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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-QSB (Mark One) þ
    
    Quarterly report under Section 13 OR 15(d) of the Securities Exchange Act of 1934For the quarterly period ended December 31, 2004
 o
    
    Transition report under Section 13 or 15(d) of the Exchange ActFor the transition period from ___to ___
 Commission File No. 0-172923 COLLEGIATE PACIFIC INC.  Delaware
    
    22-2795073(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)13950 Senlac Drive, Suite 100, Dallas, Texas
    
    75234(Address of Principal Executive Offices)
    
    (Zip code)
 (972) 243-8100
(Issuers Telephone Number, Including Area Code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes þ No o As of February 11, 2005, there were 10,006,923 shares of the issuers common stock outstanding. Transitional Small Business Disclosure Format (check one): Yes o No þ




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
TABLE OF CONTENTS PageNumberPART I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at December 31, 2004 and June 30, 2004
    
    1Condensed Consolidated Statements of Income for the three and six months ended December 31, 2004 and 2003
    
    2Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2004 and 2003
    
    3Notes to the Condensed Consolidated Financial Statements
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    11Item 3.
    
    Controls and Procedures
    
    19PART II:
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    20Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    20Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    20Item 5.
    
    Other Information
    
    21Item 6.
    
    Exhibits
    
    21SIGNATURES
    
    23Lease AgreementFiscal 2005 Base Salaries for Named Executive OfficersSection 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certifications of Principal Executive and Principal Financial Officers




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PART I. FINANCIAL INFORMATION 
 Item 1. Consolidated Financial Statements. COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,2004
    
    
    2004(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    43,402,114
    
    
    $
    7,473,145Accounts receivable, net of allowance for doubtful accounts of
$881,865 and $635,531, respectively
    
    
    17,335,879
    
    
    
    10,683,860Inventories
    
    
    13,978,422
    
    
    
    9,214,063Current portion of deferred taxes
    
    
    149,414
    
    
    
    149,414Prepaid income taxes
    
    
    961,264
    
    
    
    Prepaid expenses and other current assets
    
    
    1,445,214
    
    
    
    496,912Total current assets
    
    
    77,272,307
    
    
    
    28,017,394PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$1,058,325 and $870,394, respectively
    
    
    1,292,483
    
    
    
    831,205DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of
$55,245 and $0, respectively
    
    
    3,259,448
    
    
    
    INTANGIBLE ASSETS, net of accumulated amortization of
$528,581 and $346,238, respectively
    
    
    269,258
    
    
    
    429,833GOODWILL
    
    
    23,526,800
    
    
    
    17,308,487DEFERRED INCOME TAXES
    
    
    100,812
    
    
    
    100,812OTHER ASSETS
    
    
    269,268
    
    
    
    259,012Total assets
    
    $
    105,990,376
    
    
    $
    46,946,743LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    8,125,642
    
    
    $
    4,983,603Accrued liabilities
    
    
    1,920,801
    
    
    
    1,283,553Dividends payable
    
    
    252,299
    
    
    
    247,128Accrued interest
    
    
    269,930
    
    
    
    Current portion of long-term debt
    
    
    324,800
    
    
    
    124,800Income taxes payable
    
    
    
    
    
    
    700,850Total current liabilities
    
    
    10,893,472
    
    
    
    7,339,934REDEEMABLE COMMON STOCK (see Note 2)
    
    
    
    
    
    
    7,250,000LONG-TERM DEBT
    
    
    50,407,162
    
    
    
    73,200COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.01 par value, 1,000,000 shares authorized; no shares
issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 50,000,000 shares authorized;
10,175,080 and 9,884,142 shares issued and
10,089,054 and 9,798,116 shares outstanding, respectively
    
    
    101,751
    
    
    
    98,842Additional paid-in capital
    
    
    41,723,059
    
    
    
    31,469,423Retained earnings
    
    
    3,522,383
    
    
    
    1,372,795Treasury stock at cost, 86,026 shares, respectively
    
    
    (657,451
    )
    
    
    (657,451
    )Total stockholders equity
    
    
    44,689,742
    
    
    
    32,283,609Total liabilities and stockholders equity
    
    $
    105,990,376
    
    
    $
    46,946,743
 The accompanying notes are an integral part of these financial statements. -1-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedDecember 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2004
    
    
    2003Net sales
    
    $
    23,794,598
    
    
    $
    4,238,444
    
    
    $
    51,504,886
    
    
    $
    10,212,036Cost of sales
    
    
    15,884,544
    
    
    
    2,718,844
    
    
    
    34,201,781
    
    
    
    6,444,195Gross profit
    
    
    7,910,054
    
    
    
    1,519,600
    
    
    
    17,303,105
    
    
    
    3,767,841Selling, general and administrative expenses
    
    
    6,618,053
    
    
    
    1,812,475
    
    
    
    12,494,767
    
    
    
    3,593,654Amortization expense
    
    
    92,429
    
    
    
    12,266
    
    
    
    174,529
    
    
    
    24,533Operating profit (loss)
    
    
    1,199,572
    
    
    
    (305,141
    )
    
    
    4,633,809
    
    
    
    149,654Other income (expense):Interest income
    
    
    42,999
    
    
    
    
    
    
    
    58,444
    
    
    
    Interest expense
    
    
    (334,663
    )
    
    
    (13,143
    )
    
    
    (341,519
    )
    
    
    (23,861
    )Other
    
    
    71,184
    
    
    
    9,992
    
    
    
    120,563
    
    
    
    10,269Total other income (expense)
    
    
    (220,480
    )
    
    
    (3,151
    )
    
    
    (162,512
    )
    
    
    (13,592
    )Income (loss) before income taxes
    
    
    979,092
    
    
    
    (308,292
    )
    
    
    4,471,297
    
    
    
    136,062Provision (benefit) for income taxes
    
    
    397,945
    
    
    
    (105,068
    )
    
    
    1,818,275
    
    
    
    69,994Net income (loss)
    
    $
    581,147
    
    
    $
    (203,224
    )
    
    $
    2,653,022
    
    
    $
    66,068Weighted average number of shares outstanding:Basic
    
    
    10,004,947
    
    
    
    5,616,399
    
    
    
    9,956,587
    
    
    
    4,953,501Diluted
    
    
    10,320,184
    
    
    
    5,616,399
    
    
    
    10,211,489
    
    
    
    6,385,389Net income (loss) per share common stock  basic
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.27
    
    
    $
    0.01Net income (loss) per share common stock 
diluted
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.26
    
    
    $
    0.01
 The accompanying notes are an integral part of these financial statements. -2-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Six Months EndedDecember 31,2004
    
    
    2003CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,653,022
    
    
    $
    66,068Adjustments to reconcile net income to cash used in operating activities:Depreciation expense
    
    
    189,424
    
    
    
    97,159Amortization expense
    
    
    174,529
    
    
    
    24,533Amortization of deferred debt issuance costs
    
    
    55,245
    
    
    
    Provision for uncollectible accounts receivable
    
    
    280,803
    
    
    
    56,104Loss on sale of property and equipment
    
    
    2,723
    
    
    
    Changes in operating assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (3,348,948
    )
    
    
    862,284Inventories
    
    
    (1,032,064
    )
    
    
    (677,020
    )Prepaid expenses and other current assets
    
    
    (800,636
    )
    
    
    (690,302
    )Other assets
    
    
    36,613
    
    
    
    Accounts payable
    
    
    (689,103
    )
    
    
    (742,820
    )Accrued liabilities
    
    
    512,965
    
    
    
    145,597Income taxes payable
    
    
    (1,662,114
    )
    
    
    (34,362
    )Net cash used in operating activities:
    
    
    (3,627,541
    )
    
    
    (892,759
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (251,225
    )
    
    
    (32,137
    )Purchase of subsidiaries, net of cash acquired of $317,551
    
    
    (6,594,273
    )
    
