<SUBMISSION>
<ACCESSION-NUMBER>0000936392-07-000026
<TYPE>10-K
<PUBLIC-DOCUMENT-COUNT>11
<PERIOD>20061031
<FILING-DATE>20070116
<DATE-OF-FILING-DATE-CHANGE>20070116
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ASHWORTH INC
<CIK>0000820774
<ASSIGNED-SIC>2320
<IRS-NUMBER>841052000
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1031
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-K
<ACT>34
<FILE-NUMBER>001-14547
<FILM-NUMBER>07532886
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2765 LOKER AVE WEST
<CITY>CARLSBAD
<STATE>CA
<ZIP>92008
<PHONE>7604386610
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2765 LOKER AVENUE WEST
<CITY>CARLSBAD
<STATE>CA
<ZIP>92008
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>CHARTER GOLF INC
<DATE-CHANGED>19920703
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a26458e10vk.htm
<DESCRIPTION>FORM 10-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>








<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 10-K</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the fiscal year ended October&nbsp;31, 2006</B>
</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Commission file number: 001-14547</B>

</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Ashworth, Inc.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
(State or other jurisdiction of <BR>
incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>84-1052000</B><BR>
(I.R.S. Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>2765 LOKER AVENUE WEST, CARLSBAD, CA 92010</B><BR>
(Address of Principal Executive Office, including Zip Code)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(760)&nbsp;438-6610</B><BR>
(Registrant&#146;s Telephone Number, including Area Code)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(b) of the Act: None

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Securities registered pursuant to Section 12(g) of the Act: common stock, $.001 par value

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of
the Securities Act. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13 or
Section 15(d) of the Act. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant (1)&nbsp;has filed all reports required to be filed by
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or for
such shorter period that the Registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days. Yes <FONT face="Wingdings">&#254;</FONT> No <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K is
not contained herein, and will not be contained, to the best of Registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form 10-K
or any amendment to this Form 10-K. <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in
Rule&nbsp;12b-2 of the Exchange Act (Check one).
</DIV>

<DIV align="center" style="font-size: 10pt">Large accelerated filer <FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accelerated filer <FONT face="Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a shell company as defined in Rule&nbsp;12b-2 of the
Exchange Act. Yes <FONT face="Wingdings">&#111;</FONT> No <FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate market value of the Registrant&#146;s common stock held by nonaffiliates based upon
the last reported sales price of its common stock on December&nbsp;29, 2006 as reported on the NASDAQ
Global Market was $85,433,393.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were 14,520,175 shares of common stock, $.001 par value, outstanding at the close of
business on December&nbsp;29, 2006.
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>









<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">










<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">PART I</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;1. BUSINESS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Item&nbsp;1A. RISK FACTORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Item&nbsp;1B. UNRESOLVED STAFF COMMENTS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Item&nbsp;2. PROPERTIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Item&nbsp;3. LEGAL PROCEEDINGS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">PART II</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Item&nbsp;9A. CONTROLS AND PROCEDURES</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Item&nbsp;9B. OTHER INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#016">PART III</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Item&nbsp;11. EXECUTIVE COMPENSATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATERS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#022">PART IV</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#023">Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K</A></TD></TR>
<TR><TD colspan="9"><A HREF="#024">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#025">EXHIBIT INDEX</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv10wxaay.htm">EXHIBIT 10.(AA)</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv10wxaayx1y.htm">EXHIBIT 10.(AA)(1)</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv10wxaayx2y.htm">EXHIBIT 10.(AA)(2)</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv21.htm">EXHIBIT 21</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv23w1.htm">EXHIBIT 23.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv23w2.htm">EXHIBIT 23.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv31w1.htm">EXHIBIT 31.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv31w2.htm">EXHIBIT 31.2</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv32w1.htm">EXHIBIT 32.1</A></TD></TR>
<TR><TD colspan="9"><A HREF="a26458exv32w2.htm">EXHIBIT 32.2</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>







<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DOCUMENTS INCORPORATED BY REFERENCE</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PART III incorporates certain information by reference from either the Registrant&#146;s definitive
proxy statement for its 2007 Annual Meeting of Stockholders or a Form 10-K/A to be filed with the
Commission within 120&nbsp;days of October&nbsp;31, 2006, which information is incorporated herein by
reference.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CAUTIONARY STATEMENTS</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">This report contains certain forward-looking statements related to the Company&#146;s market
position, finances, operating results, marketing and business plans and strategies within the
meaning of Section&nbsp;27A of the Securities Act of 1933, as amended and Section&nbsp;21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements may contain the words &#147;believe,&#148;
&#147;anticipate,&#148; &#147;expect,&#148; &#147;predict,&#148; &#147;estimate,&#148; &#147;project,&#148; &#147;will be,&#148; &#145;will continue,&#148; &#147;will likely
result,&#148; or other similar words and phrases. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. The Company undertakes no
obligation to update any forward-looking statements, whether as a result of new information,
changed circumstances or unanticipated events unless required by law. Forward-looking statements
and the Company&#146;s plans and expectations are subject to a number of risks and uncertainties that
could cause actual results to differ materially from those anticipated. For more information on the
risks to which the Company is subject, see Part&nbsp;I, Item&nbsp;1A. &nbsp;Risk Factors below.
</DIV>

<!-- link1 "PART I" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<!-- link2 "Item&nbsp;1. BUSINESS" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. BUSINESS.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GENERAL DEVELOPMENTS OF THE COMPANY</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth, Inc., based in Carlsbad, California, was incorporated in Delaware on March&nbsp;19, 1987.
As used in this report, the terms &#147;we,&#148; &#147;us,&#148; &#147;our,&#148; &#147;Ashworth&#148; and the &#147;Company&#148; refer to
Ashworth, Inc., its predecessors, subsidiaries and affiliates, unless the context indicates
otherwise. The Company designs, markets, distributes and licenses quality sports apparel, headwear
and accessories under the Ashworth<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, The Game<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and Kudzu<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> labels. The Company also holds a license
to design, source, market and sell Callaway Golf apparel primarily in the United States, Europe,
and Canada.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth earns revenues and income and generates cash through the design, marketing and
distribution of quality men&#146;s and women&#146;s sports apparel, headwear and accessories under the
Ashworth, Callaway Golf apparel, Kudzu, and The Game brands. The Company&#146;s products are sold in
the United States, Europe, Canada and various other international markets to selected golf pro
shops, resorts, off-course specialty shops, upscale department stores, retail outlet stores,
colleges and universities, entertainment complexes, sporting goods dealers that serve the high
school and college markets, NASCAR/racing markets, outdoor sports distribution channels, and top
specialty-advertising firms for the corporate market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2006, the Company entered into a settlement agreement with a stockholder group led by
Knightspoint Partners II, L.P. (collectively, the &#147;Knightspoint Group&#148;). As part of the settlement
agreement, two of Knightspoint Group&#146;s proposed candidates, David M. Meyer and Peter M. Weil, were
appointed to the Board of Directors effective May&nbsp;8, 2006. In addition to the appointment of
Messrs Meyer and Weil, a third independent director, to be mutually agreed upon by Knightspoint
Group and the Company, is to be added to the Board as soon as practicable. Messrs Meyer and Weil
were both elected to the Board at the July&nbsp;17, 2006 annual meeting of stockholders.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the Company announced the appointment of Gary I. &#147;Sims&#148; Schneiderman to the
position of President and the appointment of James B. Hayes as the Chairman of the Board. These
announcements were part of a reorganization resulting from the resignation of Randall L. Herrel,
Sr., the Company&#146;s former Chairman and Chief Executive Officer who resigned effective October&nbsp;17, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2006, the Company announced the appointment of Peter M. Weil to the position of
Chief Executive Officer. Mr.&nbsp;Weil will continue to serve as a member of the Company&#146;s Board of
Directors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
website address is <U>www.ashworthinc.com</U>. You may obtain free electronic copies of our
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments to those reports on the &#147;Investor Info&#148; portion of our website, under the heading &#147;SEC
Filings.&#148; These reports are available on our website as soon as reasonably practicable after we
electronically file them with the Securities and Exchange Commission.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH PRODUCTS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth Men&#146;s Division designs Authentics<FONT style="font-variant: SMALL-CAPS"><SUP style="font-size: 85%; vertical-align: text-top">TM</SUP></FONT>, AWS<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP>
(Ashworth Weather Systems) and fashion collections. Each fashion collection typically consists of
knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and
accessories. Product design focuses on classic, timeless designs with emphasis on quality and
innovation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth Women&#146;s Division designs Authentics<FONT style="font-variant: SMALL-CAPS"><SUP style="font-size: 85%; vertical-align: text-top">TM</SUP></FONT>, AWS<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP> and
fashion collections. The collections focus on timeless, elegant designs that are functional and
sophisticated for the woman with a fashion sense and an active lifestyle.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf
Company to create lines of men&#146;s and women&#146;s Callaway Golf apparel. The first product offering was
designed for Fall 2002 and included three separate collections.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Callaway Golf apparel men&#146;s Collection and Sport range includes classic and fashion lines
featuring knit and woven shirts, pullovers, jackets, sweaters, vests, pants, shorts, headwear and
accessories. The Collection range designs focus on sophisticated styling using luxury fabrics
while the Sport range designs aim to appeal to the active consumer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Callaway Golf apparel X Series product line combines fashion with technical performance
fabrication, and features knit shirts, pullovers, vests, jackets, pants, shorts, headwear and
waterproof rainwear.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Callaway Golf is a trademark of Callaway Golf Company. Ashworth, Inc. is an Official Apparel
Licensee of Callaway Golf Company. The multi-year agreement has various annual requirements for
marketing expenditures and royalty payments based on the level of net revenues.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2004, the Company completed its acquisition of Gekko Brands, LLC (&#147;Gekko&#148;). Gekko
designs, produces and distributes headwear and apparel under The Game and Kudzu brands.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DISTRIBUTION CHANNELS</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company warehouses and ships the majority of its products from its embroidery and
distribution centers in Oceanside, California; Phenix City, Alabama; and Basildon, England.
Product is also drop-shipped from off-shore factories directly to our subsidiaries, divisions and
international distributors.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently distributes and sells its products primarily through the following
distribution channels:
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Golf Pro Shops, Resorts and Off-Course Golf Specialty Shops</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s core customers are golf pro shops located at golf courses and resorts as well as
off-course specialty retailers. The Company refers to this channel as the green grass distribution
channel which accounted for 33.5% of net sales in fiscal 2006. The Company currently distributes
its products in nearly all
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">of the 50
states. According to the 2006 <I>Darrell Survey</I>, a leading golf industry consumer usage survey, the
Company was ranked first in total golf shirt usage over all top competitors in 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Collegiate Bookstores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Game brand products are marketed primarily under licenses to over 1,000 colleges and
universities, resorts and sporting goods team dealers that serve the high school and college
markets. The Game brand is one of the leading headwear brands in the College/Bookstore
distribution channel. During fiscal 2006, The Game accounted for 12.5% of net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. NASCAR and Outdoor Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Kudzu brand products are sold into NASCAR/racing markets and through outdoor sports
distribution channels, including fishing and hunting. The NASCAR/racing and outdoor sports
distribution channel accounted for 7.5% of net sales in fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Department Stores and Specialty Stores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company currently sells its Ashworth and Callaway Golf apparel products to selected
upscale department and specialty stores, including Parisian, Macy&#146;s, Lord &#038; Taylor, Bloomingdale&#146;s,
Belk, and Nordstrom. During fiscal 2006, the Department and Specialty Stores distribution channel
accounted for 10.8% of our net sales.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Corporate Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company markets its products to top specialty-advertising firms that re-sell the Company&#146;s
products to Fortune 500 companies and other corporations for use in their company stores, sales
meetings, catalogs and corporate events. Our Corporate distribution channel accounted for 12.3% of
our net sales during fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>International Market</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a wholly-owned subsidiary in Basildon, England that distributes Ashworth and
Callaway Golf apparel product to customers, either directly or through independent sales
representatives, in the United Kingdom and other European countries such as Germany, France, Spain,
Sweden, Ireland and Portugal. The Company distributes Ashworth and Callaway Golf apparel, headwear
and accessories in Canada through two separate divisions, operated by Almec Leisure Group.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has entered into licensing and distribution agreements with various partners in
countries such as China, Japan, Hong Kong, Singapore, Taiwan, Australia and South Korea. Under
these agreements, the licensees import certain product lines from Ashworth and manufacture other
approved licensed products designed specifically for their market.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also uses distributors to sell Ashworth products in other countries such as United
Arab Emirates, South Africa and Mexico. The Company&#146;s International distribution channel, which
includes our wholly-owned European subsidiary, Canadian divisions, and international licensees and
distributors, accounted for 18.4% of our net sales in fiscal 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Ashworth Retail Stores</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates, through wholly-owned subsidiaries, 18 retail stores in California,
Texas, Massachusetts, Illinois, Virginia, Arizona, Utah, Nevada, Georgia, Florida, New York and
Washington. The main purpose of these stores is to help control and manage inventory by selling
prior season and irregular
merchandise.
The Company also sells its excess and irregular inventory through select
clearance retailers.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">During fiscal 2006, the Ashworth Retail Stores distribution channel accounted
for 5.0% of our net sales.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SALES AND MARKETING</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s products are sold in the United States, Europe and Canada largely by independent
sales representatives who are not employees of the Company or its subsidiaries. At December&nbsp;31,
2006, the Company had approximately 180 independent and 30 employee sales representatives
worldwide. The Company also uses several different distributors and licensees in various
international locations<I>.</I>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to add exposure and consumer credibility to its Ashworth brand, the Company has
contracts with golf celebrities who wear and endorse the Company&#146;s products. At October&nbsp;31, 2006,
these individuals included: Fred Couples, Jim Nantz, Stuart Appleby, Chris DiMarco, Nick Watney
and others. The Company uses these players and celebrities in advertisements, in-store displays,
and for trade shows, store and other special appearances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth marketing platform is designed to heighten brand awareness, brand strength and
brand growth globally through print, moving media, communications, promotional, and tradeshow
initiatives.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth continued its in-store shop program in 2006 and has a distinct in-store presence in
many golf shops and department stores throughout the United States. This modular fixture program
is designed to help create an in-store shop for Ashworth and Callaway Golf apparel products coupled
with pictures and displays of our spokespersons and golf professionals.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to introduce new young customers to the Ashworth brand, the Company supports high
school and collegiate golf by providing team uniforms to selected high school, college and
university golf teams.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with its acquisition of Gekko, the Company began marketing to the
collegiate sports market. In an effort to create brand awareness and promote sell through at the
consumer level, the Company has promotional agreements with college sports coaches who wear and
endorse The Game brand products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s apparel business continues to be seasonal, with the highest revenues
traditionally in the period from January through July and the lowest revenues in the period from
August through December.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in fiscal 2006 were $209.6&nbsp;million which was an increase of 2.4% from net
revenues of $204.8&nbsp;million in fiscal 2005. During the last three fiscal years, the Company had the
following domestic and international net revenues:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004 (1)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Net Revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic, excluding Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">129,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">130,825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,396</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">International:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth U.K. Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other international</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,706</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD align="left" valign="top">&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Net Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,102</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">On July&nbsp;6, 2004 the Company acquired Gekko Brands, LLC (Gekko). The financial information
above includes the results of operations for Gekko from July&nbsp;7, 2004 (approximately four months for
fiscal year 2004) and 12&nbsp;months for fiscal years 2005 and 2006.</DIV></TD>
</TR>

</TABLE>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Note 1 of Notes to Consolidated Financial Statements, The Company and Summary of
Significant Accounting Policies, Business&#148; for revenues, operating income and identifiable assets
of Ashworth U.K., Ltd., and &#147;Note 12, Segment Information&#148; for market segment information.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s revenues from its international operations may be adversely affected by currency
fluctuations, taxation and laws or policies of the foreign countries in which the Company conducts
business, as well as laws and policies of the United States affecting foreign trade, investment and
taxation.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For more information regarding the risks of currency fluctuations that could affect the
Company&#146;s ability to sell its products in foreign markets, the value in U.S. dollars of revenues
received in foreign currencies, the impact of such fluctuations on the Company&#146;s international
segment and strategies the Company may use to manage the risks presented by currency exchange rate
fluctuations, see &#147;Item&nbsp;7. Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations &#151; Liquidity and Capital Resources &#151; Currency Fluctuations,&#148; &#147;Item&nbsp;7A, Quantitative
and Qualitative Disclosures about Market Risk &#151; Foreign Currency Exchange Rate Risk,&#148; and &#147;Note 1
of Notes to Consolidated Financial Statements, Foreign Currency.&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2006, the Company had a sales order backlog of approximately $59,017,000 from
independent third parties, which is approximately $851,000 or 1.4% lower than the comparable
backlog at December&nbsp;31, 2005. Backlog reflects sales orders that are placed with the Company prior
to the period in which the goods are to be shipped, as opposed to &#147;at-once&#148; sales orders that are
received in the period in which the goods are expected to be shipped. The current backlog covers
orders for goods expected to be shipped through approximately September&nbsp;2007. The amount of the
sales order backlog at a particular time is affected by a number of factors, including the timely
flow of product from suppliers which can impact the Company&#146;s ability to ship on time, and the
timing of customers&#146; orders. Accordingly, a comparison of sales order backlog from period to
period is not necessarily meaningful and may not be indicative of eventual actual shipments in any
period. In addition, sales orders may be changed or canceled prior to shipment, preventing the
Company from converting backlog into revenue.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INVENTORY</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company seeks to maintain sufficient levels of inventory to support its Ashworth
Authentics and Callaway Classics programs, increased sales volume, and to meet increased customer
demand for at-once
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">ordering. Disposal of excess prior season inventory is an ongoing part of the
Company&#146;s business, and inventory write-downs may impair the Company&#146;s financial performance in any
period. Certain inventory may be subject to multiple write-downs if the Company&#146;s initial reserve
estimates for inventory obsolescence or lack of throughput prove to be too low. These risks
increase as inventory grows.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPETITION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the 2006 <I>Darrell Survey</I>, the Ashworth brand was the leader in the Company&#146;s core
green grass market in 2006, with a 12.0% share in shirt usage among golfers. In addition to topping
the rankings for the coveted number one position overall, Ashworth also retained favor with the low
handicappers (0-5 handicap) with a number one ranking in total shirt usage among the game&#146;s most
demanding players. The Company&#146;s share of other markets, including upscale department stores and
the corporate market, is less
significant. The golf apparel market is not dominated by any single company, and is highly
competitive both in the United States and abroad. The Company competes not only with golf apparel
manufacturers, but also with other branded sports and sportswear apparel manufacturers, including
Nike and Adidas, that have entered the golf apparel market in recent years. Many of the Company&#146;s
competitors have greater financial resources. Ashworth competes with other golf apparel
manufacturers on design, product quality, customer service and brand image.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PRODUCT SOURCING</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Full Package Finished Goods</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s products are manufactured to the Company&#146;s quality and styling specifications and
imported into the United States, Canada, and the United Kingdom as &#147;full packed&#148; finished goods
produced by independent third party suppliers. Nearly all the Company&#146;s merchandised goods are
manufactured in Asia, including Brunei, China, Indonesia, Korea, Malaysia, the Philippines, Taiwan,
Thailand, Hong Kong, Macao and Vietnam. We also manufacture goods with independent factories in
Peru, Mexico and Costa Rica. Our largest single apparel manufacturer
operates in Thailand and
Hong Kong and accounted for approximately 21% of the total fiscal 2006 production. Our largest
single headwear manufacturer is located in China and accounted for approximately 50% of the total
fiscal 2006 production.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>In-House Embroidery</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company embroiders custom golf course, tournament, collegiate, NASCAR/racing, outdoor sports,
and corporate logos in its Oceanside, California, Phenix City, Alabama and Basildon, England
embroidery and distribution centers using approximately 120 multi-head, computer-controlled
embroidery machines with a total of approximately 800 sewing heads. The embroidery design libraries
contain over 135,000 Ashworth, Callaway, The Game, Kudzu and customer designs. Embroidery is
applied to both garments and finished headwear. On average, the Company embroiders 82,000 logos per
week on approximately 68,000 product units.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Duties and Quotas</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Virtually all of our merchandise imported into the United States, Canada and the United
Kingdom is subject to duties. Until January&nbsp;1, 2005, our apparel merchandise was also subject to
quotas. Quotas represent the right, pursuant to bilateral or other international trade
arrangements, to export amounts of certain categories of merchandise into a country or territory
pursuant to a visa or license. Under the Agreement on Textiles and Clothing, quotas on textile and
apparel products were eliminated on January&nbsp;1, 2005 for World Trade Organization (the &#147;WTO&#148;) member
countries, including the United States, Canada and European countries. Notwithstanding quota
eliminations, China&#146;s accession agreement for membership in the WTO provides that WTO member
countries (including the United States, Canada and the United Kingdom) may re-impose quotas on
specific categories of products in the event it is determined that imports from China have surged
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">and are threatening to create a market disruption for such categories of products (so-called
&#147;safeguard quota provisions&#148;). In response to surging imports, in November&nbsp;2005 the United States
and China agreed to a new quota arrangement which will impose quotas on certain textile products
through the end of 2008. In addition, the European Union also agreed with China on a new textile
arrangement which will impose quotas through the end of 2007. The United States and other countries
may also unilaterally impose additional duties in response to a particular product being imported
(from China, Vietnam or other countries) in such increased quantities as to cause (or threaten)
serious damage to the relevant domestic industry (generally known as &#147;anti-dumping&#148; actions). China
has imposed an export tax on all textile products manufactured in China. Although there can be no
assurance, the Company does not believe this tax or quota will have a material impact on our
business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Ashworth is also subject to other international trade agreements and regulations, such as the North
American
Free Trade Agreement and the Andean Trade Promotion and Drug Eradication Act. In addition, each of
the countries in which our products are sold has laws and regulations covering imports. The United
States and the other countries in which our products are manufactured and sold may, from time to
time, impose new duties, tariffs, surcharges or other import controls or restrictions, including
the imposition of &#147;safeguard quota&#148;, or adjust presently prevailing duty or tariff rates or levels.
In an effort to minimize our potential exposure to import risk, the Company actively monitors
import restrictions and quota fill rates and if needed can shift production to other countries or
manufacturers.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>TRADEMARKS AND LICENSE</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns and utilizes numerous trademarks, principal among which are the Ashworth
typed and design marks, the Golfman design mark, and the Weather Systems stylized mark. The
Ashworth typed and design marks, the Golfman design marks and the Weather Systems stylized mark
have been registered for apparel, shoes, leather goods and/or golf bags on the Principal Register
of the United States Patent and Trademark Office. Additionally, the Company has several other
pending trademark applications and trademark registrations in the United States for the AWS and Two
Bar Design marks.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has registered the Ashworth typed and design marks, the Golfman design marks
and/or the Weather Systems stylized marks and has pending applications for apparel, shoes, leather
goods and/or golf bags internationally. The application process varies from country to country and
can take approximately one to three years to complete.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has EZ-TECH<FONT style="font-family: Symbol">&#226;</FONT> as a registered trademark in the United States, Australia,
Canada and the United Kingdom.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with its acquisition of Gekko, the Company acquired the registered trademarks of
The Game and Kudzu.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth regards its trademarks and other proprietary rights as valuable assets and believes
that they have significant value in the marketing of its products. Although Ashworth believes that
it has the exclusive right to use the trademarks and intends to vigorously protect its trademarks
against infringement, there can be no assurance that Ashworth can successfully protect the
trademarks from conflicting uses or claims of ownership in cases where the trademarks were used
and/or registered prior to Ashworth&#146;s lawful registrations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Callaway Golf is a trademark of Callaway Golf Company. The Company is an Official Apparel
Licensee of Callaway Golf Company. The Company has licensed the use of the Callaway Golf trademark
pursuant to a multi-year, exclusive licensing agreement to design, source and sell Callaway Golf
brand apparel primarily in the United States, Europe and Canada. The agreement, effective until
December&nbsp;31, 2010, provides for, among other matters, minimum annual royalty payments and other
sales and marketing commitments regardless of the Company&#146;s actual sales of Callaway &#151; branded
products. It may be extended
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">for one five-year term at Ashworth&#146;s sole discretion, provided that
Ashworth meets or exceeds certain performance requirements for calendar years 2008 and 2009.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EMPLOYEES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2006, Ashworth had approximately 625 regular employees and 100 seasonal
temporary employees. We believe that relations between Ashworth and its employees are generally
good.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following are our current and former executive officers who resigned during fiscal
2006 and their principal business experience for the past five years.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position with the Company</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Current Officers as of December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter M. Weil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gary I. (&#147;Sims&#148;) Schneiderman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter E. Holmberg
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President &#151; Green Grass
Sales and Merchandising</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Greg W. Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President &#151; Corporate Controller
and
Principal Accounting Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Former Officers as of December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Randall L. Herrel, Sr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive Officer
and
Chairman of the Board</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Winston E. Hickman
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief
Financial Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter S. Case
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Chief
Financial
Officer and Treasurer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Current Officers as of December&nbsp;31, 2006:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Peter M. Weil,<BR>
Chief Executive Officer and Director</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Weil </B>previously served as a full-time consultant and member of the Company&#146;s Office of the
Chairman (an interim executive body utilized until a new CEO was identified) from September&nbsp;12,
2006 until October&nbsp;30, 2006 when he was appointed as Chief Executive Officer. Mr.&nbsp;Weil was
appointed to the Company&#146;s Board of Directors on May&nbsp;8, 2006 and continues to serve as a member of
the Board. Mr.&nbsp;Weil is currently an inactive Partner of Lighthouse Retail Group LLC, a consulting
firm specializing in improving operating and positioning strategies for retailers. From 1996 to
2004, Mr.&nbsp;Weil served as Senior Vice President/Director of Management Horizons (formerly,
PricewaterhouseCoopers &#151; retail consulting group). His consulting clients have included Hewlett
Packard, Disney, Brooks Brothers, Nordstrom, Family Dollar and Loblaws. Mr.&nbsp;Weil previously held
Senior Vice President positions with Macy&#146;s, Marshalls and J Baker/Morse Shoe in merchandising and
supply chain management. Mr.&nbsp;Weil holds an M.B.A. from the Harvard Business School and a B.A. from
the University of Michigan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Gary I. (&#147;Sims&#148;) Schneiderman<BR>
President</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Schneiderman </B>was appointed President of the Company effective September&nbsp;12, 2006. Mr.&nbsp;Sims
joined the Company in September&nbsp;2001 and served as Vice President of Sales for Ashworth and
Callaway Golf apparel Retail Sales until January&nbsp;2004, when he was promoted to Senior Vice
President of Sales and became responsible for Callaway Golf apparel Green Grass Sales. In
September&nbsp;2005, Mr.&nbsp;Schneiderman was promoted to Executive Vice President of Sales, Marketing and
Customer Service. Prior to joining the Company, Mr.&nbsp;Sims served in a number of capacities at Tommy
Hilfiger USA, including National Sales Manager for men&#146;s sportswear. He served as a Regional Sales
Manager for Pincus Brothers Maxwell Tailored Clothing from 1985 to 1990.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Peter E. Holmberg<BR>
Executive Vice President &#151; Green Grass Sales and Merchandising</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Holmberg </B>was appointed Executive Vice President &#151; Green Grass Sales and Merchandising on
October&nbsp;25, 2006. Mr.&nbsp;Holmberg joined the Company in July&nbsp;1998 and served as the Director of
Corporate Sales until December&nbsp;1999. He served as Vice President of Corporate Sales from December
1999 to August&nbsp;2001 when he was promoted to Senior Vice President of Sales and had the added
responsibility of Ashworth Green Grass Sales. Mr.&nbsp;Holmberg then served as the Senior Vice
President of Merchandising and Design from May&nbsp;2005 until September&nbsp;2005 when he was promoted to
Executive Vice President of Merchandising, Design and Production. Prior to joining the Company,
Mr.&nbsp;Holmberg served as National Corporate Sales Manager for Cutter &#038; Buck, Inc. from 1995 to 1998
and as Regional Manager and Buyer for Patrick James, Inc. from 1992 to 1995. Mr.&nbsp;Holmberg was the
proprietor of The Country Gentleman, an upscale retail store in Bellevue, Washington, from 1975 to
1992.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Greg W. Slack<BR>
Vice President &#151; Finance, Corporate Controller and Principal Accounting Officer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Slack </B>was appointed Principal Accounting Officer on October&nbsp;25, 2006. Mr.&nbsp;Slack joined the
Company as Director of Internal Audit in October&nbsp;2005, was promoted to Corporate Controller in
February&nbsp;2006 and appointed Vice President of Finance in July&nbsp;2006. From September&nbsp;2004 until
October&nbsp;2005 Mr.&nbsp;Slack worked on the Company&#146;s Sarbanes-Oxley project as an independent consultant.
Mr.&nbsp;Slack was with JMC Management, Inc. from December&nbsp;2001 through August&nbsp;2004 where he served as
the Chief Financial Officer from January&nbsp;2003 to August&nbsp;2004 and as the Controller from December
2001 to January&nbsp;2003. Prior to that Mr.&nbsp;Slack held various accounting related positions at Bay
Logics, Inc. and PricewaterhouseCoopers LLP. He holds a Certified Public Accountant license from
the state of California and a B.S. degree in Accountancy from San Diego State University.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><U><B>Former Officers as of December&nbsp;31, 2006:</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Randall L. Herrel, Sr.<BR>
President and Chief Executive Officer and Chairman of the Board</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Herrel </B>joined the Company in December&nbsp;1996 when he was appointed Director, President and Chief
Executive Officer and resigned from his positions with the Company effective October&nbsp;17, 2006. Mr.
Herrel served as the Company&#146;s Chairman from April&nbsp;2001 until September&nbsp;2006. From 1994 to 1996,
Mr.&nbsp;Herrel served as President and Chief Operating Officer of Quiksilver, Inc., a young men&#146;s and
women&#146;s apparel company. Mr.&nbsp;Herrel joined Quiksilver in 1989 and also served at various times as
Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Winston E. Hickman<BR>
Executive Vice President and Chief Financial Officer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Hickman </B>joined the Company on February&nbsp;23, 2006 and resigned from his position with the Company
effective November&nbsp;17, 2006. Mr.&nbsp;Hickman most recently served as Executive Vice President and
Chief Financial Officer of REMEC, Inc., a NASDAQ-listed designer and manufacturer of advanced
wireless subsystems used in commercial and defense communications applications. Mr.&nbsp;Hickman joined
REMEC in 2003 from privately-held Paradigm Wireless System, Inc. where, beginning in 2000, he was
an investor, Chief Financial Officer and a member of the board of directors. Mr.&nbsp;Hickman has also
previously served as board member, Chief Financial Officer, and financial advisor to a number of
public and private companies. Mr.&nbsp;Hickman served as Chief Financial Officer of Pacific Scientific
Company, a NYSE-listed company with sales in excess of $300&nbsp;million. Prior to Pacific Scientific,
he held senior financial positions at Rockwell International, Allied-Signal, and Vans, Inc. He
currently serves as a member of the board of directors of SRS Labs, Inc., a NASDAQ-listed company,
where he is Chairman of the Audit Committee. Mr.&nbsp;Hickman holds an M.B.A. from the University of
Southern California and a B.A. from California State University, Long Beach.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Peter S. Case<BR>
Executive Vice President, Chief Financial Officer and Treasurer</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Mr.&nbsp;Case </B>served as the Executive Vice President, Chief Financial Officer and Treasurer of the
Company from September&nbsp;16, 2005 until February&nbsp;1, 2006 when he resigned from his position with the
Company. Mr.&nbsp;Case had been the interim Chief Financial Officer and Treasurer of the Company from
July&nbsp;29, 2005 until September&nbsp;16, 2005. Mr.&nbsp;Case was a California licensed CPA and held several
increasingly responsible finance and operations positions within Ashworth since joining the Company
as Director of Finance on June&nbsp;30, 2000. Prior to joining Ashworth, Mr.&nbsp;Case held various
accounting related positions at Guess?, Inc., Occidental Petroleum Corporation and Deloitte &#038;
Touche LLP.
</DIV>

