10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

(Mark One)

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2009
	or
[   ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from                                      t o

Commission File Number:  001-33978


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)

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   [  ] No

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 definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]      Accelerated filer[  ]       Non-accelerated filer [X]        Smaller reporting company [   ]


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

[  ] Yes   [X] No

The number of outstanding shares of the Registrant's common stock, par value $.001 per share, was 6,641,804 on May 6, 2009.

ADAMS GOLF, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I		FINANCIAL INFORMATION	Page
	Item 1.	Financial Statements
		Condensed Consolidated Balance Sheets -
		March 31, 2009 (unaudited) and December 31, 2008	3
		Unaudited Condensed Consolidated Statements of Operations -
		Three months ended March 31, 2009 and 2008	4
		Unaudited Condensed Consolidated Statement of Stockholders' Equity -
		Three months ended March 31, 2009	5
		Unaudited Condensed Consolidated Statements of Cash Flows -
		Three months ended March 31, 2009 and 2008	6
		Notes to Unaudited Condensed Consolidated Financial Statements	7-14
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15-23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	N/A
	Item 4(T).	Controls and Procedures	23-24
PART II		OTHER INFORMATION
	Item 1.	Legal Proceedings	24-25
	Item 1A.	Risk Factors	25
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	N/A
	Item 3.	Defaults Upon Senior Securities	N/A
	Item 4.	Submissions of Matters to a Vote of Security Holders	N/A
	Item 5.	Other Information	N/A
	Item 6.	Exhibits	26
		Signatures	26

Item 1.  

ADAMS GOLF, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

ASSETS
	March 31, 2009	December 31, 2008
	(unaudited)
Current assets:
Cash and cash equivalents	$   2,619	$   5,960
Trade receivables, net of allowance for doubtful accounts of $1,303       (unaudited) and $1,321 in 2009 and 2008, respectively	24,427	14,743
Inventories, net	33,246	33,611
Prepaid expenses	1,537	908
Other current assets	48	29
Total current assets	61,877	55,251
Property and equipment, net	1,284	1,210
Deferred tax asset - non current	10,228	10,228
Other assets, net	331	367
	$  73,720	$  67,056
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$   9,661	$     9,471
Accrued expenses	7,364	7,253
Current debt	6,016	--
Other current liabilities	14	--
Total current liabilities	23,055	16,724
Other liabilities	13	18
Total liabilities	23,068	16,742
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; 7,019,241 and 6,909,866 shares issued      and 6,608,304 and 6,498,929 shares outstanding at March 31, 2009 (unaudited) and December 31,      2008, respectively	7	7
Additional paid-in capital	92,918	92,701
Accumulated other comprehensive income	320	565
Accumulated deficit	(37,839)	(38,205)
Treasury stock, 410,937 common shares at March 31, 2009 and December 31, 2008, at cost	(4,754)	(4,754)
Total stockholders' equity	50,652	50,314
	$  73,720	$  67,056
Contingencies

See accompanying notes to unaudited condensed consolidated financial statements.

ADAMS GOLF, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

		Three Months Ended
		March 31,
	2009		2008
Net sales	$  23,475		$  28,001
Cost of goods sold	14,467		15,890
Gross profit	9,008		12,111
Operating expenses:
Research and development expenses	853		1,086
Selling and marketing expenses	5,951		7,655
General and administrative expenses	1,841		2,550
Total operating expenses	8,645		11,291
Operating income	363		820
Other income (expense):
Interest income (expense), net	(16)		34
Other income (expense), net	47		(50)
Income before income taxes	394		804
Income tax expense	28		6
Net income	$      366		$     798
Net income per common share - basic	$ 0.06		$ 0.13
- diluted	$ 0.05		$ 0.11

See accompanying notes to unaudited condensed consolidated financial statements.

ADAMS GOLF, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)

Three Months Ended March 31, 2009
(unaudited)

	Shares of		Additional	Accumulated Other			Cost of	Total
	Common	Common	Paid-in	Comprehensive	Accumulated	Comprehensive	Treasury	Stockholders'
	Stock	Stock	Capital	Income	Deficit	Income	Stock	Equity
Balance, December 31, 2008	6,909,866	$  7	$ 92,701	$   565	$ (38,205)		$ (4,754)	$   50,314
Comprehensive income:
Net income	--	--	--	--	366	$   366	--	366
Foreign currency translation	--	--	--	(245)	--	(245)	--	(245)
Comprehensive income	--	--	--	--	--	$    121	--	--
Issuance of restricted stock	100,000	--	--	--	--		--	--
Stock options exercised	9,375	--	--	--	--		--	--
Amortization of deferred compensation	--	--	217	--	--		--	217
Balance, March 31, 2009	7,019,241	$   7	$ 92,918	$    320	$ (37,839)		$ (4,754)	$   50,652

See accompanying notes to unaudited condensed consolidated financial statements.

