##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2003

OR

[ ] 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: 0-18553

Ashworth, Inc.

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 84-1052000                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employee
Identification No.)

2765 LOKER AVENUE WEST
CARLSBAD, CA 92008
(Address of Principal Executive Offices)

(760) 438-6610
(Telephone No. Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

Indicate the number of shares outstanding of each of the registrants classes
of common stock, as of the latest practicable date.

|                             |  |                              |            | 
|---------------------------- |  | ---------------------------- | ---------- | 
|Title                        |  | Outstanding at June 10, 2003
|$.001 par value Common Stock |  |                              | 12,962,047 | 





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TABLE OF CONTENTS



|                  |                                                                                               |  |  |  |  |  |  | 
|----------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                  | CONDENSED CONSOLIDATED BALANCE SHEETS                                                        
|                  | CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                                  
|                  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                              
|                  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                         
|                  | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                  | Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                  | Item 4. CONTROLS AND PROCEDURES.                                                             
|PART II          
|OTHER INFORMATION
|                  | Item 1. LEGAL PROCEEDINGS                                                                    
|                  | Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS  NONE                                     
|                  | Item 3. DEFAULTS UPON SENIOR SECURITIES  NONE                                               
|                  | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                  | Item 5. OTHER INFORMATION  NONE                                                             
|                  | Item 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES       
|CERTIFICATIONS   
|EXHIBIT INDEX    
|EXHIBIT 10(i)(1) 
|EXHIBIT 10(i)(2) 
|EXHIBIT 10(i)(3) 
|EXHIBIT 10(i)(4) 
|EXHIBIT 10(i)(5) 
|EXHIBIT 10(i)(6) 
|EXHIBIT 10(r)    
|EXHIBIT 10(s)    
|EXHIBIT 99.1     
|EXHIBIT 99.2     



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INDEX

|         |  |                                                                                       |  |  |                                                      |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------- |  |  | ---------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                       |  |  |                                                      |  | PAGE
|         |  |                                                                                       |  |  |                                                      |  |     
|Part I.  |  | Financial Information                                                                 |  |  |                                                      | 
|Item 1.  |  | Financial Statements                                                                  |  |  |                                                      | 
|         |  |                                                                                       |  |  | Condensed Consolidated Balance Sheets                |  |      | 1  | 
|         |  |                                                                                       |  |  | Condensed Consolidated Statements of Income          |  |      | 2  | 
|         |  |                                                                                       |  |  | Condensed Consolidated Statements of Cash Flows      |  |      | 3  | 
|         |  |                                                                                       |  |  | Notes to Condensed Consolidated Financial Statements |  |      | 4  | 
|Item 2.  |  | Managements Discussion and Analysis of
Financial Condition and Results of Operations |  |  | 7                                                    | 
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |  | 15                                                   | 
|Item 4.  |  | Controls and Procedures                                                               |  |  | 16                                                   | 
|Part II. |  | Other Information                                                                     |  |  |                                                      | 
|Item 1.  |  | Legal Proceedings                                                                     |  |  | 16                                                   | 
|Item 2.  |  | Changes in Securities and Use of Proceeds                                             |  |  | 17                                                   | 
|Item 3.  |  | Defaults Upon Senior Securities                                                       |  |  | 17                                                   | 
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  |  | 17                                                   | 
|Item 5.  |  | Other Information                                                                     |  |  | 17                                                   | 
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  |  | 17                                                   | 
|         |  |                                                                                       |  |  | Signatures                                           |  |      | 21 | 
|         |  |                                                                                       |  |  | Certifications                                       |  |      | 22 | 
|         |  |                                                                                       |  |  | Exhibit Index                                        |  |      | 24 | 

-i-



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ASHWORTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                         |                                                |                            |                                          |                                            |             |             |             |             |            |            |             | 
|---------------------------------------- | ---------------------------------------------- | -------------------------- | ---------------------------------------- | ------------------------------------------ | ----------- | ----------- | ----------- | ----------- | ---------- | ---------- | ----------- | 
|                                         |                                                |                            |                                          |                                            |             | April 30,   |             | October 31,
|                                         |                                                |                            |                                          |                                            |             | 2003        |             | 2002       
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                |                            |                                          |                                            |             | (UNAUDITED) |             | (AUDITED)  
|ASSETS                                   |                                                |                            |                                          |                                            |             |             |             |            
|Current assets:                          |                                                |                            |                                          |                                            |             |             |             |            
|                                         | Cash and cash equivalents                      |                            | $                                        | 1,258,000                                  |             |             | $           | 2,336,000   |           
|                                         | Accounts receivable  trade, net               |                            |                                          | 48,468,000                                 |             |             |             | 33,572,000  |           
|                                         | Accounts receivable  other                    |                            |                                          | 1,565,000                                  |             |             |             | 1,821,000   |           
|                                         | Inventories, net                               |                            |                                          | 43,371,000                                 |             |             |             | 41,188,000  |           
|                                         | Income tax refund receivable                   |                            |                                          |                                           |             |             |             | 246,000     |           
|                                         | Other current assets                           |                            |                                          | 4,618,000                                  |             |             |             | 3,284,000   |           
|                                         | Deferred income tax asset                      |                            |                                          | 1,958,000                                  |             |             |             | 1,748,000   |           
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                | Total current assets       |                                          |                                            | 101,238,000 |             |             |             | 84,195,000 |           
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|Property, plant and equipment, at cost   |                                                |                            | 40,733,000                               |                                            |             |             | 39,167,000  |            
|                                         | Less accumulated depreciation and amortization |                            |                                          | (23,114,000                                | )           |             |             | (21,278,000 | )         
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                |                            | Total property, plant and equipment, net |                                            |             | 17,619,000  |             |             |            | 17,889,000 |            
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|Other assets, net                        |                                                |                            | 779,000                                  |                                            |             |             | 891,000     |            
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                |                            |                                          | Total assets                               |             | $           | 119,636,000 |             |            | $          | 102,975,000 | 
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|LIABILITIES AND STOCKHOLDERS EQUITY     |                                                |                            |                                          |                                            |             |             |             |            
|Current liabilities:                     |                                                |                            |                                          |                                            |             |             |             |            
|                                         | Line of credit payable                         |                            | $                                        | 18,682,000                                 |             |             | $           | 11,125,000  |           
|                                         | Current portion of long-term debt              |                            |                                          | 287,000                                    |             |             |             | 553,000     |           
|                                         | Accounts payable  trade                       |                            |                                          | 5,892,000                                  |             |             |             | 6,338,000   |           
|                                         | Income taxes payable                           |                            |                                          | 2,682,000                                  |             |             |             |            |           
|                                         | Accrued liabilities                            |                            |                                          | 5,147,000                                  |             |             |             | 3,014,000   |           
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                | Total current liabilities  |                                          |                                            | 32,690,000  |             |             |             | 21,030,000 |           
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|Long  term debt, net of current portion |                                                |                            | 2,776,000                                |                                            |             |             | 2,921,000   |            
|Deferred income tax liability            |                                                |                            | 1,134,000                                |                                            |             |             | 904,000     |            
|Other long term liabilities              |                                                |                            | 427,000                                  |                                            |             |             | 535,000     |            
|Stockholders equity:                    |                                                |                            |                                          |                                            |             |             |             |            
|                                         | Common stock                                   |                            |                                          | 13,000                                     |             |             |             | 13,000      |           
|                                         | Capital in excess of par value                 |                            |                                          | 37,255,000                                 |             |             |             | 37,185,000  |           
|                                         | Retained earnings                              |                            |                                          | 44,966,000                                 |             |             |             | 40,578,000  |           
|                                         | Accumulated other comprehensive income (loss)  |                            |                                          | 375,000                                    |             |             |             | (191,000    | )         
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                | Total stockholders equity |                                          |                                            | 82,609,000  |             |             |             | 77,585,000 |           
|                                         |                                                |                            |                                          |                                            |             |             |             |            
|                                         |                                                |                            |                                          | Total liabilities and stockholders equity |             | $           | 119,636,000 |             |            | $          | 102,975,000 | 
|                                         |                                                |                            |                                          |                                            |             |             |             |            

See accompanying notes to condensed consolidated financial statements.

