May 19, 2005
By U.S. Mail
Mr. Oliver Brewer
Chief Executive Officer
Adams Golf, Inc.
300 Delaware Avenue, Suite 572
Wilmington, Delaware 19801
Re: Adams Golf, Inc.
Form 10-K for the year ended December 31, 2004
File No. 000-24583
Dear Mr. Brewer:
We have reviewed your filing and have the following
comments.
Other than as indicated, we think you should revise your document
in
future filings. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with supplemental
information so we may better understand your disclosure. After
reviewing this information, we may or may not raise additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
* * * * *
Form 10-KSB (Fiscal year ended December 31, 2004)
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Critical Accounting Policies and Estimates, page 15
1. We note your section on critical accounting policies. However,
it
appears that your discussion is a mere repetition of disclosure
from
Note 1 to your financial statements. Pursuant to FR-60, this
section
is intended to focus on the sensitivity aspects of critical
accounting policies, that is, the likelihood that materially
different amounts would be reported under different conditions or
assumptions. FR-60 states that registrants need not repeat
information that is already included in the financial statements
or
other sections of the filing. Please revise.
Results of Operations, page 17
2. In your analysis of the operating results between periods, your
explanations focus on changes between years within each product
class
(drivers, irons, fairway woods). We believe that this section
could
benefit from an analysis on shifts in the product mix that
comprises
sales for each year. In addition, you refer to maturing product
lines. Some consideration should be given to adding a discussion
on
the life cycle of each product or product class, and how the life
cycle is expected to impact sales in future periods.
3. In your discussions of general and administrative expenses and
accounts receivable balances on page 18, you refer to the
significant
increase in bad debt reserves recorded in fiscal 2004. You
attribute
that increase to "the risk of uncertainty in collectability of
unfavorable accounts." Supplementally and in future filings,
please
expand your disclosure to explain the reasons for this apparent
increase in risk. For example, is it attributable to a change in
your credit policy, the use of extended payment terms or some
other
factor?
Consolidated Financial Statements
Report of the Independent Registered Public Accounting Firm, page
F-3
4. PCAOB Audit Standard 1 requires the audit report to state that
the
audit was conducted in accordance with "the standards of the
Public
Company Accounting Oversight Board (United States)." The standard
is
effective for reports issued or reissued on or after May 24, 2004.
As the report of KPMG has been reissued for purposes of these
consolidated financial statements, it appears that this report
should
be revised to comply with the new standard. Please amend your
document to include the revised report or advise.
Note (1) Summary of Significant Accounting Policies
(h) Advertising Costs, page F-10
5. We note your disclosure that advertising costs, included in
selling and marketing expenses, other than direct commercial
costs,
are expensed as incurred. However, the treatment for direct
commercial costs is unclear. Please expand your disclosure to
explain the accounting for direct commercial costs, if different
from
other advertising costs as indicated. Please refer to SOP 93-7.
In
addition, supplementally describe the specific nature of these
costs
and explain your related accounting policies.
(t) Classification of Promotional and Advertising Costs, page F-14
6. We note that you engage in various promotional and advertising
programs, including co-op advertising and "spiff incentives."
Supplementally and in detail describe the nature and contractual
terms of each individually significant program and explain your
method of accounting for each. In addition, please provide us
with
schedules of activity in your related reserve accounts for each of
the periods for which income statements have been presented. We
may
have further comment upon review of your response.
Note (8) Professional Services Agreement and Settlement Expense,
page
F-17
7. In the description of your agreement with Mr. Faldo, you make
reference to a contingency payment based on certain future
financial
performance thresholds. Please tell us, supplementally, the
periods
for which financial performance will be measured, and whether any
part of this contingency has already been earned or is likely to
be
earned. If necessary, please revise your disclosure to discuss
your
conclusion with respect to this contingency in accordance with
SFAS
No. 5.
Note (9) Commitments and Contingencies, page F-18
8. We note your disclosure regarding the class action lawsuit that
was brought against you, originating in June 1999. Please revise
your disclosure to include the likelihood of an adverse outcome,
as
well as the estimate loss, or range of loss, if one can be made,
in
accordance with SFAS 5.
Note (13) Stockholders` Equity, page F-23
9. We noted your tabular disclosure on the range of exercise
prices
for outstanding options. We recommend that you give consideration
to
the guidance in paragraph 48 of SFAS No. 123, which suggests a
difference of 150% between the low exercise price and the high
exercise in the range, by showing option price exercise ranges
that
are meaningful for assessing the cash that may be received as a
result of options being exercised. Please revise your table so
that
each range of exercise prices is reflected accordingly.
* * * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
Other
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has
access to all information you provide to the staff of the Division
of
Corporation Finance in our review of your filing or in response to
our comments on your filing.
You may contact Ms. Kristin Shifflett, Staff Accountant, at
(202) 551-3381, or Ms. Margery Reich, Senior Staff Accountant, at
(202) 551-3347, if you have questions regarding comments on the
financial statements and related matters. Please contact me at
(202)
551-3211 with any other questions.
Sincerely,
David R. Humphrey
Accounting Branch Chief
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May 19, 2005
Mr. Oliver Brewer
Adams Golf, Inc.
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