ADAMS GOLF, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Three Months Ended
	March 31,
	2009	2008
Cash flows from operating activities:
Net income	$    366	$    798
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property and equipment and intangible assets	158	143
Amortization of deferred compensation	217	207
Provision for doubtful accounts	238	327
Changes in operating assets and liabilities:
Trade receivables	(9,922)	(12,787)
Inventories	365	(1,612)
Prepaid expenses	(629)	(137)
Other current assets	(20)	24
Other assets	--	135
Accounts payable	190	1,705
Accrued expenses and other current liabilities	129	(1,452)
Net cash used in operating activities	(8,908)	(12,649)
Cash flows from investing activities:
Purchases of equipment	(196)	(312)
Net cash used in investing activities	(196)	(312)
Cash flows from financing activities:
Principal payments under capital lease obligation	(5)	(3)
Proceeds from debt	6,013	3,016
Net cash provided by financing activities	6,008	3,013
Effects of exchange rate changes	(245)	133
Net decrease in cash and cash equivalents	(3,341)	(9,815)
Cash and cash equivalents at beginning of period	5,960	11,265
Cash and cash equivalents at end of period	$  2,619	$  1,450
Supplemental disclosure of cash flow information
Interest paid	$       20	$       17
Income taxes paid	$        28	$        --

See accompanying notes to unaudited condensed consolidated financial statements.

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

The unaudited condensed consolidated financial statements of Adams Golf, Inc. and its subsidiaries (the "Company", "Adams Golf", "we", "us", or "our") for the three month periods ended March 31, 2009 and 2008 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The information included reflects all adjustments (consisting only of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods.   However, these operating results are not necessarily indicative of the results expected for the full fiscal year.   Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations.  The notes to the unaudited condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in our 2008 Annual Report on Form 10-K filed with the SEC on March 11, 2009.

We design, assemble, market and distribute premium quality, technologically innovative golf clubs for all skill levels.  Our recently launched products include Speedline drivers and hybrid fairway woods, Idea Tech a4 and a4 OS I-woods and irons, Idea a3 and a3 OS I-woods and irons, Idea Pro Gold I-woods and irons and Insight Tech a4 and a4 OS drivers and hybrid-fairway woods.  We also continue to develop new products for certain of our older product lines that include RPM family drivers and fairway woods and irons, the Ovation family of drivers, fairway woods and irons, Tom Watson signature wedges and under the name of Women's Golf Unlimited, the Lady Fairway and Square 2 brands.  We continue to sell certain older product lines, including the Insight XTD A3 & A3 OS drivers and hybrid-fairway woods, Idea a2 and a2 OS irons, Idea Tech OS I-woods and irons, Idea a2 and a2 OS, the Tight Lies family of fairway woods, the Puglielli series of wedges, and certain accessories.

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.

2.   Inventories

Inventories consisted of the following on the dates indicated (in thousands):

	March 31,	December 31,
	2009	2008
	(unaudited)
Finished goods	$   21,578	$   20,226
Component parts	11,668	13,385
Total inventory	$  33,246	$   33,611

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 March 31, 2009 and December 31, 2008, inventories included $1,072,000 and $821,000 of consigned inventory, respectively, and $184,000 and $197,000 of inventory obsolescence reserves, respectively.  

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.   Accrued Expenses

Accrued expenses consisted of the following on the dates indicated (in thousands):

	March 31,	December 31,
	2009	2008
	(unaudited)
Payroll and commissions	$     762	$       447
Product warranty and sales returns allowances	1,511	1,641
Professional services	54	7
Accrued inventory	49	1,021
Accrued sales promotions	704	274
Deferred revenue	1,965	1,429
Other	2,319	2,434
Total accrued expenses	$   7,364	$   7,253

4.   Income per Common Share

The weighted average common shares used for determining basic and diluted income per common share were6,553,880 and 7,488,059, for the three months ended March 31, 2009, and 6,256,173 and 7,428,920, for the three months ended March 31, 2008.  