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ASHWORTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |            |  
|-------------------------------------------- | ------------------------------------------------------------------- | - | ---------------------------- | ---------- | -------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                             |                                                                     |   | Three months ended April 30, |            | Six months ended April 30,
|                                             |                                                                     |   |                              |            |                           
|                                             |                                                                     |   | 2003                         |            | 2002                       |   | 2003       |            | 2002
|                                             |                                                                     |   |                              |            |                            |   |            |            |     
|Net revenues                                 |                                                                     | $ | 52,595,000                   |            |                            | $ | 43,579,000 |            |      | $ | 79,158,000 |            |   | $ | 63,683,000 |           
|Cost of goods sold                           |                                                                     |   | 30,635,000                   |            |                            |   | 25,266,000 |            |      |   | 47,231,000 |            |   |   | 38,059,000 |           
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Gross profit                                                        |   |                              | 21,960,000 |                            |   |            | 18,313,000 |      |   |            | 31,927,000 |   |   |            | 25,624,000 |  
|Selling, general and
administrative expenses |                                                                     |   | 14,712,000                   |            |                            |   | 12,255,000 |            |      |   | 24,394,000 |            |   |   | 21,045,000 |           
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Income from operations                                              |   |                              | 7,248,000  |                            |   |            | 6,058,000  |      |   |            | 7,533,000  |   |   |            | 4,579,000  |  
|Other income (expense):                      |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Interest income                                                     |   |                              | 5,000      |                            |   |            | 25,000     |      |   |            | 15,000     |   |   |            | 32,000     |  
|                                             | Interest expense                                                    |   |                              | (259,000   | )                          |   |            | (245,000   | )    |   |            | (451,000   | ) |   |            | (396,000   | )
|                                             | Other income (expense)                                              |   |                              | 143,000    |                            |   |            | (8,000     | )    |   |            | 216,000    |   |   |            | 5,000      |  
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Total other expense                                                 |   |                              | (111,000   | )                          |   |            | (228,000   | )    |   |            | (220,000   | ) |   |            | (359,000   | )
|                                             | Income before provision for
income                      tax expense |   |                              | 7,137,000  |                            |   |            | 5,830,000  |      |   |            | 7,313,000  |   |   |            | 4,220,000  |  
|Provision for income tax expense             |                                                                     |   | 2,855,000                    |            |                            |   | 2,332,000  |            |      |   | 2,925,000  |            |   |   | 1,688,000  |           
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Net income                                                          |   | $                            | 4,282,000  |                            |   | $          | 3,498,000  |      |   | $          | 4,388,000  |   |   | $          | 2,532,000  |  
|                                             |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|Net income per share                         |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|Basic:                                       |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Weighted average shares
outstanding                                 |   |                              | 12,958,000 |                            |   |            | 13,222,000 |      |   |            | 12,955,000 |   |   |            | 13,191,000 |  
|                                             | Net income per share                                                |   | $                            | 0.33       |                            |   | $          | 0.26       |      |   | $          | 0.34       |   |   | $          | 0.19       |  
|Diluted:                                     |                                                                     |   |                              |            |                            |   |            |            |      |   |            |            |   |   |            |           
|                                             | Weighted average shares
outstanding                                 |   |                              | 13,082,000 |                            |   |            | 13,667,000 |      |   |            | 13,081,000 |   |   |            | 13,491,000 |  
|                                             | Net income per share                                                |   | $                            | 0.33       |                            |   | $          | 0.26       |      |   | $          | 0.34       |   |   | $          | 0.19       |  

See accompanying notes to condensed consolidated financial statements.

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ASHWORTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

|                                                     |                                                        |   |                            |             |      |   |            |             |  
|---------------------------------------------------- | ------------------------------------------------------ | - | -------------------------- | ----------- | ---- | - | ---------- | ----------- | -
|                                                     |                                                        |   | Six months ended April 30,
|                                                     |                                                        |   |                           
|                                                     |                                                        |   | 2003                       |             | 2002
|                                                     |                                                        |   |                            |             |     
|Cash flows from operating activities:                |                                                        |   |                            |             |      |   |            |            
|Net cash used in operating activities                |                                                        | $ | (7,214,000                 | )           |      | $ | (5,984,000 | )          
|Cash flows from investing activities:                |                                                        |   |                            |             |      |   |            |            
|                                                     | Purchases of property and equipment                    |   |                            | (1,646,000  | )    |   |            | (840,000    | )
|                                                     |                                                        |   |                            |             |      |   |            |            
|Net cash used in investing activities                |                                                        |   | (1,646,000                 | )           |      |   | (840,000   | )          
|Cash flows from financing activities:                |                                                        |   |                            |             |      |   |            |            
|                                                     | Principal payments on capital
lease obligations        |   |                            | (86,000     | )    |   |            | (54,000     | )
|                                                     | Borrowings on line of credit                           |   |                            | 27,652,000  |      |   |            | 21,100,000  |  
|                                                     | Payments on line of credit                             |   |                            | (20,095,000 | )    |   |            | (13,845,000 | )
|                                                     | Principal payments on notes payable
and long-term debt |   |                            | (325,000    | )    |   |            | (309,000    | )
|                                                     | Proceeds from issuance of common stock                 |   |                            | 70,000      |      |   |            | 737,000     |  
|                                                     |                                                        |   |                            |             |      |   |            |            
|Net cash provided by financing activities            |                                                        |   | 7,216,000                  |             |      |   | 7,629,000  |            
|Effect of exchange rate changes on cash              |                                                        |   | 566,000                    |             |      |   | 58,000     |            
|                                                     |                                                        |   |                            |             |      |   |            |            
|Net increase (decrease) in cash and cash equivalents |                                                        |   | (1,078,000                 | )           |      |   | 863,000    |            
|Cash and cash equivalents, beginning of period       |                                                        |   | 2,336,000                  |             |      |   | 1,055,000  |            
|                                                     |                                                        |   |                            |             |      |   |            |            
|                                                     |                                                        |   |                            |             |      |   |            |            
|Cash and cash equivalents, end of period             |                                                        | $ | 1,258,000                  |             |      | $ | 1,918,000  |            
|                                                     |                                                        |   |                            |             |      |   |            |            

See accompanying notes to condensed consolidated financial statements.

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ASHWORTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2003

NOTE 1  Basis of Presentation.



| |  | In the opinion of management, the accompanying condensed consolidated
balance sheets and related interim condensed consolidated statements of
operations and cash flows include all adjustments (consisting only of
normal recurring items) necessary for their fair presentation. The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, and expenses and the
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates. Interim results are not necessarily
indicative of results to be expected for the full year.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Certain information in footnote disclosures normally included in
financial statements has been condensed or omitted in accordance with
the rules and regulations of the Securities and Exchange Commission
(SEC). The information included in this Form 10-Q should be read in
conjunction with Managements Discussion and Analysis of Financial
Condition and Results of Operations, and consolidated financial
statements and notes thereto included in the annual report on Form 10-K
for the year ended October 31, 2002, filed with the SEC on January 30,
2003.                                                                                                                                                                                           
|
| |  | Certain reclassifications have been made to the prior years condensed
consolidated financial statements to conform to classifications used in
the current year. These reclassifications had no impact on previously
reported results.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Shipping and Handling Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The shipping expenses, which consist primarily of payments made to
freight companies, are reported in selling, general and administrative
expenses. Shipping expenses for the quarters ended April 30, 2003 and
2002 were $520,000 and $707,000 respectively. For the six-month
periods ended April 30, 2003 and 2002, shipping expenses were $832,000
and $1,001,000 respectively.                                                                                                                                                                                                                                                                                                                                                                                

NOTE 2  Inventories.



| |  | Inventories consisted of the following at April 30, 2003 and October
31, 2002:
| |  | ------------------------------------------------------------------------------

|                       |  |           |            |             |  |   |            | 
|---------------------- |  | --------- | ---------- | ----------- |  | - | ---------- | 
|                       |  | April 30, |            | October 31,
|                       |  | 2003      |            | 2002       
|                       |  |           |            |            
|Raw materials          |  | $         | 137,000    |             |  | $ | 121,000    | 
|Work in process        |  |           | 92,000     |             |  |   | 356,000    | 
|Finished goods         |  |           | 43,142,000 |             |  |   | 40,711,000 | 
|                       |  |           |            |             |  |   |            | 
|Total inventories, net |  | $         | 43,371,000 |             |  | $ | 41,188,000 | 
|                       |  |           |            |             |  |   |            | 

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NOTE 3  Net Income Per Share Information.