<!-- link2 "Item&nbsp;1A. RISK FACTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1A. RISK FACTORS.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company&#146;s business is subject to certain risks that could affect the value of the Company&#146;s
common stock. These risks include, but are not limited to, the following:</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to Our Business</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>If our embroidery and distribution center fails to operate as anticipated, the Company could incur
additional expense.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s results of operations would continue to be adversely affected if the Company&#146;s
embroidery and distribution center (the &#147;EDC&#148;) does not operate as anticipated or functionality
problems are encountered.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Any such operational problems may cause the Company to incur additional
expense, experience delays in customer shipments, or require the Company to lease additional
distribution space. In addition, the Company&#146;s results of operations could be negatively impacted
if future sales volume growth does not reach expected levels and the facility&#146;s additional
distribution capacity is not fully utilized, or if the Company does not achieve projected cost
savings from the distribution facilities as soon as, or in the amounts, anticipated.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>System
Failure may adversely affect the Company&#146;s financial results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2005, the Company signed purchase contracts for a new Enterprise Resource Planning
(&#147;ERP&#148;) system to be installed over the next two fiscal years. The Company has recently completed
the design phase of this project in its U.K. subsidiary and expects to implement the system there
during the second half of fiscal
2007. The Company may experience difficulties in implementing the new ERP system and other related
systems that could disrupt its ability to timely and accurately process and report key components
of the results of its consolidated operations, its financial position and cash flows. Any
disruptions or difficulties that may occur in connection with implementing the new ERP system or
any future systems could also adversely affect the Company&#146;s ability to complete the evaluation of
its internal control over financial reporting and attestation activities pursuant to Section&nbsp;404 of
the Sarbanes-Oxley Act of 2002. System failure or malfunctioning may result in disruption of
operations and the inability to process transactions and could adversely affect the Company&#146;s
financial results.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>If we are unable to implement a successful transition in executive leadership and recruit and
retain key personnel necessary to operate our business, our ability to successfully develop and
market our products may be harmed.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Over the last 18&nbsp;months, the Company has experienced a high level of turnover in its executive
leadership along with other organizational changes that include the resignations of the Company&#146;s
chairman and chief executive officer, the chief operating officer and three chief financial
officers, and the appointments of a new chairman, chief executive officer, president and executive
vice president of green grass sales and merchandising who have been in their respective position
for less than six months. The Company is currently in process of searching for a new chief
financial officer. The new executive management team may experience difficulty transitioning into
their new positions and effectively managing the Company&#146;s business processes which may have a
negative impact on the Company&#146;s results of operations and financial position. The loss of any of
the Company&#146;s executive officers or management or the inability to attract or retain qualified
personnel could delay the development and introduction of new products, harm the Company&#146;s ability
to sell its products, damage the image of the Company&#146;s brands and/or prevent the Company from
executing its business strategy.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to determine adequate inventory levels may result in inventory write-downs that could harm
our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company maintains high levels of inventory to support its Authentics program as well as the
Callaway Golf apparel basics. Additional products, greater sales volume, and customer trends
toward increased &#147;at-once&#148; ordering may require increased inventory. Disposal of excess prior
season inventory is an ongoing part of the Company&#146;s business, and write-downs of inventories have
materially impaired the Company&#146;s financial position in the past and may do so again in the future.
Particular inventories may be subject to multiple write-downs if the Company&#146;s initial reserve
estimates for inventory obsolescence or lack of sell-through prove to be too low. These risks
increase as inventory increases.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to meet certain performance requirements could cause the Company to lose its exclusive
licensing agreement with Callaway Golf.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is party to a multi-year licensing agreement to design, source and sell Callaway Golf
apparel primarily in the United States, Europe and Canada. The agreement provides for, among other
matters, minimum annual royalty payments and other sales and marketing commitments regardless of
the Company&#146;s
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">actual
sales of Callaway - branded products. In addition, the Company must meet
certain performance requirements for calendar years 2008 and 2009 in order to have the option to
extend the licensing agreement for an additional five-year term after December&nbsp;31, 2010. If the
Company fails to meet these requirements, future agreements with Callaway Golf apparel may be
discontinued and the Company's revenues would materially decline.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our products face intense competition</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The market for golf apparel and sportswear is extremely competitive. The Company has several
strong competitors, including Nike and Adidas, that have greater financial resources and larger
market share and presence outside of the Company&#146;s core green grass market. Price competition or
industry consolidation could weaken the Company&#146;s competitive position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Changes in the retail industry could cause a decrease in the number of retail stores in which our
products are carried.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In recent years, the retail industry has experienced consolidation and other ownership changes. In
the future, retailers in the United States and in foreign markets may undergo changes that could
decrease the number of stores that carry our products or increase the ownership concentration
within the department store retail industry, including: consolidating their operations; undergoing
restructurings or reorganizations; or realigning their affiliations. The Company&#146;s business could
be materially affected by these changes in the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Sales of our product is dependent on the economy, popularity of golf, and weather conditions.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Demand for the Company&#146;s products may decrease significantly if the economy weakens, if the
popularity of golf decreases, if consolidation of golf properties continues, or if unusual weather
conditions or other factors cause a reduction in rounds played.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Development of fashions or styles not well received could negatively impact our revenues and net
profits.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Like other apparel manufacturers, the Company must correctly anticipate and help direct fashion
trends within its industry. The Company&#146;s results of operations and financial position would
suffer if the Company develops fashions or styles that are not well received in any season. In the
past, the Company has developed fashions and styles that were not well received by consumers,
resulting in slower than anticipated sell-through of the Company&#146;s products which required
significant markdown allowances that materially impaired the Company&#146;s financial position and
adversely affected the results of operations. The Company may experience similar circumstances in
the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Poor sell-through of the Company&#146;s products could cause reduced revenues and net profit</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is increasingly selling its products to customers in the department store retail
channel. If the department stores do not sell-through the Company&#146;s products in a timely manner,
they often request markdown allowances from the Company or delay future purchases of the Company&#146;s
products which could cause the Company to lose sales or receive lower margins. The Company&#146;s
products have experienced less than anticipated sell-through in the past and may do so again in the
future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our international sourcing involves inherent risks which could result in harm to our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company does not own or operate any manufacturing facilities and depends exclusively on
independent third parties for the manufacture of all our products. Our products are manufactured to
our specifications primarily by international manufacturers in Asian countries. Our largest single
apparel and manufacturer operates in Thailand and Hong Kong and accounted for approximately 21%
of our total production during fiscal 2006. Our largest single
headwear manufacturer is located
in China and accounted for approximately 50% of our total production during fiscal 2006. The
inability of a manufacturer to ship orders of our products
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">in a timely manner or to meet our
quality standards could cause us to miss the delivery date requirements of our customers for those
items, which could result in cancellation of orders, refusal to accept deliveries or a substantial
reduction in purchase prices, any of which could have a material adverse effect on our financial
condition and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Contractors may be unable to deliver the Company&#146;s products if necessary raw materials are not
available.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s domestic and foreign suppliers rely on readily available supplies of raw materials at
reasonable prices. If these raw materials are in short supply or are only available at inflated
prices, the contractors may be unable to deliver the Company&#146;s products in sufficient quantities or
at expected prices and the Company could lose sales and have lower gross profit margins.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Dealing with companies violating labor laws could disrupt our shipments and damage our reputation.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company seeks to require our licensees and independent manufacturers to operate in compliance
with applicable laws and regulations. While our internal and vendor operating guidelines promote
ethical business practices and our staff periodically visits and monitors the operations of our
independent manufacturers, we do not control these manufacturers or their labor practices. The
violation of labor or other laws by an independent manufacturer used by the Company or one of our
licensees, or the divergence of an independent manufacturer&#146;s or licensee&#146;s labor practices from
those generally accepted as ethical in the United States, could interrupt, or otherwise disrupt the
shipment of finished products to us or damage our reputation. Any of these, in turn, could have a
material adverse effect on our financial condition and results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Non-compliance with the Fair Labor Association could cause lost sales in the collegiate market.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company participates in the Fair Labor Association (FLA). The FLA is an organization of
industry, non-government organizations, colleges and universities dedicated to improving working
conditions worldwide. Participation in the FLA requires the Company to comply with the FLA
Workplace Code of Conduct. If the Company fails to comply with the FLA Workplace Code of Conduct,
it could lose its FLA accreditation. Loss of this accreditation could result in lost sales
opportunities in the collegiate market and other markets concerned with fair labor practices.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to meet The Customs-Trade Partnership Against Terrorism criteria could cause lengthy delays
in pass-through of the Company&#146;s products</B>.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company participates in The Customs-Trade Partnership Against Terrorism (C-TPAT). This is a
voluntary program designed to improve international supply chain security for businesses, with
respect to terrorism, through cooperative relationships between businesses and governments. The
benefits of participation in the program include a reduced number of U.S. Customs and Border
Protection (CBP)&nbsp;inspections, priority processing for CBP inspections and assignment of a C-TPAT
specialist who will help enhance the Company&#146;s supply chain security. In order to participate, the
Company must be certified by meeting certain security criteria. If at any time the Company fails
to meet the required criteria, it will be suspended or removed from the program until the
deficiencies are corrected. Suspension from the program could expose the Company to lengthy delays
in the pass-through of its product with CBP which could result in lost sales opportunities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Currency exchange rate fluctuations could result in higher costs and decreased margins.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Fluctuations in foreign currency exchange rates could affect the Company&#146;s ability to sell its
products in foreign markets and the value in U.S. dollars of revenues received in foreign
currencies. The Company&#146;s revenues from its international segment may also be adversely affected
by taxation and laws or policies of the foreign countries in which the Company has operations, as
well as laws and policies of the United States affecting foreign trade, investment and taxation.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company&#146;s international operations involve inherent risk which could result in harm to our
business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As a result of its international business, the Company is exposed to increased risks inherent in
conducting business outside of the United States. In addition to foreign currency risks and
increased difficulty in protecting the Company&#146;s intellectual property rights and trade secrets,
these risks include (i)&nbsp;unexpected government action or changes in legal or regulatory
requirements, (ii)&nbsp;social, economic or political instability, (iii)&nbsp;the effects of any
anti-American sentiments on the Company&#146;s brands or sales of the Company&#146;s products, (iv)&nbsp;increased
difficulty in controlling and monitoring foreign operations from the United States, including
increased difficulty in identifying and recruiting qualified personnel for its foreign operations,
and (v)&nbsp;increased exposure to interruptions in air carrier or shipping services which could
significantly adversely affect
the Company&#146;s ability to obtain timely delivery of products from international suppliers or to
timely deliver its products to international customers. Although the Company believes the benefits
of conducting business internationally outweigh these risks, any significant adverse change in
circumstances or conditions could have a significant adverse effect upon the Company&#146;s operations
and its financial performance and condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company may be adversely affected by the financial health of our customers.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">If economic conditions deteriorate, the ability of the Company&#146;s customers to pay current
obligations may be adversely impacted and the Company may experience an increase in delinquent and
uncollectible accounts.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company is subject to periodic litigation which could result in unexpected expense of time and
resources.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is from time to time party to claims and litigation proceedings. See &#147;Legal
Proceedings,&#148; below. Such matters are subject to many uncertainties and the Company cannot predict
with assurances the outcomes and ultimate financial impacts of them. There can be no guarantees
that actions that have been or may be brought against the Company in the future will be resolved in
the Company&#146;s favor or that insurance carried by the Company will be available or paid to cover any
litigation exposure. Any losses resulting from settlements or adverse judgments arising out of
these claims could materially and adversely affect the Company&#146;s financial position and results of
operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>A material failure of internal control over financial reporting could materially impact the
Company&#146;s financial results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In designing and evaluating its internal control over financial reporting, management recognizes
that any internal control or procedure, no matter how well designed and operated, can provide only
reasonable assurance of achieving desired control objectives, and management is required to apply
its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management believes that the Company&#146;s internal control over financial reporting currently provides
reasonable assurance of achieving their control objectives. However, no system of internal
controls can be designed to provide absolute assurance of effectiveness. See &#147;Item&nbsp;9A. Controls and
Procedures&#148; below. A material failure of internal control over financial reporting could materially
impact the Company&#146;s reported financial results and the market price of its stock could
significantly decline. Additionally, adverse publicity related to a material failure of internal
control over financial reporting could have a negative impact on the Company&#146;s reputation and
business.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to adequately protect our intellectual property rights could adversely affect our business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s success depends to a significant degree upon its ability to protect and preserve its
intellectual property, including copyrights, trademarks, patents, service marks, trade secrets and
similar intellectual property. The Company relies on the intellectual property, patent, trademark
and copyright laws of the
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">United States and other countries to protect its proprietary rights.
However, the Company may be unable to prevent third parties from using its intellectual property
without its authorization, particularly in those countries where the laws do not protect its
proprietary rights as fully as in the United States. The use of the Company&#146;s intellectual
property or similar intellectual property by others could reduce or eliminate any competitive
advantage the Company has developed, causing it to lose sales or otherwise harm its business. If
it became necessary for the Company to resort to litigation to protect these rights, any
proceedings could be burdensome and costly and the Company may not prevail.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Failure to retain and continue to obtain high quality endorsers of our products could harm our
business.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">One of the key elements of the Company&#146;s marketing strategy has been to obtain endorsements from
professional golfers and celebrities, which contributes to the authenticity and image of our
brands. Management believes that this strategy has been an effective means of gaining brand
exposure worldwide and
creating broad appeal for our products. There can be no assurance that the Company will be able to
maintain its existing relationships with these individuals in the future or that it will be able to
attract new athletes and celebrities to endorse its products.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our business is affected by seasonality and consumer discretionary spending, which could result in
fluctuations in out operating results.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The apparel industry has historically been subject to substantial cyclical variations. As domestic
and international economic conditions change, trends in discretionary consumer spending become
unpredictable and could be subject to reductions due to uncertainties about the future. When
consumers reduce discretionary spending, purchases of specialty apparel may decline. A general
reduction in consumer discretionary spending due to a recession in the domestic and/or
international economies or uncertainties regarding future economic prospects could have a material
adverse effect on the Company&#146;s results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our Company borrows on a line of credit that is subject to variable rates of interest, which could
negatively impact out net profitability.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Borrowings against the line of credit under the Company&#146;s loan agreement are at variable rates of
interest and expose the Company to interest rate risk. If interest rates increase, the Company&#146;s
debt service obligations on the variable rate indebtedness would increase even though the amount
borrowed remained the same, and its net income and cash flows would decrease. The Company&#146;s line
of credit agreement contains certain financial covenants based on the Company&#146;s performance. If
the Company&#146;s financial performance results in any of these covenants being violated, the lenders
may choose to require repayment of the outstanding borrowings sooner than currently required by the
agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">E<B>volving regulation of corporate governance and public disclosure may result in additional expenses
and continuing uncertainty.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Changing laws, regulations and standards relating to corporate governance and public disclosure,
including the Sarbanes-Oxley Act of 2002, recent SEC regulations and NASDAQ Global Market
(&#147;NASDAQ&#148;) rules and regulations, are creating significant expenses and uncertainty for companies
such as ours. These recent or changed laws, regulations and standards are subject to varying
interpretations, in many cases due to their lack of specificity, and as a result, their application
in practice may evolve over time as new guidance is provided by regulatory and governing bodies.
This could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. The Company is committed
to maintaining high standards of corporate governance and public disclosure. As a result,
management intends to invest resources to comply with evolving laws, regulations and standards, and
this investment may result in increased general and administrative expenses and a diversion of management
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">and Board of Directors time and attention from revenue-generating activities and
operational oversight to compliance activities. If the Company&#146;s efforts to comply with new or
changed laws, regulations and standards differ from the activities intended by regulatory or
governing bodies, regulatory authorities or others may initiate legal proceedings against the
Company and the Company may be adversely impacted.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Future changes in financial accounting standards or practices or existing taxation rules or
practices may affect the Company&#146;s reported results of operations.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A change in accounting standards or practices or a change in existing taxation rules or practices
can have a significant effect on the Company&#146;s reported results and may even affect its reporting
of transactions completed before the change is effective. New accounting pronouncements and
taxation rules and varying interpretations of accounting pronouncements and taxation practices have
occurred and may occur in the future. Changes to existing rules or the questioning of current
practices may adversely affect the Company&#146;s reported financial results or the way it conducts its
business. For example, changes have been approved by the Financial Accounting Standards Board, or
FASB, that require that the Company record compensation expense in its
statements of operations for equity compensation instruments, including employee and director stock
options, using the fair value method. Although there was no change in the Company&#146;s total cash
flows, the reported financial results beginning in the first quarter of 2006 were negatively
impacted by this accounting change. Other potential changes in existing taxation rules related to
stock options and other forms of equity compensation could also have a significant negative effect
on the Company&#146;s reported results.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to Our Common Stock</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our
Company may be forced to expend substantial time and other resources
to oppose shareholder
nominees for our Board of Directors or other proposals that we
believe are not  in the best interest of our Company.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">During 2006, the Company entered into a settlement agreement with a stockholder group led by
Knightspoint Partners II, L.P. (collectively, the &#147;Knightspoint Group&#148;). As part of the settlement,
the Company established a special committee of five directors to oversee the exploration of a range
of strategic alternatives to enhance shareholder value, appointed two of Knightspoint Group&#146;s
proposed candidates to the Board of Directors and agreed to add a third independent director, to be
mutually agreed upon by Knightspoint Group and the Company, as soon as practicable. Should a
shareholder or group of shareholders submit nominees for our Board of Directors or other proposals
that we believe are not in the best interests of the Company or its stockholders, management would
be forced to expend substantial time and energy which may divert management&#146;s attention from the
operations of the Company, as well as incur significant additional costs, including fees for the
retention of legal and financial advisors, that may negatively impact the Company&#146;s operating
results and financial condition.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Our stock price has been volatile, and an investment in our stock could suffer a significant
decline in value.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The market price of the Company&#146;s common stock has been volatile and has fluctuated substantially
in the past. For example, between October&nbsp;31, 2005 and October&nbsp;31, 2006, the closing price of the
Company&#146;s common stock, as reported on NASDAQ, has ranged from a low of $6.36 to a high of $10.25.
The Company expects its common stock to continue to be subject to such fluctuations in price in
response to various factors, many of which are beyond our control, including:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">changes in the level of competition, such as would occur if one of the
Company&#146;s larger and better financed competitors introduced better designed or lower
priced products to compete with the Company&#146;s product lines;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">changes in economic conditions in the Company&#146;s domestic and international
markets, such as economic downturns, reduced consumer demand, inflation and currency
fluctuations;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">changes in sales levels, since a significant portion of the Company&#146;s costs
are fixed costs with the result that relatively higher sales could likely increase
profitability but relatively lower sales would not reduce costs by the same proportion,
and hence could cause operating losses;</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">lower than expected consumer demand, whether as a result poorly received
product lines or otherwise;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">the Company&#146;s failure to achieve, or changes in, financial estimates by
securities analysts and comments or opinions about the Company by securities analysts or
major stockholders;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">additions or departures of our key personnel;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">sales of the Company&#146;s common stock and limited daily trading volume; and</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">economic and other external factors, disasters or crises.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In the past, following periods of volatility in the market price of a company&#146;s securities,
securities class action litigation has often been instituted. A securities class action suit
against the Company could result in substantial costs, potential liabilities and the diversion of
management&#146;s attention and resources.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Future sales by existing stockholders could depress the market price of the Company&#146;s common stock.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Sales of the Company&#146;s common stock in the public market, or the perception that such sales could
occur, could negatively impact the market price of its common stock. As of October&nbsp;31, 2006:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">the Company had approximately 14.5&nbsp;million shares of its common stock issued
in registered offerings and freely tradable in the public markets;</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">the Company had approximately 0.8&nbsp;million shares of its common stock issuable
upon exercise of outstanding stock options under its equity incentive plan at a weighted
average exercise price of $8.12, for stock options; and</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="font-family: Wingdings">&#250;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">the Company had in effect registration statements under the Securities Act of
1933 registering approximately 1.9&nbsp;million shares of common stock reserved under its
equity incentive plan.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company is unable to estimate the number of shares of its common stock that may actually be
resold in the public market since this will depend on the market price for its common stock, the
individual circumstances of the sellers and other factors. The Company also has a number of
institutional stockholders that own significant blocks of its common stock. If one or more of
these stockholders were to sell large portions of their holdings in a relatively short time, for
liquidity or other reasons, the prevailing market price of the Company&#146;s common stock could be
negatively affected.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Anti-takeover devices may prevent a sale, or changes in the management, of the Company.</B>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has in place several anti-takeover devices, including a stockholder rights plan that
may have the effect of delaying or preventing a sale, or changes in the management, of the Company.
For example, the Company&#146;s bylaws require stockholders to give written notice of any proposal or
director nomination to the Company within a specified period of time prior to any stockholder
meeting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>The Company does not pay dividends and this may negatively affect the price of its stock.</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company has not paid dividends on its common stock and does not anticipate paying dividends on
its common stock in the foreseeable future. The future price of the Company&#146;s common stock may be
adversely impacted because it has not paid and does not anticipate paying dividends.
</DIV>

<!-- link2 "Item&nbsp;1B. UNRESOLVED STAFF COMMENTS" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1B. UNRESOLVED STAFF COMMENTS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<!-- link2 "Item&nbsp;2. PROPERTIES" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. PROPERTIES.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company owns an embroidery and distribution center (the &#147;EDC&#148;) and an adjacent undeveloped
seven acres of land, located in Oceanside, California. The EDC consists of approximately 203,000
square feet of useable office and warehouse space used by the Company to warehouse, embroider,
finish, package and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">distribute apparel and related accessories. The EDC was financed with an $11.7
million secured loan agreement with a remaining principal balance of $11.2&nbsp;million as of October
31, 2006, that carries a fixed interest rate of 5% amortized over 30&nbsp;years, due and payable on May
1, 2014. The Company leases its principal executive offices, which are located in Carlsbad,
California.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and its subsidiaries currently have the following material leases for
administrative and distribution facilities:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Lease</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Min./Current</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Square</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Rent</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Base Rent</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Footage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Per Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Per Month</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>($)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="5" align="left"><B>Administrative and Distribution Centers:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Carlsbad, CA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/31/10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,024</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Essex, England</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/31/13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,719</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Phenix City, AL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/06/12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,333</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and its subsidiaries also lease a total of approximately 53,000 square feet of
retail space for its 18 retail stores. The leases expire through August&nbsp;2016 and require total
current base rent per month of approximately $145,000 and total maximum base rent per month of
approximately $179,000. The Company also pays percentage rent based on revenues that exceed
certain breakpoints for all of the retail store leases. In addition, the Company leases a showroom
in New York at a fixed annual rent of $95,000 paid in monthly installments of $7,910. The lease on
the showroom expires in April&nbsp;2007. All of the leases require the Company to pay its pro rata share
of taxes, insurance and maintenance expenses. The Company, guarantees at least some portion of
several leases held by Ashworth subsidiaries.
</DIV>
<!-- link2 "Item&nbsp;3. LEGAL PROCEEDINGS" -->
<DIV align="left"><A NAME="005"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. LEGAL PROCEEDINGS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is party to claims and litigation proceedings arising in the normal course of
business. Although the legal responsibility and financial impact with respect to such claims and
litigation cannot currently be ascertained, the Company does not believe that these matters will
result in payment by the Company of monetary damages, net of any applicable insurance proceeds,
that, in the aggregate, would be material in relation to the consolidated financial position or
results of operations of the Company.
</DIV>
<!-- link2 "Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No matter was submitted to a vote of the Company&#146;s security holders during the fourth quarter
of the fiscal year covered by this report, either by proxy solicitation or otherwise.
</DIV>
<!-- link1 "PART II" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<!-- link2 "Item&nbsp;5. MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES" -->
<DIV align="left"><A NAME="008"></A></DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>Item&nbsp;5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.</B></DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Market Information</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s common stock is traded on the NASDAQ Global Market under the symbol &#147;ASHW.&#148; The
following table sets forth the high and low sale prices on the NASDAQ Global Market for the
quarters indicated.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Fiscal 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended January&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">9.03</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">7.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended April&nbsp;30, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended July&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended October&nbsp;31, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.24</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Fiscal 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended January&nbsp;31, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">11.35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8.16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended April&nbsp;30, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended July&nbsp;31, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.32</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.97</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Quarter ended October&nbsp;31, 2005
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.37</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.95</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Holders</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has only one class of common stock. As of December&nbsp;29, 2006, there were 461
stockholders of record and approximately 3,400 beneficial owners of the Company&#146;s common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dividends have ever been declared with respect to the Company&#146;s common stock. In the past,
the Board of Directors has chosen to reinvest profits in the Company rather than declare a
dividend. The Company does not currently intend to pay cash dividends for the foreseeable future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Recent Sales of Unregistered Securities</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">There were no stock repurchases made during the quarter ended October&nbsp;31, 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See &#147;Item&nbsp;12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters&#148; below.
</DIV>

<!-- link2 "Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA" -->
<DIV align="left"><A NAME="009"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. SELECTED CONSOLIDATED FINANCIAL DATA.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statements of operations data set forth below with respect to the fiscal years ended
October&nbsp;31, 2006, 2005 and 2004 and the balance sheet data as of October&nbsp;31, 2006 and 2005 are
derived from, and should be read in conjunction with, the audited Consolidated Financial Statements
and the Notes thereto
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">included elsewhere in this annual report on Form 10-K. The statement of
operations data set forth below with respect to the fiscal years ended October&nbsp;31, 2003 and 2002
and the balance sheet data as of October&nbsp;31, 2004, 2003 and 2002 are derived from audited financial
statements not included in this annual report on Form&nbsp;10-K. No dividends have been paid for any of
the periods presented.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>Years Ended October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004 (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19">(In thousands, except for per share amounts)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statements of Operations Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">204,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">173,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">129,286</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(727</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,509</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average basic shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average diluted shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,487</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>As of October 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19">(In thousands)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">71,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63,165</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,714</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt (less current portion)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,585</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">On July&nbsp;6, 2004 the Company acquired Gekko Brands, LLC (Gekko). The financial information above includes the results of
operations for Gekko from July&nbsp;7, 2004 (approximately four months for fiscal year 2004) and 12&nbsp;months for fiscal years 2005
and 2006.</DIV></TD>
</TR>

</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The diluted net loss per share for the year ended October&nbsp;31, 2005 was calculated using the
basic weighted average shares outstanding as the effect of stock options would be anti-dilutive
due to the Company&#146;s loss position in that period.
</DIV>

