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U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
   FORM 10-QSB (Mark One) þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the Quarterly Period Ended December 31, 2003 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from  to .
 Commission File Number 0-17293 COLLEGIATE PACIFIC INC.  Delaware
    
    22-2795073(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)13950 Senlac Drive, Suite 100, Dallas, Texas
    
    75234(Address of Principal Executive Offices)
    
    (Zip code)
 (972) 243-8100   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 10, 2004, there were 6,661,038 shares of the issuers common
stock outstanding and 2,280,190 of the issuers common stock purchase warrants
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 INFORMATION.Item 1. Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at December 31, 2003
and June 30, 2003
    
    
    1Condensed Consolidated Statements of Income for the
three and six months ended December 31, 2003 and 2002
    
    
    2Condensed Consolidated Statements of Cash Flows for
the six months ended December 31, 2003 and 2002
    
    
    3Notes to the Condensed Consolidated Financial Statements
    
    
    4Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    7Item 3. Controls and Procedures
    
    
    12PART II: OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K
    
    
    13SIGNATURES
    
    
    14Loan and Security AgreementCertification of Principal Executive OfficerCertification of Principal Financial OfficerSection 906 Certifications




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##### Table of Contents



PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements 
 COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS December 31,
    
    June 30,2003
    
    2003(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    5,468,982
    
    
    $
    365,713Accounts receivable, net of allowance for doubtful
accounts of $77,923 and $121,139 at December 31,
2003 and June 30, 2003, respectively
    
    
    1,784,163
    
    
    
    2,702,551Inventories
    
    
    4,368,635
    
    
    
    3,691,615Prepaid expenses and other assets
    
    
    908,332
    
    
    
    218,030Current portion of deferred income taxes
    
    
    102,171
    
    
    
    102,171Total current assets
    
    
    12,632,283
    
    
    
    7,080,080Property, plant and equipment, net of accumulated
depreciation of $726,364 and $629,205 at December
31, 2003 and June 30, 2003, respectively
    
    
    476,033
    
    
    
    541,055Other assets:License agreements, net of accumulated amortization
of $132,427 and $118,915 at December 31, 2003
and June 30, 2003, respectively
    
    
    103,002
    
    
    
    116,514Goodwill
    
    
    544,375
    
    
    
    544,375Deferred income taxes
    
    
    304,646
    
    
    
    304,646Other assets, net
    
    
    227,633
    
    
    
    238,654$
    14,287,972
    
    
    $
    8,825,324LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    899,912
    
    
    $
    1,642,732Accrued expenses
    
    
    203,876
    
    
    
    205,505Dividends payable
    
    
    147,226
    
    
    
    107,704Income taxes payable
    
    
    20,427
    
    
    
    54,789Total current liabilities
    
    
    1,271,441
    
    
    
    2,010,730Revolving line of credit
    
    
    
    
    
    
    800,000Total liabilities
    
    
    1,271,441
    
    
    
    2,810,730Stockholders equity:Common stock, $.01 par value; authorized 50,000,000
shares; issued 5,889,046 and 4,308,169 shares at
December 31, 2003 and June 30, 2003, respectively
    
    
    58,890
    
    
    
    43,082Additional paid-in capital
    
    
    13,611,758
    
    
    
    6,387,090Retained earnings
    
    
    3,333
    
    
    
    201,065Treasury shares at cost: 86,026 and 80,326 at December
31, 2003 and June 30, 2003, respectively
    
    
    (657,450
    )
    
    
    (616,643
    )Total stockholders equity
    
    
    13,016,531
    
    
    
    6,014,594$
    14,287,972
    
    
    $
    8,825,324
 See accompanying notes to condensed consolidated 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 31,2003
    
    2002
    
    2003
    
    2002Net sales
    
    $
    4,238,444
    
    
    $
    3,508,767
    
    
    $
    10,212,036
    
    
    $
    8,274,958Cost of sales
    
    
    2,718,844
    
    
    
    2,217,659
    
    
    
    6,444,195
    
    
    
    5,227,673Gross margin
    
    
    1,519,600
    
    
    
    1,291,108
    
    
    
    3,767,841
    
    
    
    3,047,285Selling, general and administrative
expenses
    
    
    1,824,741
    
    
    
    1,505,791
    
    
    
    3,618,187
    
    
    
    2,966,429Operating profit (loss)
    