| |  | Basic net income per share has been computed based on the weighted
average number of common shares outstanding during the period. Diluted
net income per share has been computed based on the weighted average
number of common shares outstanding plus the dilutive effects of common
shares potentially issuable from the exercise of common stock options.
Common stock options are excluded from the computation of net income
per share if their effect is anti-dilutive. The following table sets
forth the computation of basic and diluted net income per share based
on the requirements of SFAS No. 128:
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                      |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |         | 
|----------------------------------------------------------------------------------------------------- | ------------- | - | ---------------------------- | ------- | -------------------------- | - | ---------- | ------- | ---- | - | ---------- | ------- |  | - | ---------- | ------- | 
|                                                                                                      |               |   | Three months ended April 30, |         | Six months ended April 30,
|                                                                                                      |               |   |                              |         |                           
|                                                                                                      |               |   | 2003                         |         | 2002                       |   | 2003       |         | 2002
|                                                                                                      |               |   |                              |         |                            |   |            |         |     
|Numerator:                                                                                            |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|Net income
numerator for basic and diluted
income per share  income
available to common stockholders |               | $ | 4,282,000                    |         |                            | $ | 3,498,000  |         |      | $ | 4,388,000  |         |  | $ | 2,532,000  |        
|                                                                                                      |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|Denominator:                                                                                          |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|Denominator for basic income
per share  weighted average shares                                      |               |   | 12,958,000                   |         |                            |   | 13,222,000 |         |      |   | 12,955,000 |         |  |   | 13,191,000 |        
|Effect of dilutive securities:                                                                        |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|                                                                                                      | stock options |   |                              | 124,000 |                            |   |            | 445,000 |      |   |            | 126,000 |  |   |            | 300,000 | 
|                                                                                                      |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|Denominator for diluted income
per share  adjusted weighted
average
shares and assumed conversions   |               |   | 13,082,000                   |         |                            |   | 13,667,000 |         |      |   | 13,081,000 |         |  |   | 13,491,000 |        
|                                                                                                      |               |   |                              |         |                            |   |            |         |      |   |            |         |  |   |            |        
|Basic net income per share                                                                            |               | $ | 0.33                         |         |                            | $ | 0.26       |         |      | $ | 0.34       |         |  | $ | 0.19       |        
|Diluted net income per share                                                                          |               | $ | 0.33                         |         |                            | $ | 0.26       |         |      | $ | 0.34       |         |  | $ | 0.19       |        



| |  | For the quarters ended April 30, 2003 and 2002, the diluted weighted
average shares outstanding computation excludes 1,867,000 and 710,000
options whose impact would have an anti-dilutive effect, respectively.
For the six-month periods ended April 30, 2003 and 2002, the diluted
weighted average shares outstanding computation excludes 1,847,000 and
1,173,000 options whose impact would have an anti-dilutive effect,
respectively.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 4  Stock Option Compensation.



| |  | The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. Under
APB 25, because the exercise price of the Companys employee stock
options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. The interim information
regarding pro forma net income and earnings per share is required by
Statement No. 123 and Statement No. 148. For purposes of pro forma
disclosures, the estimated fair value of the options is
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | amortized to
expense over the
options vesting period. The Companys pro forma information is as
follows (in thousands except for net income per share information):
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                             |                       |   |                              |      |                            |   |           |      |      |   |           |      |  |   |           |      | 
|---------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ---------------------------- | ---- | -------------------------- | - | --------- | ---- | ---- | - | --------- | ---- |  | - | --------- | ---- | 
|                                                                                                                             |                       |   | Three months ended April 30, |      | Six months ended April 30,
|                                                                                                                             |                       |   |                              |      |                           
|                                                                                                                             |                       |   | 2003                         |      | 2002                       |   | 2003      |      | 2002
|                                                                                                                             |                       |   |                              |      |                            |   |           |      |     
|Net income, as reported                                                                                                      |                       | $ | 4,282,000                    |      |                            | $ | 3,498,000 |      |      | $ | 4,388,000 |      |  | $ | 2,532,000 |     
|Deduct: Stock-based
employee compensation
expense determined
under fair value based
method for all awards,
net of tax effect |                       |   | (140,000                     | )    |                            |   | (171,000  | )    |      |   | (338,000  | )    |  |   | (447,000  | )   
|                                                                                                                             |                       |   |                              |      |                            |   |           |      |      |   |           |      |  |   |           |     
|Pro forma net income                                                                                                         |                       | $ | 4,142,000                    |      |                            | $ | 3,327,000 |      |      | $ | 4,050,000 |      |  | $ | 2,085,000 |     
|                                                                                                                             |                       |   |                              |      |                            |   |           |      |      |   |           |      |  |   |           |     
|Net Income per share:                                                                                                        |                       |   |                              |      |                            |   |           |      |      |   |           |      |  |   |           |     
|                                                                                                                             | Basic  as reported   |   | $                            | 0.33 |                            |   | $         | 0.26 |      |   | $         | 0.34 |  |   | $         | 0.19 | 
|                                                                                                                             | Basic  pro forma     |   | $                            | 0.32 |                            |   | $         | 0.25 |      |   | $         | 0.31 |  |   | $         | 0.16 | 
|                                                                                                                             | Diluted  as reported |   | $                            | 0.33 |                            |   | $         | 0.26 |      |   | $         | 0.34 |  |   | $         | 0.19 | 
|                                                                                                                             | Diluted  pro forma   |   | $                            | 0.32 |                            |   | $         | 0.24 |      |   | $         | 0.31 |  |   | $         | 0.15 | 



| |  | These pro forma calculations only include the effects of grants made in
1996 through 2003. As such, the impacts may not be representative of
the effects on reported net income in future years.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 5  Comprehensive Income.



| |  | The Company includes the cumulative foreign currency translation
adjustment as a component of comprehensive income in addition to net
income for the period. For the quarters ended April 30, 2003 and 2002,
total comprehensive income was $4,142,000 and $3,862,000, respectively.
For the six-month periods ended April 30, 2003 and 2002, total
comprehensive income was $4,954,000 and $2,590,000, respectively.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 6  Legal Proceedings.



| |  | On January 22, 1999, Milberg Weiss Bershad Hynes & Lerach LLP filed a
class action in the United States District Court for the Southern
District of California (U.S. District Court) on behalf of purchasers
of the Companys common stock during the period between September 4,
1997 and July 15, 1998. The action was subsequently consolidated with
two similar suits and plaintiffs filed their Amended and Consolidated
Complaint on December 17, 1999. Upon the Companys motion, the U.S.
District Court dismissed the Complaint with leave to amend on July 18,
2000. On September 18, 2000, plaintiffs served their Second
Consolidated Amended Complaint (Second Amended Complaint). On
November 6, 2000, the Company filed its motion to dismiss the Second
Amended Complaint, which the U.S. District Court granted, in part, and
denied, in part. The remaining portions of the Second Amended
Complaint allege that, among other things, during the class period and
in violation of the Securities Exchange Act of 1934, the Companys
financial statements, as reported, did not conform to generally
accepted accounting principles with respect to revenues and inventory
levels. It further alleges that certain Company executives made false
or misleading statements or omissions concerning product demand and
that two former executives engaged in insider trading. The plaintiffs
seek unspecified damages. The parties are currently in the discovery
process.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | The Company is party to other claims and litigation proceedings arising
in the normal course of business. Although the legal responsibility
and financial impact with respect to such other claims and litigation
cannot currently be ascertained, the Company does not believe that
these other matters will result in payment by the Company of monetary
damages, net of any applicable insurance proceeds, that, in the
aggregate, would be material in relation to the consolidated financial
position or results of operations of the Company.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 7  Segment Information.



| |  | The Company defines its operating segments as components of an
enterprise for which separate financial information is available and
regularly reviewed by the Companys senior management. The Company has
the following two reportable segments: domestic and international.
Management evaluates segment performance based primarily on revenues
and income from operations. Interest income and expense is evaluated
on a consolidated basis and is not allocated to the Companys business
segments. Segment information is summarized (for the dates or periods
presented) below:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |            |            | 
|----------------------- | ------------- | ----- | - | ---------------------------- | ---------- | -------------------------- | - | ---------- | ---------- | ---- | - | ---------- | ---------- |  | - | ---------- | ---------- | 
|                        |               |       |   | Three months ended April 30, |            | Six months ended April 30,
|                        |               |       |   |                              |            |                           
|                        |               |       |   | 2003                         |            | 2002                       |   | 2003       |            | 2002
|                        |               |       |   |                              |            |                            |   |            |            |     
|Net revenues:           |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |           
|                        | Domestic      |       | $ | 43,440,000                   |            |                            | $ | 37,155,000 |            |      | $ | 66,977,000 |            |  | $ | 55,025,000 |           
|                        | International |       |   | 9,155,000                    |            |                            |   | 6,424,000  |            |      |   | 12,181,000 |            |  |   | 8,658,000  |           
|                        |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |            |           
|                        |               | Total |   | $                            | 52,595,000 |                            |   | $          | 43,579,000 |      |   | $          | 79,158,000 |  |   | $          | 63,683,000 | 
|                        |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |            |           
|Income from operations: |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |           
|                        | Domestic      |       | $ | 5,606,000                    |            |                            | $ | 5,080,000  |            |      | $ | 5,467,000  |            |  | $ | 4,116,000  |           
|                        | International |       |   | 1,642,000                    |            |                            |   | 978,000    |            |      |   | 2,066,000  |            |  |   | 463,000    |           
|                        |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |            |           
|                        |               | Total |   | $                            | 7,248,000  |                            |   | $          | 6,058,000  |      |   | $          | 7,533,000  |  |   | $          | 4,579,000  | 
|                        |               |       |   |                              |            |                            |   |            |            |      |   |            |            |  |   |            |           

