    
    (706,812
    )Prepaid expenses and other current assets
    
    
    (52,640
    )
    
    
    (68,588
    )Other assets, net
    
    
    (177,239
    )
    
    
    (7,553
    )Accounts payable
    
    
    322,767
    
    
    
    488,334Accrued expenses
    
    
    (749,390
    )
    
    
    76,857Income taxes payable
    
    
    646,061
    
    
    
    54,789Net cash provided by operating activities:
    
    
    151,492
    
    
    
    214,376CASH FLOWS
FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (215,611
    )
    
    
    (222,351
    )Purchase of
subsidiaries, net of cash acquired of $798,831
    
    
    (12,646,829
    )
    
    
    Net cash used in investing activities:
    
    
    (12,862,440
    )
    
    
    (222,351
    )CASH FLOWS
FROM FINANCING ACTIVITIES:Proceeds from borrowings under line of credit
    
    
    6,571,798
    
    
    
    800,000Payments on notes payable and line of credit
    
    
    (7,436,916
    )
    
    
    (353,063
    )Purchase of treasury stock
    
    
    (40,808
    )
    
    
    (120,230
    )Payment of dividends
    
    
    (572,537
    )
    
    
    (256,911
    )Proceeds from issuance of common stock
    
    
    21,296,843
    
    
    
    36,530Net cash provided by financing activities:
    
    
    19,818,380
    
    
    
    106,326Increase in cash and cash equivalents
    
    
    7,107,432
    
    
    
    98,351Cash and cash equivalents, beginning of year
    
    
    365,713
    
    
    
    267,362Cash and cash equivalents, end of year
    
    $
    7,473,145
    
    
    $
    365,713SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    52,415
    
    
    $
    84,525Cash paid for income taxes
    
    $
    480,000
    
    
    $
    SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Fair value of assets acquired in business acquisitions
    
    $
    11,897,034
    
    
    $
    Liabilities assumed in business acquisitions
    
    $
    8,714,750
    
    
    $
    
 The accompanying notes are
an integral part of these consolidated financial statements. 30




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 1. General: Collegiate Pacific Inc. (CPI) was incorporated on April 10, 1997 and
commenced business in February 1998. Collegiate Pacific, Inc. is a Delaware
corporation and is primarily engaged in the mail order marketing of sports
equipment and team uniforms to schools, colleges, and other organizations
throughout the United States. 2. Summary of Significant Accounting Policies: Consolidation.The consolidated financial statements include the balances
and results of operations of CPI and its wholly owned subsidiaries Tomark
Sports, Inc. (Tomark) and Kesslers Team Sports, Inc. (Kesslers). CPI,
together with Tomark and Kesslers, are generally referred to herein as the
Company. All significant intercompany balances and transactions have been
eliminated in consolidation. Cash and Cash Equivalents.The Company includes as cash and cash
equivalents, all highly liquid investments with maturities of three months or
less at the date of purchase. Financial Instruments and Credit Risk Concentrations.Financial
instruments, which are potentially subject to concentrations of credit risk,
consist principally of cash, accounts receivable, and notes payable. Cash
deposits are placed with high credit, quality financial institutions to
minimize risk. Accounts receivable are unsecured. The carrying value of these
financial instruments approximates their fair value due to their short-term
nature or their index tied to market rates. Accounts Receivable.The Companys accounts receivable are due primarily
from customers in the institutional market. Credit
is extended based on evaluation of each customers financial condition and,
generally, collateral is not required. Accounts receivable are generally due
within 30 days and are stated in amounts due from customers net of an allowance
for doubtful accounts. Accounts outstanding longer than contractual payment
terms are considered past due. The Company records allowances by considering a
number of factors, including the length of time trade accounts receivable are
past due, the Companys previous loss history, the customers current ability
to pay its obligation to the Company, and the condition of the general economy
and the industry as a whole. The Company writes-off accounts receivable when
they become uncollectible, and payments subsequently received on such
receivables are credited to the allowance in the period the payment is
received. Changes in the Companys allowance for doubtful accounts for the years
ended June 30, 2004 and 2003 are as follows: 2004
    
    2003Balance at beginning of period
    
    $
    121,139
    
    
    $
    96,181Provision for uncollectible accounts
receivable
    
    
    194,620
    
    
    
    78,373Effect of business acquisitions
    
    
    488,756
    
    
    
    Accounts written off, net of recoveries
    
    
    (168,984
    )
    
    
    (53,415
    )Balance at end of period
    
    $
    635,531
    
    
    $
    121,139
 Inventories.Inventories are carried at the lower of cost or market using
the weighted-average cost method for items purchased for resale and
the standard cost method for manufactured items. Inventory
adjustments for estimated obsolescence or diminution in market value
are recorded in an amount equal to the difference between the cost of
inventory and the estimated market value, based on market conditions
from time to time. 31




