##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 001-14547
 Ashworth, Inc.
 Delaware
    
    84-1052000(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 2765 LOKER AVENUE WEST
 CARLSBAD, CA 92008
  (760) 438-6610
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
 o þ
  Title
    
    Outstanding at February 28, 2006$.001 par value Common Stock
    
    14,371,910




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##### 



PAGEPart I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    
    1Condensed Consolidated Statements of Operations
    
    
    2Condensed Consolidated Statements of Cash Flows
    
    
    3Notes to Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24Part II. Other InformationItem 1. Legal Proceedings
    
    
    25Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    32Exhibit Index
    
    
    33EXHIBIT 31.1EXHIBIT 32.1




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
  
 
 January 31, 2006
    
    
    October 31, 2005AssetsCurrent assets:Cash and cash equivalents
    
    $
    3,123,000
    
    
    $
    3,839,000Accounts receivable  trade, net
    
    
    29,240,000
    
    
    
    37,306,000Accounts receivable  other
    
    
    572,000
    
    
    
    1,053,000Inventories, net
    
    
    61,723,000
    
    
    
    46,126,000Income tax refund receivable
    
    
    4,593,000
    
    
    
    4,036,000Other current assets
    
    
    6,888,000
    
    
    
    6,157,000Deferred income tax asset
    
    
    3,441,000
    
    
    
    3,441,000Total current assets
    
    
    109,580,000
    
    
    
    101,958,000Property, plant and equipment, at cost
    
    
    60,794,000
    
    
    
    60,203,000Less accumulated depreciation and amortization
    
    
    (23,384,000
    )
    
    
    (22,121,000
    )Total property, plant and equipment, net
    
    
    37,410,000
    
    
    
    38,082,000Goodwill
    
    
    13,865,000
    
    
    
    13,865,000Intangible assets, net
    
    
    10,487,000
    
    
    
    10,571,000Other assets
    
    
    321,000
    
    
    
    238,000Total assets
    
    $
    171,663,000
    
    
    $
    164,714,000Liabilities and Stockholders EquityCurrent liabilities:Line of credit payable
    
    $
    23,100,000
    
    
    $
    19,500,000Current portion of long-term debt
    
    
    1,942,000
    
    
    
    2,366,000Accounts payable
    
    
    16,575,000
    
    
    
    11,149,000Accrued liabilities:Salaries and commissions
    
    
    2,476,000
    
    
    
    3,529,000Other
    
    
    4,999,000
    
    
    
    6,142,000Total current liabilities
    
    
    49,092,000
    
    
    
    42,686,000Long-term debt, net of current portion
    
    
    16,692,000
    
    
    
    17,320,000Deferred income tax liability
    
    
    1,972,000
    
    
    
    1,972,000Other long-term liabilities
    
    
    148,000
    
    
    
    174,000Stockholders equity:Common stock
    
    
    14,000
    
    
    
    14,000Capital in excess of par value
    
    
    46,139,000
    
    
    
    44,755,000Retained earnings
    
    
    55,332,000
    
    
    
    55,382,000Accumulated other comprehensive income
    
    
    2,274,000
    
    
    
    2,411,000Total stockholders equity
    
    
    103,759,000
    
    
    
    102,562,000Total liabilities and stockholders equity
    
    $
    171,663,000
    
    
    $
    164,714,000
 
 1




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##### Table of Contents



Three months ended January 31,2006
    
    
    2005Net revenues
    
    $
    40,612,000
    
    
    $
    36,513,000Cost of goods sold
    
    
    22,636,000
    
    
    
    21,878,000Gross profit
    
    
    17,976,000
    
    
    
    14,635,000Selling, general and administrative expenses
    
    
    17,698,000
    
    
    
    14,091,000Income from operations
    
    
    278,000
    
    
    
    544,000Other income (expense):Interest income
    
    
    10,000
    
    
    
    20,000Interest expense
    
    
    (679,000
    )
    
    
    (533,000
    )Net foreign currency exchange gain
    
    
    170,000
    
    
    
    43,000Other income, net
    
    
    138,000
    
    
    
    64,000Total other expense
    
    
    (361,000
    )
    
    
    (406,000
    )Income
(loss) before provision for income taxes
    
    
    (83,000
    )
    
    
    138,000Provision (benefit) for income taxes
    
    
    (33,000
    )
    
    
    55,000Net income (loss)
    
    $
    (50,000
    )
    
