10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number:  0-24583

ADAMS GOLF, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	75-2320087
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2801 E. Plano Pkwy, Plano, Texas	75074
(Address of principal executive offices)	(Zip Code)

(302) 427-5892

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock $.001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes   x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes   x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one)

Large accelerated filer o      Accelerated filer o       Non-accelerated filer x       Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

o Yes   x No

The aggregate market value of the Registrant's common stock held by nonaffiliates of the Registrant at June 30, 2007 was $31,098,050 based on the closing sales price of $8.16 per share of the Registrant's common stock on the OTC Bulletin Board.

The number of outstanding shares of the Registrant's common stock, par value $.001 per share, was 6,221,745 on March 7, 2008. On February 19, 2008, we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing in a one-to-four ratio.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the Registrant's definitive proxy statement, which will be filed on or before April 30, 2008, for the Annual Meeting of Stockholders to be held on or about May 20, 2008.

ADAMS GOLF, INC.

FORM 10-K

TABLE OF CONTENTS

PART I
	Item 1.	Business	Page 3
	Item 1A.	Risk Factors	Page 11
	Item 2.	Properties	Page 17
	Item 3.	Legal Proceedings	Page 17
	Item 4.	Submission of Matters to a Vote of Security Holders	Page 19
PART II
	Item 5.	Market for Registrant's Common Equity and Related Stockholders Matters and Issuer Purchases of Equity Securities	Page 19
	Item 6.	Selected Financial Data	Page 22
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	Page 23
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	Page 31
	Item 8.	Financial Statements and Supplementary Data	Page 31
	Item 9A(T).	Controls and Procedures	Page 31
PART III
	Item 10	Directors and Executive Officers of the Registrant	Page 33
	Item 11	Executive Compensation	Page 33
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	Page 33
	Item 13	Certain Relationships and Related Transactions	Page 33
	Item 14	Principal Accounting Fees and Services	Page 33
PART IV
	Item 15	Exhibits and Financial Statement Schedules	Page 34

1

Forward Looking Statements

This Annual Report contains "forward-looking statements" made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, without limitation, in the notes to the consolidated financial statements included in this Annual Report and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Annual Report. Any and all statements contained in this Annual Report that are not statements of historical fact may be deemed forward-looking statements. The statements include, but are not limited to: statements regarding pending litigation, statements regarding liquidity and our ability to increase revenues or achieve satisfactory operational performance, statements regarding our ability to satisfy our cash requirements and our ability to satisfy our capital needs, including cash requirements during the next twelve months, statements regarding our ability to produce products commercially acceptable to consumers and statements using terminology such as "may," "might," "will," "would," "should," "could," "project," "pro forma," "predict," "potential," "strategy," "attempt," "develop," "continue," "future," "expect," "intend," "estimate," "anticipate," "plan," "seek" or "believe." Such statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions related to certain factors including, without limitation, the following:

—  Product development difficulties;

—  Product approval and conformity to governing body regulations;

—  Assembly difficulties;

—  Product introductions;

—  Patent infringement risks;

—  Uncertainty of the ability to protect intellectual property rights;

—  Market demand and acceptance of products;

—  The impact of changing economic conditions;

—  The future market for our capital stock;

—  The success of our marketing strategy;

—  Our dependence on one supplier for a majority of our inventory products;

—  Our dependence on suppliers who are concentrated in one geographic region;

—  Our dependence on a limited number of customers;

—  Business conditions in the golf industry;

—  Reliance on third parties, including suppliers, and freight transporters;

—  The actions of competitors, including pricing, advertising and product development risks concerning future technology;

—  The management of sales channels and re-distribution;

—  The uncertainty of the results of pending litigation;

—  The adequacy of the allowance for doubtful accounts, obsolete inventory and warranty reserves;

—  The risk associated with events that may prove unrecoverable under existing insurance policies; and

—  The impact of operational restructuring on operating results and liquidity and one-time events and other factors detailed in this Annual Report under "Risk Factors" in Part I, Item 1A, below.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein. Except as required by federal securities laws, we undertake no obligation to publicly update or revise any written or oral forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Annual Report. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

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Item 1. Business

General

We design, assemble, market and distribute premium quality, technologically innovative golf clubs for all skill levels, including Idea a3 and a3 OS irons, Idea a2 and a2 OS irons, Idea Tech OS irons, Idea Pro Irons and Idea a3 and a3 OS, Idea a2 and a2 OS, Idea Tech OS and Idea Pro I-woods, Insight XTD A3 &A3 OS drivers and hybrid-fairway woods, RPM drivers and fairway woods, the Ovation family of drivers, fairway woods and irons, the Tight Lies family of fairway woods, the Redline family of fairway woods and drivers, Tight Lies GT500 and GT3 irons and i-woods, the Tom Watson signature and Puglielli series of wedges, and certain accessories. In addition, under Women's Golf Unlimited we distribute the Lady Fairway and Square 2 brands.

We were incorporated in 1987 and re-domesticated in Delaware in 1990. We completed an internal reorganization in 1997, and we now conduct our operations through several direct and indirect wholly-owned subsidiaries, agencies and distributorships

Segments and Products

Adams Golf operates in a single segment within the golf industry (golf clubs and accessories) and financial information for the segment may be found in the financial statements attached as Exhibits hereto. Specifically, we offer more than one class of product within that segment:

Irons

In June 2007 we launched our Idea a3 line of hybrid iron sets and in September 2007 we launched our Idea a3 OS line of hybrid irons and integrated sets. The a3 irons are offered in an 8 piece men’s, women's and senior set, with three graphite-shafted hybrid irons integrated into the set. The a3 set of irons won a Gold designation in the 2008 Golf Digest Hot List voting, and were the category leader in “Outstanding Technology” in the iron category. The Idea a3 OS irons are offered in 3 different 8 piece configurations—one for men, one for women, and one for seniors. The a3 OS set of irons won a Gold designation in the 2008 Golf Digest Hot List voting, and were the category leader in “Outstanding Function” in the iron category. We also offer 4 different color versions of the Idea a3 OS Women’s 13 piece set. The set includes a 460cc titanium driver, 2 fairway woods, an 8 piece Women’s Idea a3 OS iron set with 6 hybrid irons integrated into the set, a gap wedge, a putter and a bag.

In September 2006 we launched the Idea Tech OS and Idea Pro series’ of integrated hybrid iron sets. The Idea Tech OS irons are offered in an 8 piece men’s set, women’s set and senior’s set. Each set comes with 4 graphite shafted hybrid irons, with a heel biased adjustable weight port for swing weight, shaft, or length adjustment. These high-tech sets also include titanium faces for increased ball speed and more distance and composite crowns for low center of gravity and high launch. The Idea Pro series is offered in an 8 piece men’s set, which includes 2 Idea Pro hybrids and 6 forged irons. The Idea Pro hybrids won the Editor’s Choice in the hybrid category in the 2007 Golf Digest Hot List voting, and the 6 forged irons are crafted with forged carbon 8620 steel for ultimate feel and sound desired by the better players. The Idea Pro line of irons is an integrated set of tour-proven hybrids and forged irons that are marketed to low handicap golfers.

Drivers

We currently offer a variety of different driver models based on the shape, size and material used in the club head. Our current driver heads are made of titanium, alloy and/or carbon fiber, depending on the model. The shafts of our drivers are generally graphite. In February 2007 we introduced our new Insight BUL, Belle and BTY series of drivers. By dramatically shaping and expanding the perimeter of the club head, we created a club that reached 5,000 MOI (Moment of Inertia). Increased MOI generally reduces side spin, increases ball speed and provides greater stability at impact. During the first quarter of 2008, we are launching the Insight XTD driver line. These drivers offer greater distance and maximized ball speed using the Boxer technology and an expanded impact zone of the face. This driver is the official driver of the Long Drivers of America and won a silver designation in the 2008 Golf Digest Hot List voting.

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Fairway Woods

In February, 2007 we introduced the Insight BUL, Belle and BTY series of fairway woods. We believe the Insight series of fairway woods provides a material advantage to golfers—the clubs include a one-piece titanium face and crown brazed to a stainless steel body. They are the first and only fairway wood currently manufactured in this manner. The Insight fairway woods won a Gold designation in the 2007 Golf Digest Hot List voting, and were the category leader in “Outstanding Technology” in the fairway wood category. During the first quarter of 2008, we are launching the Insight XTD hybrid-fairway woods line. These hybrid-fairway woods use the Boxer technology and are designed to combine desirable properties of both hybrids and fairway woods. The Insight XTD hybrid-fairway woods won a Gold designation in the 2008 Golf Digest Hot List voting, and were the category leader in “Outstanding Technology” in the fairway wood category. We offer a variety of individual hybrids in the recently introduced Idea a3, a3 OS, Tech OS and Idea Pro lines. These individual hybrids are designed to be easier to hit than conventional long irons. The Idea a3 and a3 OS hybrid irons won a Gold designation in the 2008 Golf Digest Hot List voting, and were the category leader in “Outstanding Technology and Function” in the hybrid category. The Idea Pro hybrid line won the Editor’s Choice in the hybrid category in the 2007 Golf Digest Hot List voting, and is gaining increasing popularity on the PGA, Champion’s, Nationwide and LPGA professional golf tours.

Wedges and Other

As a complement to the Idea irons, we offer the Tom Watson signature wedges with a classic profile and the Puglielli wedges. We also offer a line of putters, golf bags, hats and other accessories.

Percentage of Net Sales by Product Class

	2007			2006			2005
Drivers		11.1	%		9.6	%		27.8	%
Fairway Woods		19.5			19.5			25.8
Irons		66.9			67.9			42.4
Wedges and Other		2.5			3.0			4.0
Total		100.0	%		100.0	%		100.0	%

Design and Development

Our design and development team is responsible for developing, testing and introducing new technologies and product designs. This team is currently led by Tim Reed, Vice President-Research and Development. Prior to joining our company, Mr. Reed spent over 18 years in the golf industry and, most notably, was responsible for all new product introductions at TearDrop Golf Company, which included TearDrop Putters and Tommy Armour and Ram brand golf clubs.

Together with management, the design and development team engages in a four-step process to create new products.

4

Market Evaluation - Prior to development of any potential concepts, our management team, in conjunction with the design and development team, performs an evaluation of the current golf market to determine which particular product classes we will pursue for concept development. As a part of the market evaluation, we analyze our current product offerings against current and anticipated competitor products with respect to consumer preferences. To attempt to determine consumer preferences, we utilize our independent sales force, consumer surveys and market intelligence tools that solicit product and design characteristics desired by consumers. Once the consumer product and design characteristics are determined and evaluated, management and the design and development team determine the product classes and types of products that will be pursued for the upcoming season.

Performance Characteristics - For the product classes and the types of products to be offered within those classes, management evaluates the target market for our new concepts and the performance characteristics that are commensurate with the target market. Performance characteristics are always predicated on producing high quality, high performance products. Certain performance characteristics that are evaluated include easy playability, ball flight and spin objectives, desired weight and feel of the product and conformity to U.S. Golf Association ("USGA") golf equipment standards.

Patent Review - We consider patent protection for our technologies and product designs to be an important part of our development strategy; however, we may elect not to seek patent protection for some of our technologies or product designs. We, in conjunction with our patent attorneys, conduct a search of prior art and existing products to determine whether a new product idea may be covered by an existing patent. Patent review, depending upon the complexity of the design involved, generally requires between one and six months to complete; however, this stage of product development typically occurs in conjunction with one or more of the other three R&D steps.

Development - Concurrent with the patent review process, the design and development team begins to develop computer generated working designs incorporating the desired performance characteristics, which are then modeled using in-house rapid prototyping systems. During the development phase, substantial consideration is also given to optimal shaft performance, cosmetics and sound characteristics. Once prototypes are developed, they are subjected to stringent iterative testing requirements to determine if the product will deliver the desired performance. In certain circumstances, prototypes are distributed to consumers to solicit feedback with respect to specific product performance characteristics and consumer perception. Using consumer feedback, subsequent modifications are made to the products to achieve the performance requirements desired by the identified target market.

Historically, the entire process from Market Evaluation through Development has taken from six to twelve months to complete.

Our research and development expenses were approximately $3,698,000, $2,607,000 and $2,285,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

Patents

Our ability to compete effectively in the golf club market may depend on our ability to maintain the proprietary nature of our technologies and products. As of the date hereof, we hold 22 U.S. patents relating to certain products and proprietary technologies and we have 11 patent applications pending. Assuming timely payment of maintenance fees, if any, we expect that the 22 currently issued patents will expire on various dates between 2009 and 2022. We hold patents with respect to the design of the Insight, RPM, Redline, Ovation,Tight Lies fairway wood, the SC Series driver, the Idea and GT irons, including our graphite tipped (GT) shaft, and the Tight Lies ST fairway wood and driver heads. There can be no assurance, however, as to the degree of protection afforded by these or any other patents we hold or as to the likelihood that patents will be issued from the pending patent applications. Moreover, our patents may have limited commercial value or may lack sufficient breadth to adequately protect the aspects of our products to which the patents relate. The U.S. patents we hold do not preclude competitors from developing or marketing products similar to our products in international markets.

5

There can be no assurance that competitors, many of whom have substantially greater resources than we do and have made substantial investments in competing products, will not apply for and obtain patents that will prevent, limit or interfere with our ability to make and sell our products. We are aware of numerous patents held by third parties that relate to products competitive to us. There is no assurance that these patents would not be used as a basis to challenge the validity of our patent rights, to limit the scope of our patent rights, or to limit our ability to obtain additional or broader patent rights. A successful challenge to the validity of our patents may adversely affect our competitive position. Moreover, there can be no assurance that such patent holders or other third parties will not claim infringement by us with respect to current and future products. Because U.S. patent applications are held and examined in secrecy, it is also possible that presently pending U.S. applications will eventually issue with claims that may be infringed by our products or technologies. The defense and prosecution of patent suits is costly and time-consuming, even if the outcome is favorable. This is particularly true in foreign countries where the expenses associated with such proceedings can be prohibitive. An adverse outcome in the defense of a patent suit could subject us to significant liabilities to third parties, require us and others to cease selling products, or require disputed rights to be licensed from third parties. Such licenses may not be available on satisfactory terms, if at all.

Despite our efforts to protect our patent and other intellectual property rights, unauthorized parties have attempted and are expected to continue to attempt to copy all, or certain aspects of, our products. Policing unauthorized use of our intellectual property rights can be difficult and expensive, and while we generally take appropriate action whenever we discover any of our products or designs have been copied, knock-offs and counterfeit products are a persistent problem in the performance-oriented golf club industry. There can be no assurance that our means of protecting our patent and other intellectual property rights will be adequate.

Raw Materials, Manufacturing and Assembly

We manage all stages of manufacturing, from sourcing to assembly, in order to maintain a high level of product quality and consistency. We establish product specifications, select the material used to produce the components and test the specifications of components we receive.

As part of our quality control program, we review the quality assurance programs at the manufacturing facilities of our component part suppliers to monitor adherence to design specifications. In addition to the quality assurance conducted by the suppliers at their facilities, we also conduct random sampling and perform testing of products received from the suppliers or produced at our facility to ensure consistency with our design specifications. Golf clubs are then built by our assembly personnel using the appropriate component parts.

We have put into place a purchasing procedure that strives to negotiate effective terms with various vendors while continuing to ensure the quality of our components. We are frequently re-evaluating existing vendors while testing potential new vendors for all the various product lines we offer. At any time, we may purchase a substantial majority of our volume of a specific component part from a single vendor, but we continually strive to maintain primary and secondary suppliers for each component part. Substantially all of our fairway wood, driver, iron, i-wood, wedge and putter component parts are manufactured in China. A significant portion of our inventory purchases are from one supplier in China; we purchased approximately 46% and 62% of our total inventory purchased for the years ended December 31, 2007 and 2006, respectively, from this one Chinese supplier.

We could, in the future, experience shortages of components or periods of increased price pressures, which could have a material adverse effect on our business, results of operations, financial position and/or liquidity. To date, we have not experienced any material interruptions in supply from any sole supplier.

6

Marketing

The goals of our marketing efforts are to build our brand identity and drive sales through our retail distribution channels. To accomplish these goals, we currently use golf-specific advertising, engage in promotional activities, and capitalize on our relationships with well known professional golfers.

Endemic Advertising - Our primary advertising efforts focus on golf-specific advertising, which include advertising with television commercials that run during golf tournaments and advertising in golf-related magazines and certain newspapers. We also sponsor developmental professional tours and selected golf tournaments.

Promotional Activities - We engage in a variety of promotional activities to sell and market our products. Such activities have included consumer sweepstakes and promotional giveaways with certain purchases.

Relationships with Professional Golfers – We have entered into endorsement contracts with professional golfers on the PGA, Champions PGA, Nationwide and LPGA Tours and believe that having a presence on these tours promotes the image of our product lines and builds brand awareness. On the PGA Tour we have entered into endorsement agreements with professionals such as Rory Sabbatini, Aaron Baddeley, Tommy "Two Gloves" Gainey and Brad Elder. On the Champions Tour, we have entered into endorsement agreements with Tom Watson, Bernard Langer, Scott Hoch, Brad Bryant, D.A. Weibring, Allen Doyle, Des Smyth, R.W. Eaks, Dana Quigley, and Jerry Pate. On the LPGA Tour, we have entered into endorsement agreements with Brittney Lincicome, Brittany Lang, and Taylor Leon. All of the above contracts have various dates of expiration through 2010 and require the use of certain of our products.

Markets and Methods of Distribution

Our net sales are primarily derived from sales to on- and off- course golf shops, sporting goods retailers, mass merchants and, to a lesser extent, international distributors. No assurances can be given that demand for our current products or the introduction of new products will allow us to achieve historical levels of sales in the future.

Sales to Retailers - We sell a majority of our products to selected retailers. We believe our selective retail distribution strategy helps our retailers maintain profitable margins and maximize sales of our products. For the year ended December 31, 2007, sales to U.S. specialty retailers, mass merchants, sporting goods retailers, and on course accounts accounted for approximately 83% of our total net sales, which remained flat compared to the year ended December 31, 2006. As products mature, they may be sold to alternative channels of distribution, which are not in direct competition with selected retailers for premier product lines.

We maintain a field sales staff that at February 22, 2008, consisted of 64 independent sales representatives, one senior vice president, two regional vice presidents, a key accounts director and three regional sales managers, who are in regular personal contact with our retail accounts (approximately 4,000 retailers). These sales representatives, sales managers and regional vice presidents are supported by nine inside sales representatives who maintain contact with our retailers nationwide. The inside sales representatives also serve in a customer service capacity as we believe that superior customer service can significantly enhance our marketing efforts.

International Sales - International sales are made primarily in Europe, Canada, Japan, South Africa and other Asian regions. International sales in Canada are made through an agency relationship. Sales in Japan are made through an independent distributor. Prior to that date, sales were made through our wholly-owned subsidiary. Sales in the United Kingdom are made through an independent distributor. International sales to other countries throughout the world are made through a network of approximately 33 independent distributors. For the years ended December 31, 2007, 2006 and 2005, international sales accounted for approximately 16.9%, 17.1% and 14.1%, respectively, of our net sales.

7

Web Site - We maintain a Web site at www.adamsgolf.com, which allows the visitor to access certain information about our products and heritage, locate retailers, inquire into careers, access corporate information related to corporate governance and news releases, and inquire about contacting us directly. We also maintain www.ladyfairway.com and www.squaretwo.com for information about our Women's Golf Unlimited product lines. We do not currently sell our products via our Web sites.

Unauthorized Distribution and Counterfeit Clubs

Despite our efforts to limit our distribution to selected retailers, some quantities of our products have been found in unapproved outlets or distribution channels, including unapproved retailers conducting business on common internet auction sites. The existence of a "gray market" in our products can undermine the sales of authorized retailers, our agents and our foreign wholesale distributors who promote and support our products and can injure our image in the minds of our customers and consumers. We make efforts to limit or deter unauthorized distribution of our products, but do not believe the unauthorized distribution of our products can be totally eliminated. We do not believe that the unauthorized distribution of our clubs has had, or will have, a material adverse effect on our results of operations, financial condition or competitive position, although there can be no assurance as to future effects resulting from the unauthorized distribution of our products.

In addition, we are occasionally made aware of the existence of counterfeit copies of our golf clubs, particularly in foreign markets. We take action in these situations through local authorities and legal counsel where practical. We do not believe that the availability of counterfeit clubs has had or will have a material adverse effect on our results of operations, financial condition and/or competitive position, although there can be no assurance as to future effects resulting from the unauthorized distribution of our products.

Industry Specific Requirements

We perform ongoing credit evaluation of our wholesale customers' financial condition and generally provide credit without the requirement of collateral from these customers. We measure each customer's financial strength using various key aspects such as, but not limited to, the customer's overall credit risk (via Dun and Bradstreet reports), payment history, track record for meeting payment plans, industry communications, the portion of the customer’s balance that is past due and other various items. We also look at the overall aging of the receivables in total and relative to prior periods to determine the appropriate reserve requirements. Periods will fluctuate depending on the strength of the customers and the change in mix of customer and their respective strength could affect the reserve disproportionately compared to the total change in the accounts receivable balance. We believe we have adequate reserves for potential credit losses. Due to industry sensitivity to consumer buying trends and available disposable income, we have in the past extended payment terms for specific retail customers. Issuance of these terms (i.e. greater than 30 days or specific dating) is dependent on our relationship with the customer and the customer's payment history. Payment terms are extended to selected customers typically during off-peak times in the year in order to promote our brand name and to assure adequate product availability often to coincide with planned promotions or advertising campaigns. Although a significant amount of our sales are not affected by these terms, the extended terms do have a negative impact on our financial position and liquidity. We expect to continue to selectively offer extended payment terms in the future, depending upon known industry trends and our financial condition. The loss of a significant individual customer or a combination of significant customers would have a material adverse effect on our consolidated revenues, results of operations, financial condition and competitive market position.

In addition to extended payment terms, the nature of the industry also requires that we carry a substantial level of inventory due to the lead times associated with purchasing components overseas coupled with the seasonality of customer demand. Our inventory balances were approximately $28,745,000 and $24,651,000 at December 31, 2007 and 2006, respectively. The increase in inventory levels over these dates is primarily a result of incremental purchasing of inventory for recently introduced product lines. A significant portion of our inventory purchases are from suppliers who are located predominately in China. We do not anticipate any changes in the relationships with our suppliers; however, if such change were to occur, we believe we would have alternative sources available, although replacing product could take six to nine months.

8

Major Customers

We are currently dependent on four customers, which collectively comprised approximately 25.5% of net revenues for the year ended December 31, 2007. Of these customers, one individual customer represented greater than 5% but less than 10% of net revenues for the year ended December 31, 2007, and one customer represented greater than 10% but less than 15% of net revenues for the year ended December 31, 2007.  For the year ended December 31, 2006, four customers comprised approximately 25.2% of net revenues. Of these customers, three customers individually represented greater than 5% but less then 10% of net revenues, while no customer represented greater than 10% of net revenues for the year ended December 31, 2006. For the year ended December 31, 2005, five customers comprised approximately 26.0% of net revenues. Of these customers, no customer individually represented greater than 5% but less then 10% of net revenues, and one customer represented greater than 10% but less then 15% of net revenues for the year ended December 31, 2005. The loss of one of these customers or a combination of these customers would have a material adverse effect on our consolidated revenues, results of operations, financial condition and competitive market position.

Seasonality and Quarterly Fluctuations

Golf generally is regarded as a warm weather sport, and net sales of golf equipment have been historically strongest for us during the first and second quarters. In addition, net sales of golf clubs are dependent on discretionary consumer spending, which may be affected by general economic conditions. A decrease in consumer spending generally could result in decreased spending on golf equipment, which could have a material adverse effect on our business, operating results and/or financial condition. In addition, our future results of operations could be affected by a number of other factors, such as unseasonable weather patterns and natural disasters such as hurricanes, which could interrupt our sales patterns and could generate hardships for customers in the affected area, demand for and market acceptance of our existing and future products; new product introductions by our competitors; competitive pressures resulting in lower than expected selling prices; and the volume of orders that are received and which can be fulfilled in a quarter. Any one or more of these factors could adversely affect us or result in us failing to achieve our expectations as to future sales or operating results.

Because most operating expenses are relatively fixed in the short term, we may be unable to adjust spending sufficiently in a timely manner to compensate for any unexpected sales shortfall that could materially adversely affect quarterly results of operations and liquidity. If technological advances by competitors or other competitive factors require us to invest significantly greater resources than anticipated in research and development or sales and marketing efforts, our business, operating results and/or financial condition could be materially adversely affected. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. In addition, the results of any quarter are not indicative of results to be expected for a full fiscal year. As a result of fluctuating operating results or other factors discussed in this report, in certain future quarters our results of operations may be below the expectations of public market analysts or investors. In such event, the market price of our common stock could be materially adversely affected.

Backlog

The amount of our order backlog at any particular time is affected by a number of factors, including seasonality and scheduling of the manufacturing and shipment of products. At February 22, 2008, we had current backorders of $3,238,000, or 3.4% of total net sales for the year ended December 31, 2007, and orders to be fulfilled at a future date, not to exceed the current year, of $8,879,000, or 9.4% of total net sales for the year ended December 31, 2007. At February 22, 2007, we had current backorders of $4,774,000, or 6.3% of total net sales for the year ended December 31, 2006, and orders to be fulfilled at a future date, not to exceed the current year, of $3,756,000, or 4.9% of total net sales for the year ended December 31, 2006. The current decrease in backorders is due to our being in a favorable inventory position on our a3 and a3 OS irons sets and hybrids this year. We do not anticipate that a significant level of orders will remain unfilled within the current fiscal year. In addition, we believe that the amount of our backlog is not an appropriate indicator of future sales levels.

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Competition

The golf club market is highly competitive. We compete with a number of established golf club manufacturers, some of which have greater financial and other resources than us. Our competitors include Callaway Golf Company, adidas-Salomon AG (Taylor Made - adidas Golf), Nike, Inc. (Nike Golf), Fortune Brands, Inc. (Titleist and Cobra) and Karsten Assembly Company (PING), among others. We compete primarily on the basis of performance, brand name recognition, quality and price. We believe that our ability to market our products through multiple distribution channels, including on- and off- course golf shops and other retailers, is important to the manner in which we compete. The purchasing decisions of many golfers are often the result of highly subjective preferences, which can be influenced by many factors, including, among others, advertising, media, promotions and product endorsements. These preferences may also be subject to rapid and unanticipated changes. We could face substantial competition from existing or new competitors who introduce and successfully promote golf clubs that achieve market acceptance. Such competition could result in significant price erosion or increased promotional expenditures, either of which could have a material adverse effect on our business, operating results and/or financial condition. There can be no assurance that we will be able to compete successfully against current and future sources of competition or that our business, operating results and/or financial condition will not be adversely affected by increased competition in the markets in which we operate.

The golf club industry is generally characterized by rapid and widespread imitation of popular technologies, designs and product concepts. Due to the success of the Tight Lies fairway woods, several competitors introduced products similar to the Tight Lies fairway woods. Should our recently introduced product lines achieve widespread market success, it is reasonable to expect that our current and future competitors would move quickly to introduce similar products that would directly compete with the new product lines. We may face competition from manufacturers introducing other new or innovative products or successfully promoting golf clubs that achieve market acceptance. The failure to successfully compete in the future could result in a material deterioration of customer loyalty and our image, and could have a material adverse effect on our business, results of operations, financial position and/or liquidity.

The introduction of new products by us or our competitors can be expected to result in closeouts of existing inventories at both the wholesale and retail levels. Such closeouts are likely to result in reduced margins on the sale of older products, as well as reduced sales of new products given the availability of older products at lower prices. As the Idea a3 and a3 OS product line of irons and the Insight drivers and fairway woods were introduced, older product lines such as the Idea a2 and a2 OS Irons, RPM and Redline fairway woods and drivers experienced reductions in price at both wholesale and retail levels.

Domestic and Foreign Operations

Domestic and foreign net sales for the years ended December 31, 2007, 2006 and 2005 were comprised as follows:

	2007				2006				2005
Domestic	$	78,623,000	83.1	%	$	63,016,000	82.9	%	$	48,496,000	85.9	%
Foreign		15,981,000	16.9			13,014,000	17.1			7,928,000	14.1
Total	$	94,604,000	100.0	%	$	76,030,000	100.0	%	$	56,424,000	100.0	%

Foreign net sales are generated in various regions including, but not limited to, Canada (a majority of our foreign sales), Europe, Japan, Australia, South Africa, and South America. A change in our relationship with one or more of the customers or distributors could negatively impact the volume of foreign sales.