    
    Net cash used in investing activities:
    
    
    (6,845,498
    )
    
    
    (32,137
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings under line of credit
    
    
    7,718,951
    
    
    
    Payments on notes payable and line of credit
    
    
    (7,823,018
    )
    
    
    (800,000
    )Proceeds from issuance of 5.75% senior subordinated notes
    
    
    50,000,000
    
    
    
    Deferred debt issuance costs
    
    
    (3,314,693
    )
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (40,808
    )Payment of dividends
    
    
    (498,264
    )
    
    
    (371,504
    )Proceeds from issuance of common stock
    
    
    319,032
    
    
    
    7,240,477Net cash provided by financing activities:
    
    
    46,402,008
    
    
    
    6,028,165Increase in cash and cash equivalents
    
    
    35,928,969
    
    
    
    5,103,269Cash and cash equivalents, beginning of period
    
    
    7,473,145
    
    
    
    365,713Cash and cash equivalents, end of period
    
    $
    43,402,114
    
    
    $
    5,468,982SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    16,344
    
    
    $
    23,861Cash paid for income taxes
    
    $
    3,480,389
    
    
    $
    290,000SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:Fair value of assets acquired in business acquisitions
    
    $
    7,914,857
    
    
    $
    Liabilities assumed in business acquisitions
    
    $
    4,495,229
    
    
    $
    Promissory notes issued for business acquisitions
    
    $
    600,000
    
    
    $
    Common stock issued for business acquisitions (231,788 and
no shares, respectively)
    
    $
    2,687,514
    
    
    $
    
 The accompanying notes are an integral part of these financial statements. -3-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Basis of Presentation: These unaudited condensed consolidated financial statements of Collegiate Pacific Inc. and its
subsidiaries (collectively, the Company) have been prepared in accordance with accounting
principles generally accepted in the United States of America (US GAAP) for interim financial
reporting. Accordingly, they do not include all of the information and footnotes required by US
GAAP for complete financial statements and should be read in conjunction with the Companys annual
report on Form 10-KSB for the fiscal year ended June 30, 2004. All significant intercompany
transactions and balances have been eliminated in consolidation. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered necessary for a fair
presentation of the interim financial information have been included. Operating results for the interim period are not necessarily indicative of results that may be
expected for the fiscal year ending June 30, 2005. 2. Business Combinations: On July 26, 2004, the Company completed its acquisition of all of the outstanding capital
stock of Dixie Sporting Goods Co., Inc. (Dixie). Dixie is a supplier of team uniforms and
sporting goods equipment throughout the Mid-Atlantic United States. The Company paid the former
stockholders of Dixie a total of approximately $7.0 million, which consisted of $4.0 million in
cash, $0.5 million in promissory notes, up to an additional $1.0 million in the form of an earnout
if the net income of Dixie exceeds certain target levels in the 17 month period ending December 31,
2005, and 148,662 shares of the Companys common stock valued at $1.5 million. The cash portion of
the purchase price was paid out of the Companys working capital. The acquisition of Dixie was accounted for using the purchase method of accounting and,
accordingly, the net assets and results of operations of Dixie have been included in the Companys
consolidated financial statements since the date of acquisition. Assets acquired included a
contractual backlog intangible asset in the amount of $12,000, which is being amortized on a
straight-line basis over its estimated useful life of six months. The purchase price was allocated
to assets acquired, which included the identified intangible asset, and liabilities assumed, based
on their respective estimated fair values at the date of acquisition. The Companys purchase price
allocation is preliminary, subject to post-acquisition due diligence, and may be adjusted as
additional information is obtained. The excess of the purchase price over the fair value of the
net assets acquired has been preliminarily recorded as goodwill in the amount of $3,192,804. In
accordance with Statement of Financial Accounting Standards No. 142, the goodwill associated with
this acquisition is not being amortized, but will be tested annually for impairment. The Company purchased Dixie after considering the historic levels of earnings achieved by
Dixie, the impact the Dixie sales force could have on future earnings of the Company by increasing
the sales volume of products that the Company imports and manufactures, and the increase to the
combined customer base by cross selling products to each others customers. The consideration
given to the stockholders of Dixie was agreed upon after the Company determined the potential
impact on future earnings of the integrated companies. On September 29, 2004, the Company entered into an amendment (the Amendment) to the Asset
Purchase Agreement, dated as of February 9, 2004, by and among Collegiate Pacific Inc., RPD
Services, Inc. (f/k/a Kesslers Sport Shop, Inc.), Kesslers Team Sports, Inc. (f/k/a BOO Acquisition
Corp.), Bob
Dickman, Phil Dickman, Dan Dickman and Floyd Dickman (the Purchase Agreement). Under the
terms of the Purchase Agreement, the Company issued a total of 906,250 shares of its common stock
(the -4-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Shares) to RPD Services in connection with its acquisition of Kesslers on April 1, 2004, and
agreed to the terms of a price guarantee with respect to those shares that, if triggered in full,
would have obligated Collegiate Pacific to pay RPD Services an amount of up to $7,250,000. As a
result, the Company recorded a contingent liability of $7,250,000 for redeemable common stock in
its audited consolidated financial statements for the fiscal year ended June 30, 2004. Under the terms of the Amendment, the parties agreed to terminate Collegiate Pacifics
obligations under the price guarantee and the resale provisions with respect to the Shares,
effective as of the date of the Amendment, September 29, 2004. Accordingly, the Company no longer
has any amount recorded as a contingent liability for redeemable common stock at December 31, 2004.
Consequently, $7,250,000 of the increase in stockholders equity as of December 31, 2004, compared
to June 30, 2004, is attributable to the elimination of the price guaranty under the terms of the
Amendment. On December 10, 2004, the Company completed its acquisition of all of the outstanding capital
stock of CMS of Central Florida Inc. d/b/a Orlando Team Sports (OTS). OTS is a supplier of team
uniforms and sporting goods equipment in the State of Florida. The Company paid the former OTS
stockholders a total of approximately $3.1 million, which consisted of $1.8 million in cash, $0.1
million in a promissory note, and 83,126 shares of the Companys common stock valued at $1.2
million. The portion of the consideration represented by shares of
common stock of the Company was
determined using the average closing prices of the common stock over
a period of time prior to the date
that the Company announced the signing of the letter of intent. The Company agreed to register the
83,126 shares with the Securities and Exchange Commission for resale by the former OTS stockholders
within 120 days of the closing of the transaction. The cash portion of the purchase price was paid
out of the Companys working capital. The Company also entered
into a lease with McWeeney Smith Partnership (the
Partnership) for its 12,000 square foot warehouse and
distribution facility in Sanford, Florida. The former OTS
stockholders are partners in the Partnership. The term of the lease
runs through July 2010 and the monthly rental rate is approximately
$6,200. The Companys wholly owned subsidiary, OTS, employs the
former OTS management team. The acquisition of OTS was accounted for using the purchase method of accounting and,
accordingly, the net assets and results of operations of OTS have been included in the Companys
consolidated financial statements since the date of acquisition. The purchase price was allocated
to assets acquired and liabilities assumed, based on their respective estimated fair values at the
date of acquisition. The Companys purchase price allocation is preliminary, subject to
post-acquisition due diligence, and may be adjusted as additional information is obtained. After
determining that the value of any identifiable intangible assets was not material, the excess of
the purchase price over the fair value of the net assets acquired has been preliminarily recorded
as goodwill in the amount of $3,117,047. In accordance with Statement of Financial Accounting
Standards No. 142, the goodwill associated with this acquisition is not being amortized, but will
be tested annually for impairment. The Company purchased OTS after considering the historic levels of earnings achieved by OTS,
the impact the OTS sales force could have on future earnings of the Company by increasing the sales
volume of products the Company imports and manufactures, and the increase to the combined customer
base by cross selling products to each others customers. The consideration given to the
stockholders of OTS was agreed upon after the Company determined the potential impact on future
earnings of the integrated companies. The following presents the unaudited pro forma results for the Company for the three and six
months ended December 31, 2004 and 2003, as if the acquisition of OTS had been consummated at the
beginning of each of the periods presented. In addition, the results for the three and six months
ended December 31, 2003, include adjustments for the operating results for the previous
acquisitions of Tomark Inc. (January 2004), Kesslers Sports Shop, Inc. (April 2004) and Dixie
Sporting Goods Co., Inc (July 2004). The pro forma results are prepared for comparative purposes
only and do not necessarily reflect the results that
would have occurred had the acquisitions occurred at the beginning of the periods presented or
the results which may occur in the future. -5-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the Three Months Ended
    
