For the fiscal year ended December 31, 2001

OR

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes   [  ] No

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

At March 14, 2002, the aggregate market value of the Registrant's Common Stock held by nonaffiliates of the Registrant was $5,063,772 based on the closing sales price of $0.38 per share of the Registrant's Common Stock on the Nasdaq Stock Market's National Market.

The number of outstanding shares of the Registrant's Common Stock, par value $.001 per share, was 22,480,071 on March 29, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates certain information by reference from the Registrant's definitive proxy statement, dated April 3, 2002, for the annual meeting of stockholders to be held on May 1, 2002.

Item 1.  Business

General

Adams Golf, Inc. (the "Company" or "Adams Golf") designs, manufactures, markets and distributes premium quality, technologically innovative golf clubs including the Tight Lies GT irons and i-Woods, the Tight Lies family of fairway woods and drivers, the Tom Watson signature series of wedges and the GT Spec Putters.  The Company was incorporated in 1987 and re-domesticated in Delaware in 1990.  The Company completed an internal reorganization in 1997 and now conducts its operations through several direct and indirect wholly-owned subsidiaries.

Segments and Products

Adams Golf operates in a single segment within the golf industry (golf clubs) and offers more than one class of product within that segment.  The Company currently offers the following classes of products:

Drivers

The Company currently offers a variety of different models based on the shape, size and material(s) used (titanium and steel) in the club.  The Company's current driver heads are made of SP-700 Titanium and 17-4 stainless steel or 455 stainless steel depending on the model.  The recently introduced Tight Lies GT 363 and ST 363 models, with a 363cc traditional shaped head and high performance face are made of SP-700 titanium and are designed to deliver maximum distance and increased control for off-center shots.  The Tight Lies GT 363 is available in both a traditional graphite shaft and in Adams Golf's patented graphite tipped (GT) shaft.  The Tight Lies ST 363 driver head has been designed for optimal performance with True Temper Sports' Bi-Matrx, steel tipped shaft.  In addition, the Company recently introduced the Tight Lies GT 303 stainless steel drivers featuring a 455 stainless steel 303cc head.  The drivers are available with either a traditi onal graphite shaft or Adams Golf's proprietary graphite tipped (GT) shafts.  The Company also offers an ST version of the 303cc driver in its Tight Lies ST 303, which is made of 17-4 stainless steel and has also been optimized for use with the Bi-Matrx shaft.  The Company's other drivers include the SC Series drivers and Tight Lies 2 drivers with proprietary technologies that affect the directional spin of the golf ball during flight.

Fairway Woods

The Company currently offers a variety of fairway wood designs all of which incorporate the "upside down" head shape of the Company's most successful product line to date, the Tight Lies fairway woods.  Similar to the driver class, the Company also manufactures and markets products under the names Tight Lies GT and ST in the fairway wood class.  Recently, the Company introduced the Tight Lies GT fairway woods which incorporate the "thin-faced" design of the Tight Lies GT drivers to deliver maximum distance and playability.  The Tight Lies GT fairway woods are currently offered with either a traditional graphite shaft or a proprietary graphite tipped (GT) shaft.  The Tight Lies ST fairway woods feature a 17-4 stainless steel head designed to optimize performance with the steel-tipped Bi-Matrx shafts from True Temper Sports.  The Company also offers the Tight Lies GT i-Wood, which is a hybrid utility club designed to provide the golfer with the distance of a lo ng iron and the playability of a fairway wood.  The Company also continues to offer its original Tight Lies and Tight Lies 2 product lines.

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Irons, Wedges and Putters

Adams Golf currently offers the Tight Lies GT irons which incorporate the Company's popular "upside down" head design along with its innovative, proprietary graphite tipped (GT) shaft.  The GT irons are designed to produce straighter shots, reduced vibration and easy to hit playability.  In addition to the Performance and Tour models of the GT irons, the Company recently introduced the Ultimate GT Iron model which features a graduated offset and center of gravity through the set to provide increased distance and maximum forgiveness for off-center shots.  As a complement to the Tight Lies GT irons, Adams Golf offers the Tom Watson signature wedges with a classic profile and the Company's proprietary graphite tipped (GT) shaft designed to produce less friction and increased feel and playability.  Finally in this, class, the Company has recently introduced the GT Spec line of putters featuring a milled face and body cast from soft stainless steel.  These putters are designed to provide a better feeling, more consistent path to the hole through the use of heavier head weights and the addition of the Company's graphite tipped (GT) shafts.

Percentage of Net Sales by Product Class

The Company's growth and ultimate success depends, in large part, on its ability to develop and introduce new products that are adopted by consumers in the marketplace.  Historically, a large portion of new golf club technologies and product designs have been met with consumer rejection.  Certain products introduced by the Company have not met the level of consumer acceptance anticipated by management.  No assurance can be given that the Company will be able to continue to design, manufacture and introduce new products that will meet with market acceptance.  Failure by the Company to identify and develop innovative new products that achieve widespread market acceptance would adversely affect the Company's future growth and viability.  Additionally, successful technologies, designs and product concepts are likely to be copied by competitors.  Certain of the Company's products and technologies have been copied by competitors in the past, resulting in, among other things, the diversion of management's attention, confusion in the marketplace and price erosion.  The Company's operating results have fluctuated and could continue to fluctuate as a result of the number, timing and market acceptance of new product introductions by the Company or its competitors.

Design and Development

The Company's design and development team is responsible for developing, testing and introducing new technologies and product designs.  This team is currently led by Barney Adams, the Company's founder, Chairman and inventor of the Tight Lies fairway woods, and Adams Golf's in-house design development team headed by Tim Reed, Vice President-Research and Development.  Prior to joining the Company, Mr. Reed, spent over 18 years in the golf industry and, most notably, was responsible for all new product introductions at TearDrop Golf Company which included TearDrop Putters and Tommy Armour and Ram brand golf clubs.

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Management and the design and development team engages in a four-step process to create new products.

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

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

Patent Review - The Company considers patent protection for its technologies and product designs to be an important part of its development strategy; however, the Company may not seek patent protection for some of its technologies or product designs.  The Company and its patent attorneys conduct a search of prior art and existing products to determine whether a new product idea may be covered by an existing patent.  Patent review, depending upon the complexity of the design involved, generally requires between three and 18 months to complete, however, this stage of product development typically occurs in conjunction with one or more of the other steps.

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

Historically, the entire process from Market Evaluation through Development has taken from 6 to 12 months to complete.

The Company's research and development expenses were approximately $1,008,000, $2,083,000 and $2,092,000 for the years ended December 31, 2001, 2000 and 1999, respectively.

Patents

The Company's ability to compete effectively in the golf club market will depend, in large part, on its ability to maintain the proprietary nature of its technologies and products.  The Company currently holds 21 U.S. patents relating to certain of its products and proprietary technologies and has four patent applications pending.  Assuming timely payment of maintenance fees, if any, the Company expects that the 21 currently issued patents will expire on various dates between 2009 and 2019.  The Company has been awarded patents with respect to the design of the Tight Lies fairway wood, the SC Series driver, the Tight Lies GT irons, including the Company's graphite tipped (GT) shaft and the Tight Lies ST fairway wood and driver heads.  There can be no assurance, however, as to the degree of protection afforded by these or any other patents held by the Company or as to the likelihood that patents will be issued from the pending patent applications.  Moreover, t hese patents may have limited commercial value or

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may lack sufficient breadth to adequately protect the aspects of the Company's products to which the patents relate.  The Company currently holds six foreign patents and has eleven foreign patent applications pending.  The U.S. patents held by the Company do not preclude competitors from developing or marketing products similar to the Company's products in international markets.

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

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

Raw Materials, Manufacturing and Assembly

The Company manages all stages of manufacturing, from sourcing to assembly, in order to maintain a high level of product quality and consistency.  The Company establishes product specifications, selects the material used to produce the components and tests the specifications of all components received by the Company.