    $
    83,000Net income
(loss) per share:Basic
    
    $
    (0.00
    )
    
    $
    0.01Diluted
    
    $
    (0.00
    )
    
    $
    0.01Weighted-average shares outstanding:Basic
    
    
    14,182,000
    
    
    
    13,726,000Diluted
    
    
    14,182,000
    
    
    
    14,110,000
  2




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Three months ended January 31,2006
    
    
    2005Cash flows from operating activities:Net cash used in operating activities
    
    $
    (3,750,000
    )
    
    $
    (4,387,000
    )Cash flows from investing activities:Net purchases of property, plant and equipment
    
    
    (631,000
    )
    
    
    (2,533,000
    )Purchases of intangible assets
    
    
    (23,000
    )
    
    
    Net cash used in investing activities
    
    
    (654,000
    )
    
    
    (2,533,000
    )Cash flows from financing activities:Principal payments on capital lease obligations
    
    
    
    
    
    
    (45,000
    )Borrowings on line of credit
    
    
    9,350,000
    
    
    
    13,500,000Payments on line of credit
    
    
    (5,750,000
    )
    
    
    (7,750,000
    )Principal payments on notes payable and
long-term debt
    
    
    (1,052,000
    )
    
    
    (1,042,000
    )Proceeds from exercise of stock options
    
    
    1,121,000
    
    
    
    357,000Excess tax benefit from share-based payment
arrangements
    
    
    153,000
    
    
    
    Change in restricted cash
    
    
    
    
    
    
    (25,000
    )Net cash provided by financing activities
    
    
    3,822,000
    
    
    
    4,995,000Effect of exchange rate changes on cash
    
    
    (134,000
    )
    
    
    367,000Net decrease in cash and cash equivalents
    
    
    (716,000
    )
    
    
    (1,558,000
    )Cash and cash equivalents, beginning of period
    
    
    3,839,000
    
    
    
    5,541,000Cash and cash equivalents, end of period
    
    $
    3,123,000
    
    
    $
    3,983,000
  3




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NOTE 1  Basis of Presentation.
   Shipping and Handling Revenue
 Accounting for Shipping
and Handling Fees and Costs
 Cost of Goods Sold
  Shipping and Handling Expenses
  Reclassifications
  4




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Stock-Based Compensation
 Share-Based Payment, Accounting for Stock Issued to
Employees, Accounting for Stock-Based Compensation.
  Accounting for Stock-Based Compensation-Transition and Disclosure,
 5




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Three months endedJanuary 31, 2005Net income  as reported
    
    $
    83,000Deduct: Stock-based employee compensation expense determined
under the fair value based
method for all awards, net of
tax
    
    
    (327,000
    )Net income (loss)  pro forma
    
    $
    (244,000
    )Net income per common share  as reportedBasic
    
    $
    0.01Diluted
    
    $
    0.01Net income
(loss) per common share  pro formaBasic
    
    $
    (0.02
    )Diluted
    
    $
    (0.02
    )
  Earnings Per Share
  6




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Earnings Per Share
 Three Months EndedJanuary 31,2006
    
    
    2005Numerator:Net income (loss)
    
    $
    (50,000
    )
    
    $
    83,000Denominator:Weighted-average shares outstanding
    
    
    14,181,787
    
    
    
    13,726,000Effect of dilutive options
    
    
    
    
    
    
    384,000Denominator for dilutive earnings per share
    
    
    14,181,787
    
    
    
    14,110,000Basic
earnings (loss) per share
    
    $
    (0.00
    )
    
    $
    0.01Diluted earnings (loss) per share
    
    $
    (0.00
    )
    
    $
    0.01
  NOTE 2  Inventories.
  January 31,
    
    
    October 31,2006
    
    
    2005Raw materials
    
    $
    88,000
    
    
    $
    146,000Finished goods
    
    
    61,635,000
    
    
    
    45,980,000Total inventories, net
    
    $
    61,723,000
    
    
    $
    46,126,000
 NOTE 3  Goodwill and Other Intangible Assets.
 Goodwill and Other Intangible Assets.
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January 31, 2006
    
    
    October 31, 2005Gross Carrying
    
    
    Accumulated
    
    
    
    
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Net Book Value
    
    
    Amount
    
    
    Amortization
    
    
    Net Book ValueIndefinite life:Tradenames
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000
    
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000Finite life:Customer lists
    