Our business is subject to the risks generally associated with doing business abroad, such as foreign government relations, foreign consumer preferences, import and export control, political unrest disruptions or delays in shipments and changes in economic conditions and fluctuation in exchange rates in which we purchase components or sell our products. Recent foreign events, including, without limitation, continuing U.S. military operations and the resulting instability in Iraq, could potentially cause a delay in imports or exports due to heightened security with customs.

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Employees

At February 22, 2007, we had 155 full-time employees including 40 engaged in production, 23 in order fulfillment, 30 in research and development and quality control, 9 in sales support and 53 in management and administration. Our employees are not unionized. We believe that our relations with our employees are good.

Item 1A. Risk Factors.

The financial statements contained in this report and the related discussions describe and analyze our financial performance and condition for the periods indicated. For the most part, this information is historical. Our prior results are not necessarily indicative of our future performance or financial condition. We, therefore, have included in this report a discussion of certain factors which could affect our future performance or financial condition. These factors could cause our future performance or financial condition to differ materially from our prior performance or financial condition or from our expectations or estimates of our future performance or financial condition.

Dependence on New Product Introductions; Uncertain Consumer Acceptance

Our ultimate success depends, in large part, on our ability to successfully develop and introduce new products widely accepted in the marketplace. Historically, a large portion of new golf club technologies and product designs have been met with consumer rejection. Certain products we previously introduced have not met the level of consumer acceptance anticipated by management. No assurance can be given that our current or future products will be met with consumer acceptance. Failure by us to timely identify and develop innovative new products that achieve widespread market acceptance would adversely affect our continued success and viability. Additionally, successful technologies, designs and product concepts are likely to be copied by competitors. Accordingly, our operating results could fluctuate as a result of the amount, timing, and market acceptance of new product introductions by us or our competitors. If we are unable to develop new products that will ultimately be widely accepted by a wide range of customers, it will have a material adverse effect on our business and results of operations.

The design of new golf clubs is also greatly influenced by the rules and interpretations of the USGA. Although the golf equipment standards established by the USGA generally apply only to competitive events sanctioned by the organization, we believe that it is critical for our future success that new clubs we introduce comply with USGA standards. We invest significant resources in the development of new products and efforts to comply with USGA standards may hinder or delay development of the product and adversely effect revenues and customer demand. Additionally, increased costs associated with complying with USGA standards could reduce margins and adversely affect the results of operations.

Decreasing Amount of Golf Played by Consumers

Our revenues are completely driven from sales of golf related products and the demand for these products is directly related to the number of golfers and rounds of golf being played each year and overall popularity of golf. If golf participation or the number of rounds of golf played decreases, sales of our products may be adversely affected. In addition, if the amount of exposure of our products through media and advertising such as television coverage of events or the popularity of magazines we advertise in were to decrease, our sales could be adversely affected.

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IncreasingCompetition

The golf club market is highly competitive. We compete with a number of established golf club manufacturers, some of which have greater financial and other resources than we have. Our competitors include Callaway Golf Company, adidas-Salomon AG (Taylor Made - adidas Golf), Nike, Inc. (Nike Golf), Fortune Brands, Inc. (Titleist and Cobra) and Karsten Assembly Company (PING), among others. We compete primarily on the basis of performance, brand name recognition, quality and price. We believe that our ability to market our products through multiple distribution channels, including on- and off- course golf shops and other retailers, is important to the manner in which we compete. The purchasing decisions of many golfers are often the result of highly subjective preferences, which can be influenced by many factors, including, among others, advertising, media, promotions and product endorsements. These preferences may also be subject to rapid and unanticipated changes. We could face substantial competition from existing or new competitors who introduce and successfully promote golf clubs that achieve market acceptance. Such competition could result in significant price erosion or increased promotional expenditures, either of which could have a material adverse effect on our business, operating results and/or financial condition. There can be no assurance that we will be able to compete successfully against current and future sources of competition or that our business, operating results and/or financial condition will not be adversely affected by increased competition in the markets in which we operate.

The golf club industry is generally characterized by rapid and widespread imitation of popular technologies, designs and product concepts. Due to the success of the Tight Lies fairway woods, several competitors introduced products similar to the Tight Lies fairway woods. Should our recently introduced product lines achieve widespread market success, it is reasonable to expect that our current and future competitors would move quickly to introduce similar products that would directly compete with the new product lines. We may face competition from manufacturers introducing other new or innovative products or successfully promoting golf clubs that achieve market acceptance. Accordingly, our operating results could fluctuate as a result of the amount, timing and market acceptance of new products introduced by us or our competitors. The failure to successfully compete in the future could result in a material deterioration of customer loyalty and our image, and could have a material adverse effect on our business, results of operations, financial position and/or liquidity.

Our introduction of new products or our competitor's introductions can be expected to result in closeouts of existing inventories at both the wholesale and retail levels. Such closeouts are likely to result in reduced margins on the sale of older products, as well as reduced sales of new products given the availability of older products at lower prices. As the Idea a3 and a3 OS product line of irons and the Insight drivers and fairway woods were introduced, older product lines such as the Idea a2 and a2 OS Irons, RPM and Redline fairway woods and drivers experienced reductions in price at both wholesale and retail levels.

Risks Associated with Intellectual Property Protection

Imitation of popular club design is widespread in the golf industry. No assurance can be given that other golf club manufacturers will not be able to successfully sell golf clubs that imitate our products without infringing on our copyrights, patents, trademarks or trade dress. Many of our competitors have obtained patent, trademark, copyright or other protection of intellectual property rights pertaining to golf clubs. No assurance can be given that we will not be adversely affected by the assertion by competitors that our designs infringe on such competitor's intellectual property rights. Litigation in respect to patents or other intellectual property matters, whether with or without merit, could be time-consuming to defend, result in substantial costs and diversion of management and other resources, cause delays or other problems in the marketing and sales of our products, or require us to enter into royalty or licensing agreements, any or all of which could have a material adverse effect on our business, operating results and financial condition. We have had to defend against infringement claims in the past and will likely be subject to such claims in the future. Such claims could result in alteration or withdrawal of our existing products and delayed introduction of new products.

Our attempts to maintain the secrecy of our confidential business information, include but are not limited to, engaging in the practice of having prospective vendors and suppliers sign confidentiality agreements when producing components of new technology. No assurance can be given that our confidential business information will be adequately protected in all instances. The unauthorized use of our confidential business information could adversely affect us.

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Uncertainty Regarding Continuation of Profitability

While we generated net income in each of the past five fiscal years, we have not done so consistently prior to that period and experienced significant losses prior to the year ended December 31, 2003. There can be no assurance that we will be able to increase or maintain revenues or continue such profitability on a quarterly or annual basis in the future. An inability to continue such improvements in our financial performance could jeopardize our ability to develop, enhance, and market products, retain qualified personnel, and take advantage of future opportunities or respond to competitive pressures.

Need for Additional Capital

No assurances can be given that we will have sufficient cash resources beyond twelve months or to fund our operations over a length of time. It is possible that the only sources of funding are current cash reserves, projected cash flows from operations and up to $15.0 million of borrowings available under our revolving credit facility. Historically, we have funded capital expenditures for operations through cash flow from operations. To the extent our cash requirements or assumptions change, we may have to raise additional capital and/or further curtail our operating expenses, including further operational restructurings. If we need to raise additional funds through the issuance of equity securities, the percentage ownership of the stockholders of our Company would be reduced, stockholders could experience additional dilution, and/or such equity securities could have rights, preferences or privileges senior to our Company's common stock. Nevertheless, given the current market price for our Company's common stock and the state of the capital markets generally, we do not expect that we would be able to raise funds through the issuance of our capital stock in the foreseeable future. We may also find it difficult to secure additional debt financing beyond our current credit facility. There can be no assurance that financing will be available if needed or if available on terms favorable to us, or at all. Accordingly, it is possible that the only sources of funding are current cash reserves, projected cash flows from operations and up to $15.0 million of borrowings available under our revolving credit facility.

Dependence on Key Personnel and Endorsements

Our success depends to an extent upon the performance of our management team, which includes our Chief Executive Officer and President, Oliver G. (Chip) Brewer, III, who participates in all aspects of our operations, including product development and sales efforts. The loss or unavailability of Mr. Brewer could adversely affect our business and prospects. In addition, Mr. Tim Reed joined the management team in 2000 in the capacity of Vice President of Research and Development. If Mr. Reed is unable to continue to lead his team to develop innovative products, it could also adversely affect our business. With the exception of our Company's Chairman of the Board of Directors, B.H. (Barney) Adams, and Mr. Brewer, none of our Company's officers and employees are bound by employment agreements, and the relations of such officers and employees are, therefore, at will. We established key-men life insurance policies on the lives of Mr. Brewer and Mr. Reed; however, there can be no assurance that the proceeds of these policies could adequately compensate us for the loss of their services. In addition, there is strong competition for qualified personnel in the golf club industry, and the inability to continue to attract, retain and motivate other key personnel could adversely affect our business, operating results and/or financial condition.

On the PGA Tour we have entered into endorsement agreements with professionals such as Rory Sabbatini, Aaron Baddeley, Tommy "Two Gloves" Gainey and Brad Elder. On the Champions Tour, we have entered into endorsement agreements with Tom Watson, Bernard Langer, Scott Hoch, Brad Bryant, D.A. Weibring, Allen Doyle, Des Smyth, R.W. Eaks, Dana Quigley, and Jerry Pate. On the LPGA Tour, we have entered into endorsement agreements with Brittney Lincicome, Brittany Lang, and Taylor Leon. All of the above contracts have various dates of expiration through 2010 and require the use of certain of our products. The loss of one or more of these endorsement arrangements could adversely affect our marketing and sales efforts and, accordingly, our business, operating results and/or financial condition. From time to time, we negotiate with and sign endorsement contracts with either existing or new tour players. As is typical in the golf industry, generally the agreements with these professional golfers do not necessarily require that they use our golf clubs at all times during the terms of the respective agreements, including, in certain circumstances, at times when we are required to make payments to them. The failure of certain individuals to use our products on one or more occasions has resulted in negative publicity involving us. No assurance can be given that our business would not be adversely affected in a material way by negative publicity or by the failure of our known professional endorsers to carry and use our products.

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Effectiveness of our Marketing Strategy

We have designed our marketing strategy to include advertising efforts in multiple media avenues such as television airtime on golf related events, product education for the consumer through an internet website, publications including periodicals and brochures, and in store media such as point of purchase displays and product introduction fact sheets. For the years ended December 31, 2007, 2006 and 2005, we spent approximately $5.7 million, $5.6 million and $5.0 million, respectively, on the above listed marketing efforts. There can be no assurances that our marketing strategy will be effective or that increases in the levels of investments in advertising spending will result in material fluctuations in the sales of our products.

Source of Supply

A significant portion of our inventory purchases are from one supplier in China; we purchased approximately 46% and 62% of our total inventory purchased for the years ended December 31, 2007 and 2006, respectively, from this one Chinese supplier.   Substantially all of our fairway wood, driver, iron, i-wood, wedge and putter component parts are manufactured in China and Taiwan. We could, in the future, experience shortages of components for reasons including but not limited to the supplier’s production capacity or materials shortages, or periods of increased price pressures, which could have a material adverse effect on our business, results of operations, financial position and/or liquidity.

Sufficient Inventory Levels

In addition to extended payment terms to our customers, the nature of the industry also requires that we carry a substantial level of inventory due to the lead times associated with purchasing components overseas coupled with the seasonality of customer demand. Our inventory balances were approximately $28,745,000 and $24,651,000 at December 31, 2007 and December 31, 2006, respectively. If we were unable to maintain sufficient inventory to meet customer demand on a timely basis or provide have sufficient capacity to assemble the products at our facility, the effect could result in cancellation of customer orders, loss of customers, and damage to our reputation. In addition, carrying a substantial level of inventory has an adverse effect on our financial position and liquidity.

Accounts Receivable Customer Terms

Due to industry sensitivity to consumer buying trends and available disposable income, we have in the past extended payment terms for specific retail customers. Issuance of these terms (i.e. greater than 30 days or specific dating) is dependent on our relationship with the customer and the customer's payment history typically during off-peak times in the year. These extended terms do have a negative impact on our financial position and liquidity. In addition, the reserves we establish may not be adequate in the event that the customer's financial strength weakens significantly. In addition, the customer base may shrink and thus could adversely affect our net sales along with increased credit risk that could result adversely effect to our financial condition.

Seasonality and Quarterly Fluctuations

Golf generally is regarded as a warm weather sport, and net sales of golf equipment have been historically strongest for us during the first and second quarters. In addition, net sales of golf clubs are dependent on discretionary consumer spending, which may be affected by general economic conditions. A decrease in consumer spending generally could result in decreased spending on golf equipment, which could have a material adverse effect on our business, operating results and/or financial condition. In addition, our future results of operations could be affected by a number of other factors, such as unseasonable weather patterns and natural disasters such as hurricanes, which could interrupt the sales patterns and could generate hardships for customers in the effected area, demand for and market acceptance of our existing and future products; new product introductions by our competitors; competitive pressures resulting in lower than expected selling prices; and the volume of orders that are received and that can be fulfilled in a quarter. Any one or more of these factors could adversely affect us or result in us failing to achieve our expectations as to future sales or operating results.

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Because most operating expenses are relatively fixed in the short term, we may be unable to adjust spending sufficiently in a timely manner to compensate for any unexpected sales shortfall that could materially adversely affect quarterly results of operations and liquidity. If technological advances by competitors or other competitive factors require us to invest significantly greater resources than anticipated in research and development or sales and marketing efforts, our business, operating results and/or financial condition could be materially adversely affected. Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as an indication of future performance. In addition, the results of any quarter are not indicative of results to be expected for a full fiscal year. As a result of fluctuating operating results or other factors discussed in this report, in certain future quarters our results of operations may be below the expectations of public market analysts or investors. In such event, the market price of our common stock could be materially adversely affected.

Rapid Growth, Increased Demand for Product

If we are successful in obtaining rapid market growth for various golf clubs, we may be required to deliver large volumes of quality products to customers on a timely basis which could potentially require us to increase the production facility, increase purchasing of raw materials or finished goods, increase the size of the workforce, expand our quality control capabilities, or incur additional expenses associated with sudden increases in demand. Any combination of one or more of the listed factors could have a materially adverse effect on our operations and financial position.

AdequateProduct Warranty Reserves

We provide a limited one year product warranty on all of our golf clubs. Significant increases in the incidence of such claims may adversely affect our sales and our reputation with consumers. We establish reserves for warranty claims. There can be no assurance that this reserve will be sufficient if we were to experience an unexpectedly high incidence of problems with our products.

Unauthorized Distribution and Counterfeit Clubs

Some quantities of our products have been found in unapproved outlets or distribution channels, including unapproved retailers conducting business on common internet auction sites. The existence of a "gray market" in our products can undermine the sales of authorized retailers and foreign wholesale distributors who promote and support our products and can injure our image in the minds of our customers and consumers. We do not believe the unauthorized distribution of our products can be totally eliminated. There can be no assurances that unauthorized distribution of our clubs will not have a material adverse effect on our results of operations, financial condition and/or competitive position.

In addition, we are occasionally made aware of the existence of counterfeit copies of our golf clubs, particularly in foreign markets. We take action in these situations through local authorities and legal counsel where practical. However, the inability to effectively deter counterfeit efforts could have a material adverse effect on our results of operations, financial condition and/or competitive position.

Certain Risks of Conducting Business Abroad

Our Company imports a significant portion of our component parts, including heads, shafts, headcovers, and grips from companies in China and Taiwan. In addition, we sell our products to certain distributors located outside the United States. Our international business is currently centered in Canada, Europe, South Africa and Asia, and our management intends to focus our international efforts through agency and distributor relationships. International sales accounted for 17% of our net sales for the years ended December 31, 2007 and December 31, 2006. Our business is subject to the risks generally associated with doing business abroad, such as foreign government relations, foreign consumer preferences, import and export control, political unrest, disruptions or delays in shipments and changes in economic conditions and exchange rates in countries in which we purchase components or sell our products. Recent foreign events, including, without limitation, continuing U.S. military operations and the resulting instability in Iraq, could potentially cause a delay in imports or exports due to heightened security with customs. In addition, by conducting business abroad, we could be adversely affected by the change in foreign exchange rates amongst the countries and the result could adversely affect our financial condition.

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Risks associated with the Purchase of Assets of Women’s Golf Unlimited

In connection with the purchase of the assets (the “WGU Assets”) from Women’s Golf Unlimited, Inc. (“WGU”), we granted WGU a limited license to use certain intellectual property included in the WGU Assets (the “WGU Marks”). The limited license allows WGU to sell certain inventory that it owned at the time the license was granted and to collect WGU’s outstanding accounts receivable. We have little or no control over WGU with respect to the terms of the sale of WGU’s existing inventory, including, without limitation, price, quantity, potential customers, and geographic area of sale. If WGU sells the existing inventory at low prices or takes any other action that would impair the WGU Assets or brand, the WGU Assets and brand that we purchased may lose value in the market. In addition, the loss of value of the WGU assets and brand may hurt our relationship with resellers and distributors that have distributed in the past or would distribute in the future products under the Women’s Golf Unlimited brand. We can provide no assurances that we will be able to maintain the WGU Assets or the Women’s Golf Unlimited brand. Although we did not assume any liabilities when we purchased the assets of WGU, we will continue to sell products under the WGU brand and therefore may be subject to claims for damages, liabilities or other obligations from the past operations of WGU. Even if we are successful in our defense against such claims, we may incur defense costs and spend management time and resources in defending against such claims.

Reliance on Third Parties for Delivery

We use United Parcel Services (UPS) for substantially all outbound shipments of our products in the United States. We use other freight lines and larger air carriers for large domestic shipments and international shipments. In addition, many of the components we use to build our products are shipped via air and ocean carriers from overseas. If there were a significant interruption in services from one or more of these providers, we might be unable to engage alternative suppliers to deliver our products or timely provide the necessary components for production in a cost efficient manner. This interruption could have a material adverse effect on our financial results.

Risks of Adequate Insurance Coverage

We procure various insurance policies to cover different aspects of our business, including but not limited to, property, commercial liability, workers compensation, business interruption, foreign liabilities, auto, crime, employment practices and directors' and officers' Insurance. Although we obtain various insurance policies, unforeseen situations or events may arise that could limit the amount or types of insurance coverage.

Currently, we have potential exposure in our directors' and officers' insurance policy covering the time period of the class action lawsuit, where our third layer of coverage for the $5 million layer between $15 million and $20 million is currently being denied by Zurich, as they claim that we did not notify them timely in the class action lawsuit. On August 7, 2007, TIG Insurance Co ("TIG"), which provided insurance coverage totaling $7.5 million for the layer of exposure between $7.5 million and $15 million, informed us that it was reserving its rights to deny coverage, based on, among other things, certain exclusions in the policy and recent legal authority holding that damages and settlements arising out of Section 11 claims are uninsured loss. Additionally, our directors' and officers' insurance policy covering the time period of the class action lawsuit has an endorsement that limits the defense costs covered under the policy for the underwriters of the IPO to $1 million, and at this time the underwriters' attorneys have exhausted this $1 million sublimit. As of March 7, 2008, the total amount of outstanding underwriter defense costs was just less than $1.4 million. To the extent that our Company is liable for any material amounts denied under or in excess of our directors' and officers' insurance, or any other insurance policy for that matter, it could have a material effect on our business and our results of operations.

Risks Associated with the Price of our Common Stock

The SEC has adopted regulations which generally define a "penny stock" to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock prior to our reverse stock split on February 19, 2008 was less than $5.00 per share and if the market price of our common stock drops below $5.00 again, it may be designated as a "penny stock" according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

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Anti-Takeover Provisions

Our Certificate of Incorporation and Amended and Restated Bylaws contain, among other things, provisions establishing a classified Board of Directors, authorizing shares of preferred stock with respect to which our Board of Directors have the power to fix the rights, preferences, privileges and restrictions without any further vote or action by the stockholders, requiring that all stockholder action be taken at a stockholders' meeting and establishing certain advance notice requirements in order for stockholder proposals or director nominations to be considered at such meetings. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. In general this statute prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Such provision could delay, deter or prevent a merger, consolidation, tender offer, or other business combination or change of control involving our Company that some or a majority of our stockholders might consider to be in their best interest, including offers or attempted takeovers that might otherwise result in such stockholders receiving a premium over the market price for the common stock. The potential issuance of preferred stock may have the effect of delaying, deferring or preventing a change of control, may discourage bids for the common stock at a premium over the market price of the common stock and may adversely affect the market price of and voting and other rights of the holders of the common stock. We have not issued and currently have no plans to issue shares of preferred stock.

Item 2. Properties.

Our administrative offices and assembly facilities currently occupy approximately 65,000 square feet of space in Plano, Texas. This facility is leased by us pursuant to a lease agreement expiring in 2008 and may be extended for an additional five years. We maintain the right to terminate the lease if we move to a larger facility owned by the current lessor. Additionally, we have a second location for our warehouse facilities occupying another 53,000 square feet of warehouse space in Plano, Texas, conveniently located to our existing administration and assembly facility. This facility is leased by us pursuant to a lease agreement expiring in 2010. We believe that our current facilities encompassing both locations will be sufficient for the foreseeable future.

Item 3. Legal Proceedings.

Beginning in June 1999, the first of seven class action lawsuits was filed against us, certain of our current and former officers and directors, and the three underwriters of our initial public offering ("IPO") in the United States District Court of the District of Delaware. The complaints alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with our IPO. In particular, the complaints alleged that our prospectus, which became effective July 9, 1998, was materially false and misleading. The operative complaint was filed on January 24, 2006, and it alleges that the prospectus failed to disclose that unauthorized distribution of our products (gray market sales) threatened our long-term profits and that we engaged in questionable sales practices (including double shipping and unlimited rights of return), which threatened post-IPO financial results. Discovery closed on August 11, 2006. On November 21, 2006, all summary-judgment briefing was completed. On December 13, 2006, we learned that the Delaware District Court judge whom the case was set before was elevated to the United States Court of Appeals for the Third Circuit. On December 15, 2006, we were notified that our case was assigned to the vacant judicial position and that all proceedings had been postponed until a new judge was confirmed, and there was no trial date set at this time. On February 7, 2008, we were notified that our case has been reassigned to Chief Judge Gregory M. Sleet. There has been no scheduling conference set yet, and there is no trial date set at this time. A mediation has been scheduled for April 8, 2008.

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We maintain directors' and officers' ("D&O") and corporate liability insurance to cover certain risks associated with these securities claims filed against us or our directors and officers. During the period covering the class action lawsuit, we maintained insurance from multiple carriers, each insuring a different layer of exposure, up to a total of $50 million. In addition, we have met the financial deductible of our directors' and officers' insurance policy for the period covering the time the class action lawsuit was filed. On March 30, 2006, Zurich American Insurance Company, which provided insurance coverage totaling $5 million for the layer of exposure between $15 million and $20 million, notified us that it was denying coverage due to the fact that it was allegedly not timely notified of the class action lawsuit.  On October 11, 2007, we filed a suit against our former insurance broker, Thilman & Filipini, LLC ("T&F"), for various claims related to T&F's alleged failure to notify Zurich of the class action lawsuit. Depending on the outcome of this proceeding, based on the previously disclosed agreement with Chubb & Son ("Chubb"), a division of Federal Insurance Company ("Federal"),which is described below, we could be required to pay Zurich's $5 million limit of liability in cash before the layers of insurance coverage excess to the Zurich layer attach. We previously disclosed that Chubb had notified us that coverage under the Federal policy, which provided insurance coverage totaling $10 million for the layer of exposure between $20 million and $30 million, and the Executive Risk Indemnity Inc. ("ERII") policy, which provided insurance coverage totaling $10 million for the layer of exposure between $40 million and $50 million, would attach only if the underlying limits are exhausted by payment from the underlying insurance carriers. On June 18, 2007, Chubb notified us that Federal and ERII will not require that Zurich pay the full mount of its limit of liability before the Federal and ERII policies attach, and it confirmed that Chubb will accept payment in cash by our company of Zurich's limit of liability to satisfy this requirement, so long as such payment is for covered loss. On August 7, 2007, TIG Insurance Co ("TIG"), which provided insurance coverage totaling $7.5 million for the layer of exposure between $7.5 million and $15 million, informed us that it was reserving its rights to deny coverage, based on, among other things, certain exclusions in the policy and recent legal authority holding that damages and settlements arising out of Section 11 claims are uninsured loss. We disagree with TIG's interpretation of the policy language and legal authority, and negotiations on this issue continue. At this point in the legal proceedings, we cannot predict with any certainty the outcome of the matter, per the guidance in SFAS 5, and thus can not reasonably estimate future liability on the conclusion of the events, if any.

The underwriters for the IPO are also defendants in the securities class action. The underwriting agreement that we entered into with the underwriters in connection with the IPO contains an indemnification clause, providing for indemnification against any loss, including defense costs, arising out of the IPO. After the first lawsuit was filed, the underwriters requested indemnification under the agreement. Our D&O insurance policy included an endorsement providing $1 million to cover indemnification of the underwriters. Our D&O insurer has notified the underwriters of the exhaustion of the $1 million sublimit. We believe that we have no current obligation to pay the underwriters' defense costs. We believe that the applicable case law provides that the earliest possible time that an obligation to indemnify might exist is after a court has decided conclusively that the underwriters are without fault under the federal securities laws. The litigation is not at that stage yet. As of March 7, 2008, the total amount of outstanding underwriter defense costs was just less than $1.4 million. At this time, the underwriters are not able to predict with certainty the amount of defense costs they expect to incur going forward, but it is likely they will incur additional costs before this matter is concluded. At this time, we cannot predict with any certainty the outcome of this indemnification issue, per the guidance in SFAS 5, and thus cannot reasonably estimate future liability on the conclusion of the events, if any.

From time to time, we are engaged in various other legal proceedings in the normal course of business. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time.

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Item 4. Submission of Matters to a Vote of Security Holders.

At our Special Meeting of Stockholders held on February 4, 2008, the following proposal was adopted by the margin indicated.

To amend the Company's certificate of incorporation to effect a one-for-four reverse stock split of the outstanding shares of the Company's common stock be ratified.

Number of Shares
Vote For	Vote Against		Abstained
23,512,902		277,236		10,123

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Our common stock is currently listed and traded on the OTC Bulletin Board ("OTCBB") under the symbol "ADGF.OB." The prices in the table below represent the quarterly high and low sales price for our common stock as reported by the OTCBB. All price quotations represent prices between dealers, without retail mark-ups, mark-downs or commissions and may not represent actual transactions.

	High		Low
2007
First Quarter	$	9.00	$	7.00
Second Quarter		9.64		7.44
Third Quarter		8.80		7.64
Fourth Quarter		9.16		7.60
2006
First Quarter	$	6.24	$	4.56
Second Quarter		6.64		5.60
Third Quarter		6.28		5.08
Fourth Quarter		7.88		5.24

On February 19, 2008 we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing in a one-to-four ratio. Our symbol then changed from "ADGO.OB" to "ADGF.OB". The above table represents values restated as a result of the reverse stock split. On March 7, 2008, the last reported sale price of the common stock on the OTCBB was $9.00 per share. At March 7, 2008, we had approximately 890 stockholders based on the number of holders of record and an estimate of the number of individual participants represented by security position listings.

Our listing on the OTCBB could adversely affect the ability or willingness of investors to purchase the common stock, which, in turn, would likely severely affect the market liquidity of our securities. Given the current market price for our common stock and the state of the capital markets generally, we do not expect that we would be able to raise funds through the issuance of our capital stock. No dividends have been declared or paid relating to our common stock, nor do we anticipate declaring dividends in the foreseeable future. The current credit facility does not limit the declaring or payment of dividends unless we are in default of the facility.

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Equity Plan Compensation Information:

The following table sets forth information at December 31, 2007, regarding compensation plans under which our equity securities are authorized for issuance. On February 19, 2008, we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing in a one-to-four ratio. The below table represents values as a result of the reverse stock split.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		1,100,274	$	0.16		796,158
Equity compensation plans not approved by security holders		—		n/a		—
Total		1,100,274	$	0.16		796,158

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Performance Graph

The following performance graph compares the performance of our common stock to the Standard and Poor’s Small Cap 600 index and an industry peer group, selected in good faith, for the period from December 31, 2002, through December 31, 2007. The graph assumes that the value of the investment in our common stock and each index was $100 at December 31, 2002 and that all dividends were reinvested. We have paid no dividends. Performance data is provided for the last trading day closest to year end for each 2002, 2003, 2004, 2005, 2006, and 2007.