    
    For the Six Months EndedDecember 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2004
    
    
    2003Net sales
    
    $
    24,987,790
    
    
    $
    21,073,868
    
    
    $
    55,420,428
    
    
    $
    45,331,357Net income
    
    
    676,861
    
    
    
    5,950
    
    
    
    2,805,833
    
    
    
    1,954,722Net income per
share common stock:Basic
    
    $
    0.07
    
    
    $
    0.00
    
    
    $
    0.28
    
    
    $
    0.31Diluted
    
    $
    0.07
    
    
    $
    0.00
    
    
    $
    0.27
    
    
    $
    0.25
 3. Inventories: Inventories at December 31, 2004 and June 30, 2004 consisted of the following: December 31,
    
    
    June 30,2004
    
    
    2004Raw materials
    
    $
    587,774
    
    
    $
    457,337Work in progress
    
    
    127,499
    
    
    
    115,223Finished goods
    
    
    13,263,149
    
    
    
    8,641,503Inventories
    
    $
    13,978,422
    
    
    $
    9,214,063
 4. Allowance for Doubtful Accounts: Changes in the Companys allowance for doubtful accounts for the six months ended December 31,
2004 and the year ended June 30, 2004 are as follows: December 31,
    
    
    June 30,2004
    
    
    2004Balance at beginning of period
    
    $
    635,531
    
    
    $
    121,139Provision for uncollectible accounts
receivable
    
    
    280,803
    
    
    
    194,620Effect of business acquisitions
    
    
    204,015
    
    
    
    488,756Accounts written off, net of recoveries
    
    
    (238,484
    )
    
    
    (168,984
    )Balance at end of period
    
    $
    881,865
    
    
    $
    635,531
 -6-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Income (Loss) Per Share: Summarized basic and diluted income (loss) per share are as follows: For the Three Months Ended
    
    
    For the Six Months EndedDecember 31,
    
    
    December 31,2004
    
    
    2003
    
    
    2004
    
    
    2003Net income (loss)
    
    $
    581,147
    
    
    $
    (203,224
    )
    
    $
    2,653,022
    
    
    $
    66,068Weighted average
common shares - basic
    
    
    10,004,947
    
    
    
    5,616,399
    
    
    
    9,956,587
    
    
    
    4,953,501Effect of dilutive securities
(options and warrants)
    
    
    315,237
    
    
    
    
    
    
    
    254,902
    
    
    
    1,431,888Weighted average
common shares - diluted
    
    
    10,320,184
    
    
    
    5,616,399
    
    
    
    10,211,489
    
    
    
    6,385,389Net income (loss) per share - basic
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.27
    
    
    $
    0.01Per share effect of dilutive securities
(options and warrants)
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
    
    
    Net income (loss) per share - diluted
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.26
    
    
    $
    0.01Options, warrants and common
shares underlying convertible
securities excluded from
computation because their effect
was antidilutive
    
    
    3,602,469
    
    
    
    3,435,620
    
    
    
    1,801,235
    
    
    
    1,733,560
 The shares of the
Companys common stock underlying the convertible securities, which were issued in the current
quarterly period, were not included in the calculation for diluted net income as their effect was
antidilutive. The number of excluded shares of the Companys
common stock was based upon the period the
convertible securities were outstanding and would have been 1,283,573
shares. The total number of common
shares, which may be issued upon full conversion of the convertible securities, is 3,412,969. 6. Stock Based Compensation: On December 11, 1998, the Companys stockholders approved a new stock option plan (the
Plan). The Plan authorized the Companys Board of Directors to grant employees, directors and
consultants of the Company and its subsidiaries up to an aggregate of 400,000 shares of the
Companys common stock, $0.01 par value per share. The Plan, as amended, now authorizes the
Companys Board of Directors to grant employees, directors and consultants of the Company and its
subsidiaries up to an aggregate of 1,500,000 shares of the Companys common stock. The options
vest after the employee has been employed for a certain period of time or on the award date if the
employee has been employed for at least one year on the award date. The Company accounts for all options issued under the Plan in accordance with the recognition
and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock
Issued to Employees, and related interpretations. No stock-based compensation cost is
reflected in net income, as all options granted under the plan had an exercise price equal to the
market value of the underlying common stock on the date of grant. The following table illustrates
the effect on net income and income per share as if the Company had applied the fair value
recognition provisions of Financial -7-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Accounting Standards Board (FASB) SFAS No. 123, Accounting
for Stock-Based Compensation, to stock-based employee compensation: For the Three Months Ended
    
    
    For the Six Months EndedDecember 31
    
    
    December 312004
    
    
    2003
    
    
    2004
    
    
    2003Net income (loss), as reported
    
    $
    581,147
    
    
    $
    (203,224
    )
    
    $
    2,653,022
    
    
    $
    66,068Add: stock based employee
compensation expense included
in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deduct: stock-based employee
compensation expense
determined using the fair
value based method for all
awards, net of related tax
effects
    
    
    498,261
    
    
    
    2,334
    
    
    
    694,916
    
    
    
    5,283Pro forma income (loss)
    
    $
    82,886
    
    
    $
    (205,558
    )
    
    $
    1,958,106
    
    
    $
    60,785Net income (loss) per share
common stock:As reported:Basic
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.27
    
    
    $
    0.01Diluted
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.26
    
    
    $
    0.01Pro forma:Basic
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    0.20
    
    
    $
    0.01Diluted
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    0.19
    
    
    $
    0.01
 The fair value of these options was
estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions: expected
average volatility of 34.0%; risk free interest rate of 3.41 to 3.57 %; dividend yield of 1.0 to
1.1%; and expected lives of five years. 7. Long-Term Debt: On November 26, 2004, the
Company announced the completion of its sale of $40.0 million
principal amount of 5.75% Convertible Senior Subordinated Notes due 2009 (the Notes). The Notes
were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933,
as amended (the Securities Act). Thomas Weisel Partners LLC (Thomas Weisel) was the initial
purchaser of the Notes. On December 3, 2004, the Company announced the completion of its sale of
an additional $10.0 million principal amount of Notes pursuant to the exercise by the initial
purchaser of the option granted to it in connection with the initial offering of the Notes. The
issuance of the Notes resulted in aggregate proceeds of $46.7 million to the Company, net of
issuance costs. The Notes are governed by the Indenture dated as of November 26, 2004, between the Company and
The Bank of New York Trust Company N.A., as trustee (the Indenture). The Indenture provides,
among other things, that the Notes will bear interest of 5.75% per year, payable semi-annually and
will be convertible into the Companys common stock at a conversion rate of 68.2594 shares per
$1,000 principal amount of Notes, subject to certain adjustments. This is equivalent to a
conversion price of approximately $14.65 per share. On or after December 31, 2005, the Company may
redeem the Notes, in whole or in part, at the redemption price, which is 100% of the principal
amount, plus accrued and unpaid interest and
additional interest, if any, to, but excluding, the redemption date only if the closing price
of the Companys common stock exceeds 150% of the conversion price for at least 20 trading days in
any consecutive 30-day trading period. The Company will make an additional payment in cash with
respect to the Notes called for redemption on or before December 10, 2007, in an amount equal to
$172.50 per -8-