The effect of all warrants and options to purchase shares of our common stock for the three months ended March 31, 2009 resulted in additional dilutive shares of 934,179.  The effect of all warrants and options to purchase shares of our common stock for the three months ended March 31, 2008 resulted in additional dilutive shares of 1,172,747.

5.   Geographic Segment and Data

We generate substantially all revenues from the design, assembly, marketing and distribution of premium quality, technologically innovative golf clubs and accessories.  Our products are distributed in both domestic and international markets.  Net sales by customer for these markets consisted of the following during the periods indicated (in thousands):

	Three Months Ended March 31,
	2009	2008
	(unaudited)
United States	$  19,583	$  23,214
Rest of World	3,892	4,787
Total net sales	$ 23,475	$ 28,001

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 our customers or distributors could negatively impact the volume of foreign sales.

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6.   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.

7.   Comprehensive Income

Comprehensive income for the three months ended March 31, 2009 was approximately $0.1 million.

8.   Stock-Based Compensation

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.  At March 31, 2009, 983,607 outstanding options were outstanding with exercise prices from $0.04 to $4.80 per share.  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 March 31, 2009, 691,160 shares remained available for grant, including forfeitures.

During the three months ended March 31, 2009, 100,000 options were granted with an exercise price equal to the fair market value of the underlying common stock at the date of grant and 100,000 shares of restricted stock were issued.  The per share weighted-average fair value of stock options granted during the quarter ended March 31, 2009 was $2.70 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 expected volatility, based on historical daily annualized volatility of 96.34%.  We use historical data to estimate option exercise and employee termination factors within the valuation model.

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.   Stock-Based Compensation (continued)

Operating expenses included in the consolidated statements of operations for the three months ended March 31, 2009 and 2008 include total compensation expense associated with stock options and restricted stock grants of $217,000 and $207,000, respectively.

	Number of	Weighted	Aggregate
	Outstanding	Average	Intrinsic
	Shares	Exercise Price	Value of Options
Options outstanding at December 31, 2008	892,982	$    0.19	$   2,510,227
Options granted	100,000	3.02	302,000
Options forfeited / expired	--	--	--
Options exercised	(9,375)	0.04	27,750
Options outstanding at March 31, 2009	983,607	0.48	1,890,313
Options exercisable at March 31, 2009	880,482	0.17	1,959,563

The weighted average remaining contractual life of the options outstanding at March 31, 2009 was 4.66 years and for options exercisable at March 31, 2009 was 4.07 years.

As of March 31, 2009, compensation costs related to non-vested awards totaled $1.2 million, which is expected to be recognized over a weighted average period of 1.4 years.

As of March 31, 2009, there was $1.0 million of unrecognized compensation costs related to the non-vested share-based compensation of restricted stock grants awarded.  The amount of such unrecognized compensation costs were determined based on the fair value of our common stock on the date of grant of $8.50 for a block of 150,000 shares granted, $8.60 for a block of 11,365 shares granted and $3.30 for a block of 100,000 shares granted.  Compensation expense recognized during the three months ended March 31, 2009 related to the restricted stock grants was $0.2 million.

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 designated a specific 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 these designated future exercise dates is as follows:

Period of Exercise	Total Options to be exercised
2009	80,625
2010	15,000
2011	27,500
2012	29,521
2013	15,000
Beyond 2013	16,250
Total Options	183,896
	=======

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.   New Accounting Pronouncements

There have been no new material accounting pronouncements that are applicable to our business for this period.

10.   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 increase 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 31, 2009, we had $6.0 million of outstanding borrowings on our credit facility and we were in compliance with the terms of our agreement.  In October 2008, Wells Fargo announced plans to acquire Wachovia Bank, N.A. and closed the acquisition at the end of 2008.  The transaction resulted in the merger of Wachovia Bank into Wells Fargo with Wells Fargo being the surviving institution.  Wells Fargo, as successor to Wachovia Bank, has become our lender under our existing line of credit and is subject to all of the terms and conditions thereof.

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 flows, 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.

11.   Contingencies

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 and sought recissory or compensatory damages in an unspecified amount.  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.   On February 7, 2008, we were notified that our case was reassigned to Chief Judge Gregory M. Sleet. The parties participated in a mediation on April 8, 2008, but no resolution has been reached at this time.  The Court heard oral argument on Defendant's summary-judgment motions on February 20, 2009.  A hearing on the parties' Daubert motions has been set for May 29, 2009.  The Court set a trial date of October 13, 2009.