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 Property and Equipment.Property and equipment includes office equipment,
furniture and fixtures, manufacturing equipment, and vehicles. These assets are
stated at cost and are depreciated over their estimated useful lives of 3 to 10
years using the straight-line method. The cost of maintenance and repairs is
expensed as incurred and significant renewals and betterments are capitalized. License Agreements, Trademarks and Other Intangible Assets.License
agreements represent amounts paid to acquire exclusive distribution rights for
specific products and are amortized over their estimated useful lives of 5 to
10 years. Trademarks represent amounts paid to acquire the rights to brand specific
products or categories of products with recognizable brands in certain sporting
good categories and are amortized over 15 years. Other intangible assets represents a contractual backlog intangible asset
acquired as part of the Companys acquisition of substantially all of the
operating assets of Kesslers Sports Shop, Inc. This asset is being amortized
on a straight-line basis over its estimated useful life of nine months. The Company estimates the
average remaining life of license agreements, trademarks, and other
intangible assets to be 7 years. Goodwill.Goodwill represents the excess of the purchase price paid and
liabilities assumed over the estimated fair market value of assets acquired and
identifiable intangible assets. Goodwill is tested for impairment annually and
whenever impairment indicators are present. If the fair value of goodwill is
less than the carrying amount of goodwill, an impairment will be
recognized. The assessment of whether goodwill has been impaired is
based on the Companys estimate of the fair value using a model
which considers both a discounted future cash flow analysis and an
analysis of market multiples. Valuation of Long-Lived Assets.The Company periodically evaluates the
carrying value of depreciable and amortizable long-lived assets whenever events
or changes in circumstances indicate that the carrying amount may not be fully
recoverable. If the total of the expected future undiscounted cash flows is
less than the carrying amount of the assets, a loss is recognized in the amount
that the carrying value of the assets exceeds their fair value. Revenue Recognition.The Company recognizes revenue upon its shipment of
inventories to customers. A provision is made for returns, which are based upon
historical rates of return experienced by the Company. Shipping and Handling Fees and Costs.Shipping and handling costs are
included in cost of sales, while amounts billed are included in net
sales. Advertising.Advertising costs are expensed as incurred. Advertising
expenses for the fiscal years ended June 30, 2004 and 2003 were approximately
$1.9 million and $1.8 million, respectively. No advertising costs were
capitalized at June 30, 2004 or 2003. Stock Based Compensation.At June 30, 2004, the Company has a stock-based
employee compensation plan, which is described more fully in Note 10. The
Company accounts for the plan under the recognition and measurement principles
of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees and related interpretations. No stock-based compensation
cost is reflected in net income, as all options granted under the plan had an
exercise price equal to the market price of the underlying common stock on the
date of grant. The following table illustrates the effect on net income and
income per share if the Company had applied the fair value recognition
provisions of Financial Accounting Standards Board (FASB) SFAS No. 123,
Accounting for Stock-based Compensation, to stock-based employee
compensation: 32




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 2004
    
    2003Net income, as reported
    
    $
    1,883,692
    
    
    $
    1,253,849Add:
stock-based employee compensation expense included in net income
    
    
    
    
    
    
    Deduct:
stock-based employee compensation expense determined under fair value
method for all awards, net of related tax effects
    
    
    (442,403
    )
    
    
    (1,109,690
    )Pro forma net income
    
    $
    1,441,289
    
    
    $
    144,159Net income per share common stock:Basic  as reported
    
    $
    0.30
    
    
    $
    0.30Basic  pro forma
    
    $
    0.23
    
    
    $
    0.03Diluted  as reported
    
    $
    0.25
    
    
    $
    0.27Diluted  pro forma
    
    $
    0.19
    
    
    $
    0.03
 Income Taxes.The Company utilizes the asset and liability approach in
its reporting for income taxes. Deferred income tax assets and liabilities are
computed for differences between the financial statements and tax bases of
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income Per Share.Basic income per common share is computed by dividing
the net income by the weighted average number of shares of common stock
outstanding. Diluted income per share is computed based on weighted average
number of shares outstanding increased by the effect of stock options and
warrants when dilutive. Use of Estimates in Financial Statements.The preparation of consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates. 3. Business Combinations: On January 9, 2004, the Company completed its acquisition of Tomark, Inc.
(Tomark) by merging Tomark with and into a wholly owned subsidiary of the
Company. The Company paid the former stockholders of Tomark a total of
$5,250,000, which consisted of $2,500,000 in cash, $250,000 in promissory
notes, and 270,562 shares of the Companys common stock valued at $2,500,000.
The cash portion of the purchase price was paid out of the Companys working
capital. The acquisition of Tomark was accounted for using the purchase method of
accounting and, accordingly, the net assets and results of operations of Tomark
have been included in the Companys consolidated financial statements since the
date of acquisition. The purchase price was allocated to assets acquired, and liabilities
assumed, based on their 33




