##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-QSB (Mark One) þ
    
    Quarterly report under Section 13 OR 15(d) of the Securities Exchange Act of 1934For the quarterly period ended March 31, 2005
 o
    
    Transition report under Section 13 or 15(d) of the Exchange ActFor the transition period from ______to ______
 Commission File No. 0-172923 COLLEGIATE PACIFIC INC.  Delaware
    
    22-2795073(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)
 13950 Senlac Drive, Suite 100, Dallas, Texas
    
    75234(Address of Principal Executive Offices)
    
    (Zip code)
 (972) 243-8100   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 May 12, 2005, there were 10,120,749 shares of the issuers common stock outstanding. Transitional Small Business Disclosure Format (check one): o þ




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
TABLE OF CONTENTS  
 PageNumberPART I:
    
    FINANCIAL INFORMATIONItem 1.
    
    Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at March 31, 2005 and June 30, 2004
    
    1Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2005 and 2004
    
    2Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2005 and 2004
    
    3Notes to the Condensed Consolidated Financial Statements
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    11Item 3.
    
    Controls and Procedures
    
    23PART II:
    
    OTHER INFORMATIONItem 5.
    
    Other Events
    
    24Item 6.
    
    Exhibits
    
    25SIGNATURES
    
    26Stock Purchase AgreementConsent AgreementLetter AgreementSection 302 Certification of Principal Executive OfficerSection 302 Certification of Principal Financial OfficerSection 906 Certification of Principal Executive Officer and Principal Financial Officer




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PART I. FINANCIAL INFORMATION 
 Item 1. Consolidated Financial Statements. COLLEGIATE PACIFIC INC.
AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    June 30,2005
    
    
    2004(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    41,008,491
    
    
    $
    7,473,145Accounts receivable, net of allowance for doubtful accounts of
$953,122 and $635,531, respectively
    
    
    19,153,911
    
    
    
    10,683,860Inventories
    
    
    15,287,716
    
    
    
    9,214,063Current portion of deferred taxes
    
    
    149,414
    
    
    
    149,414Prepaid income taxes
    
    
    511,594
    
    
    
    Prepaid expenses and other current assets
    
    
    1,813,186
    
    
    
    496,912Total current assets
    
    
    77,924,312
    
    
    
    28,017,394PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$1,165,435 and $870,394, respectively
    
    
    1,346,555
    
    
    
    831,205DEFERRED DEBT ISSUANCE COSTS, net of accumulated amortization of
$222,784 and $0, respectively
    
    
    3,155,522
    
    
    
    INTANGIBLE ASSETS, net of accumulated amortization of
$543,337 and $346,238, respectively
    
    
    504,502
    
    
    
    429,833GOODWILL
    
    
    23,649,199
    
    
    
    17,308,487DEFERRED INCOME TAXES
    
    
    100,812
    
    
    
    100,812OTHER ASSETS
    
    
    242,533
    
    
    
    259,012Total assets
    
    $
    106,923,435
    
    
    $
    46,946,743LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    7,848,026
    
    
    $
    4,983,603Accrued liabilities
    
    
    1,828,863
    
    
    
    1,283,553Dividends payable
    
    
    254,919
    
    
    
    247,128Accrued interest
    
    
    988,681
    
    
    
    Current portion of long-term debt
    
    
    271,067
    
    
    
    124,800Income taxes payable
    
    
    
    
    
    
    700,850Total current liabilities
    
    
    11,191,556
    
    
    
    7,339,934REDEEMABLE COMMON STOCK (see Note 2)
    
    
    
    
    
    
    7,250,000LONG-TERM DEBT
    
    
    50,374,415
    
    
    
    73,200COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.01 par value, 1,000,000 shares authorized; no shares
issued
    
    
    
    
    
    
    Common stock, $0.01 par value, 50,000,000 shares authorized;
10,196,780 and 9,884,142 shares issued and
10,110,754 and 9,798,116 shares outstanding, respectively
    
    
    101,968
    
    
    
    98,842Additional paid-in capital
    
    
    41,857,822
    
    
    
    31,469,423Retained earnings
    
    
    4,055,125
    
    
    
    1,372,795Treasury stock at cost, 86,026 shares, respectively
    
    
    (657,451
    )
    
    
    (657,451
    )Total stockholders equity
    
    
    45,357,464
    
    
    
    32,283,609Total liabilities and stockholders equity
    
    $
    106,923,435
    
    
    $
    46,946,743
 The accompanying notes are an integral part of these financial statements. - 1 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    27,018,429
    
    
    $
    11,153,919
    
    
    $
    78,523,315
    
    
    $
    21,365,956Cost of sales
    
    
    17,544,088
    
    
    
    7,014,007
    
    
    
    51,745,869
    
    
    
    13,458,203Gross profit
    
    
    9,474,341
    
    
    
    4,139,912
    
    
    
    26,777,446
    
    
    
    7,907,753Selling, general and administrative expenses
    
    
    7,469,843
    
    
    
    2,629,437
    
    
    
    19,964,610
    
    
    
    6,223,091Amortization expense
    
    
    14,755
    
    
    
    12,266
    
    
    
    189,284
    
    
    
    36,799Operating profit
    
    
    1,989,743
    
    
    
    1,498,209
    
    
    
    6,623,552
    
    
    
    1,647,863Other income (expense):Interest income
    
    
    179,288
    
    
    
    6,210
    
    
    
    237,732
    
    
    
    15,484Interest expense
    
    
    (899,372
    )
    
    
    (4,823
    )
    
    
    (1,240,891
    )
    
    
    (28,684
    )Other income
    
    
    32,774
    
    
    
    1,435
    
    
    
    153,338
    
    
    
    2,430Total other income (expense)
    
    
    (687,310
    )
    
    
    2,822
    
    
    
    (849,821
    )
    
    
    (10,770
    )Income before income taxes
    
    
    1,302,433
    
    
    
    1,501,031
    
    
    
    5,773,731
    
    
    
    1,637,093Provision for income taxes
    
    
    514,772
    
    
    
    606,336
    
    
    
    2,333,047
    
    
    
    676,330Net income
    
    $
    787,661
    
    
    $
    894,695
    
    
    $
    3,440,684
    
    
    $
    960,763Weighted average number of shares outstanding:Basic
    
    
    10,094,747
    
    
    
    6,516,430
    
    
    
    10,002,640
    
    
    
    5,474,477Diluted
    
    
    10,410,933
    
    
    
    7,957,793
    
    
    
    10,277,970
    
    
    
    6,909,524Net income per share common stock  basic
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.18Net income per share common stock  diluted
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.14
 The accompanying notes are an integral part of these financial statements. - 2 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months EndedMarch 31,2005
    
    

    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    3,440,684
    
    
    $
    960,763Adjustments to reconcile net income to cash used in operating activities:Depreciation expense
    
    
    300,596
    
    
    
    158,926Amortization expense
    
    
    189,284
    
    
    
    36,799Amortization of deferred debt issuance costs
    
    

    222,784
    
    
    
    Provision for uncollectible accounts receivable
    
    
    460,339
    
    
    
    99,131Loss on sale of property and equipment
    
    
    2,912
    
    
    
    Changes in operating assets and liabilities, net of effects of acquisitions:Accounts receivable
    
    
    (5,346,517
    )
    
    
    (1,519,763
    )Inventories
    
    
    (2,565,684
    )
    
    
    (669,763
    )Prepaid expenses and other current assets
    
    
    (1,168,608
    )
    
    
    (676,183
    )Other assets
    
    
    63,347
    
    
    
    2,062Accounts payable
    
    
    (966,718
    )
    
    
    734,209Accrued liabilities
    
    
    1,127,355
    
    
    
    (121,693
    )Income taxes payable
    
    
    (1,212,444
    )
    
    
    385,530Net cash used in operating activities:
    
    
    (5,452,670
    )
    
    
    (609,982
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (416,657
    )
    
    
    (118,670
    )Purchase of subsidiaries, net of cash acquired of $317,551 and $432,897,
respectively
    
    
    (6,726,870
    )
    
    
    (2,069,967
    )Net cash used in investing activities:
    
    
    (7,143,527
    )
    