COMPARISON OF CUMULATIVE TOTAL RETURNS

Assumes Initial Investment of $100

December 2007

Company	December 2002		December 2003		December 2004		December 2005		December 2006		December 2007
Adams Golf, Inc.	$	100.00	$	284.01	$	559.93	$	479.96	$	787.91	$	900.01
S&P Small Cap 600		100.00		138.80		170.24		183.32		211.02		210.40
Peer Group A (1)		100.00		135.05		123.65		132.59		133.58		165.66

(1) Peer Group consists of Callaway Golf Company, Aldila, Inc. and Cutter & Buck Inc.

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Item 6. Selected Financial Data.

The selected financial data presented below is derived from our consolidated financial statements for the years ended December 31, 2007, 2006, 2005, 2004 and 2003, respectively. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the consolidated financial statements and related notes, and other financial information included elsewhere in this document.

	Year Ended December 31,
	2007		2006		2005		2004		2003
	(in thousands, except per share data)
Consolidated Statements of Operations Data:
Net sales	$	94,604	$	76,030	$	56,424	$	56,762	$	50,879
Operating income		4,106		3,440		2,045		3,100		2,137
Net income	$	9,401	$	9,000	$	3,240	$	3,078	$	2,003
Income per common share (1) :
Basic	$	1.54	$	1.54	$	0.57	$	0.55	$	0.36
Diluted	$	1.32	$	1.24	$	0.47	$	0.47	$	0.33
Weighted average common shares (1):
Basic		6,095		5,830		5,684		5,639		5,620
Diluted		7,134		7,232		6,951		6,536		6,133
Consolidated Balance Sheet Data:
Total assets	$	71,186	$	55,603	$	44,102	$	38,378	$	30,054
Total debt (including current maturities)		—		—		—		—		—
Stockholders' equity	$	53,299	$	41,869	$	32,127	$	26,438	$	22,228

(1) See Note 1 (k) of Notes to Consolidated Financial Statements for information concerning the calculation of income per common share and weighted average common shares outstanding.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We design, assemble, market and distribute premium quality, technologically innovative golf clubs for all skill levels. Our net sales are primarily derived from sales to on- and off- course golf shops and sporting goods retailers and, to a lesser extent, international distributors and mass merchandisers. No assurances can be given that demand for our current products or the introduction of new products will allow us to achieve historical levels of sales in the future. Our net sales are typically driven by product lifecycles. Several factors affect a product's life, including but not limited to, customer acceptance, competition and technology. As a result, each product family's life cycles generally range from one to three years.

Our business, financial condition, cash flows and results of operations are subject to seasonality resulting from factors such as weather and spending patterns. Due to the seasonality of our business, one quarter's financial results are not indicative of the full fiscal year's expected financial results. A majority of our revenue is earned in the first and second quarters of the year and revenues generally decline in the third and fourth quarters.

Costs of our clubs consist primarily of component parts, including the head, shaft and grip. To a lesser extent, our cost of goods sold includes labor, occupancy and shipping costs in connection with the inspection, testing, assembly and distribution of our products and certain promotional and advertising costs given in the form of additional merchandise as consideration to customers.

Key Performance Indicators

Our management team has defined and tracks performance against several key sales, operational and balance sheet performance indicators. Key sales performance indicators include, but are not limited to, the following:

—Daily sales by product group

—Daily sales by geography

—Sales by customer channel

—Gross margin performance

—Market share by product at retail

—Inventory share by product at retail

Tracking these sales performance indicators on a regular basis allows us to understand whether we are on target to achieve our internal sales plans.

Key operational performance indicators include, but are not limited to, the following:

—Product returns (dollars and percentage of sales)

—Product credits (dollars and percentage of sales)

—Units shipped per man-hour worked

—Orders shipped on time

—Expenses by department

—Inbound and outbound freight cost by mode (dollars and dollars per unit)

—Inbound freight utilization by mode (ocean vs air)

Tracking these operational performance indicators on a regular basis allows us to understand whether we will achieve our expense targets and efficiently satisfy customer demand.

Key balance sheet performance indicators include, but are not limited to, the following:

—Days of sales outstanding

—Days of inventory (at cost)

—Days of payables outstanding

Tracking these balance sheet performance indicators on a regular basis allows us to understand our working capital performance and forecast cash flow and liquidity.

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Results of Operations

The following table sets forth operating results expressed as a percentage of net sales for the periods indicated:

	Years Ended December 31,
	2007			2006			2005
Net sales		100.0	%		100.0	%		100.0	%
Cost of goods sold		57.7			55.6			53.7
Gross profit		42.3			44.4			46.3
Operating expenses:
Research and development expenses		3.9			3.4			4.0
Selling and marketing expenses		25.1			26.0			29.4
General and administrative expenses		8.9			10.4			12.5
Settlement expenses		—			—			(3.1	)
Restructuring expense		—			—			(0.1	)
Total operating expenses		37.9			39.8			42.7
Operating income		4.4			4.6			3.6
Interest income, net		0.3			0.2			0.4
Other income, net		0.2			—			1.9
Income before income taxes		4.9			4.8			5.9
Income tax expense (benefit)		(5.0	)		(7.0	)		0.2
Net income		9.9	%		11.8	%		5.7	%

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Total net sales increased to $94.6 million for the year ended December 31, 2007 from $76.0 million for the comparable period of 2006 primarily resulting from the introduction of our new product lines, including the Idea a3 and a3 OS Irons and Iwoods and Tech OS Irons and Iwoods. Several factors affect a product's life, including but not limited to, customer acceptance, competition and technology. As a result, each product family's life cycle generally ranges from one to three years. Due to the seasonality of our business, one quarter's financial results are not indicative of the full fiscal year's expected financial results.

Net sales of irons increased to $63.3 million, or 66.9% of total net sales for the year ended December 31, 2007 from $51.6 million, or 67.9% of total net sales, for the comparable period of 2006. The increase was primarily generated from the net sales of recently launched Idea a3 and a3 OS irons coupled with the continued sales of the Idea a2 and a2 OS irons and integrated iron sets while the prior period net sales primarily resulted from the Idea a2 and a2 OS irons and integrated iron sets.

Net sales of drivers increased to $10.5 million, or 11.1% of total net sales, for the year ended December 31, 2007 from $7.3 million, or 9.6% of total net sales, for the comparable period of 2006. A large portion of the driver net sales for the year ended December 31, 2007 was generated by the Insight driver, which was introduced in the first quarter of 2007, while prior period net sales were driven by the Redline RPM product line.

Net sales of fairway woods increased to $18.4 million, or 19.5% of total net sales, for the year ended December 31, 2007, from $14.8 million, or 19.5% of total net sales, for the comparable period of 2006. Net sales for the year ended December 31, 2007 were generated from Insight fairway woods and Idea a3, Idea a2 and a2 OS, Idea Pro and Tech OS I-woods. Net sales for the same period of 2006 were generated from RPM LP fairway woods, Idea a2 and a2 OS I-woods and Original Tight Lies fairway woods.

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We were dependent on four customers, which collectively comprised approximately 25.5% of net sales for the year ended December 31, 2007. Of these, one customer individually represented greater than 5% but less than 10% of net sales and one customer represented greater than 10% but less than 15% of net sales. No customer represented greater than 15% of net sales. Should these customers or our other customers fail to meet their obligations to us, our results of operations and cash flows would be adversely impacted.

Net sales of our products outside the U.S. increased to $16.0 million, or 16.9% of total net sales, from $13.0 million, or 17.1% of total net sales, for the year ended December 31, 2007 and 2006, respectively. Net sales resulting from countries outside the U.S. and Canada decreased to 6.0% of total net sales for the year ended December 31, 2007 from 6.7% for the comparable period of 2006.

Cost of goods sold increased to $54.6 million, or 57.7% of total net sales, for the year ended December 31, 2007 from $42.3 million, or 55.6% of total net sales, for the comparable period of 2006. The increase as a percentage of total net sales is primarily due to changes in the product mix, increases in some component pricing, and increasing inbound freight costs related to fuel price increases.

Selling and marketing expenses increased to $23.8 million for the year ended December 31, 2007 from $19.8 million for the comparable period in 2006. The increase is primarily the result of additional commission expense of $1.8 million as a result of the increased net sales during the period and an increase in marketing and tour player expenses of $1.2 million and an increase in other compensation expenses of $0.6 million.

General and administrative expenses increased to $8.4 million for the year ended December 31, 2007 from $7.9 million for the comparable period in 2006 primarily related to compensation expenses.

Research and development expenses, primarily consisting of costs associated with development of new products, increased to $3.7 million for the year ended December 31, 2007 from $2.6 million for the comparable period in 2006 primarily related to compensation expenses resulting from increased staffing efforts.

Other income increased to $0.3 million for the year ended December 31, 2007 from $0.0 million for the comparable period in 2006 as a result of a breakup fee awarded to our company resulting from our participation in the bidding process for a potential acquisition of a competitive golf club manufacturer.

Income tax benefit decreased to $4.7 million for the year ended December 31, 2007 from an income tax benefit of $5.3 million for the comparable period in 2006. The income tax benefit in each year is attributable to our management's assessment of the realizability of our existing deferred tax asset and the recording of a deferred tax benefit of $4.8 million and $5.4 million during 2007 and 2006, respectively. This amount represents what we believe to be an estimate of future usage of our carry back. The remaining asset has a valuation allowance applied to it.

Our inventory balances were approximately $28.7 million and $24.7 million at December 31, 2007 and December 31, 2006, respectively. The increase in inventory levels is primarily a result of the increased purchasing related to the recently launched Idea a3 and a3 OS Irons, which were launched in the second quarter of 2007 and third quarter of 2007, respectively.

Our net accounts receivable balances were approximately $18.0 million and $13.6 million at December 31, 2007 and December 31, 2006, respectively. The increase is primarily due to increasing annual revenue and the strengthening of our existing product lines.

Our accounts payable balances were approximately $9.2 million and $6.3 million at December 31, 2007 and December 31, 2006, respectively. The increase in accounts payable is primarily associated with increases in inventory purchases associated with the purchasing cycle for recently launched products.

Our accrued liabilities balances were approximately $8.7 million and $7.5 million at December 31, 2007 and December 31, 2006, respectively. The increase in accrued liabilities is primarily associated with increases in our inventory in transit and deferred revenue program.

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Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Total net sales increased to $76.0 million for the year ended December 31, 2006 from $56.4 million for the comparable period of 2005 primarily resulting from the introductions of our new product lines, including the Idea A2 and A2 OS Irons. Overall, product family life cycles generally range from one to three years, and each product family varies in its life cycle as there are multiple factors influencing the life, such as, but not limited to, customer acceptance, competition and technology.

Net sales of irons increased to $51.6 million, or 67.9% of total net sales, from $23.9 million, or 42.4% of total net sales, for the years ended December 31, 2006 and 2005, respectively. The increase was primarily generated from the net sales of Idea A2 and A2 OS irons while the prior period net sales primarily resulted from the Original Idea irons and integrated iron sets.

Net sales of drivers decreased to $7.3 million, or 9.6% of total net sales, for the year ended December 31, 2006 from $15.7 million, or 27.8% of total net sales, for the comparable period of 2005. A large portion of the driver net sales for the year ended December 31, 2006 was generated by the RPM Ti and RPM Dual product lines, which were introduced in the first quarter of 2006 and second quarter of 2005, respectively. The overall decrease in driver net revenue results from lower sales of RPM and Ovation driver product families as they progress further in their life cycle.

Net sales of fairway woods increased to $14.8 million, or 19.5% of total net sales, from $14.5 million, or 25.8% of total net sales, for the years ended December 31, 2006 and 2005, respectively. This period's net sales were generated from RPM Low Profile fairway woods and Idea A2 and A2 OS and Original Idea I-woods. The prior period's net sales were generated from RPM Ti and stainless steel fairway woods, Ovation fairway woods, Idea I-woods and Original Tight Lies fairway woods.

We are currently dependent on four customers, which collectively comprised approximately 25.2% of net sales for the year ended December 31, 2006. Of these, three customers individually represented greater than 5% but less than 10% of net sales and no customers represented greater than 10% of net sales. Should these customers or our other customers fail to meet their obligations to us, our results of operations and cash flows would be adversely impacted.

Net sales of our products outside the U.S. increased to $13.0 million, or 17.1% of total net sales, from $7.9 million, or 14.1% of total net sales, for the years ended December 31, 2006 and 2005, respectively. Net sales resulting from countries outside the U.S. excluding Canada increased to 6.7% of total net sales for the year ended December 31, 2006 compared to 3.6% of total net sales for the year ended December 31, 2005.

Cost of goods sold increased to $42.3 million, or 55.6% of total net sales, for the year ended December 31, 2006 from $30.3 million, or 53.7% of total net sales, for the comparable period of 2005. The increase as a percentage of total net sales is primarily due to changes in the product mix, coupled with decreases in fairway wood and driver net pricing and increases in some component pricing, increasing inbound freight costs related to fuel price increases and other inventory related costs.

Selling and marketing expenses increased to $19.8 million for the year ended December 31, 2006 from $16.6 million for the comparable period in 2005. The increase is primarily the result of additional commission expense of $1.4 million as a result of the increased net sales during the period. In addition, advertising and promotional expense increased $0.6 million as a result of our support of the newly launched Idea A2 and A2 OS irons and RPM Low Profile fairway woods, an increase in tour player expenses of $0.4 million and an increase of $0.3 million in compensation expenses.

General and administrative expenses increased to $7.9 million for the year ended December 31, 2006 from $7.1 million for the comparable period in 2005. The increase is a result of $0.3 million related to bad debt expense resulting from our continued efforts to maintain adequate reserves for Accounts Receivable and an increase in legal expenses of $0.3 million.

Research and development expenses, primarily consisting of costs associated with development of new products, increased to $2.6 million for the year ended December 31, 2006 from $2.3 million for the comparable period in 2005.

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Settlement expense was zero for the year ended December 31, 2006 compared to a reversal of expense of $1.8 million for the year ended December 31, 2005. During 2005, we reversed settlement expense of $1.8 million, which is attributable to the reversal of the accrued expenses for the settlement agreement that was reached with Mr. Nick Faldo in regards to the dispute regarding provisions of his prior professional services agreement with Adams Golf. Because Mr. Faldo did not meet the conditions precedent to pay in his contract, we are no longer due to make any future payments.

Other income decreased to zero for the year ended December 31, 2006 from $1.0 million for the comparable period in 2005 which is attributable to our one time receipt of a $965 thousand insurance claim paid by our insurance carrier in connection with an embezzlement which occurred during the period from 2001 through 2004. This event was disclosed in the Annual Report on Form 10-K for the year ended December 31, 2004.

Income tax benefit increased to $5.3 million for the year ended December 31, 2006 from an income tax expense of $0.1 million for the comparable period in 2005. This is attributable to our management assessment of our existing deferred tax asset and the recording of a deferred tax benefit of $5.4 million. This amount represents what we believe to be an estimate of future usage of our carry back. The remaining asset has an existing valuation allowance applied to it.

Our inventory balances were approximately $24.7 million and $16.2 million at December 31, 2006 and December 31, 2005, respectively. The increase in inventory levels is primarily a result of increased purchasing related to the recently launched A2 and A2 OS iron sets launched in the third quarter of 2005 and Idea Pro Irons and Tech OS Irons launched in the third quarter of 2006.

Our net accounts receivable balances were approximately $13.6 million and $14.2 million at December 31, 2006 and December 31, 2005, respectively. The decrease is primarily due to the strengthening of our current product lines and strengthening of the overall economy.

Our accounts payable balances were approximately $6.3 million and $4.7 million at December 31, 2006 and December 31, 2005, respectively. The increase in accounts payable is primarily associated with increases in inventory purchases associated with the recent product launch of the Idea A2 and A2 OS irons, Idea Pro and Tech OS irons.

Our accrued liabilities balances were approximately $7.5 million and $7.3 million at December 31, 2006 and December 31, 2005, respectively. The increase in accrued liabilities is primarily associated with increases in accruals related to compensation, sales returns and warranty, offset by decreases in accrued intransit inventory and our deferred revenue program.

Disclosure of Contractual Obligations

We are obligated to make future payments under various contracts, including equipment capital leases and operating leases. We do not have any long-term debt or purchase commitment obligations. The following table summarized our contractual obligations at December 31, 2007, reported by maturity of obligation.

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term Debt Obligations	$	—	$	—	$	—	$	—	$	—
Capital Lease Obligations		30,363		10,830		19,533		—		—
Operating Lease Obligations		3,261,222		699,271		1,276,053		999,304		286,594
Purchase Obligations		—		—		—		—		—
Other Long-term Liabilities Reflected on the Registrant's Balance sheet under GAAP		—		—		—		—		—
Total	$	3,291,585	$	710,101	$	1,295,586	$	999,304	$	286,594

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Liquidity and Capital Resources

Our principal sources of liquidity are cash reserves, cash flows provided by operations and our credit facilities in effect from time to time. Cash inflows from operations are generally driven by collections of accounts receivables from customers, which generally increase in our second quarter and continue into the third quarter and then begin to decrease during the fourth quarter. As necessary we could use our credit facility to supplement our cash inflows from operations as well as other investing activities such as potential future acquisitions. Cash outflows are primarily tied to procurement of inventory which typically begins to build during the fourth quarter and continues heavily into the first and second quarters in order to meet demands during the height of the golf season.

Cash and cash equivalents increased to $11.3 million at December 31, 2007 compared to $9.5 million at December 31, 2006. During the year, accounts receivable increased $4.5, inventory increased $4.1 million, and other non-current assets increased $4.8 million related to the value of our deferred tax asset. These increases were partially offset with an increase in accrued expenses and accounts payable of $4.2 million.

In November 2007, we signed a revolving credit agreement with Wachovia Bank, National Association to provide up to $15.0 million in short term debt with the option to go up to $30 million. The agreement is collateralized by all of our assets and requires us, among other things, to maintain certain financial performance levels relative to the fixed charge coverage ratio, but only when we have an outstanding balance on the facility. Interest on outstanding balances accrues at a rate of Libor plus 1.75% and is payable monthly. As of March 7, 2008, we had no outstanding borrowings on our credit facility.

Working capital increased at December 31, 2007 to $42.3 million compared to $36.0 million at December 31, 2006. Approximately 30% of our current assets were comprised of accounts receivable at December 31, 2007. Due to industry sensitivity to consumer buying trends and available disposable income, we have in the past extended payment terms for specific purchase transactions. Issuance of these terms (i.e. greater than 30 days or specific dating) is dependent on our relationship with the customer and the customer's payment history. Payment terms are extended to selected customers typically during off-peak times in the year in order to promote our brand name and to assure adequate product availability and to coincide with planned promotions or advertising campaigns. Although a significant amount of our sales are not affected by these terms, the extended terms do have a negative impact on our financial position and liquidity. We expect to continue to selectively offer extended payment terms in the future, depending upon known industry trends and our financial condition. We generate cash flow from operations primarily by collecting outstanding trade receivables. Because we have limited cash reserves, if collections of a significant portion of trade receivables are unexpectedly delayed, we would have a limited amount of funds available to further expand production until such time as we could collect a significant portion of the trade receivables. If our cash needs in the near term exceed the available cash and cash equivalents on hand and the available borrowing under our credit facility, we would be required to obtain additional financing or limit expenditures to the extent of available cash on hand, all of which could adversely effect our current growth plans and result in a material adverse effect on our results of operations, financial condition and/or liquidity.

Our anticipated sources of liquidity over the next twelve months are expected to be cash reserves, projected cash flows from operations, and available borrowings under our credit facility. We anticipate that operating cash flows and current cash reserves will also fund capital expenditure programs. These capital expenditure programs can be suspended or delayed at any time with minimal disruption to our operations if cash is needed in other areas of our operations. In addition, cash flows from operations and cash reserves will be used to support ongoing purchases of component parts for our current and future product lines. The expected operating cash flow, current cash reserves and borrowings available under our credit facility are expected to allow us to meet working capital requirements during periods of low cash flows resulting from the seasonality of the industry.

If adequate funds are not available or not available on acceptable terms, we may be unable to continue operations; develop, enhance and market products; retain qualified personnel; take advantage of future opportunities; or respond to competitive pressures, any of which could have a material adverse effect on our business, operating results, financial condition and/or liquidity.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our results of operations, financial condition and liquidity are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may materially differ from these estimates under different assumptions or conditions. On an on-going basis, we review our estimates to ensure that the estimates appropriately reflect changes in our business.

  Inventories

Inventories are valued at the lower of cost or market and primarily consist of finished golf clubs and component parts. Cost is determined using the first-in, first-out method. The inventory balance, which includes material, labor and assembly overhead costs, is recorded net of an estimated allowance for obsolete inventory. The estimated allowance for obsolete inventory is based upon management's understanding of market conditions and forecasts of future product demand. Accounting for inventories could result in material adjustments if market conditions and future demand estimates are significantly different than original assumptions, causing the reserve for obsolescence to be materially adversely affected.

  Revenue Recognition

We recognize revenue when the product is shipped. At that time, the title and risk of loss transfer to the customer and collectability is reasonably assured. Collectability is evaluated on an individual customer basis taking into consideration historical payment trends, current financial position, results of independent credit evaluations and payment terms. Additionally, an estimate of product returns and warranty costs are recorded when revenue is recognized. Estimates are based on historical trends taking into consideration current market conditions, customer demands and product sell through. We also record estimated reductions in revenue for sales programs such as co-op advertising and spiff incentives. Estimates in the sales program accruals are based on program participation and forecast of future product demand.  If actual sales returns and sales programs significantly exceed the recorded estimated allowances, our sales would be adversely affected. We recognize deferred revenue as a result of sales that have extended terms and a right of return of the product under a specified program. Once the product is paid for and all revenue recognition criteria have been met, we record revenue.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. An estimate of uncollectable amounts is made by management using an evaluation methodology involving both overall and specific identification. We evaluate each individual customer and measure various key aspects of the customer such as, but not limited to, their overall credit risk (via Dun and Bradstreet reports), payment history, track record for meeting payment plans, industry communications, the portion of the customer's balance that is past due and other various items. From an overall perspective, we also look at the aging of the receivables in total and aging relative to prior periods to determine the appropriate reserve requirements. Fluctuations in the reserve requirements will occur from period to period as the change in customer mix or strength of the customers could affect the reserve disproportionately compared to the total change in the accounts receivable balance. Based on management's assessment, we provide for estimated uncollectable amounts through a charge to earnings and a credit to the valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. We generally do not require collateral. Accounting for an allowance for doubtful accounts could be significantly affected as a result of a deviation in our assessment of any one or more customers' financial strength. While only one customer represents greater than 5% but less than 10% of net sales and one customer represents greater than 10% but less than 15% of net sales for the year ended December 31, 2007, if a combination of customers were to become financially impaired, our financial results could be severely affected.

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  Product Warranty

Our golf equipment is sold under warranty against defects in material and workmanship for a period of one year. An allowance for estimated future warranty costs is recorded in the period products are sold. In estimating our future warranty obligations, we consider various relevant factors, including our stated warranty policies, the historical frequency of claims, and the cost to replace or repair the product. Accounting for product warranty reserve could be adversely affected if one or more of our products were to fail (i.e broken shaft, broken head, etc) to a significant degree above and beyond our historical product failure rates, which determine the product warranty accruals.

  Income Taxes

We account for income taxes in accordance with FAS No. 109, "Accounting for Income Taxes" ("FAS 109") as clarified by FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes ("FIN 48"). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred income tax assets, we consider whether it is "more likely than not," according to the criteria of FAS 109, that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. FIN 48 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Due to our historical operating results, management is unable to conclude on a more likely than not basis that all deferred income tax assets generated from net operating losses through December 31, 2002 and other deferred tax assets will be realized. However, due to our recent earnings history, we have concluded that it is more likely than not that a portion of the deferred tax asset will be realized. We have recognized a valuation allowance equal to a portion of the deferred income tax asset for which realization is uncertain.

  Impairment of Long-Lived Assets

We reviewed long-lived assets and certain identifiable intangibles according to the guidance in SFAS ("Statement of Financial Accounting Standards") 144 for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the year ended December 31, 2007 and 2006, there were no impairments of long-lived assets.

New Accounting Pronouncements

Any new accounting pronouncements have been listed in Note 1 (f) of the Consolidated Financial Statements which is incorporated herein by this reference.

30

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates

In the normal course of doing business, we are exposed to market risk through changes in interest rates with respect to our cash equivalents. Cash and cash equivalents at December 31, 2007, were $11,265,000. The average interest rate earned for the year end December 31, 2007, was 4.15%.

Additionally, we are exposed to interest rate risk from our Line of Credit (see Item 7 - Management Discussion and Analysis, Liquidity and Capital Resources). Outstanding borrowings accrue interest, at the Libor rate plus 1.75%. Our company would then be exposed to changes in the Libor rate. As of March 7, 2008, we had no outstanding borrowings on our credit facility.

Foreign Currency Fluctuations

In the normal course of business, we are exposed to foreign currency exchange rate risks that could impact our results of operations. We are exposed to foreign currency exchange rate risk inherent primarily in our sales commitments, anticipated sales and assets and liabilities denominated in currencies other than the U.S. dollar. We transact business in several currencies worldwide, however all foreign transactions are transacted in U.S. dollar except for Canadian activities. The functional currency of our Canadian operations is Canadian dollars. The accompanying consolidated financial statements have been expressed in United States dollars, our reporting currency. Reporting assets and liabilities of out foreign operations have been translated at the rate of exchange at the end of each period. Revenues and expenses have been translated at the monthly average rate of exchange in effect during the respective period. Gains and losses resulting from translation are accumulated in other comprehensive income (loss) in stockholders' equity. Gains or losses resulting from transactions that are made in a currency different from the functional currency are recognized in comprehensive income as they occur. Inventory purchases are invoiced by suppliers in U.S. dollars.

Item 8. Financial Statements and Supplementary Data

The financial statements are set forth herein under Item 15 commencing on page F-1. Schedule II to the consolidated financial statements is set forth herein under Item 15 on page S-1. In addition, supplementary financial information is required pursuant to the provisions of Regulation S-K, Item 302, and is set forth herein under Item 15, note 15 of the notes to Consolidated Financial Statements.

Item 9A(T). Controls and Procedures

Introduction

"Disclosure Controls and Procedures" are defined in Exchange Act Rules 13a -15(e) and 15d -15 (e) as the controls and procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified by the SEC's rules and forms. Disclosure Controls and Procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

31

"Internal Control Over Financial Reporting" is defined in Exchange Act Rules 13a -15(f) and 15d -15(f) as a process designed by, or under the supervision of, an issuer's principal executive and principal financial officers, or persons performing similar functions, and effected by an issuer's board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of an issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the issuer's assets that could have a material adverse effect on the financial statements.

We have endeavored to design our Disclosure Controls and Procedures and Internal Controls Over Financial Reporting to provide reasonable assurances that our objectives will be met. All control systems are subject to inherent limitations, such as resource constraints, the possibility of human error, lack of knowledge or awareness, and the possibility of intentional circumvention of these controls. Furthermore, the design of any control system is based, in part, upon assumptions about the likelihood of future events, which assumptions may ultimately prove to be incorrect. As a result, no assurances can be made that our control system will detect every error or instance of fraudulent conduct, including an error or instance of fraudulent conduct, which could have a material adverse impact on our operations or results.

Evaluation of Internal Controls over Financial Reporting and Disclosure Controls and Procedure

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management conducted an assessment of our internal controls over financial reporting as of December 31, 2007, based on the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

Based on the results of the assessment, management concluded that as of December 31, 2007, our internal controls over financial reporting are effective. There were no material changes to our Internal Controls Over Financial Reporting during the year ended December 31, 2007, that have materially affected or are reasonably likely to materially affect our Internal Controls Over Financial Reporting.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our Disclosure Controls and Procedures as of the end of the period covered by this report and have concluded that our Disclosure Controls and Procedures as of the end of the period covered by this report were designed to ensure that material information relating to us is made known to the Chief Executive Officer and Chief Financial Officer by others within our Company, and were effective.

In addition, it is our policy to not participate in off-balance sheet transactions, including but not limited to special purpose entities.

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Security and Exchange Commission that permit the company to provide only management's report in this annual report.

32

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated by reference to our Proxy Statement for the Annual Meeting of the Stockholders to be held on or about May 20, 2008, to be distributed to the stockholders on or before April 30, 2008 ("the 2008 Proxy Statement") under the respective captions, "Elections of Directors," "Stock Ownership - Section 16(a) Beneficial Ownership Reporting Compliance" and "Management-Executive Officers."

We have adopted a code of ethics that applies to our chief executive officer, chief financial officer, and to all of our other officers, directors, employees and agents. A description of how to receive a copy of our code of ethics is posted on our website, which is located at www.adamsgolf.com. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website. Information contained in our website, whether currently posted or posted in the future, is not part of this document or the documents incorporated by reference in this document.

Item 11. Executive Compensation.

The information required by this Item is incorporated by reference to our 2008 Proxy Statement under the caption "Management-Compensation of Executive Officers."