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 respective estimated fair values at the date of acquisition. After
determining that the value of any identifiable intangible assets was not
material, the excess of the purchase price over the fair value of the net
assets acquired has been recorded as goodwill in the amount of $4,728,719. In
accordance with Statement of Financial Accounting Standards No. 142, the
goodwill associated with this acquisition is not being amortized, but will be
tested annually for impairment. The
Company purchased Tomark to increase its existing sales and customer
base in the California market, expand its product base in its
existing baseball product offerings, increase the profitability of
Tomark by including products sold that the Company imports or
manufactures, and consolidate administrative tasks. The consideration
given to the stockholders of Tomark was agreed upon after the Company
determined the potential impact on future earnings of the integrated
companies. On April 1, 2004, the Company completed its acquisition of substantially
all of the operating assets of Kesslers Sport Shop, Inc. d/b/a Kesslers Team
Sports, Inc., an Indiana corporation (Kesslers). Under the terms of the
purchase agreement, the Company paid Kesslers $13,750,000 for substantially all
of its operating assets. The payment consisted of $6,500,000 in cash and
906,250 shares of Collegiate Pacifics common stock (the Shares) valued at
$7,250,000. The Company also paid certain liabilities of Kesslers at closing
in the approximate amount of $4,700,000 and assumed certain other specified
liabilities of Kesslers related to the acquired operating assets. The Company
also agreed to register all of the Shares for resale with the Securities and
Exchange Commission. The registration statement has been filed and was
effective on August 20, 2004. Additionally, so long as Kesslers and its
stockholders comply with the applicable provisions of the purchase agreement,
the Company is required to either (a) repurchase from Kesslers or its
stockholders, as the case may be, for cash any of the Shares that have not been
sold by Kesslers prior to the second anniversary of the effective date of the
registration statement (August 20, 2006) covering the Shares for a per share
price of $8.00 (the same per share price used to determine the number of Shares
issued at closing) or (b) if all of the Shares have been sold as of the second
anniversary of the effective date of the registration statement covering the
Shares, pay Kesslers an amount in cash equal to the difference between
$7,250,000 and the total sales proceeds received by Kesslers from the sale of
the Shares. The acquisition of substantially all of the assets of Kesslers was
accounted for using the purchase method of accounting and, accordingly, the net
assets and results of operations of Kesslers have been included in the
Companys consolidated financial statements since the date of acquisition.
Assets acquired included a contractual backlog intangible asset in the amount
of $210,000, which is being amortized on a straight-line basis over its
estimated useful life of nine months. The purchase price was allocated to
assets acquired, which included the identified intangible asset, and
liabilities assumed, based on their respective estimated fair values at the
date of acquisition. The excess of the purchase price over the fair value of
the net assets acquired has been recorded as goodwill in the amount of
$12,029,894. In accordance with Statement of Financial Accounting Standards
No. 142, the goodwill associated with this acquisition is not being amortized,
but will be tested annually for impairment. The
Company purchased Kesslers after considering the historic levels of
earnings achieved by Kesslers, the impact the Kesslers sales force
could have on future earnings of the Company by increasing the sales
volume of products that the Company imports and manufacturers, and
the increase to the combined customer base by cross selling products
to each others customers. The consideration given to the
stockholders of Kesslers was agreed upon after the Company determined
the potential impact on future earnings of the integrated companies. Since
the Company purchased the stock of Tomark, none of the goodwill will
be deductible for tax purposes. The goodwill related to the acquisition
of Kesslers is fully deductible for tax purposes over a 15 year
period. The
following table summarizes the estimated fair value of the assets
acquired and liabilities assumed related to the acquisitions
completed during fiscal 2004: Current assets
    
    $
    11,510,156Property and equipment
    
    
    315,706Other assets
    
    
    71,171Intangible assets
    
    
    210,000Goodwill
    
    
    16,758,613Total assets acquired
    
    $
    28,865,646Current liabilities
    
    $
    4,016,749Non-current liabilities
    
    
    4,698,001Total liabilities assumed
    
    $
    8,714,750
 34




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 The following presents the unaudited pro forma results for the Company for
the years ended June 30, 2004 and 2003, as if the acquisitions of Tomark, Inc.
and Kesslers Sports Shop, Inc. had been consummated at the beginning of each of
the periods presented. The pro forma results are prepared for comparative
purposes only and do not necessarily reflect the results that would have
occurred had the acquisition occurred at the beginning of the periods presented
or the results which may occur in the future. 2004
    
    2003(unaudited pro forma)Net sales
    
    $
    69,057,008
    
    
    $
    56,720,665Net income
    
    $
    2,691,071
    
    
    $
    1,988,852Net income per share common stock:Basic
    
    $
    0.43
    
    
    $
    0.37Diluted
    
    $
    0.36
    
    
    $
    0.34
 4. Inventories: Inventories consisted of the following: 2004
    
    2003Raw materials
    
    $
    457,337
    
    
    $
    310,871Work in progress
    
    
    115,223
    
    
    
    83,229Finished goods
    
    
    8,641,503
    
    
    
    3,297,515Inventories
    
    $
    9,214,063
    
    
    $
    3,691,615
 5. Property and Equipment: Property and equipment consisted of the following: EstimatedUseful Lives(Years)
    
    2004
    
    2003Office equipment
    
    
    4 - 7
    
    
    $
    535,093
    
    
    $
    266,287Fixtures and equipment
    
    
    3 - 7
    
    
    
    614,920
    
    
    
    529,916Manufacturing equipment
    
    
    5 - 10
    
    
    
    452,038
    
    
    
    374,057Vehicles
    
    
    7
    
    
    
    99,548
    
    
    
    Total property and equipment
    
    
    
    
    
    
    1,701,599
    
    
    
    1,170,260Less: accumulated depreciation
    
    
    
    
    
    
    (870,394
    )
    
    
    (629,205
    )Property and equipment, net
    
    
    
    
    
    $
    831,205
    
    
    $
    541,055
 35




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 6. Intangible Assets: Intangible assets consisted of the following: 2004
    
    2003Gross
    
    
    
    
    
    GrossCarrying
    
    Accumulated
    
    Carrying
    
    AccumulatedAmortizable intangible assets
    
    Value
    
    Amortization
    
    Value
    
    AmortizationLicense Agreements
    
    $
    235,429
    
    
    $
    145,938
    
    
    $
    235,429
    
    
    $
    118,915Trademarks
    
    
    330,642
    
    
    
    130,133
    
    
    
    330,642
    
    
    
    108,090Contractual Backlog
    
    
    210,000
    
    
    
    70,167
    
    
    
    
    
    
    
    Total amortizable intangible assets
    
    $
    776,071
    
    
    $
    346,238
    
    
    $
    566,071
    
    
    $
    227,005Intangible assets not subject to
amortizationGoodwill
    
    $
    17,308,487
    
    
    $
    
    
    
    $
    544,375
    
    
    $
    
 Amortization expense related to intangible assets totaled $119,233 and
$58,300 during the years ended June 30, 2004 and 2003, respectively. The
aggregate estimated amortization expense for intangible assets for each of the
fiscal years ending June 30 is as follows: Year Ending June 30,2005
    