    
    (2,188,637
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from borrowings under line of credit
    
    
    9,185,948
    
    
    
    Payments on notes payable and line of credit
    
    
    (9,379,549
    )
    
    
    (833,918
    )Proceeds from issuance of 5.75% senior subordinated notes
    
    
    50,000,000
    
    
    
    Deferred debt issuance costs
    
    
    (3,378,306
    )
    
    
    Purchase of treasury stock
    
    
    
    
    
    
    (40,808
    )Payment of dividends
    
    
    (750,562
    )
    
    
    (371,504
    )Proceeds from issuance of common stock
    
    
    454,012
    
    
    
    10,789,916Net cash provided by financing activities:
    
    
    46,131,543
    
    
    
    9,543,686Increase in cash and cash equivalents
    
    
    33,535,346
    
    
    
    6,745,067Cash and cash equivalents, beginning of period
    
    
    7,473,145
    
    
    
    365,713Cash and cash equivalents, end of period
    
    $
    41,008,491
    
    
    $
    7,110,780SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid for interest
    
    $
    29,427
    
    
    $
    28,684Cash paid for income taxes
    
    $
    3,545,491
    
    
    $
    290,000SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:Fair value of assets acquired in business acquisitions
    
    $
    7,690,531
    
    
    $
    1,167,238Liabilities assumed in business acquisitions
    
    $
    4,495,229
    
    
    $
    875,681Promissory notes issued for business acquisitions
    
    $
    600,000
    
    
    $
    250,000Common stock issued for business acquisitions (231,788 and
270,562 shares, respectively)
    
    $
    2,687,514
    
    
    $
    2,500,000
 The accompanying notes are an integral part of these financial statements. - 3 -




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




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS the terms of a price guarantee with respect to those shares that, if triggered
in full, would have obligated
Collegiate Pacific to pay RPD Services an amount of up to $7,250,000. As a result, the
Company recorded a contingent liability of $7,250,000 for redeemable common stock in its audited
consolidated financial statements for the fiscal year ended June 30, 2004. Under the terms of the Amendment, the parties agreed to terminate Collegiate Pacifics
obligations under the price guarantee and the resale provisions with respect to the Shares,
effective as of the date of the Amendment, September 29, 2004. Accordingly, the Company no longer
carries a contingent liability for redeemable common stock. Consequently, $7,250,000 of the
increase in stockholders equity as of March 31, 2005, compared to June 30, 2004, is attributable
to the elimination of the price guaranty under the terms of the Amendment. On December 10, 2004, the Company completed its acquisition of all of the outstanding capital
stock of CMS of Central Florida Inc. d/b/a Orlando Team Sports (OTS). OTS is a supplier of soft
good athletic apparel, footwear products and sporting goods equipment in the State of Florida. The
Company paid the former OTS stockholders a total of approximately $3.1 million, which consisted of
$1.8 million in cash, $0.1 million in a promissory note, and 83,126 shares of the Companys common
stock valued at $1.2 million. The cash portion of the purchase price was paid out of the Companys
working capital. The Company also entered into a lease with McWeeney Smith Partnership (the
Partnership) for its 12,000 square foot warehouse and distribution facility in Sanford, Florida.
The former OTS stockholders are partners in the Partnership. The term of the lease runs through
July 2010 and the monthly rental rate is approximately $6,400. The Companys wholly owned
subsidiary, OTS, employs the former OTS management team. The acquisition of OTS was accounted for using the purchase method of accounting and,
accordingly, the net assets and results of operations of OTS have been included in the Companys
consolidated financial statements since the date of acquisition. Assets acquired included
identifiable intangible assets of contractual backlog in the amount of $150,000, noncompetition
agreements in the amount of $50,000 and customer relationships in the amount of $50,000. The
Company is still in the process of finalizing the valuation of these assets, therefore, the values
assigned to the assets are preliminary estimates and subject to change. The purchase price was
allocated to assets acquired, which includes the estimated 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 excess of the purchase price over
the fair value of the net assets acquired has been preliminarily recorded as goodwill in the amount
of $3,106,849. In accordance with Statement of Financial Accounting Standards No. 142, the
goodwill associated with this acquisition is not being amortized, but will be tested annually for
impairment. The Company purchased OTS after considering the historic levels of earnings achieved by OTS,
the impact the OTS sales force could have on future earnings of the Company by increasing the sales
volume of products the Company imports and manufactures, and the increase to the combined customer
base by cross selling products to each others customers. The consideration given to the
stockholders of OTS was agreed upon after the Company determined the potential impact on future
earnings of the integrated companies. The following presents the unaudited pro forma results for the Company for the three and nine
months ended March 31, 2005 and 2004, as if the acquisitions of Tomark Inc. (January 2004),
Kesslers Sports Shop, Inc. (April 2004), Dixie Sporting Goods Co., Inc (July 2004) and CMS of
Central Florida, Inc. (December 2004) 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 - 5 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS would have occurred had the acquisitions occurred at the beginning of the periods presented or
the results which may occur in the future. For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    27,018,429
    
    
    $
    23,610,956
    
    
    $
    82,438,858
    
    
    $
    71,259,362Net income
    
    
    787,661
    
    
    
    911,857
    
    
    
    3,593,895
    
    
    
    2,681,228Net income per
share common stock:Basic
    
    $
    0.08
    
    
    $
    0.12
    
    
    $
    0.36
    
    
    $
    0.41Diluted
    
    $
    0.08
    
    
    $
    0.10
    
    
    $
    0.35
    
    
    $
    0.33
 3. Net Sales: The Companys net sales to external customers are attributable to sales of sporting goods
equipment and soft good athletic apparel and footwear. The following table details the Companys
consolidated net sales by these product lines for the three and nine months ended March 31, 2005,
and 2004: For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Sporting goods equipment
    
    $
    18,033,432
    
    
    $
    11,153,919
    
    
    $
    44,484,533
    
    
    $
    21,365,956Soft good athletic apparel and footwear
    
    
    8,984,997
    
    
    
    
    
    
    
    34,038,782
    
    
    
    Net sales
    
    $
    27,018,429
    
    
    $
    11,153,919
    
    
    $
    78,523,315
    
    
    $
    21,365,956
 4. Inventories: Inventories at March 31, 2005, and June 30, 2004, consisted of the following: March 31,
    
    
    June 30,2005
    
    
    2004Raw materials
    
    $
    532,041
    
    
    $
    457,337Work in progress
    
    
    107,713
    
    
    
    115,223Finished goods
    
    
    14,647,962
    
    
    
    8,641,503Inventories
    
    $
    15,287,716
    
    
    $
    9,214,063
 - 6 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Allowance for Doubtful Accounts: Changes in the Companys allowance for doubtful accounts for the nine months ended March 31,
2005 and the fiscal year ended June 30, 2004 are as follows: March 31,
    
    
    June 30,2005
    
    
    2004Balance at beginning of period
    
    $
    635,531
    
    
    $
    121,139Provision for uncollectible accounts receivable
    
    
    460,339
    
    
    
    194,620Effect of business acquisitions
    
    
    204,015
    
    
    
    488,756Accounts written off, net of recoveries
    
    
    (346,763
    )
    
    
    (168,984
    )Balance at end of period
    
    $
    953,122
    
    
    $
    635,531
 6. Income Per Share: Summarized basic and diluted income per share are as follows: For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31,
    
    
    March 31,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    787,661
    
    
    $
    894,695
    
    
    $
    3,440,684
    
    
    $
    960,763Weighted average
common shares  basic
    
    
    10,094,747
    
    
    
    6,516,430
    
    
    
    10,002,640
    
    
    
    5,474,477Effect of dilutive securities
(options and warrants)
    
    
    316,186
    
    
    
    1,441,363
    
    
    
    275,330
    
    
    
    1,435,047Weighted average
common shares  diluted
    
    
    10,410,933
    
    
    
    7,957,793
    
    
    
    10,277,970
    
    
    
    6,909,524Net income per share  basic
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.18Per share effect of dilutive
securities
(options and warrants)
    
    
    
    
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    (0.04
    )Net income per share  diluted
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.14Options, warrants and common
shares underlying convertible
notes excluded from
computation because their effect
was antidilutive
    