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.   Contingencies (continued)

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"), asserting various causes of action arising out of the T&F's alleged failure to notify Zurich of the class action lawsuit.  On March 18, 2008, the suit against T&F was amended to also name as Defendants certain alleged successor entities to T&F.  All of the Defendants moved to dismiss our lawsuit on the basis that our suit was premature in that we had not been damaged by the alleged conduct of the Defendants because we had not paid any sums in satisfaction of a judgment or settlement of the class action securities litigation.  Those motions were denied pursuant to a Memorandum Opinion and Order dated September 26, 2008.  T&F's successor entities also moved to dismiss the claims brought against them on the grounds that, as purchasers of solely T&F's assets, they could not be held liable for the T&F debts or liabilities.  The Court struck our complaint solely against the successor entity Defendants on the grounds that we had not alleged sufficient facts triggering a n exception to the general rule that the purchaser of an entity's assets is not liable for the entity's liabilities and ordered us to replead our claims against the successor entity Defendants.  We must replead our claims before June 22, 2009.  We and T&F have engaged in preliminary written discovery efforts, but substantial discovery remains to be completed.  No trial date has been set.

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 amount of its limit of liability before the Federal and ERII p olicies 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.  All of the excess insurance carriers (other than Zurich, which has denied coverage) have reserved their rights to deny coverage on various grounds.  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 cannot reasonably estimate future liability on the conclusion of the events, if any.

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11.   Contingencies (continued)

As mentioned above, 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 May 6, 2009, the total amount of outstanding underwriter defense costs approximately $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.  Therefore, we currently 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.

Beginning April 2008, we received communications from the Estate of Anthony Antonious that our products infringed a patent of Anthony Antonious patent concerning an aerodynamic metal wood golf club head.  On May 28, 2008, we filed a declaratory judgment lawsuit against the Anthony Antonious Trust in the United States District Court for the Southern District of the State of Ohio, alleging non-infringement of the Antonious patent.  On June 30, 2008, the Estate of Anthony Antonious filed a lawsuit against us in the United States District Court in the State of New Jersey alleging infringement of the patent.  On September 2, 2008, we filed a Request for Ex Parte Reexamination with the United States Patent and Trademark Office ("USPTO") requesting that the USPTO reexamine the Antonious patent at issue.  The USPTO issued an order granting our Request for Ex Parte Reexamination on November 7, 2008 after finding that a substantial new question of patentability affecting the claims h as been raised.   As a result, both the Ohio lawsuit and the New Jersey lawsuit have been stayed pending the outcome of the USPTO's reexamination proceeding.  On March 23, 2009 the USPTO issued a non-final Official Action rejecting all of the claims at issue.  The trust responded to the Office Action on April 22, 2009 attempting to convince the USPTO that the claims should not be rejected. At this point in the legal proceedings, we cannot predict the outcome of the matter with any certainty, 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.  

12.   Reclassifications

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

ADAMS GOLF, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.   Business and Credit Concentrations

We were dependent on two customers, which collectively comprised approximately 28% of net sales for the three months ended March 31, 2009.  One customer individually represented greater than 5% but less than 10% of net sales, and one customer represented greater than 10% of net sales but less than 25%.  For the three months ended March 31, 2008, we were dependent on three customers, which collectively comprised approximately 25% of net sales.  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%

A significant portion of our inventory purchases are from one supplier in China.  We purchased approximately 46% and 48% of our total inventory purchased for the three months ended March 31, 2009 and December 31, 2008, respectively, from this one Chinese supplier.  Many other industry suppliers also are located in China.  We do not anticipate any changes in the relationships with our suppliers.  However, if such change were to occur, we have alternative sources available.  Supply from these alternative sources, however, may not be immediately available or available in the quantities necessary to meet customer demand.

14.   Product Warranty Reserve

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 suffer a broken shaft, 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
Quarter ended December 31, 2008	$     466	(152)	208	$    522
Quarter ended March 31, 2009	$     522	(63)	60	$    519

Item 2.  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with (i) the attached unaudited condensed consolidated financial statements and notes thereto for the three months ended March 31, 2009, and with our consolidated financial statements and notes thereto for the year ended December 31, 2008 included in our Annual Report on Form 10-K filed with the SEC on March 11, 2009 and (ii) the discussion under the caption "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on March 11, 2009 and any material changes from the risk factors as previously disclosed in the Annual Report on Form 10-K set forth in Item 1A of Part II below.