    $
    188,8992006
    
    
    32,1712007
    
    
    31,1462008
    
    
    31,1462009
    
    
    31,146Thereafter
    
    
    115,325Total
    
    $
    429,833
 7. Line of Credit and Notes Payable: On April 28, 2004, the Company and Merrill Lynch Business Financial
Service Inc., agreed to amend the terms of the Companys existing revolving
line of credit (the Credit Facility) by increasing the Credit Facility from
$5.0 million to $12.0 million and extending the term of the facility to
December 31, 2005. The Credit Facility is secured by all of the Companys
assets. Borrowings under the Credit Facility bear interest at the rate of
2.25% plus the one-month LIBOR rate (1.35% at June 30, 2004). The Credit
Facility permits the Company to borrow up to 80% of its eligible accounts
receivable and 50% of its eligible inventory, but not to exceed $12.0 million
in total borrowings. As of June 30, 2004, there was no balance outstanding
under the Credit Facility, leaving the Company with approximately $12.0 million
of availability under the terms of the borrowing base formula of the Credit
Facility. The Credit Facility contains customary covenants and the Company
must maintain certain financial ratios pertaining to its fixed charges and
total debt to (a) total net worth and (b) earnings before interest, taxes,
depreciation and amortization. The Company entered into an amendment to the
Credit Facility in August 2004 to clarify the calculations of its financial
ratios after taking into account the Companys recent acquisitions. The
Company is currently in compliance with all financial covenants. On
January 9, 2004, the Company issued promissory notes to the two
former stockholders of Tomark in the aggregate amount of $250,000.
Payments of principal and interest are paid monthly and interest
accrues at the rate of 3% per annum on the unpaid principal amounts
of the notes. The notes expire on December 31, 2005. Payments due in
fiscal 2005 and 2006 are $124,800 and $73,200, respectively. 36




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 8. Federal Income Taxes: The temporary differences that give rise to the deferred tax assets or
liabilities are as follows: 2004
    
    2003Deferred tax assets attributed to:Accounts receivable
    
    $
    77,439
    
    
    $
    44,821Inventories
    
    
    36,011
    
    
    
    26,236Net operating loss carryforward
    
    
    147,664
    
    
    
    361,842Compensation accruals
    
    
    29,464
    
    
    
    Intangible assets
    
    
    7,039
    
    
    
    Other
    
    
    8,256
    
    
    
    2,379Total deferred tax assets
    
    
    305,873
    
    
    
    435,278Deferred tax
liabilities attributed to:Property and equipment
    
    
    (55,647
    )
    
    
    (25,491
    )Intangible assets
    
    
    
    
    
    
    (2,970
    )Total deferred tax liabilities
    
    
    (55,647
    )
    
    
    (28,461
    )Net deferred taxes
    
    $
    250,226
    
    
    $
    406,817
 Based on the Companys operating results and projections of future taxable
income, the Company believes that it will realize its deferred tax assets, and
accordingly, has not established a valuation allowance on its net deferred tax
assets. Deferred tax assets and liabilities included in the balance sheet are as
follows: 2004
    
    2003Current deferred tax asset
    
    $
    149,414
    
    
    $
    102,171Non-current deferred tax asset
    
    
    100,812
    
    
    
    304,646Balance at end of period
    
    $
    250,226
    
    
    $
    406,817
 The provision for income taxes consists of the following: 2004
    
    2003FederalCurrent
    
    $
    1,213,918
    
    
    $
    40,080Deferred
    
    
    (143,019
    )
    
    
    (373,832
    )StateCurrent
    
    
    264,603
    
    
    
    17,105Deferred
    
    
    (27,135
    )
    
    
    (32,985
    )Total provision for income taxes
    
    $
    1,308,367
    
    
    $
    (349,632
    )
 37




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 Following is a reconciliation of income taxes at the Federal statutory
rate to income tax expense: 2004
    
    2003Tax expense at the Federal statutory rate
    
    $
    1,085,300
    
    
    $
    307,433Change in valuation allowance
    
    
    
    
    
    
    (419,920
    )Increase in available net operating loss carry-forwards
    
    
    
    
    
    
    (259,237
    )State income taxes, net of federal benefit
    
    
    210,848
    
    
    
    17,105Other
    
    
    12,219
    
    
    
    4,987Income tax expense (benefit)
    
    $
    1,308,367
    
    
    $
    (349,632
    )
 At June 30, 2004, the Company had net operating loss carry-forwards, which
related to pre-1998 operations of the former Drug Screening Systems, Inc.
(DSSI), the predecessor to the Company. Because of the ownership change
rules of the Internal Revenue Code (the Code), the Companys ability to use
the DSSI net operating loss carryforwards is limited to approximately
$78
thousand annually, in accordance with the provisions of the Code, and expire in 2011. 9. Related Party Transactions: During the fiscal year ended June 30, 2003, the Company paid the majority
stockholder of the Company approximately $5,000 in interest on notes payable
assumed in conjunction with the purchase of Kesmil Manufacturing. The Company
repaid the note payable in the amount of approximately $353,000 to the majority stockholder in full in August 2002. During fiscal 2004, the Company paid approximately $34,200 in rent for the
facility located in Richmond, Indiana. This location is owned by RPD Services,
Inc., an Indiana corporation f/k/a Kesslers Sport Shop, Inc., from which we
acquired substantially all of its operating assets in April 2004. RPD
Services, Inc. is owned by Bob Dickman, Phil Dickman and Dan Dickman, all of
whom are employed by our wholly owned subsidiary, Kesslers Team Sports, Inc.
The lease term for the facility expires in March 2009. 10. Stock Options and Warrants: On December 11, 1998, the Companys stockholders approved a stock option
plan, (the 1998 Collegiate Pacific Inc. Stock Option Plan). This plan
authorized the Companys Board of Directors to grant employees, directors and
consultants of the Company up to an aggregate of 400,000 shares of the
Companys common stock, $0.01 par value per share. The options vest in full
upon the employees one-year anniversary date of employment with the Company or
the award date if the employee has been employed for at least one year on the
grant date. The number of shares available under the 1998 Collegiate Pacific
Inc. Stock Option Plan was increased to 1,000,000 upon approval by the
Companys stockholders on March 20, 2001, and increased to 1,500,000 upon
approval by the Companys stockholders on January 15, 2004. 38