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS $1,000 principal amount of the Notes, less the amount of any interest actually paid on the
Notes before the redemption date. In addition, upon the occurrence of a fundamental change,
holders may require the Company to purchase all or a portion of the Notes in cash at a price equal
to 100% of the principal amount of Notes to be repurchased, plus accrued and unpaid interest and
additional interest, if any, to, but excluding, the repurchase date, plus the make whole premium,
if applicable. In connection with the completion of the sale of the Notes, on November 26, 2004, the Company
entered into a registration rights agreement with Thomas Weisel (the Registration Rights
Agreement). Under the terms of the Registration Rights Agreement, the Company is required to file
with the Securities and Exchange Commission a registration statement for the registration of the
Notes and the shares issuable upon conversion of the Notes within 90 days after the closing. The
Company has agreed to use its reasonable efforts to cause the registration statement to be declared
effective under the Securities Act within 180 days after the
closing. On January 24, 2005, the
Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission for
the registration of the Notes and the shares issuable upon conversion of the Notes (the
Registration Statement). The Registration Statement has not been declared effective under the
Securities Act. In connection with the offer and sale of the Notes, on November 18, 2004, the Company entered
into a consent agreement with Merrill Lynch Business Financial Service Inc. (MLBFS) with respect
to the Companys $12 million revolving credit facility with MLBFS (the Consent Agreement),
providing for, among other things, MLBFSs consent to the issuance of the Notes. On November 23,
2004, the Company entered into a letter agreement with MLBFS providing for, among other things, a
change of the maturity of the credit facility from December 31, 2005, to September 30, 2005. In addition, on November 26, 2004, the Company entered into a letter agreement with MLBFS
providing for, among other things, an amendment to the Companys ratio of debt to earnings before
interest, taxes, depreciation and amortization (EBITDA) to take into account the issuance of the
Notes. The Companys ratio of outstanding debt to MLBFS to the Companys EBITDA on a trailing
12-month basis may not exceed 2.0 to 1.0. 8. Recent Accounting Pronouncements: In November 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 151, Inventory Costs. This statement amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
4, previously stated that . . . under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment
as current period charges. . . . This Statement requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of so abnormal. In
addition, this Statement requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. Adoption of this
statement is required for the Companys fiscal year beginning July 1, 2005. The adoption of this
statement is not expected to have a material effect on the financial condition or results of
operations of the Company. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment. This statement is a revision of Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. SFAS No.
123(R) addresses financials accounting for transactions in which an entity obtains employee
services in share-based payment transactions. Adoption of this statement is required for the
Companys fiscal year - 9 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS beginning July 1, 2005. The adoption of this statement is not expected to have a material
effect on the financial condition or results of operations of the Company. - 10 -




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Overview Certain statements in Managements Discussion and Analysis are forward-looking as defined in
the Private Securities Litigation Reform Act of 1995. These statements are based on current
expectations that are subject to risks and uncertainties. Actual results may differ materially from
expectations as of the date of this filing because of the factors discussed below under the
Statement Regarding Forward-Looking Disclosure section and elsewhere in this Quarterly Report on
Form 10-QSB. Collegiate Pacific Inc. (Collegiate Pacific, we, us, our, or the Company) is a
premier marketer, manufacturer and distributor of sporting goods and equipment, team uniforms,
physical education, recreational and leisure products primarily to the institutional market in the
United States. The institutional market generally consists of youth sports programs, park and
recreational organizations, schools, colleges, churches, government agencies, athletic teams,
athletic clubs and dealers. We sell our products directly to our customers primarily through the
distribution of our unique, informative catalogs and fliers, our strategically located road sales
professionals, our telemarketers and the Internet. We offer a broad line of sporting goods and
equipment and other recreational products, as well as provide after-sale customer service. We
currently market approximately 4,500 sports related equipment products, team uniforms and
recreational related equipment and products to over 300,000 potential institutional, retail,
Internet, sports teams and sporting good dealer type customers. Since commencing operations in
early 1998, we have sold our products to approximately 80,000 customers. References herein to
fiscal 2004 and fiscal 2005 refer to our fiscal years ended or ending, as the case may be, June
30, 2004 and 2005, respectively. Matters Affecting Comparability Collegiate Pacifics operating results for the second quarter of fiscal 2005 include the
operating results of Tomark Sports, Inc. (Tomark) and Kesslers Sport Shop, Inc. , both of which
we acquired in fiscal 2004, the operating results of Dixie Sporting Goods Co., Inc. (Dixie),
which we acquired during the first quarter of fiscal 2005, and the operating results of CMS of
Central Florida Inc. d/b/a Orlando Team Sports (OTS), which we acquired during the second quarter
of fiscal 2005, each since their respective acquisition dates. However, the condensed consolidated
statements of income for the three and six months ended December 31, 2003, do not include the
operating results for any of those acquisitions since each acquisition was completed after December
31, 2003. Approximately $39.8 million of the $41.3 million increase in net sales, when compared to
the first six months of fiscal 2004, is attributable to Collegiate Pacifics acquisitions during
fiscal 2004 and fiscal 2005. See Note 2 to Notes to Condensed Consolidated Financial Statements. Consolidated Results of Operations The following table compares selected financial data from the Consolidated Statements of
Income for the three and six months ended December 31, 2004 and 2003: - 11 -




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For the Three Months Ended
    
    
    For the Six Months EndedDecember 31,
    
    
    December 31,Increase
    
    
    
    
    
    
    
    
    
    
    Increase2004
    
    
    2003
    
    
    Dollars
    
    
    Percentage
    
    
    2004
    
    
    2003
    
    
    Dollars
    
    
    Percentage(dollars in thousands, except per share amounts)Net sales
    
    $
    23,795
    
    
    $
    4,238
    
    
    $
    19,557
    
    
    
    461.5
    %
    
    $
    51,505
    
    
    $
    10,212
    
    
    $
    41,293
    
    
    
    404.4
    %Gross profit
    
    
    7,910
    
    
    
    1,520
    
    
    
    6,390
    
    
    
    420.4
    %
    
    
    17,303
    
    
    
    3,768
    
    
    
    13,535
    
    
    
    359.2
    %Operating profit
(loss)
    
    
    1,200
    
    
    
    (305
    )
    
    
    1,505
    
    
    
    493.4
    %
    
    
    4,634
    
    
    
    150
    
    
    
    4,484
    
    
    
    2,989.3
    %Net income (loss)
    
    
    581
    
    
    
    (203
    )
    
    
    784
    
    
    
    386.2
    %
    
    
    2,653
    
    
    
    66
    
    
    
    2,587
    
    
    
    3,919.7
    %Diluted earnings
(loss) per share
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.10
    
    
    
    250.0
    %
    
    $
    0.26
    
    
    $
    0.01
    
    
    $
    0.25
    
    
    
    2,500.0
    %Expressed as a
percentage
of net sales:Gross margin
    
    
    33.2
    %
    
    
    35.9
    %
    
    
    
    
    
    
    
    
    
    
    33.6
    %
    
    
    36.9
    %Selling, general
and administrative
expenses
    
    
    27.8
    %
    
    
    42.8
    %
    
    
    
    
    
    
    
    
    
    
    24.3
    %
    
    
    35.2
    %Operating profit
(loss)
    
    
    5.0
    %
    
    
    7.2
    %
    
    
    
    
    
    
    
    
    
