##### 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 July 31, 2007
 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 92010
 (760) 438-6610
 þ o
  o þ o
 o þ
  Title
    
    Outstanding at August 31, 2007$.001 par value Common Stock
    
    14,658,511




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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
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22Item 4. Controls and Procedures
    
    
    23Part II. Other InformationItem 1. Legal Proceedings
    
    
    24Item1A. Risk Factors
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Signatures
    
    
    33Exhibit Index
    
    
    34EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  -i-




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PART I
 FINANCIAL INFORMATION
  
  July 31, 2007
    
    
    October 31, 2006(UNAUDITED)AssetsCurrent assets:Cash and cash equivalents
    
    $
    7,869,000
    
    
    $
    7,508,000Accounts receivable  trade, net
    
    
    31,334,000
    
    
    
    33,984,000Accounts receivable  other, net
    
    
    194,000
    
    
    
    526,000Inventories, net
    
    
    53,608,000
    
    
    
    44,971,000Income tax refund receivable
    
    
    923,000
    
    
    
    3,743,000Other current assets
    
    
    4,359,000
    
    
    
    5,247,000Deferred income tax asset, net
    
    
    440,000
    
    
    
    3,116,000Total current assets
    
    
    98,727,000
    
    
    
    99,095,000Property, plant and equipment, at cost
    
    
    67,702,000
    
    
    
    65,958,000Less accumulated depreciation and amortization
    
    
    (29,399,000
    )
    
    
    (26,832,000
    )Total property, plant and equipment, net
    
    
    38,303,000
    
    
    
    39,126,000Goodwill
    
    
    15,250,000
    
    
    
    15,250,000Intangible assets, net
    
    
    9,963,000
    
    
    
    10,245,000Other assets
    
    
    372,000
    
    
    
    327,000Total assets
    
    $
    162,615,000
    
    
    $
    164,043,000Liabilities and Stockholders EquityCurrent liabilities:Line of credit payable
    
    $
    22,300,000
    
    
    $
    14,000,000Current portion of long-term debt
    
    
    2,339,000
    
    
    
    2,117,000Accounts payable
    
    
    10,287,000
    
    
    
    10,724,000Accrued liabilities:Salaries and commissions
    
    
    4,260,000
    
    
    
    4,077,000Other
    
    
    5,842,000
    
    
    
    6,681,000Total current liabilities
    
    
    45,028,000
    
    
    
    37,599,000Long-term debt, net of current portion
    
    
    14,385,000
    
    
    
    15,671,000Deferred income tax liability
    
    
    1,965,000
    
    
    
    1,965,000Other long-term liabilities
    
    
    76,000
    
    
    
    174,000Stockholders equity:Common stock
    
    
    15,000
    
    
    
    15,000Capital in excess of par value
    
    
    49,709,000
    
    
    
    48,256,000Retained earnings
    
    
    45,703,000
    
    
    
    56,333,000Accumulated other comprehensive income
    
    
    5,734,000
    
    
    
    4,030,000Total stockholders equity
    
    
    101,161,000
    
    
    
    108,634,000Total liabilities and stockholders equity
    
    $
    162,615,000
    
    
    $
    164,043,000
  1




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Three months ended July 31,
    
    
    Nine months ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    49,461,000
    
    
    $
    52,816,000
    
    
    $
    147,597,000
    
    
    $
    159,448,000Cost of goods sold
    
    
    30,578,000
    
    
    
    31,190,000
    
    
    
    89,856,000
    
    
    
    89,963,000Gross profit
    
    
    18,883,000
    
    
    
    21,626,000
    
    
    
    57,741,000
    
    
    
    69,485,000Selling, general and administrative expenses
    
    
    21,841,000
    
    
    
    19,836,000
    
    
    
    62,799,000
    
    
    
    59,044,000Income (loss) from operations
    
    
    (2,958,000
    )
    
    
    1,790,000
    
    
    
    (5,058,000
    )
    
    
    10,441,000Other income (expense):Interest income
    
    
    24,000
    
    
    
    21,000
    
    
    
    82,000
    
    
    
    40,000Interest expense
    
    
    (837,000
    )
    