    
    (305,141
    )
    
    
    (214,683
    )
    
    
    149,654
    
    
    
    80,856Other income (expense)Interest expense
    
    
    (13,143
    )
    
    
    (19,288
    )
    
    
    (23,861
    )
    
    
    (35,843
    )Other income
    
    
    9,992
    
    
    
    2,910
    
    
    
    10,269
    
    
    
    3,096Income (loss) before provision for taxes
    
    
    (308,292
    )
    
    
    (231,061
    )
    
    
    136,062
    
    
    
    48,109Income tax expense (benefit)
    
    
    (105,068
    )
    
    
    
    
    
    
    69,994
    
    
    
    Net income (loss)
    
    $
    (203,224
    )
    
    $
    (231,061
    )
    
    $
    66,068
    
    
    $
    48,109Net income (loss) per share  basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Net income (loss) per share  diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Weighted average shares
outstanding:Basic
    
    
    5,616,399
    
    
    
    4,224,186
    
    
    
    4,953,501
    
    
    
    4,227,696Diluted
    
    
    5,616,399
    
    
    
    4,224,186
    
    
    
    6,385,389
    
    
    
    4,927,029
 See accompanying notes to condensed consolidated financial statements. 2




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Six months endedDecember 31,2003
    
    2002Cash flows from operating activities:Net income
    
    $
    66,068
    
    
    $
    48,109Adjustments to reconcile net income to net cash
used in operating activities:Depreciation, amortization and bad debt expense
    
    
    177,796
    
    
    
    150,945Net changes in operating assets and liabilities
    
    
    (1,136,623
    )
    
    
    (790,872
    )Net cash used in operating activities
    
    
    (892,759
    )
    
    
    (591,818
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (32,137
    )
    
    
    (141,096
    )Cash flows from financing activities:Cash paid for treasury shares
    
    
    (40,808
    )
    
    
    (98,076
    )Payment of dividends
    
    
    (371,504
    )
    
    
    (85,637
    )Repayment on note payable to stockholder
    
    
    
    
    
    
    (353,063
    )Proceeds from issuance of common stock
    
    
    7,240,477
    
    
    
    50Repayment on revolving line of credit
    
    
    (800,000
    )
    
    
    Proceeds from revolving line of credit
    
    
    
    
    
    
    1,150,000Net cash provided by financing activities
    
    
    6,028,165
    
    
    
    613,274Net increase (decrease) in cash and cash equivalents
    
    
    5,103,269
    
    
    
    (119,640
    )Cash and cash equivalents at beginning of period
    
    
    365,713
    
    
    
    267,362Cash and cash equivalents at end of period
    
    $
    5,468,982
    
    
    $
    147,722Supplemental disclosure of cash flow informationCash paid during the period for interest
    
    $
    23,861
    
    
    $
    35,843Cash paid during the period for income taxes
    
    $
    290,000
    
    
    $
    
 See accompanying notes to condensed consolidated financial statements. 3




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  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, 2003. 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, 2004.2.
    
    InventoriesInventories consist of the following: December 31,
    
    June 30,2003
    
    2003Raw materials
    
    $
    343,799
    
    
    $
    310,871Work in progress
    
    
    69,200
    
    
    
    83,229Finished goods
    
    
    3,955,636
    
    
    
    3,297,515$
    4,368,635
    
    
    $
    3,691,615
  3.
    
    Income Per ShareSummarized basic and diluted income per share are as follows: For the three months ended
    
    For the six months endedDecember 31,
    
    December 31,2003
    
    2002
    
    2003
    
    2002Net income (loss)
    
    
    (203,224
    )
    
    
    (231,061
    )
    
    
    66,068
    
    
    
    48,109Weighted average
common shares  basic
    
    
    5,616,399
    
    
    
    4,224,186
    
    
    
    4,953,501
    
    
    
    4,227,696Effect of dilutive securities
(options and warrants)
    
    
    
    
    
    
    
    
    
    
    1,431,888
    
    
    
    699,333Weighted average
common shares  diluted
    
    
    5,616,399
    
    
    
    4,224,186
    
    
    
    6,385,389
    
    
    
    4,927,029Income (loss) per share  basic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Per share effect of dilutive
securities (options and warrants)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income (loss) per share  diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Options and warrants excluded from
computation because their effect
was antidilutive
    
    
    3,435,620
    
    
    
    4,905,307
    
    
    
    1,733,560
    
    
    
    236,500
 4




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  4.
    