As a part of its operational restructuring executed in 2001, the Company elected to outsource substantially all of its manufacturing processes to a third-party service provider.  The service provider is compensated on a per piece basis for every golf club assembled and is allowed to utilize certain equipment and production space previously utilized by the Company for its internal manufacturing processes.  All products manufactured by the service provider continue to be subject to the same quality control and product specification requirements previously instituted by the Company.  Management believes that outsourcing its manufacturing process to a third party will, in addition to certain other benefits, reduce costs associated with seasonal production requirements.

Consequently, as a part of the Company's quality control program, the Company has established a quality assurance program at the manufacturing facilities of its component part suppliers to monitor adherence to design specifications.  Upon arrival at the Company's manufacturing facilities in Plano, Texas, the components used in the Company's clubs are again checked to ensure consistency with strict design specifications.  Golf clubs are then assembled by manufacturing personnel using the appropriate component parts.

The Company has redundant sources of supply for each of the component parts used in the manufacture of the original Tight Lies.  However, the components used in the manufacture of all other product lines are currently selected from a small number of suppliers, each of which is sourced from a single supplier within that group.  Therefore, for all products other than the original Tight Lies, the Company effectively has a single source of supply.  Substantially all of the Company's fairway wood, driver and iron component parts are manufactured in Taiwan, China and Mexico.  Both multi-material shafts, Graphite Tip (GT) and Bi-Matrx steel tip (ST) shafts used

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 in some of the Company's product lines are available from a sole supplier, True Temper Sports.   The Company has not entered into a long-term supply agreement with any of its component part suppliers, including True Temper Sports.

The Company could, in the future, experience shortages of components or periods of increased price pressures which could have a material adverse effect on the Company's business, results of operations, financial position or liquidity.  In the event that the Company was unable to obtain adequate supplies or experienced a supply interruption of its proprietary Graphite Tip (GT) shaft from the sole manufacturer, True Temper Sports, the Company could experience up to a 25% reduction in its annual net sales focused primarily in the iron and wedge product class.  With respect to other component parts utilized in the manufacture of its current products, although the Company would be able to identify alternative manufacturers to source the materials, it would likely result in delays during the transition period which could have a material adverse impact on the Company's business, results of operations, financial position and liquidity.  In addition, any failure to obtain adequate suppli es or fulfill customer orders on a timely basis could have a material adverse effect on the Company's financial position or liquidity, business or results of operations.

Marketing

The goals of the Company's marketing efforts are to build its brand identity and drive sales through its retail distribution channels.  To accomplish these goals, Adams Golf uses traditional image-based advertising, engages in promotional activities, and capitalizes on its relationships with well known golf personalities.

Traditional Image-Based Advertising - The Company's primary advertising efforts focus on traditional image-based advertising.  This advertising includes a series of commercials which run during major golf tournaments and golf related and other programs; newspaper, magazine and radio ad campaigns; sponsorship of a developmental professional tour and sponsorship of selected golf tournaments.

Promotional Activities - The Company engages in a variety of promotional activities to sell and market its products.  Such activities have included consumer sweepstakes; promotional giveaways with certain purchases, including items such as instructional videos, gift packaging and golf bags; and other promotional campaigns.

Relationships with Professional Golfers - The Company has entered into endorsement contracts with professional golfers on the PGA and Senior PGA Tours and believes that having a presence on these tours promotes the validity of its product lines and builds brand awareness.  In August 1999, the Company entered into a five year endorsement agreement with Tom Watson which will expire August 31, 2004.  Under the terms of the agreement, Mr. Watson is entitled to an annual retainer, options to purchase a certain number of shares of the Company's stock, a royalty on sales of the Tight Lies GT irons and bonuses contingent on levels of performance in televised golf events.  In exchange for the compensation noted above, Mr. Watson must meet and maintain certain performance requirements which include, but are not limited to, exclusive use of the Company's products, participation in minimum number of events and public appearances and feedback on performance of the Company's products.& nbsp; In addition to the agreement with Mr. Watson, the Company has entered into endorsement agreements with other well-known professionals such as Bruce Lietzke, Larry Nelson, Sammy Rachels, Walter Hall and Jose Maria Canizares, which expire at various dates through 2004 and require use of certain of the Company's products  The Company also continues to maintain an endorsement from Hank Haney which expires February 28, 2003.  In addition, to Mr. Haney's endorsement, he is required to exclusively use the Company's products, make a minimum number of appearances and provide feedback on performance of the Company's products.

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Employees

At March 14, 2002, the Company had 62 full-time employees including 23 engaged in order fulfillment, 5 in research and development and quality control, 8 in sales support and 26 in management and administration.  The Company's employees are not unionized.  Management believes that its relations with its employees are good.

Item 2.   Properties

The Company's administrative offices and manufacturing facilities currently occupy approximately 86,000 square feet of space in Plano, Texas.  This facility is leased by the Company pursuant to a lease agreement expiring in 2004 and may be extended for an additional five years.  The Company maintains the right to terminate the lease if it moves to a larger facility owned by the current lessor.  The Company believes that these facilities will be sufficient for the forseeable future.

Item 3.   Legal Proceedings

Beginning in June 1999, the first of seven class action lawsuits was filed against the Company, certain of its current and former officers and directors, and the three underwriters of the Company's initial public offering ("IPO") in the United States District Court of the District of Delaware.  The complaints alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, in connection with the Company's IPO.  In particular, the complaints alleged that the Company's prospectus, which became effective July 9, 1998, was materially false and misleading in at least two areas.  Plaintiffs alleged that the prospectus failed to disclose that unauthorized distribution of the Company's products (gray market sales) allegedly threatened the Company's long-term profits. Plaintiffs also alleged that the prospectus failed to disclose that the golf equipment industry suffered from an oversupply of inventory at the retail level, which had an adverse impact on the Company's sales.  On May 17, 2000, these cases were consolidated into one amended complaint, and a lead plaintiff was appointed.  The plaintiffs were seeking unspecified amounts of compensatory damages, interests and costs, including legal fees.  On December 10, 2001, the United States District Court for the District of Delaware dismissed the consolidated, amended complaint citing the plaintiffs failed to plead any facts supporting their claim that the Company, its officers, directors or underwriters violated the federal securities laws.  On January 14, 2002, the plaintiffs filed a motion for leave an amended claim to file an amended complaint.  In the motion, Plaintiffs allege that, if given another opportunity, they would be able to amend the original causes of action to state actionable claims.  On January 24, 2002, the Company filed an opposition to the plaintiff's motion and is awaiting a response from the court.

The Company maintains directors' and officers' and corporate liability insurance to cover risks associated with these securities claims filed against the Company or its directors and officers.

At this time it is not possible to predict whether the Company will incur any liability or to estimate the damages, or the range of damages, that the Company might incur in connection with the action.  The Company is also not able to estimate the amount, if any, of reimbursements that it would receive from insurance policies should damages with respect to the above actions be incurred.

In January 2001, the Company was notified that it was part of an investigation by the Federal Trade Commission concerning practices surrounding manufacturers' minimum advertised price policies and Internet retailers.  As of March 29, 2002, the Company has yet to receive any additional correspondence beyond the initial request for information submitted in January 2001.  Management does not anticipate future inquiries regarding the matter and in that context does not anticipate any potential liability.  No assurance can be given that the Commission will not continue to assess the competitive landscape of the industry and direct future inquires to the Company.  Given those circumstances, no assurance can be given that the future inquiries by the Commission will not have a material adverse effect on the Company's results of operations, financial condition, or competitive position.

From time to time the Company is engaged in various legal proceedings in the normal course of business.  The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time.  However, the Company, based on consultation with legal counsel, is of the opinion that there are no matters pending or threatened which could have a material adverse effect on the Company's financial condition, results of operations or liquidity.

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

Not Applicable

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

The Company's common stock is currently listed and traded on the Nasdaq Stock Market's National Market under the symbol "ADGO".  The prices in the table below represent, for the periods indicated, the quarterly high and low sales price for Adams Golf, Inc. common stock as reported by the Nasdaq Stock Market.  All price quotations represent prices between dealers, without retail mark-ups, mark-downs or commissions and may not represent actual transactions.