    
    (828,000
    )
    
    
    (2,209,000
    )
    
    
    (2,229,000
    )Net foreign currency exchange gain (loss)
    
    
    (49,000
    )
    
    
    125,000
    
    
    
    69,000
    
    
    
    462,000Other income (expense), net
    
    
    (5,000
    )
    
    
    26,000
    
    
    
    (183,000
    )
    
    
    128,000Total other expense, net
    
    
    (867,000
    )
    
    
    (656,000
    )
    
    
    (2,241,000
    )
    
    
    (1,599,000
    )Income (loss) before income tax
    
    
    (3,825,000
    )
    
    
    1,134,000
    
    
    
    (7,299,000
    )
    
    
    8,842,000Provision for income taxes
    
    
    1,824,000
    
    
    
    453,000
    
    
    
    3,331,000
    
    
    
    3,536,000Net income (loss)
    
    $
    (5,649,000
    )
    
    $
    681,000
    
    
    $
    (10,630,000
    )
    
    $
    5,306,000Net income (loss) per share:Basic
    
    $
    (0.39
    )
    
    $
    0.05
    
    
    $
    (0.73
    )
    
    $
    0.37Diluted
    
    $
    (0.39
    )
    
    $
    0.05
    
    
    $
    (0.73
    )
    
    $
    0.37Weighted-average shares outstanding:Basic
    
    
    14,602,000
    
    
    
    14,495,000
    
    
    
    14,548,000
    
    
    
    14,359,000Diluted
    
    
    14,602,000
    
    
    
    14,624,000
    
    
    
    14,548,000
    
    
    
    14,513,000
  2




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Nine months ended July 31,2007
    
    
    2006CASH FLOW FROM OPERATING ACTIVITIES:Net cash provided (used) in operating activities
    
    $
    (6,131,000
    )
    
    $
    3,882,000CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (3,189,000
    )
    
    
    (4,804,000
    )Purchase of intangibles
    
    
    (64,000
    )
    
    
    (88,000
    )Net cash used in investing activities
    
    
    (3,253,000
    )
    
    
    (4,892,000
    )CASH FLOWS FROM FINANCING ACTIVITIESPrincipal payments on capital lease obligations
    
    
    (229,000
    )
    
    
    (63,000
    )Borrowings on line of credit
    
    
    31,250,000
    
    
    
    31,700,000Payments on line of credit
    
    
    (22,950,000
    )
    
    
    (33,350,000
    )Borrowings on notes payable and long-term debt
    
    
    683,000
    
    
    
    Principal payments on notes payable and long-term debt
    
    
    (1,518,000
    )
    
    
    (1,373,000
    )Proceeds from issuance of common stock
    
    
    881,000
    
    
    
    2,489,000Excess tax benefit from share-based payment arrangements
    
    
    
    
    
    
    533,000Net cash provided (used) in financing activities
    
    
    8,117,000
    
    
    
    (64,000
    )Effect of exchange rate changes
    
    
    1,628,000
    
    
    
    1,127,000Net increase in cash and cash equivalents
    
    
    361,000
    
    
    
    53,000Cash, beginning of period
    
    
    7,508,000
    
    
    
    3,839,000Cash, end of period
    
    $
    7,869,000
    
    
    $
    3,892,000
  3




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NOTE 1  Basis of Presentation.
   Shipping and Handling Revenue
 Accounting of 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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Earnings (Loss) Per Share
  Earnings Per Share
 Three months ended July 31,
    
    
    Nine months ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income (loss)
    
    $
    (5,649,000
    )
    
    $
    681,000
    
    
    $
    (10,630,000
    )
    
    $
    5,306,000Denominator:Weighted-average shares outstanding
    
    
    14,602,000
    
    
    
    14,495,000
    
    
    
    14,548,000
    
    
    
    14,359,000Effect of dilutive options
    
    
    
    
    
    
    129,000
    
    
    
    
    
    
    
    154,000Denominator for dilutive earnings per share
    
    
    14,602,000
    
    
    
    14,624,000
    
    
    
    14,548,000
    
    
    
    14,513,000Basic income (loss) per share
    
    $
    (0.39
    )
    