    
    9.0
    %
    
    
    1.5
    %
 Acquisitions On January 9, 2004, Collegiate Pacific completed the acquisition of Corona, California based
Tomark in a merger transaction. Tomark is a marketer, distributor, manufacturer and installer of
sporting goods and related equipment primarily to the institutional market in the State of
California. On April 1, 2004, Collegiate Pacific completed its acquisition of substantially all of the
operating assets of Richmond, Indiana based Kesslers Sport Shop, Inc. (now known as RPD Services,
Inc.). Our wholly owned subsidiary, Kesslers Team Sports, Inc. (Kesslers) is a supplier of team
uniforms and sporting goods equipment throughout the Mid-Western United States. On July 26, 2004, Collegiate Pacific completed the acquisition of all of the outstanding
capital stock of Richmond, Virginia based Dixie. Dixie is a supplier of team uniforms and sporting
goods equipment throughout the Mid-Atlantic United States. On December 10, 2004, Collegiate Pacific completed its acquisition of all of the outstanding
capital stock of Sanford, Florida based OTS. OTS is a supplier of team uniforms and sporting goods
equipment throughout in the State of Florida. Three Months Ended December 31, 2004 Compared to Three Months Ended December 31, 2003 Net Sales.Net sales for the fiscal quarter ended December 31, 2004, totaled $23.8 million
compared to $4.2 million for the fiscal quarter ended December 31, 2003, an increase of $19.6
million, or 461.5%. Net sales grew by a combined $18.9 million from the businesses we acquired
during fiscal 2004 and early fiscal 2005, and reflects the results of our efforts during the
quarter to direct a selection of our traditional catalog customers to our acquired road sales team.
These efforts have contributed to the growth in net sales for each of our acquired businesses.
We believe that if we can successfully service a selection of our traditional catalog customers in
specific regions of the United States with our newly acquired road sales team, we will continue to - 12 -




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grow our net sales through greater account penetration and retention. The increase in sales
for our existing catalog operations was due to our expanded product offerings and the overall
growth in our customer base. We believe future net sales will continue to rise from current
levels, however, no assurances can be made that any future increases in net sales will be at the
same rate. Historically, sales of our sporting goods have experienced seasonal fluctuations. This
seasonality causes our financial results to vary from quarter to quarter, which usually results in
lower net sales and operating profit in the second quarter of our fiscal year (October through
December) and higher net sales and operating profit in the remaining quarters of our fiscal year.
We attribute this seasonality primarily to the budgeting procedures of our customers and the
seasonal demand for our products, which have historically been driven by spring and summer sports.
Generally, between the months of October and December of each fiscal year, there is a lower level
of sports activities at our historical institutional customer base, a higher degree of adverse
weather conditions and a greater number of school recesses and major holidays. We believe that our
recent acquisitions of Kesslers, Dixie and OTS, which have a greater focus on fall and winter
sports, may reduce the seasonality of our financial results. Gross Profit. Gross profit for the fiscal quarter ended December 31, 2004, was $7.9 million,
or 33.2% of net sales, compared with $1.5 million, or 35.9% of net sales, for the fiscal quarter
ended December 31, 2003. The improvement in gross profit dollars for the quarter was attributable
to the increase in sales volume. The decrease in gross profit margin for the fiscal quarter ended
December 31, 2004, compared to the fiscal quarter ended December 31, 2003,was mainly due to the
increase in sales of soft good products, which generally have slightly lower gross margins. In the
fiscal quarter ended December 31, 2004, Tomark, Kesslers, Dixie and OTS contributed a combined
gross profit of $6.3 million and gross profit percentage of 33.2%. Other factors which affect
gross profit are the cost of freight, which is influenced by oil prices, the cost of raw materials
used in the manufacturing process and the Companys ability to timely pass these changes to
variable costs on to its customers. Selling, General and Administrative Expenses.Selling, general and administrative (SG&A)
expenses for the fiscal quarter ended December 31, 2004, were $6.6 million, or 27.8% of net sales,
compared with $1.8 million, or 42.8% of net sales, for the fiscal quarter ended December 31, 2003.
The increase in SG&A expenses for the fiscal quarter ended December 31, 2004, was attributable to
Collegiate Pacifics acquisitions in fiscal 2004 and early fiscal 2005, which resulted in increased
expenses of $4.5 million, an increase in personnel related costs incurred in connection with
additional sales personnel and a slight increase in general insurance costs incurred in connection
with the Companys growth. Operating Profit.Operating profit for the fiscal quarter ended December 31, 2004, increased
to $1.2 million, or 5.0% of net sales, compared to an operating loss of $305 thousand, or 7.2% of
net sales for the fiscal quarter ended December 31, 2003. The increase in operating profit was
primarily attributable to higher sales volume, partially offset by higher SG&A expenses. Interest Expense.Interest expense for the fiscal quarter ended December 31, 2004, increased
to $335 thousand, or 2,446.3%, compared to $13 thousand for the fiscal quarter ended December 31,
2003. The increase in interest expense is attributable to interest on the 5.75% Convertible Senior
Subordinated Notes due 2009 (the Notes) during the fiscal quarter ended December 31, 2004. See
Liquidity and Capital Resources. Income Taxes.Income tax expense for the fiscal quarter ended December 31, 2004, increased to
$398 thousand, which is approximately 40.6% of our income before taxes. Due to an - 13 -




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operating loss for the fiscal quarter ended December 31, 2003, the Company had a tax benefit
of $105 thousand for that period. Net Income.Net income for the fiscal quarter ended December 31, 2004, increased to $581
thousand, or 2.4% of net sales, compared to a net loss of $203 thousand, or 4.8% of net sales, for
the fiscal quarter ended December 31, 2003. The increase in net income was attributable to
increased sales activity, as well as a decrease in SG&A expenses as a percentage of net sales,
which was offset by the increase in income tax expense. Six Months Ended December 31, 2004 Compared to Six Months Ended December 31, 2003 Net Sales.Net sales for the six months ended December 31, 2004, totaled $51.5 million
compared to $10.2 million for the six months ended December 31, 2003, an increase of $41.3 million,
or 404.4%. Net sales grew by a combined $39.8 million from the businesses we acquired during
fiscal 2004 and fiscal 2005, and reflects the results of our efforts during the six months ended
December 31, 2004, to direct a selection of our traditional catalog customers to our acquired road
sales team. These efforts have contributed to the growth in net sales for each of our acquired
businesses. We believe that if we can successfully service a selection of our traditional catalog
customers with our newly acquired road sales team, we will continue to grow our net sales through
greater account penetration and retention in specific regions of the United States. The increase
in sales for our existing catalog operations was due to our expanded product offerings and the
overall growth in our customer base. We believe future net sales will continue to rise from
current levels, however, no assurances can be made that any future increases in net sales will be
at the same rate. Historically, sales of our sporting goods have experienced seasonal fluctuations. This
seasonality causes our financial results to vary from quarter to quarter, which usually results in
lower net sales and operating profit in the second quarter of our fiscal year (October through
December) and higher net sales and operating profit in the remaining quarters of our fiscal year.
We attribute this seasonality primarily to the budgeting procedures of many of our institutional
customers and the seasonal demand for our products, which have historically been driven by spring
and summer sports. Generally, between the months of October and December of each fiscal year,
there is a lower level of sports activities at our historical institutional customer base, a higher
degree of adverse weather conditions and a greater number of school recesses and major holidays.
We believe that our recent acquisitions of Kesslers, Dixie and OTS, which have a greater focus on
fall and winter sports, may reduce the seasonality of our financial results. Gross Profit. Gross profit for the six months ended December 31, 2004, was $17.3 million, or
33.6% of net sales, compared with $3.8 million, or 36.9% of net sales, for the six months ended
December 31, 2003. The improvement in gross profit dollars for six-month period was attributable
to the increase in sales volume. The decrease in gross profit margin for the six month period
ended December 31, 2004, compared to the six month period ended December 31, 2003,was mainly due
to the increase in sales of soft good products, which generally have slightly lower gross margins.
In the six month period ended December 31, 2004, Tomark, Kesslers, Dixie and OTS contributed a
combined gross profit of $13.1 million and gross profit percentage of 32.9%. Other factors which
affect gross profit are the cost of freight, which is influenced by oil prices, the cost of raw
materials used in the manufacturing process and the Companys ability to timely pass these changes
to variable costs on to its customers. Selling, General and Administrative Expenses.SG&A expenses for the six months ended December
31, 2004, were $12.5 million, or 24.3% of net sales, compared with $3.6 million, or 35.2% of net
sales, for the six months ended December 31, 2003. The increase in SG&A - 14 -