|              |               |       |   |             |             |             |   |            |             | 
|------------- | ------------- | ----- | - | ----------- | ----------- | ----------- | - | ---------- | ----------- | 
|              |               |       |   | April 30,   |             | October 31,
|              |               |       |   |             |             |            
|              |               |       |   | 2003        |             | 2002       
|              |               |       |   |             |             |            
|Total assets: |               |       |   |             |             |             |   |           
|              | Domestic      |       | $ | 100,263,000 |             |             | $ | 86,198,000 |            
|              | International |       |   | 19,373,000  |             |             |   | 16,777,000 |            
|              |               |       |   |             |             |             |   |            |            
|              |               | Total |   | $           | 119,636,000 |             |   | $          | 102,975,000 | 
|              |               |       |   |             |             |             |   |            |            




Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General



| |  | The Company operates in an industry that is highly competitive and must
accurately anticipate fashion trends and consumer demand for its products.
There are many factors that could cause actual results to differ materially
from the projected results contained in certain forward-looking statements in
this report. For additional information, see Cautionary Statements and Risk
Factors, below.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Because the Companys business is seasonal, the current balance sheet
balances at April 30, 2003 may more meaningfully be compared to the balances at
April 30, 2002, rather than to the balances at October 31, 2002.

Critical Accounting Policies

In response to the SECs Release Numbers 33-8040, Cautionary Advice
Regarding Disclosure About Critical Accounting Policies and 33-8056,
Commission Statement About Managements Discussion and Analysis of Financial
Condition and Results of Operations, the Company has identified the following
critical accounting policies that affect its more significant judgments and
estimates used in the preparation of its consolidated financial statements.

Revenue Recognition.Based on its terms of F.O.B. shipping point, where
risk of loss and title transfer to the buyer at time of shipment, the Company
recognizes revenue at the time products are shipped or, for Company stores, at
the point of sale. The Company records sales in accordance with SEC Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements.
Under these guidelines, revenue is recognized when all of the following exist:
persuasive evidence of a sale arrangement exists, delivery of the product has
occurred, the price is fixed or determinable and payment is reasonably assured.
Provisions are made currently for estimated product returns and sales
allowances.

Sales Returns and Other Allowances.Management must make estimates of
potential future product returns related to current period product revenues.
Management analyzes historical returns, current economic trends, changes in
customer demand, and sell-through of our products when evaluating the adequacy
of the sales returns and other allowances. Significant management judgments
and estimates must be made and used in connection with establishing the sales
returns and other allowances in any accounting period. Material differences
may result in the amount and timing of our revenues for any period if
management makes different judgments or utilizes different estimates. The
reserves for sales returns and other allowances amounted to $575,000 at April
30, 2003 compared to $535,000 at October 31, 2002 and $447,000 at April 30,
2002.

Allowance for Doubtful Accounts.Management must also make estimates of
the uncollectability of accounts receivable. The Company maintains an
allowance for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments, which results in bad debt
expense. Management determines the adequacy of this allowance by analyzing
historical bad debts, continually evaluating individual customer receivables
considering the customers financial condition and current economic conditions.
During the second quarter of fiscal 2003 the Company wrote off the $2.5
million unpaid principal balance of an unsecured promissory note and
approximately $2.0 million of receivables due from a national retail customer
which had filed for protection under U.S. bankruptcy laws, against the $4.5
million previously reserved by the Company for these specific receivables. If
the financial condition of other significant customers of ours were to
deteriorate, resulting in the impairment of their ability to make payments,
material additional allowances for doubtful accounts may be required. In
October 2002, the Company acquired credit insurance to cover many of its major
accounts. Our trade accounts receivable balance was $48.5 million, net of
allowances for doubtful accounts of $1.3 million at April 30, 2003 as compared
to the balance of $33.6 million, net of allowances for doubtful accounts of
$3.2 million at October 31, 2002. At April 30, 2002, the trade accounts
receivable balance was $44.8 million, net of allowances for doubtful accounts
of $1.4 million.

Inventory.The Company writes down its inventory for estimated
obsolescence or unmarketable inventory equal to the difference between the cost
of inventory and the estimated net realizable value

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based on assumptions about
age of the inventory, future demand and market conditions. This process
provides for a new basis for the inventory until it is sold. If actual market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required. Our inventory balance was $43.4
million, net of inventory write-downs of $0.8 million at April 30, 2003 as
compared to an inventory balance of $41.2 million, net of inventory write-downs
of $1.0 million at October 31, 2002. At
April 30, 2002, the inventory balance was $33.8 million, net of inventory
write-downs of $0.8 million.

Asset Purchase Credits.In November 2000, the Company entered into an
agreement with a third party whereby inventory was exchanged for future asset
purchase credits (APCs), which may be utilized by the Company to purchase
future goods and services over a four-year period. The original value of the
inventory exchanged (at cost) was $1.4 million resulting in $1.4 million in
future APCs. The Company has entered into contracts with several third party
suppliers who have agreed to accept these APCs, in part, as payment for goods
and services. From time to time the Company may enter into additional
contracts with such third party suppliers to use the APCs. At April 30, 2003,
the Company had $0.7 million of the APCs remaining and management expects to
fully utilize them over the remaining life of the contract.

At April 30, 2003 and 2002, the Company did not have any relationships
with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements
or other contractually narrow or limited purposes. In addition, the Company
does not engage in trading activities involving non-exchange traded contracts
which rely on estimation techniques to calculate fair value. As such, the
Company is not exposed to any financing, liquidity, market or credit risk that
could arise if the Company had engaged in such relationships.

Results of Operations

Second quarter 2003 compared to second quarter 2002

Consolidated net revenues for the second quarter of fiscal 2003 increased
20.7% to $52,595,000 from $43,579,000 for the same period in 2002. Net
revenues for the domestic segment increased 16.9% to $43,440,000 from
$37,155,000 in the second quarter of 2002 primarily due to increased net
revenues from the Companys golf related distribution channel which increased
17.5% or $4,835,000, the retail distribution channel which increased 46.8% or
$1,279,000 and the corporate distribution channel which increased 4.0% or
$205,000, each as compared to the same quarter in the prior fiscal year. Net
revenues for the international segment increased 42.5% to $9,155,000 from
$6,424,000 for the same period of the prior fiscal year. The increase was
primarily due to higher revenues in the Companys U.K. subsidiary and Canadian
divisions as well as a slight increase in other international territories.

Consolidated gross margin for the quarter decreased slightly to 41.8% as
compared to 42.0% a year earlier. This decrease was primarily due to reduced
selling prices on certain styles, partially offset by decreased costs resulting
from improved sourcing. The decrease in selling prices allowed the Company to
stay competitive in a golf apparel market that presented significant downward
price pressures.

Consolidated selling, general, and administrative (SG&A) expenses
increased 20.0% to $14,712,000 for the second quarter of fiscal 2003 from
$12,255,000 for the same period in fiscal 2002. This increase was primarily
due to increased marketing expense as well as higher sales related variable
expense resulting from the higher revenues. As a percentage of net revenues,
SG&A expenses decreased slightly to 28.0% of net revenues for the second
quarter of fiscal 2003 compared to 28.1% in the second

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quarter of fiscal 2002.

Total other expenses decreased to $111,000 for the second quarter of
fiscal 2003 from $228,000 in the second quarter of fiscal 2002, due primarily
to a currency transaction gain in the current fiscal year as compared to a
currency transaction loss incurred by the Companys U.K. subsidiary in the same
period of the prior fiscal year.

The effective income tax rate for the second quarter of fiscal 2003
remained at 40.0% of pre-tax income.

Six months ended April 30, 2003 compared to six months ended April 30, 2002

Consolidated net revenues for the first half of fiscal 2003 increased
24.3% to $79,158,000 from $63,683,000 for the same period in fiscal 2002. Net
revenues for the domestic segment increased 21.7% to $66,977,000 from
$55,025,000 in the first half of fiscal 2002, primarily due to increased net
revenues from the Companys golf related distribution channel which increased
20.8% or $8,256,000, the retail distribution channel which increased 56.2% or
$2,143,000 and the corporate distribution channel which increased 18.3% or
$1,521,000, each as compared to the same period in the prior fiscal year. Net
revenues for the international segment increased 40.7% to $12,181,000 from
$8,658,000 for the same period of the prior fiscal year. The increase was
primarily due to higher revenues in the Companys U.K. subsidiary and Canadian
divisions as well as a slight increase in other international territories.

