##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
  FORM 10-QSB [X]
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2004 [  ]
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934for 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
(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 [X]
No [  ] As of May 10, 2004, there were 8,834,045 shares of the issuers common stock
outstanding and 1,069,333 of the issuers common stock purchase warrants
outstanding. Transitional
Small Business Disclosure Format (check one):
Yes [  ] No [X]




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
TABLE OF CONTENTS PageNumberPART I: FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at March 31, 2004
and June 30, 2003
    
    
    1Condensed Consolidated Statements of Operations for the
three and nine months ended March 31, 2004 and 2003
    
    
    2Condensed Consolidated Statements of Cash Flows for
the nine months ended March 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
    
    
    8Item 3. Controls and Procedures
    
    
    13PART II: OTHER INFORMATIONItem 2. Changes in Securities and Small Business Issuer Purchases of
Equity Securities
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14Item 6. Exhibits and Reports on Form 8-K
    
    
    15Signatures
    
    
    16Letter AgreementLease AgreementStandard Industrial/Commercial Single-Tenant LeaseSubsidiaries302 Certification of Principal Executive Officer302 Certification of Principal Financial OfficerSection 906 Certifications




---



##### Table of Contents



PART I. FINANCIAL INFORMATION 
 ITEM 1. Financial Statements COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    June 30,2004
    
    2003(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    7,110,780
    
    
    $
    365,713Accounts receivable, net of allowance for doubtful accounts of $177,275 and
$121,139 at March 31, 2004 and June 30, 2003, respectively
    
    
    4,662,742
    
    
    
    2,702,551Inventories
    
    
    4,791,067
    
    
    
    3,691,615Prepaid expenses and other current assets
    
    
    872,203
    
    
    
    218,030Current portion of deferred taxes
    
    
    132,779
    
    
    
    102,171Total current assets
    
    
    17,569,571
    
    
    
    7,080,080PROPERTY AND EQUIPMENT:Property and equipment, net of accumulated depreciation of $788,131 and
$629,205 at March 31, 2004 and June 30, 2003, respectively
    
    
    596,498
    
    
    
    541,055License agreements, net of accumulated amortization of $139,183 and
$118,915 at March 31, 2004 and June 30, 2003, respectively
    
    
    96,246
    
    
    
    116,514Goodwill
    
    
    5,170,304
    
    
    
    544,375Deferred income taxes
    
    
    307,160
    
    
    
    304,646Other assets, net
    
    
    229,540
    
    
    
    238,654Total assets
    
    $
    23,969,319
    
    
    $
    8,825,324LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILTIES:Accounts payable
    
    $
    2,759,281
    
    
    $
    1,642,732Accrued liabilities
    
    
    560,948
    
    
    
    205,505Dividends payable
    
    
    197,578
    
    
    
    107,704Income taxes payable
    
    
    459,226
    
    
    
    54,789Total current liabilities
    
    
    3,977,033
    
    
    
    2,010,730REDEEMABLE COMMON STOCK,270,562 shares issued at March 31, 2004 (see Note 2)
    
    
    2,500,000
    
    
    
    LONG-TERM DEBT
    
    
    229,200
    
    
    
    800,000STOCKHOLDERS EQUITY:Common stock, $0.01 par value, 50,000,000 shares authorized; 6,873,690,
including 270,562 shares of redeemable common stock, and
4,308,169 shares issued at March 31, 2004 and June 30, 2003, respectively
    
    
    66,031
    
    
    
    43,082Additional paid-in capital
    
    
    17,154,056
    
    
    
    6,387,090Retained earnings
    
    
    700,450
    
    
    
    201,065Treasury stock at cost, 86,026 and 80,326 at March 31, 2004 and
June 30, 2003, respectively
    
    
    (657,451
    )
    
    
    (616,643
    )Total stockholders equity
    
    
    17,263,086
    
    
    
    6,014,594Total liabilities and stockholders equity
    
    $
    23,969,319
    
    
    $
    8,825,324
 The accompanying notes are an integral part of these financial statements. 1




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    Nine Months EndedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    11,153,919
    