<!-- link2 "Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="010"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>RESULTS OF OPERATIONS</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company operates in an industry that is highly competitive and must accurately anticipate
fashion trends and consumer demand for its products. There are many factors that could cause
actual results to differ materially from the projected results contained in certain forward-looking
statements in this annual report on Form 10-K. For additional information, see &#147;Cautionary
Statements&#148; and &#147;Item&nbsp;1A. Risk Factors&#148; in Part&nbsp;I .
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC&#146;s Financial Reporting Release No.&nbsp;60, &#147;Cautionary Advice Regarding Disclosure About
Critical Accounting Policies&#148; (&#147;FRR 60&#148;), encourages companies to provide additional disclosure and
commentary on those accounting policies considered to be critical. The Company has identified the
following critical accounting policies that affect its significant judgments and estimates used in
the preparation of its consolidated financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue Recognition. </I>Based on its terms of F.O.B. shipping point, where risk of loss and
title transfer to the buyer at the time of shipment, the Company recognizes revenue at the time
products are shipped or, for
Company stores, at the point of sale. The Company records sales in accordance with SEC Staff
Accounting Bulletin No.&nbsp;104, <I>Revenue Recognition</I>. Under these guidelines, revenue is recognized
when all of the following exist: persuasive evidence of a sale arrangement exists, delivery of the
product has occurred, the price is fixed or determinable, and payment is reasonably assured. The
Company also includes payments from its customers for shipping and handling in its net revenues
line item in accordance with Emerging Issues Task Force (&#147;EITF&#148;) 00-10, <I>Accounting of Shipping and
Handling Fees and Costs</I>. Provisions are made for estimated sales returns and other allowances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sales Returns, Markdowns and Other Allowances. </I>Management must make estimates of potential
future product returns and other allowances related to current period product revenues. Management
analyzes historical returns, current economic trends, changes in customer demand, and sell-through
of our products when evaluating the adequacy of the sales returns and other allowances.
Significant management judgments and estimates must be made and used in connection with
establishing the sales returns and other allowances in any accounting period. Material differences
may result with respect to the amount and timing of our revenues for any period if management makes
different judgments or utilizes different estimates. The reserves for sales returns, markdowns and
other allowances amounted to $4.0&nbsp;million at October&nbsp;31, 2006 compared to $4.1&nbsp;million at October
31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Allowance for Doubtful Accounts. </I>Management must also make estimates of the collectability of
accounts receivable. The Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments, which results in bad debt
expense. Management determines the adequacy of this allowance by analyzing current economic
conditions, historical bad debts and continually evaluating individual customer receivables while
considering the customer&#146;s financial condition. The Company has credit insurance to cover many of
its major accounts. Our trade accounts receivable balance was $34.0 million, net of allowances for
doubtful accounts of $1.1&nbsp;million, at October&nbsp;31, 2006 as compared to the balance of $37.3&nbsp;million,
net of allowances for doubtful accounts of $1.2&nbsp;million, at October&nbsp;31, 2005. Allowances for
doubtful accounts as a percentage of trade accounts receivable was 3.1% at October&nbsp;31, 2006 and
2005, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Inventory. </I>The Company writes down its inventory by amounts equal to the difference between
the cost of inventory and the estimated net realizable value based on assumptions about the age of
the inventory, future demand, and market conditions. This process provides for a new basis for the
inventory until it is sold. If actual market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. Our inventory balance was $45.0
million, net of inventory write-downs of $3.5&nbsp;million, at October&nbsp;31, 2006 as compared to an
inventory balance of $46.1&nbsp;million, net of inventory write-downs of $3.8&nbsp;million, at October&nbsp;31,
2005. Inventory write-downs as a percentage of inventories was 7.1% at October&nbsp;31, 2006 compared
to 7.7% at October&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deferred Taxes. </I>SFAS No.&nbsp;109, <I>Accounting for Income Taxes</I>, establishes financial accounting
and reporting standards for the effect of income taxes. The objectives of accounting for income
taxes are to recognize the amount of taxes payable or refundable for the current year and deferred
tax liabilities and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">assets for the future tax consequences of events that have been recognized in
an entity&#146;s financial statements or tax returns. Judgment is required in assessing the future tax
consequences of events that have been recognized in our financial statements or tax returns.
Variations in the actual outcome of these future tax consequences could materially impact our
financial position, results of operations, or cash flows. Accruals for tax contingencies are
provided for in accordance with the requirements of SFAS No.&nbsp;5.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Share-based compensation. </I>The Company accounts for stock-based compensation in accordance
with SFAS No.&nbsp;123(R), <I>Share-Based Payment</I>. Under the fair value recognition provisions of this
statement, share-based compensation cost is measured at the grant date based on the value of the
award and is recognized as expense over the vesting period. Determining the fair value of
share-based awards at the grant date requires judgment. In addition, judgment is also required in
estimating the amount of share-based awards that are expected to be forfeited. If actual results
differ significantly from these estimates, stock-based compensation expense and our results of
operations could be materially impacted.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At October&nbsp;31, 2006 and 2005, the Company did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, the
Company does not engage in trading activities involving non-exchange traded contracts that rely on
estimation techniques to calculate fair value. As such, the Company is not exposed to any
financing, liquidity, market or credit risk that could arise if the Company had engaged in such
relationships.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Overview</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company earns revenues and income and generates cash through the design, marketing and
distribution of quality men&#146;s and women&#146;s sports apparel, headwear and accessories under the
Ashworth, Callaway Golf apparel, Kudzu, and The Game brands. The Company&#146;s products are sold in
the United States, Europe, Canada and various other international markets to selected golf pro
shops, resorts, off-course specialty shops, upscale department stores, retail outlet stores,
colleges and universities, entertainment complexes, sporting goods dealers that serve the high
school and college markets, NASCAR/racing markets, outdoor sports distribution channels, and to top
specialty-advertising firms for the corporate market. All of the Company&#146;s apparel production in
fiscal 2006 was through &#147;full package&#148; purchases of ready-made goods with nearly all of the apparel
and all of the headwear being manufactured in Asian countries. The Company embroiders a majority
of these garments with custom golf course, tournament, collegiate and corporate logos for its
customers.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2006, the Company entered into a settlement agreement with a stockholder group led by
Knightspoint Partners II, L.P. (collectively, the &#147;Knightspoint Group&#148;). As part of the settlement
agreement, two of Knightspoint Group&#146;s proposed candidates, David M. Meyer and Peter M. Weil, were
appointed to the Board of Directors effective May&nbsp;8, 2006. In addition to the appointment of
Messrs Meyer and Weil, a third independent director, to be mutually agreed upon by Knightspoint
Group and the Company, is to be added to the Board as soon as practicable. Messrs Meyer and Weil
were both elected to the Board at the July&nbsp;17, 2006 annual meeting of stockholders.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2005, the Company&#146;s Board of Directors, in consultation with its independent
financial advisor, Houlihan Lokey Howard &#038; Zukin, undertook an extensive review and evaluation of a
range of strategic alternatives, including the possible sale of the Company, to enhance value for
all stockholders. At the present time, the Board has determined that the interests of the Company&#146;s
stockholders will be best served by focusing principally on improving the Company&#146;s operations and
financial performance.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s EDC
opened on November&nbsp;1, 2004. The EDC is equipped with state of the art
automated systems designed to reduce the standard labor cost of an
embroidered unit and provide the
Company what it believed to be a competitive advantage in the markets in which we compete while
also providing us with sufficient embroidery capacity to accommodate
anticipated future growth. Its operation in the first three quarters of
fiscal 2005 was not as efficient as originally planned primarily due to issues caused by the
programming requirements necessary to have the many varied automated systems work together.
Management believes these
issues were largely resolved in the fourth quarter of fiscal 2005 enabling management to
realize per unit labor cost savings during fiscal 2006 as planned standards were attained. Although
the Company has reached its planned labor standard, the EDC is
operating substantially below its designed production capacity and
burdening income from operations with significant unabsorbed fixed
and indirect costs.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the fourth quarter and 12&nbsp;months of fiscal 2006, revenues in the Company&#146;s green grass
distribution channel decreased 35.3% and 18.4%, respectively, as compared to the same period of
fiscal 2005, primarily due to the Company&#146;s decision to reduce the amount of off-priced sales,
increased competitive pressure and an overall continued softness in the golf market. This reduction
in sales volume in the golf channel in the fourth quarter and the
12&nbsp;months of fiscal 2006 had further negative impact on gross margin resulting from the under-utilization of the EDC&#146;s embroidery
capacity&#151;specifically, the fixed and indirect costs associated with embroidery that were recognized
in the period. Based on the Company&#146;s anticipated sales volume for the first half of fiscal 2007,
the Company believes that the under-utilization of the EDC will continue to negatively affect gross
margin. The Company is currently evaluating various options, including, among others: utilizing the
facility on a more limited one shift embroidery basis through the use of supply chain planning to
enable off-shore embroidery; developing a joint venture to better utilize available embroidery
capacity; as well as selling the EDC and utilizing external distribution providers and contract
embroiderers. The Company is in the initial stages of evaluating all available options and noted
that there is no guarantee that any agreement will be reached as a result of this process.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Innovation</I>. The Company continues to be a market leader in offering high quality
apparel for on course performance and off course lifestyle apparel for the golf consumer. This
combination of technical innovation and luxury fabrications allows the Company to continue to serve
a large segment of the marketplace.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Ashworth brand offers the latest innovations in luxurious cotton performance with its
updated EZ-TECH<SUP style="font-size: 85%; vertical-align: text-top">TM</SUP> Collection of products that now include moisture wicking properties
in addition to easy care performance that resists wrinkles, shrinkage, pilling and fading.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, the Company completed its largest offering of the stand-alone AWS (Ashworth Weather
Systems) performance line. We believe the AWS collection strongly places the Ashworth brand in the
growing performance apparel segment of the marketplace.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006 Ashworth introduced the Exclusive Silver Label Collection. Silver Label product is
constructed with the highest quality fabrications and is only available at the finest Golf Clubs
and Resorts around the world.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These latest product innovations are distributed in all sales channels as well as being
represented on the PGA Tour by Team Ashworth Tour Professionals, including Fred Couples and Chris
DiMarco.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Callaway Golf Apparel brand represents all aspects of Callaway Golf under the Collection,
Sport, X Series and Women&#146;s labels. As leaders in quality, innovation and performance, the Callaway
Golf X Series line offers products for any golf course condition. The Dry Sport, Wind Sport, Warm
Sport and Rain Sport products are represented in the X Series lines under the Callaway Performance
Center Collection.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes the Ashworth and Callaway Golf Apparel brands complement each other and
allow the Company to offer a broad representation of products for today&#146;s golfer.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Technology. </I>In December&nbsp;2005, the Company signed purchase contracts for a new Enterprise
Resource Planning (&#147;ERP&#148;) system. The current computer system was initially installed in 1993 and
lacks the sophistication required to efficiently operate a multi-currency, multi-subsidiary
business. The new ERP system is expected to provide management with timely, consolidated
information to gain better visibility into our business drivers. The time required to complete the
initial design phase of the project exceeded the Company&#146;s and the systems consultant&#146;s original
estimate, pushing the first phase implementation of the system in the United Kingdom to May&nbsp;2007.
Management believes the second phase of implementation at the Company&#146;s corporate headquarters will
be delayed until the second half of fiscal 2008 or the beginning of fiscal 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Fiscal 2006 Compared To Fiscal 2005</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues were $209.6&nbsp;million for fiscal 2006, an increase of 2.3% from net
revenues of $204.8&nbsp;million in fiscal 2005. The increase was primarily due to increased net sales
in the Gekko Brands, LLC (&#147;Gekko&#148;) and Ashworth UK, Ltd, subsidiaries and continued growth in the
Company&#146;s retail, corporate and Company-owned outlet store distribution channels, partially offset
by a decline in net revenues from the Company&#146;s golf-related distribution channel and the other
international segment.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the domestic segment (excluding Gekko) decreased 2.8% to $129.4&nbsp;million in
fiscal 2006 from $133.2&nbsp;million in fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues from the Company&#146;s retail distribution channel increased $7.2&nbsp;million or 46.4% to
$22.7&nbsp;million from $15.5&nbsp;million in fiscal 2005, primarily driven by the Company&#146;s enhanced
merchandising strategy focused on classic key item products with a lower percentage of fashion
products. This change in product mix improved full priced sell-through of Spring/Summer product and
the Company effectively delivered Fall/Holiday products later in the season to maximize product
turn and profitability that resulted in lower experienced and projected requests from major
customers for margin assistance as compared to fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues from the domestic green grass and off-course specialty distribution channel
decreased $15.9&nbsp;million or 18.4% to $70.3&nbsp;million for
fiscal 2006 from $86.2&nbsp;million in fiscal 2005,
primarily due to the Company&#146;s decision to reduce the amount of off-price sales, increased
competitive pressure and a continued softness in the golf market. Despite the softness in demand,
the Company has seen growth in both of its Ashworth AWS and Callaway X series technical performance
product offerings. To ensure the future success of our brands in our core business channel, we have
undertaken a number of initiatives to enhance our leadership position in the coming year. These
include: the construction of two new exhibit booths for both Ashworth and Callaway Golf apparel to
debut at the January&nbsp;2007 PGA Show; broadening our support and presence at the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">shop level with a
new in-store visual initiative program designed to provide state of the art in-store enhancements
to the majority of our premiere partners over the course of the next two years; and a repositioning
of our green grass sales management team to provide more attention and service to the channel.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in the Company&#146;s domestic corporate distribution channel increased $2.0&nbsp;million
or 8.5% to $25.8&nbsp;million in fiscal 2006 from $23.8&nbsp;million
in fiscal 2005. Growth in the corporate
distribution channel is attributable to certain sales promotions and the addition of
technical performance product offerings.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues in the Company&#146;s domestic outlet store distribution channel increased $2.8
million or 36.7% to $10.5&nbsp;million in fiscal 2006 from $7.7&nbsp;million in fiscal 2005, primarily due to
the opening of four new outlet locations during the second half of the year and the full year
effect of four outlets opened during fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for Gekko increased $4.3&nbsp;million or 11.4% to $41.8&nbsp;million in fiscal 2006 as
compared to $37.5&nbsp;million in the prior fiscal year, primarily due to increased sales of apparel
into the collegiate/bookstore channel and the addition of a multi-year exclusive on-site
merchandiser license with the Kentucky Derby that began in 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for Ashworth U.K., Ltd. increased $4.6&nbsp;million or 19.5% to $28.0&nbsp;million in
fiscal 2006 as compared to $23.4&nbsp;million in fiscal 2005, primarily due to a year-over-year increase
in both the Ashworth and Callaway Golf apparel brands in the golf, resort and corporate
distribution channels including an increase in net revenues associated with licensed product sales
contributed by the 2006 Ryder Cup championships event played in September&nbsp;2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues for the other international segment decreased $0.2&nbsp;million or 1.9% to $10.5
million as compared to $10.7&nbsp;million in fiscal 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated gross profit margin for fiscal 2006 increased to 40.9% as compared to 37.6%
in fiscal 2005. The increase was primarily due to a decrease in granted markdown allowances in the
Company&#146;s domestic retail distribution channel driven by the Company&#146;s focus on classic key item products with a lower percentage of fashion product. This
strategy improved full priced sell-through, reduced levels of domestic inventory and realized
direct labor efficiencies at the Company&#146;s EDC. These improvements in gross margin were partly
offset by lower than forecasted full priced sales in the Company&#146;s green grass distribution channel
that directly contributed to the under-utilization of the EDC&#146;s embroidery capacity.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative (&#147;SG&#038;A&#148;) expenses increased 8.0% to $81.5&nbsp;million in
fiscal 2006 compared to $75.4&nbsp;million in fiscal 2005. As a percentage of net revenues, SG&#038;A
expenses increased to 38.9% of net revenues in fiscal 2006 as compared to 36.8% in fiscal 2005.
Primary drivers of the higher SG&#038;A expense included the net addition of four new Company stores and
the full year effect of the four new outlets added during fiscal
2005, expenses associated with the previously-announced resignation
of the Company&#146;s former Chairman and CEO and other
organizational charges, consulting and legal fees
associated with the 2006 Annual Meeting of Stockholders and the strategic alternatives process, and
an increase in licensed/royalty products
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net other expenses decreased $0.2&nbsp;million to $2.6&nbsp;million in fiscal 2006 as compared to $2.8
million in fiscal 2005, primarily due to a net foreign currency transaction gain in fiscal 2006
compared to a net loss in the prior year, offset partly by an increase in interest expense due to
higher average borrowings on the revolving credit facility and incrementally higher interest rates
throughout fiscal 2006.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax (benefit)&nbsp;rate applicable to the Company for fiscal 2006 increased to
45.7% compared to the (43.6%) effective income tax (benefit)&nbsp;rate for fiscal 2005. The increase in
the effective income tax (benefit)&nbsp;rate for fiscal 2006 compared to fiscal 2005 results from an increase in non-deductible permanent tax differences due
principally to the accounting for incentive stock options under SFAS 123R.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2006, the Company recorded net income of $1.0&nbsp;million or $0.07 per basic and
diluted
share, as compared to a net loss of ($0.7) million or ($0.05) per basic and diluted share in
the prior year. The increase in net income in fiscal 2006 was primarily attributable to the higher
gross profit margins as outlined above.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Fiscal 2005 Compared To Fiscal 2004</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated net revenues were $204.8&nbsp;million in fiscal 2005, an increase of 18.3% from net
revenues of $173.1&nbsp;million in fiscal 2004. The increase was primarily due to the addition of
Gekko&#146;s net revenues of $37.5&nbsp;million for the entire year in fiscal 2005 compared to $13.6&nbsp;million
in net revenues from Gekko for approximately four months in fiscal 2004. Excluding Gekko, domestic
net revenues for fiscal 2005 increased 1.8% to $133.2&nbsp;million from $130.8&nbsp;million in fiscal 2004,
primarily due to our corporate and Company stores channels which increased by 8.6% and 46.7%,
respectively. The increase in corporate sales was driven by increased promotional spending while
the increase in the Company stores sales was due to the net addition of four new stores. These
increases were partially offset by an 11.8% decrease in our retail channel, primarily attributed
to significantly higher markdown allowances both granted and provided for to compensate our vendors
for products that had less than expected sell-through. Net revenues, from the Company&#146;s Ashworth,
U.K. Ltd subsidiary increased by $4.3&nbsp;million or 22.5% to $23.4&nbsp;million in fiscal 2005 from $19.1
million in fiscal 2004. Sales growth in the U.K. was consistent in most channels and geographic
areas for both the Ashworth and Callaway Golf apparel brands, as well as most product categories.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The gross profit margin for fiscal 2005 decreased to 37.6% as compared to 41.7% in fiscal
2004. The decrease was primarily due to increased markdown allowances from lower than anticipated
full priced sell-through of both apparel lines, an increase in inventory reserves due to a
significant build up of excess domestic inventory in the third quarter of fiscal 2005 and the
subsequent required discounting of product in the fourth quarter of fiscal 2005 to clear the excess
inventory, and inefficiencies experienced at the Company&#146;s U.S. EDC.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SG&#038;A expenses increased 39.5% to $75.4&nbsp;million in
fiscal 2005 compared to $54.1&nbsp;million in fiscal 2004. As a percentage of net revenues, SG&#038;A
expenses increased to 36.8% of net revenues in fiscal 2005 as compared to 32.2% in fiscal 2004.
Primary drivers of the higher SG&#038;A expenses included 12 versus four months of expenses from Gekko,
the net addition of four new Company stores, higher sales promotions expense, EDC direct labor
expense overruns, and various professional fees associated with the documentation of various
internal controls to comply with Sarbanes-Oxley Section&nbsp;404 requirements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net other expenses were $2.8&nbsp;million in fiscal 2005 compared to $4.4&nbsp;million in fiscal 2004.
The balance in fiscal year 2004 included a $3&nbsp;million charge related to the settlement of the class
action lawsuit recorded in the third quarter of fiscal 2004 with the remaining balance primarily
comprised of interest expense. The balance in fiscal year 2005 is primarily due to a full year&#146;s
interest of $0.6&nbsp;million related to the $11.7&nbsp;million, 10-year, fixed rate term loan for the
purchase of the new distribution center building in March&nbsp;2004, as well as the full year&#146;s interest
of $0.9&nbsp;million related to the $20&nbsp;million five-year, fixed rate term loan for financing of the
Gekko acquisition that was consummated in July&nbsp;2004.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effective income tax (benefit)&nbsp;rate applicable to the Company for fiscal 2005 increased to
(43.6%) compared to the 40% effective income tax rate for fiscal 2004. The increase in the
effective income tax (benefit)&nbsp;rate for fiscal 2005 compared to the effective income tax rate for
fiscal 2004 resulted from a change in the mix of taxable income and loss between entities
consolidated for tax filing in the United States and Ashworth, U.K., Ltd and the tax rate
differential between the tax jurisdictions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2005, the Company recorded a loss of ($0.7) million or ($0.05) per diluted
share, as compared to a net income of $8.2&nbsp;million or $0.60 per diluted share in the prior year.
The decrease in net income for fiscal 2005 was primarily attributable to the lower gross profit
margins and higher SG&#038;A expenses as outlined above.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Capital Resources and Liquidity</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s primary sources of liquidity are expected to be cash flows from operations, the
working capital line of credit with its bank and other financial alternatives such as leasing. The
Company requires cash for capital expenditures and other requirements associated with its domestic
and international production, distribution and sales activities, as well as for general working
capital purposes. The Company&#146;s need for working capital is seasonal with the greatest
requirements existing from approximately December through the end of July each year. The Company
typically builds up its inventory early during this period to provide product for shipment for the
Spring/Summer selling season.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities of $15.0&nbsp;million for the fiscal year ended October
31, 2006 was primarily attributable to earnings, adjusted for depreciation and amortization,
decrease in net trade accounts receivable, inventory, other current assets and tax receivable which
in total amounted to $14.5&nbsp;million, offset in part by decrease in accounts payable and other
long-term liabilities.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
cash used in investing activities of $7.8&nbsp;million for the fiscal year ended October&nbsp;31,
2006 was primarily attributable to purchases of furniture, fixtures and leasehold improvements
related to the opening of four new outlet stores during the year as well as the purchase and
implementation costs associated with the Company&#146;s new ERP system.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities of $5.0&nbsp;million for the fiscal year ended October&nbsp;31,
2006 was due primarily to principal payments of notes payable, long-term debt and the revolving
credit facility which totaled $7.8&nbsp;million, offset in part by proceeds from the exercising of stock
options and a net foreign currency exchange gain.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;6, 2004, the Company entered into a loan agreement with Union Bank of California,
N.A., as the administrative agent, and two other lenders (collectively referred to as the &#147;Bank&#148;).
The loan agreement was comprised of a $20.0&nbsp;million term loan and a $35.0&nbsp;million revolving credit
facility, is due to expire on July&nbsp;6, 2009 and is collateralized by substantially all of the assets
of the Company, other than the Company&#146;s EDC in Oceanside, California.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under this loan agreement, interest on the $20.0&nbsp;million term loan was fixed at 5.4% for the
term of the loan. Interest on the revolving credit facility is charged at the Bank&#146;s reference
rate. At October&nbsp;31, 2006, the bank&#146;s reference rate was 8.5%. The loan agreement also provides
for optional interest rates based on London inter-bank offered rates (&#147;LIBOR&#148;) for periods of at
least 30&nbsp;days in increments of $0.5&nbsp;million.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;3, 2004, the Company entered into the First Amendment to the loan agreement to
amend Section&nbsp;6.12(a), Tangible Net Worth. The loan agreement, as amended, contains certain
financial covenants that include a requirement that the Company maintain (1)&nbsp;a minimum tangible net
worth of $74.0&nbsp;million plus the net proceeds from any equity securities issued (including net
proceeds from stock option exercises) after the date of the loan agreement for the period ending
October&nbsp;31, 2004, and a minimum tangible net worth of $74.0&nbsp;million plus 90% of net income after
taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January&nbsp;31, 2005, plus the net proceeds from any
equity securities issued (including net proceeds from stock option exercises) after the date of the
loan agreement, (2)&nbsp;a minimum EBITDA determined on a rolling four quarter basis ranging from $16.5
million at July&nbsp;6, 2004 and increasing over time to $27.0&nbsp;million at October&nbsp;31, 2008 and
thereafter, (3)&nbsp;a minimum ratio of cash and accounts receivable to current liabilities of 0.75:1.00
for fiscal quarters ending January&nbsp;31 and April&nbsp;30 and 1.00:1.00 for fiscal quarters ending July&nbsp;31
and October&nbsp;31, and (4)&nbsp;a minimum fixed charge coverage ratio of 1.10:1.00 at July&nbsp;31, 2004 and
1.25:1.00 thereafter. The loan agreement limits annual lease and equipment rental expense
associated with the Company&#146;s distribution center in Oceanside, California as well as annual
capital expenditures in any single fiscal year on a consolidated basis in excess of certain amounts
allowed for the acquisition of real property and equipment in connection with the distribution
center. The loan agreement had an additional requirement where, for any period of 30 consecutive
days, the total indebtedness under the revolving credit facility may not be more than $15.0
million. The loan agreement also limits the annual aggregate amount the Company may spend to
acquire shares of its common stock.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;27, 2005 and September&nbsp;8, 2005, the Company entered into the Second and Third
Amendments, respectively, to the loan agreement. The Second Amendment to the loan agreement amended
Section&nbsp;6.12(e), Capital Expenditures, to increase the spending limitation to acquire fixed assets
from not more than $5&nbsp;million in any single fiscal year on a consolidated basis to a total of $20.0
million for fiscal years 2004 and 2005 together, for the acquisition of real property and equipment
in connection with the distribution center located in Oceanside, California. The Third Amendment
waived non-compliance with various financial covenants of the loan agreement, solely for the period
ended July&nbsp;31, 2005.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;26, 2006, the Company entered into the Fourth Amendment to the loan to amend
several sections of the credit facility and to waive non-compliance with financial covenants at
October&nbsp;31, 2005. Under the terms of the revised loan agreement, the revolving loan commitment was
adjusted to $42.5&nbsp;million and the term loan commitment was adjusted to $6.8&nbsp;million. Based on the
revised loan agreement, the term loan commenced January&nbsp;31, 2006 and has equal monthly
installments of principal in the amount of $125,000, plus all accrued interest for each monthly
installment period, with a balloon installment for the entire unpaid principal balance and all
accrued and unpaid interest due in full on the maturity date of July&nbsp;6, 2009.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with the signing of the Fourth Amendment, the Company borrowed $7.5&nbsp;million against
the revolving credit facility and paid down the term loan by the same amount. The Company also paid
bank fees totaling $125,000 related to the Fourth Amendment. The balance sheet at October&nbsp;31, 2005
and the cash flow statement for the year ended October&nbsp;31, 2005 in the accompanying financial
statements have been adjusted to record these transactions as if the Fourth Amendment had been in
effect as of October&nbsp;31, 2005. See &#147;Note 5 &#151; Line of Credit,&#148; in the accompanying notes to
Consolidated Financial Statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The loan agreement was also modified, pursuant to the Fourth Amendment, to reflect the change
to a borrowing base commitment. The primary requirements under the borrowing base denote that the
Bank shall not be obligated to advance funds under the revolving credit facility at any time that
Company&#146;s aggregate obligations to the Bank exceed the sum of (a)&nbsp;seventy five percent (75%) of the
Company&#146;s eligible accounts
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">receivables, and (b)&nbsp;fifty-five percent (55%) of the Company&#146;s eligible
inventory. If at any time the Company&#146;s obligations to the Bank under the referenced facilities
exceed the permitted sum, the Company shall immediately repay to the Bank such excess. The
applicable rate schedule was adjusted to reflect an additional pricing tier based on the average
daily funded debt to EBITDA ratio. The Fourth Amendment also amended certain financial covenants
and maintenance requirements under the loan agreement as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Minimum tangible net worth equal to the sum of $75.0&nbsp;million; plus the sum of
90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January&nbsp;31, 2006; plus, the net proceeds from any equity
securities issued after the date of the Fourth Amendment, including net proceeds from
stock options exercised;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1.00, except for
the fiscal quarters ending January&nbsp;31 and April&nbsp;30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1.00;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital expenditures are not to exceed $7.0&nbsp;million in any fiscal year;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1.00; provided that, for the fiscal quarter
ending January&nbsp;31, 2006, the fixed charge coverage ratio shall not be less than 0.80
to 1.00; and for purposes of determining the fixed charge coverage ratio only, the
Company&#146;s inventory write-down of $4.4&nbsp;million shall be added back to EBITDA for the
Company&#146;s fiscal quarter ending April&nbsp;30, 2006 and the Company&#146;s maintenance capital
expenditures shall be $4.0&nbsp;million through the fiscal year ending October&nbsp;31, 2006;
and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15.0&nbsp;million
was eliminated.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company was not in compliance with the required quick asset ratio in the first quarter of
fiscal year 2006. The Company obtained a written waiver of the quick assets to current liabilities
covenant requirement from its lenders for the period ended January&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is in compliance with all of the loan agreement financial
covenants as of October&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The revolving credit facility under the loan agreement may also be used to finance commercial
letters of credit and standby letters of credit. Commercial letters of credit outstanding under
the loan agreement totaled $2.9&nbsp;million at October&nbsp;31, 2006 as compared to $4.3&nbsp;million outstanding
at October&nbsp;31, 2005. The Company had $14.0&nbsp;million outstanding against the revolving credit
facility under this loan agreement at October&nbsp;31, 2006, compared to $19.5&nbsp;million outstanding at
October&nbsp;31, 2005. The decrease in borrowings under the revolving credit facility is primarily due
to increased cash flow from operations. Net income increased by $1.7&nbsp;million to $1.0&nbsp;million in
fiscal 2006 from a $0.7&nbsp;million loss in 2005, accounts receivable were collected more timely, and
there was a reduction in inventory purchases. The Company had $5.6&nbsp;million outstanding on the term
loan at October&nbsp;31, 2006 versus $7.5&nbsp;million as of October&nbsp;31, 2005. The decrease in borrowings on
the term loan is due to regular monthly payments of principal. At October&nbsp;31, 2006, $20.6&nbsp;million
was available for borrowings against the revolving credit facility under this loan agreement,
subject to borrowing base limitations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the year ended October&nbsp;31, 2006, the Company entered into a capital lease agreement for
the purchase of a software license. The lease began in April&nbsp;2006 for a 36&nbsp;month term, ending in
March&nbsp;2009 for $556,000. The lease agreement calls for 12 quarterly payments of $53,450 with an
imputed interest rate of 9.08%. The software license asset is expected to be placed into service
in May&nbsp;2007. It will be depreciated over a three year life using the straight-line method. During
the fiscal years ended October&nbsp;31, 2005 and 2004, the Company did not acquire any equipment under
capital leases.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2006 the Company entered into a lease agreement with Key Equipment Finance, a
Division of Key Corporate Capital, Inc. (&#147;KEF&#148; or the &#147;Lessor&#148;) for an IBM server with all
applicable software, accessories and upgrade package with total payments of $595,166. The terms of
the lease agreement call for 42&nbsp;monthly payments of $14,171, in advance. The last payment will be
made on September&nbsp;30, 2009.
The total interest paid over the life of the agreement will be $8,394. The equipment has a
five year life. The Company has determined that the lease meets the criteria for treatment as an
operating lease.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;30, 2004, the Company agreed to a schedule with KEF thereby completing the Master
Equipment Lease Agreement (the &#147;Lease&#148;), dated as of June&nbsp;23, 2003, and previously entered into by
Ashworth and KEF. Under the terms of the Lease, the Company is leasing the equipment for its
distribution center in Oceanside, California. The aggregate cost of the equipment was approximately
$10.4&nbsp;million. The initial term of the Lease is for ninety-one (91)&nbsp;months beginning on September
1, 2004 and the monthly rent payment is $128,800. At the end of the initial term, the Company will
have the option to (1)&nbsp;purchase all, but not less than all, equipment on the initial term
expiration date at a price equal to the greater of (a)&nbsp;the then fair market sale value thereof, or
(b)&nbsp;12% of the total cost of the equipment (plus, in each case, applicable sales taxes), (2)&nbsp;renew
the Lease on a month to month basis at the same rent payable at the expiration of the initial lease
term; (3)&nbsp;renew the Lease for a minimum period of not less than 12 consecutive months at the then
current fair market rental value; or (4)&nbsp;return such equipment to the Lessor pursuant to, and in
the condition required by, the Lease.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During fiscal 2006, common stock and capital in excess of par value increased by $3.5&nbsp;million
of which $2.5&nbsp;million is due to the issuance of 446,000 shares of common stock on the exercise of
options, $0.5&nbsp;million due to the related tax benefit and $0.5&nbsp;million due to FAS123R compensation
expense.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;25, 2002, the Company entered into an agreement to purchase the land and a
building, to be built to the Company&#146;s specifications for its distribution center, in the Ocean
Ranch Corporate Center in Oceanside, California. The building was constructed with approximately
203,000 square feet of useable office and warehouse space and is used by the Company to warehouse,
embroider, finish, package and distribute clothing products and related accessories. On April&nbsp;2,
2004, the Company completed the purchase of the new distribution center for approximately $13.7
million and entered into a secured loan agreement with a bank to finance $11.65&nbsp;million of the
purchase price. The loan is amortized over 30&nbsp;years, but is due and payable on May&nbsp;1, 2014 with a
balloon payment of $9.6&nbsp;million. To fulfill certain requirements under the mortgage loan
agreement, the Company created Ashworth EDC, LLC, a special purpose entity, to be the purchaser and
mortgagor. Ashworth EDC, LLC is a wholly owned limited liability company organized under the laws
of the state of Delaware and its results are reported in the consolidated statements included in
this annual report on Form 10-K.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on current levels of operations, the Company expects that sufficient cash flow will be
generated from operations so that, combined with other financing alternatives available, including
cash on hand, borrowings under its bank credit facility and leasing alternatives, the Company will
be able to meet all of its debt service, capital expenditure and working capital requirements for
at least the next 12&nbsp;months.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Contractual Obligations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our contractual obligations as of October&nbsp;31, 2006 (in
000&#146;s) :
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Less</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>More</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Than 1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>1-3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>3-5</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>than 5</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>years</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">4,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">1,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">1,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">1,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Line of Credit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Endorsement contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minimum licensing guarantees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,892</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Totals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">146,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">71,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,699</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Currency Fluctuations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth U.K., Ltd. is a wholly-owned subsidiary of the Company operating in England which
maintains its books of account in British pounds. Ashworth Canada and Ashworth Golf Apparel Canada
are divisions of the Company operating in Canada and maintain their books of account in Canadian
dollars. For consolidation purposes, the assets and liabilities of Ashworth U.K., Ltd., Ashworth
Canada and Ashworth Golf Apparel Canada are converted to U.S. dollars at the month-end exchange
rate and results of operations are converted using an average rate during the month. A
translation difference arises for share capital and retained earnings, which are converted at rates
other than the month-end rate, and this amount is reported in the stockholders&#146; equity section of
the balance sheets.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth U.K., Ltd. sells the Company&#146;s products to other countries in Europe, with revenues
largely denominated in the local currency. Fluctuations in the currency rates between the United
Kingdom and those other countries give rise to a loss or gain that is reported in earnings. (See
&#147;Note 1 to Consolidated Financial Statements, Foreign Currency&#148;).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ashworth Canada and Ashworth Golf Apparel Canada sell the Company&#146;s products within Canada
with the revenues denominated in Canadian dollars; ordinarily there is no transaction adjustment
for currency exchange rates for the Company for sales transactions. Ashworth U.K., Ltd., Ashworth
Canada and Ashworth Golf Apparel Canada purchase products from the Company in U.S. dollars,
therefore there are transaction adjustments for currency exchange rates for purchase transactions.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All export revenues by Ashworth, Inc. are U.S. dollar denominated and ordinarily there is no
transaction adjustment for currency exchange rates for the Company. However, with respect to
export revenues to Ashworth U.K., Ltd., Ashworth Canada and Ashworth Golf Apparel Canada, the
foreign entities are at risk on their indebtedness to Ashworth, Inc. The foreign entities maintain
their accounts with Ashworth, Inc. in British pounds or Canadian dollars, but owe Ashworth, Inc. in
U.S. dollars. At the end of every accounting period, the debt is adjusted to British pounds or
Canadian dollars by multiplying the indebtedness by the closing British pound/U.S. dollar or U.S.
dollar/Canadian dollar exchange rate to ensure that the account has sufficient British pounds or
Canadian dollars to meet its U.S. dollar obligation. This
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">re-measurement is either income or
expense in each entity&#146;s financial statements. When the financial statements of Ashworth U.K.,
Ltd., Ashworth Canada and Ashworth Golf Apparel Canada are consolidated with the financial
statements of Ashworth, Inc., the gain or loss on transactions that are of a long-term investment
nature is eliminated from the income statement and appears in the stockholders&#146; equity section of
the consolidated balance sheet under &#147;Accumulated other comprehensive income (loss).&#148;
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company purchases nearly all of its products from offshore manufacturers. All of these
purchases were denominated either in U.S. dollars, or in British pounds for Ashworth U.K., Ltd.,
and consequently there was no foreign currency exchange risk related to these transactions apart
from the foreign currency exchange risk associated from translating the financial statements of
Ashworth U.K., Ltd from the functional currency of British pounds to the reporting currency of U.S.
dollars.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Inflation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management believes that inflation has not had a material effect on our results of operations
during the three most recent fiscal years. There can be no assurance that a high rate of inflation
in the future would not have an adverse effect on the Company&#146;s results of operations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>New Accounting Standards</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2006, the FASB issued Interpretation No.&nbsp;48, <I>Accounting for Uncertainty in Income
Taxes </I>(&#147;FIN 48&#148;). FIN 48 requires the use of a two-step approach for recognizing and measuring tax
benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in
income tax positions. The Company is required to adopt FIN 48 effective November&nbsp;1, 2007. The
cumulative effect of initially adopting FIN 48 will be recorded as an adjustment to opening
retained earnings in the year of adoption and will be presented separately. Only tax positions that
meet the more than likely than not recognition threshold at the effective date may be recognized on
adoption of FIN 48. The Company is currently evaluating the impact this new standard will have on
its future results of operations and financial position.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, <I>Fair Value Measurements (&#147;SFAS 157&#148;). </I>SFAS
No.&nbsp;157 defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No.&nbsp;157
clarifies the definition of exchange price as the price between market participants in an orderly
transaction to sell an asset or transfer a liability in the market in which the reporting entity
would transact for the asset or liability, which market is the principal or most advantageous
market for the asset or liability. SFAS No.&nbsp;157 is effective for financial statements issued for
fiscal years beginning after November&nbsp;15, 2007, and interim periods within those fiscal years. The
Company is currently evaluating the impact, if any, this new standard will have on its consolidated
financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2006, the Securities and Exchange Commission (&#147;SEC&#148;) issued Staff Bulletin No.
108,
<I>Quantifying Financial Statement Misstatements </I>(&#147;SAB 108&#148;). SAB 108 provides interpretive
guidance on how registrants should quantify misstatements when evaluating the materiality of
financial statement errors. SAB 108 also provides transition accounting and disclosure guidance for
situations in which a material error existed in prior period financial statements, allowing
companies to restate prior period financial statements or recognize the cumulative effect of
initially applying SAB 108 through an adjustment to beginning retained earnings in the year of
adoption. SAB 108 is effective for financial statements issued for fiscal years beginning after
November&nbsp;15, 2006, and interim periods within those fiscal years. The Company does not expect the
adoption of SAB 108 will have a material impact on the Company&#146;s consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->
<DIV align="left"><A NAME="011"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Interest Rate Risk</B>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s debt consists of a term loan, mortgage note, notes payable, capital lease and
line of credit obligations which had a total balance of $31.8&nbsp;million at October&nbsp;31, 2006. The
debt bears interest at fixed rates ranging from 3.5% to 9.08%, which approximates fair value based
on current rates offered for debt with similar risks and maturities. The Company also had $14.0
million outstanding at October&nbsp;31, 2006 on its revolving line of credit with interest charged at
the Bank&#146;s reference rate plus a pre-defined spread based on the Company&#146;s funded debt to EBITDA
ratio (the &#147;Applicable Rate&#148;). At October&nbsp;31, 2006, the Applicable Rate was 8.5%. A hypothetical
10% increase in interest rates during the year ended October&nbsp;31, 2006 would have resulted in a
$139,000 reduction in net income.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currency Exchange Rate Risk</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s ability to sell its products in foreign markets and the U.S. dollar value of the
sales made in foreign currencies can be significantly influenced by foreign currency fluctuations.
A decrease in the value of foreign currencies relative to the U.S. dollar could result in downward
price pressure for the Company&#146;s products or losses from currency exchange rates. From time to
time the Company and its U.K. subsidiary enter into short-term foreign exchange contracts with its
bank to hedge against the impact of currency fluctuations between the U.S. dollar and the British
pound. The contracts provide that, on specified dates, the Company would sell the bank a specified
number of British pounds in exchange for a specified number of U.S. dollars. Additionally, the
Company&#146;s U.K. subsidiary from time to time enters into similar contracts with its bank to hedge
against currency fluctuations between the British pound and other European currencies. Realized
gains and losses on these contracts are recognized in the same period as the hedged transaction.
These contracts have maturity dates that do not normally exceed 12&nbsp;months. The Company had no
foreign currency related derivatives at October&nbsp;31, 2006 or 2005. The Company will continue to
assess the benefits and risks of strategies to manage the risks presented by currency exchange rate
fluctuations. There is no assurance that any strategy will be successful in avoiding losses due to
exchange rate fluctuations, or that the failure to manage currency risks effectively would not have
a material adverse effect on the Company&#146;s results of operations.
</DIV>
<!-- link2 "Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" -->
<DIV align="left"><A NAME="012"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following financial statements with respect to the Company are submitted herewith:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Reports of Independent Registered Public Accounting Firms, pages F-1 and F-2.<BR></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Balance Sheets &#151; October&nbsp;31, 2006 and 2005, pages F-3 and F-4.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Operations for the years ended October&nbsp;31, 2006, 2005 and
2004,
page F-5.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Stockholders&#146; Equity for the years ended October&nbsp;31, 2006,
2005 and 2004, page F-6.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Cash Flows for the years ended October&nbsp;31, 2006, 2005 and
2004,
pages F-7 and F-8.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Notes to Consolidated
Financial Statements, pages F-9 through F-41.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Reports of Independent
Registered Public Accounting Firms, pages F42-F43.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Supplementary Schedule, page
F-44.</DIV></TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<!-- link2 "Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE" -->
<DIV align="left"><A NAME="013"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<!-- link2 "Item&nbsp;9A. CONTROLS AND PROCEDURES" -->
<DIV align="left"><A NAME="014"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9A. CONTROLS AND PROCEDURES.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1. Evaluation of Disclosure Controls and Procedures</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We maintain disclosure controls and procedures designed to ensure that information required to be
disclosed in the reports we file pursuant to the Exchange Act are recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the Securities and
Exchange Commission, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer (&#147;CEO&#148;) and Principal
Accounting Officer (&#147;PAO&#148;) as appropriate,
to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures, no matter how well
designed and operated, can only provide a reasonable assurance of achieving the desired control
objectives, and in reaching a reasonable level of assurance, management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Management designed the disclosure controls and procedures to provide reasonable assurance of
achieving the desired control objectives.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We carried out an evaluation, under the supervision and with the participation of our management,
including our CEO and PAO, of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this Annual Report. As a result of
the material weaknesses in internal control over financial reporting discussed below, our
disclosure controls and procedures were not effective as of October&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We believe our financial statements fairly present in all material respects the financial position,
results of operations and cash flows for the interim and annual periods presented in our annual
report on Form 10-K and quarterly reports on Form 10-Q. The unqualified opinion of our independent
registered public accounting firm on our financial statements for the period ended October&nbsp;31, 2006
is included in this Form 10-K.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>2. Management&#146;s Report on Internal Control over Financial Reporting</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rules&nbsp;13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934. Internal control over financial reporting refers to the process designed by, or under the
supervision of, our CEO and PAO, 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, and includes those policies and procedures that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with the
authorization of our management and directors; and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Management has used the framework set forth in the report entitled <I>Internal Control&#151;Integrated
Framework </I>published by the Committee of Sponsoring Organizations of the Treadway Commission, known
as COSO, to evaluate the effectiveness of the Company&#146;s internal control over financial reporting
as of October&nbsp;31, 2006.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As a result of our assessment, management identified one material weakness in internal control over
financial reporting as of October&nbsp;31, 2006. A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim financial statements will not be prevented or detected.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Inadequate Internal Controls over Inventory Costing</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of October&nbsp;31, 2006, management did not maintain effective internal controls over inventory
costing. This material weakness resulted in a material adjustment to income from operations in the
fourth quarter. Certain product completion costs that are incurred immediately prior to shipment
were being improperly capitalized as part of a substantial amount of the Company&#146;s inventory. This
resulted in an adjustment to the ending inventory value. The adjustment points to a material
weakness in the design of the Company&#146;s internal controls over financial reporting.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>3. Management&#146;s Remediation Effort</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Remediation of Controls over Inventory Costing</B>