    $
    0.05
    
    
    $
    (0.73
    )
    
    $
    0.37Diluted income (loss) per share
    
    $
    (0.39
    )
    
    $
    0.05
    
    
    $
    (0.73
    )
    
    $
    0.37
  NOTE 2  Inventories.
  July 31,
    
    
    October 31,2007
    
    
    2006Raw materials
    
    $
    
    
    
    $
    93,000Finished goods
    
    
    53,608,000
    
    
    
    44,878,000Total inventories, net
    
    $
    53,608,000
    
    
    $
    44,971,000
 6




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NOTE 3  Goodwill and Other Intangible Assets.
 Goodwill and Other Intangible Assets.
 July 31, 2007
    
    
    October 31, 2006Gross Carrying
    
    
    Accumulated
    
    
    Net Book
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net BookAmount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueIndefinite life:Tradenames
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000
    
    
    $
    8,700,000
    
    
    $
    
    
    
    $
    8,700,000Finite life:Customer lists
    
    
    1,530,000
    
    
    
    (715,000
    )
    
    
    815,000
    
    
    
    1,530,000
    
    
    
    (541,000
    )
    
    
    989,000Non-competes
    
    
    1,372,000
    
    
    
    (1,134,000
    )
    
    
    238,000
    
    
    
    1,372,000
    
    
    
    (1,011,000
    )
    
    
    361,000Customer sales backlog
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    
    
    
    
    190,000
    
    
    
    (190,000
    )
    
    
    Trademarks
    
    
    1,566,000
    
    
    
    (1,356,000
    )
    
    
    210,000
    
    
    
    1,502,000
    
    
    
    (1,307,000
    )
    
    
    195,000Total intangible assets
    
    $
    13,358,000
    
    
    $
    (3,395,000
    )
    
    $
    9,963,000
    
    
    $
    13,294,000
    
    
    $
    (3,049,000
    )
    
    $
    10,245,000
   Remainder 2007
    
    $
    111,0002008
    
    
    439,0002009
    
    
    297,0002010
    
    
    252,0002011
    
    
    164,0002012
    
    
    Thereafter
    
    
    Total
    
    $
    1,263,000
 NOTE 4  Business Loan Agreement.
  1.
    
    The borrowing base calculation was changed and denotes that the Lenders shall not
be obligated to advance funds under the revolving credit facility at any time that the
Companys aggregate obligations to the Lenders exceed the sum of (a) eighty-five percent
(85%) of Borrowers Eligible Accounts, and (b) the lesser of (i) sixty-five percent (65%)
of Borrowers Eligible Inventory and (ii) eighty-five percent (85%) of the appraised net
recovery value of Borrowers Inventory, as such terms are defined in the amended Loan
Agreement.2.
    
    A Control Account was established wherein any immediately available funds in the
account will be automatically applied to the Companys outstanding obligations under the
revolving line of credit to minimize the Companys interest expense.
 7




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3.
    
    A Minimum Borrowing Base Availability provision was added which states that the
Company must maintain a difference between the Borrowing Base and the aggregate outstanding
obligations under the Credit Agreement of at least $7.5 million, except if the Company has
achieved at least two (2) consecutive quarters of a Fixed Charge Coverage Ratio in excess
of 1:10 to 1:00. If the Company is not in compliance with this provision for five (5)
consecutive business days, this will constitute a Triggering Event and will result in the
Control Account becoming the property of the Companys bank as partial payment for the
Companys outstanding obligations under the Credit Agreement. Such a Triggering Event may
be cured by maintaining the difference of at least $7.5 million for thirty (30) consecutive
days.4.
    
    The Minimum Tangible Net Worth requirement was modified and is now equal to the sum
of at least $70.0 million; plus 50% of net income after income taxes (without subtracting
losses) earned in each quarterly accounting period commencing after April 30, 2007; plus,
the net proceeds from any equity securities issued after the date of the Eighth Amendment
(inclusive of securities issued in connection with stock-based compensation).5.
    