    
    $
    6,071,820
    
    
    $
    21,365,956
    
    
    $
    14,346,778Cost of sales
    
    
    7,014,007
    
    
    
    3,726,145
    
    
    
    13,458,203
    
    
    
    8,953,818Gross profit
    
    
    4,139,912
    
    
    
    2,345,675
    
    
    
    7,907,753
    
    
    
    5,392,960Selling, general, and administrative expenses
    
    
    2,641,703
    
    
    
    1,738,007
    
    
    
    6,259,890
    
    
    
    4,704,436Operating profit
    
    
    1,498,209
    
    
    
    607,668
    
    
    
    1,647,863
    
    
    
    688,524Other income (expense):Interest income
    
    
    6,210
    
    
    
    
    
    
    
    15,484
    
    
    
    Interest expense
    
    
    (4,823
    )
    
    
    (25,729
    )
    
    
    (28,684
    )
    
    
    (61,572
    )Other
    
    
    1,435
    
    
    
    826
    
    
    
    2,430
    
    
    
    3,922Income before income taxes
    
    
    1,501,031
    
    
    
    582,765
    
    
    
    1,637,093
    
    
    
    630,874Provision for income tax
    
    
    606,336
    
    
    
    
    
    
    
    676,330
    
    
    
    Net income
    
    $
    894,695
    
    
    $
    582,765
    
    
    $
    960,763
    
    
    $
    630,874Net income per share common stock  basic
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.15Net income per share common stock  diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.13Weighted average number of shares outstanding:Basic
    
    
    6,516,430
    
    
    
    4,223,684
    
    
    
    5,474,477
    
    
    
    4,226,359Diluted
    
    
    7,957,793
    
    
    
    4,349,377
    
    
    
    6,909,524
    
    
    
    4,734,478
 The accompanying notes are an integral part of these financial statements. 2




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 For the Nine Months EndedMarch 31,2004
    
    2003Cash flows from operating activities:Net income
    
    $
    960,763
    
    
    $
    630,874Adjustments to reconcile net income to cash (used in) provided by
operating activities -Depreciation, amortization, and provision for uncollectable accounts receivable
    
    
    294,857
    
    
    
    239,870Net changes in operating assets and liabilities, net of effects of acquisitions
    
    
    (1,865,602
    )
    
    
    (1,844,837
    )Net cash used in operating activities
    
    
    (609,982
    )
    
    
    (974,093
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (118,670
    )
    
    
    (155,371
    )Purchase of subsidiary, net of cash acquired
    
    
    (2,069,967
    )
    
    
    Net cash used in investing activities
    
    
    (2,188,637
    )
    
    
    (155,371
    )Cash flows from financing activities:Purchase of treasury shares
    
    
    (40,808
    )
    
    
    (99,921
    )Payment of cash dividends on common stock
    
    
    (371,504
    )
    
    
    (171,274
    )Payments on notes payable
    
    
    (833,918
    )
    
    
    (353,063
    )Proceeds from issuance of common stock
    
    
    10,789,916
    
    
    
    50Proceeds from borrowings under line of credit
    
    
    
    
    
    
    2,050,000Net cash provided by financing activities
    
    
    9,543,686
    
    
    
    1,425,792Increase in cash and cash equivalents
    
    
    6,745,067
    
    
    
    296,328Cash and cash equivalents, beginning of period
    
    
    365,713
    
    
    
    267,362Cash and cash equivalents, end of period
    
    $
    7,110,780
    
    
    $
    563,690Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    28,684
    
    
    $
    61,572Cash paid for income taxes
    
    
    290,000
    
    
    
    Supplemental disclosure of non-cash investing and financing activities:Fair value of assets acquired in business acquisitions
    
    
    1,204,634
    
    
    
    Liabilities assumed in business acquisitions
    
    
    857,013
    
    
    