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Management performed an in-depth review of inventory costing. The analysis for inventory costing
was updated to remove the improperly applied costs and a downward adjustment of approximately $1,017,000
was made to the ending inventory and a corresponding adjustment made
to income from operations in the fourth quarter. Inventory costing will continue to be reviewed on a periodic
basis as part of the Company&#146;s internal controls.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">The Company believes that these corrective actions will remediate the material weaknesses
identified above. The Company will continue to monitor the effectiveness of these actions and will
make any other changes or
take such other actions that management deems appropriate given the circumstances.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Changes in Internal Control over Financial Reporting</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Except as noted above, there have been no significant changes in our internal controls over
financial reporting (as such term is defined in Rule&nbsp;13a-15(f) and 15d-15(f) under the Securities
Exchange Act) during the fiscal quarter ended October&nbsp;31, 2006 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Board of Directors and Stockholders<BR>
Ashworth, Inc. and Subsidiaries

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have audited management&#146;s assessment, included in the accompanying Management&#146;s Report on
Internal Control over Financial Reporting that Ashworth, Inc. and
Subsidiaries did not maintain effective
internal control over financial reporting as of October&nbsp;31, 2006, based on criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO)&nbsp;in Internal Control -
Integrated Framework. Ashworth, Inc. and Subsidiaries&#146; management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on
management&#146;s assessment and an opinion on the effectiveness of the company&#146;s internal control over
financial reporting based on our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management&#146;s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A company&#146;s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the
United States of America. A company&#146;s internal control over financial reporting includes those
policies and procedures that (1)&nbsp;pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (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 company are being made only in accordance with authorizations of management and
directors of the company; and (3)&nbsp;provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company&#146;s assets that could have
a material effect on the financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A material weakness is a control deficiency, or combination of control deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or interim financial
statements will not be prevented or detected. The following material weakness has been identified
and included in management&#146;s assessment.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">As of October&nbsp;31, 2006, the Company did not maintain effective internal controls over inventory
costing. This material weakness resulted in a material adjustment to income from operations in the
fourth quarter.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">This material weakness was considered in determining the nature, timing, and extent of audit tests
applied in our audit of the 2006 financial statements, and this report does not affect our report
on financial statements dated January&nbsp;12, 2007 on those financial statements.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, management&#146;s assessment that Ashworth, Inc. and Subsidiaries did not maintain
effective internal control over financial reporting as of October&nbsp;31, 2006, is fairly stated, in
all material respects, based on criteria established in Internal Control&#151;Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our
opinion, because of the effects of the material weaknesses described above on the achievement of
the control criteria, Ashworth, Inc. and Subsidiaries has not maintained effective internal control
over financial reporting as of October&nbsp;31, 2006, based on criteria established in Internal
Control&#151;Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We do not express an opinion or any other form of assurance on management&#146;s statements referring to
remediation or timing in management&#146;s assessment, included in the accompanying Management&#146;s Annual
Report on Internal Control over Financial Reporting appearing in Item&nbsp;9A.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements and financial statement schedule of
Ashworth, Inc. and Subsidiaries as of and for the years ended October&nbsp;31, 2006 and 2005, and our
report dated January&nbsp;12, 2007 expressed an unqualified opinion on those financial statements and
financial statement schedule.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Moss Adams LLP<BR>
Irvine, California<BR>
January&nbsp;12, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->38<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link2 "Item&nbsp;9B. OTHER INFORMATION" -->
<DIV align="left"><A NAME="015"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9B. OTHER INFORMATION.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
</DIV>
<!-- link1 "PART III" -->
<DIV align="left"><A NAME="016"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<!-- link2 "Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT" -->
<DIV align="left"><A NAME="017"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;10 will be included in either the Company&#146;s Proxy
Statement for the 2007 Annual Meeting of Stockholders under the caption &#147;Directors and Executive
Officers&#148; or a Form 10-K/A which will be filed with the Securities and Exchange Commission no later
than February&nbsp;28, 2007 and is incorporated into this Item&nbsp;10 by reference.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a Code of Business Conduct and Ethics that applies to all directors
and employees, including the Company&#146;s principal executive, financial and accounting officers. The
Code of Business Conduct and Ethics is posted on the Company website at
<U>www.ashworthinc.com</U>. The Company intends to satisfy the requirements under Item&nbsp;10 of Form
8-K regarding disclosure of amendments to, or waivers from, provisions of our Code of Business
Conduct and Ethics that apply to our directors and senior financial and executive officers by
posting such information on the Company&#146;s website.
</DIV>
<!-- link2 "Item&nbsp;11. EXECUTIVE COMPENSATION" -->
<DIV align="left"><A NAME="018"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. EXECUTIVE COMPENSATION.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;11 will be included in either the Company&#146;s Proxy
Statement for the 2007 Annual Meeting of Stockholders under the caption &#147;Executive Compensation&#148; or
a Form 10-K/A which will be filed with the Securities and Exchange Commission no later than
February&nbsp;28, 2007 and is incorporated into this Item&nbsp;11 by reference.
</DIV>
<!-- link2 "Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATERS" -->
<DIV align="left"><A NAME="019"></A></DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATERS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;12 with respect to security ownership of certain
beneficial owners and management will be included in either the Company&#146;s Proxy Statement for the
2007 Annual Meeting of Stockholders under the caption &#147;Security Ownership of Certain Beneficial
Owners and Management&#148; or a Form 10-K/A which will be filed with the Securities and Exchange
Commission no later than February&nbsp;28, 2007 and is incorporated into this Item&nbsp;12 by reference.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->39<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EQUITY COMPENSATION PLAN INFORMATION</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Securities Available for Issuance Under the Company&#146;s Equity Compensation Plans</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information with respect to the Company&#146;s equity compensation
plans as of October&nbsp;31, 2006, which plans are as follows: the Company&#146;s 2000 Equity Incentive Plan
(the &#147;2000 Plan&#148;), the Incentive Stock Option Plan (the &#147;ISO Plan&#148;), and the Nonqualified Stock
Option Plan (the &#147;NQO Plan&#148;). The ISO Plan and the NQO Plan were each terminated at the time of
adoption of the 2000 Plan in December&nbsp;1999, and no additional awards may be granted under such
terminated plans.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(c) Number of Securities</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining Available for</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(a) Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Issuance under</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities to be Issued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(b) Weighted-average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Equity Compensation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>upon Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercise Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Plans (Excluding</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities Reflected in</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Column (a))</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans approved by
security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">871,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation
plans not approved
by security holders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">871,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes 866,000 shares of common stock that may be issued upon exercise of
outstanding options under the 2000 Plan and 5,000 shares that may be issued upon exercise of
outstanding options under the terminated ISO Plan and NQO Plan.</DIV></TD>
</TR>

</TABLE>


<!-- link2 "Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->
<DIV align="left"><A NAME="020"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;13 will be included in either the Company&#146;s Proxy
Statement for the 2007 Annual Meeting of Stockholders under the caption &#147;Certain Relationships and
Related Transactions&#148; or a Form 10-K/A which will be filed with the Securities and Exchange
Commission no later than February&nbsp;28, 2007 and is incorporated into this Item&nbsp;13 by reference.
</DIV>
<!-- link2 "Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES" -->
<DIV align="left"><A NAME="021"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. PRINCIPAL ACCOUNTING FEES AND SERVICES.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this Item&nbsp;14 will be included in either the Company&#146;s Proxy
Statement for the 2007 Annual Meeting of Stockholders under the caption &#147;Independent Registered
Public Accounting Firm Fees and Services&#148; or a Form 10-K/A which will be filed with the Securities
and Exchange Commission no later than February&nbsp;28, 2007 and is incorporated into this Item&nbsp;14 by
reference.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->40<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- link1 "PART IV" -->
<DIV align="left"><A NAME="022"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART IV</B>
</DIV>

<!-- link2 "Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K" -->
<DIV align="left"><A NAME="023"></A></DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The following documents are filed as part of this report:</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial Statements</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Balance Sheets &#151; October&nbsp;31, 2006 and 2005</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Operations for the years ended October&nbsp;31, 2006, 2005 and
2004</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Consolidated Statements of Stockholders&#146; Equity for the years ended October&nbsp;31, 2006, 2005
and 2004
Consolidated Statements of Cash Flows for the years ended October&nbsp;31, 2006, 2005 and 2004
Notes to Consolidated Financial Statements &#151; October&nbsp;31, 2006, 2005 and 2004</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial Statement Schedule</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm on Supplementary Schedule
</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Report of Independent Registered Public Accounting Firm on Supplementary Schedule</DIV></TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Schedule&nbsp;II &#151; Valuation and Qualifying Accounts</DIV></TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Exhibits.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">See Item (b)&nbsp;below.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Exhibits</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Certificate of Incorporation as filed March&nbsp;19, 1987 with the Secretary of State of Delaware,
Amendment to Certificate of Incorporation as filed August&nbsp;3, 1987 and Amendment to Certificate
of Incorporation as filed April&nbsp;26, 1991 (filed as Exhibit&nbsp;3(a) to the Company&#146;s Registration
Statement dated February&nbsp;21, 1992 (File No.&nbsp;33-45078) and incorporated herein by reference)
and Amendment to Certificate of Incorporation as filed April&nbsp;6, 1995 (filed as Exhibit&nbsp;3(a) to
the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 1994 (File No.&nbsp;001-14547) and
incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Bylaws of the Company (filed as Exhibit&nbsp;3.1 to the Company&#146;s Current
Report on Form&nbsp;8-K on February&nbsp;23, 2000 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Specimen certificate for Common Stock, par value $.001 per share, of the Company (filed as
Exhibit&nbsp;4(a) to the Company&#146;s Registration Statement dated November&nbsp;4, 1987 (File No.&nbsp;33-
16714-D) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Specimen certificate for Options granted under the Amended and Restated Nonqualified Stock
Option Plan dated March&nbsp;12, 1992 (filed as Exhibit&nbsp;4(b) to the Company&#146;s Form&nbsp;10-K for the
fiscal year ended October&nbsp;31, 1993 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Specimen certificate for Options granted under the Incentive Stock Option Plan dated June&nbsp;15,
1993 (filed as Exhibit&nbsp;4(c) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31,
1993 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Rights Agreement dated as of October&nbsp;6, 1998 and amended on February&nbsp;22, 2000 by and between
Ashworth, Inc. and American Securities Transfer &#038; Trust, Inc. (filed as Exhibit&nbsp;4.1 to the
Company&#146;s Form&nbsp;8-K filed on March&nbsp;14, 2000 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(a)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Personal Services Agreement and Acknowledgement of Termination of Executive Employment
effective December&nbsp;31, 1998 by and between Ashworth, Inc. and Gerald W. Montiel (filed as
Exhibit&nbsp;10(b) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 1998 (File
No.001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(b)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amendment to Personal Services Agreement effective January&nbsp;1, 1999 by and between Ashworth,
Inc. and Gerald W. Montiel (filed as Exhibit&nbsp;10(c) to the Company&#146;s Form&nbsp;10-K for the fiscal
year ended October&nbsp;31, 1998 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(c)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Nonqualified Stock Option Plan dated November&nbsp;1, 1996 (filed as Exhibit
10(i) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
001-14547) and incorporated herein by reference).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(d)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Incentive Stock Option Plan dated November&nbsp;1, 1996 (filed as Exhibit
10(j) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October&nbsp;31, 2000 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated 2000 Equity Incentive Plan dated December&nbsp;14, 1999 adopted by the
stockholders on March&nbsp;24, 2000 (filed as Exhibit&nbsp;4.1 to the Company&#146;s Form&nbsp;S-8 filed on
December&nbsp;12, 2000 (File No.&nbsp;333-51730) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as Borrower, Union Bank of
California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July&nbsp;6, 2009 (filed as Exhibit&nbsp;10(z)(1) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Guaranty Agreement dated July&nbsp;6, 2004 between Ashworth Store I, Inc., Ashworth Store II,
Inc., Ashworth Acquisition Corp, Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Guarantors
and Union Bank of California, N.A., as Administrative Agent on behalf of Ashworth, Inc. as the
Borrower (filed as Exhibit&nbsp;10(z)(2) to the Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31,
2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Security Agreement effective as of July&nbsp;6, 2004 to the Credit Agreement dated July&nbsp;6,
2004, between Ashworth, Inc. as Pledgor, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July&nbsp;6,
2009(filed as Exhibit&nbsp;10(z)(3) to the Company&#146;s Form&nbsp;10-Q for the quarter ended July&nbsp;31,
2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Security Agreement effective as of July&nbsp;6, 2004 to the Credit Agreement dated July&nbsp;6,
2004, between Ashworth Store I, Inc., Ashworth Store II, Inc., Ashworth Acquisition Corp,
Gekko Brands, LLC, Kudzu, LLC and The Game, LLC as Pledgor, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders,
expiring July&nbsp;6, 2009 (filed as Exhibit&nbsp;10(z)(4) to the Company&#146;s Form&nbsp;10-Q for the quarter
ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->42<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Deed of Hypothec of Universality of Moveable Property effective as of July&nbsp;6, 2004 to the
Credit Agreement dated July&nbsp;6, 2004, between Ashworth, Inc. as Grantor, Union Bank of
California, N.A., as Administrative Agent and Lender, Bank of the West and Columbus Bank and
Trust as Lenders, expiring July&nbsp;6, 2009 (filed as Exhibit&nbsp;10(z)(5) to the Company&#146;s Form&nbsp;10-Q
for the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Equitable Mortgage Over Securities effective as of July&nbsp;6, 2004 to the Credit Agreement
dated July&nbsp;6, 2004, between Ashworth, Inc. as Mortgagor, Union Bank of California, N.A., as
Security Trustee and Beneficiary, Bank of the West and Columbus Bank and Trust as
Beneficiaries, expiring July&nbsp;6, 2009 (filed as Exhibit&nbsp;10(z)(6) to the Company&#146;s Form&nbsp;10-Q for
the quarter ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(e)(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">First Amendment effective as of September&nbsp;3, 2004 to the Credit Agreement dated
July&nbsp;6, 2004, between Ashworth, Inc. as Borrower, Union Bank of California, N.A., as
Administrative Agent and Lender, Bank of the West and Columbus Bank
and Trust as Lenders, expiring July&nbsp;6, 2009 (filed as Exhibit&nbsp;10(z)(7) to the Company&#146;s Form&nbsp;10-Q for the quarter
ended July&nbsp;31, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(f)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Promotion Agreement effective November&nbsp;1, 1999 by and between Ashworth, Inc. and Fred
Couples (filed as Exhibit&nbsp;10(o) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October
31, 2000 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(g)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Contract Termination Agreement effective October&nbsp;31, 2002 by and among Ashworth, Inc., James
Nantz, III and Nantz Communications, Inc. (filed as Exhibit&nbsp;10(p) to the Company&#146;s Form&nbsp;10-K
for the fiscal year ended October&nbsp;31, 2002 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(h)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Promotion Agreement effective October&nbsp;31, 2002 by and among Ashworth, Inc., James W. Nantz,
III and Nantz Enterprises, Ltd. (filed as Exhibit&nbsp;10(q) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended January&nbsp;31, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(i)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Purchase and Installation Agreement dated April&nbsp;10, 2003 between Ashworth, Inc. and Gartner
Storage &#038; Sorter Systems of Pennsylvania (filed as Exhibit&nbsp;10 (r)&nbsp;to the Company&#146;s Form&nbsp;10-Q
for the quarter ended April&nbsp;30, 2003 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(j)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Agreement for Lease dated May&nbsp;1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and
Juniper Developments Limited (filed as Exhibit&nbsp;10(s) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended April&nbsp;30, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(k)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Lease dated September&nbsp;1, 2003 by and among Ashworth, Inc., Ashworth U.K. Limited and
Juniper Developments Limited (filed as Exhibit&nbsp;10(t) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended July&nbsp;31, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(l)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Master Equipment Lease Agreement dated as of June&nbsp;23, 2003 by and between Key Equipment
Finance and Ashworth, Inc. including Amendment 01, the Assignment of Purchase Agreement and
the Certificate of Authority (filed as Exhibit&nbsp;10(u) to the Company&#146;s Form&nbsp;10-Q for the
quarter ended July&nbsp;31, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(l)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Equipment Schedule&nbsp;No.&nbsp;01 dated as of August&nbsp;30, 2004 by and between Ashworth, Inc. and
Key Equipment Finance, a Division of Key Corporate Capital, Inc.(filed as Exhibit&nbsp;99.1 to the
Company&#146;s Form&nbsp;8-K on September&nbsp;3, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(m)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">License Agreement, effective May&nbsp;14, 2001, by and between Ashworth, Inc. and Callaway Golf
Company (filed as Exhibit&nbsp;10(v) to the Company&#146;s Form&nbsp;10-K for the fiscal year ended October
31, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(n)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amendment to License Agreement, effective December&nbsp;16, 2003, by and between Ashworth, Inc.
and Callaway Golf Company (filed as Exhibit&nbsp;10(w) to the Company&#146;s Form&nbsp;10-K for the fiscal
year ended October&nbsp;31, 2003 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(o)(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Loan Agreement, effective April&nbsp;2, 2004, by and between Ashworth EDC, LLC and Bank of
America, N.A. (filed as Exhibit&nbsp;10(x)(3) to the Company&#146;s Form&nbsp;10-Q for the quarter ended
April&nbsp;30, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(o)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Promissory Note, effective April&nbsp;2, 2004, by and between Ashworth EDC, LLC and Bank of
America, N.A. (filed as Exhibit&nbsp;10(x)(4) to the Company&#146;s Form&nbsp;10-Q for the quarter ended
April&nbsp;30, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(o)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing,
effective April&nbsp;2, 2004, by and between Ashworth EDC, LLC, PRLAP, Inc. and Bank of America,
N.A. (filed as Exhibit&nbsp;10(x)(5) to the Company&#146;s Form&nbsp;10-Q for the quarter ended April&nbsp;30,
2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(o)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Environmental Indemnity Agreement, effective April&nbsp;2, 2004, by and between Ashworth EDC,
LLC, Ashworth, Inc. and Bank of America, N.A. (filed as Exhibit&nbsp;10(x)(6) to the Company&#146;s Form
10-Q for the quarter ended April&nbsp;30, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(1)&#134;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Membership Interests Purchase Agreement, dated July&nbsp;6, 2004, by and among Ashworth
Acquisition Corp. and the selling members, identified therein (filed as Exhibit&nbsp;99.1 to the
Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Ashworth Acquisition Corp. Promissory Note in favor of W. C. Bradley Co. (filed as Exhibit
99.2 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;001-14547) and incorporated herein
by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Ashworth, Inc. Guaranty of Ashworth Acquisition Corp. Promissory Note in favor of W. C.
Bradley Co. (filed as Exhibit&nbsp;99.3 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Lease Agreement, dated July&nbsp;6, 2004, by and between 16 Downing, LLC
as Lessor and Gekko Brands, LLC as Lessee (filed as Exhibit&nbsp;99.4 to the Company&#146;s Form&nbsp;8-K
July&nbsp;21, 2004 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Ashworth, Inc. Guaranty of Payments under the Amended and Restated Lease Agreement, dated
July&nbsp;6, 2004, by and between 16 Downing, LLC as Lessor and Gekko Brands, LLC as Lessee (filed
as Exhibit&nbsp;99.5 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.&nbsp;001-14547) and
incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(p)(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Form of Executive Employment Agreement by and between Gekko Brands, LLC and certain
selling members (filed as Exhibit&nbsp;99.6 to the Company&#146;s Form&nbsp;8-K on July&nbsp;21, 2004 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(q)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Form of Stock Option Agreement for issuance of stock option grants to each of the Company&#146;s
executive officers and non-employee directors on December&nbsp;21, 2004 (filed as Exhibit&nbsp;10.1 to
the Company&#146;s Form&nbsp;8-K on December&nbsp;22, 2004 (File No.&nbsp;001-14547) and incorporated herein by
reference.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(r)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Stipulation and Agreement of Settlement regarding shareholder class-action lawsuit in which
the U.S. District Court entered a Final Approval of Settlement on November&nbsp;8, 2004 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;10Q on March&nbsp;11, 2005 (File No.&nbsp;001-14547) and incorporated
herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(s)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Second Amended and Restated Executive Employment Agreement with the Company&#146;s President and
Chief Executive Officer, Randall L. Herrel, Sr., effective as of February&nbsp;28, 2006 (filed as
Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(s)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Agreement as to Ashworth, Inc. Executive Employment Agreement with Randall L. Herrel, Sr.
effective September&nbsp;12, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on September&nbsp;13,
2006 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(s)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Change In Control Agreement with the Company&#146;s President and Chief
Executive Officer, Randall L. Herrel, Sr., effective as of February&nbsp;28, 2006 (filed as Exhibit
10.2 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(t)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Employment Agreement with the Company&#146;s Executive Vice President of
Sales and Marketing, Mr.&nbsp;Gary I. &#147;Sims&#148; Schneiderman, effective as of February&nbsp;28, 2006 (filed
as Exhibit&nbsp;10.5 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(t)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Change In Control Agreement with the Company&#146;s Executive Vice
President of Sales and Marketing, , Mr.&nbsp;Gary I. &#147;Sims&#148; Schneiderman, effective as of February
28, 2006 (filed as Exhibit&nbsp;10.6 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(u)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Employment Agreement with the Company&#146;s Executive Vice President,
Green Grass Sales and Merchandising, Peter E. Holmberg, effective as of October&nbsp;25, 2006
(filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on October&nbsp;31, 2006 (File No.&nbsp;001-14547) and
incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(u)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Amended and Restated Change in Control Agreement with the Company&#146;s Executive Vice
President, Merchandising, Design and Production, Peter E. Holmberg, effective as of February
28, 2006 (filed as Exhibit&nbsp;10.4 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(v)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Fourth Amendment effective as of January&nbsp;26, 2006 to the Credit Agreement dated July&nbsp;6,
2004, between Ashworth, Inc. as Borrower, Union Bank of California, N.A., as Administrative
Agent and Lender, Bank of the West and Columbus Bank and Trust as Lenders, expiring July&nbsp;6,
2009 (filed as Exhibit&nbsp;10.5 to the Company&#146;s Form&nbsp;10-K on February&nbsp;1, 2006 (File No.
001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Employment Letter with the Company&#146;s Executive Vice President and Chief Financial Officer,
Winston E. Hickman, effective as of February&nbsp;23, 2006 (filed as Exhibit&nbsp;10.7 to the Company&#146;s
Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Change in Control Agreement with the Company&#146;s Executive Vice President and Chief
Financial Officer, Winston E. Hickman, effective as of February&nbsp;23, 2006 (filed as Exhibit
10.8 to the Company&#146;s Form&nbsp;10-K/A on February&nbsp;28, 2006 (File No.&nbsp;001-14547) and incorporated
herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(w)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Release Agreement with the Company&#146;s Executive Vice President and Chief financial
Officer, Winston E. Hickman, dated November&nbsp;16, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s
Form&nbsp;8-K on November&nbsp;11, 2006 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Personal Services Agreement effective September&nbsp;12, 2005 by and between Ashworth, Inc.
and Peter M. Weil (filed as Exhibit&nbsp;10.2 to the Company&#146;s Form&nbsp;8-K on September&nbsp;13, 2006
(File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(x)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Employment Agreement with the Company&#146;s Chief Executive Officer, Peter M. Weil,
dated November&nbsp;27, 2006 (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on November&nbsp;28, 2006
(File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(y)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Settlement Agreement, dated May&nbsp;5, 2006, by and among the Company and Knightspoint Partners
II, L.P., Knightspoint Capital Management II LLC, Knightspoint Partners LLC, Michael S.
Koeneke, David M. Meyer, Starboard Value and Opportunity Master Fund Ltd., Parche, LLC,
Admiral Advisors, LLC, Ramius Capital Group, LLC, C4S &#038; Co., LLC, Peter A. Cohen, Jeffrey M.
Solomon, Morgan B. Stark, Thomas W. Strauss, Black Sheep Partners, LLC, Brian Black, and Peter
M. Weil (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on May&nbsp;9, 2006 (File No.&nbsp;001-14547)
and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(z)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Form of Indemnification Agreement by and between the Company and its Directors, Officers and
Other Employees Designated by the Board (filed as Exhibit&nbsp;10.1 to the Company&#146;s Form&nbsp;8-K on
December&nbsp;15, 2006 (File No.&nbsp;001-14547) and incorporated herein by reference).</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Offer of Employment Agreement effective October&nbsp;10, 2005 by and between Ashworth, Inc. and
Greg. W. Slack.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Change in Control Agreement effective as of February&nbsp;9, 2006 by and between Ashworth,
Inc. and Greg W. Slack.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Promotion and Retention Bonus Agreement effective February&nbsp;10, 2006 by and between
Ashworth, Inc. and Greg. W. Slack.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Subsidiaries of the Registrant.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Independent Registered Public Accounting Firm Consent.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Independent Registered Public Accounting Firm Consent.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as Adopted Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002 by Peter M. Weil.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as Adopted Pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002 by Greg W. Slack.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as Adopted Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002 by Peter M. Weil.</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="text-align: justify">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as Adopted Pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002 by Greg W. Slack.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Management contract or compensatory plan or arrangement required to be filed as an Exhibit
pursuant to Item 15(b) of Form 10-K and applicable rules of the Securities and Exchange Commission.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Certain portions of this exhibit have been omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(c)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Financial statements required by Regulation&nbsp;S-X excluded from the annual report to
shareholders by Rule&nbsp;14a-3(b). Not applicable.</DIV></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders of<BR>
Ashworth, Inc.