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated by reference to our 2008 Proxy Statement under the caption "Stock Ownership-Beneficial Ownership of Certain Stockholders, Directors and Executive Officers."

Item 13. Certain Relationships and Related Transactions.

The information required by this Item is incorporated by reference to our 2008 Proxy Statement under the captions "Management-Employment Contracts and Change in Control Agreements," "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions."

Item 14. Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference to our 2008 Proxy Statement under "Committees of Board of Directors; Meetings."

33

PART IV

Item 15. Exhibits, Financial Statement Schedule.

(a) The following documents are filed as a part of this report following the signature page:

(1) Consolidated Financial Statements 

Item	Page
Index to Consolidated Financial Statements and Related Financial Statement Schedule	F-1
Report of Independent Registered Public Accounting Firm	F-2 - F-3
Consolidated Balance Sheets as of December 31, 2007 and 2006	F-4
Consolidated Statements of Operations for the Years ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2007, 2006 and 2005	F-6 - F-7
Consolidated Statements of Cash Flows for the Years ended December 31, 2007, 2006 and 2005	F-8
Notes to Consolidated Financial Statements	F-9 - F-27

(2) Financial Statement Schedule

Our financial statement schedule for the years ended December 31, 2007, 2006 and 2005 is filed as part of this Annual Report and should be read in conjunction with our Consolidated Financial Statements. 

Schedule II - Valuation and Qualifying Accounts S-1

All other schedules are have been omitted because such schedules are not required under the related instructions, or are not applicable, or because the information is not present, or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. 

(3) Exhibits

The exhibits listed below are filed as a part of or incorporated by reference in this Annual Report. Where such filing is made by incorporation by reference to a previously filed document, such document is identified in parenthesis. See the Index of Exhibits included with the exhibits filed as a part of this Annual Report. 

Exhibit	Description	Location
Exhibit 3.1	Amended and Restated Certificate of Incorporation	Incorporated by reference to Form S-1 File No. 333-51715 (Exhibit 3.1)
Exhibit 3.2	Certificate of Amendment to the Restated Certificate of Incorporation filed on February 14, 2008	Included in this filing
Exhibit 3.3	Amended and Restated By-laws	Incorporated by reference to Form S-1 File No. 333-51715 (Exhibit 3.2)
Exhibit 4.1	1998 Stock Incentive Plan of the Company dated February 26, 1998, as amended	Incorporated by reference to Form S-8 File No. 333-68129 (Exhibit 4.1)
Exhibit 4.2	1996 Stock Option Plan dated April 10, 1998	Incorporated by reference to Form S-1 File No.333-51715 (Exhibit 4.2)

34

Exhibit 4.3	Adams Golf, Ltd. 401(k) Retirement Plan	Incorporated by reference to Form S-1 File No.333-51715 (Exhibit 4.3)
Exhibit 4.4	1999 Non-Employee Director Plan of Adams Golf, Inc.	Incorporated by reference to 1999 Form 10-K (Exhibit 4.4)
Exhibit 4.5	1999 Stock Option Plan for Outside Consultants of Adams Golf, Inc.	Incorporated by reference to Form S-8 File No. 333-37320 (Exhibit 4.5)
Exhibit 4.6	2002 Stock Incentive Plan for Adams Golf, Inc.	Incorporated by reference to Annex A of the 2002 Proxy Statement (Annex A)
Exhibit 4.7	Form of Option Agreement under the 2002 Stock Option Plan of Adams Golf, Inc.	Incorporated by reference to Form S-8 File No. 333-112622 (Exhibit 4.7)
Exhibit 10.1	Amendment dated September 1, 2003 to the Commercial Lease Agreement dated April 6, 1998, between Jackson-Shaw Technology Center II and the Company	Incorporated by reference to 2003 Form 10-K (Exhibit 10.12)
Exhibit 10.2*	Golf Consultant Agreement - Thomas S. Watson	Incorporated by reference to 2004 Form 10-K (Exhibit 10.17)
Exhibit 10.3	Employment Agreement - Byron H. (Barney) Adams	Incorporated by reference to 2005 Form 10-K (Exhibit 10.9)
Exhibit 10.4	Commercial Lease Agreement dated August 16, 2006, between MDN/JSC -II Limited and the Company	Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (Exhibit 10.8)
Exhibit 10.5*	Asset Purchase Agreement of Women’s Golf Unlimited	Incorporated by reference to 2006 Form 10-K (Exhibit 10.11)
Exhibit 10.6	Change of Control - Eric Logan	Incorporated by reference to the Quarterly Report on From 10-Q for the quarter ended June 30, 2007 (Exhibit 10.8)
Exhibit 10.7	Revolving line of Credit between Adams Golf, Inc and Wachovia Bank, National Association	Incorporated by reference to the Report on From 8-K dated November 13, 2007 (Exhibit 10.1)
Exhibit 10.8*	Employment Agreement - Oliver G. (Chip) Brewer	Included in this filing
Exhibit 10.9	Commercial Lease Agreement dated December 15, 2007, between MDN/JSC -II Limited and the Company	Included in this filing
Exhibit 21.1	Subsidiaries of the Registrant	Included in this filing
Exhibit 23.1	Consent of KBA Group LLP	Included in this filing
Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Included in this filing

35

Exhibit 31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Included in this filing
Exhibit 32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Included in this filing

*  Confidential treatment has been requested with respect to certain provisions of this agreement.

(b) Exhibits

See Item 15(a)(3)

(c) Financial Statement Schedule

See Item 15(a)(2)

36

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ADAMS GOLF, INC., a Delaware corporation
Date: March 11, 2008	By:	/S/ B.H. (BARNEY) ADAMS
	B.H. (Barney) Adams, Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 11, 2008	By:	/S/ B.H. (BARNEY) ADAMS
	B.H. (Barney) Adams, Chairman of the Board
Date: March 11, 2008	By:	/S/ OLIVER G. BREWER III
	Oliver G. (Chip) Brewer III
	Chief Executive Officer, President and Director
Date: March 11, 2008	By:	/S/ ERIC T. LOGAN
	Eric Logan
	Chief Financial Officer
	(Principal Financial Officer)
Date: March 11, 2008	By:	/S/ PAMELA J. HIGH
	Pamela J. High
	Controller
	(Principal Accounting Officer)
Date: March 11, 2008	By:	/S/ MARK R. MULVOY
	Mark R. Mulvoy
	Director
Date: March 11, 2008	By:	/S/ ROBERT D. ROGERS
	Robert D. Rogers
	Director
Date: March 11, 2008	By:	/S/ RUSSELL L. FLEISCHER
	Russell L. Fleischer
	Director
Date: March 11, 2008	By:	/S/ JOSEPH R. GREGORY
	Joseph R. Gregory
	Director
Date: March 11, 2008	By:	/S/ JOHN M. GREGORY
	John M. Gregory
	Director

37

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND RELATED FINANCIAL STATEMENT SCHEDULE

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2007 and 2006	F-3
Consolidated Statements of Operations for the Years ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholders' Equity for the Years ended December 31, 2007, 2006 and 2005	F-5 - F-6
Consolidated Statements of Cash Flows for the Years ended December 31, 2007, 2006 and 2005	F-7
Notes to Consolidated Financial Statements	F-8 - F-27

Financial Statement Schedule

Our financial statement schedule for the years ended December 31, 2007, 2006 and 2005 is filed as part of this Report and should be read in conjunction with our Consolidated Financial Statements.

Schedule II – Valuation and Qualifying Accounts S-1

All other schedules have been omitted because such schedules are not required under the related instructions, or are not applicable, or because the information is not present, or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Adams Golf, Inc.

We have audited the accompanying consolidated balance sheets of Adams Golf, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2007. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule appearing under Item 15 for each of the years in the three-year period ended December 31, 2007. The consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Adams Golf, Inc. and subsidiaries as of December 31, 2007 and 2006 and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule for each of the years in the three-year period ended December 31, 2007, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2006 the Company adopted Statement of Financial Accounting Standards No. 123R, "Share-Based Payment".

/S/ KBA GROUP LLP

Dallas, Texas

March 11, 2008

F-2

ADAMS GOLF, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts) 

	December 31,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	11,265		$	9,472
Trade receivables, net		18,009			13,553
Inventories, net		28,745			24,651
Prepaid expenses		743			686
Other current assets		1,432			1,371
Total current assets		60,194			49,733
Property and equipment, net		1,046			719
Deferred tax asset – non current		8,877			4,052
Other assets		1,069			1,099
	$	71,186		$	55,603
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	9,205		$	6,271
Accrued expenses and Current Liabilities		8,682			7,463
Total liabilities		17,887			13,734
Stockholders' equity:
Preferred stock, $0.01 par value; authorized 1,250,000 shares; none issued		—			—
Common stock, $.001 par value; authorized 12,500,000 shares; 6,547,847 and 6,223,807 shares issued and 6,221,724 and 5,989,652 shares outstanding at December 31, 2007 and 2006, respectively		7			6
Additional paid-in capital		91,737			90,649
Accumulated other comprehensive income		2,555			887
Accumulated deficit		(36,746	)		(46,147	)
Treasury stock, 326,123 common shares at December 31, 2007 and 234,155 common shares at December 31, 2006, at cost		(4,254	)		(3,526	)
Total stockholders' equity		53,299			41,869
Commitments and contingencies	$	71,186		$	55,603

See accompanying notes to consolidated financial statements

F-3

ADAMS GOLF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Years Ended December 31,
	2007			2006			2005
Net sales	$	94,604		$	76,030		$	56,424
Cost of goods sold		54,608			42,304			30,309
Gross profit		39,996			33,726			26,115
Operating expenses:
Research and development expenses		3,698			2,607			2,285
Selling and marketing expenses		23,772			19,800			16,571
General and administrative expenses		8,420			7,879			7,063
Reversal of settlement expenses (benefit)		—			—			(1,771	)
Reversal of restructuring expense (benefit)		—			—			(78	)
Total operating expenses		35,890			30,286			24,070
Operating income		4,106			3,440			2,045
Other income (expense):
Interest income		286			201			236
Interest expense		(1	)		(3	)		(6	)
Other		264			35			1,052
Income before income taxes		4,655			3,673			3,327
Income tax expense (benefit)		(4,746	)		(5,327	)		87
Net income	$	9,401		$	9,000		$	3,240
Income per common share :
Basic	$	1.54		$	1.54		$	0.57
Diluted	$	1.32		$	1.24		$	0.47

See accompanying notes to consolidated financial statements

F-4

ADAMS GOLF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

Years ended December 31, 2007, 2006 and 2005

	Shares of				Additional		Accumulated Other									Cost of			Total
	Common		Common		Paid-in		Comprehensive			Accumulated			Comprehensive			Treasury			Stockholders'
	Stock		Stock		Capital		Income (Loss)			Deficit			Income			Stock			Equity
Balance, December 31, 2004		5,814,414	$	6	$	87,980	$	(25	)	$	(58,387	)				$	(3,136	)	$	26,438
Comprehensive income:
Net income		—		—		—		—			3,240		$	3,240			—			3,240
Other comprehensive income, net of tax:
Unrealized gain on foreign currency translation		—		—		—		913			—			913			—			913
Comprehensive income		—		—		—		—			—		$	4,153			—			—
Stock options exercised		53,500		—		40		—			—						—			40
Amortization of deferred compensation		—		—		1,496		—			—						—			1,496
Balance, December 31, 2005		5,867,914		6		89,516		888			(55,147	)					(3,136	)		32,127
Comprehensive income:
Net income		—		—		—		—			9,000		$	9,000			—			9,000
Other comprehensive income, net of tax:
Unrealized gain on foreign currency translation		—		—		—		(1	)		—			(1	)		—			(1	)
Comprehensive income		—		—		—		—			—		$	8,999			—			—
Stock options exercised		355 ,893		—		15		—			—						—			15
Treasury stock purchased		—		—		—		—			—						(390	)		(390	)
Amortization of deferred compensation		—		—		1,118		—			—						—			1,118
Balance, December 31, 2006		6,223,807	$	6	$	90,649	$	887		$	(46,147	)				$	(3,526	)	$	41,869

(continued)

F-5

ADAMS GOLF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

Years ended December 31, 2007, 2006 and 2005

	Shares of				Additional		Accumulated Other							Cost of			Total
	Common		Common		Paid-in		Comprehensive		Accumulated			Comprehensive		Treasury			Stockholders'
	Stock		Stock		Capital		Income (Loss)		Deficit			Income		Stock			Equity
Balance, December 31, 2006		6,223,807	$	6	$	90,649	$	887	$	(46,147	)			$	(3,526	)	$	41,869
Comprehensive income:
Net income		—		—		—		—		9,401		$	9,401		—			9,401
Other comprehensive income, net of tax:
Unrealized income on foreign currency translation		—		—		—		1,668		—			1,668		—			1,668
Comprehensive income		—		—		—		—		—		$	11,069		—			—
Stock options exercised		324,040		1		42		—		—					—			43
Treasury stock purchased		—		—		—		—		—					(728	)		(728	)
Amortization of deferred compensation		—		—		1,046		—		—					—			1,046
Balance, December 31, 2007		6,547,847	$	7	$	91,737	$	2,555	$	(36,746	)			$	(4,254	)	$	53,299

See accompanying notes to consolidated financial statements

F-6

ADAMS GOLF, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income	$	9,401		$	9,000		$	3,240
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment and intangible assets		460			335			447
Amortization of deferred compensation		1,046			1,118			1,496
Provision for doubtful accounts		316			853			557
Provision for deferred income tax		(4,826	)		(5,402	)		—
Changes in assets and liabilities:
Trade receivables		(4,772	)		(236	)		(5,411	)
Inventories		(4,094	)		(8,500	)		(4,593	)
Prepaid expenses		(57	)		68			(519	)
Other current assets		(61	)		7			110
Other assets		531			525			(1,579	)
Accounts payable		2,934			1,580			815
Accrued expenses		1,242			195			(303	)
Other non-current liabilities		—			—			(449	)
Net cash provided by (used in) operating activities		2,120			(457	)		(6,189	)
Cash flows from investing activities:
Purchase of equipment		(653	)		(403	)		(338	)
Purchase of intangible assets		(600	)		—			—
Net cash used in investing activities		(1,253	)		(403	)		(338	)
Cash flows from financing activities:
Principal payments under capital lease obligation		(22	)		(35	)		(43	)
Exercise of stock options		43			15			39
Treasury stock purchase		(728	)		(390	)		—
Debt financing costs		(35	)		(4	)		(2	)
Net cash used in financing activities		(742	)		(414	)		(6	)
Effects of exchange rate changes		1,668			(1	)		913
Net increase (decrease) in cash and cash equivalents		1,793			(1,275	)		(5,620	)
Cash and cash equivalents at beginning of the year		9,472			10,747			16,367
Cash and cash equivalents at end of the year	$	11,265		$	9,472		$	10,747
Supplemental disclosure of cash flow information:
Interest paid	$	1		$	3		$	6
Income taxes paid	$	65		$	75		$	88
Supplemental disclosure of non-cash investing and financing activities – equipment financed with capital lease	$	—		$	23		$	15

See accompanying notes to consolidated financial statements.

F-7

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies

(a)   General

We design, assemble, market and distribute premium quality, technologically innovative golf clubs for all skill levels, including Idea a3 and a3 OS irons, Idea a2 and a2 OS irons, Idea Tech OS irons, Idea Pro Irons and Idea a3 and a3 OS, Idea a2 and a2 OS, Idea Tech OS and Idea Pro I-woods, Insight XTD A3 & A3 OS drivers and fairway woods, RPM drivers and fairway woods, the Ovation family of drivers, fairway woods and irons, the Tight Lies family of fairway woods, the Redline family of fairway woods and drivers, Tight Lies GT500 and GT3 irons and i-woods, the Tom Watson signature and Puglielli series of wedges, and certain accessories. In addition, under Women's Golf Unlimited we distribute the Lady Fairway and Square 2 brands.

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated in consolidation. On February 19, 2008 we completed a one-for-four reverse stock split. All share values have been restated as a result of the reverse stock split.

(b)   Inventories

Inventories are valued at the lower of cost or market and primarily consist of finished golf clubs and component parts. Cost is determined using the first-in, first-out method. The inventory balance, which includes material, labor and assembly and other overhead costs, is recorded net of an estimated allowance for obsolete inventory. The estimated allowance for obsolete inventory is based upon management's understanding of market conditions and forecasts of future product demand. Accounting for inventories could result in material adjustments if market conditions and future demand estimates are significantly different than original assumptions, causing the reserve for obsolescence to be materially adversely affected.

(c)   Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. An estimate of uncollectable amounts is made by management using an evaluation methodology involving both overall and specific identification. We evaluate each individual customer and measure various key aspects of the customer such as, but not limited to, their overall credit risk (via Dun and Bradstreet reports), payment history, track record for meeting payment plans, industry communications, the portion of the customer's balance that is past due and other various items. From an overall perspective, we also look at the aging of the receivables in total and aging relative to prior periods to determine the appropriate reserve requirements. Fluctuations in the reserve requirements will occur from period to period as the change in customer mix or strength of the customers could affect the reserve disproportionately compared to the total change in the accounts receivable balance. Based on management's assessment, we provide for estimated uncollectable amounts through a charge to earnings and a credit to the valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. We generally do not require collateral. Accounting for an allowance for doubtful accounts could be significantly affected as a result of a deviation in our assessment of any one or more customers' financial strength. While only one customer represents greater than 5% but less than 10% of net sales and one customer represents greater than 10% but less than 15% of the net sales for the year ended December 31, 2007, if a combination of customers were to become financially impaired, our operations and financial condition could be severely affected.

F-8

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies (continued)

(d)   Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the respective assets, which range from three to seven years. Maintenance and repairs are expensed as incurred. Significant replacements and betterments are capitalized.

(e)   Revenue Recognition

We recognize revenue when the product is shipped. At that time, the title and risk of loss transfer to the customer and collectability is reasonably assured. Collectability is evaluated on an individual customer basis taking into consideration historical payment trends, current financial position, results of independent credit evaluations and payment terms. Additionally, an estimate of product returns and warranty costs are recorded when revenue is recognized. Estimates are based on historical trends taking into consideration current market conditions, customer demands and product sell through. We also record estimated reductions in revenue for sales programs such as co-op advertising and spiff incentives. Estimates in the sales program accruals are based on program participation and forecast of future product demand.  If actual sales returns and sales programs significantly exceed the recorded estimated allowances, our sales would be adversely affected. We recognize deferred revenue as a result of sales that have extended terms and a right of return of the product under a specified program. Once the product is paid for and all revenue recognition criteria are met, we record revenue.

(f)   New Accounting Pronouncements

In 2006, the FASB issued SFAS No. 157, Fair Value Measurements,which provides defines fair value and provides framework for measuring the fair value and expands disclosure about those measurements. We adopted the provisions of this standard in the fourth quarter of 2007; the adoption of this standard had no impact on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115,which permits entities to choose to measure many financial instruments and certain other items at fair value. We adopted the provisions of this standard in the fourth quarter of 2007; the adoption of this standard had no impact on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations - an amendment of FASB Statement No. 141,which defines the acquirer in a business combination and discusses reporting of the acquisition method of accounting for transactions. We are currently reviewing the provisions of this standard to determine the impact to our financial statements and will adopt in the first quarter of 2008.

In December 2007, the FASB issued SFAS No. 160, Accounting for Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51, which establishes standards for reporting and comparability of consolidated financial statements, specifically as it relates to noncontrolling interests. We are currently reviewing the provisions of this standard to determine the impact to our financial statements and will adopt in the first quarter of 2009.

F-9

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1) Summary of Significant Accounting Policies (continued)

(g)   Research and Development

Research and development costs consist of all costs incurred in planning, designing and testing of golf equipment, including salary costs related to research and development. These costs are expensed as incurred. Our research and development expenses were approximately $3,698,000, $2,607,000 and $2,285,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

(h)   Advertising Costs

Advertising costs, included in selling and marketing expenses on the accompanying consolidated statements of operations, other than direct commercial costs, are expensed as incurred and totaled approximately $5,732,000, $5,631,000 and $4,980,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

(i)   Product Warranty

Our golf equipment is sold under warranty against defects in material and workmanship for a period of one year. An allowance for estimated future warranty costs is recorded in the period products are sold. In estimating our future warranty obligations, we consider various relevant factors, including our stated warranty policies, the historical frequency of claims, and the cost to replace or repair the product. Accounting for product warranty reserve could be adversely affected if one or more of our products were to fail (i.e broken shaft, broken head, etc) to a significant degree above and beyond our historical product failure rates, which determine the product warranty accruals.

	Beginning Balance		Charges for Warranty claims			Estimated accruals		Ending Balance
Year ended December 31, 2007	$	389		(543	)		491	$	337
Year ended December 31, 2006	$	307		(506	)		588	$	389

F-10

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies (continued)

(j)    Income Taxes

We account for income taxes in accordance with FAS No. 109, "Accounting for Income Taxes" ("FAS 109") as clarified by FASB Interpretation No. 48, "accounting for Uncertainty in Income Taxes ("FIN 48"). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred income tax assets, we consider whether it is "more likely than not", according to the criteria of FAS 109, that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. FIN 48 requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Due to our historical operating results, management is unable to conclude on a more likely than not basis that all deferred income tax assets generated from net operating losses through December 31, 2002 and other deferred tax assets will be realized. However, due to our recent earnings history, we have concluded that it is more likely than not that a portion of the deferred tax asset will be realized. We have recognized a valuation allowance equal to a portion of the deferred income tax asset for which realization is uncertain.

(k)   Income Per Share

The weighted average common shares used for determining basic and diluted income per common share were 6,094,385 and 7,134,363, respectively, for the year ended December 31, 2007. The effect of all options to purchase shares of our common stock for the year ended December 31, 2007 resulted in additional dilutive shares of 1,039,978.

The weighted average common shares used for determining basic and diluted income per common share were 5,830,229 and 7,232,445, respectively, for the year ended December 31, 2006. The effect of all options to purchase shares of our common stock for the year ended December 31, 2006 resulted in additional dilutive shares of 1,402,216.

The weighted average common shares used for determining basic and diluted income per common share were 5,683,515 and 6,950,932, respectively, for the year ended December 31, 2005. The effect of all warrants and options to purchase shares of our common stock for the year ended December 31, 2005 resulted in additional dilutive shares of 1,267,417.

(l)   Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short maturity of these instruments.

F-11

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies (continued)

(m)  Impairment of Long-Lived Assets

We follow the guidance in SFAS ("Statement of Financial Accounting Standards") 144 in reviewing long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. During the years ended December 31, 2007, 2006 and 2005, there was no impairment of long-lived assets.

(n)   Comprehensive Income

Comprehensive income consists of net income and unrealized gains and losses, net of related tax effect, on foreign currency translation adjustments and marketable securities.

(o)   Cash and Cash Equivalents

We consider all short-term highly liquid instruments, with an original maturity of three months or less, to be cash equivalents.

(p)   Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

(q)  Segment Reporting

We are organized by functional responsibility and operate as a single segment and within that segment offer more than one class of product.

(r)  Stock-Based Compensation

In May 2002, we adopted the 2002 Equity Incentive Plan (the “Plan”) for employees, outside directors and consultants. The Plan allows for the granting of up to 625,000 shares of our common stock at the inception of the Plan, plus all shares remaining available for issuance under all predecessor plans on the effective date of this Plan, and additional shares as defined in the Plan. In addition, the Plan automatically increases 250,000 shares available for granting on January 1 of each subsequent year for years 2003 through 2008. At December 31, 2007 (restated as a result of the one-for-four reverse stock split on February 19, 2008), 1,100,274 outstanding options had been granted with exercise prices ranging from $0.04 to $4.80 per share at the date of grant. The requisite service periods for the options to vest vary from six months to four years and the options expire ten years from the date of grant. At December 31, 2007 (restated as a result of the one-for-four reverse stock split on February 19, 2008), 796,158 shares remain available for grant, including forfeitures.

F-12

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies (continued)

(r)  Stock Compensation (continued)

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”), which established accounting standards for transactions where the entity exchanges equity instruments for goods and services. The revision of this statement focuses on the accounting for transactions where the entity obtains employee services in share-based payment transactions. This statement revision eliminates the alternative use of APB 25 intrinsic value method and requires that entities adopt the fair-value method for all share-based transactions. We adopted the provisions of this standard on a modified prospective basis on January 1, 2006. The following table illustrates the effect on net income and income per share as if we had applied the fair value recognition provisions of SFAS 123 and SFAS 148 to stock-based employee compensation for the year ended December 31, 2005 (in thousands, except for per share amounts):

	2005
Net income
As reported	$	3,240
Add: Stock-based compensation expense included in reported net income		1,496
Deduct: Total stock-based compensation expense determined under the fair value method		(1,505	)
Pro forma net income	$	3,231
Basic income per common share:
As reported	$	0.57
Pro forma	$	0.57
Diluted income per common share:
As reported	$	0.47
Pro forma	$	0.46

Compensation expense associated with adopting SFAS 123R for the year ended December 31, 2007, had an expense effect on income from operations, income before taxes and net income associated with stock options and warrants of $1,046,000. The reported basic and diluted earnings per share were $1.54 and $1.32, respectively, for the year ended December 31, 2007. Had we not adopted SFAS 123R, the effect to net income under APB 25 would have been $ 1,023,000 for the year ended December 31, 2007. The basic and diluted earnings per share did not change for the year ended December 31, 2007 as a result of the adoption of SFAS 123R.

The effect of compensation expense associated with adopting SFAS 123R for the year ended December 31, 2006, had an expense effect on income from operations, income before taxes and net income associated with stock options and warrants of $1,118,000. The reported basic and diluted earnings per share were $1.54 and $1.24 for the year ended December 31, 2006. Had we not adopted SFAS 123R, the effect to net income under APB 25 would have been $ 1,080,000 for the year ended December 31, 2006. The basic and diluted earnings per share did not change for the year ended December 31, 2006 as a result of the adoption of SFAS 123R.

F-13

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(1)   Summary of Significant Accounting Policies (continued)

(r)   Stock Compensation (continued)

Under the provisions of the 2002 Equity Incentive Plan, we have the authority to repurchase the taxable portion of the employee's shares that become outstanding after the employee exercises their options. On May 15, 2007, we repurchased 42,992 shares of common stock at an average price per share of $8.00 for a total cost of approximately $344,000. On August 15, 2007, we repurchased 33,541 shares of common stock at an average price per share of $7.96 for a total cost of approximately $267,000. On November 15, 2007, we repurchased 15,433 shares of common stock at an average price per share of $7.60 for a total cost of approximately $117,000. The repurchased shares are held in treasury.

(s)  Foreign Currency Translation and Transactions

The functional currency of our Canadian operations is Canadian dollars. The accompanying consolidated financial statements have been expressed in United States dollars, our reporting currency. Reporting assets and liabilities of our foreign operations have been translated at the rate of exchange at the end of each period. Revenues and expenses have been translated at the monthly average rate of exchange in effect during the respective period. Gains and losses resulting from translation are accumulated in other comprehensive income (loss) in stockholders' equity. Gains or losses resulting from transactions that are made in a currency different from the functional currency are recognized in earnings as they occur. Inventory purchases are invoiced by suppliers in U.S. dollars.

(t)   Classification of Shipping and Handling Fees and Costs

Shipping and handling fees and costs are included in net sales and cost of goods sold, respectively.

(u)   Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation.

(2) Trade Receivables, net

Trade receivables consist of the following at December 31, 2007 and 2006:

	2007			2006
Trade receivables	$	18,521		$	14,255
Allowance for doubtful accounts		(512	)		(702	)
	$	18,009		$	13,553

F-14

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(3)   Inventories

Inventories consist of the following at December 31, 2007 and 2006:

	2007		2006
Finished goods	$	16,887	$	13,506
Component parts		11,858		11,145
	$	28,745	$	24,651

Inventory is determined using the first-in, first-out method and is recorded at the lower of cost or market value. The inventory balance is comprised of the following: purchased raw materials or finished goods at their respective purchase costs; labor, assembly and other capitalizable overhead costs, which are then applied to each unit after work in process is completed; retained costs representing the excess of manufacturing and other overhead costs that are not yet applied to finished goods; and an estimated allowance for obsolete inventory. At December 31, 2007 and 2006, inventories included $865,000 and $543,000 of consigned inventory, respectively, and $189,000 and $153,000 of inventory obsolescence reserves, respectively.