    
 The accompanying notes are an integral part of these financial statements. 3




---



##### Table of Contents



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. Business Combinations: On January 9, 2004, the Company completed its acquisition of Tomark, Inc.
by merging Tomark with and into a wholly-owned subsidiary of the Company. The
Company 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 the Companys common stock valued at $2,500,000. The Company has
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, the Company has agreed to
repurchase from the former Tomark stockholders, for cash, any of the shares of
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 the Company used to determine the number of shares of common stock to
issue at closing) or, in the event all of those shares have been sold as of the
applicable anniversary date, the Company 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 the
shares. The cash portion of the purchase price was paid out of the Companys
working capital. 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 recorded as goodwill in the amount of $4,625,929.
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 acquisition of Tomark, Inc. was accounted for using the purchase
method of accounting and, accordingly, the net assets and results of operations
of Tomark have been included in the Companys consolidated financial statements
since the date of acquisition. The purchase price was allocated to assets
acquired, which did not include any identified intangible assets, 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 following presents the unaudited pro forma results for the Company for
the three and nine months ended March 31, 2004 and 2003, as if the acquisition
of Tomark, Inc. had been consummated at the beginning of each of the periods
presented. The pro forma results are prepared for comparative purposes only
and do not necessarily reflect the results that would have 4




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) occurred had the acquisition occurred at the beginning of the periods presented
or the results which may occur in the future. Three months ended
    
    Nine months endedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    11,153,919
    
    
    $
    9,337,960
    
    
    $
    25,363,978
    
    
    $
    21,075,871Net income
    
    
    894,695
    
    
    
    726,806
    
    
    
    683,237
    
    
    
    413,666Net income per share common stock:Basic
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    0.10Diluted
    
    $
    0.11
    
    
    $
    0.17
    
    
    $
    0.10
    
    
    $
    0.09
 3. Inventories: Inventories at March 31, 2004 and June 30, 2003 consisted of the
following: March 31,
    
    June 30,2004
    
    2003Raw materials
    
    $
    601,793
    
    
    $
    310,871Work in progress
    
    
    116,854
    
    
    
    83,229Finished goods
    
    
    4,072,420
    
    
    
    3,297,515Inventories
    
    $
    4,791,067
    
    
    $
    3,691,615
 5




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) 4. Income Per Share: Summarized basic and diluted income per share are as follows: Three months ended
    
    Nine months endedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Net income
    
    $
    894,695
    
    
    $
    582,765
    
    
    $
    960,763
    
    
    $
    630,874Weighted
average common shares - basic
    
    
    6,516,430
    
    
    
    4,223,684
    
    
    
    5,474,477
    
    
    
    4,226,359Effect of dilutive securities (options
and warrants)
    
    
    1,441,363
    
    
    
    125,693
    
    
    
    1,435,047
    
    
    
    508,119Weighted average common shares -
diluted
    
    
    7,957,793
    
    
    
    4,349,377
    
    
    
    6,909,524
    
    
    
    4,734,478Net income per share  basic
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.15Per share effect of dilutive securities
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.02
    )Net income per share  diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.13Options and warrants excluded from
computation because their effect was
antidilutive
    
    
    
    
    
    
    236,500
    
    
    
    1,155,707
    
    
    
    236,500
 5. Stock Based Compensation: On 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 authorizes 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 to employees and directors 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 Accounting Standards
Board (FASB) SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation: 6




---



##### Table of Contents



COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) Three months ended
    
    Nine months endedMarch 31,
    
    March 31,2004
    
    2003
    
    2004
    
    2003Net income, as reported
    
    $
    894,695
    
    
    $
    582,765
    
    
    $
    960,763
    
    
    $
    630,874Add: 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
    
    
    2,207
    
    
    
    4,932
    
    
    
    7,490
    
    
    
    614,288Pro forma net income
    
    $
    892,488
    
    
    $
    577,833
    
    
    $
    953,273
    
    
    $
    16,586Income per common share:As reported:Basic
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.15Diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.13Pro forma:Basic
    