    Stock Based CompensationOn December 11, 1998, the Companys stockholders approved a new stock
option plan (the Plan). The Plan initially authorized the Companys
Board of Directors to grant employees, directors and consultants of the
Company up to an aggregate of 400,000 shares of the Companys common
stock, $0.01 par value per share. The Plan, as amended, now authorized
the Companys Board of Directors to grant employees, directors and
consultants of the Company up to an aggregate of 1,500,000 shares of the
Companys common stock. The options vest in full upon the employees
one-year anniversary of employment with the Company 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 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 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 312003
    
    2002
    
    2003
    
    2002Net income (loss), as reported
    
    $
    (203,224
    )
    
    $
    (231,061
    )
    
    $
    66,068
    
    
    $
    48,109Stock based compensation
expense recorded
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deduct: Total stock-based
employee compensation expense
determined using the fair
value based method for all
awards, net of related tax
effects
    
    
    2,334
    
    
    
    5,041
    
    
    
    5,283
    
    
    
    609,357Pro forma income (loss)
    
    $
    (205,558
    )
    
    $
    (236,102
    )
    
    $
    60,785
    
    
    $
    (561,248
    )Income (loss) per common
share:As reportedBasic
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Diluted
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    0.01
    
    
    $
    0.01Pro formaBasic
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.01
    
    
    $
    (0.13
    )Diluted
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    0.01
    
    
    $
    (0.13
    )
  The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model with the following
weighted-average assumptions: expected volatility ranging from 103% to
122%; risk free interest rate of 4.48% to 4.80%; no dividend yield; and
expected lives of five years.5.
    
    Subsequent EventOn January 9, 2004, the Company completed its previously announced
acquisition of Tomark, Inc. Under the terms of the Agreement and Plan of
Merger, Tomark merged 5




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) with and into a wholly-owned subsidiary of the Company, whereupon the
surviving company changed its name to Tomark Sports, Inc. (the Merger).
In connection with the Merger, the Company paid consideration in the
amount of $5,250,000 to the shareholders of Tomark, Inc. in exchange for
their Tomark shares, which consisted of $2,500,000 in cash, $250,000 in
the form of promissory notes, and 270,562 shares of the Companys common
stock (the Merger Shares), valued at $2,500,000. The Company has
agreed to register the Merger Shares with the Securities and Exchange
Commission for resale by the former Tomark shareholders. On February 9, 2004, the Company announced it had signed a definitive
agreement to acquire substantially all of the operating assets of
Kesslers Sport Shop, Inc. d/b/a Kesslers Team Sports. Under the terms of
the Asset Purchase Agreement, a wholly-owned subsidiary of the Company
will acquire those assets in exchange for a combination of cash, the
assumption of specified liabilities and shares of the Companys common
stock. The transaction is subject to the satisfaction of customary
closing conditions and it is anticipated that the transaction will close
by the end of March 2004. 6