    
    3,607,969
    
    
    
    
    
    
    
    2,403,479
    
    
    
    1,155,707
 The shares of the Companys common stock underlying the convertible notes, were not
included in the calculation for diluted net income as their effect was antidilutive. The number of
excluded shares of the Companys common stock was based upon the period the convertible securities
were outstanding and would have been 3,412,969 shares. The total number of common shares, which
may be issued upon full conversion of the convertible notes, is 3,412,969. - 7 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7. Stock Based Compensation: On December 11, 1998, the Companys stockholders approved a new stock option plan (the
Plan). The Plan authorized the Companys Board of Directors to grant employees, directors and
consultants of the Company and its subsidiaries up to an aggregate of 400,000 shares of the
Companys common stock, $0.01 par value per share. The Plan, as amended, now authorizes the
Companys Board of Directors to grant employees, directors and consultants of the Company and its
subsidiaries up to an aggregate of 1,500,000 shares of the Companys common stock. The options
vest after the employee has been employed for a certain period of time or on the award date if the
employee has been employed for at least one year on the award date. The Company accounts for all options issued under the Plan in accordance with the recognition
and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. No stock-based compensation cost is
reflected in net income, as all options granted under the plan had an exercise price equal to the
market value of the underlying common stock on the date of grant. The following table illustrates
the effect on net income and income per share as if the Company had applied the fair value
recognition provisions of Financial Accounting Standards Board (FASB) SFAS No. 123, Accounting
for Stock-Based Compensation, to stock-based employee compensation: For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31
    
    
    March 312005
    
    
    2004
    
    
    2005
    
    
    2004Net income, as reported
    
    $
    787,661
    
    
    $
    894,695
    
    
    $
    3,440,684
    
    
    $
    960,763Add: stock-based
employee compensation
expense included in
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deduct: stock-based
employee compensation
expense determined
using the fair value
based method for all
awards, net of related
tax effects
    
    
    910,573
    
    
    
    2,207
    
    
    
    1,605,489
    
    
    
    7,490Pro forma income (loss)
    
    $
    (122,912
    )
    
    $
    892,488
    
    
    $
    1,835,195
    
    
    $
    953,273Net income (loss) per
share common stock:As reported:Basic
    
    $
    0.08
    
    
    $
    0.14
    
    
    $
    0.34
    
    
    $
    0.18Diluted
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    0.33
    
    
    $
    0.14Pro forma:Basic
    
    $
    (0.01
    )
    
    $
    0.14
    
    
    $
    0.18
    
    
    $
    0.17Diluted
    
    $
    (0.01
    )
    
    $
    0.11
    
    
    $
    0.18
    
    
    $
    0.14
 The fair value of these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions: expected average volatility of
34.0% to 35.0%; risk free interest rate of 3.41% to 3.99 %; dividend yield of 1.0% to 1.1%; and
expected lives of five years. - 8 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8. Long-Term Debt: On November 26, 2004, the Company announced the completion of its sale of $40.0 million
principal amount of 5.75% Convertible Senior Subordinated Notes due 2009 (the Notes). The Notes
were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933,
as amended (the Securities Act). On December 3, 2004, the Company announced the completion of its
sale of an additional $10.0 million principal amount of Notes pursuant to the exercise by the
initial purchaser of the option granted to it in connection with the initial offering of the Notes.
The issuance of the Notes resulted in aggregate proceeds of $46.6 million to the Company, net of
issuance costs. The Notes are governed by the Indenture dated as of November 26, 2004, between the Company and
The Bank of New York Trust Company N.A., as trustee (the Indenture). The Indenture provides,
among other things, that the Notes will bear interest of 5.75% per year, payable semi-annually and
will be convertible into the Companys common stock at a conversion rate of 68.2594 shares per
$1,000 principal amount of Notes, subject to certain adjustments. This is equivalent to a
conversion price of approximately $14.65 per share. On or after December 31, 2005, the Company may
redeem the Notes, in whole or in part, at the redemption price, which is 100% of the principal
amount, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the
redemption date only if the closing price of the Companys common stock exceeds 150% of the
conversion price for at least 20 trading days in any consecutive 30-day trading period. The
Company will make an additional payment in cash with respect to the Notes called for redemption on
or before December 10, 2007, in an amount equal to $172.50 per $1,000 principal amount of the
Notes, less the amount of any interest actually paid on the Notes before the redemption date. In
addition, upon the occurrence of a fundamental change, holders may require the Company to purchase
all or a portion of the Notes in cash at a price equal to 100% of the principal amount of Notes to
be repurchased, plus accrued and unpaid interest and additional interest, if any, to, but
excluding, the repurchase date, plus the make whole premium, if applicable. In connection with the completion of the sale of the Notes, on November 26, 2004, the Company
entered into a registration rights agreement with the initial purchaser of the Notes (the
Registration Rights Agreement). Under the terms of the Registration Rights Agreement, the Company
was required to file a registration statement with the Securities and Exchange Commission for the
registration of the Notes and the shares issuable upon conversion of the Notes. On January 24,
2005, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange
Commission for the registration of the Notes and the shares issuable upon conversion of the Notes
(the Registration Statement). On April 5, 2005, the Company filed Amendment No. 1 to the
Registration Statement. The Registration Statement has not been declared effective under the
Securities Act. If the Registration Statement has not been declared effective by May 26, 2005, the
annual interest rate payable under the Notes will increase from 5.75% to 6.0% until the
Registration Statement has been declared effective. In connection with the offer and sale of the Notes, on November 18, 2004, the Company entered
into a consent agreement with Merrill Lynch Business Financial Service Inc. (MLBFS) with respect
to the Companys $12 million revolving credit facility with MLBFS (the Consent Agreement),
providing for, among other things, MLBFSs consent to the issuance of the Notes. On November 23,
2004, the Company entered into a letter agreement with MLBFS providing for, among other things, a
change of the maturity of the credit facility from December 31, 2005, to September 30, 2005. In addition, on November 26, 2004, the Company entered into a letter agreement with MLBFS
providing for, among other things, an amendment to the Companys ratio of debt to earnings before
interest, taxes, depreciation and amortization (EBITDA) to take into account the issuance of the
Notes.
The Companys ratio of outstanding debt to MLBFS to the Companys EBITDA on a trailing
12-month basis may not exceed 2.0 to 1.0. - 9 -




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COLLEGIATE PACIFIC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 9. Recent Accounting Pronouncements: In November 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 151, Inventory Costs. This statement amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
4, previously stated that . . . under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment
as current period charges. . . . This Statement requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of so abnormal. In
addition, this Statement requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. Adoption of this
statement is required for the Companys fiscal year beginning July 1, 2005. The adoption of this
statement is not expected to have a material effect on the financial condition or results of
operations of the Company. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123(R), Share-Based Payment. This statement is a revision of Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation. SFAS No.
123(R) addresses financial accounting for transactions in which an entity obtains employee services
in share-based payment transactions. Adoption of this statement is required for the Companys
fiscal year beginning July 1, 2005. Because substantially all of the Companys outstanding stock options will
have fully vested as of June 30, 2005, the adoption of this statement is not expected to have a
material effect on the financial condition or results of operations of the Company. 10. Subsequent Event: On May 11, 2005, the Company completed its previously announced acquisition of all of the
outstanding capital stock of Salkeld and Sons Inc. (Salkeld),a Delaware corporation, from its
stockholders (the Stockholders) for total consideration of approximately $2.73 million, exclusive
of transaction related costs, pursuant to the terms of a Stock Purchase Agreement, dated May 11,
2005, by and among the Company and the Stockholders (the Purchase Agreement). The Company paid
approximately $2.5 million of the total consideration in cash and $230 thousand with promissory
notes. In addition, the Company agreed to pay the Stockholders up to an additional $1.1 million in
the form of an earnout if Salkelds gross profit exceeds a certain target level during the
12-month period ending April 30, 2006. - 10 -