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheet of Ashworth, Inc. and subsidiaries as
of October&nbsp;31, 2006 and 2005 and the related consolidated statements of operations, stockholders&#146;
equity and cash flows for each of the years then ended October&nbsp;31, 2006 and 2005. These financial
statements are the responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Ashworth, Inc. and subsidiaries as of October&nbsp;31,
2006 and 2005, and the consolidated results of its operations and its cash flows for the years
ended October&nbsp;31, 2006 and 2005, in conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of Ashworth, Inc. and its subsidiaries&#146; internal control
over financial reporting as of October&nbsp;31, 2006, based on criteria established in Internal Control
&#151; Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated January&nbsp;12, 2007, expressed an
unqualified opinion on management&#146;s
assessment and an adverse opinion on the effectiveness of internal
control over financial reporting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ Moss Adams LLP<BR>
Irvine, California<BR>
January&nbsp;12, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders of<BR>
Ashworth, Inc.:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We have
audited the accompanying consolidated statements of operations, stockholders&#146; equity, and
cash flows of Ashworth, Inc. (a Delaware corporation) and
subsidiaries (the &#147;Company&#148;) for the year ended October&nbsp;31, 2004. These consolidated financial statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the results of Ashworth Inc.&#146;s operations and cash flows for the year ended
October&nbsp;31, 2004, in conformity with U.S. generally accepted accounting principles.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">/s/ KPMG LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Diego, California<BR>
January&nbsp;27, 2005

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">October&nbsp;31, 2006 and 2005

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:60px; text-indent:-15px"><B>Assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,839,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable &#151; trade, net (Note 1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,984,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,306,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable &#151; other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,053,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,971,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,126,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax refund receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,743,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,036,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,247,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,157,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,116,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,441,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,095,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,958,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment, at cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,732,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,732,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,503,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,483,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Production and distribution equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,970,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,019,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,629,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,804,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,124,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,165,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,958,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,832,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,121,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,126,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,082,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,865,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,571,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,714,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">(Continued)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-3<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Balance Sheets

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">October&nbsp;31, 2006 and 2005

</DIV>


<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>October 31, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:75px; text-indent:-15px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Line of credit payable (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debt (Notes 5 and 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,366,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,724,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,149,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Salaries and commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,077,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,529,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,142,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,599,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,686,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, net of current portion (Notes 5 and 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,671,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,320,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,965,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,972,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.001 par value; authorized
50,000,000 shares; issued and outstanding
14,520,000 and 14,074,000 shares in 2006 and 2005,
respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,256,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,755,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,333,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,382,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,411,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,634,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,562,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,714,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-4<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Operations

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,102,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123,787,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,875,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,972,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,813,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,913,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,130,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,475,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,441,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,087,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,043,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other income (expense):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,897,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,372,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,353,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net foreign currency exchange
gain (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(222,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(228,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,269,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,585,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,760,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,371,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before provision for
income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,288,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,672,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,469,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average shares outstanding:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,401,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,728,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Consolidated Statements of Stockholders&#146; Equity

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Capital in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Excess of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Retained</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Par Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Income (Loss)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>BALANCE,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>October&nbsp;31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,267,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,230,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">47,906,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,406,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">88,555,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">439,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,557,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized losses on cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>BALANCE,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>October&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,706,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,171,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,109,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,922,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,216,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,064,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,064,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive loss:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,238,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>BALANCE,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>October&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,074,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,755,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,382,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,411,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,562,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,531,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,532,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Section&nbsp;16 - profit disgorgement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit on options exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FAS123R Compensation Expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>BALANCE,</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>October&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,256,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,333,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,030,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,634,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->F-6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Statements of Cash Flows

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,842,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,118,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,049,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">(Gain) loss on disposal of property, plant
and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,525,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in net deferred income
taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,439,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Provision for doubtful accounts, markdowns
and sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,664,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,061,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,832,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Non-cash inventory writedowns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,337,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Tax benefit from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">520,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Excess tax benefits from share-based
payment arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(533,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Stock compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">481,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,815,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,101,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,380,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">864,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,905,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in net income tax
receivable/payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,193,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,039,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,564,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,974,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(897,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (increase)&nbsp;in other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(811,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(425,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,475,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,548,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,841,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,160,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(181,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) operating
activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,953,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(883,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,168,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net purchases of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,464,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,576,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,006,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,282,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of Intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of subsidiary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,225,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(560,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,678,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,805,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,131,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40,402,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on capital lease
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(79,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(169,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Borrowings on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,650,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,055,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on line of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,150,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,400,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41,100,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank overdrafts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">715,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">366,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,650,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(376,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on notes payable and
long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,349,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,423,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,729,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,487,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,064,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,557,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restrictions on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(654,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Excess tax benefit from share-based
payment arrangements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">533,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Net cash provided by (used in) financing
activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,032,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,787,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,235,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,553,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(475,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,516,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash
equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,669,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,702,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">517,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of
year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,839,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,541,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,024,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,508,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,839,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,541,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">(Continued)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-7<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Statements of Cash Flows

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">For the Years Ended October&nbsp;31, 2006, 2005 and 2004