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 A
summary of the Companys stock option activity for the fiscal years ended June 30, 2004
and 2003 is as follows: WeightedAverageOptions
    
    Exercise PriceOutstanding at July 1, 2002
    
    
    498,200
    
    
    $
    5.16Granted
    
    
    292,200
    
    
    
    5.46Exercised
    
    
    (7,500
    )
    
    
    4.86Forfeited or cancelled
    
    
    (10,000
    )
    
    
    7.57Outstanding at June 30, 2003
    
    
    772,900
    
    
    
    5.25Granted
    
    
    300,000
    
    
    
    9.31Exercised
    
    
    (213,800
    )
    
    
    4.49Forfeited or cancelled
    
    
    (1,000
    )
    
    
    6.08Outstanding at June 30, 2004
    
    
    858,100
    
    
    $
    6.85Exercisable at June 30, 2003
    
    
    769,900
    
    
    $
    5.24Exercisable at June 30, 2004
    
    
    683,100
    
    
    $
    6.21
 The Company utilized the following assumptions in calculating the estimated fair value of each stock option
grant on the date of grant using the Black-Scholes option-pricing model with the following weighted-average
assumptions for grants: 2004
    
    2003Expected volatility
    
    
    33
    %
    
    
    100
    %Risk-free interest rate
    
    
    3.58
    %
    
    
    3.10
    %Dividend yield
    
    
    1.5
    %
    
    
    2.0
    %Expected lives
    
    5 years
    
    5 years
 39




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 The weighted average fair value of options granted in fiscal 2004 and 2003
was $2.84 and $3.80 per share, respectively. The following table summarizes additional information about stock options
at June 30, 2004: Outstanding
    
    ExercisableWeightedAverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedContractual
    
    Average
    
    
    
    
    
    AverageLife
    
    Exercise
    
    
    
    
    
    ExerciseExercise price
    
    Shares
    
    (In Years)
    
    Price
    
    Shares
    
    Price$3.88 - $4.81
    
    
    146,100
    
    
    
    6.8
    
    
    $
    3.90
    
    
    
    146,100
    
    
    $
    3.90$4.90 - $6.13
    
    
    380,500
    
    
    
    7.6
    
    
    $
    5.84
    
    
    
    380,500
    
    
    $
    5.84$9.38
    
    
    31,500
    
    
    
    4.7
    
    
    $
    9.38
    
    
    
    31,500
    
    
    $
    9.38$9.05 - $9.48
    
    
    300,000
    
    
    
    9.8
    
    
    $
    9.31
    
    
    
    125,000
    
    
    $
    9.23858,100
    
    
    
    
    
    
    
    
    
    
    
    683,100
 In August 2004, employees of Dixie Sporting Goods Co. Inc., and other
employees and directors of the Company were issued 180,300 stock options at exercise prices ranging from
$8.73 to $9.25, leaving 224,300 options for issuance under the plan. On April 14, 2004, the Company announced its Board of Directors had
unanimously authorized the Company to call for cancellation effective as of May
21, 2004, all outstanding warrants. On May 26, 2000, each record holder of our
common stock received a special dividend from the Company of one warrant for
each share of common stock owned by the record holder. The Company issued the
warrants pursuant to a warrant agreement between the Company and Continental
Stock Transfer and Trust Company, Inc. Each warrant entitled the holder to
purchase from the Company, for cash, one share of common stock at $5.00 per
share. The total number of warrants issued was 4,244,607. Of the warrants
that were originally issued, 4,199,599 were exercised and 45,008 were
cancelled, which required the Company to pay those former holders a total of
approximately $2,250 upon cancellation. 11. Leases: The Company leases office and warehouse facilities located in Dallas,
Texas, Corona, California and Richmond, Indiana, under the terms of operating
leases, which expire at various dates through 2009. The Company also leases
small sales offices or storage areas in the following locations: Cleveland and
Columbus, Ohio; Gulfport, Mississippi; Crown Point, Fort Wayne, Indianapolis,
KoKomo, and Portland, Indiana; Knoxville and Memphis, Tennessee; Little Rock,
Arkansas; Norcross and Woodstock, Georgia; Springfield, Illinois; and Tulsa,
Oklahoma. These leases expire at various dates through 2008. Rent expense was
approximately $581,277 for the fiscal year ended June 30, 2004, and $339,000
for the fiscal year ended June 30, 2003. 40




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##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004 and 2003 Future minimum lease commitments on all operating leases with terms in
excess of one year are as follows: Year Ending June 30,2005
    
    $
    823,2652006
    
    
    699,6142007
    
    
    642,0622008
    
    
    346,6962009
    
    
    102,600Thereafter
    
    
    Total minimum future lease payments
    
    $
    2,614,237
 12. Income Per Share: Summarized basic and diluted income per common share for the years ended
June 30, 2004 and 2003 are as follows: 2004
    