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. Overview Certain statements in Managements Discussion and Analysis are forward-looking as defined in
the Private Securities Litigation Reform Act of 1995. These statements are based on current
expectations that are subject to risks and uncertainties. Actual results may differ materially from
expectations as of the date of this filing because of the factors discussed below under the
Statement Regarding Forward-Looking Disclosure section and elsewhere in this Quarterly Report on
Form 10-QSB. Collegiate Pacific Inc. (Collegiate Pacific, we, us, our, or the Company) is a
premier marketer, manufacturer and distributor of sporting goods and equipment, soft good athletic
apparel and footwear products (soft goods), physical education, recreational and leisure products
primarily to the institutional market in the United States. The institutional market generally
consists of youth sports programs, park and recreational organizations, schools, colleges,
churches, government agencies, athletic teams, athletic clubs and dealers. We sell our products
directly to our customers primarily through the distribution of our unique, informative catalogs
and fliers, our strategically located road sales professionals, our telemarketers and the Internet.
We offer a broad line of sporting goods and equipment, soft goods and other recreational products,
as well as provide after-sale customer service. We currently market approximately 4,500 sports
related equipment products, soft goods and recreational related equipment and products to over
300,000 potential institutional, retail, Internet, sports teams and sporting good dealer type
customers. Since commencing operations in early 1998, we have sold our products to approximately
80,000 customers. References herein to fiscal 2004 and fiscal 2005 refer to our fiscal years
ended or ending, as the case may be, June 30, 2004 and 2005, respectively. Matters Affecting Comparability Collegiate Pacifics operating results for the third quarter of fiscal 2005 include the
operating results of Tomark Sports, Inc. (Tomark) and Kesslers Sport Shop, Inc. (Kesslers),
both of which we acquired in fiscal 2004, the operating results of Dixie Sporting Goods Co., Inc.
(Dixie), which we acquired during the first quarter of fiscal 2005, and the operating results of
CMS of Central Florida Inc. d/b/a Orlando Team Sports (OTS), which we acquired during the second
quarter of fiscal 2005, each since their respective acquisition dates. However, the condensed
consolidated statements of income for the three and nine months ended March 31, 2004, do not
include the operating results for the Kesslers, Dixie or OTS acquisitions since those acquisitions
were completed after March 31, 2004. Approximately $54.5 million of the $57.1 million increase in
net sales, when compared to the first nine months of fiscal 2004, is attributable to Collegiate
Pacifics acquisitions during fiscal 2004 and fiscal 2005. This reflects the results of our
efforts during the year to direct a selection of our traditional catalog customers to our acquired
road sales professionals. These efforts have contributed to the growth in net sales for each of
our acquired businesses. We believe that if we can successfully service a selection of our
traditional catalog customers in specific regions of the United States with our road sales
professionals, we will continue to grow our net sales through greater account penetration and
retention. See Note 2 to Notes to Condensed Consolidated Financial Statements. - 11 -




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Consolidated Results of Operations The following table compares selected financial data from the Consolidated Statements of
Income for the three and nine months ended March 31, 2005 and 2004: For the Three Months Ended
    
    
    For the Nine Months EndedMarch 31,
    
    
    March 31,Increase (Decrease)
    
    
    
    
    
    
    
    
    
    
    Increase2005
    
    
    2004
    
    
    Dollars
    
    
    Percentage
    
    
    2005
    
    
    2004
    
    
    Dollars
    
    
    Percentage(dollars in thousands, except per share amounts)Net sales
    
    $
    27,018
    
    
    $
    11,154
    
    
    $
    15,864
    
    
    
    142.2
    %
    
    $
    78,523
    
    
    $
    21,366
    
    
    $
    57,157
    
    
    
    267.5
    %Gross profit
    
    
    9,474
    
    
    
    4,140
    
    
    
    5,334
    
    
    
    128.9
    %
    
    
    26,777
    
    
    
    7,908
    
    
    
    18,869
    
    
    
    238.6
    %Operating profit
    
    
    1,990
    
    
    
    1,498
    
    
    
    492
    
    
    
    32.8
    %
    
    
    6,624
    
    
    
    1,648
    
    
    
    4,976
    
    
    
    301.9
    %Net income
    
    
    788
    
    
    
    895
    
    
    
    (107
    )
    
    
    (12.0
    )%
    
    
    3,441
    
    
    
    961
    
    
    
    2,480
    
    
    
    258.1
    %Diluted earnings
per share
    
    $
    0.08
    
    
    $
    0.11
    
    
    $
    (0.03
    )
    
    
    (27.3
    )%
    
    $
    0.33
    
    
    $
    0.14
    
    
    $
    0.19
    
    
    
    135.7
    %Expressed as a
percentage of
net sales:Gross profit margin
    
    
    35.1
    %
    
    
    37.1
    %
    
    
    
    
    
    
    
    
    
    
    34.1
    %
    
    
    37.0
    %Selling, general
and administrative
expenses
    
    
    27.6
    %
    
    
    23.6
    %
    
    
    
    
    
    
    
    
    
    
    25.4
    %
    
    
    29.1
    %Operating profit
    
    
    7.4
    %
    
    
    13.4
    %
    
    
    
    
    
    
    
    
    
    
    8.4
    %
    
    
    7.7
    %
 Acquisitions On January 9, 2004, Collegiate Pacific completed the acquisition of Corona, California based
Tomark in a merger transaction. Tomark is a marketer, distributor, manufacturer and installer of
sporting goods and related equipment primarily to the institutional market in the State of
California. On April 1, 2004, Collegiate Pacific completed its acquisition of substantially all of the
operating assets of Richmond, Indiana based Kesslers Sport Shop, Inc. (now known as RPD Services,
Inc.). Our wholly owned subsidiary, Kesslers Team Sports, Inc. (Kesslers) is a supplier of soft
goods and sporting goods equipment throughout the Mid-Western United States. On July 26, 2004, Collegiate Pacific completed the acquisition of all of the outstanding
capital stock of Richmond, Virginia based Dixie. Dixie is a supplier of soft goods and sporting
goods equipment throughout the Mid-Atlantic United States. On December 10, 2004, Collegiate Pacific completed its acquisition of all of the outstanding
capital stock of Sanford, Florida based OTS. OTS is a supplier of soft goods and sporting goods
equipment throughout the State of Florida. Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004 Net Sales.Net sales for the fiscal quarter ended March 31, 2005, totaled $27.0 million
compared to $11.2 million for the fiscal quarter ended March 31, 2004, an increase of $15.8
million, or 142.2%. Net sales grew by a combined $14.7 million from the businesses we acquired
after March 31, 2004 and early fiscal 2005, and reflect the results of our efforts during the
quarter to direct a selection of our traditional catalog customers to our acquired road sales
professionals. These efforts have contributed to the growth in net sales for each of our acquired
businesses. We believe that if we can successfully service a selection of our traditional catalog customers
in - 12 -