On March 14, 2002, the last reported sale price of the common stock on the Nasdaq Stock Market's National Market was $0.38 per share.  At March 14, 2002, Adams Golf, Inc. has approximately 6,000 stockholders based on the number of holders of record and an estimate of the number of individual participants represented by security position listings.

No dividends have been declared or paid relating to the Company's common stock.

On July 30, 2001, the Company was notified by Nasdaq that it had failed to maintain the minimum $1.00 bid price requirement for 30 consecutive trading days and that the 90 day "cure-period" for which the Company's stock would need to satisfy the minimum bid requirement of $1.00 for ten consecutive trading days had begun.  Given the events of September 11, 2001 in New York City and Washington D.C., Nasdaq had provided temporary relief with respect to the minimum bid price requirement until January 2, 2002 and suspended the Company's 90 day cure period initiated on July 30, 2001.  Effective January 2, 2002, Nasdaq reinstated the minimum bid price requirement and on February 14, 2002, again notified the Company that it had failed to meet the minimum $1.00 bid price for 30 consecutive trading days and that the 90 day "cure period" had been initiated.  If the Company's stock is unable to satisfy the minimum bid requirement of $1.00 for ten consecutive trading days during the 90 day " cure period," Nasdaq will provide the Company with written notification that it has determined to delist the Company's common stock from the National Market System.  The Company would be entitled to request a review of that determination or elect to phase down to the Nasdaq SmallCap Market in accordance with the program described below.

On February 6, 2002 and for a one year period thereafter, the Securities and Exchange Commission approved a pilot program modifying the minimum bid price grace period for the Nasdaq SmallCap Market.  Under the program, the Company could elect to phase down to the SmallCap Market at the expiration of the 90 day National Market "cure period" at which time the Company would receive an additional 90 days to achieve the minimum bid requirement of $1.00 for ten consecutive trading days.  Should the Company be unable to achieve the minimum bid requirement while continuing to demonstrate compliance with the core initial listing standards of the SmallCap Market of either (i) net income of $750,000, (ii) stockholders' equity of $5 million or (iii) market capitalization of $50 million, the Company will be afforded an additional 180 day grace period to regain compliance.  Should the Company be unable to regain compliance, the Company's common stock would be delisted from the Nasdaq SmallCap Market at which time it could be eligible to trade on the electronic bulletin board, rather than either the Nasdaq National Market or SmallCap Systems.  The inability to maintain a listing on the Nasdaq Stock Market could adversely affect the ability or willingness of investors to purchase the common stock, which, in turn, would likely severely affect the market liquidity of the Company's securities.

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Item 6.   Selected Financial Data

The selected financial data presented below is derived from the Company's consolidated financial statements for the years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively.  The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the consolidated financial statements and related notes, and other financial information included elsewhere in this document.

______________________

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

Overview

The Company designs, manufactures, markets and distributes premium quality, technologically innovative golf clubs including the Tight Lies GT irons and i-Woods, the Tight Lies family of fairway woods and drivers, the Tom Watson signature series of wedges and the GT Spec Putters.  Founded in 1987, the Company operated initially as a components supplier and contract manufacturer.  Thereafter, the Company established its custom fitting operation and today the Company markets a full line of innovative, high quality, professionally engineered golf clubs to players at all skill levels.

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

The Company manages all stages of manufacturing, from sourcing to assembly, in order to maintain a high level of product quality and consistency.  The Company establishes product specifications, selects the material used to produce the components and tests the specifications of all components received by the Company.  

Consequently, as a part of the Company's quality control program, the Company has established a quality assurance program at of manufacturing facilities of its component parts to monitor adherence to design specifications.  Upon arrival at the Company's manufacturing facilities in Plano, Texas, the components used in the Company's clubs are again checked to ensure consistency with strict design specifications.  Golf clubs are then assembled by a third party service provider using the appropriate component parts.  The Company has redundant sources of supply for each of the component parts used in the manufacture of the original Tight Lies.  However, the components used in the manufacture of all other product lines are generally selected from a small number of suppliers each of which is sourced from a single supplier within that group.  Therefore, for all products other than the original Tight Lies, the Company effectively has a single source of supply. &n bsp;Substantially all of the Company's fairway wood, driver and iron component parts are manufactured in Taiwan, China and Mexico.  Both multi-material shafts, Graphite Tip (GT) and Bi-Matrx steel tip (ST) shafts used in some of the Company's product lines are available from a sole supplier, True Temper Sports

Costs of the Company's clubs consist primarily of component parts, including the head, shaft and grip.  To a lesser extent the Company's cost of goods sold includes contract labor, occupancy and shipping costs in connection with the inspection, testing, assembly and distribution of its products.

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Results of Operations

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

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Net sales increased 15.8% to $49.2 million for the year ended December 31, 2001 from $42.4 million for 2000, primarily due to significant increases in sales of mass produced irons and drivers.  Net sales of irons increased 268.2% to $12.5 million or 25.4% of net sales from $3.4 million or 8.0% of net sales for the years ended December 31, 2001 and 2000, respectively.  The increase is primarily the result of the introduction of the Tight Lies GT irons in the fall of 2000 which translated into increased volume in 2001.  The Tight Lies GT irons represent the Company's first mass produced set of irons.  Prior to their introduction, the Company's participation in the iron category was limited to custom irons sold through the Company's custom fitting accounts.  Also contributing to the increase in net sales for the year ended December 31, 2001 as compared to 2000, was an increase in driver sales of $2.8 million primarily the result of the introduction of the Tight Lies ST Driver in January 2001.  Increased revenues were partially offset by reduced sales for the Tight Lies 2 and SC Driver product lines.  Net sales of drivers were $12.5 million or 25.5% of net sales as compared to $9.7 million or 22.8% of net sales for the periods ended December 31, 2001 and 2000, respectively.  Approximately $2.9 million of net sales for the year ended December 31, 2001 was derived from the closeout of the SC Series driver.  The increases in the iron and driver categories were partially offset by reduced levels of fairway wood sales.  The reduced levels of fairway wood revenues was primarily the result of the diversification of the Company's revenues to a variety of new product classes.  Net sales of fairway woods decreased to $22.8 million or 46.5% from $29.9 million or 70.5% for the years ended December 31, 2001 and 2000, respectively.  Tight Lies ST fairway woods and Tight Lies GT i-Woods, each introduced in Janua ry 2001 generated $14.1 million of the $22.9 million in net sales of fairway woods for the year ended December 31, 2001 with the remainder generated by the original Tight Lies and Tight Lies 2 product lines.

Net sales of the Company's products outside the U.S. increased to $9.5 million or 19.3% of net sales, from $6.7 million or 15.8% of net sales for the years ended December 31, 2001 and 2000, respectively, with growth focused primarily in Canada and Europe.

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Cost of goods sold increased to $24.4 million or 49.7% of net sales, for the year ended December 31, 2001 from $19.7 million or 46.4% of net sales, for the comparable period of 2000.  The overall dollar increase is primarily the result of a 10.9% increase in units sold during the year ended December 31, 2001 as compared to 2000 coupled with changes in the product mix to the higher cost ST and GT product lines.  In addition, cost of goods sold for the year ended December 31, 2000 included $2.5 million of costs associated with the write-down of certain inventories of the SC Series driver, original Tight Lies and Tight Lies 2 product lines to net realizable value coupled with $0.7 million of costs associated with a sales program whereby one additional SC Series driver was given for every four held by retailers as compensation for reductions in the suggested retail selling price.  Excluding the impact of this inventory write-down and sales program above, cost of goods sold as a perc entage of net sales was 38.9% for the year ended December 31, 2000 as compared to 49.7% for the comparative period of 2001.  The increase in cost of goods sold as a percentage of net sales of 10.8% is primarily the result of 40.7% of net sales being generated by the ST Driver and GT irons which generally produce a lower gross margin on a per unit basis compared to historical levels.  In addition, the Company reduced the wholesale selling price of the original Tight Lies, Tight Lies 2 and SC driver product lines during 2001.  These products generated approximately 6.2 fewer basis points of margin in the aggregate as compared to the similar period in 2000.  The Company anticipates that cost of goods sold as a percentage of net sales will continue at current levels given the utilization of more costly component parts and expected wholesale selling price reductions for maturing product lines.