    The Minimum Fixed Charge Coverage Ratio (FCCR) was set at no less than 1:10 to 1:00
for periods after the earlier of two (2) consecutive quarters ended with a FCCR in excess
of 1.10:1.00 or July 31, 2008. The FCCR may be used in determining the Applicable Rate.6.
    
    Capital Expenditures (including the total amount of any capital leases) are limited
to $4.0 million in any one fiscal year on a consolidated basis. The Company may invest any
net proceeds from the sale of any existing real property and equipment used in connection
with the Companys Oceanside, California Embroidery and Distribution Center in like assets
within two (2) years of disposal of such assets and such investment will be in addition to
the $4.0 million permitted in each fiscal year provided no event of default has occurred,
is continuing or would result after giving effect to such investment.7.
    
    The Applicable Rate schedule was modified and is now based on the Fixed Charge Coverage
Ratio or average daily Borrowing Base Availability instead of the Funded Debt to EBITDA
Ratio.
 NOTE 5  Issuance of Common Stock.
  8




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NOTE 6  Stock-Based Compensation.
   Three months ended July 31,
    
    Nine months ended July 31,2007
    
    2006
    
    2007
    
    2006Expected life (years)
    
    
    4.64
    
    
    
    3.71
    
    
    
    4.91
    
    
    
    3.71-3.81Risk-free interest rate
    
    
    4.89
    %
    
    
    5.02
    %
    
    
    4.65
    %
    
    
    4.45-5.02
    %Volatility
    
    
    37.4
    %
    
    
    37.7
    %
    
    
    37.4
    %
    
    
    37.7-38.8
    %Dividend yields
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average fair value of options
during the period
    
    $
    3.24
    
    
    $
    3.25
    
    
    $
    3.06
    
    
    $
    2.96
 NOTE 7  Comprehensive Income.
  Three months ended July 31,
    
    
    Nine months ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income (loss)
    
    $
    (5,649,000
    )
    
    $
    681,000
    
    
    $
    (10,630,000
    )
    
    $
    5,306,000Effects of foreign currency translation
    
    
    618,000
    
    
    
    741,000
    
    
    
    1,704,000
    
    
    
    1,234,000Total comprehensive income (loss)
    
    $
    (5,031,000
    )
    
    $
    1,422,000
    
    
    $
    (8,926,000
    )
    
    $
    6,540,000
 NOTE 8  Legal Proceedings.
  9




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NOTE 9  Income Taxes.
  October 31,July 31,2007
    
    
    2007Deferred tax assets:Allowance for doubtful accounts
    
    $
    379,000
    
    
    $
    379,000Inventory reserves
    
    
    1,177,000
    
    
    
    1,177,000Accrued nondeductible
    
    
    303,000
    
    
    
    303,000Other nondeductible
    
    
    1,747,000
    
    
    
    1,747,000Other deductible capitalized
    
    
    488,000
    
    
    
    488,000Total gross deferred tax
    
    
    4,094,000
    
    
    
    4,094,000Valuation allowance
    
    
    (2,700,000
    )
    
    
    Total gross deferred tax
    
    $
    1,394,000
    
    
    $
    4,094,000Deferred tax liabilities:Deductible capitalized costs
    
    $
    1,350,000
    
    
    $
    1,350,000State tax
    
    
    30,000
    
    
    
    30,000Depreciation
    
    
    1,562,000
    
    
    
    1,562,000Total gross deferred tax liabilities
    
    $
    2,942,000
    
    
    $
    2,942,000
 Accounting for Income Taxes
  10




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NOTE 10  Segment Information.
  Three months ended July 31,
    
    
    Nine months ended July 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues:Domestic
    
    $
    28,651,000
    
    
    $
    30,808,000
    
    
    $
    87,597,000
    
    
    $
    100,198,000Gekko Brands, LLC
    
    
    12,594,000
    
    
    
    11,959,000
    
    
    
    32,828,000
    
    
    
    30,201,000Ashworth, U.K., Ltd.
    