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specific regions of the United States with our road sales professionals, we will continue to
grow our net sales through greater account penetration and retention. The increase in net sales
for our existing catalog operations was due to our expanded product offerings and the overall
growth in our customer base. We believe future net sales will continue to rise from current
levels, however, no assurances can be made that any future increases in net sales will be at the
same rate. Historically, sales of our sporting goods have experienced seasonal fluctuations. This
seasonality causes our financial results to vary from quarter to quarter, which usually results in
lower net sales and operating profit in the second quarter of our fiscal year (October through
December) and higher net sales and operating profit in the remaining quarters of our fiscal year.
We attribute this seasonality primarily to the budgeting procedures of our customers and the
seasonal demand for our products, which have historically been driven by spring and summer sports.
Generally, between the months of October and December of each fiscal year, there is a lower level
of sports activities at our historical institutional customer base, a higher degree of adverse
weather conditions and a greater number of school recesses and major holidays. We believe that our
acquisitions of Kesslers, Dixie and OTS, which have a greater focus on fall and winter sports, as
well as recent additions to our team of road sales professionals, may reduce the seasonality of our
financial results. Gross Profit. Gross profit for the fiscal quarter ended March 31, 2005, was $9.5 million, or
35.1% of net sales, compared with $4.1 million, or 37.1% of net sales, for the fiscal quarter ended
March 31, 2004. Kesslers, Dixie and OTS contributed a combined $4.9 million to our gross profit
for the fiscal quarter ended March 31, 2005. We include the acquisition cost of our inventory, the cost of shipping and handling (freight
costs), our manufacturing costs and any write-off of obsolete or
damaged inventory in our determination
of our total cost of sales. Our total cost of sales for the fiscal quarter ended March 31, 2005,
was $17.5 million, or 64.9% of net sales, compared to $7.0 million, or 62.9% of net sales in the
same period last fiscal year. Our total cost of sales for the quarter ended March 31, 2005,
consisted of $15.5 million for the acquisition cost of our inventory, $1.8 million in freight
costs, a $123 thousand write-off of obsolete or damaged inventory, and $115 thousand for labor and overhead
costs associated with the equipment we manufacture. The increase in our gross profit was due to the increase in our net sales during the fiscal
quarter ended March 31, 2005. We continue to direct a selection of our traditional catalog
customers to our road sales professionals. We believe these efforts have contributed to the growth
in our net sales volume and anticipate this trend will continue in future periods as our road sales
professionals continue to expand the number of face to face sales calls with our traditional
institutional customers. Although we do from time to time adjust the selling price of our
products, we do not believe that any price adjustments during the quarter contributed to our
increase in net sales. The decrease in gross profit margin for the fiscal quarter ended March 31, 2005 (35.1%),
compared to the fiscal quarter ended March 31, 2004 (37.1%),was primarily due to the increase in
sales of our soft goods by our road sales professionals. Historically, we have recognized a higher
gross profit margin from our sale of sporting goods and equipment than we have from the sale of
soft goods. For the fiscal quarter ended March 31, 2005, $9.0 million of our net sales
(approximately 33.3% of our net sales for the quarter) were from the sale of soft goods.
Consequently, our overall gross profit margin was affected by our additional sales of soft goods
during the fiscal quarter ended March 31, 2005, compared to the same fiscal quarter last year. No
other factor contributed to our decrease in gross profit margins for the fiscal quarter ended
March 31, 2005. - 13 -




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However, the Company actually experienced an increase in its gross profit margin for the
fiscal quarter ended March 31, 2005 (35.1%), compared to the fiscal quarter ended December 31, 2004
(33.2%) and we believe this trend will continue as we complete our field training efforts with our
road sales professionals and recognize the results of those efforts in the form of increased sales
of our sporting goods and equipment. Prior to working for the Company, our road sales
professionals historically sold only soft goods. As our road sales professionals continue to
increase their sales of our sporting goods and equipment, along with our soft goods, we anticipate
our gross profit margin percentage will continue to be positively impacted to the extent our sales
of sporting goods and equipment increase at a faster rate than our sales of soft goods. We are also increasing our efforts to replace our domestically sourced sporting goods and
equipment with comparable products from international sources. We believe that by sourcing some
additional products from international suppliers we will be able to decrease the acquisition cost
of our inventory and thereby increase our gross profit margins from the sale of those products. Selling, General and Administrative Expenses.Selling, general and administrative (SG&A)
expenses for the fiscal quarter ended March 31, 2005, were $7.5 million, or 27.6% of net sales,
compared with $2.6 million, or 23.6% of net sales, for the fiscal quarter ended March 31, 2004. The
primary components of our SG&A expenses are personnel costs, advertising expenses, travel expenses,
rent, professional services and insurance costs. The increase in SG&A expenses for the fiscal quarter ended March 31, 2005, was primarily
attributable to Collegiate Pacifics acquisitions after March 31, 2004, and early fiscal 2005,
which contributed a combined $4.4 million to our total SG&A expenses for the fiscal quarter ended
March 31, 2005. These expenses consisted of $3.1 million for personnel related costs, $0.6 million
for various selling and office expenses, $0.3 million for rent expense, $0.2 million for travel
expenses and $0.2 million for advertising expenses. In addition to the increase in our SG&A
expenses that was attributable to our acquisitions, we also experienced additional advertising
costs in the amount of $0.2 million, personnel related costs in the amount of $0.1 million for
additional personnel, and other selling costs in the amount of $0.2 million, all of which were
incurred in connection with the Companys growth. Operating Profit.Operating profit for the fiscal quarter ended March 31, 2005, increased to
$2.0 million, or 7.4% of net sales, compared to an operating profit of $1.5 million, or 13.4% of
net sales for the fiscal quarter ended March 31, 2004. The increase in operating profit was
primarily attributable to higher sales volume, partially offset by higher SG&A expenses. Interest Expense.Interest expense for the fiscal quarter ended March 31, 2005, increased to
$899 thousand, compared to $5 thousand for the fiscal quarter ended March 31, 2004. The increase in
interest expense is attributable to interest incurred on the 5.75% Convertible Senior Subordinated
Notes due 2009 (the Notes) during the fiscal quarter ended March 31, 2005. See Liquidity and
Capital Resources. Income Taxes.Income tax expense for the fiscal quarter ended March 31, 2005, decreased to
$515 thousand, which is approximately 39.5% of our income before taxes, compared to $606 thousand
for the fiscal quarter ended March 31, 2004. The decrease in income tax expense is attributable to
the decrease in income before taxes caused by the increase in interest expense associated with the
Notes. Net Income.Net income for the fiscal quarter ended March 31, 2005, decreased to $788
thousand, or 2.9% of net sales, compared to net income of $895 thousand, or 8.0% of net sales, - 14 -




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for
the fiscal quarter ended March 31, 2004. The decrease in net income was primarily driven by the
interest expense associated with the Notes, as well as an increase in SG&A expenses as a percentage
of net sales, which was offset by a decrease in income tax expense. Nine Months Ended March 31, 2005 Compared to Nine Months Ended March 31, 2004 Net Sales.Net sales for the nine months ended March 31, 2005, totaled $78.5 million compared
to $21.4 million for the nine months ended March 31, 2004, an increase of $57.1 million, or 267.5%.
Net sales grew by a combined $54.5 million from the businesses we acquired during fiscal 2004 and
fiscal 2005, and reflect the results of our efforts during the nine months ended March 31, 2005, to
direct a selection of our traditional catalog customers to our acquired road sales professionals.
These efforts have contributed to the growth in net sales for each of our acquired businesses. We
believe that if we can successfully service a selection of our traditional catalog customers with
our road sales professionals, we will continue to grow our net sales through greater account
penetration and retention. The increase in net sales for our existing catalog operations was due to
our expanded product offerings and the overall growth in our customer base. We believe future net
sales will continue to rise from current levels, however, no assurances can be made that any future
increases in net sales will be at the same rate. Historically, sales of our sporting goods have experienced seasonal fluctuations. This
seasonality causes our financial results to vary from quarter to quarter, which usually results in
lower net sales and operating profit in the second quarter of our fiscal year (October through
December) and higher net sales and operating profit in the remaining quarters of our fiscal year.
We attribute this seasonality primarily to the budgeting procedures of our customers and the
seasonal demand for our products, which have historically been driven by spring and summer sports.
Generally, between the months of October and December of each fiscal year, there is a lower level
of sports activities at our historical institutional customer base, a higher degree of adverse
weather conditions and a greater number of school recesses and major holidays. We believe that our
recent acquisitions of Kesslers, Dixie and OTS, which have a greater focus on fall and winter
sports, as well as recent additions to our team of road sales professionals, may reduce the
seasonality of our financial results. Gross Profit. Gross profit for the nine months ended March 31, 2005, was $26.8 million, or
34.1% of net sales, compared with $7.9 million, or 37.0% of net sales, for the nine months ended
March 31, 2004. In the nine month period ended March 31, 2005, Tomark, Kesslers, Dixie and OTS
contributed a combined gross profit of $18.0 million and gross profit margin of 33.0%. We include the acquisition cost of our inventory, the cost of shipping and handling (freight
costs), our manufacturing costs and any write-off of obsolete or
damaged inventory in our determination
of our total cost of sales. Our total cost of sales for the nine months ended March 31, 2005, was
$51.7 million, or 65.9% of net sales, compared to $13.5 million, or 63.0% of net sales in the same
period last fiscal year. Our total cost of sales for the nine months ended March 31, 2005,
consisted of $46.4 million for the acquisition cost of our inventory, $4.5 million in freight
costs, a $397 thousand write-off of obsolete or damaged inventory, and $396 thousand for labor and overhead
costs associated with the equipment we manufacture. The increase in our gross profit was due to the increase in our net sales during the nine
months ended March 31, 2005. We continue to direct a selection of our traditional catalog
customers to our road sales professionals. We believe these efforts have contributed to the growth
in our net sales volume and anticipate this trend will continue in future periods as our road
sales professionals continue to expand the number of face to face sales calls with our
traditional institutional customers. Although we do from time to time adjust the selling price of
our - 15 -