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Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations. Background Collegiate Pacific Inc. (we, us, our, or the Company) is in the
mail order marketing of sports equipment business. We manufacture and
distribute our products primarily to institutional customers located throughout
the United States. Our principal customers include country clubs, school
districts, colleges and universities, YMCAs, YWCAs and similar recreational
organizations, municipal recreation departments, and other governmental
agencies. We offer a broad line of sporting equipment and other recreational
products, as well as provide after-sale customer service. We currently market
about 3,200 sports and recreational related equipment and products to over
200,000 potential institutional, retail, Internet, and sporting good dealer
type customers. Since commencing operations in early 1998, we have processed
approximately 160,000 orders for approximately 50,000 customers. References
herein to fiscal 2003 and fiscal 2004 refer to our fiscal years ended or
ending, as the case may be, June 30, 2003 and 2004, respectively. Three Months Ended December 31, 2003 Compared to Three Months Ended December
31, 2002 and Six Months ended December 31, 2003 Compared to Six Months Ended
December 31, 2002 Net SalesNet sales for the three months ended December 31, 2003,
increased by approximately $730 thousand, or approximately 21%, compared to the
same period in fiscal 2003. Net sales for the six months ended December 31,
2003, increased by approximately $1.9 million, or 23%, compared to the same
period in fiscal 2003. We attribute the growth in net sales primarily to an
increase in the sale of manufactured products to all of our customers, an
overall increase in catalog sales, and a slight increase in our dealer related
revenues, each of which was the result of our own internal growth and not due
to any acquisitions. 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 as we experienced in the current period. We
also believe that seasonality in our net sales will continue to be a factor in
future periods because of the budgeting procedures of our customers and the
seasonal demand for our products. As a result, we continue to see an increase
in demand for our products during the third and fourth quarters of our fiscal
year (January  June). Gross Profit. Gross profit for the three months ended December 31, 2003,
increased by approximately $228 thousand, or 18%, compared to the same period
in fiscal 2003. As a percentage of net sales, gross profit for the three months
ended December 31, 2003, was approximately 36%, compared to 37% for the same
period in fiscal 2003. Gross profit for the six months ended December 31,
2003, increased by approximately $721 thousand, or 24%, compared to the same
period in fiscal 2003. As a percentage of net sales, gross profit for the six
months ended December 31, 2003 and 2002, was 37%. The decrease in gross profit
percentage for the three months ended December 31, 2003, over the same periods
in fiscal 2003,was primarily due to lower absorption of labor and overhead in
our manufacturing facility and slightly lower gross profits for drop-shipped
products. The increase in gross profit for the six months ended December 31,
2003 compared to the same period in 2002 was primarily due to the increase in
the Companys net sales over the same period last year and an increase in the
absorption of manufacturing, labor and overhead expenses as a result of
increased manufacturing revenues. Selling, General and Administrative Expenses.Selling, general and
administrative (SG&A) expenses for the three months ended December 31, 2003,
increased by approximately 7




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$319 thousand, or 21%, compared to the same period in fiscal 2003. As a
percentage of net sales, SG&A expenses for the three months ended December 31,
2003 and 2002, was 43%. SG&A expenses for the six months ended December 31,
2003, increased by approximately $652 thousand, or 22%, compared to the same
period in fiscal 2003. As a percentage of net sales, SG&A expenses for the six
months ended December 31, 2003, decreased to 35% from 36% for the same period
in fiscal 2003. The increase in SG&A expenses was primarily due to an increase
in personnel related costs incurred in connection with additional sales
personnel and additional advertising costs incurred in connection with the
Companys marketing efforts. Also contributing to the increase in SG&A
expenses was an increase in general insurance costs as a result of the
Companys growth. Operating Profit.Operating losses increased by approximately $90
thousand for the three months ended December 31, 2003, compared to the same
period in fiscal 2003. As a percentage of net sales, operating losses
increased to approximately (7%) for the three months ended December 31, 2003,
compared to (6%) for the same period during fiscal 2003. The increase in
operating losses was primarily due to the increase in selling, general and
administrative expenses relating to personnel and advertising costs incurred as
a result of our increased marketing efforts. Operating profit increased by
approximately $69 thousand for the six months ended December 31, 2003, compared
to the same period in fiscal 2003. As a percentage of net sales, operating
profit was approximately 1% for the six months ended December 31, 2003, and
2002. The slight increase in operating profit for the six months ended
December 31, 2003 compared to the same period in 2002, was due primarily to the
increase in our gross profit from increased sales and the lower SG&A expenses
as a percentage of sales. Interest Expense.Interest expense decreased by approximately $6 thousand
for the three months ended December 31, 2003, compared to the fiscal quarter
ended December 31, 2002. Interest expense decreased by approximately $12
thousand for the six months ended December 31, 2003, compared to the same
period last year. The decrease in interest expense was due to the net cash
provided by our operating activities and the funds received as a result of
warrants exercised during the three and six months ended December 31, 2003,
which was used to reduce the outstanding balance of the Companys borrowings,
as well as lower interest rates during the second quarter of fiscal 2004
compared to the same period last year. See Liquidity and Capital Resources. Income Taxes.Income tax benefit for the three months ended December 31,
2003, increased to approximately $105 thousand, or 34% of the operating losses
before income taxes, compared to the same period in fiscal 2003. Income tax
expenses for the six months ended December 31, 2003, increased by approximately
$70 thousand compared to the same period in fiscal 2003. As previously
reported, the Company eliminated its valuation allowance on net deferred tax
assets at the end of fiscal 2003. The Company recorded no income taxes or
income tax benefits in the same three or six-month periods in fiscal 2003
because the change in the valuation allowance was equal to the change in the
net deferred tax assets. Due to the elimination of the valuation allowance at June 30, 2003, the
Company will record tax expense on all future net income at the Companys
effective tax rate and, accordingly, income tax expense (benefit) and net
income after taxes in future periods may not be comparable to amounts recorded
in fiscal 2003 and prior years. Net Income.Net loss decreased by approximately $28 thousand, or 12%, for
the three months ended December 31, 2003, compared to the same three-month
period last year. As a percentage of net sales, net loss decreased to
approximately 5% for the three months ended December 31, 2003, compared to 7%
for the three months ended December 31, 2002. Net 8