    
    1,530,000
    
    
    
    (365,000
    )
    
    
    1,165,000
    
    
    
    1,530,000
    
    
    
    (307,000
    )
    
    
    1,223,000Non-competes
    
    
    1,372,000
    
    
    
    (887,000
    )
    
    
    485,000
    
    
    
    1,372,000
    
    
    
    (846,000
    )
    
    
    526,000Customer sales backlog
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    
    
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    Trademarks
    
    
    1,409,000
    
    
    
    (1,273,000
    )
    
    
    136,000
    
    
    
    1,386,000
    
    
    
    (1,264,000
    )
    
    
    122,000Total intangible assets
    
    $
    13,201,000
    
    
    $
    (2,715,000
    )
    
    $
    10,486,000
    
    
    $
    13,178,000
    
    
    $
    (2,607,000
    )
    
    $
    10,571,000
   Remainder 2006
    
    $
    327,0002007
    
    
    426,0002008
    
    
    408,0002009
    
    
    266,0002010
    
    
    220,0002011
    
    
    139,000Thereafter
    
    
    Total
    
    $
    1,786,000
 NOTE 4  Line of Credit Agreement.
   8




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9




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1)
    
    Minimum tangible net worth equal to the sum of $75 million; plus the sum of
90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January 31, 2006; plus, the net proceeds
from any equity securities issued after the date of the Fourth Amendment;2)
    
    A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least .90:1:00, except for
the fiscal quarters ending January 31 and April 30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1:00;3)
    
    Capital expenditures are not to exceed more than $7 million in any fiscal
year;4)
    
    Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1:00; provided that, for the fiscal quarter
ended January 31, 2006, the fixed charge coverage ratio shall be not less than 0.80
to 1:00; and for purposes of determining the fixed charge coverage ratio only, the
Companys inventory write-down of $4,400,000 shall be added back to EBITDA for the
Companys fiscal quarter ending April 30, 2006 and the Companys maintenance capital
expenditures shall be $4,000,000 through the fiscal year ending October 31, 2006; and5)
    
    The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15 million was
eliminated.
   NOTE 5  Issuance of Common Stock.
  10




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NOTE 6  Stock-Based Compensation.
   Three Months EndedJanuary 31,2006
    
    2005Expected life
    
    3.8 years
    
    3.6 yearsRisk-free interest rate
    
    
    4.45
    %
    
    
    2.89% - 3.22
    %Volatility
    
    
    38.83
    %
    
    
    43.36
    %Dividend yields
    
    
    
    
    
    
    Weighted-average fair value of options granted during the period
    
    $
    2.87
    
    
    $
    3.83
 NOTE 7  Comprehensive Income.
  Three months ended January 31,2006
    
    
    2005Net income
(loss)
    
    $
    (50,000
    )
    
    $
    83,000Effects of foreign currency translation
    
    
    (137,000
    )
    
    
    367,000Total
comprehensive income (loss)
    
    $
    (187,000
    )
    
    $
    450,000
 11




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NOTE 8  Legal Proceedings.
  NOTE 9  Segment Information.
  12




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Three months January 31,2006
    
    
    2005Net revenues:Domestic
    
    $
    24,685,000
    
    
    $
    22,941,000Gekko Brands, LLC
    
    $
    10,096,000
    
    
    $
    8,628,000Ashworth, U.K., Ltd.
    
    
    4,478,000
    
    
    
    3,415,000Other International
    
    
    1,353,000
    
    
    
    1,529,000Total
    
    $
    40,612,000
    
    
    $
    36,513,000Income (loss) from operations:Domestic
    
    $
    (1,458,000
    )
    
    $
    (1,397,315
    )Gekko Brands, LLC
    
    $
    1,071,000
    
    
    $
    1,216,315Ashworth, U.K., Ltd.
    
    
    413,000
    
    
    
    346,000Other International
    
    
    252,000
    
    
    
    379,000Total
    
    $
    278,000
    
    
    $
    544,000Capital expenditures:Domestic
    
    $
    566,000
    
    
    $
    1,781,000Gekko Brands, LLC
    
    $
    51,000
    
    
    $
    614,000Ashworth, U.K., Ltd.
    
    
    14,000
    
    
    
    138,000Total
    
    $
    631,000
    
    
    $
    2,533,000Depreciation expense:Domestic
    
    $
    1,149,000
    
    
    $
    883,000Gekko Brands, LLC
    
    $
    101,000
    
    
    $
    89,000Ashworth, U.K., Ltd.
    