    
    6,065,000
    
    
    
    7,377,000
    
    
    
    19,395,000
    
    
    
    20,567,000Other International
    
    
    2,151,000
    
    
    
    2,672,000
    
    
    
    7,777,000
    
    
    
    8,482,000Total
    
    $
    49,461,000
    
    
    $
    52,816,000
    
    
    $
    147,597,000
    
    
    $
    159,448,000Income (loss) from operations:Domestic
    
    $
    (5,433,000
    )
    
    $
    795,000
    
    
    $
    (10,753,000
    )
    
    $
    5,604,000Gekko Brands, LLC
    
    
    813,000
    (1)
    
    
    1,329,000
    
    
    
    2,112,000
    
    
    
    2,172,000Ashworth, U.K., Ltd.
    
    
    1,094,000
    
    
    
    (983,000
    )
    
    
    1,604,000
    
    
    
    480,000Other International
    
    
    568,000
    
    
    
    649,000
    
    
    
    1,979,000
    
    
    
    2,185,000Total
    
    $
    (2,958,000
    )
    
    $
    1,790,000
    
    
    $
    (5,058,000
    )
    
    $
    10,441,000Capital expenditures:Domestic
    
    $
    755,000
    
    
    $
    1,163,000
    
    
    $
    2,711,000
    
    
    $
    4,447,000Gekko Brands, LLC
    
    
    112,000
    
    
    
    30,000
    
    
    
    313,000
    
    
    
    262,000Ashworth, U.K., Ltd.
    
    
    2,000
    
    
    
    56,000
    
    
    
    166,000
    
    
    
    95,000Total
    
    $
    869,000
    
    
    $
    1,249,000
    
    
    $
    3,190,000
    
    
    $
    4,804,000Depreciation expense:Domestic
    
    $
    1,196,000
    
    
    $
    1,130,000
    
    
    $
    3,735,000
    
    
    $
    3,440,000Gekko Brands, LLC
    
    
    121,000
    
    
    
    96,000
    
    
    
    332,000
    
    
    
    304,000Ashworth, U.K., Ltd.
    
    
    63,000
    
    
    
    76,000
    
    
    
    168,000
    
    
    
    229,000Total
    
    $
    1,380,000
    
    
    $
    1,302,000
    
    
    $
    4,235,000
    
    
    $
    3,973,000
 July 31,
    
    
    October 31,2007
    
    
    2006Total assets:Domestic
    
    $
    85,713,000
    
    
    $
    92,337,000Gekko Brands, LLC
    
    
    44,564,000
    
    
    
    42,597,000Ashworth, U.K., Ltd.
    
    
    24,196,000
    
    
    
    22,517,000Other International
    
    
    8,142,000
    
    
    
    6,592,000Total
    
    $
    162,615,000
    
    
    $
    164,043,000Long-lived assets, at cost:Domestic
    
    $
    66,259,000
    
    
    $
    62,937,000Gekko Brands, LLC
    
    
    28,745,000
    
    
    
    29,209,000Ashworth, U.K., Ltd.
    
    
    1,678,000
    
    
    
    2,683,000Total
    
    $
    96,682,000
    
    
    $
    94,829,000Goodwill:Gekko Brands, LLC
    
    $
    15,250,000
    
    
    $
    15,250,000
 
 (1)
    
    The compensation expense related to the employment and non-compete agreements
entered into with the principals of Gekko on June 4, 2007 is reflected in the income from
operations in the Gekko Brands LLC segment. 11




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##### Table of Contents



Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   Cautionary Statements and Risk Factors
  Critical Accounting Policies
 Cautionary Advice Regarding Disclosure About
Critical Accounting Policies
 Revenue Recognition. Revenue Recognition Accounting of Shipping and Handling Fees and Costs
 12




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##### Table of Contents



Sales Returns and Other Allowances.
 Allowance for Doubtful Accounts.
 Inventory.
 Deferred Taxes. Accounting for Income Taxes Accounting for
Contingencies
 Stock-Based Compensation. Share-Based Payment
 13




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Off-Balance Sheet Arrangements
  Overview
    Accounting for Income Taxes (SFAS 109
 14




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##### Table of Contents



Results of Operations
 Third quarter 2007 compared to third quarter 2006
      15




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16




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##### Table of Contents



Nine months ended July 31, 2007 compared to nine months ended July 31, 2006
        17




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Capital Resources and Liquidity
  18




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##### Table of Contents



1.
    