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income for the six months ended December 31, 2003, increased by
approximately $18 thousand, or 37%, compared to the same six-month period in
fiscal 2003. The increase was primarily attributable to the increases in net
sales and a decrease in SG&A expenses as a percentage of net sales, which was
partially offset by an increase in taxes for the six month period ended
December 31, 2003 as noted above. As a percentage of net sales, net income was
approximately 1% for the six months ended December 31, 2003 and 2002. Liquidity and Capital Resources Cash and cash equivalents totaled approximately $5.5 million at December
31, 2003, compared to approximately $366 thousand at June 30, 2003. Cash used
in operations increased by approximately $301 thousand in the six months ended
December 31, 2003, primarily due to an increase in inventories, an increase in
prepaid expenses, and a decrease in accounts payable, which was partially off
by a decrease in accounts receivable. The changes in our accounts receivable,
accounts payable and inventory are a reflection of the seasonality of the
Companys annual business cycle. During the first half of our fiscal year
(July-December), our net sales during that period are historically lower than
the second half of our fiscal year (January-June). As a result, the balance of
our accounts receivable and accounts payable are generally lower during the
first half of our fiscal year and at the same time our inventory levels are
higher during this period as we prepare for the anticipated increase in net
sales that we historically experience during the second half of our fiscal
year. The Company used approximately $32 thousand in cash in investing
activities during the six month period ended December 31, 2003, compared to
approximately $141 thousand for the same period in fiscal 2003. The decrease
was due to a lower requirement for spending on property and equipment in the
six-month period in fiscal year 2004 as compared to the same period in period
in fiscal year 2003 when the Company expanded its warehouse operations. The
Company expects to spend approximately $150 thousand on additional property and
equipment during the balance of fiscal 2004. The Company provided approximately $6 million from financing activities
for the six months ended December 31, 2003. The cash provided by financing
activities was from the issuance of common stock upon the exercise of common
stock warrants and options of approximately $7.2 million, offset by the
purchase of treasury shares of approximately $41 thousand, the payments of
dividends of approximately $372 thousand, and repayments on the revolving line
of credit of approximately $800 thousand during the period. For the same
period in fiscal 2003, the Company provided approximately $613 thousand from
financing activities, which was due to a net increase in outstanding debt of
approximately $1.2 million, partially offset by cash paid for treasury shares
of approximately $98 thousand, the payment of dividends of approximately $86
thousand, and repayments on a note payable to stockholder of approximately $353
thousand. Current assets totaled approximately $12.6 million at December 31, 2003,
providing the company with working capital of approximately $11.4 million. On December 16, 2003, the Companys entered into a new revolving credit
facility with Merrill Lynch Business Financial Services Inc. (Merrill Lynch).
This $5.0 million revolving credit facility with Merrill Lynch (the Line of
Credit) is the Companys principal external source of liquidity. The Line of
Credit replaced the revolving credit facility the Company previously maintained
with Bank of America, N.A. 9