Forward Looking Statements

This Quarterly 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 Quarterly Report and under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report.  Any and all statements contained in this Quarterly Report that are not statements of historical fact may be deemed forward-looking statements.  The statements include, but are not limited to: statements regarding the effect of unauthorized sales of our clubs and sales of counterfeit clubs, 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:

          --The ability to maintain historical growth in revenue and profitability;
          --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 global economic uncertainty;
          --The future market for our capital stock;
          --The uncertainty in the debt and equity markets;
          --The success of our marketing strategy;
          --The success of our tour 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;
          --Solvency of, and reliance on third parties, including suppliers, and freight transporters;
          --The actions of competitors, including pricing, advertising and product development risks concerning future technology;
          --Investor audience, interest or valuation;
          --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 under Risk Factors, Item 1A.

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 Quarterly 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.

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 six months 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)
          --Vendor purchase order cycle time

Tracking these operational performance indicators on a regular basis allows us to understand whether we are on target to 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.

Results of Operations

The following table sets forth operating results expressed as a percentage of net sales for the periods indicated.  All information is derived from the accompanying unaudited condensed consolidated financial statements.  Results for any one or more periods are not necessarily indicative of annual results or continuing trends.  

	Three Months Ended March 31,
	2009	2008
	(unaudited)
Net sales	100.0 %	100.0 %
Cost of goods sold	61.6	56.7
Gross profit	38.4	43.3
Operating expenses:
Research and development expenses	3.6	3.9
Sales and marketing expenses	25.4	27.3
General and administrative expenses	7.8	9.1
Total operating expenses	36.8	40.3
Interest income (expense), net	(0.1)	0.1
Other income, net	0.2	(0.2)
Income before income taxes	1.7	2.9
Income tax expense	0.1	0.1
Net income	1.6%	2.8%

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Total net sales decreased to $23.4 million for the three months ended March 31, 2009 from $28.0 million for the comparable period of 2008.  Our sales were primarily driven by the product sales of Speedline drivers and hybrid-fairway woods and the Idea a3 and a3 OS Irons and the recent launch of the Tech a4 and a4 OS irons, hybrids, drivers and hybrid-fairway woods.  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 six months 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.  The decline in net sales for the three months ended March 31, 2009 was primarily due to reduced demand by customers caused by a less than favorable economic environment in the United States and abroad.

Net sales of irons decreased to $13.7 million, or 58.3% of total net sales for the three months ended March 31, 2009 from $16.7 million, or 59.8% of total net sales, for the comparable period of 2008.  Current period iron net sales primarily resulted from the Tech a4 and a4 OS Irons, Idea a3 and a3 OS irons coupled with a smaller portion of sales resulting from integrated iron sets while the comparable period of 2008 net sales primarily resulted from the Idea a3 and a3 OS irons coupled with a smaller portion of sales from Tech OS irons and integrated iron sets.

Net sales of fairway woods decreased to $5.4 million, or 22.9% of total net sales, for the three months ended March 31, 2009, from $6.2 million, or 22.2% of total net sales, for the comparable period of 2008.  Net sales for the three months ended March 31, 2009 primarily were generated from Speedline hybrid-fairway woods, Tech a4 and a4 OS hybrids and hybrid-fairway woods, Idea a3 and a3 OS and Idea Pro Gold I-woods.  Net sales for the three months ended March 31, 2008 primarily were generated from Insight XTD fairway woods and Idea a3 and a3 OS, Idea Pro and Tech OS I-woods.

Net sales of drivers decreased to $4.4 million, or 18.9% of total net sales, for the three months ended March 31, 2009 from $4.7 million, or 16.8% of total net sales, for the comparable period of 2008.  A large portion of the driver net sales for the three months ended March 31, 2009 was generated by the Speedline driver, which was launched in the first quarter of 2009, coupled with the Tech a4 and a4 OS driver, which was introduced in the third quarter of 2008, while comparable period of 2008 net sales were primarily driven by the Insight XTD driver, which was launched in the first quarter of 2008.