    $
    0.14
    
    
    $
    0.14
    
    
    $
    0.17
    
    
    $
    0.00Diluted
    
    $
    0.11
    
    
    $
    0.13
    
    
    $
    0.14
    
    
    $
    0.00
 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 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. 6. Subsequent Event: On April 1, 2004, the Company completed its previously announced
acquisition of substantially all of the operating assets of Kesslers Sport
Shop, Inc. d/b/a Kesslers Team Sports, Inc., an Indiana corporation
(Kesslers). Under the terms of the purchase agreement, the Company paid
Kesslers $13,750,000 for substantially all of its operating assets. The
payment consisted of $6,500,000 in cash and 906,250 shares of Collegiate
Pacifics common stock (the Shares) valued at $7,250,000. The Company also
paid certain liabilities of Kesslers at closing in the approximate amount of
$4,700,000 and assumed certain other specified liabilities of Kesslers related
to the acquired operating assets. The Company also agreed to register all of
the Shares for resale with the Securities and Exchange Commission.
Additionally, so long as Kesslers and its stockholders comply with the
applicable provisions of the purchase agreement, the Company is required to
either (a) repurchase from Kesslers or its stockholders, as the case may be,
for cash any of the Shares that have not been sold by Kesslers prior to the
second anniversary of the effective date of a registration statement covering
the Shares for a per share price of $8.00 (the same per share price used to
determine the number of Shares issued at closing) or (b) if all of the Shares
have been sold as of the second anniversary of the effective date of a
registration statement covering the Shares, pay Kesslers an amount in cash
equal to the difference between $7,250,000 and the total sales proceeds
received by Kesslers from the sale of the Shares. The parties also entered
into an escrow agreement pursuant to which 31,250 of the Shares payable to
Kesslers will be held in escrow to secure the indemnification obligations of
Kesslers and its stockholders. 7




---



##### Table of Contents



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 7,000 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 70,000 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 March 31, 2004 Compared to Three Months Ended March 31, 2003
and Nine Months ended March 31, 2004 Compared to Nine Months Ended March 31,
2003 Net Sales.Net sales for the three months ended March 31, 2004, increased
by approximately $5.1 million, or approximately 84%, compared to the same
period in fiscal 2003. Net sales for the nine months ended March 31, 2004,
increased by approximately $7.0 million, or 49%, compared to the same period in
fiscal 2003. We attribute the growth in net sales to an increase in catalog
sales during the periods. Our increase in catalog sales was due to our
expanded product offerings and the overall growth in our customer base.
Specifically, our net sales growth for the three and nine months ended March
31, 2004, were enhanced by approximately $3.4 million due to our acquisition of
Tomark, Inc. in January 2004. 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
expect 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 March 31, 2004,
increased by approximately $1.8 million, or 76%, compared to the same period in
fiscal 2003. As a percentage of net sales, gross profit for the three months
ended March 31, 2004, was approximately 37%, compared to 39% for the same
period in fiscal 2003. Gross profit for the nine months ended March 31, 2004,
increased by approximately $2.5 million, or 47%, compared to the same period in
fiscal 2003. As a percentage of net sales, gross profit for the nine months
ended March 31, 2004 was 37%, compared to 38% for the same period in fiscal
2003. Of the increase from fiscal 2003, approximately $1.3 million of gross
profit for the three and nine months ended March 31, 2004 was the result of the
acquisition of Tomark, Inc. The increase in gross profit dollars for the three
and nine months ended March 31, 2004, compared to the same
periods in fiscal
2003 was primarily due to the increase in the Companys net sales and an
increase in the absorption of manufacturing, labor and overhead expenses as a
result of increased manufacturing revenues. The decrease in gross profit
percentage for the three and nine months ended March 31, 2004, compared to the
same periods in fiscal 2003,was primarily due to a slight increase in the sale
of drop-shipped products as a percentage of net sales, which historically have
lower margins, and an increase in freight costs during the three months ended
March 31, 2004. Management believes that gross profit will fluctuate from historical results, either higher or lower,
due in part to operating results of acquisitions made by the Company. Other factors which affect gross margin
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 pass these cost changes to its customer base in a timely manner. 8