    
    76,000
    
    
    
    77,000Total
    
    $
    1,326,000
    
    
    $
    1,049,000
 January 31,
    
    
    January 31,2006
    
    
    2005Total assets:Domestic
    
    $
    110,693,000
    
    
    $
    108,431,000Gekko Brands, LLC
    
    $
    37,709,000
    
    
    $
    32,465,000Ashworth, U.K., Ltd.
    
    
    18,193,000
    
    
    
    18,353,000Other International
    
    
    5,068,000
    
    
    
    3,821,000Total
    
    $
    171,663,000
    
    
    $
    163,070,000Long lived assets, at cost:Domestic
    
    $
    58,838,000
    
    
    $
    53,558,000Gekko Brands, LLC
    
    $
    27,352,000
    
    
    $
    25,684,000Ashworth, U.K., Ltd.
    
    
    1,991,000
    
    
    
    1,921,000Total
    
    $
    88,181,000
    
    
    $
    81,163,000Goodwill:Gekko Brands, LLC
    
    $
    13,865,000
    
    
    $
    12,642,000
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NOTE 10  Contingencies
  
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   Critical Accounting Policies
  Revenue Recognition. Revenue Recognition Accounting of Shipping and Handling Fees and Costs
 Sales Returns and Other Allowances.
 14




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Allowance for Doubtful Accounts.
 Inventory.
 Asset Purchase Credits.
 15




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Off-Balance Sheet Arrangements
  Overview
 ® â â
     16




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Innovation
 TM
    Preparing For Additional Growth.
 Results of Operations
 First quarter 2006 compared to First quarter 2005
  17




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Capital Resources and Liquidity
   18




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19




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1)
    
    Minimum tangible net worth equal to the sum of $75 million; plus the sum of
90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January 31, 2006; plus, the net proceeds
from any equity securities issued after
the date of the Fourth Amendment;2)
    
    A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least .90:1:00, except for
the fiscal quarters ending January 31 and April 30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1:00;3)
    
    Capital expenditures are not to exceed more than $7 million in any fiscal
year;4)
    
    Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1:00; provided that, for the fiscal quarter
ended January 31, 2006, the fixed charge coverage ratio shall be not less than 0.80
to 1:00; and for purposes of determining the fixed charge coverage ratio only, the
Companys inventory write-down of $4,400,000 shall be added back to EBITDA for the
Companys fiscal quarter ending April 30, 2006 and the Companys maintenance capital
expenditures shall be $4,000,000 through the fiscal year ending October 31, 2006; and5)
    
    The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15 million was
eliminated.
   20




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21




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Derivatives
  New Accounting Standards
 Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB Statement
No. 3
 22




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Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No. 29 Accounting for
Nonmonetary Transactions
 Inventory Costs, an amendment of ARB No. 43,
Chapter 4 . Inventory
Pricing
 Cautionary Statements
  23




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
   Foreign Currency Exchange Rate Risk
  
 Item 4. CONTROLS AND PROCEDURES
 EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
  24




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CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
   
 PART II
 OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
  25




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Item 1A. Risk Factors
  q
    
    The Company received a notice from Knightspoint Partners II, LLC
(Knightspoint) dated December 22, 2005 indicating that Knightspoint intends to
present a number of proposals at the Companys Annual Meeting in 2006. On February 27,
2006, Knightspoint filed a preliminary proxy statement with the United States
Securities and Exchange Commission in connection with certain proposals and director
nominations Knightspoint intends to make at the Companys Annual Meeting in 2006.
The Company is currently evaluating the proposals in the Knightspoint filing. If
the Company were to oppose the Knightspoint proposals as not in the Companys or
stockholders best interest, management would be forced to expend substantial time and
energy which may divert managements attention from the operations of the Company, as
well as incur significant additional costs, including fees for the retention of legal
and financial advisors, that would negatively impact the Companys operating results
and financial condition. At this time, management can not estimate the impact that
such proposals will have on the Companys operating results and financial condition.
 
 Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None
 
 Item 3. DEFAULTS UPON SENIOR SECURITIES  None
 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
Not applicable
 
 Item 5. OTHER INFORMATION  None
 
 Item 6. EXHIBITS
  3(a)
    
    Certificate of Incorporation as filed March 19, 1987 with the Secretary of State of Delaware, Amendment to Certificate of
Incorporation as filed August 3, 1987 and Amendment to Certificate of Incorporation as filed April 26, 1991 (filed as
Exhibit 3(a) to the Companys Registration Statement dated February 21, 1992 (File No. 33-45078) and incorporated herein
by reference) and Amendment to Certificate of Incorporation as filed April 6, 1995 (filed as Exhibit 3(a) to the Companys
Form 10-K for the fiscal year ended October 31, 1994 (File No. 001-14547) and incorporated herein by reference).3(b)
    
    Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Companys Current Report on Form 8-K on February
23, 2000 (File No. 001-14547) and incorporated herein by reference).4(a)
    
    Specimen certificate for Common Stock, par value $.001 per share, of the Company (filed as Exhibit 4(a) to the Companys
Registration Statement dated November 4, 1987 (File No. 33-16714-D) and incorporated herein by reference).4(b)
    
    Specimen certificate for Options granted under the Amended and Restated Nonqualified Stock Option Plan dated March 12,
1992 (filed as Exhibit 4(b) to the Companys Form 10-K for the fiscal year ended October 31, 1993 (File No. 001-14547) and
incorporated herein by reference).
 26




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4(c)
    
    Specimen certificate for Options granted under the Incentive Stock Option Plan dated June 15, 1993 (filed as Exhibit 4(c)
to the Companys Form 10-K for the fiscal year ended October 31, 1993 (File No. 001-14547) and incorporated herein by
reference).4(d)
    
    Rights Agreement dated as of October 6, 1998 and amended on February 22, 2000 by and between Ashworth, Inc. and American
Securities Transfer & Trust, Inc. (filed as Exhibit 4.1 to the Companys Form 8-K filed on March 14, 2000 (File No.
001-14547) and incorporated herein by reference).10(a)*
    
    Personal Services Agreement and Acknowledgement of Termination of Executive Employment effective December 31, 1998 by and
between Ashworth, Inc. and Gerald W. Montiel (filed as Exhibit 10(b) to the Companys Form 10-K for the fiscal year ended
October 31, 1998 (File No. 001-14547) and incorporated herein by reference).10(b)*
    
    Amendment to Personal Services Agreement effective January 1, 1999 by and between Ashworth, Inc. and Gerald W. Montiel
(filed as Exhibit 10(c) to the Companys Form 10-K for the fiscal year ended October 31, 1998 (File No. 001-14547) and
incorporated herein by reference).10(c)*
    
    Amended and Restated Nonqualified Stock Option Plan dated November 1, 1996 (filed as Exhibit 10(i) to the Companys Form
10-K for the fiscal year ended October 31, 2000 (File No. 001-14547) and incorporated herein by reference).10(d)*
    
    Amended and Restated Incentive Stock Option Plan dated November 1, 1996 (filed as Exhibit 10(j) to the Companys Form 10-K
for the fiscal year ended October 31, 2000 (File No. 001-14547) and incorporated herein by reference).10(e)*
    
    Amended and Restated 2000 Equity Incentive Plan dated December 14, 1999 adopted by the stockholders on March 24, 2000
(filed as Exhibit 4.1 to the Companys Form S-8 filed on December 12, 2000 (File No. 333-51730) and incorporated herein by
reference).10(e)(1)
    
    Credit Agreement dated July 6, 2004, between Ashworth, Inc. as Borrower, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July 6, 2009 (filed as Exhibit
10(z)(1) to the Companys Form 10-Q for the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by
reference).10(e)(2)
    
    Guaranty Agreement dated July 6, 2004 between Ashworth Store I, Inc., Ashworth Store II, Inc., Ashworth Acquisition Corp,
Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Guarantors and Union Bank of California, N.A., as Administrative Agent
on behalf of Ashworth, Inc. as the Borrower (filed as Exhibit 10(z)(2) to the Companys Form 10-Q for the quarter ended
July 31, 2004 (File No. 001-14547) and incorporated herein by reference).10(e)(3)
    
    Security Agreement effective as of July 6, 2004 to the Credit Agreement dated July 6, 2004, between Ashworth, Inc. as
Pledgor, Union Bank of California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust
as Lenders, expiring July 6, 2009(filed as Exhibit 10(z)(3) to the Companys Form 10-Q for the quarter ended July 31, 2004
(File No. 001-14547) and incorporated herein by reference).
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10(e)(4)
    