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of cash
flow information:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest paid, net of
capitalized interest of $0, $0
and $127,000 in 2006, 2005 and
2004, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,716,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,643,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">672,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes paid, net of refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(297,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,779,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,029,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosure of
non-cash financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayment of term loan from
borrowings against line of
credit
(Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(556,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosures of
noncash transactions:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">During the year ended October&nbsp;31,
2004, the Company purchased all
of the members&#146; interests of Gekko
Brands, LLC for $23,678,000. In
conjunction with the acquisition,
liabilities were assumed as follows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of assets acquired:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash paid for members&#146; interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,324,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Liabilities assumed, including
$1,000,000 note payable to
sellers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,678,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,646,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(1)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>The Company and Summary of Significant Accounting Policies</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Business</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Ashworth, Inc. (the &#147;Company&#148;), based in Carlsbad, California, designs, markets and
distributes quality men&#146;s and women&#146;s sports apparel, headwear and accessories under the
Ashworth<FONT style="font-family: Symbol">&#226;</FONT>, Callaway Golf apparel, Kudzu<FONT style="font-family: Symbol">&#226;</FONT>, and The Game<FONT style="font-family: Symbol">&#226;</FONT> brands. The
Company&#146;s products are sold in the United States, Europe, Canada and various other
international markets to selected golf pro shops, resorts, off-course specialty shops, upscale
department stores, retail outlet stores, colleges and universities, entertainment complexes,
sporting goods dealers that serve the high school and college markets, NASCAR/racing markets,
outdoor sports distribution channels, and to top specialty-advertising firms for the corporate
market.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf
Company to design, market and distribute complete lines of men&#146;s and women&#146;s Callaway Golf
apparel. The agreement allows Ashworth to sell Callaway Golf apparel primarily in the United
States, Europe, Canada and Australia. The initial Callaway Golf apparel products shipped in
April&nbsp;2002.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company has wholly-owned subsidiaries that currently own and operate 18 Company outlet
stores. A wholly-owned United Kingdom subsidiary distributes the Company&#146;s products in
Europe. The Company established one division in 1998 to sell and distribute its Ashworth
products in Canada and a second division in 2002 to distribute its Callaway Golf apparel in
Canada.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On July&nbsp;6, 2004, Ashworth, Inc. completed the acquisition of all of the membership interests
in Gekko Brands, LLC (the &#147;Acquisition&#148;), a leading designer, producer and distributor of
headwear and apparel under The Game and Kudzu brands, pursuant to that certain Membership
Interests Purchase Agreement entered into on July&nbsp;6, 2004, by and among Ashworth Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Ashworth, Inc., and the selling
members identified therein. Ashworth intends that the operations of this subsidiary will
continue to focus on designing, producing and distributing headwear and apparel.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company, together with its subsidiaries and divisions, had aggregate net foreign revenues
in Europe, Canada, Singapore, United Arab Emirates, Australia, Japan, Taiwan, Mexico, Hong
Kong, South Africa and other countries of approximately $38,472,000, $34,101,000 and
$28,706,000 in the years ended October&nbsp;31, 2006, 2005 and 2004, respectively. The Company&#146;s
wholly-owned United Kingdom subsidiary, Ashworth U.K., Ltd., had net revenues of $27,987,000,
$23,416,000 and $19,117,000 and operating income of $1,436,000, $1,976,000 and $2,380,000 in
the years ended October&nbsp;31, 2006, 2005 and 2004, respectively. Ashworth U.K., Ltd. had
identifiable assets of $22,517,000 and $18,999,000 as of October&nbsp;31, 2006 and 2005,
respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Principles of Consolidation</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The consolidated financial statements include the accounts of the Company and all of its
subsidiaries. All significant intercompany accounts and transactions have been eliminated in
consolidation.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Cash and Cash Equivalents</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company considers all highly liquid instruments purchased with an original maturity of
three months or less to be cash equivalents.</DIV></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /Folio -->
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Accounts Receivable</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company extends credit to customers in the normal course of business, subject to
established credit limits. Accounts receivable, net, in the consolidated balance sheets
consists of amounts due from customers net of allowances for doubtful accounts and reserves
for sales returns, markdowns and other allowances. The allowance for doubtful accounts is
determined by reviewing accounts receivable aging and evaluating individual customer
receivables, considering customers&#146; financial condition, credit history and current economic
conditions. The following table summarizes the activity in the allowance for doubtful
accounts for the years ended October&nbsp;31, 2006, 2005 and 2004:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,170,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">726,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">522,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(659,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(477,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(533,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,106,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,243,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,170,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Management analyzes historical returns, current economic trends, changes in customer demand,
and sell-through of our products when evaluating the adequacy of the reserves for sales
returns, markdowns and other allowances. See &#147;Note 1 &#151; Summary of Significant Accounting
Policies and Business &#151; Revenue Recognition,&#148; below.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Inventories</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes
materials, labor, freight-in and overhead. Inventory write-downs are permanent reductions of
cost until the inventory is sold. Below is a summary of the components of net inventories at
October&nbsp;31, 2006 and 2005:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw Materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">93,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">146,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished Goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,878,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,980,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Inventories, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,971,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46,126,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Inventories are presented net of inventory write-downs at October&nbsp;31, 2006 and 2005 of
$3,449,000 and $3,837,000, respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-10<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Other Current Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company had $654,000 and $0 in restricted cash as of October&nbsp;31, 2006 and 2005,
respectively, recorded in other current assets. The restricted cash is reserved for payment
under a rabbi trust agreement with the former CEO due to be disbursed in May&nbsp;2007.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Property, Plant and Equipment</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Property, plant and equipment are stated at cost.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Depreciation and amortization have been provided using straight-line and accelerated methods
over the following estimated useful lives:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">20 to 30 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production and distribution equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">5 to 12 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">3 to 7 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leasehold improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">Shorter of life of lease or useful life</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">All maintenance and repair costs are charged to operations as incurred. When assets are sold
or otherwise disposed of, the costs and accumulated depreciation or amortization are removed
from the accounts and any resulting gain or loss is reflected in operations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company capitalized interest of $0, $0 and $127,000 during the years ended October&nbsp;31,
2006, 2005 and 2004, respectively, related to construction in progress.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On February&nbsp;24, 2004, the Company sold land and two buildings located in Carlsbad, California
used in its distribution operation for $5,747,000 and recorded a gain on disposal of fixed
assets of $1,589,000. Net of selling costs, the Company realized cash proceeds from the sale
totaling $5,272,000. The land, buildings and other assets were reported in the Company&#146;s
domestic segment and were sold as a unit on an &#147;as is&#148; basis. As a result of the sale, the
Company paid the $2,610,000 balance due on the mortgage relating to the subject property. The
Company entered into a lease agreement to lease the facility from the new owner. The term of
the lease commenced on February&nbsp;24, 2004 and terminated on December&nbsp;31, 2004, with an option
to renew the term of the lease for a period of 60&nbsp;days. The Company did not exercise the
option to renew the lease past its expiration date of December&nbsp;31, 2004. Under the terms of
the lease agreement the Company paid monthly rent of approximately $47,000 plus taxes,
insurance and utilities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On October&nbsp;25, 2002, the Company entered into an agreement to purchase the land and a
building, to be built to the Company&#146;s specifications for its new distribution center, in the
Ocean Ranch Corporate Center in Oceanside, California. The building was constructed with
approximately 203,000 square feet of useable office and warehouse space and is now being used
by the Company to warehouse, embroider, finish, package and distribute clothing products and
related accessories. On April&nbsp;2, 2004, the Company completed the purchase of the new
distribution center in Oceanside, California for approximately $13,686,000 and entered into a
secured loan agreement with a bank to finance $11,650,000 of the purchase price. See &#147;Note 6
 &#151; Long-term Debt&#148; below.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Goodwill and Intangible Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company accounts for goodwill and other intangible assets in accordance with Statement of
Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;142
<I>&#147;Goodwill and Other Intangible Assets&#148; </I>(&#147;SFAS No.&nbsp;142&#148;),
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">which requires that goodwill and intangibles with indefinite lives no longer be
amortized, but instead be tested for impairment at least annually at the reporting unit level.
If impairment is indicated, a write-down
to fair value (normally measured by discounting estimated future cash flows) is recorded.
Intangible assets with finite lives continue to be amortized primarily on the straight-line
basis over their estimated useful lives.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Other Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company had $251,000 and $233,000 in restricted cash as of October&nbsp;31, 2006 and 2005,
respectively, recorded in other assets. The restricted cash is in an interest bearing account
on deposit with the Company&#146;s bank pursuant to the lease agreement for the office and
distribution facility in Basildon, England. The lessor has access to the bank account should
the Company fail to pay its monthly rent. The cash will be on deposit for a maximum of five
years from the inception of the lease agreement, which was May&nbsp;1, 2003.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Advertising Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Advertising costs, which consist primarily of product advertising, are included in selling,
general and administrative expenses and are expensed in the period the costs are incurred.
Advertising expenses for the years ended October&nbsp;31, 2006, 2005 and 2004 were $2,045,000,
$1,867,000 and $1,869,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company makes certain payments for cooperative advertising for specific placements in
customers&#146; advertisements and catalogues and includes these costs in the selling, general and
administrative line item of its statements of operations. Included in advertising expenses
are cooperative advertising expenses of $783,000, $667,000 and $208,000 for the years ended
October&nbsp;31, 2006, 2005 and 2004, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Shipping and Handling Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Shipping expenses, which consist primarily of payments made to freight companies, are reported
in selling, general and administrative expenses. Shipping expenses for the years ended
October&nbsp;31, 2006, 2005 and 2004 were $2,609,000, $3,091,000 and $2,217,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Income Taxes</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax 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.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Stock-Based Compensation</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On November&nbsp;1, 2005, the Company adopted SFAS No.&nbsp;123 (revised 2004), <I>Share-Based Payment</I>
(&#147;SFAS No.123R&#148;)<I>, </I>which addresses the accounting for stock-based payment transactions in
which an enterprise receives director and employee services in exchange for (a)&nbsp;equity
instruments of the enterprise or (b)&nbsp;liabilities that are based on the fair value of the
enterprise&#146;s equity instruments or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-12<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">that may be settled by the issuance of such equity
instruments. In January&nbsp;2005, the SEC issued Staff Accounting Bulletin (&#147;SAB&#148;) No.&nbsp;107,
which provides supplemental implementation guidance for SFAS No.&nbsp;123R. SFAS No.&nbsp;123R
eliminates the ability to account for stock-based compensation transactions using the
intrinsic value method under Accounting Principles Board (&#147;APB&#148;) Opinion No.&nbsp;25, <I>Accounting
for Stock Issued to Employees, </I>and instead generally requires that such transactions be
accounted for using a fair-value-based method. The Company uses the Black-Scholes-Merton
(&#147;BSM&#148;) option-pricing
model to determine the fair value of stock-based awards under SFAS No.&nbsp;123R, consistent with
that used for pro forma disclosures under SFAS No.&nbsp;123, <I>Accounting for Stock-Based
Compensation </I>(&#147;SFAS No.&nbsp;123&#148;). The Company has elected the modified prospective transition
method permitted by SFAS No.&nbsp;123R and, accordingly, prior periods have not been restated to
reflect the impact of SFAS No.&nbsp;123R. The modified prospective transition method requires
that stock-based compensation expense be recorded for all new and unvested stock options
that are ultimately expected to vest as the requisite service is rendered beginning on
November&nbsp;1, 2005, the first day of the Company&#146;s fiscal year 2006. Stock-based compensation
expense for awards granted prior to November&nbsp;1, 2005 is based on the grant date fair value
as determined under the pro forma provisions of SFAS No.123. The Company has recorded an
incremental stock-based compensation expense of $481,000 during fiscal 2006,
as a result of the adoption of SFAS No.&nbsp;123R. In accordance with SFAS No.&nbsp;123R, beginning in
the first quarter of fiscal 2006 the Company has presented excess tax benefits from the
exercise of stock-based compensation awards as a financing activity in the consolidated
statements of cash flows.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The income tax benefit related to stock-based compensation expense was $141,000 during
fiscal 2006. As of October&nbsp;31, 2006, $148,000 of total unrecognized compensation cost
related to stock options is expected to be recognized over a weighted-average period of
three years. This compensation cost to be recognized in future periods as of October&nbsp;31,
2006 does not consider or include the effect of stock options that may be issued in
subsequent periods.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Prior to the adoption of SFAS No.&nbsp;123R, the Company measured compensation expense for its
employee and non-employee director stock-based compensation plans using the intrinsic value
method prescribed by APB Opinion No.&nbsp;25. The Company applied the disclosure provisions of
SFAS No.&nbsp;123 as amended by SFAS No.&nbsp;148, <I>Accounting for Stock-Based Compensation-Transition
and Disclosure, </I>as if the fair-value-based method had been applied in measuring compensation
expense. Under APB Opinion No.&nbsp;25, when the exercise price of the Company&#146;s employee and
non-employee director stock options was equal to or greater than the market price of the
underlying stock on the date of the grant, no compensation expense was recognized.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The following table illustrates the effect on net income after taxes and net income per
common share as if the Company had applied the fair-value recognition provisions of SFAS No.
123R to stock-based compensation for the years ended October&nbsp;31, 2005 and 2004:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss) &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Stock-based employee and non-employee director compensation expense
determined under the fair-value-based method for all awards, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,457,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss) &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,184,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,954,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per common share &#151; as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per common share &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.58</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 12pt; margin-left: 4%">SFAS No.&nbsp;123R requires the use of a valuation model to calculate the fair value of
stock-based awards. The Company has elected to use the BSM option-pricing model, which
incorporates various assumptions including volatility, expected life, interest rates and
dividend yields. The expected volatility is based on the historic volatility of the
Company&#146;s common stock over the last 10&nbsp;years commensurate with the estimated expected life
of the Company&#146;s stock options. The expected life of an award is based on historical
experience and on the terms and conditions of the stock awards granted to employees and
directors.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The assumptions used for the fiscal years ended October&nbsp;31, 2006, 2005 and 2004 and the
resulting estimates of weighted-average fair value of options granted during those periods
are as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.64 - 3.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3.55 - 3.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">4.45% - 5.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">2.89% - 4.30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">1.91% - 3.14</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">37.7% - 38.8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">42.7% - 44.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">44.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yields</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted -average fair value of options
granted during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.74</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company did not reflect any stock-based employee compensation expense in the
consolidated financial statements for the fiscal years ended October&nbsp;31, 2005 and 2004
presented in the above table.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Earnings Per Share</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Basic earnings per common share is computed by dividing income available to common
stockholders by the weighted-average number of shares of common stock outstanding during the
period. Diluted earnings per common share is computed by dividing income available to common
stockholders by the weighted-average number of shares of common stock outstanding during
the period plus the number of additional shares of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">common stock that would have been
outstanding if the dilutive potential shares of common stock had been issued. The dilutive
effect of outstanding options is reflected in diluted earnings per share by application of
the treasury stock method. Under the treasury stock method, an increase in the fair market
value of the Company&#146;s common stock can result in a greater dilutive effect from outstanding
options. For the twelve months ended October&nbsp;31, 2006, 2005 and 2004 shares subject to
outstanding options totaled 114,000, 317,000 and 327,000 respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The following table sets forth the computation of basic and diluted earnings per share based
on the requirements SFAS No.&nbsp;128, <I>Earnings Per Share</I>:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Numerator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Numerator for basic and diluted
income per share &#151; income
available to common stockholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,203,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Denominator:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for basic income
per share &#151; weighted-average shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,872,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,401,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Denominator for diluted income
per share &#151; adjusted weighted-average
shares and assumed conversions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,514,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,189,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,728,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.60</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Diluted income (loss)&nbsp;per share for the year ended October&nbsp;31, 2005 is calculated using basic
weighted-average shares as the denominator because the effect of stock options would be
anti-dilutive due to the Company&#146;s loss position. The diluted weighted-average shares
outstanding computation excludes 323,000, 643,000 and 317,000 options whose impact would have
an anti-dilutive effect in 2006, 2005 and 2004, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Long-Lived Assets</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company reviews the carrying amount of long-lived assets or groups of assets, excluding
goodwill, for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. The determination of any impairment includes a
comparison of the estimated future undiscounted operating cash flows anticipated to be
generated during the remaining life of the asset or group of assets to the net carrying value
of the asset or group of assets.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Foreign Currency</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company&#146;s reporting currency is the U.S. dollar. Assets and liabilities of the
Company denominated in foreign currencies are translated at the rate of exchange at the
balance sheet date, while revenue and expenses are translated using the average exchange rate.
Gains and losses on foreign currency transactions are recognized as incurred. Gains and
losses on re-measurement of transactions denominated in currency other than the functional
currency of individual subsidiaries are recognized at each balance sheet date. Cumulative
translation adjustments resulting from the translation of the financial statements of foreign
subsidiaries are included as a separate component of stockholders&#146; equity. The Company&#146;s
ability to sell its products in foreign markets and the U.S. dollar value of the sales made in
foreign currencies can be significantly influenced by foreign currency fluctuations. A
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-15<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">decrease in the value of foreign currencies relative to the U.S. dollar could result in
downward price pressure for the Company&#146;s products or losses from currency exchange rates.
The Company periodically uses forward exchange contracts designated as cash flow hedges to
protect against the foreign currency exchange rate risks inherent in its forecasted revenues
and cost of sales denominated in other than local currencies. Foreign currency derivatives
are used only to meet the Company&#146;s objectives of minimizing variability in the Company&#146;s
operating results arising from foreign exchange rate movements. The Company does not enter
into foreign exchange contracts for speculative purposes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">From time to time, the Company and its subsidiaries enter into short-term foreign
exchange contracts with its bank to hedge against the impact of currency fluctuations. Such
contracts are designated at inception to the related foreign currency exposures being hedged,
which include anticipated Euro denominated sales and
U. S. dollar denominated intercompany inventory purchases by the Company&#146;s wholly-owned
U.K. subsidiary. These contracts have maturity dates that do not normally exceed 12&nbsp;months.
The Company estimates the fair value of derivatives based on quoted market prices and records
all derivatives on the balance sheet at fair value. The Company had no foreign currency
related derivatives at October&nbsp;31, 2006 or 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">For derivative instruments designated as cash flow hedges, the Company initially records
the effective portions of the gain or loss on the derivative instrument in accumulated other
comprehensive income (&#147;OCI&#148;) as a separate component of stockholders&#146; equity and subsequently
reclassifies these amounts into earnings in the period during which the hedged transaction is
recognized in earnings. The Company records the ineffective portion of the gain or loss, if
any, in other income or expense immediately. The Company reports the effective portion of
cash flow hedges in the same financial statement line item as the changes in value of the
hedged item. For the year ended October&nbsp;31, 2006 and 2005, no gains or losses were
reclassified into earnings related to cash flow hedges. For the year ended October&nbsp;31, 2004 ,
the Company reclassified gains of $33,000 to the net revenues line item of its financial
statements and losses of $286,000 to the cost of goods sold line item of its financial
statements related to cash flow hedges.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">For the years ended October&nbsp;31, 2006, 2005 and 2004, the Company recorded the following
activity in accumulated other comprehensive income related to cash flow hedges:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000"><B>Years Ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning OCI balance related
to cash flow hedges, net of
tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(108,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Net loss recorded in OCI,
net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(86,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Net gain (loss)
reclassified from OCI into
earnings, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(194,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ending OCI balance related to
cash flow hedges, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-16<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">For foreign currency forward contracts designated as cash flow hedges, the Company measures
effectiveness by comparing the cumulative change in the hedge contract with the cumulative
change in the hedged item, both of which are based on forward rates. Assessments of hedge
effectiveness are performed using the dollar offset method and applying a hedge effectiveness
ratio between 80% and 125%. During fiscal years ended October&nbsp;31, 2006, 2005 and 2004, the
Company did not discontinue any cash flow hedges for which it was probable that a forecasted
transaction would not occur.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Revenue Recognition</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company recognizes revenue at the time products are shipped based on its terms of FOB
shipping point, where risk of loss and title transfer to the buyer or, for Company stores, at
the point of sale. The Company records sales in accordance with SEC Staff Accounting Bulletin
No.&nbsp;104, <I>Revenue Recognition</I>. Under these guidelines, revenue is recognized when all of the
following exist: persuasive evidence of a sale arrangement exists, delivery of the product
has occurred, the price is fixed or determinable, and payment is
reasonably assured. Provision is made currently for estimated sales returns, markdowns and
other allowances and is included in net revenues in the accompanying statements of operations.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Management analyzes historical returns, current economic trends, changes in customer demand,
and sell-through of our products when evaluating the adequacy of the reserves for sales
returns, markdowns and other allowances. Significant management judgments and estimates must
be made and used in connection with establishing the reserves for sales returns, markdowns and
other allowances in any accounting period. Material differences may result in the amount and
timing of our revenues for any period if management makes different judgments or utilizes
different estimates. The following table summarizes the activity in reserve for sales
returns, markdowns and other allowances for the years ended October&nbsp;31, 2006, 2005 and 2004:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,268,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,278,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for sales
returns, markdowns and
other allowances</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,142,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,511,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,855,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,167,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,672,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,865,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,082,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,268,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Asset Purchase Agreements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In November&nbsp;2000, the Company entered into an agreement with a third party
whereby prior seasons&#146; slower selling inventory which was not damaged was exchanged for future
asset purchase credits (&#147;APCs&#148;), which may be utilized by the Company to purchase future goods
and services over a four-year period. The original value of the inventory exchanged (at cost)
was $1.4&nbsp;million, resulting in $1.4&nbsp;million in future APCs. In December&nbsp;2003, the Company
amended its agreement with the third party to exchange $0.9&nbsp;million of additional prior
seasons&#146; slower selling inventory (at cost) for an additional
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">$0.9&nbsp;million in future APCs and
an extension of the original November&nbsp;2000 agreement through December&nbsp;1, 2007. The Company
has entered into contracts with several third party suppliers who have agreed to accept these
APCs, in part, as payment for goods and services. The Company purchases products such as
sales fixtures, office and packaging supplies, as well as temporary help, freight and printing
services from such third party suppliers. Management reviews and estimates the likelihood of
fully utilizing the APCs on a periodic basis. If the Company is unable to find suppliers who
agree to accept the APCs in quantities as projected by management, a write-down of the value
of the APCs may be required. At October&nbsp;31, 2006, the Company had fully utilized all acquired
APCs and does not intend to enter into any new contracts for APCs in exchange for prior
season&#146;s slower moving inventory at this time. Barter revenues for the years ended October
31, 2006, 2005 and 2004 were $0, $0 and $873,000, respectively. Barter expenses for the years
ended October&nbsp;31, 2006, 2005 and 2004 were $0, $631,000 and $533,000, respectively. At
October&nbsp;31, 2006 and 2005, unused APC balances of $0 and
$181,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Shipping and Handling Revenue</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company includes payments from its customers for shipping and handling in its net revenues
line item in accordance with Emerging Issues Task Force (&#147;EITF&#148;) 00-10, <I>Accounting of Shipping
and Handling Fees and Costs</I>.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Cost of Goods Sold</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company includes FOB purchase price, inbound freight charges, duty, buying commissions and
overhead in its cost of goods sold line item. Overhead costs include purchasing and receiving
costs, inspection costs, warehousing costs, internal transfers costs and other costs
associated with the Company&#146;s distribution. The Company does not exclude any of these costs
from cost of goods sold.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Royalty Expenses</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Royalty expenses are recognized as incurred and are included in the selling, general and
administrative expenses line item in the accompanying consolidated financial statements. For
the years ended October&nbsp;31, 2006, 2005 and 2004, royalty expenses were $6,204,000, $5,463,000
and $3,214,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Legal Fees</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company expenses costs of settlement, damages and costs of defense when incurred. Costs
that are probable and estimable are accrued. For the years ended October&nbsp;31, 2006, 2005 and
2004, legal fees were $1,451,000, $725,000 and $545,000, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Use of Estimates</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-18<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Fair Value of Financial Instruments</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The fair value of the Company&#146;s line of credit and long-term debt approximates the carrying
value based on borrowing rates currently available to the Company for bank loans with similar
terms and maturities. The carrying value of all other financial instruments potentially
subject to valuation risk (principally consisting of cash and cash equivalents, accounts
receivable, accounts payable, bank overdrafts and forward exchange contracts) also approximate
fair value due to the short-term nature of those instruments.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Reclassifications</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Certain reclassifications have been made to the prior year balances in order to conform with
the current year presentation.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(2)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Acquisition of Membership Interests in Gekko Brands, LLC</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">At close of business on July&nbsp;6, 2004, Ashworth, Inc. completed the acquisition (the
&#147;Acquisition&#148;) of all of the membership interests in Gekko Brands, LLC (&#147;Gekko&#148;), a leading
designer, producer and distributor of headwear and apparel under The Game<FONT style="font-family: Symbol">&#210;</FONT> and
Kudzu<FONT style="font-family: Symbol">&#210;</FONT> brands, pursuant to the Membership Interests Purchase Agreement entered into on
July&nbsp;6, 2004, between Ashworth Acquisition Corp., a Delaware corporation and wholly owned
subsidiary of Ashworth, Inc., and the selling members identified therein.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The purchase price for the
Acquisition was $24.7 million consisting of $23 million in cash, a $1
million promissory note and $0.7 million in acquisition costs. The $1
million note payable is subordinate to the Business Loan Agreement
with Union Bank of California, N.A. As defined in the Membership
Interests Purchase Agreement the Company may pay an additional $6.5
million to certain selling members of Gekko if the subsidiary
achieves certain specific EBIT and other operating targets over
approximately the next four years or through Ashworth&#146;s fiscal
year 2008. As of October 31, 2006, the Gekko members have earned a total of
$3.2 million. Over the remaining two years, fiscal 2007 and fiscal
2008, the Company may pay an additional $3.3 million. The Company
will account for any such contingent payments as additional costs of
the acquired entity at the time the contingency is resolved. In fiscal
years ended 2006, 2005 and during the period from July 7, 2004
through October 31, 2004, Gekko achieved certain specified EBIT
targets entitling the certain selling members to additional
consideration in the amount of $1,385,000, $1,225,000 and $540,000,
respectively. The resulting liability and adjustment to goodwill are reflected in the accompanying financial statements for the years
ended October 31, 2006 and 2005.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">In connection with the Acquisition, Ashworth entered into a secured 5-year bank facility
comprised of a $20&nbsp;million term loan and a $35&nbsp;million line of credit replacing its prior $55
million facility. To finance the cash purchase price of the Acquisition, Ashworth utilized
the term loan together with part of the new line of credit. On January&nbsp;26, 2006, the Company
entered into the Fourth Amendment to the loan agreement to amend several sections of the
credit facility. Based on the revised loan agreement, the term loan commitment was adjusted
to $6.8&nbsp;million with funds borrowed on the line of credit.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The operating results of Gekko are included in the Company&#146;s consolidated results from the
date of acquisition.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The acquisition has been accounted for using the purchase method in accordance with SFAS No.
141, <I>Business Combinations</I>. The following table presents the allocation of the aggregate
purchase price for Gekko at the date of acquisition, July&nbsp;6, 2004:</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Allocation At</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">July 7, 2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net working capital (net of cash received)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,107,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,490,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,646,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,077,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangible assets (Note 3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,650,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">24,678,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The $12,077,000 allocated to goodwill reflects the benefit the Company expects to realize from
expanding its distribution into non-golf channels and the value of the assembled workforce at
Gekko. The $10,650,000 in other assets includes tradenames, customer relationships, customer
sales backlog, and non-compete agreements.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Pro Forma Results of Operations</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The results of Gekko&#146;s operations have been included in the consolidated financial
statements since July&nbsp;7, 2004. Had the acquisition been completed as of the beginning of
fiscal 2004, the Company would have reported actual and pro forma net revenues, net income
and basic and diluted net income per share amounts for the years ended October&nbsp;31, 2006,
2005 and 2004 as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Pro Forma</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">204,788,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">194,214,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,472,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,861,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(727,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,772,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">.49</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Actual diluted loss per share for the fiscal year ended October&nbsp;31, 2005 was calculated
using basic weighted-average shares as the effect of stock options would be anti-dilutive
due to the Company&#146;s loss position.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(3)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Goodwill and Other Intangible Assets.</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company accounts for goodwill and intangible assets in accordance with SFAS No.&nbsp;142,
<I>Goodwill and Other Intangible Assets. </I>Under SFAS No.&nbsp;142, goodwill and certain intangible
assets are not
</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">amortized but are subject to an annual impairment test. Changes in goodwill,
tradenames and customer related intangibles during the year ended October&nbsp;31, 2006, 2005 and
2004 were due to the acquisition of Gekko on July&nbsp;6, 2004. Under terms of the Gekko
Membership Interest Purchase Agreement, up to an additional $6,500,000 in additional
consideration may be paid to certain selling members of Gekko if the subsidiary achieves
certain defined earnings before interest and taxes (&#147;EBIT&#148;) and other operating targets
through Ashworth&#146;s fiscal year 2008. The Company accounts for such contingent payments as
additional costs of the acquired entity at the time the contingency is resolved. For the
years ended October&nbsp;31, 2006, 2005 and for the period from July&nbsp;7, 2004 through October&nbsp;31,
2004, Gekko achieved the specified EBIT targets entitling certain selling members to
additional consideration in the amount of $1,385,000, $1,225,000 and $540,000, respectively.
The additional consideration is included in goodwill at October&nbsp;31, 2006, 2005 and 2004,
respectively. For the year ended October&nbsp;31, 2005 and for the period from July&nbsp;7, 2004
through October&nbsp;31, 2004, the Company recorded approximately $20,000 and $23,000,
respectively, to goodwill related to pre-acquisition contingencies that were resolved within
one year from the date of acquisition. At October&nbsp;31, 2006, 2005 and 2004, goodwill, all of
which is in the Gekko segment, totaled $15,250,000, $13,865,000 and $12,640,000, respectively.
The Company anticipates that the entire amount of goodwill will be deductible for income tax
purposes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The following sets forth the intangible assets, excluding goodwill, by major category:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">October 31, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">October 31, 2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Book</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Gross Carrying</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net Book</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Indefinite life:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tradenames</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,700,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finite life:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer lists</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,530,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(541,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">989,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,530,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(307,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,223,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-competes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,011,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(846,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">526,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer sales backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,502,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,307,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,386,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,264,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,294,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,049,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,245,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,178,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,607,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,571,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Intangible assets with finite lives are amortized using the straight-line method over
the estimated useful life. At October&nbsp;31, 2006, the estimated useful lives and
weighted-average useful lives for finite-lived intangible assets were as follows:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Estimated</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Useful Life</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Avg. Useful</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Years)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Life (Years)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finite life:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer lists</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">3-7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-competes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer sales backlog</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trademarks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">During the years ended October&nbsp;31, 2006, 2005 and 2004, aggregate amortization expense was
approximately $442,000, $544,000 and $326,000, respectively. Amortization expense related to
intangible assets at October&nbsp;31, 2006 in each of the next five fiscal years is expected to be
as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">444,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">152,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,545,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(4)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Leases</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">During the year ended October&nbsp;31, 2006, the Company entered into a capital lease agreement for
the purchase of a software license. The lease began in April&nbsp;2006 for a 36&nbsp;month term, ending
in March&nbsp;2009 for $556,000. The lease agreement calls for 12 quarterly payments of $53,450
with an imputed interest rate of 9.08%. The software license asset is expected to be placed
into service in May&nbsp;2007. It will be depreciated over a three year life using the
straight-line method. During the years ended October&nbsp;31, 2005 and 2004, the Company did not
acquire any equipment under capital leases.</DIV></TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">At October&nbsp;31, 2006 and 2005, the accompanying consolidated balance sheets include the
following licensing agreement and furniture and equipment under existing capital leases:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Furniture and Equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">554,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Software License</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(554,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total furniture and equipment under
capital lease, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Amortization of assets held under capital leases is included in depreciation and amortization
expense.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On April&nbsp;30, 2006, the Company entered into a lease agreement with Key Equipment Finance, a
Division of Key Corporate Capital, Inc. (&#147;KEF&#148; or the &#147;Lessor&#148;) for an IBM server with all
applicable software, accessories and upgrade package for $586,772. The terms of the lease
agreement call for 42&nbsp;monthly payments of $14,171, in advance. The last payment will be made
on September&nbsp;30, 2009. The Company has determined that the lease meets the criteria for
treatment as an operating lease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On August&nbsp;30, 2004 the Company agreed to a schedule with KEF thereby completing the Master
Equipment Lease Agreement, dated as of June&nbsp;23, 2003, previously entered into by Ashworth and
KEF. Under the terms of the schedule, the Company leases equipment for its distribution center
in Oceanside, California. The aggregate cost of the equipment is approximately $10.4&nbsp;million.
The initial term of the lease is for ninety-one (91)&nbsp;months beginning on September&nbsp;1, 2004 and
the monthly rent payment is $129,000. At the end of the initial term, the Company will have
the option to (1)&nbsp;purchase all, but not less than all, equipment on the initial term
expiration date at a price equal to the greater of (a)&nbsp;the then fair market sale value
thereof, or (b)&nbsp;12% of the total cost of the equipment (plus, in each case, applicable sales
taxes); (2)&nbsp;renew the lease on a month to month basis at the same rent payable at the
expiration of the initial lease term; (3)&nbsp;renew the lease for a minimum period of not less
than 12 consecutive months at the then current fair market rental value; or (4)&nbsp;return such
equipment to the Lessor pursuant to, and in the condition required by, the lease. The Company
has determined that the lease meets the criteria for treatment as an operating lease.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company and its subsidiaries also lease certain other production, warehouse and outlet
store facilities, as well as certain production and office equipment, under operating leases.
These leases expire in various fiscal years through August&nbsp;2016. Rent expense recognized on a
straight-line basis for the years ended October&nbsp;31, 2006, 2005 and 2004 was $6,752,000,
$6,158,000 and $3,654,000, respectively. Future minimum lease payments under non-cancelable
operating leases and future minimum capital lease payments as of October&nbsp;31, 2006 are:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Operating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Years Ending October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leases</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Leases</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">214,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,573,000</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,618,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,713,000</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,544,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,505,000</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,194,000</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">41,147,000</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less amount representing interest at 8.26%</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value of future minimum capital
lease
payments (Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">473,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(5)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Line of Credit Agreement</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On July&nbsp;6, 2004, the Company entered into a new business loan agreement with Union Bank of
California, N.A., as the administrative agent, and two other lenders. The loan agreement is
comprised of a $20.0&nbsp;million term loan and a $35.0&nbsp;million revolving credit facility, which
expires on July&nbsp;6, 2009 and is collateralized by substantially all of the assets of the
Company other than the Company&#146;s EDC.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Under this loan agreement, interest on the $20.0&nbsp;million term loan was fixed at 5.4% for the
term of the loan. Interest on the revolving credit facility is charged at the bank&#146;s
reference rate. At October&nbsp;31, 2006, the bank&#146;s reference rate was 8.50%. The loan
agreement also provides for optional interest rates based on London inter-bank offered rates
(&#147;LIBOR&#148;) for periods of at least 30&nbsp;days in increments of $0.5&nbsp;million.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On September&nbsp;3, 2004, the Company entered into the First Amendment to the loan agreement to
amend Section&nbsp;6.12(a), Tangible Net Worth. The loan agreement, as amended, contains certain
financial covenants that include requirements that the Company maintain (1)&nbsp;a minimum tangible
net worth of $74.0&nbsp;million plus the net proceeds from any equity securities issued (including
net proceeds from stock option exercises) after the date of the loan agreement for the period
ending October&nbsp;31, 2004, and a minimum tangible net worth of $74.0&nbsp;million plus 90% of net
income after taxes (without subtracting losses) earned in each quarterly accounting period
commencing after January&nbsp;31, 2005, plus the net proceeds from any equity securities issued
(including net proceeds from stock option exercises) after the date of the loan agreement, (2)
a minimum earnings before interest, income taxes, depreciation and amortization (&#147;EBITDA&#148;)
determined on a rolling four quarter basis ranging from $16.5&nbsp;million at July&nbsp;6, 2004 and
increasing over time to $27.0&nbsp;million at October&nbsp;31, 2008 and thereafter, (3)&nbsp;a minimum ratio
of cash and accounts receivable to current liabilities of 0.75:1.00 for fiscal quarters ending
January&nbsp;31 and April&nbsp;30 and 1.00:1.00 for fiscal quarters ending July&nbsp;31 and October&nbsp;31, and
(4)&nbsp;a minimum fixed charge coverage ratio of 1.10:1.00 at July&nbsp;31, 2004 and 1.25:1.00
thereafter. The loan agreement limits annual lease and equipment rental expense associated
with the Company&#146;s distribution center in Oceanside, California as well as annual capital
expenditures in any single fiscal year on a
</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">consolidated basis in excess of certain amounts
allowed for the acquisition of real property and equipment in connection with the distribution
center. The loan agreement had an additional requirement where, for any period of 30
consecutive days, the total indebtedness under the revolving credit facility may not be more
than $15.0&nbsp;million. The loan agreement also limits the annual aggregate amount the Company
may spend to acquire shares of its common stock.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On May&nbsp;27, 2005 and September&nbsp;8, 2005, the Company entered into the Second and Third
Amendments, respectively, to the loan agreement. The Second Amendment to the loan agreement
amended Section&nbsp;6.12(e), Capital Expenditures, to increase the spending limitation to acquire
fixed assets from not more than $5.0&nbsp;million in any single fiscal year on a consolidated basis
to a total of $20.0&nbsp;million for fiscal years 2004 and 2005 together, for the acquisition of
real property and equipment in connection with the distribution
center located in Oceanside, California. The Third Amendment waived non-compliance with
various financial covenants of the loan agreement, solely for the period ended July&nbsp;31, 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On January&nbsp;26, 2006, the Company entered into the Fourth Amendment to the loan agreement to
amend several sections of the credit facility and to waive non-compliance with financial
covenants at October&nbsp;31, 2005. Under the terms of the revised loan agreement, the revolving
credit facility was adjusted to $42.5&nbsp;million and the term loan commitment was adjusted to
$6.8&nbsp;million. Based on the revised loan agreement, the term loan shall commence January&nbsp;31,
2006 and have equal monthly installments of principal in the amount of $125,000, plus all
accrued interest for each monthly installment period, with a balloon installment for the
entire unpaid principal balance and all accrued and unpaid interest due in full on the
maturity date of July&nbsp;6, 2009.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Concurrent with the signing of the Fourth Amendment, the Company borrowed $7.5&nbsp;million against
the revolving credit facility and paid down the term loan by the same amount. The Company also
paid bank fees totaling $125,000 related to the Fourth Amendment. The balance sheet at
October&nbsp;31, 2005 and the cash flow statement for the year ended October&nbsp;31, 2005 in the
accompanying financial statements have been adjusted to record these transactions as if the
Fourth Amendment had been in effect as of October&nbsp;31, 2005.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The loan agreement was also modified, pursuant to the Fourth Amendment, to reflect the change
to a borrowing base commitment. The primary requirements under the borrowing base denote that
the bank shall not be obligated to advance funds under the revolving credit facility at any
time that Company&#146;s aggregate obligations to the bank exceed the sum of (a)&nbsp;seventy five
percent (75%) of the Company&#146;s eligible accounts receivables, and (b)&nbsp;fifty-five percent (55%)
of the Company&#146;s eligible inventory. If at any time the Company&#146;s obligations to the bank
under the referenced facilities exceed the permitted sum, the Company shall immediately repay
to the bank such excess. The applicable rate schedule was adjusted to reflect an additional
pricing tier based on the average daily funded debt to EBITDA ratio. The Fourth Amendment
also amended certain financial covenants and maintenance requirements under the loan agreement
as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Minimum tangible net worth equal to the sum of $75.0&nbsp;million; plus the sum
of 90% of net income after income taxes (without subtracting losses) earned in each
quarterly accounting period commencing after January&nbsp;31, 2006; plus, the net proceeds
from any equity securities issued after the date of the Fourth Amendment including
net proceeds from stock options exercised;
</DIV></TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-25<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">A ratio of quick assets to current liabilities (including the outstanding
amount of loans and letter of credit obligations) of at least 0.90:1.00, except for
the fiscal quarters ending January&nbsp;31 and April&nbsp;30, as to which the ratio of quick
assets to current liabilities shall be at least 0.75:1.00;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Capital expenditures are not to exceed more than $7.0&nbsp;million in any fiscal
year;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Fixed charge coverage ratio as of the last day of any fiscal quarter is
required to be not less than 1.25 to 1.00; provided that, for the fiscal quarter
ending January&nbsp;31, 2006, the fixed charge coverage ratio shall not be less than 0.80
to 1.00; and for purposes of determining the fixed charge coverage ratio only, the
Company&#146;s inventory write-down of $4.4&nbsp;million shall be added back to EBITDA for the
Company&#146;s fiscal quarter ending April&nbsp;30, 2006 and the Company&#146;s maintenance capital
expenditures shall be $4.0&nbsp;million through the fiscal year ending October&nbsp;31, 2006;
and</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The requirement where, for any period of 30 consecutive days, the total
indebtedness under the revolving credit facility may not be more than $15.0&nbsp;million
was eliminated.</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company was not in compliance with the required quick asset ratio in the first quarter of
fiscal year 2006. The Company obtained a written waiver of the quick assets to current
liabilities covenant requirement from its lenders for the period ended January&nbsp;31, 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company  is in compliance with all of the loan agreement financial
covenants as of October&nbsp;31, 2006.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The revolving credit facility under the loan agreement may also be used to finance
commercial letters of credit and standby letters of credit. Commercial letters of credit
outstanding under the loan agreement totaled $2.9&nbsp;million at October&nbsp;31, 2006 as compared to
$4.3&nbsp;million outstanding at October&nbsp;31, 2005. The Company had $14.0&nbsp;million outstanding
against the revolving credit facility under this loan agreement at October&nbsp;31, 2006,
compared to $19.5&nbsp;million outstanding at October&nbsp;31, 2005 and $5.6&nbsp;million outstanding on
the term loan at October&nbsp;31, 2006 compared to $7.5&nbsp;million at October&nbsp;31, 2005. At October
31, 2006, $20.6&nbsp;million was available for borrowings against the revolving credit facility
under the loan agreement, subject to the borrowing base limitations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-26<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(6)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Long-term Debt</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Amounts outstanding under long-term debt agreements at October&nbsp;31, 2006 and 2005 consist of
the following:</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Term loan payable to a bank, bearing interest at 5.4%, payable
in monthly payments of $333,000 plus interest through December
31, 2005 and $125,000 plus interest thereafter and through
maturity of July&nbsp;6, 2009, collateralized by substantially all
of the Company&#146;s assets, excluding real estate. (Note 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,583,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Note payable to a bank, bearing interest at 5.0%, payable in
monthly principal and interest payments of $63,000 through
April&nbsp;2014, with a balloon payment of approximately $9,700,000
payable at maturity of May&nbsp;1, 2014; collateralized by
land and building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,228,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,404,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subordinated note payable to a third party, bearing simple
interest at 3.5%, payable in annual principal payments of
$250,000 plus interest on the outstanding principal balance due
June&nbsp;30, 2006, 2007 and 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Note payable to a finance company, bearing interest at 3.9%,
payable in monthly payments of principal and interest $471
through maturity of July&nbsp;26, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations (Note 4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,788,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,686,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,117,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,366,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,671,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,320,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-27<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Future maturities of long-term debt and capital lease obligations at October&nbsp;31, 2006 are
as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Years Ending October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,137,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,892,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">216,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,199,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,788,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(7)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Employees&#146; </B><B>401(k)</B><B> Plan</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company maintains a defined contribution retirement plan covering substantially all
full-time employees. Company contributions, which are voluntary and at the discretion of the
Company&#146;s Board of Directors, are currently being made at 50% of the amount the employee
contributes up to 3% of compensation. The Company&#146;s expense for the years ended October&nbsp;31,
2006, 2005 and 2004 was $314,000, $249,000 and $281,000, respectively.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(8)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Stockholders&#146; Equity</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Common Stock Options</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On December&nbsp;14, 1999, the Company adopted the Ashworth, Inc. 2000 Equity Incentive Plan which
was subsequently amended (as amended to date, the &#147;2000 Plan&#148;). The stockholders adopted the
2000 Plan on March&nbsp;24, 2000 and concurrently terminated the Company&#146;s Incentive Stock Option
Plan, the Founders&#146; Nonqualified Stock Option Plan and the Nonqualified Stock Option Plan
(together, the &#147;Terminated Plans&#148;). With the adoption of the 2000 Plan and the concurrent
termination of the Terminated Plans, the Company reduced the aggregate number of shares
available for issuance under its stock plans from 2,041,439 under the Terminated Plans to
1,900,000 shares of common stock under the 2000 Plan. On December&nbsp;12, 2000, the Company filed
Form S-8 (File No.&nbsp;333-51730) to register the 1,900,000 shares of common stock available for
issuance under the 2000 Plan.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">As of October&nbsp;31, 2006, of the 1,900,000 shares of common stock available for issuance under
the 2000 Plan, the Company had outstanding options covering 866,000 shares of common stock
with exercise prices ranging from $4.25 to $11.78 and expiration dates between May&nbsp;2010 and
September&nbsp;2016. At October&nbsp;31, 2006, a total of 526,000 shares of common stock remained
available for issuance pursuant to awards granted under the 2000 Plan. As of October&nbsp;31,
2006, the Company still had options covering 5,000 shares of common stock outstanding under
the Terminated Plans with an exercise price of $4.16 and an expiration date of November&nbsp;2007.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-28<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The following is a summary of stock option activity under the 2000 Plan and the Terminated
Plans for the fiscal years ended October&nbsp;31, 2004, October&nbsp;31, 2005 and October&nbsp;31, 2006:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Option exercise price per share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual Term</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Intrinsic</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>options</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Range</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(in Years)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">2,202,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(439,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.82</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">1,050,000</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(340,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.33</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,652,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(368,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.42</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,531,000</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(403,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.19</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(446,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.68</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,387,000</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.78</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"></TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000"></TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">871,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">7.2</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">286,000</TD>
    <TD></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercisable October 31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">756,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">6.9</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">270,639</TD>
    <TD></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercisable
October 31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">1,299,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.63</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">4.4</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">883,364</TD>
    <TD></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Exercisable
October 31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">1,431,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.94</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">2.7</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right"></TD>
    <TD></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000"></TD>
    <TD></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The
Company incurred stock-based employee compensation expense of
$481,000, $0.0 and $0.0 in fiscal years 2006, 2005 and 2004,
respectively.
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The following is a summary of stock options outstanding at October&nbsp;31, 2006:
</DIV>

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Options outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options exercisable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="7"><B>Range of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>exercise prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(shares)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(shares)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>price</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">$ 4.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">6.64</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">180,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">5.54</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">152,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">5.36</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">$ 6.65
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">9.14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">456,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">7.75</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">376,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">7.63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$ 9.81
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">-
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">11.78</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">235,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">10.74</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">228,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">10.78</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">871,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8.10</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">756,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">8.12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-29<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On October&nbsp;26, 2005, the Company&#146;s Board of Directors approved the accelerated vesting of all
currently outstanding, &#147;out-of-the-money,&#148; unvested stock
options (the &#147;Options&#148;) to purchase shares of common stock of the Company. These Options were previously awarded to directors,
officers, and employees under the 2000 Plan. These Options have an exercise price greater than
$6.97, the closing price on October&nbsp;26, 2005, which is the effective date of the acceleration.
Outstanding unvested options that are &#147;in-the-money&#148; were not subject to acceleration and will
continue to vest in accordance with their normal schedule.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Options to purchase approximately 328,000 shares of Ashworth, Inc. common stock, which would
otherwise have vested from time to time over the next three years, became immediately
exercisable as a
result of the Board of Directors&#146; actions. The purpose of the accelerated vesting is to
reduce future stock option compensation expense that the Company would otherwise recognize in
its results of operations with the adoption of SFAS No.&nbsp;123R. The number of shares and
exercise prices of the Options subject to the acceleration are unchanged. The remaining terms
for each of the Options granted remain the same.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">At October&nbsp;31, 2006 and 2005, the number of shares of common stock underlying exercisable
options was 756,000 and 1,299,000, respectively, and the weighted-average exercise price of
those options was $8.12 and $7.60, respectively.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The
following is a summary of unvested stock options:
</DIV>