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expenses for the six months ended December 31, 2004, was attributable to Collegiate Pacifics
acquisitions in fiscal 2004 and fiscal 2005, which resulted in increased expenses of $8.3 million,
an increase in personnel related costs incurred in connection with additional sales personnel and a
slight increase in general insurance costs incurred in connection with the Companys growth. Operating Profit.Operating profit for the six months ended December 31, 2004, increased to
$4.6 million, or 9.0% of net sales, compared to operating profit of $150 thousand, or 1.5% of net
sales for the six months ended December 31, 2003. The increase in operating profit was primarily
attributable to higher sales volume, partially offset by higher SG&A expenses. Interest Expense.Interest expense for the six months ended December 31, 2004, increased to
$342 thousand, or 1,331.3%, compared to $24 thousand for the six months ended December 31, 2003.
The increase in interest expense was attributable to interest on the Notes during the six months
ended December 31, 2004. See Liquidity and Capital Resources. Income Taxes.Income tax expense for the six months ended December 31, 2004, increased to
$1.8 million, which is approximately 40.7% of our income before taxes. Income tax expense for the
six months ended December 31, 2003 was $70 thousand, or approximately 51.4% of income before taxes, and included additional provisions to correct
the year to date tax amount to the expected year end effective rate. Net Income.Net income for the six months ended December 31, 2004, increased to $2.7 million,
or 5.2% of net sales, compared to net income of $66 thousand, or 0.6% of net sales, for the six
months ended December 31, 2003. The increase in net income was attributable to increased sales
activity, as well as a decrease in SG&A expenses as a percentage of net sales, which was offset by
the increase in income tax expense. Liquidity and Capital Resources Cash Flow Activity Cash and cash equivalents totaled approximately $43.4 million at December 31, 2004, compared
to approximately $7.5 million at June 30, 2004. Collegiate Pacifics operating activities utilized
approximately $3.6 million in cash during the six months ended December 31, 2004, compared to
utilizing approximately $893 thousand during the six months ended December 31, 2003. The increase
in cash utilized by operating activities was due to an increase in accounts receivable of $3.3
million, an increase in inventories of $1.0 million and a decrease in income taxes payable of
approximately $1.7 million during the six months ended December 31, 2004, which is attributable to
increased sales volume during the six month period. Net cash used in investing activities was $6.8 million during the six month period ended
December 31, 2004, compared to approximately $32 thousand for the six month period ended December
31, 2003. The increase in cash used during the six months ended December 31, 2004 is attributable
to cash used for the acquisitions of Dixie and OTS of $6.6 million, which is net of the amount of
cash acquired in connection with those acquisitions. No material commitments for capital
expenditures existed as of December 31, 2004. Cash provided by financing activities during the six months ended December 31, 2004 was $46.4
million, compared to approximately $6.0 million during the six months ended December 31, 2003. The
increase in cash provided by financing activities during the six months ended December 31, 2004,
was due to proceeds from the sale of the Notes of $46.7 million, after debt issuance costs, as well
as the issuance of common stock upon the exercise of options of approximately $319 thousand,
partially offset by net payments on the Companys revolving line - 15 -




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of credit and other notes payable of $104 thousand, as well as the payment of dividends of
approximately $498 thousand during the six month period. The cash provided by financing activities
during the six months ended December 31, 2003, was from the issuance of common stock upon the
exercise of common stock warrants and options of approximately $7.2 million, partially offset by
the purchase of treasury shares of approximately $41 thousand, the payment of dividends of
approximately $372 thousand and repayments on the Companys revolving line of credit of
approximately $800 thousand. Current assets as of December 31, 2004, totaled approximately $77.3 million, thereby providing
the company with working capital of approximately $66.4 million. Capital Structure and Resources On November 26, 2004, the Company announced the completion of its sale of $40.0 million
principal amount of the Notes. The Notes were sold to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the Securities Act). Thomas Weisel
Partners LLC (Thomas Weisel) was the initial purchaser of the Notes. On December 3, 2004, the
Company announced the completion of its sale of an additional $10.0 million principal amount of
Notes pursuant to the exercise by Thomas Weisel of the option granted to it in connection with the
initial offering of the Notes. The issuance of the Notes resulted in aggregate proceeds of $46.7
million to the Company, net of issuance costs. The Notes are governed by the Indenture dated as of November 26, 2004, between the Company and
The Bank of New York Trust Company N.A., as trustee (the Indenture). The Indenture provides,
among other things, that the Notes will bear interest of 5.75% per year, payable semi-annually and
will be convertible into the Companys common stock at a conversion rate of 68.2594 shares per
$1,000 principal amount of Notes, subject to certain adjustments. This is equivalent to a
conversion price of approximately $14.65 per share. On or after December 31, 2005, the Company may
redeem the Notes, in whole or in part, at the redemption price, which is 100% of the principal
amount, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the
redemption date only if the closing price of the Companys common stock exceeds 150% of the
conversion price for at least 20 trading days in any consecutive 30-day trading period. The
Company will make an additional payment in cash with respect to the Notes called for redemption on
or before December 10, 2007, in an amount equal to $172.50 per $1,000 principal amount of the
Notes, less the amount of any interest actually paid on the Notes before the redemption date. In
addition, upon the occurrence of a fundamental change, holders may require the Company to purchase
all or a portion of the Notes in cash at a price equal to 100% of the principal amount of Notes to
be repurchased, plus accrued and unpaid interest and additional interest, if any, to, but
excluding, the repurchase date, plus the make whole premium, if applicable. In connection with the completion of the sale of the Notes, on November 26, 2004, the Company
entered into a registration rights agreement with Thomas Weisel (the Registration Rights
Agreement). Under the terms of the Registration Rights Agreement, the Company is required to file
with the Securities and Exchange Commission a registration statement for the registration of the
Notes and the shares issuable upon conversion of the Notes within 90 days after the closing. The
Company has agreed to use its reasonable efforts to cause the registration statement to be declared
effective under the Securities Act within 180 days after the closing. On January 24, 2005, the
Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission for
the registration of the Notes and the shares issuable upon conversion of the Notes (the
Registration Statement). The Registration Statement has not been declared effective under the
Securities Act. - 16 -