We were dependent on two customers, which collectively comprised approximately 28% of net sales for the three months ended March 31, 2009.  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 25% of net sales for this period.  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 United States decreased to $3.9 million, or 16.6% of total net sales, from $4.8 million, or 17.1% of total net sales, for the three months ended March 31, 2009 and 2008, respectively.  Net sales resulting from countries outside the United States and Canada increased to 5.1% of total net sales for the three months ended March 31, 2009 from 4.4% for the comparable period of 2008.

Cost of goods sold decreased to $14.5 million, or 61.6% of total net sales, for the three months ended March 31, 2009 from $15.9 million, or 56.7% of total net sales, for the comparable period of 2008.  The increase as a percentage of total net sales is primarily due to changes in the product mix and increases in some component pricing as well as increases in inbound raw material freight costs driven by increased fuel costs over the majority of 2008.

Selling and marketing expenses decreased to $6.0 million for the three months ended March 31, 2009 from $7.7 million for the comparable period in 2008.  The decrease is primarily the result of a decrease in marketing and tour expense of $0.9 million and commission expense of $0.6 million.

General and administrative expenses decreased to $1.8 million for the three months ended March 31, 2009 from $2.6 million for the comparable period in 2008.  The decrease is primarily the result of a decrease in compensation expense of $0.4 million.

Research and development expenses, primarily consisting of costs associated with development of new products, decreased to $0.9 million for the three months ended March 31, 2009 from $1.1 million for the comparable period in 2008.  The decrease is primarily the result of a decrease in compensation expense.

Due to the recession currently affecting the global economy and the golf industry specifically, we continue to assess our cost structure, including but not limited to work force reductions, gross margin initiatives and overall cost savings in order to sustain our financial position as well as to position ourselves for future growth.

Our net accounts receivable balances were approximately $24.4 million and $14.7 million at March 31, 2009 and December 31, 2008, respectively.  The increase is consistent with the seasonality of our business; historically, sales in the golf industry are stronger in the first half of the year as compared to the second half of the year.

Our current debt increased to $6.0 million at March 31, 2009 from $0 at December 31, 2008.  The increase was a result of our seasonal working capital cycle, where inventory purchases are relatively high in the first half of the year and accounts receivable collections increase at the end of the second quarter and accelerate into the third quarter.

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 effect 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 decreased to $2.6 million at March 31, 2009 compared to $6.0 million at December 31, 2008. During the period, accrued expenses and accounts payable increased $0.3 million partially coupled with an increase in short term debt of $6.0 million offset by a increase in accounts receivable of $10.0 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 increase 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 31, 2009 and May 6, 2009, we had $6.0 million and $5.5 million, respectively, of outstanding borrowings on our credit facility and we were in compliance with the terms of our agreement.  In October 2008, Wells Fargo announced plans to acquire Wachovia Bank, N.A. and closed the acquisition at the end of 2008.  The transaction resulted in the merger of Wachovia Bank into Wells Fargo with Wells Fargo being the survivin g institution.  Wells Fargo, as successor to Wachovia Bank, has become our lender under our existing line of credit and is subject to all of the terms and conditions thereof.

Working capital increased at March 31, 2009 to $38.8 million compared to $38.5 million at December 31, 2008.   Approximately 39% of our current assets were comprised of accounts receivable at March 31, 2009.  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 (e.g. 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.  Given the current global e conomic recession and credit crisis, we believe that more customers may request payment terms and 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, which may not be available at all or in the full amounts necessary, or limit expenditures to the extent of available cash on hand, all of which could adversely effec t 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, current cash reserves, and available borrowings also will 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 flows, 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.

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 the ability to collect is reasonably assured.  The ability to collect is evaluated on an individual customer basis taking into consideration historical payment trends, current financial position, results of independent credit evaluations and payment terms.  If the ability to collect decreases significantly, including but not limited to, due to the current global economic recession, our revenue would be adversely affected.  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 ba sed 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 com pared 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 which 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 represent greater than 5% but less than 10% of net sales and one customer represents greater than 10% but less than 25% of net sales for the three months ended March 31, 2009, if a combination of customers were to become financially impaired, our financial results could be severely affected.

  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 have 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 three months ended March 31, 2009 and 2008, there were no impairments of long-lived assets.

Item 4(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.