    The borrowing base calculation was changed and denotes that the Lenders shall not be
obligated to advance funds under the revolving credit facility at any time that the
Companys aggregate obligations to the Lenders exceed the sum of (a) eighty-five percent
(85%) of Borrowers Eligible Accounts, and (b) the lesser of (i) sixty-five percent (65%)
of Borrowers Eligible Inventory and (ii) eighty-five percent (85%) of the appraised net
recovery value of Borrowers Inventory, as such terms are defined in the amended Loan
Agreement.2.
    
    A Control Account was established wherein any immediately available funds in the account
will be automatically applied to the Companys obligation under the revolving line of
credit to minimize the Companys interest expense.3.
    
    A Minimum Borrowing Base Availability provision was added which states that the Company
must maintain a difference between the Borrowing Base and the aggregate outstanding
obligations under the Credit Agreement of at least $7.5 million, except if the Company has
achieved at least two (2) consecutive quarters of a Fixed Charge Coverage Ratio in excess
of 1:10 to 1:00. If the Company is not in compliance with this provision for five (5)
consecutive business days, this will constitute a Triggering Event and will result in the
Control Account becoming the property of the Companys bank as partial payment for the
Companys outstanding obligations under the Credit Agreement. Such a Triggering Event may
be cured by maintaining the difference of at least $7.5 million for thirty (30) consecutive
days.4.
    
    The Minimum Tangible Net Worth requirement was modified and is now equal to the sum of
at least $70.0 million; plus 50% of net income after income taxes (without subtracting
losses) earned in each quarterly accounting period commencing after April 30, 2007; plus,
the net proceeds from any equity securities issued after the date of the Eighth Amendment
(inclusive of securities issued in connection with stock-based compensation).
 19




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##### Table of Contents



5.
    
    The Minimum Fixed Charge Coverage Ratio (FCCR) was set at no less than 1:10 to 1:00 for
periods after the earlier of two (2) consecutive quarters ended with a FCCR in excess of
1.10:1.00 or July 31, 2008. The FCCR may be used in determining the Applicable Rate.6.
    
    Capital Expenditures (including the total amount of any capital leases) are limited to
$4.0 million in any one fiscal year on a consolidated basis. The Company may invest any net
proceeds from the sale of any existing real property and equipment used in connection with
the Companys Oceanside, California Embroidery and Distribution Center in like assets
within two (2) years of disposal of such assets and such investment will be in addition to
the $4.0 million permitted in each fiscal year provided no event of default has occurred,
is continuing or would result after giving effect to such investment.7.
    
    The Applicable Rate schedule was modified and is now based on the Fixed Charge Coverage
Ratio or average daily Borrowing Base Availability instead of the Funded Debt to EBITDA
Ratio.
       20




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##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115 , Fair Value Measurements
 Accounting for Uncertainty in Income
Taxes
 Fair Value Measurements
 21




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##### Table of Contents



Quantifying Financial Statement Misstatements
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  22




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##### Table of Contents



Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Evaluation of Internal Control over Financial Reporting
  1)
    
    pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the Companys assets;2)
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that the Companys receipts and expenditures are being made
only in accordance with the authorization of the Companys management and directors;
and3)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Companys assets that could have a
material effect on the financial statements.
 Internal ControlIntegrated
Framework
 23




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##### Table of Contents



Changes in Internal Control over Financial Reporting
   
 PART II
 OTHER INFORMATION
 
 Item 1. LEGAL PROCEEDINGS
   
 Item 1A. Risk Factors
  An amendment to the Companys stockholder rights plan may cause increased volatility in the
Companys common stock prices.
 24




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##### Table of Contents



Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None
 
 Item 3. DEFAULTS UPON SENIOR SECURITIES  Not applicable.
 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
      Number of
    
    Number ofVotes FOR
    
    Votes WITHHELDDetlef H. Adler
    
    
    7,570,214
    
    
    
    6,367,969Stephen G. Carpenter
    
    
    13,160,527
    
    
    
    777,656Michael S. Koeneke
    
    
    13,647,824
    
    
    