(4)   Property and Equipment, net

Property and equipment consist of the following at December 31, 2007 and 2006:

	2007			2006
Equipment	$	2,296		$	1,992
Computers and software		7,924			9,197
Furniture and fixtures		770			840
Leaseholds improvements		188			188
Accumulated depreciation and amortization		(10,132	)		(11,498	)
	$	1,046		$	719

(5)   Other current and non-current Assets

Other current assets, net, consist of the following at December 31, 2007 and 2006:

	2007		2006
Maintenance agreements		81		17
Other receivable		—		4
Deferred tax asset		1,351		1,350
	$	1,432	$	1,371

F-15

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(5) Other current and non-current Assets (continued)

We recorded a deferred tax asset of $4.8 million during the year ended December 31, 2007 and $5.4 million for the same period during 2006. This amount represents what we believe to be an estimate of future usage of our carry back; the remaining asset has an existing valuation allowance applied to it. At December 31, 2007, we had net operating loss carryforwards for federal, foreign and state income tax purposes of approximately $37 million and tax credit carryforwards of $0.3 million, which are available to offset future taxable income through 2022. The short term portion of the deferred tax asset of $1.4 million is reported in other current assets; the long term portion of the deferred tax asset of $8.9 million is reported as a deferred tax asset non-current in the non-current asset section of the balance sheet.

Other assets, net, consist of the following at December 31, 2007 and 2006:

	2007		2006
Deposits	$	23	$	14
Long term endorsements		540		1,080
Other, including intangible assets purchased		506		5
	$	1,069	$	1,099

The increase in other non-current assets primarily represents the intangibles purchased of $0.6 million related to the purchase of Women’s Golf Unlimited which occurred in the first quarter of 2007.

(6)   Accrued Expenses and Current Liabilities

Accrued expenses and Current Liabilities consist of the following at December 31, 2007 and 2006:

	2007		2006
Payroll and commissions	$	2,707	$	2,046
Advertising		—		326
Product warranty expense and sales returns		1,611		2,040
Professional services		23		7
Accrued inventory		971		296
Accrued sales promotions		390		859
Deferred revenue		1,538		805
Other		1,442		1,084
	$	8,682	$	7,463

F-16

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(7)   Restructuring

During 2002, we executed an operational restructuring plan, which resulted in the closure of the Adams Golf UK, Limited wholly owned subsidiary. The operational restructuring plan resulted in a restructuring charge of $850,000 for severance, a write off of goodwill and other related exit costs. Restructuring expense for 2003 and 2005 resulted in a benefit due to the release of liability from our previously recorded building lease and accounting and legal fees for the Adams Golf, UK subsidiary. We continue to sell our products in the UK through a third party distributor.

(8) Professional Services Agreement and Settlement Expense

In May 1998, Adams Golf, Ltd. entered into an agreement with Nicholas A. Faldo. The agreement provided that Mr. Faldo provide a variety of services to Adams Golf including endorsement and use of certain of Adams Golf Ltd.'s products. On November 6, 2000, we announced that Mr. Faldo was in material breach of his contract for failure to use certain of our products. On August 25, 2001, an agreement was reached with Mr. Faldo in settlement of the dispute regarding provisions of his prior professional services agreement with Adams Golf. As a result, we established a liability representing the present value of the future obligation, which approximated $2,673,000, utilizing our incremental borrowing rate of 6.04%. In accordance with the terms of the settlement, Mr. Faldo waived all future rights to accrued and unpaid royalties of $1.1 million associated with his prior professional services agreement with us. Therefore, $1,579,000 of settlement expense was incurred during the year ended December 31, 2001. We owed two $100,000 payments, one due at December 31, 2003 and one due at December 31, 2004. However, according to the terms of Mr. Faldo's contract, he was required to play a specified number of PGA sanctioned events and keep his PGA credentials. Because Mr. Faldo has failed to meet the contract requirements, the payment was not made at December 31, 2003 or December 31, 2004. During September 2005, we determined that it was appropriate to reverse the settlement liability previously accrued. Accordingly, we reversed approximately $1,339,000 and $449,000 in accrued expenses and other non-current liabilities.  

(9) Commitments and Contingencies

We are obligated under certain noncancellable operating leases for assembly, warehouse and office space. A summary of the minimum rental commitments under noncancellable leases is as follows:

Years ending
December 31,
2008	$	699
2009		649
2010		626
2011		569
2012		430
Beyond 2012		288
	$	3,261

Rent expense was approximately $650,000, $602,000 and $609,000 for the years ended December 31, 2007, 2006 and 2005, respectively.

F-17

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(9)   Commitments and Contingencies (continued)

Beginning in June 1999, the first of seven class action lawsuits was filed against us, certain of our current and former officers and directors, and the three underwriters of our initial public offering ("IPO") in the United States District Court of the District of Delaware. The complaints alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with our IPO. In particular, the complaints alleged that our prospectus, which became effective July 9, 1998, was materially false and misleading. The operative complaint was filed on January 24, 2006, and it alleges that the prospectus failed to disclose that unauthorized distribution of our products (gray market sales) threatened our long-term profits and that we engaged in questionable sales practices (including double shipping and unlimited rights of return), which threatened post-IPO financial results. Discovery closed on August 11, 2006. On November 21, 2006, all summary-judgment briefing was completed. On December 13, 2006, we learned that the Delaware District Court judge whom the case was set before was elevated to the United States Court of Appeals for the Third Circuit. On December 15, 2006, we were notified that our case was assigned to the vacant judicial position and that all proceedings had been postponed until a new judge was confirmed, and there was no trial date set at this time. On February 7, 2008, we were notified that our case has been reassigned to Chief Judge Gregory M. Sleet. There has been no scheduling conference set yet, and there is no trial date set at this time. A mediation has been scheduled for April 8, 2008.

We maintain directors' and officers' ("D&O") and corporate liability insurance to cover certain risks associated with these securities claims filed against us or our directors and officers. During the period covering the class action lawsuit, we maintained insurance from multiple carriers, each insuring a different layer of exposure, up to a total of $50 million. In addition, we have met the financial deductible of our directors' and officers' insurance policy for the period covering the time the class action lawsuit was filed. On March 30, 2006, Zurich American Insurance Company, which provided insurance coverage totaling $5 million for the layer of exposure between $15 million and $20 million, notified us that it was denying coverage due to the fact that it was allegedly not timely notified of the class action lawsuit.  On October 11, 2007, we filed a suit against our former insurance broker, Thilman & Filipini, LLC ("T&F"), for various claims related to T&F's alleged failure to notify Zurich of the class action lawsuit. Depending on the outcome of this proceeding, based on the previously disclosed agreement with Chubb & Son ("Chubb"), a division of Federal Insurance Company ("Federal"),which is described below, we could be required to pay Zurich's $5 million limit of liability in cash before the layers of insurance coverage excess to the Zurich layer attach. We previously disclosed that Chubb had notified us that coverage under the Federal policy, which provided insurance coverage totaling $10 million for the layer of exposure between $20 million and $30 million, and the Executive Risk Indemnity Inc. ("ERII") policy, which provided insurance coverage totaling $10 million for the layer of exposure between $40 million and $50 million, would attach only if the underlying limits are exhausted by payment from the underlying insurance carriers. On June 18, 2007, Chubb notified us that Federal and ERII will not require that Zurich pay the full mount of its limit of liability before the Federal and ERII policies attach, and it confirmed that Chubb will accept payment in cash by our company of Zurich's limit of liability to satisfy this requirement, so long as such payment is for covered loss. On August 7, 2007, TIG Insurance Co ("TIG"), which provided insurance coverage totaling $7.5 million for the layer of exposure between $7.5 million and $15 million, informed us that it was reserving its rights to deny coverage, based on, among other things, certain exclusions in the policy and recent legal authority holding that damages and settlements arising out of Section 11 claims are uninsured loss. We disagree with TIG's interpretation of the policy language and legal authority, and negotiations on this issue continue. At this point in the legal proceedings, we cannot predict with any certainty the outcome of the matter, per the guidance in SFAS 5, and thus can not reasonably estimate future liability on the conclusion of the events, if any.

F-18

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(9)  Commitments and Contingencies (continued)

The underwriters for the IPO are also defendants in the securities class action. The underwriting agreement that we entered into with the underwriters in connection with the IPO contains an indemnification clause, providing for indemnification against any loss, including defense costs, arising out of the IPO. After the first lawsuit was filed, the underwriters requested indemnification under the agreement. Our D&O insurance policy included an endorsement providing $1 million to cover indemnification of the underwriters. Our D&O insurer has notified the underwriters of the exhaustion of the $1 million sublimit. We believe that we have no current obligation to pay the underwriters' defense costs. We believe that the applicable case law provides that the earliest possible time that an obligation to indemnify might exist is after a court has decided conclusively that the underwriters are without fault under the federal securities laws. The litigation is not at that stage yet. As of March 7, 2008, the total amount of outstanding underwriter defense costs was just less than $1.4 million. At this time, the underwriters are not able to predict with certainty the amount of defense costs they expect to incur going forward, but it is likely they will incur additional costs before this matter is concluded. At this time, we cannot predict with any certainty the outcome of this indemnification issue, per the guidance in SFAS 5, and thus cannot reasonably estimate future liability on the conclusion of the events, if any.

From time to time, we are engaged in various other legal proceedings in the normal course of business. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time.

(10) Retirement Plan

In February 1998, we adopted the Adams Golf, Ltd. 401(k) Retirement Plan (the "Plan"), which covers substantially all employees. We match 50% of employee contributions up to a maximum of 6% of the employee's compensation. For the years ended December 31, 2007, 2006 and 2005, we contributed approximately $134,000, $149,000 and $135,000, respectively, to the Plan.

(11) Liquidity

In November 2007, we signed a revolving credit agreement with Wachovia Bank, National Association to provide up to $15.0 million in short term debt with the option to go up to $30 million. The agreement is collateralized by all of our assets and requires, among other things, us to maintain certain financial performance levels relative to the fixed charge coverage ratio, but only when we have an outstanding balance on the facility. Interest on outstanding balances accrues at a rate of Libor plus 1.75% payable monthly. As of December 31, 2007 and March 7, 2008, we have no outstanding borrowings on our credit facility.

Our anticipated sources of liquidity over the next twelve months are expected to be cash reserves, projected cash flows from operations, and available borrowings under our credit facility. We anticipate that operating cash flows and current cash reserves will also fund capital expenditure programs. These capital expenditure programs can be suspended or delayed at any time with minimal disruption to our operations if cash is needed in other areas of our operations. In addition, cash flows from operations and cash reserves will be used to support ongoing purchases of component parts for our current and future product lines. The expected operating cash flow, current cash reserves and borrowings available under our credit facility are expected to allow us to meet working capital requirements during periods of low cash flows resulting from the seasonality of the industry.

F-19

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(11)  Liquidity (continued)

If adequate funds are not available or not available on acceptable terms, we may be unable to continue operations; develop, enhance and market products; retain qualified personnel; take advantage of future opportunities; or respond to competitive pressures, any of which could have a material adverse effect on our business, operating results, financial condition and/or liquidity.

(12)  Income Taxes

Income tax expense (benefit) for the years ended December 31, 2007, 2006 and 2005 consists of the following:

	2007			2006			2005
Federal-current	$	79		$	68		$	83
State-current		1			7			4
Deferred		(4,826	)		(5,402	)
	$	(4,746	)	$	(5,327	)	$	87

Actual income tax expense differs from the "expected" income tax expense (benefit) (computed by applying the U.S. federal corporate tax rate of 35% to income before income taxes) for the years ended December 31, 2007, 2006 and 2005 as follows:

	2007			2006			2005
Computed "expected" tax benefit	$	1,629		$	1,286		$	1,165
State income taxes, net of federal tax expense		47			37			33
Change in valuation allowance for deferred tax assets		(6,809	)		(6,770	)		(1,242	)
Other		387			120			131
	$	(4,746	)	$	(5,327	)	$	87

F-20

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(12)  Income Taxes (continued)

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December 31, 2007 and 2006 are presented below:

	2007			2006
Deferred tax assets:
Allowance for doubtful accounts receivable	$	184		$	253
Product warranty and sales returns		580			735
Property and equipment		—			35
Other reserves		89			294
Deferred Compensation		166			850
263A adjustment		106			106
Research and development tax credit carryforwards		306			306
Net operating loss carryforwards		13,245			14,080
Total deferred tax assets		14,676			16,659
Valuation allowance		(4,448	)		(11,257	)
Net deferred tax assets		10,228			5,402
Deferred tax liabilities:
Other		—			—
Total deferred tax liabilities		—			—
Net deferred taxes assets	$	10,228		$	5,402

Amounts recorded in consolidated balance sheets at December 31, 2007 and 2006:

	2007		2006
Current	$	1,351	$	1,350
Non-current		8,877		4,052
	$	10,228	$	5,402

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

F-21

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(12)  Income Taxes (continued)

At December 31, 2007, we cannot determine based on a weighing of objective evidence that it is more likely than not that the remaining net deferred tax assets will be realized. As a result, as of December 31, 2007, we have established a valuation allowance for the deferred tax assets in excess of existing taxable temporary differences. We recorded a deferred tax asset of $10.2 million. This amount represents what we believe to be an estimate of future usage of our carry back. The remaining asset has an existing valuation allowance applied to it. The net change in the valuation allowance for the years ended December 31, 2007 and 2006 was $6,809,000 and $6,770,000, respectively.

At December 31, 2007, we have net operating loss carryforwards for federal, foreign and state income tax purposes of approximately $36,791,000 and tax credit carryforwards of $306,000 which are available to offset future taxable income through 2022. The availability of approximately $502,000 of the net operating loss carryforwards to reduce future taxable income is limited to approximately $71,000 per year for the remaining life of the net operating losses, as a result of a change in ownership.

(13)  Stockholders' Equity

(a)   Employee Stock Option Plans

In May 2002, we adopted the 2002 Equity Incentive Plan for employees, outside directors and consultants. The plan allows for the granting of up to 625,000 shares of our common stock at the inception of the plan, plus all shares remaining available for issuance under all predecessor plans on the effective date of this plan, and additional shares as defined in the plan. On May 1, 2002, the four predecessor plans described in previous annual reports were terminated and a total of 538,370 shares available for issuance under these predecessor plans were transferred to the Equity Incentive Plan. As shares forfeit or expire under the four predecessor plans, those shares become available under the 2002 Equity Incentive Plan. Since the initial transfer on May 1, 2002, an additional 201,510 shares were transferred to the Equity Incentive Plan. In addition, the plan automatically increases 250,000 shares available for granting on January 1 of each subsequent year for years 2003 through 2008. At December 31, 2007, 1,100,274 outstanding options had been granted with exercise prices ranging from $0.04 to $4.80 per share at the date of grant. The vesting periods vary from six months to four years and the options expire ten years from the date of grant. At December 31, 2007, 796,158 shares remain available for grant, including forfeitures.

The following is a summary of stock options outstanding as of December 31, 2007:

			Weighted		Weighted				Weighted
Range of			Average		average				Average Vested
Exercise	Options		Remaining		Exercise price		Options		Exercise price
Prices	Outstanding		Contractual life		per share		Exercisable		per share
$0.04 - $1.20		1,062,774		5.63 years	$	0.04		853,995	$	0.04
$1.21 - $4.00		12,500		5.12 years		1.24		12,500		1.24
$4.01 - $8.00		25,000		7.26 years		4.76		15,625		4.77
		1,100,274		5.66 years	$	0.16		882,120	$	0.14

F-22

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(13)  Stockholders' Equity (continued)

The per share weighted-average fair value of stock options granted during 2006 and 2005 was $4.72 and $5.52, respectively, on the date of grant using the Black Scholes option pricing model with the following weighted-average assumptions: Risk free interest rate, 3.5%; expected life, 10 years; expected dividend yield, 0%; and daily annualized volatility, 107.4% and 111.4% in 2006 and 2005, respectively. We use historical data to estimate option exercise and employee termination factors within the valuation model.

Operating expenses included in the consolidated statements of operations for the years ended December 31, 2007, 2006 and 2005 include total compensation expense associated with stock options and warrants of $1,046,000, $1,118,000 and $1,496,000, respectively.

A summary of stock option activity follows:

				Weighted		Aggregate
	Number of			Average		Intrinsic
	Shares			Exercise price		Value of options
Options outstanding at December 31, 2004		1,599,244		$	0.36
Options granted		323,540			0.04
Options forfeited (expired)		(76,583	)		5.28
Options exercised		(53,500	)		0.72
Options outstanding at December 31, 2005		1,792,701			0.12
Options granted		12,500			4.72
Options forfeited (expired)		(25,000	)		2.96
Options exercised		(355,893	)		0.04		1,973,664
Options outstanding at December 31, 2006		1,424,308			0.16		11,003,577
Options granted		7			0.04
Options forfeited (expired)		—			—
Options exercised		(324,041	)		0.04		2,557,468
Options outstanding at December 31, 2007		1,100,274			0.16		9,725,455
Options exercisable at December 31, 2007		882,120		$	0.16		7,814,920

The weighted average remaining contractual life of the options exercisable at December 31, 2007 was 5.30 years and at December 31, 2006 was 6.37 years.

As of December 31, 2007, compensation costs related to non-vested awards totaled $0.5 million, which is expected to be recognized over a weighted average period of 0.8 years.

On February 19, 2008 we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing with a one-to-four ratio. The above footnote represents values restated as a result of the reverse stock split.

F-23

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(13)  Stockholders' Equity (continued)

(a)  Common Stock Repurchase Program

In October 1998, the Board of Directors approved a plan whereby we are authorized to repurchase from time to time on the open market up to 500,000 shares of its common stock. At December 31, 1998, we had repurchased 164,375 shares of common stock at an average price per share of $19.08 for a total cost of approximately $3,136,000. At August 15, 2006, we repurchased 34,346 shares of common stock at an average price per share of $5.40 for a total cost of approximately $186,000. At November 15, 2006, we repurchased 35,434 shares of common stock at an average price per share of $5.76 for a total cost of approximately $204,000. On May 15, 2007, we repurchased 42,992 shares of common stock at an average price per share of $8.00 for a total cost of approximately $344,000. On August 15, 2007, we repurchased 33,541 shares of common stock at an average price per share of $7.96 for a total cost of approximately $267,000. On November 15, 2007, we repurchased 15,433 shares of common stock at an average price per share of $7.60 for a total cost of approximately $117,000. The repurchased shares are held in treasury. No shares were repurchased during the years ended December 31, 2005 or 2004.

(b)  Deferred Compensation

Due to the passage of The American Jobs Creation Act and the subsequent IRS Section 409A rules, stock options that were issued at a strike price less than market value at the date of grant will now be considered deferred compensation by the Internal Revenue Service and the individual who was granted the options will incur adverse tax consequences, including but not limited to excise taxes, unless the individual deemed future exercise date of the unvested stock options at December 31, 2004 and made this election before December 31, 2005. As a result of the compliance with the American Job Creation Act, a summary of the elected future exercise dates is as follows:

Period of Exercise	Total Options to be exercised
2008		194,425
2009		90,000
2010		15,000
2011		27,500
Beyond 2012		60,771
Total Options		387,696

On February 19, 2008 we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing with a one-to-four ratio. The above table represents values restated as a result of the reverse stock split.

F-24

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(14)  Segment Information

We generate substantially all revenues from the design, marketing and distribution of premium quality, technologically innovative golf clubs. Our products are distributed in both domestic and international markets. Net sales by customer domicile for these markets consisted of the following for the years ended December 31, 2007, 2006 and 2005:

	2007		2006		2005
United States	$	78,623	$	63,016	$	48,496
Rest of world		15,981		13,014		7,928
	$	94,604	$	76,030	$	56,424

The following table sets forth net sales by product class for the years ended December 31, 2007, 2006 and 2005:

	2007		2006		2005
Fairway woods	$	18,428	$	14,841	$	14,539
Drivers		10,472		7,323		15,673
Irons		63,251		51,649		23,919
Wedges and other		2,453		2,217		2,293
Total	$	94,604	$	76,030	$	56,424

F-25

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(15)  Quarterly Financial Results (unaudited)

 Quarterly financial results for the years ended December 31, 2007 and 2006 are as follows:

	2007
	1st Quarter		2nd Quarter		3rd Quarter			4th Quarter
Net sales	$	27,808	$	30,403	$	18,929		$	17,464
Gross profit	$	12,195	$	13,302	$	7,740		$	6,760
Net income (loss)	$	3,754	$	2,517	$	(327	)	$	3,457
Income (loss) per share – basic	$	0.63	$	0.42	$	(0.05	)	$	0.57
– diluted		0.49		0.33		(0.05	)		0.49

	2006
	1st Quarter		2nd Quarter		3rd Quarter			4th Quarter
Net sales	$	22,265	$	25,733	$	14,960		$	13,072
Gross profit	$	10,452	$	11,170	$	6,385		$	5,719
Net income (loss)	$	3,349	$	1,770	$	(500	)	$	4,381
Income (loss) per share – basic	$	0.59	$	0.31	$	(0.09	)	$	0.76
– diluted		0.48		0.25		(0.09	)		0.61

F-26

ADAMS GOLF, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2007 and 2006

(Tables in thousands, except share and per share amounts)

(16)  Business and Credit Concentrations

We are currently dependent on four customers, which collectively comprised approximately 25.5% of net sales for the year ended December 31, 2007. Of these, one customer individually represented greater than 5% but less than 10% of net sales, while one customer individually represented greater than 10% but less than 15% of net sales for the year ended December 31, 2007. For the year ended December 31, 2006, four customers, which collectively comprised approximately 25.2% of net sales, of which three customers individually represented greater than 5% but less than 10% of net sales, while no customer individually represented greater than 10% of net sales for the year ended December 31, 2006. For the year ended December 31, 2005, five customers collectively comprised approximately 26.0% of net sales, of which no customer individually represented greater than 5% of net sales while one customer represented greater than 10% but less than 15% of net sales for the year ended December 31, 2005. The loss of an individual or a combination of these customers would have a material adverse effect on consolidated revenues, results of operations, financial condition and competitive market position.

A significant portion of our inventory purchases are from one supplier in China; we purchased approximately 46% and 62% of our total inventory purchased for the years ended December 31, 2007 and 2006, respectively, from this one Chinese supplier. This supplier and many other industry suppliers are located in China. We do not anticipate any changes in the relationships with its suppliers; however, if such change were to occur, we have alternative sources available.

(17)  Subsequent Events

On February 4, we held a special meeting with shareholders to vote on a one-for-four reverse stock split on our shares of common stock. On February 19, 2008 we completed a one-for-four reverse stock split resulting in our total shares issued and outstanding and outstanding stock options decreasing with a one-to-four ratio.

As of March 6, 2008, we have completed our application for listing our common stock on the market operated by NASDAQ and our application has been approved. NASDAQ has notified us that we are allowed to begin trading as of March 13, 2008..

F-27

Schedule II

ADAMS GOLF, INC. AND SUBSIDIARIES

Valuation and Qualifying Accounts

For the years ended December 31, 2007, 2006 and 2005

(Table in thousands)

	Balance at		Charged to					Balance at
	Beginning		cost and other					end of
Description	of period		expenses			Deductions(1)		Period
Allowance for doubtful accounts:
Year ended December 31, 2007	$	702		316			506	$	512
Year ended December 31, 2006	$	952		853			1,103	$	702
Year ended December 31, 2005	$	746		557			351	$	952
Product warranty and sales returns:
Year ended December 31, 2007	$	2,040		545			974	$	1,611
Year ended December 31, 2006	$	1,546		1,359			865	$	2,040
Year ended December 31, 2005	$	1,120		1,151			725	$	1,546
Inventory obsolescence
Year ended December 31, 2007	$	153		36			—	$	189
Year ended December 31, 2006	$	215		—			62	$	153
Year ended December 31, 2005	$	474		—			259	$	215
Deferred tax asset valuation allowance:
Year ended December 31, 2007	$	11,257		(6,809	)		—	$	4,448
Year ended December 31, 2006	$	18,027		(6,770	)		—	$	11,257
Year ended December 31, 2005	$	19,269		(1,165	)		77	$	18,027

(1) Represents uncollectible accounts charged against the allowance for doubtful accounts, actual costs incurred for warranty repairs and sales returns, and inventory items deemed obsolete charged against the inventory obsolescence reserve.

S-1

EX-3.2

Certificate of Amendment

to the

Restated Certificate of Incorporation

of

Adams Golf, Inc.

Adams Golf, Inc., a corporation organized and existing under and by virtue of General Corporation Law of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY:

FIRST: That the Board of Directors of the Corporation has duly adopted a resolution, pursuant to Section 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Restated Certificate of Incorporation of this Corporation and declaring said amendment to be advisable;

SECOND: That the stockholders of the Corporation have duly approved said amendment by the required vote of such stockholders, such required vote being a majority of the outstanding shares of the Corporation’s Common Stock, adopted at a special meeting of the stockholders of the Corporation duly called and held in accordance with the requirements of Section 222 of the General Corporation Law of the State of Delaware, such approval being in accordance with the terms of the Restated Certificate of Incorporation and Section 242 of the General Corporation Law of the State of Delaware;

THIRD: That the Restated Certificate of Incorporation is hereby amended by adding the following provision to the end of Article Four:

“4.D. Reverse Stock Split. As of 12:01 A.M. (Eastern Time) on February 15, 2008 (the “Effective Time”), each issued and outstanding share of the Corporation’s Common Stock (including each share of treasury stock, the “Pre-Split Common Stock”) shall automatically and without any action on the part of the holder thereof be reclassified as and reduced to one-fourth (1/4) of a share of Common Stock (such reduction of shares designated as the “Reverse Stock Split”). The par value of the Corporation’s Common Stock following the Reverse Stock Split shall remain $0.001 per share. No fractional shares shall be issued and, in lieu thereof, each holder of less than one share of Pre-Split Common Stock shall be entitled to receive a cash payment (without interest) in lieu of such fractional share in an amount approximately equal to (i) such fractional share multiplied by four (4) multiplied by the average of the high and low trading prices of the Common Stock as reported on the OTCBB for the thirty (30) trading days immediately prior to the Effective Time if shares of Common Stock have traded on the OTCBB during regular trading hours on each of the thirty (30) business days immediately prior to the Effective Time or (ii) such fractional share multiplied by the fair market value per share as determined by the Corporation’s Board of Directors in good faith if shares of Common Stock have not traded on the OTCBB during regular trading hours on each of the thirty (30) business days immediately prior to the Effective Time. Whether or not the Reverse Stock Split would result in fractional shares for a holder of record shall be determined on the basis of the total number of shares of Common Stock held by such holder of record at the time that the Reverse Stock Split occurs.”

FOURTH: This Certificate of Amendment to the Restated Certificate of Incorporation shall be effective as of 12:01 A.M. (Eastern Time) on February 15, 2008 in accordance with the provisions of Section 103(d) of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed on this 14th day of February, 2008.

ADAMS GOLF, INC.
By:	/s/ Eric T. Logan
Name:	Eric T. Logan
Title:	CFO

EX-10.8

EXECUTIVE EMPLOYMENT

AGREEMENT¹

THIS AGREEMENT (the "Agreement") entered into as of the date signed by the parties below by and between Adams Golf, Inc. and its subsidiaries with its principal place of business at 2801 East Plano Parkway, Plano, Texas (the "Company") and Mr. Oliver Brewer (the "Executive");

RECITALS

WHEREAS, the Executive is and has been employed by the Company for the past six yeas as its Chief Executive Officer;

WHEREAS, the Company’s Board of Directors desires assurance of the continued association and services of the Executive in order to retain his experience, skills, abilities, background, and knowledge, and is therefore willing to engage his services on the terms and subject to the conditions set forth below;

WHEREAS, the Executive desires and is willing to continue employment with the Company onthe terms and subject to the conditions set forth below;

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties agree as follows:

AGREEMENT

1. POSITION AND DUTIES

During the term of this Agreement, the Company shall employ the Executive as Chief Executive Officer. The Executive’s duties shall be those, which shall be prescribed by the Board of Directors from time to time which shall be those reasonably expected of a chief executive officer of a similarly capitalized corporation and those performed by his predecessor. The Executive shall use his best efforts to promote the best interest of the Company. The Executive shall devote his knowledge, skill and, exclusively (other than as set forth below), all of his professional time, attention and energies (reasonable absences for vacations and illness excepted), to the business of the Company in order to perform such assigned duties faithfully, competently and diligently. Notwithstanding the foregoing, it is understood and agreed between the parties that the Executive may (i) engage in charitable and community activities, (ii) manage personal investments and affairs and (iii) serve on the boards of directors of a reasonable number of other corporations or the boards of a reasonable number of trade associations, so long as such activities and investments do not interfere or conflict with the Executive's performance of his responsibilities and obligations to the Company.

1 A portion of this document is confidential and has been omitted in accordance with Rule 24b-2 under the Securities and Exchange Act of 1934. Such omitted confidential material is marked herein as follows: [*****].