Operating expenses are primarily comprised of selling and marketing expenses, general and administrative expenses and research and development expenses.  In addition, for the year ended December 31, 2001, operating expenses included non-recurring expenses associated with a corporate restructuring plan and costs associated with the settlement of the Company's dispute with Nicholas A. Faldo regarding the provisions of his prior professional services agreement with the Company.

Selling and marketing expenses decreased to $24.5 million from $37.1 million for the years ended December 31, 2001 and 2000, respectively.  The decrease is primarily attributable to reduced advertising costs of $9.1 million for television and print media associated with the launch of the Tight Lies 2 fairway woods and Tight Lies GT irons in 2000 and an overall decrease in marketing expenses generally.  To a lesser extent, the decrease is associated with reduced creative costs associated with commercials of $1.2 million and reduced royalties of $1.4 million resulting from the cessation of Adams Golf Ltd.'s relationship with Mr. Faldo.  In addition, payroll expense decreased $0.9 million as a result of the Company's corporate restructuring executed in August 2001 which resulted in infrastructure reductions and the conversion of the domestic sales organization to an independent (non-employee) sales force.  Also, depreciation was reduced by $0.5 million resulting from infr astructure reductions associated with the Company's direct to consumer sales organization.  These decreases are partially offset by costs associated with the Company's sales agency relationship in Canada, established in August 2000, which resulted in costs of $0.9 million for the year ended December 31, 2001.  Considering the corporate restructuring executed during 2001, it is expected that compensation related expenses will be at reduced levels in future comparative periods.

General and administrative expenses, including provisions for bad debts, decreased to $9.1 million from $14.5 million for the years ended December 31, 2001 and 2000, respectively.  The decrease is primarily the result of a decrease in the provision for bad debts from $4.4 million to $0.6 million for the years ended December 31, 2000 and 2001, respectively.  The decrease in the provision for bad debts on a year over year basis is primarily due to a general downturn in the sales of golf equipment retailers and the attendant bankruptcies and financial difficulties experienced by those customers during 2000.  This situation eased somewhat in the year ended December 31, 2001.  The decrease in general and administrative expenses is also attributed to a reduction in payroll related expenses of $1.3 million resulting from an overall reduction in infrastructure attributable to attrition and the corporate restructuring executed in 2001.

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Research and development expenses, primarily consisting of costs associated with development of new products, were $1.0 million for the year ended December 31, 2001, as compared to $2.1 million for the year ended December 31, 2000.  The decrease in the research and development expenses was primarily due to $0.8 million being included in the amounts for the year ended December 31, 2000 resulting from amortization of compensation resulting from stock granted to Nicholas A. Faldo in accordance with his prior professional services agreement during the year ended December 31, 2000.  Adams Golf, Ltd. declared Mr. Faldo in material breach of his contract in 2000 and in 2000, the Company wrote off the value of the remaining unamortized compensation as a separate charge to operations because it would not provide future benefit to the Company.

During the year ended December 31, 2001, an agreement was reached with Mr. Faldo in settlement of the dispute regarding provisions of his prior professional services agreement with the Company.  Mr. Faldo received $0.5 million in connection with the settlement.  In addition, Mr. Faldo will receive $0.5 million on July 15, 2002 and a series of annual installments for the years 2003 through 2011 aggregating to $2.0 million.  In addition, Mr. Faldo is entitled to receive up to an additional $2.0 million contingent on the Company reaching certain financial performance thresholds. For the year ended December 31, 2001, the Company recorded a net charge of $1.6 million related to the settlement.  The charge is comprised of $2.7 million in expense representing the present value of the stream of future payments through 2011 under the provisions of the settlement utilizing the Company's incremental borrowing rate of 6.04%.  In accordance with the terms of the settleme nt, Mr. Faldo waived all future rights to unpaid royalties of $1.1 million associated with his prior professional services agreement with the Company.

During the year ended December 31, 2001, the Company executed an operational restructuring plan, which reduced its employee staff by 55 positions primarily associated with the conversion of its sales staff to independent (non-employee) sales representatives.  In addition, the Company eliminated 76 non-exempt positions resulting from the outsourcing of the Company's golf club assembly process.  In total, the operational restructuring plan resulted in severance related costs of approximately $1.0 million.  In addition, the Company wrote-off the remaining unamortized portion of goodwill of $0.6 million associated with its wholly-owned subsidiary in Japan.  This write-off resulted from a further revision of the Company's business model, in which management determined that it was beneficial to service the Japanese market through a distributor relationship rather than through a wholly-owned subsidiary.  Therefore, through comparison of the expected future cash flow s associated with Adams Golf Japan, Inc. to the carrying value of the remaining goodwill and long-lived assets, it was determined that the remaining unamortized portion was impaired.

As a result of the above, the Company's operating loss was $13.2 million for the year ended December 31, 2001 compared to $38.5 million for the year ended December 31, 2000.

For the year ended December 31, 2001, the Company recorded income tax expense of $0.6 million primarily representing taxes owed in settlement of Internal Revenue Service audits for the tax years ended December 31, 1997, 1998 and 1999.  In addition, for the year ended December 31, 2001, the Company did not recognize any income tax benefit due to the inability to conclude based on a weighting of objective evidence, on a more likely than not basis that deferred income tax benefits will ultimately be realized

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Net sales decreased 22.3% to $42.4 million for the year ended December 31, 2000 from $54.7 million for 1999, primarily due to a lower volume of fairway woods and SC Series drivers being sold as a result of competition from other equipment manufacturers.  Net sales of fairway woods decreased 14.0% from $34.8 million for the year ended December 31, 1999 to $29.9 million for the year ended December 31, 2000.  The decrease is primarily the result of significantly reduced volumes of the original Tight Lies line coupled with reductions in the wholesale selling price for this product line.  These factors were partially offset by increased volume of the Tight Lies 2 line, which was introduced in October 1999.  Net sales of drivers decreased 45.5% to $9.7 million for the year ended December 31, 2000 from $17.8 million in 1999.  The decrease in overall driver sales was due primarily to a 38% overall reduction in the wholesale selling price and reduced volumes resulting from increased competition in the driver category.  Net sales for the year ended December 31, 2000 were positively impacted by the Company's entry into the iron category with the introduction of the Tight Lies GT irons in November 2000.  Net sales of the iron and wedge category increased 106.9% from $1.6 million for the year ended December 31, 1999 to $3.4 million for 2000.  Net sales of 

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the Company's products outside the U.S. decreased to $6.7 million from $7.5 million for the years ended December 31, 2000 and 1999, respectively, but increased as a percentage of net sales to 15.8% from 13.7%.

Cost of goods sold increased to $19.7 million or 46.4% of net sales from $18.5 million or 33.9% of net sales for the years ended December 31, 2000 and 1999, respectively.  The increase as a percentage of net sales is partially due to cost of goods sold for the year ended December 31, 2000 including $2.5 million of additional expense associated with the write down of inventories of SC Series drivers, Tight Lies and Tight Lies 2 product lines to their estimated net realizable value which approximated 5.9% of net sales.  In addition, during 2000 the Company initiated a program with retailers whereby one additional SC Series driver was given for every four held by retailers as compensation for reductions in the suggested retail selling price.  The effect of the program was to increase cost of goods sold by 1.6% of net sales.  Additionally, the increase in cost of goods sold as a percentage of net sales is also attributable to the reduction in the suggested retail selling p rice of the SC Series driver and the original Tight Lies lines which as compared to the year ended December 31, 1999 resulted in a 9.5% reduction in the gross margin in 2000.  These factors were partially offset by the positive impact of changes in the revenue mix to higher margin products.  The positive impact of the change in the revenue mix was approximately 4.0%.  The Company anticipates that cost of goods sold as a percentage of net sales will continue at higher levels than experienced in prior years due primarily to the Company entering into new equipment categories coupled with newly introduced products that incorporate new technology in shaft and head design resulting in higher component costs.