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products, we do not believe that any price adjustments during the year have contributed to our
increase in net sales. The decrease in gross profit margin for the nine months ended March 31, 2005 (34.1%), compared
to the nine months ended March 31, 2004(37.0%),was primarily due to the increase in sales of our
soft goods by our road sales professionals. Historically, we have recognized a higher gross profit
margin from our sale of sporting goods and equipment than we have from the sale of soft goods.
During the nine months ended March 31, 2005, $34.0 million of our net sales (approximately 43.4% of
our net sales for the nine month period) were from the sale of soft goods. Consequently, our
overall gross profit margin was affected by our additional sales of soft goods during the nine
months ended March 31, 2005, compared to the same nine-month period last fiscal year. No other
factor contributed to our decrease in gross profit margin for the nine months ended March 31, 2005. However, the Company actually experienced an increase in its gross profit margin for the
fiscal quarter ended March 31, 2005 (35.1%), compared to the fiscal quarter ended December 31, 2004
(33.2%) and we believe this trend will continue as we complete our field training efforts with our
road sales professionals and recognize the results of those efforts in the form of increased sales
of our sporting goods and equipment. Prior to working for the Company, our road sales
professionals historically sold only soft goods. As our road sales professionals continue to
increase their sales of sporting goods and equipment, along with our soft goods, we anticipate our
gross profit margin percentage will continue to be positively impacted to the extent our sales of
sporting goods and equipment increase at a faster rate than our sales of soft goods. We are also increasing our efforts to replace our domestically sourced sporting goods and
equipment with comparable products from international sources. We believe that by sourcing some
additional products from international suppliers we will be able to decrease the acquisition cost
of our inventory and thereby increase our gross profit margins from the sale of those products. Selling, General and Administrative Expenses.SG&A expenses for the nine months ended March
31, 2005, were $20.0 million, or 25.4% of net sales, compared with $6.2 million, or 29.1% of net
sales, for the nine months ended March 31, 2004. The primary components of our SG&A expenses are
personnel costs, advertising expenses, travel expenses, rent, professional services and insurance
costs. The increase in SG&A expenses for the nine months ended March 31, 2005, was primarily
attributable to Collegiate Pacifics acquisitions in fiscal 2004 and early fiscal 2005, which
contributed a combined $12.9 million to our total SG&A expenses for the nine months ended March 31,
2005. These expenses consisted of $8.9 million for personnel related costs, $1.4 million for
various selling and office expenses, $0.7 million for rent expense, $0.7 million for travel
expenses, $0.4 million for advertising expenses, $0.4 million for bad debts, $0.2 million for
insurance, and $0.2 million in amortization expenses associated with intangible assets acquired in
connection with the acquisitions. In addition to the increase in our SG&A expenses that was
attributable to our acquisitions, we also experienced increases in expenses related to professional
services in the amount of $0.4 million, personnel related costs in the amount of $0.3 million for
additional personnel, and other selling costs in the amount of $0.2 million, all of which were
incurred in connection with the Companys growth. Operating Profit.Operating profit for the nine months ended March 31, 2005, increased to
$6.6 million, or 8.4% of net sales, compared to operating profit of $1.6 million, or 7.7% of net - 16 -




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sales for the nine months ended March 31, 2004. The increase in operating profit was primarily
attributable to higher sales volume and a decrease in SG&A expenses as a percentage of net sales. Interest Expense.Interest expense for the nine months ended March 31, 2005, increased to
$1.2 million, compared to $29 thousand for the nine months ended March 31, 2004. The increase in
interest expense is attributable to interest incurred on the Notes during the nine months ended
March 31, 2005. See Liquidity and Capital Resources. Income Taxes.Income tax expense for the nine months ended March 31, 2005, increased to $2.3
million, which is approximately 40.4% of our income before taxes. Income tax expense for the nine
months ended March 31, 2004, was $676 thousand, or approximately 41.3% of income before taxes, and
included additional provisions to correct the year to date tax amount to the expected year-end
effective rate. Net Income.Net income for the nine months ended March 31, 2005, increased to $3.4 million,
or 4.4% of net sales, compared to net income of $961 thousand, or 4.5% of net sales, for the nine
months ended March 31, 2004. The increase in net income was attributable to an increase in net
sales, as well as a decrease in SG&A expenses as a percentage of net sales, which was offset by the
increase in income tax expense. Liquidity and Capital Resources Cash Flow Activity Cash and cash equivalents totaled approximately $41.0 million at March 31, 2005, compared to
approximately $7.5 million at June 30, 2004. The increase in cash is attributable to the note
offering the Company completed in November 2004. Collegiate Pacifics operating activities
utilized approximately $5.5 million in cash during the nine months ended March 31, 2005, compared
to utilizing approximately $610 thousand during the nine months ended March 31, 2004. The net
increase in cash utilized by operating activities was due to:  
    An increase in accounts receivable of $5.3 million due to the increase in our net
sales during the nine-month period ended March 31, 2005;
    An increase in inventories of $2.6 million due to our build-up of inventory to
support the Companys strongest selling season, which generally occurs during the
months of January through September. We expect inventory levels to continue to
increase slightly during the last quarter of our fiscal year, which ends June 30,
2005, to support the balance of our selling season;
    A decrease in income taxes payable of approximately $1.2 million due to increased
estimated tax payments associated with the increase in the Companys net income for
the nine months ended March 31, 2005; and
    An increase in prepaid expenses of approximately $1.2 million due to the payment
of the Companys annual insurance premiums in November 2004, as well as increased
advertising expenses associated with the Companys spring catalog, which are being
amortized over the remainder of the current fiscal year ending June 30, 2005. Net cash used in investing activities was $7.1 million during the nine months ended March 31,
2005, compared to approximately $2.2 million for the nine months ended March 31, 2004. The
increase in cash used in investing activities during the nine months ended March 31, 2005,
was attributable to cash used for the acquisitions of Dixie and OTS of $6.7 million, which is
net - 17 -




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of the amount of cash acquired in connection with those acquisitions. No material commitments
for capital expenditures existed as of March 31, 2005. Net cash provided by financing activities during the nine months ended March 31, 2005, was
$46.1 million, compared to approximately $9.5 million during the nine months ended March 31, 2004.
The net increase in cash provided by financing activities during the nine months ended March 31,
2005, was due to:  
    Net proceeds from the sale of the Notes of $46.6 million, after debt issuance
costs;
    Proceeds from the issuance of common stock upon the exercise of options of
approximately $454 thousand;
    Net payments on the Companys revolving line of credit and other notes payable of
$193 thousand; and
    Payment of dividends of approximately $751 thousand during the nine-month period
ended March 31, 2005. The net cash provided by financing activities during the same nine-month period in 2004 was
due to:  
    Proceeds from the issuance of common stock upon the exercise of common stock
warrants and options of approximately $10.8 million;
    Repayments on the Companys revolving line of credit of approximately $834
thousand;
    The payment of dividends of approximately $372 thousand during the nine-month
period ended March 31, 2004; and
    The purchase of treasury shares of approximately $41 thousand. Current assets as of March 31, 2005, totaled approximately $77.9 million, thereby providing
the Company with working capital of approximately $66.7 million. Capital Structure and Resources On November 26, 2004, the Company announced the completion of its sale of $40.0 million
principal amount of the Notes. The Notes were sold to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the Securities Act). Thomas Weisel
Partners LLC (Thomas Weisel) was the initial purchaser of the Notes. On December 3, 2004, the
Company announced the completion of its sale of an additional $10.0 million principal amount of
Notes pursuant to the exercise by Thomas Weisel of the option granted to it in connection with the
initial offering of the Notes. The issuance of the Notes resulted in aggregate proceeds of $46.6
million to the Company, net of issuance costs. The Notes are governed by the Indenture dated as of November 26, 2004, between the Company and
The Bank of New York Trust Company N.A., as trustee (the Indenture). The Indenture provides,
among other things, that the Notes will bear interest of 5.75% per year, payable semi-annually and
will be convertible into the Companys common stock at a conversion rate of 68.2594 shares per
$1,000 principal amount of Notes, subject to certain adjustments. This is equivalent to a
conversion price of approximately $14.65 per share. On or after December 31, 2005, the Company may
redeem the Notes, in whole or in part, at the redemption price, which is 100% of the principal
amount, plus accrued and unpaid interest and additional interest, if any, to, but excluding, the
redemption date only if the closing price of the Companys common stock
exceeds 150% of the conversion price for at least 20 trading days in any consecutive 30-day - 18 -