2. TERM OF EMPLOYMENT

The Company agrees to employ the Executive and the Executive agrees to serve the Company pursuant to the terms and conditions of this Agreement for a term of three (3) years, commencing on January 1, 2008 and expiring on December 31, 2010, unless earlier terminated pursuant to this Agreement. Notwithstanding any contrary clause in this Agreement, the Executive shall serve at the pleasure of the Board of Directors and may be terminated at any time in accordance with the provisions of this Agreement. The Executive’s termination shall not, in any way, prejudice the Executive’s rights under this Agreement.

3. PLACE OF EMPLOYMENT

The place of employment shall be at the Company's principal office currently located in Plano, Texas; provided, however, that the Company may from time to time require the Executive to travel temporarily to other locations on Company business.

4. COMPENSATION

The Executive shall receive, for all services rendered to the Company as an employee, the following compensation.

A. Salary. The Executive shall be paid an annual base salary for each respective year as stated below. The Executive's Annual Base Salary shall be payable in equal installments in accordance with the Company's general salary payment policies, but no less frequently than monthly.

2008: Four-Hundred Twenty-Five Thousand ($425,000) dollars;

2009: Four-Hundred Fifty Thousand ($450,000) dollars;

2010: Four-Hundred Seventy-Five Thousand ($475,000) dollars;

2

B. Incentive Compensation.

i. Each calendar year, the Executive shall be eligible for two bonuses. The first bonus is to be paid at the end of the first half of the calendar year but no later than July 20 and the second bonus is to be paid at the end of the second half of the year but no later than January 20 of the following year. Each bonus shall be contingent upon the Company achieving certain revenue and EBITDA goals for the applicable half of the calendar year as agreed upon and stated in advance by the Board of Directors, The amount of each bonus shall be as follows:

(a) Thirty Seven and One-Half (37.5%) percent of Executive’s annual base salary if the Company achieves its stated, conservative revenue and EBITDA goals;

(b) Fifty (50%) percent of Executive’s annual base salary if the Company achieves its stated, negotiated target (annual board plan) revenue and EBITDA goals;

(c) One Hundred (100%) percent of Executive’s annual base salary if the Company achieves revenue and EBITDA goals that are twenty (20%) percent over its stated, negotiated revenue and EBITDA goals;

(d) The Company shall prorate accordingly each of the Executive’s incentive bonuses each calendar year based on the Company’s revenue and EBITDA performance above its stated, conservative revenue and EBITDA goals and below the performance that would pay the Executive his maximum bi-annual bonus, as defined in C above.

ii. When the Executive receives incentive compensation prior to the Company’s financial results being verified by the Company’s independent auditors and the independent auditors determine that the Company’s financial results are other than the Company determined them to be resulting in a revised situation wherein the Executive was actually not entitled to receive his potential incentive compensation, then the Executive agrees to return all unearned incentive compensation forthwith.

iii. The Company’s Board of Directors set the conservative and negotiated revenue and EBITDA goals for fiscal 2008 at the November 2007 Board meeting. The Company’s Board of Directors will establish the conservative (75% of annual bonus target) and negotiated target (annual board plan) (100 % of annual bonus target) goals annually for fiscal years 2009 and 2010 at the last Board meeting of 2008 and 2009, respectively.

C. Equity Participation.

i. Each calendar year of this Agreement, the Executive shall be granted Two-Hundred Thousand (200,000) shares of the Company’s restricted shares of common stock, One-Hundred Thousand (100,000) shares on the last trading day of June and One-Hundred Thousand (100,000) shares on the last trading day of December. The Executive shall be solely responsible for all taxes associated with these grants.

3

ii. At any time during the term of this Agreement, if a majority of the capital stock of the Company is to be sold or transferred to an entity not associated or owned by the Company or its affiliates or substantially all of the assets of the Company are to be sold or transferred to an entity not associated or owned by the Company or its affiliates, all of the Executive’s potential equity grants shall accelerate and take place no later than the calendar day immediately preceding the sale or closing date of the sale or transfer transaction.

D. Long Term Incentive Payment. The Executive shall be eligible for a one time, long term incentive payment at the conclusion of this three (3) year Agreement contingent upon the Company achieving certain cumulative EBITDA goals during the contract period as stated below. The long-term incentive payment, if any, shall be made as soon as administratively feasible but not later than February 15, 2011.

i. If the Company achieves a cumulative EBITDA of [*****] dollars the Executive shall be granted an incentive payment of Seven-Hundred Fifty Thousand ($750,000) dollars.

ii. If the Company achieves a cumulative EBITDA greater than [*****] dollars but less than [*****] dollars the Executive shall be granted an incentive payment that is prorated accordingly between the two goals.

iii. If the Company achieves a cumulative EBITDA of [*****] dollars the Executive shall be granted an incentive payment of One-Million Five- Hundred Thousand ($1,500,000) dollars.

iv. Additionally, if the Company achieves a cumulative EBITDA that is greater [*****] dollars, the Executive shall receive five (5%) percent of all cumulative EBITDA greater than [*****] dollars.

E. Employee Benefit Plans. The Executive and his "dependents," as that term may be defined under the applicable employee benefit plan(s) of the Company, shall be included in all plans, programs and policies which provide benefits for Company employees and their dependents on a basis commensurate with the Executive's position and authorities, duties, powers and responsibilities.

F. Expenses. The Executive is authorized to incur and shall be reimbursed by the Company for any and all reasonable and necessary business related expenses including, but not limited to, a company car, a local country club membership expenses for auto, business travel, entertainment, gifts and similar matters. The company car and local country club membership are subject to the compensation committee’s approval, which shall not be unreasonably withheld.

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5. ABSENCES

The Executive shall be entitled to vacations in accordance with the Company's vacation policy in effect from time to time and to absences because of illness or other incapacity and shall also be entitled to such other absences as are granted to the Company's other senior executive officers or as are approved by the Board of Directors, which approval shall not be unreasonably withheld.

6. TERMINATION

The Executive's employment with the Company may be terminated only as follows:

A. By the Company Without Cause. The Company may at any time terminate the Executive's employment without Cause upon sixty-(60) days prior written notice to the Executive.

B. By the Executive Without Good Reason. The Executive may at any time terminate his employment for any reason upon thirty-(30) days written notice to the Company.

C. By the Company For Cause. The Company may terminate the Executive’s employment for Cause. In such event, the Company shall give the Executive prompt written notice (in addition to any notice that may be required below) specifying in reasonable detail the basis for such termination. For purposes of this Agreement, "Cause" shall mean any of the following conduct by the Executive:

i. The deliberate and intentional breach of any material provision of this Agreement, which breach the Executive shall have failed to cure within thirty (30) days after the Executive's receipt ofwritten notice from the Company specifying the specific nature of the Executive's breach; or

ii. The deliberate and intentional engaging by the Executive in gross misconduct that is materially and demonstrably harmful to the best interests, monetary or otherwise, of the Company; or

iii. Conviction of a felony or conviction of any crime involving moral turpitude, fraud or deceit.

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D. By the Executive for Good Reason. The Executive may terminate his employment for Good Reason upon providing thirty (30) days written notice to the Company no later than 90 days after the Executive reasonably becomes aware of the circumstances giving rise to such Good Reason. For purposes of this Agreement, "Good Reason" means any of the following conduct of the Company, unless the Executive shall have consented thereto in writing:

i. Material breach of any material provision of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after Company’s receipt from the Executive or his agent of written notice specifying in reasonable detail the nature of the Company's breach; or

ii. The assignment to the Executive of any duties inconsistent in any material respect with the Executive's position including, but not limited to any diminution of the Executive's status and reporting requirements) authority, duties, powers or responsibilities, excluding for this purpose any action respecting the Executive that is remedied by the Company within thirty (30) days after receipt of written notice from the Executive to the Company; or

iii. The failure of the Company to obtain the assumption in writing of its obligations to perform this Agreement by any successor prior to a merger, consolidation or sale as contemplated in Section 10; or

iv. A reduction in the Executive's total compensation, excluding for this purpose any reduction that is remedied by the Company within thirty (30) days after receipt of written notice from the Executive to the Company. For purposes of this subsection, a reduction in the overall level of compensation of the Executive resulting from the failure to achieve corporate, business unit and/or individual performance goals established for purposes of incentive compensation for any year or other period shall not constitute a reduction in the overall level of compensation of the Executive.

v. The relocation of the Executive’s place of employment to a site more than 75 miles from Plano, Texas.

vi. If the Company fails to set internal financial goals or adopt a stock option plan

E. Disability. In the event that the Executive shall be unable to perform his duties hereunder on a full time basis for a period of sixty (60) consecutive calendar days by reason of incapacity due to illness, accident, physical or mental disability or otherwise, then the Company may, at itsdiscretion, terminate the Executive's employment if the Executive, within ten (10) days after receipt of written notice of termination is given (which may occur before or after the end of the entire 60 day period), shall not have returned to the performance of all of his duties on a full-time basis.

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F. Death. The Executive's employment shall terminate upon his death.

G. Mutual Written Agreement. This Agreement and the Executive's employment with the Company may be terminated at any time by the mutual written agreement of the Executive and the Company.

7. COMPENSATION IN THE EVENT OF TERMINATION

In the event that the Executive's employment terminates prior to the expiration of this Agreement, the Company shall pay the Executive compensation and provide the Executive and his eligible dependents with benefits as follows:

A. Termination By Company Without Cause or Termination By Executive For Good Reason. In the event that the Executive's employment is terminated by (i) the Company without Cause or (ii) the Executive for Good Reason, then the Company shall continue to pay or provide, as applicable and in accordance with the Company's normal payroll practices unless otherwise specified, the below stated compensation and benefits to the Executive. The Executive's subsequent death or disability shall in no way affect or limit the Company's obligations under this Section. The Executive shall not be required to mitigate the amount of any payment provided for in this Section by seeking employment or otherwise.

i. The Annual Base Salary of the Executive for a period of one (1) year after expiration of the notice period or termination, whichever is later; Full payment of the total amount of such Annual Base Salary for such period shall be made in a lump sum within fifteen (15) days after Executive’s termination of employment;

ii. The equity participation for the twelve (12) month period following the date on which the Executive was terminated will be granted in full as of the date of termination;

iii. A payment equal in amount to two (2) semi-annual bonuses. This payment will be made within 15 days after Executive’s termination of employment. The payment shall be calculated based on the potential semi-annual bonuses tied to the annual sales in effect at the time of termination and shall be paid irrespective of whether the Company achieved or was on track to achieve its internal financial goals for the calendar year and/or whether a semi-annual bonus had already been paid to the Executive in the calendar year of termination.

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iv. The long-term incentive payment for which the Executive was potentially eligible. This payment will be made within 15 days after Executive’s termination of employment. The payment shall be calculated as if the Company had achieved minimum cumulative EBITDA of [*****] dollars irrespective of whether the Company had achieved it or was on track to achieve it. Additionally, if on the date of termination, the Company has achieved more than [*****] dollars of cumulative EBITDA, then the Executive shall also receive five ($.05) cents for every EBITDA dollar achieved over [*****] dollars.

v. Continuing coverage for all purposes (including eligibility, coverage, vesting and benefit accruals, as applicable), for the salary continuation period described in subsection (a)(i) above, to the extent not prohibited by law, for the Executive and his eligible dependents under all of the employee benefit plans in effect and applicable to Executive and his eligible dependents as of the date of his termination. In the event that the Executive and/or his eligible dependents, because of the Executive's terminated status, cannot be covered or fully covered under any or all of such plans, the Company shall continue to provide the Executive and/or his eligible dependents with the same level of such benefits and coverage in effect prior to termination, payable from the general assets of the Company if necessary. Notwithstanding the foregoing, the Executive may elect (by giving written notice to the Company prior to the termination of his employment hereunder), on a benefit by benefit basis to receive in lieu of continuing coverage, cash in an amount equal to the present value (using an 8% annual discount rate) of the projected cost to the Company of providing such benefit for such continuation period. The aggregate amount of cash to which the Executive is entitled pursuant to the preceding sentence shall be payable by the Company to the Executive within sixty (60) days after the date of the termination of Executive's employment hereunder;

B. Termination By the Company For Cause. In the event that the Company shall terminate the Executive's employment for Cause, this Agreement shall terminate and the obligations of the parties shall be as set forth in Section 8 of this Agreement.

C. Termination By The Executive Without Good Reason. In the event that the Executive shall terminate employment hereunder other than for Good Reason, this Agreement shall forthwith terminate and the obligations of the parties shall be as set forth in Section 8 of this Agreement.

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D. Disability. In the event that the Company elects to terminate the Executive's employment pursuant to Section 6(e), the Executive shall continue to receive, from the date of such termination for a period of one year, one hundred (100%) percent of the Annual Base Salary, in accordance with the payroll practices of the Company for senior executive officers, reduced, however, by the amount of any proceeds from Social Security and disability insurance policies provided by and at the expense of the Company. Additionally, the Executive shall receive a payment equal to both potential semi-annual bonuses in effect at the time for which the Executive was potentially eligible irrespective of whether company achieved its internal financial goals or was on track to achieve its internal financial goals. Full payment shall be made within fifteen (15) days after Executive’s termination of employment;

E. Death. In the event of the death of the Executive during the term of this Agreement, (i) the Annual Base Salary to which the Executive is entitled shall be paid in full, within fifteen (15) days after Executive’s death, to the last beneficiary designated by the Executive under the Company's group life insurance policy maintained by the Company or such other written designation expressly provided to the Company for the purposes hereof or, failing either such designation, to his estate. The parties expressly understand that this payment of salary shall be in addition to any insurance payments paid to Executive’s survivors and/or estate under any insurance policies.

F. Mutual Written Consent. In the event that the Executive and the Company shall terminate the Executive's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing.

8. EFFECT OF EXPIRATION OF AGREEMENT OR TERMINATION OF EXECUTIVE’S EMPLOYMENT

Upon the expiration of this Agreement by its terms or the termination of the Executive's employment by the Company for Cause or the Executive Without Good Reason, neither the Company nor the Executive shall have any remaining duties or obligations except that:

A. The Company shall:

i. Pay the Executive's accrued salary and any other accrued benefits through the effective date of such expiration or termination;

ii. Reimburse the Executive for expenses already actually incurred through the effective date of such expiration or termination;

iii. Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any employee benefit plan of which the Executive or any of his dependents is or was a participant or as otherwise required by law;

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iv. Pay the Executive and his beneficiaries any compensation and/or provide the Executive or his eligible dependents any benefits due through the effective date of such expiration; and

v. Continue to remain bound by the terms of Section 12 hereof.

B. The Executive shall remain bound by the terms of Sections 9, 11 and 13.

9. COVENANTS AS TO CONFIDENTIAL INFORMATION AND COMPETITIVE CONDUCT

The Executive acknowledges and agrees as follows: (i) this Section 9 is necessary for the protection of the legitimate business interests of the Company, (ii) the restrictions contained in this Section 9 with regard to geographical scope, length of term and types of restricted activities are Reasonable; and (iii) the Executive has received adequate and valuable new consideration for entering into this Agreement.

A. Confidentiality of Information and Nondisclosure. The Executive acknowledges and agrees that his employment by the Company under this Agreement necessarily involves proprietary information pertaining to the business of the Company and its related entities. Accordingly, the Executive agrees that at all times during the terms of this Agreement and at all times thereafter, he will not, directly or indirectly, without the express written approval of the Company, unless directed by applicable legal authority having jurisdiction over the Executive, disclose to or use, or knowingly permit to be so disclosed or used, for the benefit of himself, any person, corporation or other entity other than the Company:

i. Any information concerning any financial matters, customer relationships, competitive status, supplier matters, internal organizational matters, current or future plans, or other business affairs of or relating to the Company or its subsidiaries,

ii. Any management, operational, trade, technical or other secrets or any other proprietary information or other data of the Company or its subsidiaries,

iii. Any other information related to the Company or its related entities that the Executive should reasonably believe will be damaging to the Company or its related entities and which has not been published and is not generally known outside of the Company.

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The Executive acknowledges that all of the foregoing constitutes confidential and/or proprietary information of the Company, which is the exclusive property of the Company. Excluded from this confidential and/or proprietary information of the Company shall be (i) information known by or generally available to the public through no breach by the Executive of this Agreement and which the public may use without any direct or indirect obligation to the Company and (ii) information that documentary evidence demonstrates was independently developed by the Executive.

B. Restrictive Covenant. During the term of, and for a period of one (1) year (the "Restrictive Period") after the termination of the Executive's employment other than by the Company Without Cause or by the Executive With Good Reason, the Executive shall not render, directly or indirectly, services to (as an employee, consultant, independent contractor or in any other capacity) any person, firm, corporation, association or other entity which conducts the same or similar business as the Company or its subsidiaries at the date of the Executive's termination of employment within the states in which the Company or any of its subsidiaries is then doing business at the date of the Executive's termination of employment hereunder without the prior written consent of the Board of Directors which may be withheld at its sole discretion. In the event that this Agreement expires after termination and is not renewed by the parties, the Restrictive Period shall not extend beyond the termination of employment. In the event the Executive violates any of the provisions contained in this Section, the Restrictive Period shall be increased by the period of time in which the Executive was in violation as determined by an Arbitrator or Court of competent jurisdiction. The Executive further agrees that at no time during the Restrictive period will the Executive attempt to directly or indirectly solicit or hire employees of the Company or its subsidiaries or induce any of them to terminate their employment with the Company or any of the subsidiaries.

C. Company Remedies. The Executive acknowledges and agrees that any breach of this Agreement by him will result in immediate and irreparable harm to the Company and that the Company cannot be reasonably or adequately compensated by damages in an action at law. In the event of a breach by the Executive of the provisions of this Section 9 as determined by an Arbitrator or a Court of competent jurisdiction, the Company shall be entitled, to the extent permitted by law, immediately to cease paying or providing the Executive or his dependents any compensation or benefits provided pursuant to Section 4, Section 6 or Section 7 of this Agreement as liquidated damages, and also to obtain immediate injunctive relief restraining the Executive from conduct in breach of the covenants contained in this Section 9. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach, including the recovery of damages from the Executive.

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10. AGREEMENT SURVIVES MERGER OR DISSOLUTION

This Agreement shall not be terminated by the Company's voluntary or involuntary dissolution or by any merger in which the Company is not the surviving or resulting corporation, or on any transfer of all or substantially all of the Company's assets. In the event of any such merger or transfer of assets, the provisions of this Agreement shall be binding on and inure to the benefit of the surviving business entity or the business entity to which such assets shall be transferred and to the Executive and his heirs.

11. OWNERSHIP OF INTANGIBLES

All processes, inventions, patents, copyrights, trademarks, and other intangible rights that may be conceived or developed by Executive, either alone or with others, during the term of Executive's employment, whether or not conceived or developed during Executive's working hours, and with respect to which the equipment, supplies, facilities, or trade secret information of the Company was used, or that relate at the time of conception or reduction to practice of the invention to the business of the Company or to the Company's actual or demonstrably anticipated research and development, or that result from any work performed by Executive for the Company, shall be the sole property of the Company. Executive shall execute all documents, including patent applications and assignments, required by the Company to establish the Company's rights under this Section.

12. INDEMNIFICATION BY THE COMPANY

The Company shall, to the maximum extent permitted by law, indemnify and hold the Executive harmless against expenses, including reasonable attorney's fees judgements, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the Executive's employment by the Company. The Company shall advance to the Executive any expense incurred in defending any such proceeding to the maximum extent permitted by law.

13. DISCLOSURE OF CUSTOMER INFORMATION AND SOLICITATION OF OTHER EMPLOYEES PROHIBITED

In the course of his employment, the Executive will have access to confidential records and data pertaining to the Company's customers and to the relationship between these customers and the Company's account executives. Such information is considered secret and is disclosed to the Executive in confidence. During his employment by the Company and for one (1) year after termination of that employment, the Executive shall not directly or indirectly disclose or use any such information, except as required in the course of his employment by the Company.

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14. RESOLUTION OF DIFFERENCES OVER BREACHES OF AGREEMENT

Except as otherwise provided herein, in the event of any controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Executive’s employment with the Company, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Executive agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in accordance with this Section 14 and the Commercial Arbitration Rules of thc American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered by a panel of three (3) arbitrators (the" Arbitration Panel"). the Company and the Executive shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. Except as provided in Section 12 hereof, each party shall bear sole responsibility for all expenses and costs incurred by such party in connection with the resolution of any controversy, dispute or claim in accordance with this Section 14; provided, however, the Executive may recover his costs and attorneys’ fees in recovering compensation, stock and/or benefits to which he is entitled under this Agreement.

15. WAIVER

The waiver by a party hereto of any breach by the other party hereto of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach by a party hereto.

16. NON RELIANCE

Each party to this Agreement represents, warrants and acknowledges that in entering into this Agreement that it has not relied upon any act, representation, or warranty by any other party thereto, or by any of their representatives or attorneys, except as may be expressly contained in this Agreement. Each party further represents and warrants that it has thoroughly discussed all aspects of this Agreement with his or its attorneys, that he/it has had a reasonable time to review this Agreement, that he/it fully understands the provisions of this Agreement and the effect thereof and that he/it is entering into this Agreement voluntarily and of his/its own free will.

17. CONSTRUCTION OF AGREEMENT

A. Governing Law. This Agreement shall be governed by and construed under the laws of the state of Texas.

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B. Severability. In the event that anyone or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

C. Headings. The descriptive headings of the several paragraphs of this Agreement are inserted for convenience or reference only and shall not constitute a part of this Agreement.

D. IRC § 409A. Company and Executive intend that no payment under this Agreement shall be included in Executive’s income under, or be subjected to the additional taxes imposed by, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Company and Executive each acknowledge that it is their understanding at the time this Agreement is entered into that none of the payments of cash or property provided for in this Agreement constitutes nonqualified deferred compensation subject to Section 409A of the Code, because all such payments qualify for the “short-term deferral” rule of Treas. reg. § 1.409A-1(b)(4); provided, however, that the employee benefit plan continuation coverage provided for in Section 7(a)(5) and the continued payments to be made to Executive or his beneficiary under Sections 7(d) and (e) may be nonqualified deferred compensation subject to Section 409A of the Code, but these amounts are payable in accordance with a fixed schedule and on account of and following permissible payment events, and therefore comply with the requirements of Section 409A of the Code. Company agrees that if at any time, based on changes in law, regulations, official Treasury or IRS guidance, or facts and circumstances, it determines that a payment to be made to or for the benefit of Executive, or to Executive’s beneficiary, would be nonqualified deferred compensation under Section 409A of the Code and would violate Section 409A and be subject to inclusion in income and additional taxes under Section 409A on account of a failure to delay payment of such amount for six months under Section 409A(a)(2)(B)(i) of the Code, then Company shall delay making such payment for six (6) months, if it determines that such delay shall avoid the imposition of additional tax under Section 409A of the Code. It shall be a breach of this Agreement for Company, on account of this Section 17(d), to initiate or continue any delay in any payment otherwise due Executive or his beneficiary, if Company has not made a good faith determination, informed by the advice of competent Section 409A legal counsel, that the delay or continuation of the delay is necessary to avoid a significant risk of the imposition of additional tax under Section 409A of the Code; provided, however, that if the Company determines that an amount otherwise required to be paid under this Agreement will be subject to the same amount of taxes under Section 409A of the Code, whether or not it is delayed for six months, then the Company shall have no right to delay the payment of such amount under this Section 17(d).

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18. ENTIRE AGREEMENT AND INTEGRATION

This Agreement contains the entire agreement between the parties and supersedes all prior oral and written agreements, understandings, commitments, and practices between the parties, including all prior employment agreements, whether or not fully performed by the Executive before the date of this Agreement. No amendments to this Agreement may be made except by a writing signed by both parties.

19. NOTICES

Any notice to the Company required or permitted under this Agreement shall be given In writing to the Company, either by personal service or by registered or certified mail, postage prepaid, addressed to the legal department of the Company at its then principal place of business. Any such notice to the Executive shall be given in a like manner and, if mailed, shall be addressed to his home address then shown in the Company's files. For the purpose of determining compliance with any time limit in this Agreement, a notice shall be deemed to have been duly given (a) on the date of service, if served personally on the party to whom notice is to be given, or (b) on the third business day after mailing, if mailed to the party to whom the notice is to be given in the manner provided in this section.

20. SEVERABILITY

If any provision of this Agreement is held invalid or unenforceable, the remainder of this Agreement shall nevertheless remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall nevertheless remain in full force and effect in all other circumstances.

21. EXECUTION

The Company                                    Executed on December 31, 2007.

/S/: BYRON H. ADAMS

By: Byron H. Adams

Chairman of the Board of Directors of Adams Golf, Inc.

The Executive                                    Executed on December 31, 2007.

/S/: OLIVER G. BREWER III 

By: Oliver G. Brewer III

Chief Executive Officer of Adams Golf, Inc.

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EX-10.9

LEASE AGREEMENT

THIS LEASE AGREEMENT is made this 11th day of December, 2007, between MDN / JSC - II Limited ("Landlord"), and the Tenant named below.

Tenant:	Adams Golf, Ltd.
Tenant’s Representative,	Adams Golf Ltd.
Address, and Telephone:	2800 Technology Drive
	Suite 100
	Plano, TX75074
Premises:	That portion of the Building, containing approximately 52,983 rentable square feet, as determined by Landlord, as shown on Exhibit A.
Project:	Plano Distribution Center #2
Building:	Plano Distribution Center #2
	2800 Technology Drive
	Suite 100
	Plano, TX75074
Tenant's Proportionate Share of Project:	34.063%
Tenant's Proportionate Share of Building:	34.063%
Lease Term:	Beginning on the Commencement Date and ending on the last day of the 44thfull calendar month thereafter.
Commencement Date:	January 1, 2008
Initial Monthly Base Rent:	$17,440.24
Initial Estimated Monthly Operating Expense Payments: (estimates only and subject to adjustment to actual costs and expenses according to the provisions of this Lease)	1. Utilities:                                                                    — 2. Common Area Charges:                                        $706.44 3. Taxes:                                                                       $4,062.03 4. Insurance:                                                                $353.22 5. Others:                              Mgmt. Fee                    $662.29
Initial Estimated Monthly Operating Expense Payments:	$5,783.98
Initial Monthly Base Rent and Operating Expense Payments:	$23,224.22
Security Deposit:	$23,000.00
Broker:	(None)
Addenda:	1. HVAC Maintenance Contract 2. Move Out Conditions 3. Construction (Turnkey) 4. One Renewal Option at Market
Exhibits:	A. Site Plan

1.Granting Clause. In consideration of the obligation of Tenant to pay rent as herein provided and in consideration of the other terms, covenants, and conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord, the Premises, to have and to hold for the Lease Term, subject to the terms, covenants and conditions of this Lease.

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2.Acceptance of Premises. Tenant shall accept the Premises in its condition as of the Commencement Date, subject to all applicable laws, ordinances, regulations, covenants and restrictions. Landlord has made no representation or warranty as to the suitability of the Premises for the conduct of Tenant's business, and Tenant waives any implied warranty that the Premises are suitable for Tenant's intended purposes. Except as provided in Paragraph 10, in no event shall Landlord have any obligation for any defects in the Premises or any limitation on its use. The taking of possession of the Premises shall be conclusive evidence that Tenant accepts the Premises and that the Premises were in good condition at the time possession was taken except for items that are Landlord's responsibility under Paragraph 10 and any punchlist items agreed to in writing by Landlord and Tenant.

3.Use. The Premises shall be used only for the purpose of receiving, storing, shipping and selling (but limited to wholesale sales) products, materials and merchandise made and/or distributed by Tenant and for such other lawful purposes as may be incidental thereto; provided, however, with Landlord's prior written consent, Tenant may also use the Premises for light manufacturing. Tenant shall not conduct or give notice of any auction, liquidation, or going out of business sale on the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commit waste, overload the floor or structure of the Premises or subject the Premises to use that would damage the Premises. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise, or vibrations to emanate from the Premises, or take any other action that would constitute a nuisance or would disturb, unreasonably interfere with, or endanger Landlord or any tenants of the Project. Outside storage, including without limitation, storage of trucks and other vehicles, is prohibited without Landlord's prior written consent. Tenant, at its sole expense, shall use and occupy the Premises in compliance with all laws, including, without limitation, the Americans With Disabilities Act, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants and restrictions now or hereafter applicable to the Premises (collectively, "Legal Requirements"). The Premises shall not be used as a place of public accommodation under the Americans with Disabilities Act or similar state statutes or local ordinances or any regulations promulgated thereunder, all as may be amended from time to time. Tenant shall, at its expense, make any alterations or modifications, within or without the Premises, that are required by Legal Requirements related to Tenant's use or occupation of the Premises. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant's or Landlord's insurance, increase the insurance risk, or cause the disallowance of any sprinkler credits. If any increase in the cost of any insurance on the Premises or the Project is caused by Tenant's use or occupation of the Premises, or because Tenant vacates the Premises, then Tenant shall pay the amount of such increase to Landlord. Any occupation of the Premises by Tenant prior to the Commencement Date shall be subject to all obligations of Tenant under this Lease.