For the year ended December 31, 2000, operating expenses were comprised primarily of selling and marketing expenses, general and administrative expenses, the write-off of a prepaid professional service agreement and to a lesser extent, research and development expenses.  Selling and marketing expense decreased to $37.1 million from $41.7 million for the years ended December 31, 2000 and 1999, respectively.  The decrease in selling and marketing expense is primarily the result of reduced advertising costs of $8.7 million associated with television and print media.  For the year ended December 31, 1999, the Company utilized these mediums extensively to promote the introduction of the SC Series driver, Faldo wedge and to promote sell-through of the Tight Lies fairway woods at retail.  In addition, the Company experienced a $0.4 million decrease in creative costs associated with infomercials as compared to the year ended December 31, 1999.  The reduction in these expense categories was partially offset by an increase of $1.9 million associated with the full operations of the Company's subsidiaries in the United Kingdom and Japan, $1.8 increase in sales promotion expenses, $0.7 million in additional payroll costs relating to the addition of experienced field sales personnel and a $0.6 million increase in endorsement expense primarily associated with the agreement with Tom Watson.

General and administrative expenses, including provisions for bad debts, increased to $14.5 million or 34.1% of net sales for the year ended December 31, 2000 from $11.0 million or 20.2% of net sales for the comparable period ended December 31, 1999.  The increase is primarily attributable to an increase in the provision for bad debts of $2.7 million resulting from a general downturn in the sales of golf equipment retailers and attendant bankruptcies and financial difficulties experienced by certain customers.  In addition, the Company also experienced an increase in costs of $1.0 million associated with the operations of its subsidiaries in the United Kingdom and Japan for the year ended December 31, 2000 as compared to the year ended December 31, 1999.

Research and development expenses, primarily consisting of costs associated with the development of new products, remained consistent at $2.1 million for each of the years ended December 31, 2000 and 1999.  Research and development expense includes amortization of compensation resulting from stock granted to Nicholas A. Faldo in accordance with his professional service agreement.  The impact of the amortization was $0.8 million for the year ended December 31, 2000 as compared to $1.0 million for the year ended December 31, 1999.  As Adams Golf Ltd. has announced that Mr. Faldo is in material breach of his contract, research and development expense will be at reduced levels in the future as the remaining unamortized value of the stock granted to Mr. Faldo was written-off as a charge to operations in the year ended December 31, 2000.

The write-off of the prepaid professional service agreement of $7.6 million represents a charge resulting from Mr. Faldo having been declared in material breach of his contract.  The amount represents the remaining unamortized portion of compensation resulting from stock granted in accordance with his professional service agreement.  As the Company does not believe the agreement will provide future benefit to the Company, the remaining unamortized portion was written-off as a charge to operations in the year ended December 31, 2000.

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As a result of the above, the Company's operating loss was $38.5 million for the year ended December 31, 2000 compared to $18.7 million for the year ended December 31, 1999.

The effective tax rate for the year ended December 31, 2000 was 0.6% compared to 37.9% for the year ended December 31, 1999.  The effective tax rate for the year ended December 31, 2000 was impacted by a valuation allowance of $13.6 million recorded to fully reserve net deferred tax assets as the Company is unable to conclude, based on a weighting of objective evidence, that it is more likely than not that the net deferred tax assets will be realized.

Liquidity and Capital Resources

Cash and cash equivalents increased to $9.2 million at December 31, 2001 from $6.5 million at December 31, 2000.  During the year, approximately $11.3 million was used in operations, primarily as a result of the $3.6 million increase in inventories for component part purchases and $7.1 million in operating losses, exclusive of non-cash expenses aggregating to $6.0 million primarily associated with depreciation, the write-off of the remaining goodwill associated with the wholly-owned subsidiary in Japan., the settlement with Nicholas A. Faldo and the operational restructuring executed during 2001.

Cash provided by investing activities of $14.3 million for the year ended December 31, 2001 is primarily related to the sales and maturities of marketable securities of $7.1 million and $10.4 million, respectively, offset by purchases of marketable securities of $2.9 million and equipment of $0.3 million in the ordinary course of business.

Working capital decreased to $24.2 million at December 31, 2001 compared to $34.5 million at December 31, 2000.

On March 27, 2001, the Company executed a $10.0 million revolving credit facility ("the facility") with General Electric Capital Corporation, which expires in March 2004.  During the quarter ended September 30, 2001, the Company violated a maximum monthly net loss covenant due primarily to incremental costs associated with the Company's settlement with Nick Faldo and the operational restructuring.  In addition, the Company did not comply with the December 31, 2001 minimum working capital and cash requirements required at December 31, 2001.  For each of the covenant violations noted, General Electric Capital Corporation granted the Company a waiver in each circumstance and considers the Company in good standing with regard to the provisions of the agreement.  Currently, the Company does not have any borrowings outstanding under the facility.

On March 28, 2002, the facility was amended to allow for special revolving credit advances up to the lesser of a borrowing base amount or $3.0 million.  The borrowing base for the special revolving credit advances is limited to the sum of i) the lesser of 50% of eligible accounts receivable or 85% of the estimated net forced liquidation value of eligible inventory, as determined by the lender, plus ii) 85% of the net forced liquidation value of eligible finished goods inventory, as determined by the lender.  Borrowings outstanding are secured by substantially all of the Company's property and assets.

The facility requires the Company to maintain a lock-box arrangement whereby cash receipts from accounts receivable are used to first pay down outstanding advances under the facility.  Daily cash required to fund operations in excess of the amounts remaining after repaying outstanding advances must be borrowed in the form of additional advances under the facility.  In any event, the special revolving credit advances must be repaid no later than August 31, 2002.  Additional amounts are not anticipated to be available under the facility after August 31, 2002.

The amended facility requires the Company to comply with a number of restrictive covenants, including restrictions on the amount capital expenditures of $0.5 million for any fiscal year, incurrence of other debt and sales of assets.  Additionally, the facility requires the Company to maintain compliance with various financial covenants, including, among other things, minimum tangible net worth and cash balances of $30 million and $15 million, respectively, at December 31, 2002 and net borrowing availability of $3 million.

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The amended terms call for borrowings to bear interest at the GE Capital Commercial Paper rate plus 5.75% per year.  At March 14, 2002, the GE Capital Commercial Paper Rate was 1.82%.  The unused portion of the revolving credit facility is subject to a commitment fee of 0.25% per year.  There were no borrowings outstanding under the facility at December 31, 2001.  The maximum availability under the amended facility as of March 29, 2002 was $3.0 million.

The Company expects to meet future liquidity requirements through cash flows generated from operations, cash reserves and if necessary, utilization of its credit facility.  It is anticipated that operating cash flows, current cash reserves, and the Company's credit facility will also fund capital expenditure programs.  These capital expenditure programs can be suspended or delayed at any time with minimal disruption to the Company's operations if cash is needed in other areas of the Company's operations.  In addition, cash flows from operations, cash reserves and, if necessary, the credit facility will be utilized to support ongoing purchases of component parts for the Company's current and future product lines.  It is anticipated that cash requirements to support current purchasing activities will continue at current levels, taking into consideration the seasonality of the industry and consumer acceptance of the Company's products.  The current product lines are expected to continue to produce reduced margins as compared to historical levels resulting from the utilization of more expensive component parts and price reductions associated with maturing product lines.  Concerning advertising efforts, the Company anticipates requiring less cash flow to support discretionary programs as the Company continues to reduce its expenditures in this category as compared to historical trends.  In addition, the Company expects to require less cash flow to support compensation and related expenditures as a result of the operational restructuring executed during 2001.  In contrast, the Company anticipates that promotional expenses will remain at greater than historical levels to promote "sell through" of its current products at the retail level.  The expected operating cash flow, current cash reserves and the Company's credit facility are expected to allow the Company to meet working capital requirements during periods of low cash flows resulting from the seasonality of the industry.