Consolidated gross margin for the first six months of fiscal 2003
increased slightly to 40.3% as compared to 40.2% in the first half of fiscal
2002. This increase was primarily due to improved product sourcing as well as
to the positive leverage received from the higher revenues offset by the
reductions in selling prices on various styles initiated to meet competitive
pricing pressures.

Consolidated SG&A expenses increased 15.9% to $24,394,000 for the first
half of fiscal 2003 from $21,045,000 for the same period in fiscal 2002. As a
percentage of revenues, SG&A expenses decreased to 30.8% of net revenues for
the first six months of fiscal 2003, as compared to 33.0% for the first six
months of fiscal 2002. This decrease as a percentage of net revenues was
primarily due to the fixed expenses being spread over a higher net revenues
base.

Total other expenses decreased to $220,000 in the first half of fiscal
2003 from $359,000 in the first six months of fiscal 2002, due primarily to
currency transaction gains in the current fiscal year as compared to currency
transaction losses incurred by the Companys U.K. subsidiary and Canadian
divisions in the same period of the prior year, partially offset by higher
interest expense on increased average borrowing on the Companys line of
credit.

The effective income tax rate in the first half of fiscal 2003 remained at
40.0% of pre-tax income.

Capital Resources and Liquidity

The Companys primary sources of liquidity for the remainder of fiscal
2003 are expected to be its cash flows from operations, the working capital
line of credit with its bank and other financial alternatives such as leasing.
The Company requires cash for capital expenditures and other requirements
associated with the expansion of its domestic and international production,
distribution and sales, as well as for general working capital purposes. On
April 24, 2003, the Company entered into a new business loan agreement with
Bank of America, N.A., as the administrative agent, and two other lenders. The
new credit facility expires on April 30, 2005 and is collateralized by
substantially all of the assets of the

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Company. The loan agreement provides a
revolving line of credit of $45,000,000 with a seasonal increase in the line of
credit to $55,000,000 for each period commencing December 1 through June 15
during the term of the agreement.

Interest under this loan agreement is currently charged at the banks
reference (prime) rate. At April 30, 2003, the prime rate was 4.25%. The loan
agreement also provides for optional interest rates based on London interbank
offered rates (LIBOR) for periods of at least 30 days in increments of
$500,000. The loan agreement contains various restrictive covenants requiring,
among other matters, the maintenance of certain financial ratios. Management
believes the Company was in compliance with all
such covenants as of April 30, 2003. The line of credit may also be used
to finance commercial letters of credit and standby letters of credit.
Commercial letters of credit outstanding under this loan agreement totaled
$7,128,000 at April 30, 2003 as compared to $11,227,000 at October 31, 2002
under the prior loan agreement. The Company had $18,682,000 outstanding
against the line of credit at April 30, 2003, compared to $11,125,000
outstanding at October 31, 2002 under the prior loan agreement. The decrease
in outstanding letters of credit and increase in borrowings are primarily due
to the seasonality of the Companys business. At April 30, 2003, $29,190,000
was available for borrowings under this loan agreement.

Net trade receivables were $48,468,000 at April 30, 2003, an increase of
$14,896,000 from the balance at October 31, 2002. Because the Companys
business is seasonal, the net receivables balance may more meaningfully be
compared to the balance of $44,787,000 at April 30, 2002, rather than the
year-end balance. The comparison to the second quarter of fiscal 2002 shows an
increase of 8.2% in net trade receivables and is in line with the increase in
net revenues.

Net inventories increased 5.3% to $43,371,000 at April 30, 2003 from
$41,188,000 at October 31, 2002. Compared to net inventories of $33,788,000 at
April 30, 2002, net inventories at April 30, 2003 have increased by 28.4%. The
Ashworth® brand inventory increased approximately 14.0% over the prior year.
The Callaway Golf apparel brand inventory is approximately $9.9 million in the
current year as compared to $4.5 million in the prior year. As the Company is
still in a developing stage for the Callaway Golf apparel brand, the higher
level of inventory was expected. The Company believes that its current
inventory mix is appropriate to respond to market demand.

During the first six months of fiscal 2003, the Company incurred capital
expenditures of $1,646,000 primarily for computer systems and equipment,
leasehold improvements and distribution center equipment. The Company
anticipates capital spending of approximately $2,554,000 during the remainder
of fiscal 2003, primarily on upgrades of computer systems and equipment and
outlet stores renovations. Management currently intends to finance the
purchase of the Companys capital equipment from its own cash resources, but
may use leases or equipment financing agreements if deemed appropriate. In
addition, the Company continues to evaluate projects that may require
additional capital expenditures in connection with the planned expansion of its
domestic and international production, distribution and sales.

The Company is party to an exclusive licensing agreement with Callaway
Golf Company which requires certain minimum royalty payments beginning in
January 2003. The Company believes that revenues from the Callaway Golf
apparel product line will be sufficient to cover such minimum royalty payments.

Common stock and capital in excess of par value increased by $70,000 in
the six months ended April 30, 2003, due to the issuance of shares from the
exercise of options.

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On October 25, 2002, the Company entered into an agreement to purchase the
land and building, to be built to the Companys specifications, in the Ocean
Ranch Corporate Center in Oceanside, California. The building, to be
constructed with approximately 200,000 square feet of useable space, will be
used by the Company to warehouse, embroider, finish, package and distribute
clothing products and related accessories. Subject to timely completion of
construction, the purchase agreement obligates the Company to purchase the land
and building in early fiscal year 2004 for approximately $15.0 million. The
Company has also entered into a contingent lease agreement which obligates the
Company to pay a monthly base rent plus standard common area maintenance
(CAM) charges for a term of ten years. The lease would take effect only if
the land and building purchase is not completed due to certain defaults by the
Company, as specified in the purchase agreement. The base rent and CAM
payments under the conditional lease would start on the date thirty days after
substantial completion of the improvements. The
base rent would be calculated according to a specified formula based on the
purchase price under the purchase agreement, expected interest rates and other
criteria. If the Company were to default on the purchase agreement, monthly
rental under the lease agreement is currently estimated to commence at
approximately $132,000 and the monthly CAM charges are currently estimated to
commence at approximately $27,000. The Company is not obligated to make any
deposits or progress payments under the purchase agreement unless the Company
makes change requests which require a deposit that exceeds a certain dollar
limit. The Company plans to, and management believes it will be able to,
obtain a long-term loan separate from the line of credit agreement to finance
the purchase of the land and the building.

Based on current levels of operations, the Company expects that sufficient
cash flow will be generated from operations so that, combined with other
financing alternatives available, including cash on hand, bank credit
facilities and leasing alternatives, the Company will be able to meet all of
its debt service, capital expenditure and working capital requirements for at
least the next 12 months.

Derivatives

Although the Company and its subsidiaries did not do so during the first
six months of fiscal 2003, from time to time the Company enters into short-term
foreign exchange contracts with its bank to hedge against the impact of
currency fluctuations between the U.S. dollar and the British pound and the
U.S. dollar and the Canadian dollar. The contracts provide that, on specified
dates, the Company will sell the bank a specified number of British pounds or
Canadian dollars in exchange for a specified number of U.S. dollars.
Additionally, from time to time the Companys U.K. subsidiary enters into
similar contracts with its bank to hedge against currency fluctuations between
the British pound and other European currencies. Realized gains and losses on
these contracts are recognized in the same period as the hedged transactions.
These contracts have maturity dates that do not normally exceed 12 months. At
April 30, 2003, neither the Company nor any of its subsidiaries was a party to
any outstanding foreign exchange contracts.