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"> </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Grant Date</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October 31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">193,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.47</TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="right">2.74</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">2.63</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">2.41</TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October 31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">221,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">2.62</TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="right">3.62</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(606,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">3.44</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(33,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">2.96</TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested, October 31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">52,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">2.54</TD>
    <TD></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="right">2.95</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(137,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">2.71</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled or Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"></TD>
    <TD align="right">2.43</TD>
    <TD nowrap></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unvested,
October 31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">116,000</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left"></TD>
    <TD align="right">2.78</TD>
    <TD></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px double #000000">&nbsp;</TD>
    <TD></TD>
</TR>
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The
grant-date fair value of stock options issued to employees and directors granted during fiscal 2006, 2005 and 2004 was $634,000, $1,702,000 and $627,000, respectively.  As of October 31, 2006, the total unrecognized compensation cost related to unvested shares was $148,000, which is expected to be recognized over a weighted-average period of 3 years, based on the vesting schedules.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Comprehensive Income</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company includes the cumulative foreign currency translation adjustment as well as the net
unrealized gains and loss on cash flow hedges as components of the comprehensive income in
addition to net income for the period. The following table sets forth the components of other
comprehensive income for the periods presented:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years ended October 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gains (losses)&nbsp;on cash flow
hedges, net of tax effect of $0,
$0 and ($72,000) for 2006, 2005 and
2004, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(511,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,516,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(9)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Commitments and Contingencies</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Promotional Agreements with PGA Professionals and a Television Personality</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company has promotional agreements with several PGA professionals, including Fred Couples,
a related party at the time of the agreement; Jim Nantz, a television personality and member
of the Company&#146;s board of directors until March&nbsp;24, 2004, a related party; and a management
company. Under the terms of these agreements, the Company is or was obligated to pay cash or
other compensation and, in some cases, to issue options to purchase shares of the Company&#146;s
common stock.</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The aggregate annual compensation expense recognized under these agreements using the
straight-line method in fiscal 2006, 2005 and 2004 was $1,652,000, $1,837,000 and $1,888,000,
respectively. Cash payments made to related parties under these agreements during the years
ended October&nbsp;31, 2006, 2005 and 2004 totaled $1,328,000, $1,602,000 and $1,581,000
respectively. Future minimum commitments under these agreements are as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Minimum</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Payments to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Future Minimum</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Related</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year Ending October 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Payments</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Parties</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,400,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,480,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,400,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><U><B>Executive Employment Agreements, Termination of Employment and Change in Control
Arrangements</B></U>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company previously entered into executive employment agreements with: Peter M. Weil, the
Chief Executive Officer, Randall L. Herrel, Sr., former Chief Executive Officer and President;
Winston E. Hickman, former Executive Vice President, Chief Financial Officer and Treasurer;
Peter S. Case, former Executive Vice President, Chief Financial Officer and Treasurer; Peter
E. Holmberg, the Executive Vice President of Green Grass Sales and Merchandising; Gary I.
&#147;Sims&#148; Schneiderman, the President and Greg W. Slack, the Vice President of Finance, Corporate
Controller and Principal Accounting Officer. Messrs.&nbsp;Hickman, Herrel and Case resigned from
the Company effective November&nbsp;17, 2006, October&nbsp;17, 2006 and February&nbsp;1, 2006, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Agreements With Current Executive Officers</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In connection with Peter M. Weil&#146;s appointment on October&nbsp;25, 2006 as Chief Executive Officer
of Ashworth, Inc., the Company entered into an employment agreement with Mr.&nbsp;Weil (the Weil
&#147;Employment Agreement&#148;) on November&nbsp;27, 2006. The Weil Employment Agreement provides for
compensation consisting of, among other things: an annual base salary of $400,000; a
performance bonus opportunity of 50% of annual base salary under certain circumstances; a
grant of options to purchase 100,000 shares of the Company&#146;s common stock, with 50% of the
options vesting on each of the first two anniversaries of the grant date; eligibility to
participate in the Company&#146;s 401(k) plan; coverage under the Company&#146;s medical, dental and
life insurance benefits programs; a clothing allowance in accordance with Company policy; an
automobile allowance of $1,250 per month; and, an allowance for reasonable residential
expenses, in lieu of moving expenses, and until such time as the Compensation and Human
Resources Committee or the Board takes further action, which will include
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">housing and all
reasonable expenses (to be grossed up for taxes, if applicable). If Mr.&nbsp;Weil is terminated
without Cause (as defined in the Employment Agreement), then Mr.&nbsp;Weil will receive (1)
severance compensation in an amount equal to 12&nbsp;months of his then current annual base salary
and (2)&nbsp;accelerated vesting of all stock options granted under the Weil Employment Agreement.
Mr.&nbsp;Weil&#146;s option vesting will also be accelerated as a result of a change of control. In the
event that Mr.&nbsp;Weil becomes disabled (as defined in the Weil Employment Agreement) during the
term of this Agreement for a continuous period up to 90&nbsp;days, or upon termination of his
employment as a result of his death, the Company shall pay a pro rata share of the annual
bonus in the year in which Mr.&nbsp;Weil was disabled or died.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Effective October&nbsp;25, 2006, the Company and Mr.&nbsp;Holmberg entered into the Amended and Restated
Employment Agreement (the Holmberg &#147;Employment Agreement&#148;). Under the Holmberg Employment
Agreement, Mr.&nbsp;Holmberg shall receive an annual base salary of $225,000 and is eligible to
earn an annual bonus up to a maximum of 40% of his annual base salary based and conditioned on
the Company&#146;s achievement of certain financial targets. Mr.&nbsp;Holmberg shall, among other
things, also receive an automobile allowance of $1,000 per month. If Mr.&nbsp;Holmberg is
terminated within two years of the effective date of the Holmberg Employment Agreement as a
result of a Qualifying Termination (as defined in the Holmberg Employment Agreement) and if
Mr.&nbsp;Holmberg delivers and does not revoke a fully executed release and waiver of all claims
against the Company, then the Company shall pay Mr.&nbsp;Holmberg
the equivalent of 12&nbsp;months of his then-current annual base salary, which is in lieu of any
other severance payment benefits that otherwise may at that time be available under the
Company&#146;s applicable policies; provided, however, that the Holmberg Employment Agreement is
not intended to modify or supersede the change in control agreement between the Company and
Mr.&nbsp;Holmberg.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On September&nbsp;7, 2005, the Company entered into an employment agreement with Gary I. &#147;Sims&#148;
Schneiderman. The agreement with Mr.&nbsp;Schneiderman provides for: a minimum base salary of
$300,000; bonuses to be determined by the Board on the basis of merit and the Company&#146;s
financial success and progress up to a maximum of 82.5% of his base salary; three guaranteed
minimum non-compete/retention payments of $85,000 on September&nbsp;12, 2005, $85,000 on November
24, 2005 and $40,000 following the close of final accounting records for 2006; stock options
to purchase 20,000 shares for each of fiscal years 2005, 2006 and 2007; an automobile
allowance of $1,000 per month and a club membership. The agreement also provides that if a
Qualifying Termination (as defined in the agreement) occurs, Mr.&nbsp;Schneiderman will be entitled
to receive severance payments equal to 12&nbsp;months of his then-current annual base salary, an
additional cash payment of $50,000, payment of insurance premiums for a period of 12&nbsp;months,
and immediate vesting of all options.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The
October 5, 2005 offer of employment agreement with Mr. Greg W. Slack
provides for at-will employment with an initial annual salary of
$125,000. The agreement also provides for initial options to purchase
5,000 shares of the Company&#146;s common stock as well as the
opportunity to earn a bonus of up to 20% of base salary based upon
reaching certain performance-related goals. Effective February 10,
2006, the employment agreement was modified. Mr. Slack was promoted
to Corporate Controller, his base annual salary was set at
$140,000, and his bonus opportunity was increased to up to 25% of
base salary. The February 2006 agreement also includes a retention
bonus due and payable in two installment payments. The first
installment payment made on September 11, 2006 was for $145,602. The
second payment becomes due and payable on June 30, 2007 (and assuming
Mr. Slack&#146;s salary remains unchanged) is expected to be
approximately $44,250. Mr. Slack&#146;s current annual salary is
$177,000.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Agreements With Former Executive Officers</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In connection with certain Board and management changes on September&nbsp;12, 2006, the Company and
Randall L. Herrel, Sr., the Company&#146;s Chief Executive Officer, entered into the Agreement as
to
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Ashworth, Inc. Executive Employment Agreement with Randall L. Herrel, Sr. (the &#147;Herrel
Agreement&#148;), which amended and confirmed certain understandings regarding the Second Amended
and Restated Executive Employment Agreement dated February&nbsp;28, 2006 between the Company and
Mr.&nbsp;Herrel (the Herrel &#147;Employment Agreement&#148;). The Herrel Agreement provided for, among
other matters, (1)&nbsp;Mr.&nbsp;Herrel&#146;s confirmation that he will no longer be Chairman of the Board
of Directors or President, and (2)&nbsp;continued service as Chief Executive Officer until such
service is scheduled to terminate automatically on October&nbsp;17, 2006, unless earlier terminated
pursuant to the Herrel Agreement. Concurrent with the Herrel Agreement, Mr.&nbsp;Herrel submitted
a letter of resignation (the &#147;Resignation Letter&#148;), which confirmed that Mr.&nbsp;Herrel&#146;s
resignation of all employment and Director positions effective October&nbsp;17, 2006 was not a
result of any material disagreement with the Company as to its operations, policies or
practices.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Herrel Agreement provided that if Mr.&nbsp;Herrel&#146;s employment terminated on October&nbsp;17, 2006
in accordance with the Resignation Letter or if he resigned earlier for Constructive Discharge
(as defined in the Herrel Agreement), Mr.&nbsp;Herrel would receive (1)&nbsp;severance compensation in a
cash amount equal to $629,349, (2)&nbsp;immediate vesting of all outstanding stock options upon
termination, which will remain exercisable for two years after the date of termination,
<U>provided</U>, <U>however</U>, that no option can be exercised beyond its original
expiration date, (3)&nbsp;certain employee and other benefits for one year after the date of
termination, including medical, dental, life and disability insurance, an automobile allowance
of $1,250 per month, monthly dues for a country club membership, and a clothing allowance up
to $100 per month, and (4)&nbsp;reimbursement for accrued but unpaid vacation and out-of-pocket
business expenses reimbursable under the Herrel Employment Agreement.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Had Mr.&nbsp;Herrel been terminated without Cause (as defined in the Herrel Agreement) or by death
or disability prior to October&nbsp;17, 2006, then Mr.&nbsp;Herrel would have been entitled to receive
(1)&nbsp;severance compensation in a cash amount equal to $608,973 plus $582 per each calendar day
that Mr.&nbsp;Herrel was employed by the Company after September&nbsp;12, 2006 (including weekends and
holidays) until the date of his termination, (2)&nbsp;immediate vesting of all outstanding stock
options upon termination, which will remain exercisable for two years after the date of
termination, <U>provided</U>, <U>however</U>, that no option can be exercised beyond its
original expiration date, (3)&nbsp;certain employee and other benefits for one year after the date
of termination, including medical, dental, life and disability insurance, an automobile
allowance of $1,250 per month, monthly dues for a country club membership, and a clothing
allowance up to $100 per month, and (4)&nbsp;reimbursement for accrued but unpaid vacation and
out-of-pocket business expenses reimbursable under the Herrel Employment Agreement.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Had Mr.&nbsp;Herrel been terminated prior to October&nbsp;17, 2006 either for Cause by the Company or
because Mr.&nbsp;Herrel resigned earlier for any reason other than Constructive Discharge (as
defined in the Herrel Agreement), then the amount (if any) of severance compensation and
benefits would have been determined in accordance with the relevant provisions of the Herrel
Employment Agreement.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Herrel Employment Agreement provided for a base salary of not less than $325,000 and
bonuses to be determined by the Board on the basis of merit and the Company&#146;s financial
success and progress. No bonus or stock options were awarded to Mr.&nbsp;Herrel under the fiscal
2006 or fiscal 2005 bonus plans. For achieving certain objectives as set forth in the fiscal
2004 bonus plan, Mr.&nbsp;Herrel was awarded bonuses totaling $150,000 as well as options to
purchase 45,000 shares. A $75,000 bonus, as well as an option to purchase 17,713 shares, was
awarded to Mr.&nbsp;Herrel in December&nbsp;2003 because the Company achieved the goals set forth in the
fiscal 2003 bonus plan. The Herrel Employment Agreement also provided, among other benefits,
for a monthly automobile allowance and for the Company to maintain a life insurance policy for
$1,000,000, the beneficiary of which may be named by Mr.&nbsp;Herrel. The Herrel Employment
Agreement also included severance payments, ranging from one
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">to two times his then annual base
salary, upon termination of employment under specific circumstances, including death,
termination without cause, or change of control. In addition, in case of death or termination
without cause or in connection with a change of control, all of his unvested stock options
would immediately vest.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On February&nbsp;23, 2006, the Company entered into an employment agreement with Winston E. Hickman
which terminated in connection with his resignation effective November&nbsp;17, 2006. The
agreement provided for: a base salary of $300,000; a target bonus of 50% of base salary, with
the actual payment subject to the Board&#146;s discretion; the grant of options to purchase 50,000
shares of the Company&#146;s common stock, with half of the options vesting on each of the first
two anniversaries of Mr.&nbsp;Hickman&#146;s employment with the Company; and coverage under the
Company&#146;s benefits programs. No bonus was awarded to Mr.&nbsp;Hickman for fiscal 2006. The
agreement also provided that if Mr.&nbsp;Hickman had been terminated without Cause or resigned
under certain specified circumstances, Mr.&nbsp;Hickman would have been entitled to: a lump sum
payment of either one-half or all of his then current annual salary, depending on the timing
and circumstances of his termination or resignation; a pro rata bonus; and immediate vesting
of a pro rata number of stock options.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In connection with Winston E. Hickman&#146;s resignation effective November&nbsp;17, 2006 as Executive
Vice President and Chief Financial Officer of Ashworth, Inc. (the &#147;Company&#148;), the Company
entered into a release agreement with Mr.&nbsp;Hickman (the &#147;Release Agreement&#148;) on November&nbsp;16,
2006 whereby Mr.&nbsp;Hickman provided a standard release of any claims, complaints and lawsuits
against the Company and other related entities and persons. The Release Agreement also
provides that Mr.&nbsp;Hickman will receive continuing medical, dental and Exec-U-Care insurance
coverage for a period of eighteen months from December&nbsp;1, 2006 through May&nbsp;31, 2008 in
exchange for ten (10)&nbsp;full days of consulting services to be provided by Mr.&nbsp;Hickman on
reasonable and mutually agreed upon dates between November&nbsp;20,
2006 and May&nbsp;30, 2008, to assist with a professional transition of Executive Vice President
and Chief Financial Officer responsibilities and to advise on related matters.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On September&nbsp;16, 2005, the Company entered into an employment agreement with Peter S. Case,
which terminated in connection with his resignation effective on February&nbsp;1, 2006. The
agreement provided for a base salary of $225,000 and bonuses to be determined by the Board on
the basis of merit and the Company&#146;s financial success and progress up to a maximum of 50% of
the base salary, and a monthly automobile allowance. Mr.&nbsp;Case was also awarded options to
purchase 20,000 shares of the Company&#146;s stock with vesting on the first anniversary of the
date of grant. No bonus was awarded to Mr.&nbsp;Case under the fiscal 2005 bonus plan. The
agreement also provided that if a Qualifying Termination (as defined in the agreement) had
occurred within two years of the effective date of the agreement, Mr.&nbsp;Case would have been
entitled to severance payments equal to his then-current annual base salary, immediate vesting
of the options awarded under the agreement, and continued insurance benefits for up to one
year.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Change in Control Agreements</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Additionally, the Company has entered into change in control agreements with the following
current or former executives: Randall L. Herrel, Sr., Winston E. Hickman, Peter S. Case,
Peter E. Holmberg, Gary I. &#147;Sims&#148; Schneiderman and Greg W. Slack. The change in control
agreements with Messrs Hickman, Herrel and Case terminated due to their resignations from the
Company. Upon a qualifying termination in connection with a change in control, as defined in
each agreement, the executive would be entitled to severance payments (generally equal to the
executive&#146;s highest base salary with the
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Company in the prior three years, except that Mr.
Slack would receive an amount that is equal to nine months of his highest base salary for the
prior three years, that Mr.&nbsp;Herrel, if his agreement were still in effect, would receive an
amount equal to twice the sum of his highest base salary for the prior three years and his
average bonus for the prior two years, and Mr.&nbsp;Hickman, if his agreement were still in effect,
would receive an amount equal to one and a half times his highest base salary for the prior
three years), grossed up for applicable excise taxes imposed by Section&nbsp;4999 of the Internal
Revenue Code of 1986, as amended. In addition, Mr.&nbsp;Herrel&#146;s and Mr.&nbsp;Hickman&#146;s change in
control agreements, if they were still in effect, provide for the immediate vesting of all
unexercised stock options and the continuation of insurance benefits for up to two years
(except for Mr.&nbsp;Hickman who was only entitled to the continuation of insurance benefits for up
to 18&nbsp;months). Mr. Slack&#146;s change in control agreement
provides for continuation of insurance benefits for up to nine (9)
months. Effective as of February&nbsp;28, 2006, the employment and change in control
agreements for each of the then-current executive officers were amended to comply with Section
409A of the Internal Revenue Code, as amended.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Legal Proceedings</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">On January&nbsp;22, 1999, Milberg Weiss Bershad Hynes &#038; Lerach LLP filed a class action in the
United States District Court for the Southern District of California (the &#147;U.S. District
Court&#148;) on behalf of purchasers of the Company&#146;s common stock during the period between
September&nbsp;4, 1997 and July&nbsp;15, 1998. The action was subsequently consolidated with two
similar suits and plaintiffs filed their Amended and Consolidated Complaint on December&nbsp;17,
1999. Upon the Company&#146;s motion, the U.S. District Court dismissed the Complaint with leave
to amend on July&nbsp;18, 2000. On September&nbsp;18, 2000, plaintiffs served their Second
Consolidated Amended Complaint (the &#147;Second Amended Complaint&#148;). On November&nbsp;6, 2000, the
Company filed its motion to dismiss the Second Amended Complaint, which the U.S. District
Court granted, in part, and denied, in part. The remaining portions of the Second Amended
Complaint alleged that, among other things, during the class period and in violation of the
Securities Exchange Act of 1934, the Company&#146;s financial statements, as reported, did not
conform to generally accepted accounting principles with respect to revenues and inventory
levels. It further alleged that certain Company executives made false or misleading
statements or omissions concerning product demand and that two former executives engaged in
insider trading. On November&nbsp;8, 2004, the U.S.
District Court entered a Final Approval of Settlement. Under the settlement, all claims
were dismissed and the litigation was concluded in exchange for a payment of $15.25&nbsp;million,
approximately 82% of which was paid by Ashworth&#146;s insurance carriers. As part of the
settlement, Ashworth also agreed to adopt modifications to certain corporate governance
policies. Ashworth recorded a pre-tax charge in the third quarter of fiscal year 2004 of $3
million related to settlement of this suit.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company is party to other claims and litigation proceedings arising in the normal course
of business. Although the legal responsibility and financial impact with respect to such
other claims and litigation cannot currently be ascertained, the Company does not believe
that these other matters will result in payment by the Company of monetary damages, net of
any applicable insurance proceeds, that, in the aggregate, would be material in relation to
the consolidated financial position or results of operations of the Company.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>Licensing Agreement with Callaway Golf Company</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In May&nbsp;2001, Ashworth agreed to a multi-year exclusive licensing agreement with Callaway Golf
Company to design, market and distribute complete lines of men&#146;s and women&#146;s Callaway Golf
apparel. The agreement allows Ashworth to sell Callaway Golf apparel primarily in the United
States, Europe and Canada. The initial Callaway Golf apparel products shipped in April&nbsp;2002.
The multi-year
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-35<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">agreement has various minimum annual requirements for marketing expenditures
and royalty payments based on the level of net revenues. The Company believes that revenues
from the Callaway Golf apparel product line will be sufficient to cover such minimum royalty
payments. The agreement is effective until December&nbsp;31, 2010 and, at Ashworth&#146;s sole
discretion, may be extended for one five-year term provided that Ashworth meets or exceeds
certain minimum requirements for calendar years 2008 and 2009, that Ashworth gives notice of
its intention to renew by January&nbsp;1, 2010 and that Ashworth is not in material breach of the
agreement.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(10)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Other Related-Party Transactions</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company leases its Phenix City, Alabama distribution facility from STAG II Phenix City,
LLC, who purchased the building in fiscal 2006 from 16 Downing, LLC, which was a related party
owned by certain members of Gekko Brands, LLC&#146;s management. Total payments under the
operating lease for this facility made during the years ended
October&nbsp;31, 2006, 2005 and 2004 were
$400,000, $400,000 and $133,000, respectively. The lease agreement requires monthly payments of $33,000
through June&nbsp;6, 2012.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Seidensticker (Overseas) Limited (&#147;Seidensticker&#148;), a supplier of inventoried products to us,
owned approximately 5% of our outstanding common stock at October&nbsp;31, 2006. Additionally, the
President and Chief Executive Officer of Seidensticker (Overseas) Limited was elected to the
Company&#146;s Board of Directors effective January&nbsp;1, 2006. During the years ended October&nbsp;31,
2006, 2005 and 2004, we purchased approximately $1,571,000, $5,800,000 and $4,000,000 of
products from Seidensticker. We believe that the terms upon which we purchased the inventoried
products from Seidensticker are consistent with the terms offered to other, unrelated parties.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On May 5, 2006, the Company entered into a settlement agreement (the &#147;Agreement&#148;) with Knightspoint Partners II, L.P. and certain other entities and individuals, including Mr. Peter M. Weil and Mr. David M. Meyer (collectively, the &#147;Knightspoint Group&#148;) under which, among other matters, the Company agreed to appoint Mr. Weil and Mr. Meyer to its Board of Directors (the &#147;Board&#148;) effective May 8, 2006.  Pursuant to the Agreement, the Company reimbursed Knightspoint Group for its actual expenses incurred in connection with the proxy contest in the amount of approximately $165,000.  Mr. Meyer is a managing member of Knightspoint Partners LLC, an affiliate of Knightspoint Partners II, L.P.  Mr. Meyer currently serves as a Director on the Company&#146;s Board.
</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">On September 12, 2006, concurrent with his appointment to the Office of the Chairman, Mr. Weil, who is currently CEO and a Director of the Board, entered into an agreement with the Company to provide consulting services on corporate management and operations and decision-making within the Office of the Chairman (the &#147;Weil Agreement&#148;).  Mr. Weil was paid approximately $48,000 for such
services for the period of September 12, 2006 through October 29, 2006.  Mr. Weil also received an option grant to purchase 25,000 shares with an exercise price of 100% of then-current fair market value, 12,900 of which vested and 12,100 were terminated as of October 30, 2006 pursuant to the terms of the Weil Agreement. The Weil Agreement was terminated upon Mr. Weil&#146;s appointment as Chief Executive Officer effective October 30, 2006.</DIV></TD>
</TR>


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(11)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Income Taxes</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax
credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax
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.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The provision for income taxes for the years ended October&nbsp;31, 2006, 2005 and 2004 is as
follows:</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-36<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current provision:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(285,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(262,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,850,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(80,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,217,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">619,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">238,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">430,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,497,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred provision (benefit):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Federal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,074,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">793,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,439,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">972,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit related to option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">535,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"> </TD>
    <TD align="right">537,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"> </TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,469,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company&#146;s income before provision for income taxes was allocated between domestic and
foreign tax jurisdictions for the years ended October&nbsp;31, 2006, 2005 and 2004 as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(145,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,126,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,839,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,898,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">838,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,833,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,288,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,672,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">U.S. income taxes were not provided for on a cumulative total of approximately $3.9 million of undistributed earnings for certain non-U.S. subsidiaries.  Determination of the amount of unrecognized deferred tax liability for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable.
 The company currently intends to reinvest these earnings in
operations outside the U.S.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-37<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The components of the Company&#146;s deferred income tax assets and liabilities as of October&nbsp;31,
2006 and 2005 are as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">379,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">432,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,177,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,215,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other nondeductible accruals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,747,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,462,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other deductible capitalized cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total gross deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,094,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,494,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductible capitalized costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">577,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">State tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,562,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,448,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total gross deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,942,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,025,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
temporary differences described above represent differences between the tax basis of assets or
liabilities and their reported amounts in the financial statements that will result in taxable
or deductible amounts in future years when the reported amounts of the assets or liabilities
are recovered or settled. A portion of the deferred tax assets recognized relate to federal,
state and foreign deferred tax assets. Because the Company operates in multiple state and
foreign jurisdictions, it considered the need for a valuation allowance on a federal, state
and foreign basis, taking into account the effects of local tax law. Where a valuation
allowance was not recorded, the Company believes that there was sufficient positive evidence
to support its conclusion not to record a valuation allowance.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company has recorded a net deferred income tax asset of $1,152,000 and $1,469,000 as of
October&nbsp;31, 2006 and 2005, respectively.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">Management believes that the Company will utilize the  net deferred tax
assets in the future because: (1)&nbsp;the Company has a history of federal and foreign pre-tax
income and (2)&nbsp;management believes that the Company&#146;s businesses will be profitable and will
generate taxable income in the near term. However, there can
be no assurance that the Company will generate  taxable income or that all
of deferred tax assets will be utilized. The realization of this net asset may be dependent on
the Company&#146;s ability to generate sufficient taxable income in future years. Although
realization is not assured, management believes it is more likely than not that the net
deferred income tax asset will be realized. The amount of the net deferred income tax asset
considered realizable, however, could be reduced in the near term if tax rates are lowered.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-38<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>




<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">A reconciliation of the provision for income taxes at the statutory rate to the Company&#146;s
effective rate is as follows:
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computed income tax at the expected
statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">596,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(438,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,785,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State income tax, net of federal tax benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">824,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nondeductible expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign tax jurisdiction rate differential</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(92,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credits generated and used</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(345,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(382,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subpart F income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">355,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>

<TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision (benefit)&nbsp;for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">802,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(561,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,469,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">The Company has available at October&nbsp;31, 2006 unused foreign tax credits of $283,000, which
may provide future tax benefits and expire 2016. The Company also has available at October
31, 2006 unused alternative minimum tax credits of $12,000, which may provide future tax
benefits and do not expire.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(12)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Segment Information</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company has the following four reportable segments: Domestic; Gekko Brands, LLC;
Ashworth U.K., Ltd.; and Other International. Management evaluates segment performance based
primarily on revenues and income from operations. Interest income and expense, unusual or
infrequent items, and income tax expense are evaluated on a consolidated basis and are not
allocated to the Company&#146;s business segments. Segment information is summarized as follows as
of and for the years ended October&nbsp;31, 2006, 2005 and 2004:</DIV></TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-39<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">129,360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">133,176,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">130,825,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,768,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,511,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,571,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,987,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,416,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,117,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,485,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,685,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,589,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">209,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">204,788,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,102,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;from operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,427,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7,914,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,261,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,685,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,540,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,479,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,436,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,380,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,644,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,870,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,923,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,472,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,043,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,676,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,443,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">21,265,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">963,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">574,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,464,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,576,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,006,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">92,337,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">102,745,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,454,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,597,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,217,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,151,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,517,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,999,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,430,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,592,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,753,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,451,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,043,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164,714,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">159,486,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-lived assets, at cost:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,937,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58,206,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51,752,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,209,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,301,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,053,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,683,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,977,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,789,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,829,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">87,484,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">78,594,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,865,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,640,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation expense:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,707,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,869,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,029,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gekko Brands, LLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">370,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ashworth, U.K., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">331,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,556,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,527,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-40<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements, Continued

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>(13)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><B>Results By Quarter (Unaudited)</B></DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The unaudited results by quarter for the years ended October&nbsp;31, 2006 and 2005 are shown
below:</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
  <TD nowrap align="left"><B>Year ended</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>October 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(1) (3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(1) (3)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">40,612,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66,020,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">52,816,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">50,152,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,976,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,883,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,626,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,328,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,675,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,355,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average basic
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,404,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,495,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average diluted
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,182,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,560,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,624,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,520,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>&nbsp;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Third</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fourth</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
 <TD nowrap align="left"><B>Year ended</B></TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>First</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Second</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
 <TD nowrap align="left"><B>October 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Quarter</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(2) (3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(3)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">36,513,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">64,668,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,304,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55,304,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,635,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,083,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,005,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,190,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,811,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,383,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,238,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per basic share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average basic
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,726,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,813,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,929,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,020,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per diluted share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.16</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average diluted
shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,110,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,271,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,929,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,020,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">On November&nbsp;1, 2006, the Company adopted &#147;SFAS 123R&#148;. The unaudited results for the
first, second, third and fourth quarters of fiscal 2006 include compensation expense of
$109,000, $145,000, $102,000 and $123,000 related to the adoption of &#147;SFAS 123R&#148;.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The unaudited results for the third quarter of fiscal 2005 include inventory
markdowns, net of tax effect, of $2,040,000 and inventory write-downs, net of tax
effect, of $2,640,000.</DIV></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">The diluted EPS amounts for the first and fourth quarters of the year ended
October&nbsp;31, 2006 and third and fourth quarters of the year ended October&nbsp;31, 2005
were calculated using the basic
weighted&#151;average shares as the effect of stock options would be anti-dilutive due to
the Company&#146;s loss position in those quarters.</DIV></TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ASHWORTH, INC. AND SUBSIDIARIES</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Notes to Consolidated Financial Statements

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Board of Directors and Stockholders<BR>
Ashworth, Inc.:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Under date of January&nbsp;12, 2007, we reported on the consolidated balance sheets of Ashworth, Inc. (a
Delaware corporation) and subsidiaries as of October&nbsp;31, 2006 and 2005, and the related
consolidated statements of operations, stockholders&#146; equity, and cash flows for the years ended
October&nbsp;31, 2006 and 2005. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on this consolidated financial statement schedule based on
our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, such consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">                                                     /s/ Moss Adams, LLP
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Irvine, California<BR>
January&nbsp;12, 2007

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-42<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Board of Directors and Stockholders<BR>
Ashworth, Inc.:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">Under date of January&nbsp;27, 2005, we reported on the consolidated statements of operations,
stockholders&#146; equity, and cash flows of Ashworth, Inc. (a Delaware corporation) (the Company) for
the year ended October&nbsp;31, 2004. In connection with our audit of the aforementioned consolidated
financial statements, we also audited the related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on this consolidated financial statement schedule based on
our audit.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In our opinion, such consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">/s/KPMG LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Diego, California<BR>
January&nbsp;27, 2005

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-43<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ASHWORTH, INC. AND SUBSIDIARIES
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">SCHEDULE II &#151; VALUATION AND QUALIFYING ACCOUNTS

</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Allowances for Doubtful</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accounts and Sales</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Returns, Markdowns and</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Other Allowances</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,004,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,832,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,398,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,438,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,061,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,149,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,350,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Charged to Costs and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,664,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deductions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,826,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, October&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,188,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD><DIV style="text-align: justify">Includes $639,000 added through acquisition during the year ended October&nbsp;31, 2004.</DIV></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-44<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<DIV style="font-family: 'Times New Roman',Times,serif">





<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="024"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ASHWORTH, INC.<BR>
(Registrant)</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date: January 16, 2007&nbsp;</TD>
    <TD valign="top">BY:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Peter M. Weil
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Peter M. Weil&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="32%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Peter M. Weil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Peter M. Weil
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Greg W. Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President of Finance
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Greg W. Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;and
Corporate Controller</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/Detlef H. Adler
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Detlef H. Adler
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Stephen G. Carpenter
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Stephen G. Carpenter
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ John M. Hanson, Jr
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
John M. Hanson, Jr
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ James B. Hayes.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James B. Hayes
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ David M. Meyer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
David M. Meyer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ James G. O&#146;Connor
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James G. O&#146;Connor
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ John W. Richardson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">January&nbsp;16, 2007</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
John W. Richardson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->S-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<!-- link1 "EXHIBIT INDEX " -->
<DIV align="left"><A NAME="025"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Number</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Description of Exhibit</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer of Employment Agreement effective October&nbsp;10,
2005 by and between Ashworth, Inc. and Greg. W. Slack.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)(1)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Change in Control Agreement effective as of February
9, 2006 by and between Ashworth, Inc. and Greg W.
Slack.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10(aa)(2)*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Promotion and Retention Bonus Agreement effective
February&nbsp;10, 2006 by and between Ashworth, Inc. and
Greg. W. Slack.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsidiaries of the Registrant.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Registered Public Accounting Firm Consent.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Registered Public Accounting Firm Consent.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as
Adopted Pursuant to Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002 by Peter M. Weil.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">31.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to Rules&nbsp;13a-14 and 15d-14, as
Adopted Pursuant to Section&nbsp;302 of the Sarbanes-Oxley
Act of 2002 by Greg W. Slack.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as
Adopted Pursuant to Section&nbsp;906 of the Sarbanes-Oxley
Act of 2002 by Peter M. Weil.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">32.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification Pursuant to 18 U.S.C. Section&nbsp;1350, as
Adopted Pursuant to Section&nbsp;906 of the Sarbanes-Oxley
Act of 2002 by Greg W. Slack.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->S-2<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AA)
<SEQUENCE>2
<FILENAME>a26458exv10wxaay.htm
<DESCRIPTION>EXHIBIT 10.(AA)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wxaay</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10(aa)
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">October&nbsp;5, 2005
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Greg W. Slack<BR>
13858 Freeport Road<BR>
San Diego, CA 92129