    290,359Eric S. Salus
    
    
    13,578,038
    
    
    
    360,145Peter M. Weil
    
    
    13,641,252
    
    
    
    296,931
  Number of
    
    Number of
    
    Number ofVotes FOR
    
    Votes AGAINST
    
    Votes ABSTAINRatification of Moss
Adams, LLP
    
    
    13,831,450
    
    
    
    64,950
    
    
    
    41,783
 25




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##### Table of Contents



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).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).4(e)
    
    Amendment No. 1 effective as of July 3, 2007 to the Rights Agreement dated as of February 22,
2000 by and between Ashworth, Inc. and Computershare Trust Company, N. A., as successor Rights
Agent (filed as Exhibit 4.1 to the Companys Form 8-K filed on July 3. 2007 (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).
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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).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).
 27




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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).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).
 28




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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).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).
 29




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10(s)*
    
    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)(1)*
    
    Agreement as to Ashworth, Inc. Executive Employment Agreement with Randall L. Herrel, Sr.
effective September 12, 2006 (filed as Exhibit 10.1 to the Companys Form 8-K on September 13,
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)(1)*
    
    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 10-K/A on February 28, 2006 (File No. 001-14547) and
incorporated herein by reference).10(t)(2)*
    
    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 10-K/A on February 28, 2006 (File No.
001-14547) and incorporated herein by reference).10(u)(1)*
    
    Amended and Restated Employment Agreement with the Companys Executive Vice President,
Green Grass Sales and Merchandising, Peter E. Holmberg, effective as of October 25, 2006
(filed as Exhibit 10.1 to the Companys Form 8-K on October 31, 2006 (File No. 001-14547) and
incorporated herein by reference).10(u)(2)*
    
    Amended and Restated Change in Control Agreement with the Companys Executive Vice
President, Merchandising, Design and Production, Peter E. Holmberg, effective as of February
28, 2006 (filed as Exhibit 10.4 to the Companys Form 10-K/A on February 28, 2006 (File
No. 001-14547) and incorporated herein by reference).10(v)
    
    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 10-K on February 1, 2006 (File No.
001-14547) and incorporated herein by reference).10(w)*
    
    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 10-K/A on February 28, 2006 (File No. 001-14547) and incorporated herein by reference).10(w)(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 10-K/A on February 28, 2006 (File No. 001-14547) and incorporated
herein by reference).10(w)(2)*
    
    Release Agreement with the Companys Executive Vice President and Chief financial
Officer, Winston E. Hickman, dated November 16, 2006 (filed as Exhibit 10.1 to the Companys
Form 8-K on November 11, 2006 (File No. 001-14547) and incorporated herein by reference).
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10(x)
    
    Personal Services Agreement effective September 12, 2005 by and between Ashworth, Inc. and
Peter M. Weil (filed as Exhibit 10.2 to the Companys Form 8-K on September 13, 2006 (File No.
001-14547) and incorporated herein by reference).10(x)(1)*
    
    Employment Agreement with the Companys Chief Executive Officer, Peter M. Weil, dated
November 27, 2006 (filed as Exhibit 10.1 to the Companys Form 8-K on November 28, 2006 (File
No. 001-14547) and incorporated herein by reference).10(y)
    
    Settlement Agreement, dated May 5, 2006, by and among the Company and Knightspoint Partners
II, L.P., Knightspoint Capital Management II LLC, Knightspoint Partners LLC, Michael S.
Koeneke, David M. Meyer, Starboard Value and Opportunity Master Fund Ltd., Parche, LLC,
Admiral Advisors, LLC, Ramius Capital Group, LLC, C4S & Co., LLC, Peter A. Cohen, Jeffrey M.
Solomon, Morgan B. Stark, Thomas W. Strauss, Black Sheep Partners, LLC, Brian Black, and Peter
M. Weil (filed as Exhibit 10.1 to the Companys Form 8-K on May 9, 2006 (File No. 001-14547)
and incorporated herein by reference).10(z)*
    
    Form of Indemnification Agreement by and between the Company and its Directors, Officers and
Other Employees Designated by the Board (filed as Exhibit 10.1 to the Companys Form 8-K on
December 15, 2006 (File No. 001-14547) and incorporated herein by reference).10(aa)*
    