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The Companys principal external source of liquidity is its $12 million revolving line of
credit (the Credit Facility) with Merrill Lynch Business Financial Services Inc. (MLBFS), which
is collateralized by all of the assets of Collegiate Pacific and its subsidiaries. Total
availability under the Credit Facility is determined by a borrowing formula based on eligible trade
receivables and inventories that provides for borrowings against up to 80% of its eligible trade
receivables and 50% of its eligible inventories, but not to exceed $12 million. Borrowings under
the Credit Facility bear interest at the rate of 2.25% plus the one-month LIBOR rate (4.65% at
December 31, 2004). As of December 31, 2004, there was no balance outstanding under the Credit
Facility, leaving the Company with approximately $12 million of availability under the terms of the
borrowing base formula of the Credit Facility. The Credit Facility contains customary covenants
and the Company must maintain certain financial ratios pertaining to its fixed charges and total
debt to (a) total net worth and (b) earnings before interest, taxes, depreciation and amortization
(EBITDA). In connection with the offer and sale of the Notes, on November 18, 2004, the Company entered
into a consent agreement with MLBFS with respect to the Credit Facility, providing for, among other
things, MLBFSs consent to the issuance of the Notes. On November 23, 2004, the Company entered
into a letter agreement with MLBFS providing for, among other things, a change of the maturity of
the credit facility from December 31, 2005, to September 30, 2005. In addition, on November 26,
2004, the Company entered into a letter agreement with MLBFS providing for, among other things, an
amendment to the Companys debt to EBITDA ratio to take into account the issuance of the Notes.
The Companys ratio of outstanding debt to MLBFS to EBITDA on a trailing 12-month basis may now not
exceed 2.0 to 1.0. The Company is currently in compliance with all financial covenants
and management does not believe that the financial covenants set forth in the Credit Facility will
have an adverse impact on its operations or future plans. Our
strategic plan involves growth through the acquisitions of other
companies and we actively pursue acquisitions in connection with this
plan. At any time we may be in various stages of discussions or
negotiations with several parties regarding possible acquisitions or
other alliances. We used approximately $1.2 million of the net
proceeds from the Notes to pay all outstanding principal and accrued
interest under the Credit Facility and approximately $1.8 million in
connection with our acquisition of OTS. We intend to use the balance
of the net proceeds from the Notes for general corporate purposes,
including future acquisitions. Long-Term Financial Obligations and Other Commercial Commitments The following table summarizes the outstanding borrowings and long-term contractual
obligations of the Company at December 31, 2004, and the effects such obligations are expected to
have on liquidity and cash flow in future periods. Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    1 - 3 years
    
    
    4 - 5 years
    
    
    5 years(dollars in thousands)Long-term debt
    
    $
    50,694
    
    
    $
    325
    
    
    $
    211
    
    
    $
    50,158
    
    
    $
    Operating leases
    
    
    3,482
    
    
    
    1,129
    
    
    
    1,657
    
    
    
    649
    
    
    
    47Total contractual cash
obligations
    
    $
    54,176
    
    
    $
    1,454
    
    
    $
    1,868
    
    
    $
    50,807
    
    
    $
    47
 We believe the Company will satisfy its short-term and long-term liquidity needs from
borrowings under the Credit Facility, proceeds from the sale of the Notes and cash flows from
operations. We may experience periods of higher borrowing under the Credit Facility due to the
seasonal nature of our business cycle. We are actively seeking expansion through acquisitions
and/or joint ventures, and the success of such efforts may require additional bank debt, equity
financing, or private financing. - 17 -




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Critical Accounting Policies Collegiate Pacifics discussion and analysis of its financial condition and results of
operations are based upon the Companys consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, expenses, and related disclosures of contingent assets
and liabilities. Discussed below are several significant accounting policies, which require the use of
judgments and estimates that may materially affect the consolidated financial statements. The
estimates described below are reviewed from time to time and are subject to change if the
circumstances so indicate. The effect of any such change is reflected in results of operations for
the period in which the change is made. Establishment of the reserves affecting inventories and the
allowance for doubtful accounts are among the most important. Inventories.Inventories are valued at the lower of cost or market value. Cost is determined
using the standard cost method for items manufactured by us and the weighted-average cost method
for items purchased for resale. We record adjustments to our inventories for estimated
obsolescence or diminution in market value equal to the difference between the cost of inventory
and the estimated market value, based on market conditions from time to time. These adjustments are
estimates, which could vary significantly from actual experience if future economic conditions,
levels of customer demand or competitive conditions differ from expectations. Allowance for Doubtful Accounts.We evaluate the collectibility of accounts receivable based
on a combination of factors. In circumstances where there is knowledge of a specific customers
inability to meet its financial obligations, a specific reserve is recorded against amounts due to
reduce the net recognized receivable to the amount that is reasonably believed to be collected. For
all other customers, reserves are established based on historical bad debts, customer payment
patterns and current economic conditions. The establishment of these reserves requires the use of
judgment and assumptions regarding the potential for losses on receivable balances. If the
financial condition of our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required resulting in an additional charge
to expenses when made. At December 31, 2004, our total allowance for doubtful accounts was approximately $882
thousand, an increase of $246 thousand from June 30, 2004. The increase in the amount of our
allowance for doubtful accounts for the six months ended December 31, 2004, is mainly due to
allowances for doubtful accounts that arose from the business acquisitions we completed during the
six months ended December 31, 2004, as well as an increase in accounts receivable at December 31,
2004, compared to June 30, 2004. Intangible Assets.We assess the recoverability of the carrying value of long-lived assets
periodically. If circumstances suggest that long-lived assets may be impaired, and a review
indicates that the carrying value will not be recoverable, the carrying value is reduced to its
estimated fair value. As of December 31, 2004, the balance sheet includes approximately $23.8
million of goodwill and intangible assets, net, and $1.3 million of fixed assets, net. The Company
has concluded that no impairment exists. - 18 -




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Statement Regarding Forward-Looking Disclosure This Quarterly Report onForm 10-QSB, including Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 2, contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they never materialize or prove
incorrect, could cause the results of Collegiate Pacific and its consolidated subsidiaries to
differ materially from those expressed or implied by such forward-looking statements. All
statements other than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of net sales, gross margin, expenses,
earnings or losses from operations, synergies or other financial items; any statements of the
plans, strategies and objectives of management for future operations; any statements regarding
future economic conditions or performance; any statements of expectation or belief; and any
statements of assumptions underlying any of the foregoing. The risks, uncertainties and
assumptions referred to above include Collegiate Pacifics ability to successfully execute its
acquisition plans and growth strategy, integration of acquired businesses, global economic
conditions, product demand, financial market performance and other risks that are described herein,
including but not limited to the items described from time to time in Collegiate Pacifics
Securities and Exchange Commission reports, including Collegiate Pacifics Annual Report on Form
10-KSB for the fiscal year ended June 30, 2004. Collegiate Pacific cautions that the foregoing
list of important factors is not exclusive. Any forward-looking statements included in this report
are made as of the date of filing of this report with the Securities and Exchange Commission, and
we assume no obligation and do not intend to update these forward-looking statements. 
 Item 3. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. An evaluation was carried out
under the supervision and with the participation of the Companys management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the Companys disclosure
controls and procedures (as defined in §240.13a15(e) or §240.15d15(e) of the General Rules and
Regulations of the Securities Exchange Act of 1934) as of the end of the period covered by this
Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer believe the Companys disclosure controls and procedures are effective. Changes in Internal Controls. During the period covered by this Quarterly Report,
there were no significant changes to the Companys internal controls over financial reporting or in
other factors that could significantly affect these controls, including any corrective actions with
respect to significant deficiencies and material weaknesses. However, the Company is continuing to
integrate the operations of newly acquired Dixie and OTS into the Companys current internal
controls environment and procedures. It is anticipated the integration of Dixies and OTSs
operations will be completed by the end of the third quarter of fiscal 2005. This integration will
result in changes to significant areas of the Companys internal controls in order to provide
effective monitoring and control of both Dixies and OTSs operations. -19-