"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, our principal executive and principal financial officers, or persons performing similar functions, and effected by our 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 authori zations 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 Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our Disclosure Controls and Procedures as of the end of the period covered by this report and has 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, based on their evaluations, our controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Controls over Financial Reporting

There were no changes in our Internal Controls Over Financial Reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended March 31, 2009 that have materially affected or are reasonably likely to materially affect our Internal Controls Over Financial Reporting.

PART II.  OTHER INFORMATION

Item 1.  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 and sought recissory or compensatory damages in an unspecified amount.  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. &nb sp;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.   On February 7, 2008, we were notified that our case was reassigned to Chief Judge Gregory M. Sleet. The parties participated in a mediation on April 8, 2008, but no resolution has been reached at this time.  The Court heard oral argument on Defendant's summary-judgment motions on February 20, 2009.  A hearing on the parties' Daubert motions has been set for May 29, 2009.  The Court set a trial date of October 13, 2009.

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"), asserting various causes of acti on arising out of the T&F's alleged failure to notify Zurich of the class action lawsuit.  On March 18, 2008, the suit against T&F was amended to also name as Defendants certain alleged successor entities to T&F.  All of the Defendants moved to dismiss our lawsuit on the basis that our suit was premature in that we had not been damaged by the alleged conduct of the Defendants because we had not paid any sums in satisfaction of a judgment or settlement of the class action securities litigation.  Those motions were denied pursuant to a Memorandum Opinion and Order dated September 26, 2008.  T&F's successor entities also moved to dismiss the claims brought against them on the grounds that, as purchasers of solely T&F's assets, they could not be held liable for the T&F debts or liabilities.  The Court struck our complaint solely against the successor entity Defendants on the grounds that we had not alleged sufficient facts triggering an ex ception to the general rule that the purchaser of an entity's assets is not liable for the entity's liabilities and ordered us to replead our claims against the successor entity Defendants.  We must replead our claims before June 22, 2009.  We and T&F have engaged in preliminary written discovery efforts, but substantial discovery remains to be completed.  No trial date has been set.

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 amount of its limit of liability before the Federal and ERI I 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.  All of the excess insurance carriers (other than Zurich, which has denied coverage) have reserved their rights to deny coverage on various grounds.  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 cannot reasonably estimate future liability on the conclusion of the events, if any.

As mentioned above, 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 May 6, 2009, the total amount of outstanding underwriter defense costs approximately $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.  Therefore, we currently 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.

Beginning April 2008, we received communications from the Estate of Anthony Antonious that our products infringed a patent of Anthony Antonious patent concerning an aerodynamic metal wood golf club head.  On May 28, 2008, we filed a declaratory judgment lawsuit against the Anthony Antonious Trust in the United States District Court for the Southern District of the State of Ohio, alleging non-infringement of the Antonious patent.  On June 30, 2008, the Estate of Anthony Antonious filed a lawsuit against us in the United States District Court in the State of New Jersey alleging infringement of the patent.  On September 2, 2008, we filed a Request for Ex Parte Reexamination with the United States Patent and Trademark Office ("USPTO") requesting that the USPTO reexamine the Antonious patent at issue.  The USPTO issued an order granting our Request for Ex Parte Reexamination on November 7, 2008 after finding that a substantial new question of patentability affecting the claims h as been raised.   As a result, both the Ohio lawsuit and the New Jersey lawsuit have been stayed pending the outcome of the USPTO's reexamination proceeding.  On March 23, 2009 the USPTO issued a non-final Official Action rejecting all of the claims at issue.  The trust responded to the Office Action on April 22, 2009 attempting to convince the USPTO that the claims should not be rejected. At this point in the legal proceedings, we cannot predict the outcome of the matter with any certainty, 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.  

Item 1A. Risk Factors

We have included in our filings with the SEC, including Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, a description of certain risks and uncertainties that could have an affect on our business, future performance, or financial condition.  There are no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008. 