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The Line of Credit matures on December 31, 2004, and is secured by all of
the Companys assets. Borrowings under the Line of Credit bear interest at
the rate of 2.25% plus the 1 month LIBOR rate (1.14% at December 31, 2003).
The Line of Credit permits the Company to borrow against up to 80% of its
eligible accounts receivable and 50% of its eligible inventory, but not to
exceed $5 million. As of December 31, 2003, nothing was outstanding under the
Line of Credit, leaving the Company with approximately $3.5 million of
additional availability under the terms of the borrowing base formula of the
Line of Credit. The Line of Credit contains customary covenants and the Company must
maintain certain financial ratios pertaining to its net worth and fixed
charges. The Company is currently in compliance with all financial covenants
and management does not believe that the financial covenants set forth in the
Line of Credit will have an adverse impact on its operations or future plans. Through February 10, 2004, the Company has received approximately $9.8
million from the exercise of approximately 1.9 million of the approximately 4.2
million outstanding warrants that were issued as a dividend to all stockholders
of record on May 26, 2000, as well as from the exercise of outstanding employee
stock options. The per share exercise price of the warrants is $5.00 per share
and the warrants expire on May 26, 2005. If the remaining 2.3 million warrants
were exercised, the Company would receive approximately $11.7 million from the
exercise of those warrants. No assurances, however, can be made that any
additional warrants will be exercised. As we announced in a press release on October 7, 2003, Michael J.
Blumenfeld, our Chief Executive Officer and majority shareholder, sold on a
firm commitment basis directly to Roth Capital Partners, LLC, 1,000,000
warrants formerly held by Mr. Blumenfeld at a per warrant price of $1.95.
Those 1,000,000 warrants entitled the holder to purchase an aggregate of
1,000,000 shares of Collegiate Pacifics common stock for $5.00 per share. The
Registration Statement on Form SB-2 (No. 333-34294), which became effective on
April 7, 2000, covered the issuance and resale of the warrants and underlying
common stock, including Mr. Blumenfelds sale of his warrants. Under the terms of the offering, Roth Capital immediately exercised the
warrants and the company issued 1,000,000 shares of its common stock directly
to Roth Capital. Roth Capital sold these shares to institutional investors at
a price of $6.95 per share. Collegiate Pacific received $4,550,000, net of
commissions and expenses of approximately $450,000, from the exercise of the
warrants. The Company used a portion of the net proceeds for working capital
and general corporate purposes, as well as to pay the cash portion of the
purchase price the Company paid to the former stockholders of Tomark, Inc.
under the terms of the Agreement and Plan of Merger. The Company plans to use
a portion of the proceeds to fund its acquisition of substantially all of the
operating assets of Kesslers Sport Shop, Inc. d/b/a Kesslers Team Sports. As we announced on January 9, 2004, the Company completed its acquisition
of Tomark, Inc. by merging Tomark with and into one of our wholly-owned
subsidiaries. We paid the former stockholders of Tomark, a total of
$5,250,000, which consisted of $2,500,000 in cash, $250,000 in promissory notes
and 270,562 shares of our common stock valued at $2,500,000. We have agreed to
register those shares with the Securities and Exchange Commission. Further, so
long as the former Tomark stockholders comply with the applicable provisions of
the Agreement and Plan of Merger, on the first to occur of either (a) the nine
month anniversary of the closing or (b) the six month anniversary of the
registration statement covering those shares, we have agreed to repurchase from
the former Tomark stockholders for cash any of the shares of our common stock
issued to those former stockholders that have not been sold by them as of the
applicable anniversary for a per share price of $9.24 (the same price we used
to determine the number of shares of our common stock to issue at closing) or,
in the event all of those shares have been sold 10