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trading period. The Company will make an additional payment in cash with respect to the Notes
called for redemption on or before December 10, 2007, in an amount equal to $172.50 per $1,000
principal amount of the Notes, less the amount of any interest actually paid on the Notes before
the redemption date. In addition, upon the occurrence of a fundamental change, holders may require
the Company to purchase all or a portion of the Notes in cash at a price equal to 100% of the
principal amount of Notes to be repurchased, plus accrued and unpaid interest and additional
interest, if any, to, but excluding, the repurchase date, plus the make whole premium, if
applicable. In connection with the completion of the sale of the Notes, on November 26, 2004, the Company
entered into a registration rights agreement with Thomas Weisel (the Registration Rights
Agreement). Under the terms of the Registration Rights Agreement, the Company was required to file
a registration statement with the Securities and Exchange Commission for the registration of the
Notes and the shares issuable upon conversion of the Notes. On January 24, 2005, the Company filed
a Registration Statement on Form S-3 with the Securities and Exchange Commission for the
registration of the Notes and the shares issuable upon conversion of the Notes (the Registration
Statement) and Amendment No. 1 to the Registration Statement on April 5, 2005. The Registration
Statement has not been declared effective under the Securities Act. If the Registration Statement
has not been declared effective by May 26, 2005, the annual interest rate payable under the Notes
will increase from 5.75% to 6.0% until the Registration Statement has been declared effective. The Companys principal external source of liquidity is its $12 million revolving line of
credit (the Credit Facility) with Merrill Lynch Business Financial Services Inc. (MLBFS), which
is collateralized by all of the assets of Collegiate Pacific and its subsidiaries. Total
availability under the Credit Facility is determined by a borrowing formula based on eligible trade
receivables and inventories that provides for borrowings against up to 80% of its eligible trade
receivables and 50% of its eligible inventories, but not to exceed $12 million. Borrowings under
the Credit Facility bear interest at the rate of 2.25% plus the one-month LIBOR rate (5.1% at March
31, 2005). As of March 31, 2005, there was no balance outstanding under the Credit Facility,
leaving the Company with approximately $12 million of availability under the terms of the borrowing
base formula of the Credit Facility. The Credit Facility contains customary covenants and the
Company must maintain certain financial ratios pertaining to its fixed charges and total debt to
(a) total net worth and (b) earnings before interest, taxes, depreciation and amortization
(EBITDA). As of March 31, 2005, the Company was in compliance with all financial covenants and ratios,
except for its fixed charge coverage ratio. However, on May 12, 2005, and without any declaration
or notice of default by MLBFS, MLBFS agreed to waive the Companys compliance with its fixed charge
coverage ratio for the trailing 12-months ended March 31, 2005, and amend the ratio pursuant to the
terms of a letter agreement (the May 12 Letter Agreement). Prior to the May 12 Letter Agreement, the Credit Facility provided that the Companys ratio of
(a) EBITDA and other non-cash charges, less any internally financed capital expenditures, on a
trailing 12-month basis, to (b) the sum of (i) dividends and other distributions paid or payable to
shareholders of the Company, taxes, and interest expense, on a trailing 12-month basis, plus (ii)
the aggregate amount of principal scheduled to be paid or accrued by the Company on all outstanding
indebtedness over the succeeding 12-month period (the Fixed Charge Coverage Ratio) must exceed
1.50 to 1 on a trailing 12-month basis. As of March 31, 2005, the Companys Fixed Charge Coverage
Ratio was 1.40 to 1. Under the terms of the May 12 Letter Agreement, the Companys Fixed
Charge Coverage Ratio on a trailing 12-month basis must now
exceed 1.30 to 1. See Item 5 Other Events of Part II Other Information below. The Company is - 19 -




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currently in compliance with all financial covenants and ratios and management does not believe
that the financial covenants or ratios set forth in the Credit Facility will have an adverse impact
on its operations or future plans. Management believes that all of the Companys financial
covenants and ratios now take into account the issuance of the Notes and the interest payable
thereunder. Our strategic plan involves growth through the acquisition of other companies and we actively
pursue acquisitions in connection with this plan. At any time we may be in various stages of
discussions or negotiations with several parties regarding possible acquisitions or other
alliances. We used approximately $1.2 million of the net proceeds from the Notes to pay all
outstanding principal and accrued interest under the Credit Facility and approximately $1.8 million
in connection with our acquisition of OTS. We intend to use the balance of the net proceeds from
the Notes for general corporate purposes, including future acquisitions. Long-Term Financial Obligations and Other Commercial Commitments The following table summarizes the outstanding borrowings and long-term contractual
obligations of the Company at March 31, 2005, and the effects such obligations are expected to have
on liquidity and cash flow in future periods. Payments due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 year
    
    
    1 - 3 years
    
    
    4 - 5 years
    
    
    5 years(dollars in thousands)Long-term debt
    
    $
    50,604
    
    
    $
    271
    
    
    $
    200
    
    
    $
    50,133
    
    
    $
    Interest expense on
long-term debt
    
    
    14,645
    
    
    
    3,864
    
    
    
    5,750
    
    
    
    5,031
    
    
    
    Operating leases
    
    
    3,346
    
    
    
    1,086
    
    
    
    1,683
    
    
    
    554
    
    
    
    23Total contractual cash
obligations
    
    $
    68,595
    
    
    $
    5,221
    
    
    $
    7,633
    
    
    $
    55,718
    
    
    $
    23
 We believe the Company will satisfy its short-term and long-term liquidity needs from
borrowings under the Credit Facility, proceeds from the sale of the Notes and cash flows from
operations. We may experience periods of higher borrowing under the Credit Facility due to the
seasonal nature of our business cycle. We are actively seeking expansion through acquisitions
and/or joint ventures, and the success of such efforts may require additional bank debt, equity
financing, or private financing. Critical Accounting Policies Collegiate Pacifics discussion and analysis of its financial condition and results of
operations are based upon the Companys consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, expenses, and related disclosures of contingent assets
and liabilities. Discussed below are several significant accounting policies, which require the use of
judgments and estimates that may materially affect the consolidated financial statements. The
estimates described below are reviewed from time to time and are subject to change if the
circumstances so indicate. The effect of any such change is reflected in results of operations for - 20 -