---



##### Table of Contents



Selling, General and Administrative Expenses.Selling, general and
administrative (SG&A) expenses for the three months ended March 31, 2004,
increased by approximately $904 thousand, or 52%, compared to the same period
in fiscal 2003. As a percentage of net sales, SG&A expenses for the three
months ended March 31, 2004, were 24%, compared to 29% for the same period in
fiscal 2003. SG&A expenses for the nine months ended March 31, 2004, increased
by approximately $1.6 million, or 33%, compared to the same period in fiscal
2003. As a percentage of net sales, SG&A expenses for the nine months ended
March 31, 2004, decreased to 29% from 33% for the same period in fiscal 2003.
The increase in SG&A expenses was primarily due to the acquisition of Tomark,
Inc. in January 2004, which contributed approximately $684 thousand in SG&A
expenses for the three and nine months ended March 31, 2004. The remaining
increase is attributable to 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.
As noted by the change in the percentage of SG&A expenses to total revenues, improved leverage of these
expenses has occurred with the acquisition of Tomark, Inc. Operating Profit.Operating profits increased by approximately $891
thousand for the three months ended March 31, 2004, compared to the same period
in fiscal 2003. As a percentage of net sales, operating profits increased to
approximately 13% for the three months ended March 31, 2004, compared to 10%
for the same period during fiscal 2003. Operating profit increased by
approximately $959 thousand for the nine months ended March 31, 2004, compared
to the same period in fiscal 2003. As a percentage of net sales, operating
profit was approximately 8% for the nine months ended March 31, 2004, compared
to 5% for the same period during fiscal 2003. The increase in operating profit
for the three and nine months ended March 31, 2004, compared to the same
periods in 2003, was partially a result of the acquisition of Tomark, Inc,
which contributed approximately $629 thousand to the increase in operating
profit. Increases in our gross profit from increased sales and the lower SG&A
expenses as a percentage of sales also contributed to higher operating profits
during the periods. Interest Expense.Interest expense decreased by approximately $21
thousand for the three months ended March 31, 2004, compared to the same period
in fiscal 2003. Interest expense decreased by approximately $33 thousand for
the nine months ended March 31, 2004, 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 common shares issued
for cash during the three and nine months ended March 31, 2004, which was used
to reduce the outstanding balance of the Companys borrowings, as well as lower
interest rates during the three months ended March 31, 2004, compared to the
same period last year. See Liquidity and Capital Resources. Income Taxes.Income tax expense for the three months ended March 31,
2004, increased to approximately $606 thousand. Income tax expenses for the
nine months ended March 31, 2004, increased to approximately $676 thousand. 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 nine-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 continue to 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. The Companys tax rate differs from the statutory rate due to the effect
of state income taxes. 9




---



##### Table of Contents



Net Income.Net income increased by approximately $312 thousand, or 54%,
for the three months ended March 31, 2004, compared to the same three-month
period last year. As a percentage of net sales, net income decreased to
approximately 8% for the three months ended March 31, 2004, compared to 10% for
the three months ended March 31, 2003. Net income for the nine months ended
March 31, 2004, increased by approximately $330 thousand, or 52%, compared to
the same nine-month period in fiscal 2003. As a percentage of net sales, net
income was approximately 5% for the nine months ended March 31, 2004 and 2003.
The increase was primarily attributable to the acquisition of Tomark, Inc.,
which contributed approximately $353 thousand in net income for the three and
nine months ended March 31, 2004. Other factors that affected net income for
the nine-month period ended March 31, 2004, were 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, as noted above. Liquidity and Capital Resources Cash and cash equivalents totaled approximately $7.1 million at March 31,
2004, compared to approximately $366 thousand at June 30, 2003. Cash used in
operations decreased by approximately $364 thousand in the nine months ended
March 31, 2004, primarily due to an increase in net income generated during the
period as discussed above. During the nine-month period ended March 31, 2004, cash used in investing
activities was approximately $2.2 million, compared to approximately $155
thousand for the same period in fiscal year 2003. The increase is directly
attributable to the $2.5 million in cash used to acquire Tomark Inc., net of
approximately $430 thousand of cash acquired. In addition, a decrease in
purchases of property and equipment of approximately $37 thousand was due to a
lower requirement for spending on property and equipment during the nine months
ended March 31, 2004, compared to the same period in period in fiscal 2003 when
the Company expanded its warehouse operations. The Company expects to spend
approximately $100 thousand on additional property and equipment during the
balance of fiscal 2004. The Company provided approximately $9.5 million from financing activities
for the nine months ended March 31, 2004. The cash provided by financing
activities was from the issuance of common stock upon the exercise of our
outstanding common stock warrants and options of approximately $10.8 million,
offset by the purchase of treasury shares of approximately $41 thousand, the
payment of cash dividends in the amount of approximately $372 thousand, and
repayments on our long-term debt of approximately $834 thousand during the
period. For the same period in fiscal 2003, the Company provided approximately
$1.4 million from financing activities, which was due to a net increase in
outstanding debt of approximately $2.1 million, partially offset by cash paid
for treasury shares of approximately $100 thousand, the payment of dividends of
approximately $171 thousand, and repayments on a note payable to stockholder of
approximately $353 thousand. Current assets totaled approximately $17.6 million at March 31, 2004,
providing the company with working capital of approximately $13.6 million. The Companys principal external source of liquidity is its $12.0 million
revolving line of credit with Merrill Lynch Business Financial Services Inc.
(the Line of Credit). On April 1, 2004, the amount of the Line of Credit was
temporarily increased from $5.0 million to $7.0 million to provide the Company
with sufficient availability under the Line of Credit to consummate its
acquisition of Kesslers Team Sports, Inc. On April 28, 2004, the Company and
Merrill Lynch Business Financial Services Inc. agreed to the terms of an
amendment to the Line of Credit, the terms of which permanently increased the
amount of the Line of Credit to $12.0 10