4.Base Rent. Tenant shall pay Base Rent in the amount set forth above. The first month's Base Rent, the Security Deposit, and the first monthly installment of estimated Operating Expenses (as hereafter defined) shall be due and payable on the date hereof, and Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month succeeding the Commencement Date. Payments of Base Rent for any fractional calendar month shall be prorated. All payments required to be made by Tenant to Landlord hereunder (or to such other party as Landlord may from time to time specify in writing) shall be made by check or Electronic Fund Transfer (“EFT”) of immediately available federal funds before 11:00 a.m., Eastern Time, at such place, within the continental United States, as Landlord may from time to time designate to Tenant in writing. The obligation of Tenant to pay Base Rent and other sums to Landlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off any rent due hereunder except as may be expressly provided in this Lease. If Tenant is delinquent in any monthly installment of Base Rent or of estimated Operating Expenses for more than 5 business days, Tenant shall pay to Landlord on demand a late charge equal to five (5) percent of such delinquent sum. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as a penalty, provided however, Tenant shall be allowed one (1) grace period per year.

5.Security Deposit. The Security Deposit shall be held by Landlord as security for the performance of Tenant's obligations under this Lease. The Security Deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. Upon each occurrence of an Event of Default (hereinafter defined), Landlord may use all or part of the Security Deposit to pay delinquent payments due under this Lease, and the cost of any damage, injury, expense or liability caused by such Event of Default, without prejudice to any other remedy provided herein or provided by law. Tenant shall pay Landlord on demand the amount that will restore the Security Deposit to its original amount. Landlord's obligation respecting the Security Deposit is that of a debtor, not a trustee; no interest shall accrue thereon. The Security Deposit shall be the property of Landlord, but shall be paid to Tenant when Tenant's obligations under this Lease have been completely fulfilled. Landlord shall be released from any obligation with respect to the Security Deposit upon transfer of this Lease and the Premises to a person or entity assuming Landlord's obligations under this Paragraph 5.

6.Operating Expense Payments. During each month of the Lease Term, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12 of the annual cost, as estimated by Landlord from time to time, of Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for the Project. Payments thereof for any fractional calendar month shall be prorated. The term "Operating Expenses" means all costs and expenses incurred by Landlord with respect to the ownership, maintenance, and operation of the Project including, but not limited to costs of: Taxes (hereinafter defined) and fees payable to tax consultants and attorneys for consultation and contesting taxes; insurance; utilities; maintenance, repair and replacement of all portions of the Project, including without limitation, paving and parking areas, roads, roofs (including the roof membrane), alleys, and driveways, mowing, landscaping, snow removal, exterior painting, utility lines, heating, ventilation and air conditioning systems, lighting, electrical systems and other mechanical and building systems; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; charges or assessments of any association to which the Project is subject; property management fees payable to a property manager, including any affiliate of Landlord, or if there is no property manager, an administration fee of 15 percent of Operating Expenses payable to Landlord; security services, if any; trash collection, sweeping and removal; and additions or alterations made by Landlord to the Project or the Building in order to comply with Legal Requirements (other than those expressly required herein to be made by Tenant) or that are appropriate to the continued operation of the Project or the Building as a bulk warehouse facility in the market area, provided that the cost of additions or alterations that are required to be capitalized for federal income tax purposes shall be amortized on a straight line basis over a period equal to the lesser of the useful life thereof for federal income tax purposes or 10 years. Operating Expenses do not include costs, expenses, depreciation or amortization for capital repairs and capital replacements required to be made by Landlord under Paragraph 10 of this Lease, debt service under mortgages or ground rent under ground leases, costs of restoration to the extent of net insurance proceeds received by Landlord with respect thereto, leasing commissions, or the costs of renovating space for tenants. Notwithstanding the foregoing, Landlord will reimburse Tenant any overpayment of Operating Expenses from the prior year within a reasonable time following final year-end reconciliations.

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If Tenant's total payments of Operating Expenses for any year are less than Tenant's Proportionate Share of actual Operating Expenses for such year, then Tenant shall pay the difference to Landlord within 30 days after demand, and if more, then Landlord shall retain such excess and credit it against Tenant's next payments. Notwithstanding the foregoing, provided Tenant is not in default under the current Lease, Landlord will reimburse Tenant for any overpayment of Operating Expenses from prior year within a reasonable time following final year-end reconciliations. For purposes of calculating Tenant's Proportionate Share of Operating Expenses, a year shall mean a calendar year except the first year, which shall begin on the Commencement Date, and the last year, which shall end on the expiration of this Lease. With respect to Operating Expenses which Landlord allocates to the entire Project, Tenant's "Proportionate Share" shall be the percentage set forth on the first page of this Lease as Tenant's Proportionate Share of the Project as reasonably adjusted by Landlord in the future for changes in the physical size of the Premises or the Project; and, with respect to Operating Expenses which Landlord allocates only to the Building, Tenant's "Proportionate Share" shall be the percentage set forth on the first page of this Lease as Tenant's Proportionate Share of the Building as reasonably adjusted by Landlord in the future for changes in the physical size of the Premises or the Building. Landlord may equitably increase Tenant's Proportionate Share for any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project or Building that includes the Premises or that varies with occupancy or use. The estimated Operating Expenses for the Premises set forth on the first page of this Lease are only estimates, and Landlord makes no guaranty or warranty that such estimates will be accurate.

7.Utilities. Tenant shall pay for all water, gas, electricity, heat, light, power, telephone, sewer, sprinkler services, refuse and trash collection, and other utilities and services used on the Premises, all maintenance charges for utilities, and any storm sewer charges or other similar charges for utilities imposed by any governmental entity or utility provider, together with any taxes, penalties, surcharges or the like pertaining to Tenant's use of the Premises. Landlord may cause at Tenant's expense any utilities to be separately metered or charged directly to Tenant by the provider. Tenant shall pay its share of all charges for jointly metered utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of utilities shall result in the termination of this Lease or the abatement of rent. Tenant agrees to limit use of water and sewer for normal restroom use.

8.Taxes. Landlord shall pay all taxes, assessments and governmental charges (collectively referred to as "Taxes") that accrue against the Project during the Lease Term, which shall be included as part of the Operating Expenses charged to Tenant. Landlord may contest by appropriate legal proceedings the amount, validity, or application of any Taxes or liens thereof. All capital levies or other taxes assessed or imposed on Landlord upon the rents payable to Landlord under this Lease and any franchise tax, any excise, transaction, sales or privilege tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents from the Premises and/or the Project or any portion thereof shall be paid by Tenant to Landlord monthly in estimated installments or upon demand, at the option of Landlord, as additional rent; provided, however, in no event shall Tenant be liable for any net income taxes imposed on Landlord unless such net income taxes are in substitution for any Taxes payable hereunder. If any such tax or excise is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner as the taxing authority shall require. Tenant shall be liable for all taxes levied or assessed against any personal property or fixtures placed in the Premises, whether levied or assessed against Landlord or Tenant.

9.Insurance. Landlord shall maintain all risk property insurance covering the full replacement cost of the Building. Landlord may, but is not obligated to, maintain such other insurance and additional coverages as it may deem necessary, including, but not limited to, commercial liability insurance and rent loss insurance. All such insurance shall be included as part of the Operating Expenses charged to Tenant. The Project or Building may be included in a blanket policy (in which case the cost of such insurance allocable to the Project or Building will be determined by Landlord based upon the insurer's cost calculations). Tenant shall also reimburse Landlord for any increased premiums or additional insurance which Landlord reasonably deems necessary as a result of Tenant's use of the Premises.

Tenant, at its expense, shall maintain during the Lease Term: all risk property insurance covering the full replacement cost of all property and improvements installed or placed in the Premises by Tenant at Tenant's expense; worker's compensation insurance with no less than the minimum limits required by law; employer's liability insurance with such limits as required by law; and commercial liability insurance, with a minimum limit of $1,000,000 per occurrence and a minimum umbrella limit of $1,000,000, for a total minimum combined general liability and umbrella limit of $2,000,000 (together with such additional umbrella coverage as Landlord may reasonably require) for property damage, personal injuries, or deaths of persons occurring in or about the Premises. Landlord may from time to time require reasonable increases in any such limits. The commercial liability policies shall name Landlord as an additional insured, insure on an occurrence and not a claims-made basis, be issued by insurance companies which are reasonably acceptable to Landlord, not be cancelable unless 30 days' prior written notice shall have been given to Landlord, contain a hostile fire endorsement and a contractual liability endorsement and provide primary coverage to Landlord (any policy issued to Landlord providing duplicate or similar coverage shall be deemed excess over Tenant's policies). Such policies or certificates thereof shall be delivered to Landlord by Tenant upon commencement of the Lease Term and upon each renewal of said insurance.

The all risk property insurance obtained by Landlord and Tenant shall include a waiver of subrogation by the insurers and all rights based upon an assignment from its insured, against Landlord or Tenant, their officers, directors, employees, managers, agents, invitees and contractors, in connection with any loss or damage thereby insured against. Neither party nor its officers, directors, employees, managers, agents, invitees or contractors shall be liable to the other for loss or damage caused by any risk coverable by all risk property insurance, and each party waives any claims against the other party, and its officers, directors, employees, managers, agents, invitees and contractors for such loss or damage. The failure of a party to insure its property shall not void this waiver. Landlord and its agents, employees and contractors shall not be liable for, and Tenant hereby waives all claims against such parties for, business interruption and losses occasioned thereby sustained by Tenant or any person claiming through Tenant resulting from any accident or occurrence in or upon the Premises or the Project from any cause whatsoever, including without limitation, damage caused in whole or in part, directly or indirectly, by the negligence of Landlord or its agents, employees or contractors.

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10.Landlord's Repairs. Landlord shall maintain, at its expense, the structural soundness of the roof, foundation, and exterior walls of the Building in good repair, reasonable wear and tear and uninsured losses and damages caused by Tenant, its agents and contractors excluded. The term "walls" as used in this Paragraph 10 shall not include windows, glass or plate glass, doors or overhead doors, special store fronts, dock bumpers, dock plates or levelers, or office entries. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Paragraph 10, after which Landlord shall have a reasonable opportunity to repair.

11.Tenant's Repairs. Landlord, at Tenant's expense as provided in Paragraph 6, shall maintain in good repair and condition the parking areas and other common areas of the Building, including, but not limited to driveways, alleys, landscape and grounds surrounding the Premises. Subject to Landlord's obligation in Paragraph 10 and subject to Paragraphs 9 and 15, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of the Premises and all areas, improvements and systems exclusively serving the Premises including, without limitation, dock and loading areas, truck doors, plumbing, water and sewer lines up to points of common connection, fire sprinklers and fire protection systems, entries, doors, ceilings, windows, interior walls, and the interior side of demising walls, and heating, ventilation and air conditioning systems. Such repair and replacements include capital expenditures and repairs whose benefit may extend beyond the Term. Heating, ventilation and air conditioning systems and other mechanical and building systems serving the Premises shall be maintained at Tenant's expense pursuant to maintenance service contracts entered into by Tenant or, at Landlord's election, by Landlord. The scope of services and contractors under such maintenance contracts shall be reasonably approved by Landlord. At Landlord's request, Tenant shall enter into a joint maintenance agreement with any railroad that services the Premises. If Tenant fails to perform any repair or replacement for which it is responsible, Landlord may perform such work and be reimbursed by Tenant within 10 days after demand therefore. Subject to Paragraphs 9 and 15, Tenant shall bear the full cost of any repair or replacement to any part of the Building or Project that results from damage caused by Tenant, its agents, contractors, or invitees and any repair that benefits only the Premises. (See Addendum 2.)

12.Tenant-Made Alterations and Trade Fixtures. Any alterations, additions, or improvements made by or on behalf of Tenant to the Premises ("Tenant-Made Alterations") shall be subject to Landlord's prior written consent. Tenant shall cause, at its expense, all Tenant-Made Alterations to comply with insurance requirements and with Legal Requirements and shall construct at its expense any alteration or modification required by Legal Requirements as a result of any Tenant-Made Alterations. All Tenant-Made Alterations shall be constructed in a good and workmanlike manner by contractors reasonably acceptable to Landlord and only good grades of materials shall be used. All plans and specifications for any Tenant-Made Alterations shall be submitted to Landlord for its approval. Landlord may monitor construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord for its costs in reviewing plans and specifications and in monitoring construction. Landlord's right to review plans and specifications and to monitor construction shall be solely for its own benefit, and Landlord shall have no duty to see that such plans and specifications or construction comply with applicable laws, codes, rules and regulations. Tenant shall provide Landlord with the identities and mailing addresses of all persons performing work or supplying materials, prior to beginning such construction, and Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure payment for the completion of all work free and clear of liens and shall provide certificates of insurance for worker's compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personal injury or property damage during construction. Upon completion of any Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements setting forth the names of all contractors and subcontractors who did work on the Tenant-Made Alterations and final lien waivers from all such contractors and subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations and any leasehold improvements constructed by Landlord or Tenant shall remain on the Premises as Landlord's property, except to the extent Landlord requires removal at Tenant's expense of any such items or Landlord and Tenant have otherwise agreed in writing in connection with Landlord's consent to any Tenant-Made Alterations. Tenant shall repair any damage caused by such removal.

Tenant, at its own cost and expense and without Landlord's prior approval, may erect such shelves, bins, machinery and trade fixtures (collectively "Trade Fixtures") in the ordinary course of its business provided that such items do not alter the basic character of the Premises, do not overload or damage the Premises, and may be removed without injury to the Premises, and the construction, erection, and installation thereof complies with all Legal Requirements and with Landlord's requirements set forth above. Tenant shall remove its Trade Fixtures and shall repair any damage caused by such removal.

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13.Signs. Tenant shall not make any changes to the exterior of the Premises, install any exterior lights, decorations, balloons, flags, pennants, banners, or painting, or erect or install any signs, windows or door lettering, placards, decorations, or advertising media of any type which can be viewed from the exterior of the Premises, without Landlord's prior written consent. Upon surrender or vacation of the Premises, Tenant shall have removed all signs and repair, paint, and/or replace the building facia surface to which its signs are attached. Tenant shall obtain all applicable governmental permits and approvals for sign and exterior treatments. All signs, decorations, advertising media, blinds, draperies and other window treatment or bars or other security installations visible from outside the Premises shall be subject to Landlord's approval and conform in all respects to Landlord's requirements.

14.Parking. Tenant shall be entitled to park in common with other tenants of the Project in those areas designated for non-reserved parking. Landlord may allocate parking spaces among Tenant and other tenants in the Project if Landlord determines that such parking facilities are becoming crowded. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties. Landlord agrees to allocate approximately fifty (50) parking spaces outside Suite 100 for Tenant’s use.

15.Restoration. If at any time during the Lease Term the Premises are damaged by a fire or other casualty, Landlord shall notify Tenant within 60 days after such damage as to the amount of time Landlord reasonably estimates it will take to restore the Premises. If the restoration time is estimated to exceed 6 months, either Landlord or Tenant may elect to terminate this Lease upon notice to the other party given no later than 30 days after Landlord's notice. If neither party elects to terminate this Lease or if Landlord estimates that restoration will take 6 months or less, then, subject to receipt of sufficient insurance proceeds, Landlord shall promptly restore the Premises excluding the improvements installed by Tenant or by Landlord and paid by Tenant, subject to delays arising from the collection of insurance proceeds or from Force Majeure events. Tenant at Tenant's expense shall promptly perform, subject to delays arising from the collection of insurance proceeds, or from Force Majeure events, all repairs or restoration not required to be done by Landlord and shall promptly re-enter the Premises and commence doing business in accordance with this Lease. Notwithstanding the foregoing, either party may terminate this Lease if the Premises are damaged during the last year of the Lease Term and Landlord reasonably estimates that it will take more than one month to repair such damage. Base Rent and Operating Expenses shall be abated for the period of repair and restoration in the proportion which the area of the Premises, if any, which is not usable by Tenant bears to the total area of the Premises. Such abatement shall be the sole remedy of Tenant, and except as provided herein, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.

16.Condemnation. If any part of the Premises or the Project should be taken for any public or quasi-public use under governmental law, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a "Taking" or "Taken"), and the Taking would prevent or materially interfere with Tenant's use of the Premises or in Landlord's judgment would materially interfere with or impair its ownership or operation of the Project, then upon written notice by Landlord this Lease shall terminate and Base Rent shall be apportioned as of said date. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, the Base Rent payable hereunder during the unexpired Lease Term shall be reduced to such extent as may be fair and reasonable under the circumstances. In the event of any such Taking, Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord's award, to make a separate claim against the condemning authority (but not Landlord) for such compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant's Trade Fixtures, if a separate award for such items is made to Tenant.

17.Assignment and Subletting. Without Landlord's prior written consent, Tenant shall not assign this Lease or sublease the Premises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises and any attempt to do any of the foregoing shall be void and of no effect. For purposes of this paragraph, a transfer of the ownership interests controlling Tenant shall be deemed an assignment of this Lease unless such ownership interests are publicly traded. Notwithstanding the above, Tenant may assign or sublet the Premises, or any part thereof, to any entity controlling Tenant, controlled by Tenant or under common control with Tenant (a "Tenant Affiliate"), without the prior written consent of Landlord. Tenant shall reimburse Landlord for all of Landlord's reasonable out-of-pocket expenses in connection with any assignment or sublease. Upon Landlord's receipt of Tenant's written notice of a desire to assign or sublet the Premises, or any part thereof (other than to a Tenant Affiliate), Landlord may, by giving written notice to Tenant within 30 days after receipt of Tenant's notice, terminate this Lease with respect to the space described in Tenant's notice, as of the date specified in Tenant's notice for the commencement of the proposed assignment or sublease.

Notwithstanding any assignment or subletting, Tenant and any guarantor or surety of Tenant's obligations under this Lease shall at all times remain fully responsible and liable for the payment of the rent and for compliance with all of Tenant's other obligations under this Lease (regardless of whether Landlord's approval has been obtained for any such assignments or sublettings). In the event that the rent due and payable by a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this Lease, then Tenant shall be bound and obligated to pay Landlord as additional rent hereunder all such excess rental and other excess consideration within 10 days following receipt thereof by Tenant.

If this Lease be assigned or if the Premises be subleased (whether in whole or in part) or in the event of the mortgage, pledge, or hypothecation of Tenant's leasehold interest or grant of any concession or license within the Premises or if the Premises be occupied in whole or in part by anyone other than Tenant, then upon a default by Tenant hereunder Landlord may collect rent from the assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest was hypothecated, concessionee or licensee or other occupant and, except to the extent set forth in the preceding paragraph, apply the amount collected to the next rent payable hereunder; and all such rentals collected by Tenant shall be held in trust for Landlord and immediately forwarded to Landlord. No such transaction or collection of rent or application thereof by Landlord, however, shall be deemed a waiver of these provisions or a release of Tenant from the further performance by Tenant of its covenants, duties, or obligations hereunder.

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18.Indemnification.Except for the negligence of Landlord, its agents, employees or contractors, and to the extent permitted by law, Tenant agrees to indemnify, defend and hold harmless Landlord, and Landlord's agents, employees and contractors, from and against any and all losses, liabilities, damages, costs and expenses (including attorneys' fees) resulting from claims by third parties for injuries to any person and damage to or theft or misappropriation or loss of property occurring in or about the Project and arising from the use and occupancy of the Premises or from any activity, work, or thing done, permitted or suffered by Tenant in or about the Premises or due to any other act or omission of Tenant, its subtenants, assignees, invitees, employees, contractors and agents. The furnishing of insurance required hereunder shall not be deemed to limit Tenant's obligations under this Paragraph 18.

19.Inspection and Access. Landlord and its agents, representatives, and contractors may enter the Premises at any reasonable time to inspect the Premises and to make such repairs as may be required or permitted pursuant to this Lease and for any other business purpose. Landlord and Landlord's representatives may enter the Premises during business hours for the purpose of showing the Premises to prospective purchasers and, during the last year of the Lease Term, to prospective tenants. Landlord may erect a suitable sign on the Premises stating the Premises are available to let or that the Project is available for sale. Landlord may grant easements, make public dedications, designate common areas and create restrictions on or about the Premises, provided that no such easement, dedication, designation or restriction materially interferes with Tenant's use or occupancy of the Premises. At Landlord's request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions.

20.Quiet Enjoyment. If Tenant shall perform all of the covenants and agreements herein required to be performed by Tenant, Tenant shall, subject to the terms of this Lease, at all times during the Lease Term, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.

21.Surrender. Upon termination of the Lease Term or earlier termination of Tenant's right of possession, Tenant shall surrender the Premises to Landlord in the same condition as received, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Paragraphs 15 and 16 excepted. Any Trade Fixtures, Tenant-Made Alterations and property not so removed by Tenant as permitted or required herein shall be deemed abandoned and may be stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant waives all claims against Landlord for any damages resulting from Landlord's retention and disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of the Lease Term shall survive the termination of the Lease Term, including without limitation, indemnity obligations, payment obligations with respect to Operating Expenses and obligations concerning the condition and repair of the Premises.

22.Holding Over. If Tenant retains possession of the Premises after the termination of the Lease Term, unless otherwise agreed in writing, such possession shall be subject to immediate termination by Landlord at any time, and all of the other terms and provisions of this Lease (excluding any expansion or renewal option or other similar right or option) shall be applicable during such holdover period, except that Tenant shall pay Landlord from time to time, upon demand, as Base Rent for the holdover period, an amount equal to 150% of the Base Rent in effect on the termination date, computed on a monthly basis for each month or part thereof during such holding over. All other payments shall continue under the terms of this Lease. In addition, Tenant shall be liable for all damages incurred by Landlord as a result of such holding over. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Paragraph 22 shall not be construed as consent for Tenant to retain possession of the Premises. For purposes of this Paragraph 22, “possession of the Premises” shall continue until, among other things, Tenant has delivered all keys to the Premises to Landlord, Landlord has complete and total dominion and control over the Premises, and Tenant has completely fulfilled all obligations required of it upon termination of the Lease as set forth in this Lease, including, without limitation, those concerning the condition and repair of the Premises.

23.Events of Default. Each of the following events shall be an event of default ("Event of Default") by Tenant under this Lease:

(i)Tenant shall fail to pay any installment of Base Rent or any other payment required herein when due, and such failure shall continue for a period of 5 business days from the date such payment was due, provided however, Tenant shall be allowed one (1) grace period per year.

(ii)Tenant or any guarantor or surety of Tenant's obligations hereunder shall (A) make a general assignment for the benefit of creditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it as bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a "proceeding for relief"); (C) become the subject of any proceeding for relief which is not dismissed within 60 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, or surety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or other entity).

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(iii)Any insurance required to be maintained by Tenant pursuant to this Lease shall be cancelled or terminated or shall expire or shall be reduced or materially changed, except, in each case, as permitted in this Lease.

(iv)Tenant shall not occupy or shall vacate the Premises or shall fail to continuously operate its business at the Premises for the permitted use set forth herein, whether or not Tenant is in monetary or other default under this Lease.

(v)Tenant shall attempt or there shall occur any assignment, subleasing or other transfer of Tenant's interest in or with respect to this Lease except as otherwise permitted in this Lease.

(vi)Tenant shall fail to discharge any lien placed upon the Premises in violation of this Lease within 30 days after any such lien or encumbrance is filed against the Premises.

(vii)Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Paragraph 23, and except as otherwise expressly provided herein, such default shall continue for more than 30 days after Landlord shall have given Tenant written notice of such default.

24.Landlord's Remedies. Upon each occurrence of an Event of Default and so long as such Event of Default shall be continuing, Landlord may at any time thereafter at its election: terminate this Lease or Tenant's right of possession, (but Tenant shall remain liable as hereinafter provided) and/or pursue any other remedies at law or in equity. Upon the termination of this Lease or termination of Tenant's right of possession, it shall be lawful for Landlord, without formal demand or notice of any kind, to re-enter the Premises by summary dispossession proceedings or any other action or proceeding authorized by law and to remove Tenant and all persons and property therefrom. If Landlord re-enters the Premises, Landlord shall have the right to keep in place and use, or remove and store, all of the furniture, fixtures and equipment at the Premises.

If Landlord terminates this Lease, Landlord may recover from Tenant the sum of: all Base Rent and all other amounts accrued hereunder to the date of such termination; the cost of reletting the whole or any part of the Premises, including without limitation brokerage fees and/or leasing commissions incurred by Landlord, and costs of removing and storing Tenant's or any other occupant's property, repairing, altering, remodeling, or otherwise putting the Premises into condition acceptable to a new tenant or tenants, and all reasonable expenses incurred by Landlord in pursuing its remedies, including reasonable attorneys' fees and court costs; and the excess of the then present value of the Base Rent and other amounts payable by Tenant under this Lease as would otherwise have been required to be paid by Tenant to Landlord during the period following the termination of this Lease measured from the date of such termination to the expiration date stated in this Lease, over the present value of any net amounts which Tenant establishes Landlord can reasonably expect to recover by reletting the Premises for such period, taking into consideration the availability of acceptable tenants and other market conditions affecting leasing. Such present values shall be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at the date of such termination.

If Landlord terminates Tenant's right of possession (but not this Lease), Landlord may, but shall be under no obligation to, relet the Premises for the account of Tenant for such rent and upon such terms as shall be satisfactory to Landlord without thereby releasing Tenant from any liability hereunder and without demand or notice of any kind to Tenant. For the purpose of such reletting Landlord is authorized to make any repairs, changes, alterations, or additions in or to the Premises as Landlord deems reasonably necessary or desirable. If the Premises are not relet, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rental reserved in this Lease for such period or periods, plus the cost of recovering possession of the Premises (including attorneys' fees and costs of suit), the unpaid Base Rent and other amounts accrued hereunder at the time of repossession, and the costs incurred in any attempt by Landlord to relet the Premises. If the Premises are relet and a sufficient sum shall not be realized from such reletting [after first deducting therefrom, for retention by Landlord, the unpaid Base Rent and other amounts accrued hereunder at the time of reletting, the cost of recovering possession (including attorneys' fees and costs of suit), all of the costs and expense of repairs, changes, alterations, and additions, the expense of such reletting (including without limitation brokerage fees and leasing commissions) and the cost of collection of the rent accruing therefrom] to satisfy the rent provided for in this Lease to be paid, then Tenant shall immediately satisfy and pay any such deficiency. Any such payments due Landlord shall be made upon demand therefor from time to time and Tenant agrees that Landlord may file suit to recover any sums falling due from time to time. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect in writing to terminate this Lease for such previous breach.

Exercise by Landlord of any one or more remedies hereunder granted or otherwise available shall not be deemed to be an acceptance of surrender of the Premises and/or a termination of this Lease by Landlord, whether by agreement or by operation of law, it being understood that such surrender and/or termination can be effected only by the written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times to enforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Lease strictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, and covenants of this Lease or as having modified the same. Tenant and Landlord further agree that forbearance or waiver by Landlord to enforce its rights pursuant to this Lease or at law or in equity, shall not be a waiver of Landlord's right to enforce one or more of its rights in connection with any subsequent default. A receipt by Landlord of rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. To the greatest extent permitted by law, Tenant waives the service of notice of Landlord's intention to re-enter as provided for in any statute, or to institute legal proceedings to that end, and also waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. The terms "enter," "re-enter," "entry" or "re-entry," as used in this Lease, are not restricted to their technical legal meanings. Any reletting of the Premises shall be on such terms and conditions as Landlord in its sole discretion may determine (including without limitation a term different than the remaining Lease Term, rental concessions, alterations and repair of the Premises, lease of less than the entire Premises to any tenant and leasing any or all other portions of the Project before reletting the Premises). Landlord shall not be liable, nor shall Tenant's obligations hereunder be diminished because of, Landlord's failure to relet the Premises or collect rent due in respect of such reletting.

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25.Tenant's Remedies/Limitation of Liability. Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligations hereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require a period of time in excess of 30 days, then after such period of time as is reasonably necessary). All obligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenant may not terminate this Lease for breach of Landlord's obligations hereunder. All obligations of Landlord under this Lease will be binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term "Landlord" in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligations shall be binding during the Lease Term upon each new owner for the duration of such owner's ownership. Any liability of Landlord under this Lease shall be limited solely to its interest in the Project, and in no event shall any personal liability be asserted against Landlord in connection with this Lease nor shall any recourse be had to any other property or assets of Landlord.