    Security Agreement effective as of July 6, 2004 to the Credit Agreement dated July 6, 2004, between Ashworth Store I,
Inc., Ashworth Store II, Inc., Ashworth Acquisition Corp, Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Pledgor,
Union Bank of California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust as
Lenders, expiring July 6, 2009 (filed as Exhibit 10(z)(4) to the Companys Form 10-Q for the quarter ended July 31, 2004
(File No. 001-14547) and incorporated herein by reference).10(e)(5)
    
    Deed of Hypothec of Universality of Moveable Property effective as of July 6, 2004 to the Credit Agreement dated July 6,
2004, between Ashworth, Inc. as Grantor, Union Bank of California, N.A., as Administrative Agent and Lender, Bank of the
West and Columbus Bank and Trust as Lenders, expiring July 6, 2009 (filed as Exhibit 10(z)(5) to the Companys Form 10-Q
for the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by reference).10(e)(6)
    
    Equitable Mortgage Over Securities effective as of July 6, 2004 to the Credit Agreement dated July 6, 2004, between
Ashworth, Inc. as Mortgagor, Union Bank of California, N.A., as Security Trustee and Beneficiary, Bank of the West and
Columbus Bank and Trust as Beneficiaries, expiring July 6, 2009 (filed as Exhibit 10(z)(6) to the Companys Form 10-Q for
the quarter ended July 31, 2004 (File No. 001-14547) and incorporated herein by reference).10(e)(7)
    
    First Amendment effective as of September 3, 2004 to the Credit Agreement dated July 6, 2004, between Ashworth, Inc. as
Borrower, Union Bank of California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust
as Lenders, expiring July 6, 2009 (filed as Exhibit 10(z)(7) to the Companys Form 10-Q for the quarter ended July 31,
2004 (File No. 001-14547) and incorporated herein by reference).10(f)
    
    Promotion Agreement effective November 1, 1999 by and between Ashworth, Inc. and Fred Couples (filed as Exhibit 10(o) to
the Companys Form 10-K for the fiscal year ended October 31, 2000 (File No. 001-14547) and incorporated herein by
reference).10(g)*
    
    Contract Termination Agreement effective October 31, 2002 by and among Ashworth, Inc., James Nantz, III and Nantz
Communications, Inc. (filed as Exhibit 10(p) to the Companys Form 10-K for the fiscal year ended October 31, 2002 (File
No. 001-14547) and incorporated herein by reference).10(h)*
    
    Promotion Agreement effective October 31, 2002 by and among Ashworth, Inc., James W. Nantz, III and Nantz Enterprises,
Ltd. (filed as Exhibit 10(q) to the Companys Form 10-Q for the quarter ended January 31, 2003 (File No. 001-14547) and
incorporated herein by reference).10(i)
    
    Purchase and Installation Agreement dated April 10, 2003 between Ashworth, Inc. and Gartner Storage & Sorter Systems of
Pennsylvania (filed as Exhibit 10 (r) to the Companys Form 10-Q for the quarter ended April 30, 2003 (File No. 001-14547)
and incorporated herein by reference).10(j)
    
    Agreement for Lease dated May 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and Juniper Developments Limited
(filed as Exhibit 10(s) to the Companys Form 10-Q for the quarter ended April 30, 2003 (File No. 001-14547) and
incorporated herein by reference).10(k)
    
    Lease dated September 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and Juniper Developments Limited (filed
as Exhibit 10(t) to the Companys Form 10-Q for the quarter ended July 31, 2003 (File No. 001-14547) and incorporated
herein by reference).10(l)(1)
    
    Master Equipment Lease Agreement dated as of June 23, 2003 by and between Key Equipment Finance and Ashworth, Inc.
including Amendment 01, the Assignment of Purchase Agreement and the Certificate of Authority (filed as Exhibit 10(u) to
the Companys Form 10-Q for the quarter ended July 31, 2003 (File No. 001-14547) and incorporated herein by reference).
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10(l)(2)
    
    Equipment Schedule No. 01 dated as of August 30, 2004 by and between Ashworth, Inc. and Key Equipment Finance, a Division
of Key Corporate Capital, Inc.(filed as Exhibit 99.1 to the Companys Form 8-K on September 3, 2004 (File No. 001-14547)
and incorporated herein by reference).10(m)
    