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PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings. In February 2004, the Companys wholly-owned subsidiary, Dixie Sporting Goods Co., Inc., was
named as a co-defendant in an action styled Edwin Dean Spruill, Jr. v. Jugs, Inc. and Dixie
Sporting Goods Co., Inc., civil action no. L04-361, which, at the request of Dixie, was
transferred to the Circuit Court for the City of Virginia Beach, Virginia. This lawsuit seeks a
total of $5,000,000 for damages suffered by the plaintiff while using a pitching machine
manufactured by Jugs, Inc. and sold to the plaintiffs employer by Dixie. Dixie maintains primary
and excess insurance coverage for the claim in the amount of
$3,000,000. On December 9, 2004, the plaintiff dismissed Dixie from
the lawsuit without prejudice to refile its claims against Dixie
within six months of the dismissal date. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. On December 10, 2004, Collegiate Pacific agreed to issue an aggregate of 83,126 shares of its
common stock, valued at $1.2 million, to the three former stockholders of CMS of Central Florida
Inc. d/b/a Orlando Team Sports (OTS), Barbara L. Smith, Carmine McWeeney and Michael McWeeney, as
partial consideration for the Companys acquisition of all of the capital stock of OTS. Because
the issuance by the Company of its common stock to the former stockholders of OTS did not involve a
public offering, the Company relied on Section 4(2) of the Securities Act of 1933, as amended, to
issue the shares of its common stock to the former stockholders of OTS. Collegiate Pacific filed a
Form D with the Securities and Exchange Commission covering the issuance of the shares of common
stock to the former OTS stockholders. 
 Item 4. Submission of Matters to a Vote of Security Holders. As contemplated in the Companys Proxy Statement, which was mailed to stockholders beginning
on October 28, 2004, the Companys stockholders elected Michael J. Blumenfeld, Adam Blumenfeld,
Arthur J. Coerver, Harvey Rothenberg, Jeff Davidowitz, William H. Watkins and Robert W. Hampton as
directors of the Company, each to serve until the next annual meeting of stockholders. The
Companys stockholders also considered a proposal to ratify the selection of Grant Thornton LLP as
the independent auditor of the Company for the fiscal year ending June 30, 2005. Each of the foregoing proposals was approved at the Companys annual meeting of stockholders
on December 3, 2004. Each Board nominee received the number of votes indicated below. No. of Votes Cast
    
    
    No. of Votes CastNominee for Election
    
    
    Against or WithheldMichael J. Blumenfeld
    
    
    9,246,262
    
    
    
    421,343Adam Blumenfeld
    
    
    9,180,262
    
    
    
    487,343Arthur J. Coerver
    
    
    9,180,262
    
    
    
    487,343Harvey Rothenberg
    
    
    9,180,262
    
    
    
    487,343Jeff Davidowitz
    
    
    9,664,087
    
    
    
    3,518William H. Watkins
    
    
    9,663,087
    
    
    
    4,518Robert W. Hampton
    
    
    9,662,287
    
    
    
    5,318
 -20-




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With respect to the approval of the proposal to ratify the selection of Grant Thornton LLP,
the votes cast for, against and abstaining were as follows: Votes For
    
    
    9,661,609Votes Against
    
    
    792Abstention
    
    
    5,204
 
 Item 5. Other Information. On December 3, 2004, the Compensation Committee (the Compensation Committee) of the Board of
Directors of the Company increased the base salary payable to the following three named executive
officers of the Company commencing with the pay period ended December 15, 2004: (a) Michael J.
Blumenfeld, the Companys Chairman of the Board and Chief Executive Officer, from $172,000 to
$225,000; (b) Adam Blumenfeld, the Companys President, from $162,000 to $225,000; and (c) William
R. Estill, the Companys Chief Financial Officer, from $160,000 to $195,000. The base salaries for
the other named executive officers of the Company remained at the same levels as fiscal 2004. The
Compensation Committee annually evaluates the performance and determines the compensation of the
Companys officers based on the Compensation Committees assessment of the individual performance
of the executive officers, their achievement of corporate goals and compensation at comparable
companies. The fiscal 2005 base salaries for the named executive officers are listed in Exhibit
10.3 and are incorporated herein by reference. These salaries may be changed at any time at the
discretion of the Compensation Committee. The Company does not have written employment agreements
with any of its named executive officers and each is employed at will. 
 Item 6. Exhibits.  A.
    Exhibits. The following exhibits are filed as part of this report: ExhibitNumber
    
    Exhibit2.1
    
    Stock Purchase Agreement, dated December 10, 2004, by and among Collegiate Pacific Inc.,
Barbara L. Smith, Carmine McWeeney and Michael McWeeney. (1)4.1
    
    Indenture, dated November 26, 2004, by and between Collegiate Pacific Inc. and The Bank of New
York Trust Company N.A., as Trustee. (2)4.2
    
    Form of 5.75% Convertible Senior Subordinated Note Due 2009 (included in Section 2.2 of Exhibit
4.1 to this report). (2)4.3
    
    Registration Rights Agreement, dated November 26, 2004, by and between Collegiate Pacific Inc.
and Thomas Weisel Partners LLC. (2)10.1
    
    Consent Agreement, dated November 18, 2004, by and between Merrill Lynch Business Financial
Services Inc. and Collegiate Pacific Inc. (2)10.2
    
    Letter Agreement, dated November 23, 2004, by and among Merrill Lynch Business Financial
Services Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc. and Dixie
Sporting Goods Co., Inc. (2)
 -21-




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10.3
    
    Letter, dated November 26, 2004, from Merrill Lynch Business Financial Services Inc. relating
to the Loan Documents by and between Merrill Lynch Business Financial Services Inc. and Collegiate
Pacific Inc. (2)10.4
    
    Lease Agreement, dated December 10, 2005, by and between McWeeney Smith Partnership and CMS of
Central Florida, Inc. d/b/a Orlando Team Sports.*10.5
    
    Fiscal 2005 Base Salaries for Named Executive Officers.*31.1
    
    Section 302 Certification of Principal Executive Officer.*31.2
    
    Section 302 Certification of Principal Financial Officer.*32.
    
    Section 906 Certifications of Principal Executive and Principal Financial Officers.**
   *
    
    Filed herewith**
    
    Furnished herewith(1)
    
    Previously filed as an Exhibit to our Current Report on form 8-K, filed with the Securities
and Exchange Commission on December 13, 2004, and incorporated herein by reference.(2)
    
    Previously filed as an Exhibit to our Current Report on form 8-K, filed with the Securities
and Exchange Commission on November 29, 2004, and incorporated herein by reference. -22-




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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 thereto duly authorized. COLLEGIATE PACIFIC INC.Dated: February 14, 2005
    
    /s/ Michael J. BlumenfeldMichael J. Blumenfeld, Chairman andChief Executive Officer/s/ William R. EstillWilliam R. Estill, Chief Financial Officer(Principal Financial and Accounting Officer)
 -23-




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EXHIBIT INDEX ExhibitNumber
    
    Exhibit2.1
    
    Stock Purchase Agreement, dated December 10, 2004, by and among Collegiate Pacific Inc.,
Barbara L. Smith, Carmine McWeeney and Michael McWeeney. (1)4.1
    
    Indenture, dated November 26, 2004, by and between Collegiate Pacific Inc. and The Bank of New
York Trust Company N.A., as Trustee. (2)4.2
    
    Form of 5.75% Convertible Senior Subordinated Note Due 2009 (included in Section 2.2 of Exhibit
4.1 to this report). (2)4.3
    
    Registration Rights Agreement, dated November 26, 2004, by and between Collegiate Pacific Inc.
and Thomas Weisel Partners LLC. (2)10.1
    
    Consent Agreement, dated November 18, 2004, by and between Merrill Lynch Business Financial
Services Inc. and Collegiate Pacific Inc. (2)10.2
    
    Letter Agreement, dated November 23, 2004, by and among Merrill Lynch Business Financial
Services Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc. and Dixie
Sporting Goods Co., Inc. (2)10.3
    
    Letter, dated November 26, 2004, from Merrill Lynch Business Financial Services Inc. relating
to the Loan Documents by and between Merrill Lynch Business Financial Services Inc. and Collegiate
Pacific Inc. (2)10.4
    
    Lease Agreement, dated December 10, 2005, by and between McWeeney Smith Partnership and CMS of
Central Florida, Inc. d/b/a Orlando Team Sports.*10.5
    
    Fiscal 2005 Base Salaries for Named Executive Officers.*31.1
    
    Section 302 Certification of Principal Executive Officer.*31.2
    
    Section 302 Certification of Principal Financial Officer.*32.
    
    Section 906 Certifications of Principal Executive and Principal Financial Officers.**
   *
    
    Filed herewith**
    
    Furnished herewith