Item 6.  Exhibits

See exhibit index on pages 27-28.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ADAMS GOLF, INC.
Date:  May 13, 2009		By:  /S/ OLIVER G. BREWER III
		Oliver G. Brewer, III
		Chief Executive Officer and President
		(Principal Executive Officer)
Date:  May 13, 2009		By:  /S/ PAMELA HIGH
		Pamela J. High
		Interim Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX

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	Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2007 (Exhibit 3.2)
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)
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 File No. 000-24583 (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 File No. 000-24583 (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 File No. 000-24583 (Exhibit 10.12)
Exhibit 10.2*	Golf Consultant Agreement - Thomas S. Watson	Incorporated by reference to 2004 Form 10-K File No. 000-24583 (Exhibit 10.17)
Exhibit 10.3*	Asset Purchase Agreement of Women's Golf Unlimited	Incorporated by reference to 2006 Form 10-K (Exhibit 10.11)
Exhibit 10.4	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 10.5	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 10.6	Commercial Lease Agreement dated December 15, 2007, between MDN/JSC -II Limited and the Company	Incorporated by reference to 2007 Form 10-K (Exhibit 10.9)
Exhibit 10.7	Commercial Lease Agreement dated April 10, 2008, between CLP Properties Texas, L.P. and the Company	Incorporated by reference to the Report on From 8-K dated April 15, 2008 (Exhibit 10.1)
Exhibit 10.8	Employment Agreement - Byron (Barney) H. Adams	Incorporated by reference to the Report on From 8-K dated January 12, 2009 (Exhibit 10.1)
Exhibit 10.9	Employment Agreement - Oliver G. (Chip) Brewer	Included in this filing
Exhibit 31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Included in this filing
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

___________________
* The SEC has granted our request for confidential treatment of certain portions of these agreements.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Oliver G. Brewer, certify that:

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

2.     Based on my knowledge, this 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 report;

3.     Based on my knowledge, the financial statements, and other financial information included in this 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 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 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 report our conclusions about the effectiveness of the disclosure controls              and procedures, as of the end of the period covered by this 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 control over financial reporting.

Date:  May 13, 2009	By:  /S/ OLIVER G. BREWER III
	Oliver G. Brewer, III
	Chief Executive Officer and President
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Pamela High, certify that:

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

2.     Based on my knowledge, this 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 report;

3.     Based on my knowledge, the financial statements, and other financial information included in this 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 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 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 report our conclusions about the effectiveness of the disclosure controls              and procedures, as of the end of the period covered by this 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 control over financial reporting.

Date:  May 13, 2009	By:  /S/ PAMELA HIGH
	Pamela High
	Interim Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

Section 1350 Certification

Pursuant to Rule 13a-14(b) (17 CFR  240.13a-14(b)) or Rule 15d-14(b) (17 CFR  240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C.  1350), each of the undersigned officers of Adams Golf, Inc., (the "Company"), does hereby certify, to such officer's knowledge,

The Quarterly Report on Form 10-Q for the three months ended March 31, 2009 (the "Quarterly Report"), of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Quarterly Report.

Date: May 13, 2009	By:  /S/ OLIVER G. BREWER III
	Oliver G. Brewer, III
	Chief Executive Officer and President
	(Principal Executive Officer)
Date: May 13, 2009	By:  /S/ PAMELA HIGH
	Pamela High
	Interim Chief Financial Officer
	(Principal Financial Officer)

The foregoing certification is furnished as an exhibit to the Periodic Report and will not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be deemed to be incorporated by reference into any filing under the Securities Act or Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-10.9

EXECUTIVE EMPLOYMENT

AGREEMENT

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 on the 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.

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;

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.

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 Seven-Million Five-Hundred Thousand ($7,500,000) 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 Seven-Million Five-Hundred Thousand ($7,500,000) dollars but less than Twelve Million ($12,000,000) 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 Twelve Million ($12,000,000) 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 than Twelve Million ($12,000,000) dollars, the Executive shall receive five (5%) percent of all cumulative EBITDA greater than Twelve Million ($12,000,000) 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.

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:

1. 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.
2. 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.
3. 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:

1. 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 of written notice from the Company specifying the specific nature of the Executive's breach; or
2. 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
3. Conviction of a felony or conviction of any crime involving moral turpitude, fraud or deceit.

1. 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

1. 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
2. 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.
3. The relocation of the Executive's place of employment to a site more than 75 miles from Plano, Texas.
4. If the Company fails to set internal financial goals or adopt a stock option plan

1. 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 its discretion, 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.
2. Death. The Executive's employment shall terminate upon his death.
3. 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;

1. 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;
2. 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.

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 Twelve Million ($12,000,000) 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 Twelve Million ($12,000,000) dollars of cumulative EBITDA, then the Executive shall also receive five ($.05) cents for every EBITDA dollar achieved over Twelve Million ($12,000,000) 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.

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;

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.

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 empl oyment. 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.

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.

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.

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.

1. 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).

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.