New Accounting Standards

In November 2002, the EITF discussed Issue 02-16, Accounting by a Customer
(including a Reseller) for Cash Consideration Received from a Vendor. Issue
02-16 provides guidance on how a customer should account for cash consideration
received from a vendor. The requirements of this Issue for volume-based
rebates apply to new arrangements, including modifications of existing
arrangements, entered into after November 21, 2002. The adoption of the new
accounting for other supplier payments is effective for arrangements entered
into or modified after December 31, 2002. Management has reviewed this issue
and has determined that as the Company does not receive cash consideration from
its vendors, EITF Issue 02-16 does not have a material impact on the Companys
financial position and results of operations. To date, the Company has not
received cash consideration from its vendors and has

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not entered into any
arrangements for which the Company would be required to apply the accounting
provisions of EITF Issue No.02-16.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation,to provide alternative methods of
transition to the fair value method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure provisions of
SFAS No. 123 to require disclosure in the summary of significant accounting
policies of the effects of an entitys accounting policy with respect to
stock-based employee compensation on the reported net income and earnings per
share in annual and interim financial statements. SFAS No. 148 is effective
for fiscal years beginning after December 31, 2002. The Company has adopted
the disclosure provisions of SFAS No. 148 for the quarter ending April 30,
2003. The adoption of SFAS No. 148 has not had a material impact on the
Companys financial position and results of operations.

On January 17, 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities.FIN No. 46 addresses consolidation of entities that are not
controllable through voting interests or in which the equity investors do not
bear the residual economic risks and rewards. These entities have been
commonly referred to as special purpose entities. FIN No. 46 provides guidance
related to identifying variable interest entities and determining whether such
entities should be consolidated. It also provides guidance related to the
initial and subsequent measurement of assets, liabilities and non-controlling
interests in newly consolidated variable interest entities and requires
disclosures for both the primary beneficiary of a variable interest entity and
other beneficiaries of the entity. For variable interests entities created, or
interests in variable interest entities obtained, subsequent to January 31,
2003, the Company is required to apply the consolidation provisions of FIN No.
46 immediately. For variable interest entities created, or interests in
variable interest entities obtained, on or before January 31, 2003, the
consolidation provisions of FIN No. 46 are first required to be applied in the
Companys financial statements as of July 31, 2003. To date, the Company has
not created any variable interest entities nor obtained an interest in any
variable interest entities for which the Company would be required to apply the
consolidation provisions of FIN No. 46.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 149 is
generally effective for derivative instruments, including derivative
instruments embedded in certain contracts, entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003. The
Company does not expect the adoption of SFAS 149 to have a material impact on
its financial position and results of operations.

In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity.SFAS 150
establishes standards for how to classify and measure certain financial
instruments with characteristics of both liabilities and equity. SFAS 150 is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The Company does not expect the adoption of
this statement to have a material impact on its financial position and results
of operations.

Cautionary Statements and Risk Factors

This report contains certain forward-looking statements, including without
limitation those regarding the Companys plans and expectations for revenue
growth, product lines, strategic alliances,

13



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designs and seasonal collections,
capital spending, marketing programs, foreign sourcing, cost controls,
inventory levels and availability of working capital. These forward-looking
statements may contain the words believe, anticipate, expect,
estimate, project, will be, will continue, will likely result or
other similar words and phrases. Readers are cautioned not to place undue
reliance on these forward-looking statements. The Company undertakes no
obligation to update any such statements or publicly announce any updates or
revisions to any of the forward-looking statements contained herein.
Forward-looking statements and the Companys plans and expectations are subject
to a number of risks and uncertainties that could cause actual results to
differ materially from those anticipated, and the Companys business in general
is subject to certain risks that could affect the value of the Companys common
stock. These risks include, but are not limited to, the following:



| |  |  | Demand for the Companys products may decrease significantly if the
economy weakens, the popularity of golf decreases or unusual weather
conditions cause a reduction in rounds played.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Like other apparel manufacturers, the Company must correctly anticipate
and help direct fashion trends within its industry. The Companys
results of operations could suffer if the Company fails to develop
fashions or styles that are well received in any season.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | The Company is party to a multi-year licensing agreement to design,
source and sell Callaway Golf apparel primarily in the United States,
Europe, Canada and Australia. The Company must correctly anticipate the
fashion trends and demand for these product lines. The Companys results
of operations could suffer if it fails to develop fashions or styles for
the Callaway Golf apparel product line that are well received in any
season.                                                                                                                                                                                                                                                               
|
| |  |  | The market for golf apparel and sportswear is extremely competitive.
The Company has several strong competitors that are better capitalized.
Outside the core green grass market, the Companys market share is not as
significant as that of its competition. Price competition or industry
consolidation could weaken the Companys competitive position.                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | The outbreak of Severe Acute Respiratory Syndrome has affected travel
to countries where the Companys products are manufactured. Visiting
manufacturers in the affected countries is part of the product
development process for the Company and if travel to these countries
continues to be restricted, the Companys product development process and
reputation as a designer and manufacturer of innovative products may be
adversely affected, our international production and shipments may be
limited, and the Company could lose sales.                                                                                                                                                              
|
| |  |  | The Company relies on domestic and foreign contractors to manufacture
various products. If these contractors deliver goods late or fail to
meet the Companys quality standards, the Company could lose sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | An increase in terrorist activities, as well as the threat of conflict,
would likely adversely affect the level of demand for the Companys
products as customers and consumers attention and interest are diverted
from golf and fashion and become focused on these events and the
economic, political, and public safety issues and concerns associated
with them. Also, such events could adversely affect the Companys
ability to manage its supply and delivery of product from domestic and
foreign contractors. If such events caused a significant disruption in
domestic or international shipments, the Companys ability to fulfill
customer orders also would be materially adversely affected.

14



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| |  |  | The Company has entered into agreements to purchase land and a building
in Oceanside, California and to lease new office and distribution
facilities in Basildon, England to replace and expand existing owned and
leased office and distribution facilities. The Companys results of
operations could be adversely affected if either of the distribution
centers are not operational as anticipated or functionality problems are
encountered. Any such delay or operation problems may cause the Company
to incur additional expense, experience delays in customer shipments,
require the Company to lease additional office or distribution space or
extend the term of existing leases. In addition, whether or not the
facilities are operational at the time anticipated, the Companys results
of operations could be negatively impacted if future sales volume growth
does not reach expected levels and the facilitys additional distribution
capacity is not fully utilized, or if the Company does not achieve
projected cost savings from the new distribution facility as soon as, or
in the amounts, anticipated.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If economic conditions do not improve, the ability of the Companys
customers to pay current obligations may be adversely impacted and the
Company may experience an increase in delinquent and uncollectable
accounts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Fluctuations in foreign currency exchange rates could affect the
Companys ability to sell its products in foreign markets and the value
in U.S. dollars of revenues received in foreign currencies. The
Companys revenues from its international segment may also be adversely
affected by taxation and laws or policies of the foreign countries in
which the Company has operations, as well as laws and policies of the
United States affecting foreign trade, investment and taxation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | The Company maintains high levels of inventory to support its
AuthenticsTM program as well as the Callaway Golf apparel brand.
Additional products, greater sales volume, and customer trends toward
increased at-once ordering may require increased inventory. Disposal
of excess prior season inventory is an ongoing part of the Companys
business, and write-downs of inventories may materially impair the
Companys financial performance in any period. Particular inventories
may be subject to multiple write-downs if the Companys initial reserve
estimates for inventory obsolescence or lack of throughput prove to be
too low. These risks increase as inventory increases.                                                                                                                                                                                                                                                                                                                                                                                                                                      




Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

The Companys long-term debt consists of notes payable which had a total
balance of $3,063,000 at April 30, 2003. The debt bears interest at variable
and fixed rates ranging from 5.9% to 11.0%, which approximates fair value based
on current rates offered for debt with similar risks and maturities. The
Company also had $18,682,000 outstanding at April 30, 2003 on its revolving
line of credit with interest charged at the banks reference (prime) rate. The
loan agreement also provides for optional interest rates based on LIBOR for
periods of at least 30 days in increments of $500,000. A hypothetical 10%
increase in interest rates during the six months ended April 30, 2003 would
have resulted in a $15,000 change in net income.

Foreign Currency Exchange Rate Risk

The Companys ability to sell its products in foreign markets and the U.S.
dollar value of the

15



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##### Table of Contents



sales made in foreign currencies can be significantly
influenced by foreign currency fluctuations. A decrease in the value of
foreign currencies relative to the U.S. dollar could result in downward price
pressure for the Companys products or losses from currency exchange rates.
Although the Company and its subsidiaries did not do so during the first six
months of fiscal 2003, from time to time the Company enters into short-term
foreign exchange contracts with its bank to hedge against the impact of
currency fluctuations between the U.S. dollar and the British pound and the
U.S. dollar and the Canadian dollar. The contracts provide that, on specified
dates, the Company would sell the bank a specified number of British pounds or
Canadian dollars in exchange for a specified number of U.S. dollars.
Additionally, the Companys U.K. subsidiary enters into similar contracts with
its bank to hedge against currency fluctuations between the British pound and
other European currencies. Realized gains and losses on these contracts are
recognized in the same period as the hedged transaction. These contracts have
maturity dates that do not normally exceed 12 months. The Company will
continue to assess the benefits and risks of strategies to manage the risks
presented by currency exchange rate fluctuations. There is no assurance that
any strategy will be successful in avoiding losses due to exchange rate
fluctuations, or that the failure to manage currency risks effectively would
not have a material adverse effect on the Companys results of operations. At
April 30, 2003, neither the Company nor any of its subsidiaries had any
outstanding foreign exchange contracts.