Prior to the year ended December 31, 2001, the Company experienced declining sales and increasing operating losses.  Despite an increase in net sales and a reduction in the operating losses for the year ended December 31, 2001 as compared to 2000, the Company executed an operational restructuring plan and subsequent modification of its business model to further reduce infrastructure costs and costs associated with the assembly of its products.  Further actions of this nature may also be effected as appropriate.

During 2001, the Company executed an operational restructuring plan, which reduced its employee staff by 55 exempt positions primarily associated with the conversion of its sales staff to independent (non-employee) sales representatives and 76 non-exempt positions associated with the outsourcing of the Company's golf club assembly process.  In total, the operational restructuring plan resulted in severance related costs of approximately $1.0 million during the year just ended.

Subsequently, management further modified its current business model with respect to its operating activities in Japan.  Effective January 1, 2002, the Company's established a distributor relationship with a third party in Japan and closed its Japanese subsidiary at December 31, 2001.  As a result of the decision to serve the Japanese market via an independent distributor, the Company recorded certain costs associated with the wind-down of its Japanese operations.  These costs were primarily comprised of the write-off of the remaining unamortized goodwill of $0.6 million.  The effects of these costs are not expected to have a significant impact on the Company's liquidity.

Management believes that sufficient resources will be available to meet the Company's cash requirements through the next twelve months.  Cash requirements beyond twelve months are dependent on the Company's ability to introduce products which gain market acceptance and to manage working capital requirements.  The Company has introduced new products and has taken steps to increase the market acceptance of these and its other products.  Revenues during the year ended December 31, 2001 have increased over the comparable period in 2000.  However, the current domestic economic environment, competitive landscape of the golf industry and recent changes to the Company's business model, no assurance can be given that the Company will be able sustain the year over year revenue growth experienced during the year ended December 31, 2001.  No assurance can be given that the Company's projected cash resources will be sufficient to fund the Company's future cash requirement s beyond twelve months.  Accordingly, to remain viable, it is possible that the Company may have to raise additional capital and/or further reduce its operating expenses, including during the next twelve months, notwithstanding the liquidity 

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available from the Company's revolving credit facility.  The Company may need to raise additional funds through the issuance of equity securities, in which case the percentage ownership of the stockholders of the Company will be reduced, stockholders may experience additional dilution, or such equity securities may have rights, preferences or privileges senior to the Company's Common Stock.  Nevertheless, given the current market price for the Company's common stock and the state of the capital markets generally, we do not expect that we would be able to raise funds through the issuance of our capital stock.  We may also find it difficult to secure other debt financing.  Accordingly, it is possible that our only source of funding is cash on hand and the current credit facility.  There can be no assurance that additional financing will be available when needed on terms favorable to the Company, or at all.  If adequate funds are not available or not available on acceptable terms, the Company may be unable to continue operations, develop, enhance and market products, retain qualified personnel, take advantage of future opportunities, or respond to competitive pressures, any of which could have a material adverse effect on the Company's business, operating results, financial condition or liquidity.

New Accounting Pronouncements

In April 2001, the Emerging Issues Task Force (EITF) reached consensus on Issue No. 00-25 (EITF 00-10), Vendor Income Statement Characterization of Consideration to a Purchaser of the Vendor's Products and Services, which establishes standards for how companies should account for cooperative advertising arrangements, buydowns and promotional expenditures.  The consensus reached was that all of the aforementioned amounts should be classified as a reduction of revenue.  The Company will adopt the provisions of this consensus in the first quarter of 2002, and is currently assessing the impact on the consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, Goodwill and Other Intangible Assets, which addresses the financial accounting and reporting for acquired goodwill and other intangible assets. The Company adopted the provisions of SFAS 142 on January 1, 2002 and will make any necessary reclassifications in order to conform with the new classification criteria in SFAS No. 141 for recognition separate from goodwill.  The Company will reassess the useful life and residual value of all intangible assets acquired, and make any necessary amortization period adjustments by March 31, 2002.  During the interim period ended March 31, 2002, the Company will test for impairment all intangible assets deemed to have an indefinite useful life and record any impairment loss as a cumulative effect of a change in accounting principle, if necessary.  Impairment will be measured as the excess of the carrying value over the fair value of an intangible asset with an indefinite useful life.

As of the date of adoption of SFAS No. 142, the Company expects to have unamortized goodwill in the amount of $0.1 million and no unamortized identifiable intangible assets.  The unamortized goodwill will be subject to the transition provisions of SFAS No. 142.  Amortization expense related to goodwill was $0.2 million, exclusive of impairments of $0.6 million associated with the Company's Japanese subsidiary and $0.2 million for the years ended December 31, 2001 and 2000, respectively.  The adoption of SFAS No. 142 is not expected to have a material impact on the consolidated financial statements.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses the accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs.  The Company is currently assessing the impact on the consolidated financial statements and will adopt the provisions of this standard in the first quarter of 2003.

In October, 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes a universal accounting model based on the framework established in SFAS 121for long-lived assets to be disposed of by sale. The Company is currently assessing the impact on the consolidated financial statements and will adopt the provisions of this standard in the first quarter of 2002.

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Business Risks

As indicated below, this Form 10-K contains forward-looking statements that involve risks and uncertainties.  The Company's actual results may differ materially from the results discussed in the forward-looking statements.  Factors that may cause such a difference include, but are not limited to, those discussed in this section and elsewhere throughout this Form 10-K.

Dependence on New Product Introductions; Uncertain Consumer Acceptance

During the year ended December 31, 2001, the Company's fairway woods represented 46.5% of net sales whereas, for the year ended December 31, 2000, the Company's fairway woods represented 70.5% of net sales.  To date, although certain of the Company's new product introductions have experienced modest success, the Company's ultimate success depends, in large part, on its ability to successfully develop and introduce new products widely accepted in the marketplace.  Historically, a large portion of new golf club technologies and product designs have been met with consumer rejection.  Certain products previously introduced by the Company have not met the level of consumer acceptance anticipated by management.  No assurance can be given that the Company's current or future products will meet with consumer acceptance.  Failure by the Company to timely identify and develop innovative new products that achieve widespread market acceptance would adversely affect the C ompany's continued viability.  Additionally, successful technologies, designs and product concepts are likely to be copied by competitors.  Accordingly, the Company's operating results could fluctuate as a result of the amount, timing, and market acceptance of new product introductions by the Company or its competitors.  The design of new golf clubs is also greatly influenced by the rules and interpretations of the USGA.  Although the golf equipment standards established by the USGA generally apply only to competitive events sanctioned by the organization, the Company believes that it is critical for its future success that new clubs introduced by the Company comply with USGA standards.

History of Net Losses

Although, the Company generated net income during the years ended December 31, 1996 and 1998 it has historically experienced net losses from operations.  Although the Company experienced a modest increase in revenues for the year ended December 31, 2001, for the years ended December 31, 1999 and 2000, the Company experienced declining sales and increasing operating losses.  There can be no assurance that the Company will be able to continue to increase revenues or resume profitability on a quarterly or annual basis in the future.  Further, there can be no assurance that the Company's projected cash resources will be sufficient to fund the Company's cash requirements in the future.  Accordingly, to remain viable, the Company must maintain revenues near current levels, maintain the current levels of uncollectible accounts, raise additional capital, and/or further reduce its operating expenses, notwithstanding the liquidity available through the Company's revolving credit facility.  Thus, the Company may need to raise additional funds through the issuance of equity securities, in which case the percentage ownership of the stockholders of the Company will be reduced, stockholders may experience additional dilution, or such equity securities may have rights, preferences or privileges senior to common stock. Further, there can be no assurance that additional financing will be available when needed on terms favorable to the Company or at all.  If adequate funds are not available or not available on acceptable terms, the Company may be unable to continue operations, develop, enhance and market products, retain qualified personnel, take advantage of future opportunities, or respond to competitive pressures, any of which could have a material adverse effect on the Company's business, operating results, financial condition or liquidity.