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">Re: Employment at Ashworth, Inc.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Slack:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In accordance with our recent discussions, we are pleased to confirm our offer to you of a position
with Ashworth, Inc. (the &#147;Company&#148;) upon the following terms and conditions:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Position; Reporting; Commencement</U>. The initial position title shall be Director of
Internal Audit and you shall initially report to The Audit Committee. Additional reporting
responsibilities will be to Peter Case in his position of Executive VP / CFO / Treasurer. You
shall commence employment effective on or before October&nbsp;10, 2005. You will be required to
observe the Company&#146;s personnel and business policies and procedures. In the event of any
conflict, the terms of this letter will control.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Base Salary; Reviews</U>. You will receive a bi-weekly salary of $4,807.70, less
applicable withholding and deductions, which is payable every other Friday. Employees are
generally given performance reviews in or about January of each year.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Savings Plan</U>. You will be eligible to participate in the Company&#146;s 401(k) Plan at
the first entry date following the completion of six months continuous employment with the
Company. Under the current provisions, you will be eligible as of July&nbsp;1, 2006.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Stock Options</U>: The Company will grant you 5,000 options to purchase shares of the
Company&#146;s common stock at an exercise price equal to the closing share price the day before
your employment commences. The options will vest over a three-year period, i.e. 1,666 vesting
on the one-year anniversary of employment commencement; 1,667 vesting on the two-year
anniversary of employment commencement; and 1,667 vesting on the three-year anniversary of
employment commencement. Options will be exercisable for a period of time from the vesting
date as defined by the Company&#146;s Stock Option Plan. You have an opportunity to receive
additional stock options each year during the annual review process</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Bonus:</U> You have an opportunity to receive a 20% bonus ($25,000) of your annual
salary if the Company meets the plan. In order to be eligible for the bonus program you must
be employed with Ashworth Inc. through the end of each fiscal year.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Insurance Benefits</U>. The Company will provide you with coverage under its group
medical, dental and life insurance policies as more specifically described in the group
insurance materials which will be provided to you upon your commencement of employment. The
cost of the medical and dental coverage will be shared between you and the Company, depending
on your plan and coverage elections. Under the current provisions, you will be eligible as of
December&nbsp;1, 2005. The Company reserves the right to change, modify or eliminate such benefits
or coverages in its discretion.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">7.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Vacation: </U> Paid vacation time begins to accrue following the completion of ninety
days of service. Upon the successful completion of ninety days of service, you will be
credited with paid vacation hours from date of hire. You will accrue 4.61 hrs. per pay-period
a total, of 3&nbsp;weeks per year</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">8.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Business Expenses, Mileage Reimbursement and Clothing Allowance</U>. You will receive
reimbursement for normal, ordinary and reasonable business expenses upon your submission of
receipts substantiating the expenses claimed in accordance with Company policy. As part of
reasonable expenses, you will be</DIV></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">October&nbsp;5, 2005
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Greg W. Slack<BR>
Page 2 of 2
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">entitled to reimbursement for business usage of your personal automobile. You will receive a
Clothing Allowance in accordance with Company policy of $50.00 per month.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">9.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Confidentiality; Use of Licensed Software; Solicitation of Employees; Return of Property;
Termination</U>. You acknowledge that, in the course of your employment with the Company, you
will have access to confidential information concerning the organization and functioning of
the business of the Company, and that such information is a valuable trade secret and the sole
property of the Company. Accordingly, except as required by law, legal process, or in
connection with any litigation between the parties hereto with respect to matters arising out
of this agreement, you agree that you will not, at any time during your employment with the
Company or after such employment, whether such employment is terminated as a
result of your resignation or discharge, disclose or furnish any such information to any
person other than an officer of the Company, and you will make no use of any such
information for your personal benefit.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The Company licenses the use of computer software from a variety of outside companies and,
unless authorized by the software developer, does not have the right to reproduce it. You
may use software only in accordance with the license agreement, whether on local area
networks or on multiple machines. If you learn of any misuse of software or related
documentation within the Company, you must notify your department manager. If you make,
acquire or use unauthorized copies of such computer software, you shall be disciplined as
appropriate under the circumstances. Such discipline may include termination.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">You agree that for a period of two years from the date of voluntary or involuntary
termination, you will not solicit on your behalf, or on behalf of a third party, any then
current employee of the Company, to leave his or her employment with the Company for
employment with another employer.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">You further agree that in the event of such termination, whether voluntary or involuntary,
you will not remove from the offices of the Company any personal property that does not
rightfully and legally belong to you and that you will return on the date of your said
termination, to an authorized representative of the Company, any and all property belonging
to the Company. You also agree that you will provide passwords on request for personal
computer files.</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">10.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>At-Will Employment</U>. You understand and agree that you are being employed for an
unspecified term and that this is an &#147;at-will&#148; employment relationship. This means that
either you or the Company may terminate your employment at will at any time with or without
cause or notice. This at-will aspect of your employment, which includes the right of the
Company to transfer, discipline, demote and/or reassign, may not be modified, amended or
rescinded except by an individual written agreement signed by both you and the Company&#146;s
President. This letter sets forth the entire agreement between the parties and there are no
prior or contemporaneous representations, promises or conditions, whether oral or written, to
the contrary.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">This offer of employment is contingent upon the satisfactory completion of a background check,
verifying that the information provided by you on your application and resume is accurate and
correct. The Company reserves the right to withdraw an offer of employment, or to terminate
employment, at any time based on information arising from the background check.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">If you are in agreement with the terms of this letter, please sign and return one copy of the
enclosed letter to the Human Resource Department to effect the commencement of your employment. If
you have any questions, please contact me at your earliest convenience.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sincerely,

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/Rosie Rivera</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Rosie Rivera
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Director of Human Resources</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ACCEPTED AND AGREED TO THIS<BR>
<U>10 DAY OF October, 2005</U>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="78%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/Greg W. Slack</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Greg W. Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AA)(1)
<SEQUENCE>3
<FILENAME>a26458exv10wxaayx1y.htm
<DESCRIPTION>EXHIBIT 10.(AA)(1)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wxaayx1y</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10(aa)(1)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AGREEMENT RE: CHANGE IN CONTROL</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT RE: CHANGE IN CONTROL (this &#147;Agreement&#148;) is dated as of February&nbsp;9, 2006 and is
entered into by and between Greg Slack (&#147;Executive&#148;) and Ashworth, Inc., a Delaware corporation
(the &#147;Company&#148;).
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>Background</B></U>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes that because of its position in the industry, financial resources and
historical operating results there is a possibility that the Company may become the subject of a
Change in Control (as defined below), either now or at some time in the future.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company believes that it is in the best interest of the Company and its stockholders to
foster Executive&#146;s objectivity in making decisions with respect to any pending or threatened Change
in Control of the Company and to assure that the Company will have the continued dedication and
availability of Executive, notwithstanding the possibility, threat or occurrence of a Change in
Control. The Company believes that these goals can best be accomplished by alleviating certain of
the risks and uncertainties with regard to Executive&#146;s financial and professional security that
would be created by a pending or threatened Change in Control and that inevitably would distract
Executive and could impair his ability to objectively perform his duties for and on behalf of the
Company. Accordingly, the Company believes that it is appropriate and in the best interest of the
Company and its stockholders to provide to Executive compensation arrangements upon a Change in
Control that lessen Executive&#146;s financial risks and uncertainties and that are reasonably
competitive with those of other corporations.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With these and other considerations in mind, the Compensation Committee of the Company has
authorized the Company to enter into this Agreement with the Executive to provide the protections
set forth herein for Executive&#146;s financial security following a Change in Control.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration the receipt of which is hereby acknowledged, it is hereby agreed as follows:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>Agreement</B></U>

</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Term of Agreement</U>. This Agreement shall be effective from the date first written
above and, subject to the provisions of Section&nbsp;4, shall extend to (and thereupon automatically
terminate) one (1)&nbsp;day after Executive&#146;s termination of employment with the Company for any reason.
No termination of this Agreement shall limit, alter or otherwise affect Executive&#146;s rights
hereunder with respect to a Change in Control which has occurred prior to such termination,
including without limitation Executive&#146;s right to receive the various benefits hereunder.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Purpose of Agreement</U>. The purpose of this Agreement is to provide that, in the
event of a &#147;Change in Control,&#148; Executive may become entitled to receive certain additional
benefits, as described herein, in the event of his termination under specified circumstances.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Change in Control</U>. As used in this Agreement, the phrase &#147;Change in Control&#148; shall
mean:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 1 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Except as provided by subparagraph (iii)&nbsp;hereof, the acquisition (other than from the
Company) by any person, entity or &#147;group&#148;, within the meaning of Section&nbsp;13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;) (excluding, for this purpose,
the Company or its subsidiaries, or any executive benefit plan of the Company or its subsidiaries
which acquires beneficial ownership of voting securities of the Company), of beneficial ownership
(within the meaning of Rule&nbsp;13d-3 promulgated under the Exchange Act) of forty percent (40%) or
more of either the then outstanding shares of common stock or the combined voting power of the
Company&#146;s then outstanding voting securities entitled to vote generally in the election of
directors; or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Individuals who, as of the date hereof, constitute the Board of Directors of the Company
(as of the date hereof the &#147;Incumbent Board&#148;) cease for any reason to constitute at least a
majority of the Board of Directors of the Company, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by the Company&#146;s
stockholders, is or was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election contest relating to the election
of the Directors of the Company, as such terms are used in Rule&nbsp;14a-11 of Regulation&nbsp;14A
promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Approval by the stockholders of the Company of a reorganization, merger or consolidation
with any other person, entity or corporation, other than
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of another entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the Company or such
other entity outstanding immediately after such merger or consolidation, or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) a merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires forty percent (40%) or more of the
combined voting power of the Company&#146;s then outstanding voting securities; or
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;Approval by the stockholders of the Company of a plan of complete liquidation of the
Company or an agreement for the sale or other disposition by the Company of all or substantially
all of the Company&#146;s assets.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Effect of a Change in Control</U>. In the event of a Change in Control, Sections&nbsp;6
through 11 of this Agreement shall become applicable to Executive. These Sections shall continue to
remain applicable until the third anniversary of the date upon which the Change in Control occurs.
On such third anniversary date, and provided that the employment of Executive has not been
terminated on account of a Qualifying Termination (as defined in Section&nbsp;5 below), this Agreement
shall terminate and be of no further force or effect.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Qualifying Termination</U>. If within one (1)&nbsp;year following, or within ninety (90)
days prior to, a Change in Control Executive&#146;s employment with the Company and its affiliated
companies is terminated, such termination shall be conclusively considered a &#147;Qualifying
Termination&#148; unless:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 2 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Executive voluntarily terminates his employment with the Company and its affiliated
companies. Executive, however, shall <U>not</U> be considered to have voluntarily
terminated his employment with the Company and its affiliated companies if he elects to
terminate his employment because his overall compensation plan is reduced or adversely
modified in any material respect or his authority or duties are materially changed. For
such purposes, Executive&#146;s authority or duties shall be considered to have been &#147;materially
changed&#148; if, without Executive&#146;s express and voluntary written consent, there is any
substantial diminution or adverse modification in his title, status, overall position, or
responsibilities.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The termination is on account of Executive&#146;s death or Disability. For such
purposes, &#147;Disability&#148; shall mean a physical or mental incapacity as a result of which
Executive becomes unable to continue the performance of his responsibilities for the Company
and its affiliated companies for a period of three (3)&nbsp;months.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Executive is involuntarily terminated for &#147;Cause.&#148; For this purpose, &#147;Cause&#148; shall
mean:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Executive&#146;s willful and deliberate refusal to comply with a lawful,
instruction of the CEO or Board of Directors, which refusal is not remedied by
Executive within a reasonable period of time after his receipt of written notice
from the Company identifying the refusal, so long as the instruction is consistent
with the scope and responsibilities of Executive&#146;s position;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Executive&#146;s act or acts of personal dishonesty;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Executive&#146;s conviction of a felony;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Executive&#146;s violation of the Company&#146;s policies and/or code of conduct;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Executive&#146;s violation of any confidentiality or non-competition agreement
with the Company or any Affiliate of the Company; or
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The willful engaging by Executive in misconduct which is injurious to the
Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Severance Payment</U>. If Executive&#146;s employment is terminated as a result of a
Qualifying Termination, the Company shall pay Executive within thirty (30)&nbsp;days after the
Qualifying Termination a cash lump sum equal to (9)&nbsp;months of Executive&#146;s base salary (the
&#147;Severance Payment&#148;).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) For purposes of this Agreement, Executive&#146;s &#147;base salary&#148; shall equal the
Executive&#146;s highest annual salary rate with the Company within the three year period ending
on the date of Executive&#146;s Qualifying Termination.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In lieu of a cash lump sum, Executive may, in his sole discretion, elect to receive
the Severance Payment provided by this Section in equal annual installments over
<U>three</U> (3)&nbsp;years. Such installments shall be paid to Executive on each anniversary
of the date of Executive&#146;s Qualifying Termination, beginning with the first such anniversary
and continuing on each such anniversary thereafter until fully paid. Such election to
receive the Severance Payment in installments may be made and/or revoked
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 3 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">by Executive at any time prior to the occurrence of a Change in Control by written
notice to the Board of Directors of the Company. Upon the occurrence of a Change in
Control, any such election to receive the Severance Payment in installments that has been
made and not revoked prior to the Change in Control shall be irrevocable and binding on both
the Company and Executive. In the event that at the time of a Change in Control there is
not in effect an election by Executive to receive the Severance Payment in installments,
such Severance Payment shall be paid to Executive in a single cash lump sum as provided in
subparagraph (a)&nbsp;above.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Severance Payment hereunder is in lieu of any severance payment that Executive
might otherwise be entitled to from the Company in the event of a Change in Control under
the Company&#146;s applicable severance pay policies, if any, or under any other oral or written
agreement; <U>provided</U>, <U>however</U>, that Executive shall continue to be entitled
to receive the severance pay benefits under the Company&#146;s applicable policies, if any, or
under another written agreement if and to the extent Executive&#146;s termination is not a
Qualifying Termination after, or within ninety (90)&nbsp;days prior to, a Change in Control.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Health Care Benefits</U>. The Company shall continued health care coverage for nine
(9)&nbsp;months.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>Indemnification for Excise Tax</U>. In the event that Executive becomes entitled to
receive a Severance Payment in accordance with the provisions of Section&nbsp;6 above, and such
Severance Payment and any other benefits or payments (including transfers of property) that
Executive receives, or is to receive, pursuant to this Agreement or any other agreement, plan or
arrangement with the Company in connection with a Change in Control of the Company (&#147;Other
Benefits&#148;) shall be subject to the tax imposed pursuant to Section&nbsp;4999 of the Internal Revenue
Code of 1986, as amended (the &#147;Code&#148;)(or any successor thereto) or any comparable provision of
state law (an &#147;Excise Tax&#148;), the following rules shall apply:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company shall pay to Executive, within thirty (30)&nbsp;days after the Executive&#146;s
Qualifying Termination, an additional amount (the &#147;Gross-Up Payment&#148;) such that the net
amount retained by Executive, after deduction of any Excise Tax with respect to the
Severance Payment or the Other Benefits and any federal, state and local income tax, FICA
tax, and Excise Tax upon such Gross-Up Payment, is equal to the amount that would have been
retained by Executive if such Excise Tax were not applicable. It is intended that Executive
shall not suffer any loss or expense resulting from the assessment of any Excise Tax or the
Company&#146;s reimbursement of Executive for payment of any such Excise Tax.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) For purposes of determining whether any of the Severance Payments or Other Benefits
will be subject to an Excise Tax and the amount of such Excise Tax, (i)&nbsp;any other payments
or benefits received or to be received by Executive in connection with a Change in Control
of the Company or Executive&#146;s termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any person
whose actions result in a Change in Control or any person affiliated with the Company or
such person) shall be treated as &#147;parachute payments&#148; within the meaning of Section
280G(b)(2) of the Code (or any successor thereto), and all &#147;excess parachute payments&#148;
within the meaning of Section&nbsp;280G(b)(l) of the Code (or any successor thereto) shall be
treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the
Company&#146;s independent auditors
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 4 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">and acceptable to Executive such other payments or benefits (in whole or in part) do
not constitute parachute payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered within the meaning of
Section&nbsp;280G(b)(4) of the Code (or any successor thereto), (ii)&nbsp;the amount of the Severance
Payments and Other Benefits which shall be treated as subject to the Excise Tax shall be
equal to the lesser of (A)&nbsp;the total amount of the Severance Payments or Other Benefits or
(B)&nbsp;the amount of excess parachute payments within the meaning of Sections&nbsp;280G(b)(l) and
(4)&nbsp;of the Code (or any successor or successors thereto), after applying clause (i), above,
and (iii)&nbsp;the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company&#146;s independent auditors in accordance with the principles of
Sections&nbsp;280G(d)(3) and (4)&nbsp;of the Code (or any successor or successors thereto).
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) For purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality of Executive&#146;s
residence on the date of the Executive&#146;s Qualifying Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and
local taxes.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) In the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of the Executive&#146;s Qualifying Termination,
the Executive shall repay to the Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such
reduction plus interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code (or any successor thereto) (the &#147;Applicable Rate&#148;). In the event
that the Excise Tax is determined to exceed the amount taken into account hereunder at the
time of such Qualifying Termination (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus interest, determined at
the Applicable Rate, payable with respect to such excess) at the time that the amount of
such excess is finally determined.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Rights and Obligations Prior to a Change in Control</U>. Prior to the date which is
ninety (90)&nbsp;days before a Change in Control, the rights and obligations of Executive with respect
to his employment by the Company shall be determined in accordance with the policies and procedures
adopted from time to time by the Company and the provisions of any written employment contract in
effect between the Company and Executive from time to time. This Agreement deals only with certain
rights and obligations of Executive subsequent, or within ninety (90)&nbsp;days prior to, a Change in
Control, and the existence of this Agreement shall not be treated as raising any inference with
respect to what rights and obligations exist prior to the date which is ninety (90)&nbsp;days before a
Change in Control. Unless otherwise expressly set forth in a separate written employment agreement
between Executive and the Company, the employment of Executive is expressly at-will, and Executive
or the Company may terminate Executive&#146;s employment with the Company at any time and for any
reason, with or without cause, provided that if such termination occurs within ninety (90)&nbsp;days
prior to or one (1)&nbsp;year after a Change in Control and constitutes a Qualifying Termination (as
defined in Section&nbsp;5 above) the provisions of this Agreement shall govern the payment of the
Severance Payment and certain other benefits as provided herein.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 5 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Non-Exclusivity of Rights</U>. Subject to Section 6(c) hereof, nothing in this
Agreement shall prevent or limit Executive&#146;s continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its affiliated
companies and for which Executive may qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any stock option or other agreements with the Company or
any of its affiliated companies. Except as otherwise provided in Section 6(c) hereof, amounts
which are vested benefits or which Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at or subsequent to the date of any
Qualified Termination shall be payable in accordance with such plan or program.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Full Settlement</U>. The Company&#146;s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counter-claim, recoupment, defense or other claim, right or action which the Company may
have against Executive or others. In no event shall Executive be obligated to seek other
employment or to take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of
Executive&#146;s successful collection efforts to receive amounts payable hereunder, or as a result of
any contest (regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by Executive about the amount of any
payment pursuant to this Section).
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Successors</U><B>.</B>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Agreement is personal to Executive, and without the prior written consent of
the Company shall not be assignable by Executive other than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be enforceable by
Executive&#146;s legal representatives.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the Company.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U>Governing Law</U>. This Agreement is made and entered into in the State of
California, and the internal laws of California shall govern its validity and interpretation in the
performance by the parties hereto of their respective duties and obligations hereunder.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U>Modifications</U>. This Agreement may be amended or modified only by an instrument in
writing executed by all of the parties hereto.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. <U>Dispute Resolution</U>: Executive and the Company will utilize a system of binding
arbitration to resolve all disputes that may arise out of the employment context. Both the Company
and Executive agree that any claim, dispute, and/or controversy that either Executive may have
against the Company (or its owners, directors, officers, managers, employees, agents, and parties
affiliated with its employee benefit and health plans) or the Company may have against Executive,
arising from, related to, or having any relationship or connection whatsoever with Executive&#146;s
seeking employment with, employment by, or other association with the Company, shall be submitted
to and determined exclusively by binding arbitration under the Federal Arbitration Act, in
conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec 1280 et
seq., including section 1283.05 and all of the Act&#146;s other
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 6 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">mandatory and permissive rights to discovery). Included within the scope of this Agreement
are all disputes, whether based on tort, contract, statute (including, but not limited to, any
claims or discrimination and harassment, whether they be based on the California Fair Employment
and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, or any other state or
federal law or regulation), equitable law, or otherwise. However, nothing herein shall prevent
Executive from filing and pursuing proceedings before the California Department of Fair Employment
and Housing, or the United States Equal Employment Opportunity Commission (although if Executive
chooses to pursue a claim following the exhaustion of such administrative remedies, that claim
would be subject to the provisions of this Agreement). In addition to any other requirements
imposed by law, the arbitrator selected shall be a retired California Superior Court Judge and
shall be subject to disqualification on the same grounds as would apply to a judge of such court.
To the extent applicable in civil actions in California courts, the following shall apply and be
observed: all rules of pleading (including the right of demurrer), all rules of evidence, and all
rights to resolution of the dispute by means of motions for summary judgment, judgment on the
pleadings, and judgment under Code of Civil Procedure Section&nbsp;631.8. Resolution of the dispute
shall be based solely upon the law governing the claims and defenses pleaded, and the arbitrator
may not invoke any basis (including but not limited to, notions of &#147;just cause&#148;) other than such
controlling law. The arbitrator shall have the immunity of a judicial officer from civil liability
when acting in the capacity of an arbitrator, which immunity supplements any other existing
immunity. Likewise, all communications during or in connection with the arbitration proceedings
are privileged in accordance with Cal. Civil Code Section&nbsp;47(b). As reasonably required to allow
full use and benefit of this agreement&#146;s modification to the Act&#146;s procedures, the arbitrator shall
extend the times set by the Act for the giving of notices and setting of hearings. Awards shall
include the arbitrator&#146;s written reasoned opinion.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U>Notices</U>. Any notice or communications required or permitted to be given to the
parties hereto shall be delivered personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at
such other addresses the party addressed may have substituted by notice pursuant to this Section:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ashworth, Inc.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greg Slack</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2765 Loker Avenue West
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">13858 Freeport Road</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Carlsbad, California 92010
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">San Diego, CA 92129</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attn: &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;<U>Captions</U>. The captions of this Agreement are inserted for convenience and do not
constitute a part hereof.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;<U>Severability</U>. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this<SUB style="font-size: 85%; vertical-align: text-bottom"> </SUB>Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein and there shall be deemed substituted for such invalid,
illegal or unenforceable provision such other provision as will most nearly accomplish the intent
of the parties to the extent permitted by the applicable law. In case this Agreement, or any one
or more of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof
shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other
governmental jurisdiction or subdivision thereof.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio --> 7 of 8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;<U>Counterparts</U>. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute one in the same
Agreement.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS HEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year first written above in Carlsbad, California.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">Dated: February&nbsp;9, 2006</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">ASHWORTH, INC.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/Randall L. Herrel, Sr.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Randall L. Herrel, Sr.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"> Chairman, President and CEO</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">Dated: February&nbsp;9, 2006</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">GREG SLACK</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/Greg Slack
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Greg Slack
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --> 8 of 8<!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AA)(2)
<SEQUENCE>4
<FILENAME>a26458exv10wxaayx2y.htm
<DESCRIPTION>EXHIBIT 10.(AA)(2)
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10wxaayx2y</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10(aa)(2)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">February&nbsp;10, 2006

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Mr.&nbsp;Greg Slack<BR>
13858 Freeport Road<BR>
San Diego, CA 92129

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Re: Employment at Ashworth, Inc.

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Slack:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">In accordance with our recent discussions, we are pleased to confirm our offer to you of a
promotion with Ashworth, Inc. (the &#147;Company&#148;) upon the following terms and conditions:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Position; Reporting; Commencement</U>. The position title shall be Corporate Controller
and you shall initially report to Randy Herrel in his position of Chairman/CEO, effective
February&nbsp;7, 2006. You will be required to observe the Company&#146;s personnel and business
policies and procedures. In the event of any conflict, the terms of this letter will control.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Base Salary; Reviews</U>. You will receive a bi-weekly salary of $5,384.62, less
applicable withholding and deductions, which is payable every other Friday.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Bonus:</U> You have an opportunity to receive a 25% bonus ($35,000) of your annual
salary if the Company meets the plan. In order to be eligible for the bonus program you must
be employed with Ashworth Inc. through the end of each fiscal year.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Retention Bonus</U>: You will receive two guaranteed payments of a retention bonus as
follows. The first payment, equal to six months salary (net pay of $70,000), shall be made
after the 3<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> quarter 10-Q is filed, (September&nbsp;11, 2006). In order to be eligible
for the first payment you must be employed with Ashworth Inc. through September&nbsp;11, 2006.
Should Ashworth terminate your employment for reasons other than cause, on or prior to
September&nbsp;11, 2006 you will receive the retention bonus as described for September&nbsp;11, 2006.
In addition, you will receive a second retention payment of $14,500 (net pay) to be paid on
June&nbsp;30, 2007.</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Savings Plan/Insurance Benefits</U>. Your savings plan will remain the same. In
addition to your existing insurance benefits you will be eligible for Ashworth&#146;s Exec-U-Care
health benefits</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">6.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify"><U>Business Expenses, Mileage Reimbursement and Clothing Allowance</U>. You will receive
reimbursement for normal, ordinary and reasonable business expenses upon your submission of
receipts substantiating the expenses claimed in accordance with Company policy. As part of
reasonable expenses, you will be
entitled to reimbursement for business usage of your personal automobile. You will receive a
Clothing Allowance in accordance with Company policy of $100.00 per month.</DIV></TD>
</TR>

</TABLE>
</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">If you are in agreement with the terms of this letter, please sign and return one copy of the
enclosed letter to the Human Resource Department to effect the commencement of your employment.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">Sincerely,
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/Randall L. Herrel, Sr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Randall L. Herrel, Sr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chairman, President and CEO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ACCEPTED AND AGREED TO THIS<BR>
<U>10</U> DAY OF February&nbsp;2006

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/Greg Slack
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Greg Slack
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>5
<FILENAME>a26458exv21.htm
<DESCRIPTION>EXHIBIT 21
<TEXT>
<HTML>
<HEAD>
<TITLE>exv21</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 21
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 12pt"><B>ASHWORTH, INC.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SUBSIDIARIES OF THE REGISTRANT.</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>State or other jurisdiction</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of subsidiary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>of incorporation or organization</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store I, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store II, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Store III, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth EDC, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth Acquisition Corp
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Delaware</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gekko Brands, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kudzu, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The Game, LLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Alabama</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ashworth U.K., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">England</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>6
<FILENAME>a26458exv23w1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 23.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSENT</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the registration statements (Nos. 33-92580,
333-51730, 33-35516, 33-41455, 33-47502, 33-54206 and 33-66040) on Form S-8 of our report dated
January&nbsp;12, 2007, relating to the consolidated balance sheet of Ashworth, Inc. and subsidiaries as
of October&nbsp;31, 2006, and the related consolidated statements of operations, stockholders&#146; equity
and cash flows for each of the years in the two-year period ended October&nbsp;31, 2006, and the related
consolidated financial statement schedule, management&#146;s assessment on the effectiveness of internal
control over financial reporting, and the effectiveness of internal controls over financial
reporting, appearing in this Annual Report on Form 10-K of Ashworth, Inc. and subsidiaries for the
year ended October&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"> /s/ Moss
Adams LLP<BR>
Irvine, California<BR>
January&nbsp;12, 2007

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>7
<FILENAME>a26458exv23w2.htm
<DESCRIPTION>EXHIBIT 23.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv23w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 23.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Board of Directors<BR>
Ashworth, Inc.:

</DIV>
<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">We consent to the incorporation by reference in the registration statements (Nos. 333-51730,
33-92580,  33-35516, 33-41455, 33-47502, 33-54206, and 33-66040) on Form S-8 of Ashworth,
Inc. and subsidiaries of our report dated January&nbsp;27, 2005, with respect to the consolidated
statements of operations, stockholders&#146; equity, and cash flows of Ashworth, Inc. and subsidiaries
for the year ended October&nbsp;31, 2004, and our report on the related consolidated financial statement
schedule, which reports appear in the October&nbsp;31, 2006 annual report on Form 10-K of Ashworth, Inc.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/KPMG LLP

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Diego, California<BR>
January&nbsp;16, 2007

</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>8
<FILENAME>a26458exv31w1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 31.1
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">I, Peter M. Weil, Chief Executive Officer of Ashworth, Inc., certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have reviewed this report on Form 10-K of Ashworth, Inc.;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(a)&nbsp;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;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(b)&nbsp;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;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">Date: January&nbsp;16, 2007
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">/s/ Peter M. Weil<BR>
<DIV style="font-size: 1pt; border-top: 1px solid #000000; margin-right: 30%">&nbsp;</DIV>Peter M. Weil,<BR>
Chief Executive Officer
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>9
<FILENAME>a26458exv31w2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 31.2
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">I, Greg W. Slack, Vice-President, Corporate Controller and Principal Financial and Accounting
Officer of Ashworth, Inc., certify that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">I have reviewed this report
on Form 10-K of Ashworth, Inc.;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">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;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules&nbsp;13a-15(f) and 15d-15(f)) for the registrant and have:</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(a)&nbsp;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;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(b)&nbsp;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;
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;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
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over
financial reporting that occurred during the registrant&#146;s most recent fiscal quarter
(the registrant&#146;s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant&#146;s
internal control over financial reporting; and
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="text-align: justify">The registrant&#146;s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant&#146;s
auditors and the audit committee of the registrant&#146;s board of directors (or persons
performing the equivalent functions):</DIV></TD>
</TR>

</TABLE>
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(a)&nbsp;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&#146;s ability to record, process, summarize and report financial
information; and
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees
who have a significant role in the registrant&#146;s internal control over financial
reporting.
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 12pt">Date: January&nbsp;16, 2007
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">/s/ Greg W. Slack
<DIV style="font-size: 1pt; border-top: 1px solid #000000; margin-right: 30%">&nbsp;</DIV>Greg W. Slack,<BR>
Vice-President, Corporate Controller and Principal Financial<BR>
and Accounting Officer

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>10
<FILENAME>a26458exv32w1.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 32.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">I, Peter M. Weil, in my capacity as Chief Executive Officer and Director of Ashworth, Inc. (the
&#147;Registrant&#148;), do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;the
Annual Report of the Registrant, on Form 10-K for the year ended
October&nbsp;31, 2006
(the &#147;Report&#148;), to which this certification is attached as an exhibit fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Registrant.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated: January&nbsp;16, 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Peter M. Weil<DIV style="font-size: 1pt; border-top: 1px solid #000000; margin-right: 30%">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Peter M. Weil,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Executive Officer and Director</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906 has been provided to the
Registrant and will be retained by the Registrant and furnished to the Securities and Exchange
Commission or its staff upon request.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>11
<FILENAME>a26458exv32w2.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 32.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350,<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">I, Greg W. Slack, in my capacity as Vice-President, Corporate Controller and Principal Financial
and Accounting Officer of Ashworth, Inc. (the &#147;Registrant&#148;), do hereby certify in accordance with
18 U.S.C. 1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge:
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;the
Annual Report of the Registrant, on Form 10-K for the year ended
October&nbsp;31, 2006
(the &#147;Report&#148;), to which this certification is attached as an exhibit fully complies with the
requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;the information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Registrant.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dated: January&nbsp;16, 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Greg W.
Slack<DIV style="font-size: 1pt; border-top: 1px solid #000000; margin-right: 20%">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greg W. Slack,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice-President, Corporate Controller, Principal Financial and</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Accounting Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906 has been provided to the
Registrant and will be retained by the Registrant and furnished to the Securities and Exchange
Commission or its staff upon request.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
</SUBMISSION>