---



##### Table of Contents



million and extended the maturity date of the Line of Credit to December
31, 2005. The Line of Credit remains 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 (1.09% at March 31, 2004). 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 $12 million. As of March 31, 2004,
there was no balance outstanding under the Line of Credit, leaving the Company
with approximately $5 million of additional availability under the terms of the
borrowing base formula of the Line of Credit, which was the maximum amount of
the Line of Credit prior to the April 1, 2004, temporary increase and April 28,
2004, amendment. The current balance of the Line of Credit is $2.5 million, leaving the
Company with approximately $9.5 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. On April 14, 2004, the Company announced its Board of Directors had
unanimously authorized the Company to call the warrants for cancellation
effective as of May 21, 2004. Any warrant that is not exercised by the close
of business on May 20, 2004 will be cancelled and will become entitled to
receive $0.05 for each share of Collegiate Pacifics common stock that could
have been acquired upon the exercise of the warrant prior to cancellation. The
per share exercise price of the warrants is $5.00 per share. Through May 10, 2004, the Company has received approximately $15.8 million
from the exercise of approximately 3.2 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. If the remaining 1.0 million warrants were exercised, the
Company would receive approximately $5.0 million from the exercise of those
warrants. No assurances, however, can be made that any additional warrants
will be exercised. 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 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. The cash portion
of the purchase price was paid out of our working capital. As we announced on April 1, 2004, the Company completed its acquisition of
substantially all of the operating assets and assumed specified operating
liabilities of Kesslers Team Sports, Inc., pursuant to an Asset Purchase
Agreement. We paid Kesslers $13,750,000 for 11




---



##### Table of Contents



substantially all of its operating assets, which consisted of $6,500,000
in cash and 906,250 shares of our common stock valued at $7,250,000. We also
paid certain liabilities of Kesslers at closing in the approximate amount of
$4,700,000 and assumed certain other specified liabilities of Kesslers related
to the acquired operating assets. We have agreed to register those shares with
the Securities and Exchange Commission. Further, so long as Kesslers and its
stockholders comply with the applicable provisions of the Asset Purchase
Agreement, we are required to either (a) repurchase from Kesslers or its
stockholders, as the case may be, for cash any of the shares that have not been
sold by Kesslers or its stockholders prior to the second anniversary of the
effective date of a registration statement covering the shares for a per share
price of $8.00 (the same per share price used to determine the number of shares
issued at closing) or (b) if all of the shares have been sold as of the second
anniversary of the effective date of a registration statement covering the
shares, pay Kesslers an amount in cash equal to the difference between
$7,250,000 and the total sales proceeds received by Kesslers or its
stockholders from the sale of the shares. The parties also entered into an
escrow agreement pursuant to which 31,250 of the shares payable to Kesslers
will be held in escrow to secure the indemnification obligations of Kesslers
and its stockholders. The cash portion of the purchase price was paid out of
our working capital and from proceeds drawn against our Line of Credit. On May
10, 2004, the per share closing price of our common stock on AMEX was $9.05. 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 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; 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 12