    License Agreement, effective May 14, 2001, by and between Ashworth, Inc. and Callaway Golf Company (filed as Exhibit 10(v)
to the Companys Form 10-K for the fiscal year ended October 31, 2003 (File No. 001-14547) and incorporated herein by
reference).10(n)
    
    Amendment to License Agreement, effective December 16, 2003, by and between Ashworth, Inc. and Callaway Golf Company
(filed as Exhibit 10(w) to the Companys Form 10-K for the fiscal year ended October 31, 2003 (File No. 001-14547) and
incorporated herein by reference).10(o)(1)
    
    Loan Agreement, effective April 2, 2004, by and between Ashworth EDC, LLC and Bank of America, N.A. (filed as Exhibit
10(x)(3) to the Companys Form 10-Q for the quarter ended April 30, 2004 (File No. 001-14547) and incorporated herein by
reference).10(o)(2)
    
    Promissory Note, effective April 2, 2004, by and between Ashworth EDC, LLC and Bank of America, N.A. (filed as Exhibit
10(x)(4) to the Companys Form 10-Q for the quarter ended April 30, 2004 (File No. 001-14547) and incorporated herein by
reference).10(o)(3)
    
    Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, effective April 2, 2004, by and
between Ashworth EDC, LLC, PRLAP, Inc. and Bank of America, N.A. (filed as Exhibit 10(x)(5) to the Companys Form 10-Q for
the quarter ended April 30, 2004 (File No. 001-14547) and incorporated herein by reference).10(o)(4)
    
    Environmental Indemnity Agreement, effective April 2, 2004, by and between Ashworth EDC, LLC, Ashworth, Inc. and Bank of
America, N.A. (filed as Exhibit 10(x)(6) to the Companys Form 10-Q for the quarter ended April 30, 2004 (File No.
001-14547) and incorporated herein by reference).10(p)(1)
    
    Membership Interests Purchase Agreement, dated July 6, 2004, by and among Ashworth Acquisition Corp. and the selling
members, identified therein (filed as Exhibit 99.1 to the Companys Form 8-K on July 21, 2004 (File No. 001-14547) and
incorporated herein by reference).10(p)(2)
    
    Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley Co. (filed as Exhibit 99.2 to the Companys Form 8-K
on July 21, 2004 (File No. 001-14547) and incorporated herein by reference).10(p)(3)
    
    Ashworth, Inc. Guaranty of Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley Co. (filed as Exhibit 99.3
to the Companys Form 8-K on July 21, 2004 (File No. 001-14547) and incorporated herein by reference).10(p)(4)
    
    Amended and Restated Lease Agreement, dated July 6, 2004, by and between 16 Downing, LLC as Lessor and Gekko Brands, LLC
as Lessee (filed as Exhibit 99.4 to the Companys Form 8-K July 21, 2004 (File No. 001-14547) and incorporated herein by
reference).10(p)(5)
    
    Ashworth, Inc. Guaranty of Payments under the Amended and Restated Lease Agreement, dated July 6, 2004, by and between 16
Downing, LLC as Lessor and Gekko Brands, LLC as Lessee (filed as Exhibit 99.5 to the Companys Form 8-K on July 21, 2004
(File No. 001-14547) and incorporated herein by reference).
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10(p)(6)
    
    Form of Executive Employment Agreement by and between Gekko Brands, LLC and certain selling members (filed as Exhibit 99.6
to the Companys Form 8-K on July 21, 2004 (File No. 001-14547) and incorporated herein by reference).10(q)*
    
    Form of Stock Option Agreement for issuance of stock option grants to each of the Companys executive officers and
non-employee directors on December 21, 2004 (filed as Exhibit 10.1 to the Companys Form 8-K on December 22, 2004 (File
No. 001-14547) and incorporated herein by reference.10(r)
    
    Stipulation and Agreement of Settlement regarding shareholder class-action lawsuit in which the U.S. District Court
entered a Final Approval of Settlement on November 8, 2004 (filed as Exhibit 10.1 to the Companys Form 10Q on March 11,
2005 (File No. 001-14547) and incorporated herein by reference).10(s)*
    
    Annual Base Salary for the Companys Chief Executive Officer Effective as of January 1, 2005 (filed as Exhibit 10.1 to the
Companys Form 10-Q on June 9, 2005 (File No. 001-14547) and incorporated herein by reference).10(s)(1)*
    