Item 4. CONTROLS AND PROCEDURES.

The Company, under the supervision and with the participation of
management, including the Companys Chief Executive Officer (CEO) and Chief
Financial Officer (CFO), evaluated the effectiveness of the design and
operation of the Companys disclosure controls and procedures (as defined in
Rule 13a-14(c) of the Securities Exchange Act of 1934, as amended, (the
Exchange Act)) as of a date within 90 days prior to filing of this report on
Form 10-Q. Based on this evaluation, the CEO and the CFO concluded that the
Companys disclosure controls and procedures are effective and provide
reasonable assurance that information required to be disclosed by the Company
in the reports it files under the Exchange Act, is recorded, processed,
summarized and reported within required time periods. Subsequent to the date
of the evaluation, there have not been any significant changes in the Companys
internal controls or in other factors that could significantly affect the
Companys internal controls. Since there were no significant deficiencies or
material weaknesses in the Companys internal controls, the Company did not
take any corrective action.




PART II




OTHER INFORMATION




Item 1. LEGAL PROCEEDINGS

On January 22, 1999, Milberg Weiss Bershad Hynes & Lerach LLP filed a
class action in the United States District Court for the Southern District of
California (U.S. District Court) on behalf of purchasers of the Companys
common stock during the period between September 4, 1997 and July 15, 1998.
The action was subsequently consolidated with two similar suits and plaintiffs
filed their Amended and Consolidated Complaint on December 17, 1999. Upon the
Companys motion, the U.S. District Court dismissed the Complaint with leave to
amend on July 18, 2000. On September 18, 2000, plaintiffs served their Second
Consolidated Amended Complaint (Second Amended Complaint). On November 6,
2000, the Company filed its motion to dismiss the Second Amended Complaint,
which the U.S. District Court granted, in part, and denied, in part. The
remaining portions of the Second Amended Complaint allege that, among other
things, during the class period and in violation of the Securities

16



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##### Table of Contents



Exchange Act of 1934, the Companys financial statements, as reported, did not
conform to generally accepted accounting principles with respect to revenues
and inventory levels. It further alleges that certain Company executives made
false or misleading statements or omissions concerning product demand and that
two former executives engaged in insider trading. The plaintiffs seek
unspecified damages. The parties are currently in the discovery process.

The Company is party to other claims and litigation proceedings arising in the
normal course of business. Although the legal responsibility and financial
impact with respect to such other claims and litigation cannot currently be
ascertained, the Company does not believe that these other matters will result
in payment by the Company of monetary damages, net of any applicable insurance
proceeds, that, in the aggregate, would be material in relation to the
consolidated financial position or results of operations of the Company.




Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS  NONE




Item 3. DEFAULTS UPON SENIOR SECURITIES  NONE




Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



|(1) |  | At the Companys Annual Meeting of Stockholders on March 19, 2003, the
following two directors were elected to three-year terms as Class I
directors on the Companys board of directors: Mr. John M. Hanson, Jr.
and Mr. Randall L. Herrel, Sr. The following directors continued in
office after the meeting but were not elected at the meeting: Messrs.
Stephen Bartolin, Jr., Stephen G. Carpenter, Andre P. Gambucci, H. Michael
Hecht and James W. Nantz, III.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The stockholder votes on the elections were as follows:                                                                                                                                                                                                                                                                                                                                                                                                              

|                           |  |  |            | 
|-------------------------- |  |  | ---------- | 
|John M. Hanson, Jr.        |  |  |            | 
|Number of votes FOR        |  |  | 11,627,027 | 
|Number of votes WITHHELD   |  |  | 128,246    | 
|Number of broker non-votes |  |  | 0          | 

|                           |  |  |            | 
|-------------------------- |  |  | ---------- | 
|Randall L. Herrel, Sr.     |  |  |            | 
|Number of votes FOR        |  |  | 11,627,027 | 
|Number of votes WITHHELD   |  |  | 128,246    | 
|Number of broker non-votes |  |  | 0          | 




Item 5. OTHER INFORMATION  NONE




Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  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. 0-18553) and incorporated
herein by reference).

17



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|        |  |                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.
0-18553) 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)(1) |  | 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. 0-18553) and incorporated herein by reference).                                            
|        |  |                                                                                                                                                                                                                                                                                                                               
|4(b)(2) |  | Specimen certificate for Options granted under the Founders Stock Option
Plan dated November 6, 1992 (filed as Exhibit 4(b)(2) to the Companys
Form 10-K for the fiscal year ended October 31, 1993 (File No. 0-18553)
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. 0-18553) 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. 0-18553) 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. 0-18553) 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. 0-18553) and incorporated herein by reference).                                                
|        |  |                                                                                                                                                                                                                                                                                                                               
|10(c)*  |  | First Amended and Restated Executive Employment Agreement effective
February 22, 1999 by and between Ashworth, Inc. and Randall L. Herrel, Sr.
(filed as Exhibit 10(a) to the Companys Form 10-Q for the quarter ended
April 30, 1999 (File No. 0-18553) and incorporated herein by reference).                              
|        |  |                                                                                                                                                                                                                                                                                                                               
|10(d)*  |  | Employment Agreement effective December 15, 2000 by and between Ashworth,
Inc. and Terence W. Tsang (filed as Exhibit 10(f) to the Companys Form
10-Q for the quarter ended January 31, 2001 (File No. 0-18553) and
incorporated herein by reference).                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                               
|10(e)*  |  | Founders Stock Option Plan dated November 6, 1992 (filed as Exhibit 10(g)
to the Companys Form 10-K for the fiscal year ended October 31, 1993
(File No. 0-18553) and incorporated herein by reference).                                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                               
|10(f)*  |  | 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. 0-18553) and incorporated herein by
reference).                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                               
|10(g)*  |  | 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. 0-18553) and incorporated herein by
reference).                                                                                               

18



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|         |  |                                                                                                                                                                                                                                                                                                                                                     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10(h)*   |  | 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(i)(1) |  | Credit Agreement dated April 24, 2003, between Ashworth, Inc. as Borrower,
Bank of America, N.A., as Administrative Agent and Lender, Union Bank of
California, N.A. and Bank of the West as Lenders, expiring April 30, 2005.                                                                                                                      
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(2) |  | Guaranty Agreement dated April 24, 2003 between Ashworth Store I, Inc.,
Ashworth Store II, Inc. and Ashworth Store III, Inc. as Guarantors and
Bank of America, N.A., as Administrative Agent on behalf of Ashworth, Inc.
as the Borrower.                                                                                                          
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(3) |  | Security Agreement effective as of April 24, 2003 to the Credit Agreement
dated April 24, 2000, between Ashworth, Inc. as Pledgor, Bank of America,
N.A., as Administrative Agent and Lender, Union Bank of California, N.A.
and Bank of the West as Lenders, expiring April 30, 2005.                                                              
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(4) |  | Security Agreement effective as of April 24, 2003 to the Credit Agreement
dated April 24, 2000, between Ashworth Store I, Inc., Ashworth Store II,
Inc. and Ashworth Store III, Inc. as Pledgor, Bank of America, N.A., as
Administrative Agent and Lender, Union Bank of California, N.A. and Bank
of the West as Lenders, expiring April 30, 2005.
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(5) |  | Deed of Hypothec of Universality of Moveable Property effective as of
April 24, 2003 to the Credit Agreement dated April 24, 2000, between
Ashworth, Inc. as Grantor, Bank of America, N.A., as Administrative Agent
and Lender, Union Bank of California, N.A. and Bank of the West as
Lenders, expiring April 30, 2005.                           
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(6) |  | Equitable Mortgage Over Securities effective as of April 24, 2003 to the
Credit Agreement dated April 24, 2000, between Ashworth, Inc. as
Mortgagor, Bank of America, N.A., as Security Trustee and Beneficiary,
Union Bank of California, N.A. and Bank of the West as Beneficiaries,
expiring April 30, 2005.                                     
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(j)*   |  | Change in Control Agreement dated November 1, 2000 by and between
Ashworth, Inc. and Randall L. Herrel, Sr. (filed as Exhibit 10(m) to the
Companys Form 10-K for the fiscal year ended October 31, 2000 (File No.
0-18553) and incorporated herein by reference).                                                                                 
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(k)*   |  | Change in Control Agreement dated November 1, 2000 by and between
Ashworth, Inc. and Terence W. Tsang (filed as Exhibit 10(n) to the
Companys Form 10-K for the fiscal year ended October 31, 2000 (File No.
0-18553) and incorporated herein by reference).                                                                                       
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(l)    |  | 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. 0-18553) and
incorporated herein by reference).                                                                                               
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(m)*   |  | Offer and Acceptance of Executive Employment effective November 29, 1999
by and between Ashworth, Inc. and Anthony Wilkinson (filed as Exhibit
10(q) to the Companys Form 10-Q for the quarter ended January 31, 2001
(File No. 0-18553) and incorporated herein by reference).                                                                    
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(n)*   |  | Offer and Acceptance of Executive Employment effective May 29, 2001 by and
between Ashworth, Inc. and Eddie Fadel (filed as Exhibit 10(o) to the
Companys Form 10-K for the fiscal year ended October 31, 2002 (File No.
0-18553) and incorporated herein by reference).                                                                           
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(o)*   |  | 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                                                                                                                                                                     