---



##### Table of Contents



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, and competition from others. The Company does not plan to generally
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. 13




---



##### Table of Contents



PART II. OTHER INFORMATION 
 ITEM 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities On January 9, 2004, Collegiate Pacific issued 270,562 shares of its common
stock, valued at $2,500,000, to the two former stockholders of Tomark, Inc.,
Thomas C. White and Mark S. Harpin, as partial consideration for the Companys
acquisition of Tomark, Inc. On April 1, 2004, Collegiate Pacific issued
906,250 share of its common stock, valued at $7,250,000, to Kesslers Sport
Shop, Inc. as partial consideration for the Companys acquisition of
substantially all of the operating assets of Kesslers Sport Shop, Inc. 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 Tomark and
to Kesslers Sport Shop as neither issuance involved a public offering of
Collegiate Pacifics common stock. Collegiate Pacific filed a Form D with the
Securities and Exchange Commission covering both issuances of common stock. 
 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 December 12, 2003, 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 increase the number of
authorized shares under the Companys stock option plan to 1,500,000 shares and
extend the term of the plan to November 2, 2008. Finally, the Companys
stockholders 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, 2004. Each of the foregoing proposals was approved at the Companys annual
meeting of stockholders on January 15, 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
    
    
    5,176,677
    
    
    
    139,559Adam Blumenfeld
    
    
    5,176,687
    
    
    
    139,549Arthur J. Coerver
    
    
    5,176,787
    
    
    
    139,449Harvey Rothenberg
    
    
    5,176,787
    
    
    
    139,449Jeff Davidowitz
    
    
    5,312,121
    
    
    
    4,115William H. Watkins
    
    
    5,312,121
    
    
    
    4,115Robert W. Hampton
    
    
    5,312,121
    
    
    
    4,115
 With respect to the approval of the proposal to increase the number of
authorized shares under the Companys stock option plan to 1,500,000 shares,
the votes cast for, against and abstaining were as follows: Votes For
    
    
    3,716,115Votes Against
    
    
    154,431Abstention
    
    
    1,445,690
 14




---



##### Table of Contents



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
    
    
    5,314,465Votes Against
    
    
    447Abstention
    
    
    1,324
 
 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
    
    Amendment to Loan and Security Agreement, dated April 28, 2004, by and
between the company and Merrill Lynch Business Financial Services, Inc.*10.2
    
    Lease Agreement, dated April 1, 2004, by and between Kesslers Team
Sports, Inc. (f/k/a BOO Acquisition Corp.) and RPD Services, Inc. (f/k/a
Kesslers Sport Shop, Inc.)*10.3
    
    Lease Agreement, dated May 15, 2003, by and between Tomark Sports, Inc.
and Commerce Street Partnership*21
    
    Subsidiaries*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. B. Reports on Form 8-K. The Company filed a Current Report on Form 8-K on January 23, 2004,
announcing that it had completed its acquisition of Tomark, Inc. On March 23,
2004, the Company filed an amendment to its January 23, 2004 Current Report on
Form 8-K, which included the financial statements and pro forma financial
information related to the Companys acquisition of Tomark, Inc. 15




---



##### Table of Contents



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: May 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)
 16




---



##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Exhibit3.1
    
    Articles of Incorporation (1)3.2
    
    Bylaws (1)10.1
    
    Amended Loan and Security Agreement, dated April 28, 2004, by and between
the company and Merrill Lynch Business Financial Services, Inc.*10.2
    
    Lease Agreement, dated April 1, 2004, by and between Kesslers Team
Sports, Inc. (f/k/a BOO Acquisition Corp.) and RPD Services, Inc. (f/k/a
Kesslers Sport Shop, Inc.)*10.3
    
    Lease Agreement, dated May 15, 2003, by and between Tomark Sports, Inc.
and Commerce Street Partnership*21
    
    Subsidiaries*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.