Need for Additional Capital

Although management believes that sufficient resources will be available to meet the Company's cash requirements through the next twelve months, no assurances can be given that the Company will have sufficient cash resources beyond twelve months.  Further, to the extent our cash requirements change or the assumptions on which management's expectations are based prove to be in error, we may need additional working capital resources within the year.  The Company cannot assure you that additional financing will be available on favorable terms, or at all.  Given the current market price for the Company's common stock and the state of the capital markets generally, we do not expect that we would be able to raise funds through the issuance of our capital stock.  The Company may also find it difficult to secure debt financing.  To the extent the Company was able to arrange to pay dividends, to

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 create liens, to sell or purchase our capital stock, to sell assets or to make acquisitions or enter into other specified transactions.  It is reasonably foreseeable that the Company's only source of future funding is cash on hand and its current credit facility.  If adequate funds are not available or not available on acceptable terms, the Company may be unable to continue operations, develop, enhance and market products, retain qualified personnel, take advantage of future opportunities, or respond to competitive pressures, any of which could have a material adverse effect on the Company.

Competition

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

The golf club industry is generally characterized by rapid and widespread imitation of popular technologies, designs and product concepts.  Due to the success of the Tight Lies fairway woods, the Company experienced several competitors introducing products similar to the Tight Lies fairway woods.  The Company may face competition from manufacturers introducing other new or innovative products or successfully promoting golf clubs that achieve market acceptance.  The failure to successfully compete in the future could result in a material deterioration of customer loyalty and the Company's image, and could have a material adverse effect on the Company's business, results of operations, financial position or liquidity.

The introduction of new products by the Company or its competitors can result in closeouts of existing inventories at both the wholesale and retail levels.  Such closeouts are likely to result in reduced margins on the sale of older products, as well as reduced sales of new products given the availability of older products at lower prices.

Dependence on Key Personnel and Endorsements

The Company's success depends to an extent upon the performance of the senior management team, which includes the Company's founder and Chairman, B.H. (Barney) Adams who participates in the Company's product development efforts.  The loss or unavailability of Mr. Adams could adversely affect the Company's business and prospects.  With the exception of the Company's President and Chief Executive Officer, Oliver G. (Chip) Brewer, none of the Company's officers and employees including Mr. Adams, are bound by employment agreements and the relations of such officers and employees are, therefore, at will.  The Company has a $4.0 million key-man life insurance policy on the life of Mr. Adams; however, there can be no assurance that the proceeds of this policy could adequately compensate the Company for the loss of his services.  In addition, there is strong competition for qualified personnel in the golf club industry, and the inability to continue to attract, retain and moti vate other key personnel could adversely affect the Company's business, operating results or financial condition.

The Company believes that acceptance of its products by touring professionals is an important aspect of its marketing strategy and ultimately validates the products in the mind of the consumer.  The Company has entered into endorsement arrangements with certain members of the PGA Tour and the Senior PGA Tour including Tom Watson, Bruce Lietzke, Larry Nelson and other notable players.  As is typical in the golf industry generally, the agreements with these professional golfers do not necessarily require that they use the Company's golf clubs at all 

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times during the terms thereof, including, in certain circumstances, at times when the Company is required to make payments to them.  The failure of certain individuals to use the Company's products on one or more occasions has resulted in negative publicity involving the Company.  While the Company does not believe this publicity has resulted in any significant erosion in the net sales of the Company's products to date, no assurance can be given that the Company's business would not be adversely affected in a material way by further such publicity or by the failure of its known professional endorsers to carry and use its products.

Historical Dependence on Television Advertising

The Company current marketing strategy is to continue to build brand awareness with consumers though the utilization of targeted image-based advertising such as television commercials, national magazines and newspaper ads.  For the years ended December 31, 2001, 2000 and 1999, the Company spent approximately $7.8 million, $16.6 million and $24.6 million, respectively on image based advertising.  However, the Company expects to reduce its expenditures in this category as compared to historical periods.  This Company's image-based approach supplements the Company's emphasis on establishing viable relationships with its wholesale customers and generating product awareness and acceptance through consumer interaction.  Failure to actively support the Company's current image-based advertising campaign and establish viable relationships with its wholesales customers could have a material adverse effect on the Company's business, operating results and financial condition.  ; Additionally, there can be no assurances that a decrease in the levels of advertising will not result in a material decline in sales of the Company's products.

Risks Associated with the Events of September 11, 2001

The domestic and worldwide economy has experienced a significant economic downturn in the period subsequent to the events of September 11, 2001 in New York City and Washington D.C.  Considering the economic instability, the future is uncertain as to future consumer buying trends, levels of discretionary spending and travel to leisure destinations.  Accordingly, the Company could experience reduced levels of sales in future periods which would have a material adverse effect on the Company's results of operations, financial condition or liquidity.  In addition, due to the heightened security risk worldwide and new or proposed security measures, the Company could experience delays in the receipt of component part and finished goods inventories from overseas, which, in turn could impede the Company's ability to meet future customer demand.  Also, due to safety concerns regarding the mail service in the United States, the Company could experience delays in receiving cash re ceipts from customers which could have a material adverse effect on the Company's results of operations, financial condition or liquidity.

Source of Supply

The Company has redundant sources of supply for each of the component parts used in the manufacture of the original Tight Lies.  However, the components used in the manufacture of all other product lines are generally selected from a small number of suppliers each of which is sourced from a single supplier within that group.  Therefore, for all products other than the original Tight Lies, the Company effectively has a single source of supply.  Substantially all of the Company's fairway wood, driver and iron component parts are manufactured in Taiwan, China and Mexico.  Both multi-material shafts, graphite tip (GT) and Bi-Matrx steel tip (ST) shafts used in some of the Company's product lines are available from a sole supplier, True Temper Sports   The Company has not entered into a long-term supply agreement with any of its component part suppliers, including True Temper Sports.

The Company could, in the future, experience shortages of components or periods of increased price pressures which could have a material adverse effect on the Company's business, results of operations, financial position or liquidity.  In the event that the Company was unable to obtain adequate supplies or experienced a supply interruption of its proprietary graphite tip (GT) shaft from the sole manufacturer, True Temper Sports, the Company could experience up to a 25% reduction in its annual net sales focused primarily in the iron and wedge product class.  With respect to other component parts utilized in the manufacture of its current products, although the Company would be able to identify alternative manufacturers to source the materials, it would likely result in delays during the transition period which could have a material adverse impact on the Company's business, results of operations, financial position and liquidity.  In addition, any failure to obtain adequate suppli es or fulfill customer orders on a timely basis could have a material adverse effect on the Company's business, results of operations, financial position or liquidity.

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Product Warranties

The Company provides a limited one year product warranty on all of its golf clubs with the exception of the graphite tip (GT) and steel tip Bi-Matrx (ST) shafts used in variety of the Company's product lines.  These shafts carry a five year warranty for defects in quality and workmanship.  The Company closely monitors the level and nature of warranty claims, and where appropriate, seeks to incorporate design and production changes to assure its customers of the highest quality available in the market.  Significant increases in the incidence of such claims may adversely affect the Company's sales and its reputation with golfers.  The Company establishes a reserve for warranty claims which it believes is sufficient to meet future claims.  However, there can be no assurance that these reserves will be sufficient if the Company were to experience an unusually high incidence of problems with its products.