    2003Net
    
    
    
    
    
    Per Share
    
    Net
    
    
    
    
    
    Per ShareIncome
    
    Shares
    
    Amount
    
    Income
    
    Shares
    
    AmountBasic income
per share
    
    $
    1,883,692
    
    
    
    6,324,950
    
    
    $
    0.30
    
    
    $
    1,253,849
    
    
    
    4,225,784
    
    
    $
    0.30Effect of dilutive
options and
Warrants
    
    
    
    
    
    
    1,246,960
    
    
    
    (0.05
    )
    
    
    
    
    
    
    443,790
    
    
    
    (0.03
    )Diluted income
per share
    
    $
    1,883,692
    
    
    
    7,571,910
    
    
    $
    0.25
    
    
    $
    1,253,849
    
    
    
    4,669,574
    
    
    $
    0.27
 For the fiscal years ended June 30, 2004 and 2003, stock options and
warrants covering 866,780 and 274,875 shares, respectively, were excluded in
the computations of diluted income per share because their effect was
antidilutive. 13. Subsequent Events: In July 2004, the first month of fiscal 2005, the Company completed the
acquisition of Dixie Sporting Goods Co., Inc. (Dixie) in exchange for cash,
notes and shares of the Companys common stock. Dixie, a privately held
company founded in 1965, is one of the nations largest team dealers of
sporting goods and related equipment. The Company acquired all of the
outstanding shares of Dixies common stock in exchange for 148,662 shares of
the Companys common stock valued at $1.5 million, a cash payment of $4.0
million, $0.5 million of notes and up to an additional $1.0 million in the form
of an earnout if the net income of Dixie exceeds certain target levels in the
17 month period ending December 31, 2005, resulting in a total purchase price
of approximately $7.0 million (excluding transaction costs). The Companys
wholly owned subsidiary, Dixie Sporting Goods Co., Inc., employs the two former
Dixie shareholders. The results of operations of Dixie have not been included
in the Companys consolidated financial statements for the fiscal year ended
June 30, 2004. 41




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##### Table of Contents



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE None. 
 ITEM 8A. CONTROLS AND PROCEDURES. (a)  Evaluation
of Disclosure Controls and Procedures. An
evaluation was carried out under the supervision and with the
participation of the Companys management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness
of the Companys disclosure controls and procedures (as defined in
§240.13a15(e) or §240.15d15(e) of the General Rules and Regulations of the
Securities Exchange Act of 1934) as of the end of the period covered
by this Annual Report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer believe the Companys
disclosure controls and procedures are effective. (b)  Changes
in Internal Controls. During the period covered by this Annual
Report, there were no significant changes to the Company's internal
controls over financial reporting or in other factors that could
significantly affect these controls, including any corrective actions
with respect to significant deficiencies and material weaknesses.
However, the Company is continuing to integrate the operations of the
newly acquired operations of Kesslers into its existing internal
controls environment and procedures that are currently in place at
the Company. It is anticipated this integration will be completed by
the end of the second quarter of fiscal 2005. This integration will
result in changes to significant areas of the Company's internal
controls in order to provide effective monitoring and control of
Kesslers operations. 
 ITEM 8B. OTHER INFORMATION. None. 42




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##### Table of Contents



PART III 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information set forth under the heading Director Information and
Information Concerning Executive Officers of the definitive proxy statement
for our fiscal 2005 Annual Meeting of Stockholders is incorporated by reference
in this Form 10-KSB Annual Report. 
 ITEM 10. EXECUTIVE COMPENSATION. The information set forth under the heading Executive Compensation of
the definitive proxy statement for our fiscal 2005 Annual Meeting of
Stockholders is incorporated by reference in this Form 10-KSB Annual Report. 
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The information set forth under the heading Stock Ownership and Stock
Options of the definitive proxy statement for our fiscal 2005 Annual Meeting
of Stockholders is incorporated by reference in this Form 10-KSB Annual Report. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information set forth under the heading Other Director and Executive
Officer Information of the definitive proxy statement for our fiscal 2005
Annual Meeting of Stockholders is incorporated by reference in this Form 10-KSB
Annual Report. 43




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##### Table of Contents



ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K. (a) The documents set forth below, numbered in accordance with Item 601 of
Regulation S-B, are filed herewith or incorporated herein by reference to the
location indicated. ExhibitNumber
    
    Description
    
    Location2.1
    
    Agreement and Plan of Merger, dated as
of December 30, 2003, by and among
Tomark, Inc., Collegiate Pacific Inc.,
BOO Merger Corp., Thomas C. White and
Mark S. Harpin.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
January 23, 2004.2.2
    
    Asset Purchase Agreement, dated as of
February 9, 2004, by and among Kesslers
Team Sports, Inc., Collegiate Pacific
Inc., BOO Acquisition Corp., Bob
Dickman, Dan Dickman, Phil Dickman and
Floyd Dickman.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
April 8, 2004.2.3
    
    Stock Purchase Agreement, dated as of
July 23, 2004, by and among Collegiate
Pacific Inc., Kenneth L. Caravati and
C. Michael Caravati.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
August 10, 2004.3.1
    
    Certificate of Incorporation of the
Registrant.
    
    Exhibit 1 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.3.2
    
    By-Laws of the Registrant.
    
    Exhibit 2 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.3.3
    
    Certificate of Amendment to Certificate
of Incorporation of Collegiate Pacific
Inc.
    
    Exhibit 3.10 to the
Registrants
Registration
Statement on Form
SB-2 (No.
333-34294)
originally filed on
April 7, 2000.4.1
    
    Specimen Certificate of Common Stock,
$0.01 par value, of Collegiate Pacific
Inc.
    