    Offer of Employment Agreement effective October 10, 2005 by and between Ashworth, Inc. and
Greg W. Slack. (filed as Exhibit 10(aa) to the Companys Form 10-K on January 16, 2007 (File
No. 001-14547) and incorporated herein by reference).10(aa)(1)*
    
    Change in Control Agreement effective as of February 9, 2006 by and between Ashworth,
Inc. and Greg W. Slack. (filed as Exhibit 10(aa)(1) to the Companys Form 10-K on January 16,
2007 (File No. 001-14547) and incorporated herein by reference).10(aa)(2)*
    
    Promotion and Retention Bonus Agreement effective February 10, 2006 by and between
Ashworth, Inc. and Greg. W. Slack (filed as Exhibit 10(aa)(2) to the Companys Form 10-K on
January 16, 2007 (File No. 001-14547) and incorporated herein by reference).10(ab)*
    
    Employment Letter between Eric R. Hohl and the Company, dated March 5, 2007 (filed as
Exhibit 10.1 to the Companys Form 8-K on March 7, 2007(File No. 001-14547) and incorporated
herein by reference).10(ac)*
    
    Employment Letter between Edward J. Fadel and the Company, dated May 23, 2007 (filed as
Exhibit 10.1 to the Companys Form 8-K on May 25, 2007 (File No. 001-14547) and incorporated
herein by reference).10(ad)*
    
    Severance and Release Agreement between Gary I. (Sims) Schneiderman and the Company,
dated May 25, 2007 (filed as Exhibit 10.2 to the Companys Form 8-K on May 25, 2007 (File No.
001-14547) and incorporated herein by reference).10(ae)*
    
    Severance and Release Agreement between Peter E. Holmberg and the Company, dated May 25,
2007 (filed as Exhibit 10.3 to the Companys Form 8-K on May 25, 2007 (File No. 001-14547) and
incorporated herein by reference).10(af)*
    
    Personal services agreement between Ashworth, Inc., a Delaware corporation and its
successors or assignees, and Eric S. Salus (filed as Exhibit 10.1 to the Companys Form 8-K on
June 6, 2007 (File No. 001-14547) and incorporated herein by reference).
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10(ag)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and J. Neil Stillwell. (filed as Exhibit
10.1 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated herein by
reference).10(ah)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Calvin J. Martin, Jr. (filed as
Exhibit 10.2 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference).10(ai)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Phil R. Stillwell. (filed as Exhibit
10.3 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated herein by
reference).10(aj)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Jeffery N. Stillwell. (filed as
Exhibit 10.4 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference)10(ak)
    
    Employment and Non-competition agreement by and between Gekko Brands, LLC, a wholly-owned
subsidiary of Ashworth Inc., a Delaware Corporation and Thomas Patrick Allison, Jr. (filed as
Exhibit 10.5 to the Companys Form 8-K on June 6, 2007 (File No. 001-14547) and incorporated
herein by reference)10(al)
    
    Eighth Amendment effective as of July 13, 2007 to the Revolving / Term Loan Credit Agreement
dated as of July 6, 2004 by and between Ashworth, Inc., as Borrower, each lender from time to
time party thereto and Union Bank of California, N. A., as Agent (filed as Exhibit 10.1 to the
Companys Form 8-K on August 2, 2007 (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 Peter M. Weil.31.2
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 by Eric R. Hohl.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 Peter M. Weil.32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 by Eric R. Hohl.
 
 *
    
    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. 32




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##### Table of Contents



SIGNATURES
  ASHWORTH, INCDate: September 10, 2007
    
    By:/s/Peter M. WeilPeter M. Weil

Chief Executive OfficerDate: September 10, 2007
    
    By:/s/Eric R. HohlEric R. Hohl

EVP and Chief Financial Officer
 33




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##### Table of Contents



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 Peter M. Weil.31.2
    
    Certification Pursuant to Rules 13a-14 and 15d-14, as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 by Eric R. Hohl.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 Peter M. Weil.32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 by Eric R. Hohl.