19



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|       |  |                                                                                                                                                                                                                                                                                                                                    
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  | Form 10-K for the fiscal year ended October
31, 2002 (File No. 0-18553) and incorporated herein by reference).                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                    
|10(p)  |  | Real Estate Purchase and Sale Agreement and Joint Escrow Instructions
effective October 25, 2002 by and between Innovative Development
Enterprises, Inc. and Ashworth, Inc. (filed as Exhibit 10(q) to the
Companys Form 10-K for the fiscal year ended October 31, 2002 (File No.
0-18553) and incorporated herein by reference).
|       |  |                                                                                                                                                                                                                                                                                                                                    
|10(q)* |  | 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. 0-18553) and incorporated herein by reference).                                                    
|       |  |                                                                                                                                                                                                                                                                                                                                    
|10(r)  |  | Purchase and Installation Agreement dated April 10, 2003 between Ashworth,
Inc. and Gartner Storage & Sorter Systems of Pennsylvania.                                                                                                                                                                                              
|       |  |                                                                                                                                                                                                                                                                                                                                    
|10(s)  |  | Agreement for Lease dated May 1, 2003 by and among Ashworth, Inc.,
Ashworth U.K. Limited and Juniper Developments Limited.                                                                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                    
|99.1   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 by
Randall L. Herrel, Sr.                                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                    
|99.2   |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 by
Terence W. Tsang.                                                                                                                                                                                        

*     Management contract or compensatory plan or arrangement required to be filed
as an Exhibit pursuant to Item 15(c) of Form 10-K and applicable rules of the
Securities and Exchange Commission.

(b)  Reports on Form 8-K  NONE

20



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                    |  |                                                                                                                                     |  | 
|------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | 
|                    |  | ASHWORTH, INC                                                                                                                       |  | 
|                    |  |                                                                                                                                     |  | 
|Date: June 13, 2003 |  | By: /s/ Terence W. Tsang

Terence W. Tsang
Executive Vice President,
Chief Operating Officer,
Chief Financial Officer and
Treasurer |  | 

21



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CERTIFICATIONS

I, Randall L. Herrel, Sr., Chairman, President and Chief Executive Officer of
Ashworth, Inc. (the Company), certify that:



| | (1) |  | I have reviewed this quarterly report on Form 10-Q of the Company;                                                                                                                                                                                                                                                                                                                   
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;                                                       
|
| | (3) |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in
this quarterly report;                                                                             
|
| | (4) |  | The Companys other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
have:                                                                                                                                                                      
|
| |     |  | (a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;                                                                                     
|
| |     |  | (b) evaluated the effectiveness of the Companys disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                       
|
| |     |  | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                          
|
| | (5) |  | The Companys other certifying officer and I have disclosed, based
on our most recent evaluation, to the Companys auditors and the audit
committee of the Companys board of directors (or persons performing
the equivalent function):                                                                                                                                             
|
| |     |  | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Companys ability to record,
process, summarize and report financial data and have identified for the
Companys auditors any material weaknesses in internal controls; and                                                                                         
|
| |     |  | (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Companys internal controls;
and                                                                                                                                                                                                                              
|
| | (6) |  | The Companys other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

|                    |  |                                                                                                    |  | 
|------------------- |  | -------------------------------------------------------------------------------------------------- |  | 
|Date: June 13, 2003 |  | /s/ Randall L. Herrel, Sr.

Randall L. Herrel, Sr.
Chairman, President and Chief Executive Officer |  | 

22



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##### Table of Contents



I, Terence W. Tsang, Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Ashworth, Inc. (the Company), certify that:



| | (1) |  | I have reviewed this quarterly report on Form 10-Q of the Company;                                                                                                                                                                                                                                                                                                                   
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;                                                       
|
| | (3) |  | Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present
in all material respects the financial condition, results of operations
and cash flows of the Company as of, and for, the periods presented in
this quarterly report;                                                                             
|
| | (4) |  | The Companys other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
have:                                                                                                                                                                      
|
| |     |  | (a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;                                                                                     
|
| |     |  | (b) evaluated the effectiveness of the Companys disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and                                                                                                                                                                                       
|
| |     |  | (c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                                                                                                          
|
| | (5) |  | The Companys other certifying officer and I have disclosed, based
on our most recent evaluation, to the Companys auditors and the audit
committee of the Companys board of directors (or persons performing
the equivalent function):                                                                                                                                             
|
| |     |  | (a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Companys ability to record,
process, summarize and report financial data and have identified for the
Companys auditors any material weaknesses in internal controls; and                                                                                         
|
| |     |  | (b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Companys internal controls;
and                                                                                                                                                                                                                              
|
| | (6) |  | The Companys other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

|                    |  |                                                                                                                       |  | 
|------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | 
|Date: June 13, 2003 |  | /s/ Terence W. Tsang

Terence W. Tsang
Executive Vice President, Chief Operating Officer and 
Chief Financial Officer |  | 

23



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##### Table of Contents






EXHIBIT INDEX

|         |  |                                                                                                                                                                                                                                                                                                                                                     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                     
|Number   |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                              
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(1) |  | Credit Agreement dated April 24, 2003, between Ashworth, Inc. as Borrower, Bank of America, N.A.,
as Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as
Lenders, expiring April 30, 2005.                                                                                                                      
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(2) |  | Guaranty Agreement dated April 24, 2003 between Ashworth Store I, Inc., Ashworth Store II, Inc.
and Ashworth Store III, Inc. as Guarantors and Bank of America, N.A., as Administrative Agent on
behalf of Ashworth, Inc. as the Borrower.                                                                                                          
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(3) |  | Security Agreement effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000,
between Ashworth, Inc. as Borrower, Bank of America, N.A., as Administrative Agent and Lender,
Union Bank of California, N.A. and Bank of the West as Lenders, expiring April 30, 2005.                                                             
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(4) |  | Security Agreement effective as of April 24, 2003 to the Credit Agreement dated April 24, 2000,
between Ashworth Store I, Inc., Ashworth Store II, Inc. and Ashworth Store III, Inc. as Pledgor,
Bank of America, N.A., as Administrative Agent and Lender, Union Bank of California, N.A. and Bank
of the West as Lenders, expiring April 30, 2005.
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(5) |  | Deed of Hypothec of Universality of Moveable Property effective as of April 24, 2003 to the Credit
Agreement dated April 24, 2000, between Ashworth, Inc. as Grantor, Bank of America, N.A., as
Administrative Agent and Lender, Union Bank of California, N.A. and Bank of the West as Lenders,
expiring April 30, 2005.                           
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(i)(6) |  | Equitable Mortgage Over Securities effective as of April 24, 2003 to the Credit Agreement dated
April 24, 2000, between Ashworth, Inc. as Mortgagor, Bank of America, N.A., as Security Trustee
and Beneficiary, Union Bank of California, N.A. and Bank of the West as Beneficiaries, expiring
April 30, 2005.                                     
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(r)    |  | Purchase and Installation Agreement dated April 10, 2003 between Ashworth, Inc. and Gartner
Storage & Sorter Systems of Pennsylvania.                                                                                                                                                                                                               
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|10(s)    |  | Agreement for Lease dated May 1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and
Juniper Developments Limited.                                                                                                                                                                                                                          
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|99.1     |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The
Sarbanes-Oxley Act of 2003 by Randall L. Herrel, Sr.                                                                                                                                                                                                    
|         |  |                                                                                                                                                                                                                                                                                                                                                     
|99.2     |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The
Sarbanes-Oxley Act of 2003 by Terence W. Tsang.                                                                                                                                                                                                         

24