    Exhibit 3 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.10.1
    
    Loan and Security Agreement, dated
November 5, 2003, by and between
Collegiate Pacific Inc. and Merrill
Lynch Business Financial Services Inc.
    
    Exhibit 10.1 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended December 31,
2003.10.2
    
    Amendment to Loan and Security
Agreement, dated April 28, 2004, by and
between Collegiate Pacific Inc. and
Merrill Lynch Business Financial
Services Inc.
    
    Exhibit 10.1 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.3
    
    Amended and Restated 1998 Collegiate
Pacific Inc. Stock Option Plan and form
of Stock Option Agreements.*
 44




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ExhibitNumber
    
    Description
    
    Location10.4
    
    Lease Agreement, dated July 1, 1997, by
and between Collegiate Pacific Inc. and
Post-Valwood, Inc.
    
    Exhibit 10.8 to the
Registrants Annual
Report on Form
10-KSB filed for
the fiscal year
ended June 30,
1998.10.5
    
    Lease Agreement, dated April 1, 2004,
by and between Collegiate Pacific Inc.
and RPD Services, Inc.
    
    Exhibit 10.2 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.6
    
    Lease Agreement, dated May 15, 2003, by
and between Tomark Sports, Inc., and
Commerce Street Partnership
    
    Exhibit 10.3 to the
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.7
    
    Lease Agreement, dated July 6, 1994, by
and between Dixie Sporting Goods Co.,
Inc. and E. Carlton Wilton.*10.8
    
    Amendment to Loan Agreement, dated
August 26, 2004, by and between
Collegiate Pacific Inc. and Merrill
Lynch Business Financial Services Inc.*14
    
    Code of Ethics
    
    Exhibit 14 to the
Registrants Annual
Report on Form
10-KSB for the
fiscal year ended
June 30, 2003.21
    
    Subsidiaries of Collegiate Pacific Inc.*23
    
    Consent of Grant Thornton LLP*31.1
    
    Certification of the Chief Executive
Officer pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002.*31.2
    
    Certification of the Chief Financial
Officer pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002.*32.1
    
    Certification of the Chief Executive
Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**32.2
    
    Certification of the Chief Financial
Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
   *
    
    Filed herewith**
    
    Furnished herewith 45




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##### Table of Contents



(b)
    
    Reports on Form 8-K. During the last quarter of fiscal 2004 (April 1-June 30, 2004), the
Company filed the following current reports on Form 8-K: 1. On April 8, 2004, the Company filed a Current Report on Form 8-K
reporting its acquisition of substantially all the operating assets of
Kesslers Sport Shop, Inc. (now know as RPD Services, Inc.) on April 1, 2004.
On June 7, 2004, the Company filed an amendment to this Current Report on
Form 8-K to include the required audited financial statements and pro-forma
financial information of the business acquired. 2. On May 24, 2004, the Company filed a Current Report on Form 8-K reporting
the cancellation of all unexercised warrants of the Company as of May 20,
2004. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Audit Fees Audit fees billed by Grant Thornton LLP for the review and audit of the
Companys annual financial statements included in the Companys annual report
on Form 10-KSB for the fiscal years ended June 30, 2004, and June 30, 2003, and
Grant Thornton LLPs review of the Companys interim financial statements
included in the Companys Quarterly Reports on Form 10-QSB during the fiscal
years ended June 30, 2004, and June 30, 2003, totaled
approximately $100
thousand for fiscal 2004 and $41 thousand for fiscal 2003. Audit Related Fees The aggregate fees billed by Grant Thornton LLP for assurance and related
services that were reasonably related to the performance of the audit or review
of Collegiate Pacifics financial statements and that were not included under
the heading Audit Fees above totaled approximately $148 thousand for fiscal
2004 and $2 thousand for fiscal 2003. Tax Fees The aggregate fees billed by Grant Thornton LLP for professional services
rendered for tax compliance, tax advice, and tax planning were approximately
$15 thousand for fiscal 2004 and $13 thousand for fiscal 2003 and consisted
primarily of preparing the Companys federal and state income tax returns for
such periods. All Other Fees Grant Thornton LLP did not bill for any products or services other than
the services reported under the headings Audit Fees, Audit Related Fees and
Tax Fees above for fiscal 2004 and fiscal 2003. Audit Committee Pre-Approval Policies During fiscal 2004, the Audit Committee adopted a policy governing the
pre-approval of all audit and permitted non-audit services performed by the
Companys independent auditors in order to ensure that the provision of such
services does not impair the auditors independence from the Company and its
management. Unless a type of service to be provided by the Companys
independent auditors has 46




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##### Table of Contents



received general pre-approval, it will require
specific pre-approval by the Audit Committee. Any proposed services in excess
of pre-approved fee levels will require specific pre-approval by the Audit
Committee. In all pre-approval instances, the Audit Committee will consider
whether such services are consistent with SEC rules on auditor independence. In its pre-approval policy, the Audit Committee has designated specific
services that have the pre-approval of the Audit Committee (each of which is
subject to pre-approved fee levels) and has classified these pre-approved
services into one of four categories: Audit, Audit-Related, Tax and All Other.
The term of any pre-approval is 12 months from the date of such pre-approval,
unless the Audit Committee specifically provides for a different period. The
Audit Committee will review the list of pre-approved services from time to
time, based on subsequent determinations. Pre-approved fee levels for all
services to be provided by the independent auditors will be established
periodically from time to time by the Audit Committee. Any proposed services
in excess of pre-approved costs levels will require specific pre-approval by
the Audit Committee. Pursuant to its pre-approval policy the Audit Committee may delegate its
authority to grant pre-approvals to one or more of its members, and has
currently delegated this authority to its Chairman. The decisions of the
Chairman (or any other member(s) to who such authority may be deleted) to grant
pre-approvals must be presented to the full Audit Committee at its next
scheduled meeting. The Audit Committee may not delegate its responsibilities
to pre-approve services to management. 47