26.Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

27.Subordination. This Lease and Tenant's interest and rights hereunder are and shall be subject and subordinate at all times to the lien of any first mortgage, now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications, consolidations, refinancing, assignments and extensions thereof, without the necessity of any further instrument or act on the part of Tenant. Tenant agrees, at the election of the holder of any such mortgage, to attorn to any such holder. Tenant agrees upon demand to execute, acknowledge and deliver such instruments, confirming such subordination and such instruments of attornment as shall be requested by any such holder. Tenant hereby appoints Landlord attorney in fact for Tenant irrevocably (such power of attorney being coupled with an interest) to execute, acknowledge and deliver any such instrument and instruments for and in the name of the Tenant and to cause any such instrument to be recorded. Notwithstanding the foregoing, any such holder may at any time subordinate its mortgage to this Lease, without Tenant's consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution, delivery or recording and in that event such holder shall have the same rights with respect to this Lease as though this Lease had been executed prior to the execution, delivery and recording of such mortgage and had been assigned to such holder. The term "mortgage" whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference to the "holder" of a mortgage shall be deemed to include the beneficiary under a deed of trust.

28.Mechanic's Liens. Tenant has no express or implied authority to create or place any lien or encumbrance of any kind upon, or in any manner to bind the interest of Landlord or Tenant in, the Premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises and that it will save and hold Landlord harmless from all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the interest of Landlord in the Premises or under this Lease. Tenant shall give Landlord immediate written notice of the placing of any lien or encumbrance against the Premises and cause such lien or encumbrance to be discharged within 30 days of the filing or recording thereof; provided, however, Tenant may contest such liens or encumbrances as long as such contest prevents foreclosure of the lien or encumbrance and Tenant causes such lien or encumbrance to be bonded or insured over in a manner satisfactory to Landlord within such 30 day period.

29.Estoppel Certificates. Tenant agrees, from time to time, within 10 days after request of Landlord, to execute and deliver to Landlord, or Landlord's designee, any estoppel certificate requested by Landlord, stating that this Lease is in full force and effect, the date to which rent has been paid, that Landlord is not in default hereunder (or specifying in detail the nature of Landlord's default), the termination date of this Lease and such other matters pertaining to this Lease as may be requested by Landlord. Tenant's obligation to furnish each estoppel certificate in a timely fashion is a material inducement for Landlord's execution of this Lease. No cure or grace period provided in this Lease shall apply to Tenant's obligations to timely deliver an estoppel certificate. Tenant hereby irrevocably appoints Landlord as its attorney in fact to execute on its behalf and in its name any such estoppel certificate if Tenant fails to execute and deliver the estoppel certificate within 10 days after Landlord's written request thereof.

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30.Environmental Requirements. Except for Hazardous Material contained in products used by Tenant in de minimis quantities for ordinary cleaning and office purposes, Tenant shall not permit or cause any party to bring any Hazardous Material upon the Premises or transport, store, use, generate, manufacture or release any Hazardous Material in or about the Premises without Landlord's prior written consent. Tenant, at its sole cost and expense, shall operate its business in the Premises in strict compliance with all Environmental Requirements and shall remediate in a manner satisfactory to Landlord any Hazardous Materials released on or from the Project by Tenant, its agents, employees, contractors, subtenants or invitees. Tenant shall complete and certify to disclosure statements as requested by Landlord from time to time relating to Tenant's transportation, storage, use, generation, manufacture or release of Hazardous Materials on the Premises. The term "Environmental Requirements" means all applicable present and future statutes, regulations, ordinances, rules, codes, judgments, orders or other similar enactments of any governmental authority or agency regulating or relating to health, safety, or environmental conditions on, under, or about the Premises or the environment, including without limitation, the following: the Comprehensive Environmental Response, Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policies promulgated or issued thereunder. The term "Hazardous Materials" means and includes any substance, material, waste, pollutant, or contaminant listed or defined as hazardous or toxic, under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gas liquids, liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements, Tenant is and shall be deemed to be the "operator" of Tenant's "facility" and the "owner" of all Hazardous Materials brought on the Premises by Tenant, its agents, employees, contractors or invitees, and the wastes, by-products, or residues generated, resulting, or produced therefrom.

Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all losses (including, without limitation, diminution in value of the Premises or the Project and loss of rental income from the Project), claims, demands, actions, suits, damages (including, without limitation, punitive damages), expenses (including, without limitation, remediation, removal, repair, corrective action, or cleanup expenses), and costs (including, without limitation, actual attorneys' fees, consultant fees or expert fees and including, without limitation, removal or management of any asbestos brought into the property or disturbed in breach of the requirements of this Paragraph 30, regardless of whether such removal or management is required by law) which are brought or recoverable against, or suffered or incurred by Landlord as a result of any release of Hazardous Materials for which Tenant is obligated to remediate as provided above or any other breach of the requirements under this Paragraph 30 by Tenant, its agents, employees, contractors, subtenants, assignees or invitees, regardless of whether Tenant had knowledge of such noncompliance. The obligations of Tenant under this Paragraph 30 shall survive any termination of this Lease.

Landlord shall have access to, and a right to perform inspections and tests of, the Premises to determine Tenant's compliance with Environmental Requirements, its obligations under this Paragraph 30, or the environmental condition of the Premises. Access shall be granted to Landlord upon Landlord's prior notice to Tenant and at such times so as to minimize, so far as may be reasonable under the circumstances, any disturbance to Tenant's operations. Such inspections and tests shall be conducted at Landlord's expense, unless such inspections or tests reveal that Tenant has not complied with any Environmental Requirement, in which case Tenant shall reimburse Landlord for the reasonable cost of such inspection and tests. Landlord's receipt of or satisfaction with any environmental assessment in no way waives any rights that Landlord holds against Tenant.

31.Rules and Regulations. Tenant shall, at all times during the Lease Term and any extension thereof, comply with all reasonable rules and regulations at any time or from time to time established by Landlord covering use of the Premises and the Project. The current rules and regulations are attached hereto. In the event of any conflict between said rules and regulations and other provisions of this Lease, the other terms and provisions of this Lease shall control. Landlord shall not have any liability or obligation for the breach of any rules or regulations by other tenants in the Project.

32.Security Service. Tenant acknowledges and agrees that, while Landlord may patrol the Project, Landlord is not providing any security services with respect to the Premises and that Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, any loss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of security with respect to the Premises.

33.Force Majeure. Landlord shall not be held responsible for delays in the performance of its obligations hereunder when caused by strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, delay in issuance of permits, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of Landlord ("Force Majeure").

34.Entire Agreement. This Lease constitutes the complete agreement of Landlord and Tenant with respect to the subject matter hereof. No representations, inducements, promises or agreements, oral or written, have been made by Landlord or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not contained herein, and any prior agreements, promises, negotiations, or representations are superseded by this Lease. This Lease may not be amended except by an instrument in writing signed by both parties hereto.

35.Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.

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36.Brokers. Tenant represents and warrants that it has dealt with no broker, agent or other person in connection with this transaction and that no broker, agent or other person brought about this transaction, other than the broker, if any, set forth on the first page of this Lease, and Tenant agrees to indemnify and hold Landlord harmless from and against any claims by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction.

37.Miscellaneous.(a)Any payments or charges due from Tenant to Landlord hereunder shall be considered rent for all purposes of this Lease.

(b)If and when included within the term "Tenant," as used in this instrument, there is more than one person, firm or corporation, each shall be jointly and severally liable for the obligations of Tenant.

(c)All notices required or permitted to be given under this Lease shall be in writing and shall be sent by registered or certified mail, return receipt requested, or by a reputable national overnight courier service, postage prepaid, or by hand delivery addressed to the parties at their addresses below, and with a copy sent to Landlord at 4545 Airport Way, Denver, Colorado 80239. Either party may by notice given aforesaid change its address for all subsequent notices. Except where otherwise expressly provided to the contrary, notice shall be deemed given upon delivery.

(d)Except as otherwise expressly provided in this Lease or as otherwise required by law, Landlord retains the absolute right to withhold any consent or approval.

(e)At Landlord's request from time to time Tenant shall furnish Landlord with true and complete copies of its most recent annual and quarterly financial statements prepared by Tenant or Tenant's accountants and any other financial information or summaries that Tenant typically provides to its lenders or shareholders.

(f)Neither this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant in any public record. Landlord may prepare and file, and upon request by Landlord Tenant will execute, a memorandum of lease.

(g)Intentionally Deleted.

(h)The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute an option for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.

(i)Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted in this Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any way affect the interpretation of this Lease.

(j)Any amount not paid by Tenant within 5 businessdays after its due date in accordance with the terms of this Lease shall bear interest from such due date until paid in full at the lesser of the highest rate permitted by applicable law or 15 percent per year (does not apply to grace period). It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rate or amount of any interest payable on or in connection with this Lease.  If applicable law is ever judicially interpreted so as to render usurious any interest called for under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord's and Tenant's express intent that all excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full, refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder.

(k)Construction and interpretation of this Lease shall be governed by the laws of the state in which the Project is located, excluding any principles of conflicts of laws.

(l)Time is of the essence as to the performance of Tenant's obligations under this Lease.

(m)All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. In the event of any conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.

(n)In the event either party hereto initiates litigation to enforce the terms and provisions of this Lease, the non-prevailing party in such action shall reimburse the prevailing party for its reasonable attorney's fees, filing fees, and court costs.

38.Landlord's Lien/Security Interest. Tenant hereby grants Landlord a security interest, and this Lease constitutes a security agreement, within the meaning of and pursuant to the Uniform Commercial Code of the state in which the Premises are situated as to all of Tenant's property situated in, or upon, or used in connection with the Premises (except merchandise sold in the ordinary course of business) as security for all of Tenant's obligations hereunder, including, without limitation, the obligation to pay rent. Such personalty thus encumbered includes specifically all trade and other fixtures for the purpose of this Paragraph and inventory, equipment, contract rights, accounts receivable and the proceeds thereof. In order to perfect such security interest, Tenant shall execute such financing statements and file the same at Tenant's expense at the state and county Uniform Commercial Code filing offices as often as Landlord in its discretion shall require; and Tenant hereby irrevocably appoints Landlord its agent for the purpose of executing and filing such financing statements on Tenant's behalf as Landlord shall deem necessary.

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39.Limitation of Liability of Trustees, Shareholders, and Officers of ProLogis. Any obligation or liability whatsoever of ProLogis, a Maryland real estate investment trust, which may arise at any time under this Lease or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction, or undertaking contemplated hereby shall not be personally binding upon, nor shall resort for the enforcement thereof be had to the property of, its trustees, directors, shareholders, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort, or otherwise.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written.

TENANT:		LANDLORD:
Adams Golf, Ltd.		MDN / JSC – II Limited
By:	/S/: Eric Logan	By:	/S/: Eric Brown
Name:	Eric Logan	Name:	Eric Brown
Title:	CFO	Title:	Senior Vice President
Address:		Address:
2800 Technology Drive		2310 LBJ Freeway
Suite 100		Suite 200
Plano, TX75074		Dallas, TX75234

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Rules and Regulations

1.    The sidewalk, entries, and driveways of the Project shall not be obstructed by Tenant, or its agents, or used by them for any purpose other than ingress and egress to and from the Premises.

2.     Tenant shall not place any objects, including antennas, outdoor furniture, etc., in the parking areas, landscaped areas or other areas outside of its Premises, or on the roof of the Project.

3.     Except for seeing-eye dogs, no animals shall be allowed in the offices, halls, or corridors in the Project.

4.     Tenant shall not disturb the occupants of the Project or adjoining buildings by the use of any radio or musical instrument or by the making of loud or improper noises.

5.     If Tenant desires telegraphic, telephonic or other electric connections in the Premises, Landlord or its agent will direct the electrician as to where and how the wires may be introduced; and, without such direction, no boring or cutting of wires will be permitted. Any such installation or connection shall be made at Tenant's expense.

6.     Tenant shall not install or operate any steam or gas engine or boiler, or other mechanical apparatus in the Premises, except as specifically approved in the Lease. The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Project.

7.     Parking any type of recreational vehicles is specifically prohibited on or about the Project. Further, parking any type of trucks, trailers or other vehicles in the Premises is specifically prohibited. Except for the overnight parking of operative vehicles, no vehicle of any type shall be stored in the parking areas at any time. In the event that a vehicle is disabled, it shall be removed within 48 hours. There shall be no "For Sale" or other advertising signs on or about any parked vehicle. All vehicles shall be parked in the designated parking areas in conformity with all signs and other markings. All parking will be open parking, and no reserved parking, numbering or lettering of individual spaces will be permitted except as specified by Landlord.

8.     Tenant shall maintain the Premises free from rodents, insects and other pests.

9.     Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of the Rules and Regulations of the Project.

10.     Tenant shall not cause any unnecessary labor by reason of Tenant's carelessness or indifference in the preservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitors or any other employee or person.

11.     Tenant shall give Landlord prompt notice of any defects in the water, lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating apparatus, HVAC system,or any other service equipment affecting the Premises.

12.     Tenant shall not permit storage outside the Premises, including without limitation, outside storage of trucks and other vehicles, or dumping of waste or refuse or permit any harmful materials to be placed in any drainage system or sanitary system in or about the Premises.

13.     All moveable trash receptacles provided by the trash disposal firm for the Premises must be kept in the trash enclosure areas, if any, provided for that purpose.

14.     No auction, public or private, will be permitted on the Premises or the Project.

15.     No awnings shall be placed over the windows in the Premises except with the prior written consent of Landlord.

16.     The Premises shall not be used for lodging, sleeping or cooking or for any immoral or illegal purposes or for any purpose other than that specified in the Lease. No gaming devices shall be operated in the Premises.

17.     Tenant shall ascertain from Landlord the maximum amount of electrical current which can safely be used in the Premises, taking into account the capacity of the electrical wiring in the Project and the Premises and the needs of other tenants, and shall not use more than such safe capacity. Landlord's consent to the installation of electric equipment shall not relieve Tenant from the obligation not to use more electricity than such safe capacity.

18.     Tenant assumes full responsibility for protecting the Premises from theft, robbery and pilferage.

19.     Tenant shall not install or operate on the Premises any machinery or mechanical devices of a nature not directly related to Tenant's ordinary use of the Premises and shall keep all such machinery free of vibration, noise and air waves which may be transmitted beyond the Premises.

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ADDENDUM 1

HVAC MAINTENANCE CONTRACT

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED __________, 2007 BETWEEN

MDN / JSC – II Limited

and

Adams Golf, Ltd.

Paragraph 11, captioned "TENANT REPAIRS," is revised to include the following:

Tenant agrees to enter into and maintain through the term of the Lease, a regularly scheduled preventative maintenance/service contract for servicing all hot water, heating and air conditioning systems and equipment within the Premises. Landlord requires a qualified HVAC contractor perform this work. A certificate must be provided to the Landlord upon occupancy of the leased Premises. All electrical, plumbing, and mechanical systems will be delivered in good working order to the Tenant at the time of occupancy. Landlord will warranty the existing HVAC system for the first 180 days. Furthermore, Landlord will repair HVAC system per the “TMAC Mechanical” Report dated November 2007. After the first 180 days of the primary lease term, in the event that an HVAC system repair is necessary, Tenant will pay an HVAC Repair Deductible of $800.00 per occurrence. Any charges beyond the $800.00 Deductible will be paid by Landlord.

The service contract must become effective within thirty (30) days of occupancy, and service visits should be performed on a quarterly basis. Landlord suggests that Tenant send the following list to a qualified HVAC contractor to be assured that these items are included in the maintenance contract:

1.	Adjust belt tension;
2.	Lubricate all moving parts, as necessary;
3.	Inspect and adjust all temperature and safety controls;
4.	Check refrigeration system for leaks and operation;
5.	Check refrigeration system for moisture;
6.	Inspect compressor oil level and crank case heaters;
7.	Check head pressure, suction pressure and oil pressure;
8.	Inspect air filters and replace when necessary;
9.	Check space conditions;
10.	Check condensate drains and drain pans and clean, if necessary;
11.	Inspect and adjust all valves;
12.	Check and adjust dampers;
13.	Run machine through complete cycle.

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ADDENDUM 2

MOVE-OUT CONDITIONS

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED_________, 2007 BETWEEN

MDN / JSC - II Limited

and

Adams Golf, Ltd.

Per Paragraph 21, Tenant is obligated to check and address prior to move-out of the Premises the following items. Landlord expects to receive the Premises in a well maintained condition, with normal wear and tear of certain areas acceptable. The following list is designed to assist Tenant in the move-out procedures but is not intended to be all inclusive.

1. All lighting is to be placed into good working order. This includes replacement of bulbs, ballasts, and lenses as needed.

2. All truck doors and dock levelers should be serviced and placed in good operating order. This would include the necessary replacement of any dented truck door panels and adjustment of door tension to insure proper operation. All door panels which are replaced need to be painted to match the Building standard.

3. All structural steel columns in the warehouse and office should be inspected for damage. Repairs of this nature should be pre-approved by the Landlord prior to implementation.

4. Heating/air-conditioning systems should be placed in good working order, including the necessary replacement of any parts to return the unit to a well maintained condition. This includes warehouse heaters and exhaust fans. Upon move-out, Landlord will have an exit inspection performed by a certified mechanical contractor to determine the condition.

5. All holes in the sheet rock walls should be repaired prior to move-out.

6. The carpets and vinyl tiles should be in a clean condition and should not have any holes or chips in them. Landlord will accept normal wear on these items provided they appear to be in a maintained condition.

7. Facilities should be returned in a clean condition which would include cleaning of the coffee bar, restroom areas, windows, and other portions of the space.

8. The warehouse should be in broom clean condition with all inventory and racking removed. There should be no protrusion of anchors from the warehouse floor and all holes should be appropriately patched. If machinery/equipment is removed, the electrical lines should be properly terminated at the nearest junction box.

9. All exterior windows with cracks or breakage should be replaced.

10. The Tenant shall provide keys for all locks on the Premises, including front doors, rear doors, and interior doors.

11. Items that have been added by the Tenant and affixed to the Building will remain the property of Landlord, unless agreed otherwise. This would include but is not limited to mini-blinds, air conditioners, electrical, water heaters, cabinets, flooring, etc. Please note that if modifications have been made to the space, such as the addition of office areas, Landlord retains the right to have the Tenant remove these at Tenant’s expense.

12. All electrical systems should be left in a safe condition that conforms to code. Bare wires and dangerous installations should be corrected prior to move-out.

13. All plumbing fixtures should be in good working order, including the water heater. Faucets and toilets should not leak.

14. All dock bumpers must be left in place and well secured.

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ADDENDUM 3

CONSTRUCTION

(TURNKEY)

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED___________, 2007 BETWEEN

MDN / JSC - II Limited

and

Adams Golf, Ltd.

(a) Landlord agrees to furnish or perform at Landlord's sole cost and expense those items of construction and those improvements (the "Initial Improvements") specified below:

-        ProLogis will provide an opening (10’ x 12’) on or around December 14, 2007 between Suites 100 & 300 and will allow Adams Golf forty-none (49) days to transfer inventory between the spaces. ProLogis will be responsible for sealing the opening effective January 31, 2008.

-        Tenant agrees to take the space “as-is.”

-        ProLogis warrants that all building systems will be in good working order upon lease commencement.

(b)If Tenant shall desire any changes, Tenant shall so advise Landlord in writing and Landlord shall determine whether such changes can be made in a reasonable and feasible manner. Any and all costs of reviewing any requested changes, and any and all costs of making any changes to the Initial Improvements which Tenant may request and which Landlord may agree to shall be at Tenant's sole cost and expense and shall be paid to Landlord upon demand and before execution of the change order.

(c)Landlord shall proceed with and complete the construction of the Initial Improvements. As soon as such improvements have been Substantially Completed, Landlord shall notify Tenant in writing of the date that the Initial Improvements were Substantially Completed. Such date, unless an earlier date is specified as the Commencement Date in this Lease or otherwise agreed to in writing between Landlord and Tenant, shall be the "Commencement Date," unless the completion of such improvements was delayed due to any act or omission of, or delay caused by, Tenant including, without limitation, Tenant's failure to approve plans, complete submittals or obtain permits within the time periods agreed to by the parties or as reasonably required by Landlord, in which case the Commencement Date shall be the date such improvements would have been completed but for the delays caused by Tenant. The Initial Improvements shall be deemed substantially completed ("Substantially Completed") when, in the opinion of the construction manager (whether an employee or agent of Landlord or a third party construction manager) ("Construction Manager"), the Premises are substantially completed except for punch list items which do not prevent in any material way the use of the Premises for the purposes for which they were intended. In the event Tenant, its employees, agents, or contractors cause construction of such improvements to be delayed, the date of Substantial Completion shall be deemed to be the date that, in the opinion of the Construction Manager, Substantial Completion would have occurred if such delays had not taken place. Without limiting the foregoing, Tenant shall be solely responsible for delays caused by Tenant's request for any changes in the plans, Tenant's request for long lead items or Tenant's interference with the construction of the Initial Improvements, and such delays shall not cause a deferral of the Commencement Date beyond what it otherwise would have been. After the Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a letter of acceptance of delivery of the Premises. In the event of any dispute as to the Initial Improvements, including the Commencement Date, the certificate of the Construction Manager shall be conclusive absent manifest error.

(d)The failure of Tenant to take possession of or to occupy the Premises shall not serve to relieve Tenant of obligations arising on the Commencement Date or delay the payment of rent by Tenant. Subject to applicable ordinances and building codes governing Tenant's right to occupy or perform in the Premises, Tenant shall be allowed to install its tenant improvements, machinery, equipment, fixtures, or other property on the Premises during the final stages of completion of construction provided that Tenant does not thereby interfere with the completion of construction or cause any labor dispute as a result of such installations, and provided further that Tenant does hereby agree to indemnify, defend, and hold Landlord harmless from any loss or damage to such property, and all liability, loss, or damage arising from any injury to the Project or the property of Landlord, its contractors, subcontractors, or materialmen, and any death or personal injury to any person or persons arising out of such installations, unless any such loss, damage, liability, death, or personal injury was caused by Landlord's negligence. Any such occupancy or performance in the Premises shall be in accordance with the provisions governing Tenant-Made Alterations and Trade Fixtures in the Lease, and shall be subject to Tenant providing to Landlord satisfactory evidence of insurance for personal injury and property damage related to such installations and satisfactory payment arrangements with respect to installations permitted hereunder. Delay in putting Tenant in possession of the Premises shall not serve to extend the term of this Lease or to make Landlord liable for any damages arising therefrom.

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ADDENDUM 4

ONE RENEWAL OPTION AT MARKET

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED__________, 2007 BETWEEN

MDN / JSC - II Limited

and

Adams Golf, Ltd.

(a) Provided that as of the time of the giving of the Extension Notice and the Commencement Date of the Extension Term, (x) Tenant is the Tenant originally named herein, (y) Tenant actually occupies all of the Premises initially demised under this Lease and any space added to the Premises, and (z) no Event of Default exists or would exist but for the passage of time or the giving of notice, or both; then Tenant shall have the right to extend the Lease Term for an additional term of 2 years (such additional term is hereinafter called the "Extension Term") commencing on the day following the expiration of the Lease Term (hereinafter referred to as the "Commencement Date of the Extension Term"). Tenant shall give Landlord notice (hereinafter called the "Extension Notice") of its election to extend the term of the Lease Term at least 6 months, but not more than 9 months, prior to the scheduled expiration date of the Lease Term.

(b) The Base Rent payable by Tenant to Landlord during the Extension Term shall be the greater of (i) the Base Rent applicable to the last year of the initial Lease term and (ii) the then prevailing market rate for comparable space in the Project and comparable buildings in the vicinity of the Project, taking into account the size of the Lease, the length of the renewal term, market escalations and the credit of Tenant. The Base Rent shall not be reduced by reason of any costs or expenses saved by Landlord by reason of Landlord's not having to find a new tenant for such premises (including, without limitation, brokerage commissions, costs of improvements, rent concessions or lost rental income during any vacancy period). In the event Landlord and Tenant fail to reach an agreement on such rental rate and execute the Amendment (defined below) at least 6 months prior to the expiration of the Lease, then Tenant's exercise of the renewal option shall be deemed withdrawn and the Lease shall terminate on its original expiration date.

(c) The determination of Base Rent does not reduce the Tenant's obligation to pay or reimburse Landlord for Operating Expenses and other reimbursable items as set forth in the Lease, and Tenant shall reimburse and pay Landlord as set forth in the Lease with respect to such Operating Expenses and other items with respect to the Premises during the Extension Term without regard to any cap on such expenses set forth in the Lease.

(d) Except for the Base Rent as determined above, Tenant's occupancy of the Premises during the Extension Term shall be on the same terms and conditions as are in effect immediately prior to the expiration of the initial Lease Term; provided, however, Tenant shall have no further right to any allowances, credits or abatements or any options to expand, contract, renew or extend the Lease.

(e) If Tenant does not give the Extension Notice within the period set forth in paragraph (a) above, Tenant's right to extend the Lease Term shall automatically terminate. Time is of the essence as to the giving of the Extension Notice.

(f) Landlord shall have no obligation to refurbish or otherwise improve the Premises for the Extension Term. The Premises shall be tendered on the Commencement Date of the Extension Term in "as-is" condition.

(g) If the Lease is extended for the Extension Term, then Landlord shall prepare and Tenant shall execute an amendment to the Lease confirming the extension of the Lease Term and the other provisions applicable thereto (the "Amendment").

(h) If Tenant exercises its right to extend the term of the Lease for the Extension Term pursuant to this Addendum, the term "Lease Term" as used in the Lease, shall be construed to include, when practicable, the Extension Term except as provided in (d) above.

- 16 -

EXHIBIT A

SITE PLAN

ATTACHED TO AND A PART OF THE LEASE AGREEMENT

DATED__________, 2007 BETWEEN

MDN / JSC - II Limited

and

Adams Golf, Ltd.

- 17 -

EX-21.1

EXHIBIT 21.1

ADAMS GOLF, INC., A DELAWARE CORPORATION

SUBSIDIARIES

The Company conducts its operations through several direct and indirect wholly-owned subsidiaries, agencies and distributorships, including (i) Adams Golf Holding Corp., which holds limited partnership interest of certain indirect subsidiaries of the Company; (ii) Adams Golf GP Corp., which holds capital stock or general partnership interests, as applicable, of certain indirect subsidiaries to the Company; (iii) Adams Golf, Ltd., which operates the golf club design, assembly and retail sales business; (v) Adams Golf IP, L.P., which holds the intellectual property rights of the Company, and (vi) Adams Golf Management Corp., which provides management and consulting services to certain of the Company's indirect subsidiaries.  A complete list of the Company's subsidiaries at March 13, 2007 is as follows:

Adams Golf, Ltd., a Texas limited partnership

Adams Golf Holding Corp., a Delaware corporation

Adams Golf GP Corp., a Delaware corporation

Adams Golf Management Corp., a Delaware corporation

Adams Golf IP, L.P., a Delaware limited partnership

Women's Golf Unlimited, LLC., a Texas corporation

Adams Golf U.K. Limited, a United Kingdom private limited company (dormant entity)

Adams Golf Japan, Inc. a Japan kabushiki kaisha (dormant entity)

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Adams Golf, Inc.:

We consent to incorporation by reference in Registration Statement No. 333-112622 on Form S-8 of Adams Golf, Inc. of our report dated March 13, 2008 relating to the consolidated balance sheets of Adams Golf, Inc. and subsidiaries as of December 31, 2007 and 2006 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2007, and the related financial statement schedule for each the years in the three-year period ended December 31, 2007, which report is included in the December 31, 2007 Annual Report on Form 10-K of Adams Golf, Inc.

/s/ KBA GROUP LLP

Dallas, Texas

March 11, 2007

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Oliver G. Brewer, certify that:

1. I have reviewed this annual report on Form 10-K of Adams Golf, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: March 11, 2008	By:	/S/ OLIVER G. BREWER III
		Oliver G. Brewer, III
		Chief Executive Officer and President
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Eric Logan, certify that:

1.     I have reviewed this annual report on Form 10-K of Adams Golf, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.     Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.      The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over   financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.      The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal   control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of   directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date:  March 11, 2008	By:	/S/ ERIC LOGAN
		Eric Logan
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Certification

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Adams Golf, Inc., a Delaware corporation (the "Company"), does hereby certify that:

The Annual Report on Form 10-K for the year ended December 31, 2007 (the "Periodic Report") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	ADAMS GOLF, INC.
Date:  March 11, 2008	By:	/S/ OLIVER G. BREWER III
	Oliver G. Brewer, III
	Chief Executive Officer and President
	(Principal Executive Officer)
Date:  March 11, 2008	By:	/S/ ERIC LOGAN
	Eric Logan
	Chief Financial Officer
	(Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Periodic Report or as a separate disclosure document

A signed original of this written statement required by Section 906 has been provided to Adams Golf, Inc. and will be retained by Adams Golf, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.