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as of the applicable anniversary date, we have agreed to pay those former
stockholders an amount in cash equal to the difference between $2,500,000 and
the total sales proceeds received by those stockholders from the sale of our
shares. On February 10, 2004, the per share closing price of our common stock
on AMEX was $10.05. On February 9, 2004, we announced the signing of a definitive agreement to
acquire substantially all of the operating assets of Kesslers Sport Shop, Inc.
d/b/a Kesslers Team Sports. Under the terms of the Asset Purchase Agreement, a
wholly-owned subsidiary of the Company will acquire those assets in exchange
for a combination of cash, the assumption of specified liabilities and shares
of the Companys common stock. The transaction is subject to the satisfaction
of customary closing conditions and it is anticipated that the transaction will
close by the end of March 2004. We believe the Company will satisfy its short term and long-term liquidity
needs from borrowings under the Line of Credit, cash flows from operations, and
proceeds received from the exercise of outstanding warrants. We may experience
periods of higher borrowing under the Line of Credit due to the seasonal nature
of the Companys 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. Caution Regarding Forward-Looking Statements The Company occasionally makes forward-looking statements concerning its
plans, goals, product and service offerings, and anticipated financial
performance. These forward-looking statements may generally be identified by
introductions such as outlook for an upcoming period of time, or words and
phrases such as should, expect, hope, plans, projected, believes,
forward- looking (or variants of those words and phrases) or similar language
indicating the expression of an opinion or view concerning the future. These forward-looking statements are subject to risks and uncertainties
based on a number of factors and actual results or events may differ materially
from those anticipated by such forward-looking statements. These factors
include, but are not limited to: the growth rate of the Companys revenue and
market share; the consummation of new, and the non-termination of, existing
contracts; material adverse changes in the economic conditions in the Companys
markets, including as a result of terrorist attacks, new competitors entering
the Companys business, the Companys ability to effectively manage its
business functions while growing its business in a rapidly changing
environment; the Companys ability to adapt and expand its services in such an
environment; the Companys ability to successfully refinance or extend its Line
of Credit or obtain alternative sources of financing; the effective and
efficient management of the Companys inventory levels and processing of sales
orders; the quality of the Companys plans and strategies; the Companys
ability to execute such plans and strategies; whether or not the company
consummates its previously announced acquisition of Kesslers Sport Shop; and
how much the Company may receive from the exercise of outstanding stock options
and warrants, if anything, and the Companys ability to retain key executives
and employees. In addition, forward-looking statements concerning the Companys expected
revenue or earnings levels are subject to many additional uncertainties
applicable to competitors generally and to general economic conditions over
which the Company has no control, including, but not limited to, material
adverse changes in the economic conditions in the Companys markets, including
as a result of terrorist attacks, competition from others, the amount, if any,
the Company may receive from the exercise of outstanding stock options and
warrants, and the ability to obtain and retain key executives and employees.
The Company does not plan to 11




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generally publicly update prior forward-looking statements for
unanticipated events or otherwise and, accordingly, prior forward-looking
statements should not be considered to be fresh simply because the Company
has not made additional comments on those forward-looking statements. See the
risk factors set forth in the Companys Annual Report on Form 10-KSB for the
fiscal year ended June 30, 2003. 
 Item 3. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. The Company maintains
disclosure controls and procedures designed to ensure that information required
to be disclosed in reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the specified
time periods. As of the end of the period covered by this report, the
Companys Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the Companys disclosure controls and procedures. Based on
that evaluation, which disclosed no significant deficiencies or material
weaknesses, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures are effective
as of the end of the period covered by this report. Changes in Internal Controls. There were no significant changes in the
Companys internal controls over financial reporting that occurred during the
Companys most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Companys internal controls over
financial reporting. 12




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PART II. OTHER INFORMATION 
 Item 6. Exhibits and Reports on Form 8-K.  A.
    
    Exhibits.The following exhibits are filed as part of this report: ExhibitNumber
    
    Exhibit3.1
    
    Articles of Incorporation (1)3.2
    
    Bylaws (1)10.1
    
    Loan and Security Agreement*21
    
    Subsidiaries (2)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 the companys Form 8-A dated September
9, 1999.(2)
    
    Previously filed as an exhibit to the companys Annual Report on Form
10-KSB for the fiscal year ended June 30, 2003.  B.
    
    Reports on Form 8-K. The Company filed a Current Report on Form 8-K on October 7, 2003,
announcing that Michael J. Blumenfeld, the Companys Chief Executive Officer,
had completed an offering on a firm commitment underwritten basis directly to
Roth Capital Partners, LLC, of 1,000,000 warrants held by Mr. Blumenfeld. Under
the terms of the offering, Roth Capital immediately exercised the warrants and
the company issued 1,000,000 shares of its common stock directly to Roth
Capital. The Company also filed a Current Report on Form 8-K on October 30,
2003, announcing its financial results for the fiscal quarter ended September
30, 2003. 13




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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 13, 2004
    /s/ Michael J. BlumenfeldMichael J. Blumenfeld, Chairman andChief Executive Officer/s/ William R. EstillWilliam R. Estill, Chief Financial Officer(Principal Financial and Accounting Officer) 14




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EXHIBIT INDEX ExhibitNumber
    
    Exhibit3.1
    
    Articles of Incorporation (1)3.2
    
    Bylaws (1)10.1
    
    Loan and Security Agreement*21
    
    Subsidiaries (2)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 the companys Form 8-A dated September 9, 1999.(2)
    
    Previously filed as an exhibit to the companys Annual Report on Form
10-KSB for the fiscal year ended June 30, 2003.