    Second Amended And Restated Executive Employment Agreement with the Companys President and Chief Executive Officer,
Randall L. Herrel, Sr. effective as of February 28, 2006 (filed as Exhibit 10.1 to the Companys Form 10-K/A on February
28, 2006 (File No. 001-14547) and incorporated herein by reference).10(s)(2)*
    
    Amended And Restated Change In Control Agreement with the Companys President and Chief Executive Officer, Randall L.
Herrel, Sr. effective as of February 28, 2006 (filed as Exhibit 10.2 to the Companys Form 10-K/A on February 28, 2006
(File No. 001-14547) and incorporated herein by reference).10(t)()*
    
    Amended And Restated Employment Agreement with the Companys Executive Vice President of Sales and Marketing, Mr. Gary I.
Sims Schneiderman, effective as of February 28, 2006 (filed as exhibit 10.5 to the Companys Form 10K/A on February 28,
2006 (File No. 001-14547) and incorporated herein by reference).10(t)(1)*
    
    Amended And Restated Change in Control Agreement with the Companys Executive Vice President of Sales and Marketing, Mr.
Gary I. Sims Schneiderman effective as of February 28, 2006 (filed as exhibit 10.6 to the Companys Form 10K/A on
February 28, 2006 (File No. 001-14547) and incorporated herein by reference).10(u)*
    
    Employment Agreement with the Companys Executive Vice President , Chief Financial Officer and Treasurer, Peter S. Case
effective as of September 16, 2005 (filed as exhibit 10.1 to the Companys Form 10K on February 1, 2006 (File No.
001-14547) and incorporated herein by reference).10(v)(1)*
    
    Change in Control Agreement with the Companys Executive Vice President , Chief Financial Officer and Treasurer, Peter S.
Case effective as of September 16, 2005 (filed as exhibit 10.2 to the Companys Form 10K on February 1, 2006 (File No.
001-14547) and incorporated herein by reference).10(w)*
    
    Amended And Restated Employment Agreement with the Companys Executive Vice President of Merchandising, Design and
Production, Peter E. Holmberg effective as of February 28, 2006 (filed as exhibit 10.3 to the Companys Form 10K/A on
February 28, 2006 (File No. 001-14547) and incorporated herein by reference).10(w)(1)*
    
    Amended And Restated Change in Control Agreement with the Companys Executive Vice President of Merchandising, Design and
Production, Peter E. Holmberg effective as of February 28, 2006 (filed as exhibit 10.4 to the Companys Form 10K on
February 28, 2006 (File No. 001-14547) and incorporated herein by reference).
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10(x)
    
    Fourth Amendment effective as of January 26, 2006 to the Credit Agreement dated July 6, 2004, between Ashworth, Inc. as
Borrower, Union Bank of California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust
as Lenders, expiring July 6, 2009 (filed as exhibit 10.5 to the Companys Form 10K on February 1, 2006 (File No.
001-14547) and incorporated herein by reference).10(y)*
    
    Employment Letter with the Companys Executive Vice President and Chief Financial Officer, Winston E. Hickman, effective
as of February 23, 2006 (filed as exhibit 10.7 to the Companys Form 10K/A on February 28, 2006 (File No. 001-14547) and
incorporated herein by reference).10(y)(1)*
    
    Change in Control Agreement with the Companys Executive Vice President and Chief Financial Officer, Winston E. Hickman,
effective as of February 23, 2006 (filed as exhibit 10.8 to the Companys Form 10K on February 28, 2006 (File No.
001-14547) and incorporated herein by reference).31.1
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by
Randall L. Herrel, Sr.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by
Randall L. Herrel, Sr.
 
 *
    
    Management contract or compensatory plan or arrangement required to be filed as an Exhibit
pursuant to Item 15(b) of Form 10-K and applicable rules of the Securities and Exchange Commission.
    
    Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.(b)
    
    Financial statements required by Regulation S-X excluded from the annual report to
shareholders by Rule 14a-3(b). Not applicable. 31




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SIGNATURES
  ASHWORTH, INCDate: March 13, 2006
    By:

/s/ Randall L. Herrel, Sr.Randall L. Herrel, Sr.Chairman, President and Chief Executive Officer
(Principal Executive Officer and Acting Principal Financial Officer) 32




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EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit31.1
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as
Adopted Pursuant to Section 302 of The Sarbanes-Oxley
Act of 2002 by Randall L. Herrel, Sr.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of The Sarbanes-Oxley
Act of 2002 by Randall L. Herrel, Sr.
 33