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##### Table of Contents



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. COLLEGIATE PACIFIC INC.September 28, 2004
    
    By:
    
    /s/ Michael J. BlumenfeldMichael J. Blumenfeld,Chairman of the Board and ChiefExecutive Officer(Principal Executive Officer)
 Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities indicated on September 28, 2004. Signature
    
    Capacity/s/ Michael J. Blumenfeld

Michael J. Blumenfeld
    
    Chairman of the Board and
Chief Executive Officer/s/ Adam Blumenfeld
Adam Blumenfeld
    
    President and Director/s/ Arthur J. Coerver

Arthur J. Coerver
    
    Chief Operating Officer and
Director/s/ Harvey Rothenberg
Harvey Rothenberg
    
    Vice President Marketing
and Director/s/ William R. Estill

William R. Estill
    
    Chief Financial Officer,
Secretary and Treasurer(Principal Accounting and
Financial Officer)/s/ Jeff Davidowitz
Jeff Davidowitz
    
    Director/s/ Robert W. Hampton

Robert W. Hampton
    
    Director/s/ William H. Watkins, Jr.

William H. Watkins, Jr.
    
    Director
 48




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location2.1
    
    Agreement and Plan of Merger, dated as
of December 30, 2003, by and among
Tomark, Inc., Collegiate Pacific Inc.,
BOO Merger Corp., Thomas C. White and
Mark S. Harpin.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
January 23, 2004.2.2
    
    Asset Purchase Agreement, dated as of
February 9, 2004, by and among Kesslers
Team Sports, Inc., Collegiate Pacific
Inc., BOO Acquisition Corp., Bob
Dickman, Dan Dickman, Phil Dickman and
Floyd Dickman.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
April 8, 2004.2.3
    
    Stock Purchase Agreement, dated as of
July 23, 2004, by and among Collegiate
Pacific Inc., Kenneth L. Caravati and
C. Michael Caravati.
    
    Exhibit 2.1 to the
Registrants
Current Report on
Form 8-K filed on
August 10, 2004.3.1
    
    Certificate of Incorporation of the
Registrant.
    
    Exhibit 1 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.3.2
    
    By-Laws of the Registrant.
    
    Exhibit 2 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.3.3
    
    Certificate of Amendment to Certificate
of Incorporation of Collegiate Pacific
Inc.
    
    Exhibit 3.10 to the
Registrants
Registration
Statement on Form
SB-2 (No.
333-34294)
originally filed on
April 7, 2000.4.1
    
    Specimen Certificate of Common Stock,
$0.01 par value, of Collegiate Pacific
Inc.
    
    Exhibit 3 to the
Registrants
Registration
Statement on Form
8-A filed on
September 9, 1999.10.1
    
    Loan and Security Agreement, dated
November 5, 2003, by and between
Collegiate Pacific Inc. and Merrill
Lynch Business Financial Services Inc.
    
    Exhibit 10.1 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended December 31,
2003.10.2
    
    Amendment to Loan and Security
Agreement, dated April 28, 2004, by and
between Collegiate Pacific Inc. and
Merrill Lynch Business Financial
Services Inc.
    
    Exhibit 10.1 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.3
    
    Amended and Restated 1998 Collegiate
Pacific Inc. Stock Option Plan and
forms of Stock Option Agreements.*




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##### Table of Contents



ExhibitNumber
    
    Description
    
    Location10.4
    
    Lease Agreement, dated July 1, 1997, by
and between Collegiate Pacific Inc. and
Post-Valwood, Inc.
    
    Exhibit 10.8 to the
Registrants Annual
Report on Form
10-KSB filed for
the fiscal year
ended June 30,
1998.10.5
    
    Lease Agreement, dated April 1, 2004,
by and between Collegiate Pacific Inc.
and RPD Services, Inc.
    
    Exhibit 10.2 to the
Registrants
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.6
    
    Lease Agreement, dated May 15, 2003, by
and between Tomark Sports, Inc., and
Commerce Street Partnership
    
    Exhibit 10.3 to the
Quarterly Report on
Form 10-QSB for the
fiscal quarter
ended March 31,
2004.10.7
    
    Lease Agreement, dated July 6, 1994, by
and between Dixie Sporting Goods Co.,
Inc. and E. Carlton Wilton.*10.8
    
    Amendment to Loan Agreement, dated
August 26, 2004, by and between
Collegiate Pacific Inc. and Merrill
Lynch Business Financial Services Inc.*14
    
    Code of Ethics
    
    Exhibit 14 to the
Registrants Annual
Report on Form
10-KSB for the
fiscal year ended
June 30, 2003.21
    
    Subsidiaries of Collegiate Pacific Inc.*23
    
    Consent of Grant Thornton LLP*31.1
    
    Certification of the Chief Executive
Officer pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002.*31.2
    
    Certification of the Chief Financial
Officer pursuant to Rule 13a-14(a) or
15(d)-14(a) of the Securities Exchange
Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002.*32.1
    
    Certification of the Chief Executive
Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**32.2
    
    Certification of the Chief Financial
Officer pursuant to 18 U.S.C. Section
1350 as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.**
   *
    
    Filed herewith**
    
    Furnished herewith