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the period in which the change is made. Establishment of the reserves affecting inventories
and the allowance for doubtful accounts are among the most important. Inventories.Inventories are valued at the lower of cost or market value. Cost is determined
using the standard cost method for items manufactured by us and the weighted-average cost method
for items purchased for resale. We record adjustments to our inventories for estimated
obsolescence or diminution in market value equal to the difference between the cost of inventory
and the estimated market value, based on market conditions from time to time. These adjustments are
estimates, which could vary significantly from actual experience if future economic conditions,
levels of customer demand or competitive conditions differ from expectations. Allowance for Doubtful Accounts.We evaluate the collectibility of accounts receivable based
on a combination of factors. In circumstances where there is knowledge of a specific customers
inability to meet its financial obligations, a specific reserve is recorded against amounts due to
reduce the net recognized receivable to the amount that is reasonably believed to be collected. For
all other customers, reserves are established based on historical bad debts, customer payment
patterns and current economic conditions. The establishment of these reserves requires the use of
judgment and assumptions regarding the potential for losses on receivable balances. If the
financial condition of our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required resulting in an additional charge
to expenses when made. At March 31, 2005, our total allowance for doubtful accounts was approximately $953 thousand,
an increase of $318 thousand from June 30, 2004. The increase in the amount of our allowance for
doubtful accounts for the nine months ended March 31, 2005, is mainly due to allowances for
doubtful accounts that arose from the business acquisitions we completed during the nine months
ended March 31, 2005, as well as an increase in accounts receivable at March 31, 2005, compared to
June 30, 2004. Intangible Assets.We assess the recoverability of the carrying value of long-lived assets
periodically. If circumstances suggest that long-lived assets may be impaired, and a review
indicates that the carrying value will not be recoverable, the carrying value is reduced to its
estimated fair value. As of March 31, 2005, the balance sheet includes approximately $24.2 million
of goodwill and net intangible assets, and $1.3 million of fixed assets, net of accumulated
depreciation. The Company has concluded that no impairment exists. Statement Regarding Forward-Looking Disclosure This Quarterly Report onForm 10-QSB, including Managements Discussion and Analysis of
Financial Condition and Results of Operations in Item 2, contains forward-looking statements that
involve risks and uncertainties, as well as assumptions that, if they never materialize or prove
incorrect, could cause the results of Collegiate Pacific and its consolidated subsidiaries to
differ materially from those expressed or implied by such forward-looking statements. All
statements other than statements of historical fact are statements that could be deemed
forward-looking statements, including any projections of net sales, gross profit margin, expenses,
earnings or losses from operations, synergies or other financial items; any statements of the
plans, strategies and objectives of management for future operations; any statements regarding
future economic conditions or performance; any statements of expectation or belief; and any
statements of assumptions underlying any of the foregoing. The risks, uncertainties and
assumptions referred to above include Collegiate Pacifics ability to successfully execute its
acquisition plans and growth strategy, integration of acquired businesses, global economic
conditions, product demand, financial market performance and other risks that are described - 21 -




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herein, including but not limited to the items described from time to time in Collegiate
Pacifics Securities and Exchange Commission reports, including Collegiate Pacifics Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2004. Collegiate Pacific cautions that the
foregoing list of important factors is not exclusive. Any forward-looking statements included in
this report are made as of the date of filing of this report with the Securities and Exchange
Commission, and we assume no obligation and do not intend to update these forward-looking
statements. - 22 -




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Item 3. Controls and Procedures. Evaluation of Disclosure Controls and Procedures. An evaluation was carried out
under the supervision and with the participation of the Companys management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the Companys disclosure
controls and procedures (as defined in §240.13a15(e) or §240.15d15(e) of the General Rules and
Regulations of the Securities Exchange Act of 1934) as of the end of the period covered by this
Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer believe the Companys disclosure controls and procedures are effective. Changes in Internal Control Over Financial Reporting. During the period covered by
this Quarterly Report, there was no change to the Companys internal control over financial
reporting or in other factors that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting. - 23 -




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PART II. OTHER INFORMATION 
 Item 5. Other Events. A. Acquisition of Salkeld and Sons Inc. On May 11, 2005, the Company completed its previously announced acquisition of all of the
outstanding capital stock of Salkeld and Sons Inc. (Salkeld),a Delaware corporation, from its
stockholders (the Stockholders) for total consideration of approximately $2.73 million, exclusive
of transaction related costs, pursuant to the terms of a Stock Purchase Agreement, dated May 11,
2005, by and among the Company and the Stockholders (the Purchase Agreement). The Company paid
approximately $2.5 million of the total consideration in cash and $230 thousand with promissory
notes. In addition, the Company agreed to pay the Stockholders up to an additional $1.1 million in
the form of an earnout if Salkelds gross profit exceeds a certain target level during the 12-month
period ending April 30, 2006. At the option of the Company, the earnout may be paid in cash or
shares of the Companys common stock, which shall be determined by dividing the actual earnout
amount by the average closing price of the Companys common stock on AMEX for the five trading days
prior to the payment of the earnout amount. The Purchase Agreement includes customary representations, warranties and covenants by all
parties, which generally survive for 18 months after the closing, except for certain
representations by the Stockholders that survive until the expiration of the applicable statute of
limitations. Except for claims for fraud, the Purchase Agreement also includes indemnification
provisions that limit the liability of the parties to the amount of the purchase price. The foregoing description of the Purchase Agreement does not purport to be complete and is
qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed
as Exhibit 10.1 to this Quarterly Report on Form 10-QSB. B. Consent Agreement. Under the terms of the Companys revolving credit facility (the Credit Facility) with
Merrill Lynch Business Financial Services Inc. (MLBFS), the Company is required to obtain the
consent of MLBFS prior to consummating certain acquisitions. In connection with its acquisition of
Salkeld, on May 9, 2005, the Company entered into a consent agreement with MLBFS providing for
MLBFSs consent to the Companys acquisition of Salkeld. C. Waiver and Amendment to Credit Facility. On May 12, 2005, the Company, its subsidiaries and MLBFS entered into a letter agreement (the
May 12 Letter Agreement) pursuant to which MLBFS agreed to waive the Companys compliance with
its fixed charge coverage ratio under the Credit Facility and amend the Companys fixed charge
coverage ratio. Under the terms of the Credit Facility, the Companys ratio of (a) earnings before
interest (including payments in the nature of interest under capital leases), taxes, depreciation,
amortization and other non-cash charges, less any internally financed capital expenditures, on a
trailing 12-month basis, to (b) the sum of (i) dividends and other distributions paid or payable to
shareholders of the Company, taxes, and interest expense, on a trailing 12-month basis, plus (ii)
the aggregate amount of principal scheduled to be paid or accrued by the Company on all outstanding
indebtedness over the succeeding 12-month period (the Fixed Charge Coverage Ratio) must exceed
1.50 to 1. - 24 -




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For the 12-month period ended March 31, 2005, the Companys Fixed Charge Coverage Ratio was
1.40. However, pursuant to the terms of the May 12 Letter Agreement and without any declaration or
notice of default by MLBFS, MLBFS agreed to waive the Companys compliance with its Fixed Charge
Coverage Ratio for the twelve months ended March 31, 2005, and amend the Fixed Charge Coverage
Ratio by changing the Fixed Charge Coverage Ratio to 1.30 to 1 effective as of May 12, 2005. As of
March 31, 2005, the Company did not have any amount outstanding under the Credit Facility and no
amount is outstanding under the Credit Facility as of the date of this Quarterly Report on Form
10-QSB. 
 Item 6. Exhibits. A. Exhibits. The following exhibits are filed as part of this report: ExhibitNumber
    
    Exhibit10.1
    
    Stock Purchase Agreement, dated May 11, 2005, by and among Collegiate Pacific Inc., Albert A.
Messier and Daniel F. Salkeld.*10.2
    
    Consent Agreement, dated May 9, 2005, by and among Merrill Lynch Business Financial Services
Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc., Dixie Sporting
Goods Co., Inc. and CMS of Central Florida, Inc.*10.3
    
    Letter Agreement, dated May 12, 2005, by and among Merrill Lynch Business Financial Services
Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc., Dixie Sporting
Goods Co., Inc. and CMS of Central Florida, Inc.*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 - 25 -




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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: May 16, 2005
    
    /s/ Michael J. BlumenfeldMichael J. Blumenfeld, Chairman andChief Executive Officer/s/ William R. EstillWilliam R. Estill, Chief Financial Officer(Principal Financial and Accounting Officer)
 - 26 -




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EXHIBIT INDEX ExhibitNumber
    
    Exhibit10.1
    
    Stock Purchase Agreement, dated May 11, 2005, by and among Collegiate Pacific Inc., Albert A.
Messier and Daniel F. Salkeld.*10.2
    
    Consent Agreement, dated May 9, 2005, by and among Merrill Lynch Business Financial Services
Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc., Dixie Sporting
Goods Co., Inc. and CMS of Central Florida, Inc.*10.3
    
    Letter Agreement, dated May 12, 2005, by and among Merrill Lynch Business Financial Services
Inc., Collegiate Pacific Inc., Tomark Sports, Inc., Kesslers Team Sports, Inc., Dixie Sporting
Goods Co., Inc. and CMS of Central Florida, Inc.*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