Risks Associated with Intellectual Property

Imitation of popular club design is widespread in the golf industry.  No assurance can be given that other golf club manufacturers will not be able to successfully sell golf clubs that imitate the Company's products without infringing on the Company's copyrights, patents, trademarks or trade dress.  Many of the Company's competitors have obtained patent, trademark, copyright or other protection of intellectual property rights pertaining to golf clubs.  No assurance can be given that the Company will not be adversely affected by the assertion by competitors of intellectual property rights.  This effect could include alteration or withdrawal of existing products and delayed introduction of new products.

The Company attempts to maintain the secrecy of its confidential business information including the practice of having prospective vendors and suppliers sign confidentiality agreements.  No assurance can be given that the Company's confidential business information will be adequately protected in all instances.  The unauthorized use of the Company's confidential business information could adversely affect the Company.

Unauthorized Distribution of Counterfeit Clubs

Despite the Company's efforts to limit its distribution to selected retailers, some quantities of the Company's products have been found in unapproved outlets or distribution channels.  The existence of a "gray market" in the Company's products can undermine the sales of authorized retailers and foreign wholesale distributors who promote and support the Company's products, and can injure the Company's image in the minds of its customers and consumers.  Adams Golf makes efforts to limit or deter unauthorized distribution of its products, but does not believe the unauthorized distribution of its products can be totally eliminated.  The Company does not believe that the unauthorized distribution of its clubs has had or will have a material adverse effect on the Company's results of operations, financial condition or competitive position, although there can be no assurance as to future results.

In addition, the Company is occasionally made aware of the existence of counterfeit copies of its golf clubs particularly in foreign markets.  The Company takes action in these situations through local authorities and legal counsel where practical.  The Company does not believe that the availability of counterfeit clubs has had or will have a material adverse effect on the Company's results of operations, financial condition or competitive position, although there can be no assurance as to future results.

Industry Specific Requirements

The Company performs ongoing credit evaluation of its wholesale customers' financial condition and generally provides credit without the requirement of collateral from these customers.  The Company believes it has adequate reserves for potential credit losses. For the year ended December 31, 2001, the Company experienced a reduced level of delinquent or uncollectible accounts as compared to 2000.  However, Company does not anticipate that current trends will continue given the current domestic economic conditions.  Additionally, approximately 28.5% of the Company's net sales for the year ended December 31, 2001 were derived from nine customers.  Should these or the Company's other customers fail to meet their obligations to the Company, the Company's results of operations and cash flows would be adversely impacted.  Due to industry sensitivity to consumer buying trends and available disposable income, the Company has in the past extended payment terms for sp ecific retail customers.  Issuance of these terms (i.e. greater than 30 days or specific dating) is dependent on the Company's relationship with the 

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customer and the customer's payment history.  Payment terms are extended to selected customers typically during off-peak times in the year in order to promote the Company's brand name and to assure adequate product availability often to coincide with planned promotions or advertising campaigns.  Although a significant amount of the Company's sales are not affected by these terms, the extended terms do have a negative impact on the Company's financial position and liquidity.  The Company expects to continue to selectively offer extended payment terms in the future, depending upon known industry trends and the Company's financial plans.

In addition to extended payment terms, the nature of the industry also requires that the Company carry a substantial level of inventory due to the lead times associated with purchasing components overseas coupled with the seasonality of customer demand. The Company's inventory balances were $17,418,000 and $13,779,000 at December 31, 2001 and 2000, respectively.

Certain Risks of Conducting Business Abroad

The Company imports a significant portion of its component parts, including heads, shafts, headcovers, and grips from companies in Taiwan, China and Mexico.  In addition, the Company sells its products to certain distributors located outside the United States.  The Company's international business is currently centered in Canada and Europe and management intends to focus its international expansion efforts through its European subsidiary as well as through agency and distributor relationships.  The Company's business is subject to the risks generally associated with doing business abroad, such as foreign government relations, foreign consumer preferences, import and export control, political unrest, disruptions or delays in shipments and changes in economic conditions and exchange rates in countries in which the Company purchases components or sells its products.

Seasonality and Quarterly Fluctuations

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

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

Anti-Takeover Provisions

The Company's Certificate of Incorporation and Amended and Restated Bylaws (the "Bylaws") contain, among other things, provisions establishing a classified Board of Directors, authorizing shares of preferred stock with respect to which the Board of Directors of the Company has the power to fix the rights, preferences, privileges and restrictions without any further vote or action by the stockholders, requiring that all stockholder action be taken at a stockholders' meeting and establishing certain advance notice requirements in order for stockholder proposals or

25

director nominations to be considered at such meetings.  In addition, the Company is subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law (the "DGCL").  In general this statute prohibits a publicly-held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.  Such provision could delay, deter or prevent a merger, consolidation, tender offer, or other business combination or change of control involving the Company that some or a majority of the Company's stockholders might consider to be in its best interest, including offers or attempted takeovers that might otherwise result in such stockholders receiving a premium over the market price for the common stock.  The potential issuance of preferred stock may hav e the effect of delaying, deferring or preventing a change of control of the Company, may discourage bids for the common stock at a premium over the market price of the common stock and adversely affect the market price of and voting and other rights of the holders of the common stock.  The Company has not issued and currently has no plans to issue shares of preferred stock.

Forward-Looking Statements

This Annual Report contains "forward-looking statements" made under the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.  The statements include, but are not limited to:  statements concerning the potential benefits to be achieved from our internal restructurings; statements regarding our ability to increase in revenues or achieve satisfactory operating performance; statements regarding our future capital requirements and our ability to satisfy our capital needs; statements regarding our ability to manufacture products commercially acceptable to market consumers; statements regarding our ability to source component parts from other suppliers if necessary; and statements using terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "plan," "seek" or "believe."  Such statements reflect the current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions related to cer tain factors including, without limitation, product development difficulties, manufacturing difficulties; product introductions; market demand and acceptance of products; the impact of changing economic conditions; the effects of the events on September 11, 2001 in New York City and Washington D.C.; business conditions in the golf industry; reliance on third parties including suppliers; the impact of market peers and their products; the actions of competitors, including pricing, advertising and product development risks concerning future technology; and the impact of operational restructuring on operating results and liquidity and one-time events and other factors detailed in this report under "Business Risks."  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein.  Except as required by federal securities laws, Adams Golf undertakes no obligation to publicly update or revise any written or oral forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this report.  All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk

The Company, in the normal course of doing business, is exposed to market risk through changes in interest rates with respect to its cash equivalents.  

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Item 8.   Financial Statements and Supplementary Data

The financial statements are set forth herein under Item 14 commencing on page F-1.  Schedule II to the financial statements is set forth herein under Item 14 on page S-1.  In addition, supplementary financial information is required pursuant to the provisions of Regulation S-K, Item 302, and is set forth herein under Item 14, note 16.

Item 9.   Changes in and Disagreements with Accountants and Accounting and Financial Disclosure

Not Applicable.

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Item 10.   Directors and Executive Officers of the Registrant

The information required by this Item is incorporated by reference from pages 3 through 8, inclusive, of the Company's Proxy Statement dated April 3, 2002 for the Annual Meeting of the Stockholders on May 1, 2002 ("the 2002 Proxy Statement") under the respective captions, "Elections of Directors", "Stock Ownership - Section 16(a) Beneficial Ownership Reporting Compliance" and "Management-Executive Officers".

Item 11.   Executive Compensation

The information required by this Item is incorporated by reference from pages 8 through 12, inclusive, of the Company's 2002 Proxy Statement under the caption "Management-Compensation of Executive Officers".

Item 12.   Security Ownership of Certain Beneficial Owners and Management

The information required by this Item is incorporated by reference from pages 6 through 8 of the Company's 2002 Proxy Statement under the caption "Stock Ownership-Beneficial Ownership of Certain Stockholders, Directors and Executive Officers".

Item 13.   Certain Relationships and Related Transactions

The information required by this Item is incorporated by reference from pages 7 through 12, inclusive, of the Company's 2002 Proxy Statement under the captions "Management-Employment Contracts and Change in Control Agreements," "-Compensation Committee Interlocks and Insider Participation" and "-Certain Transactions".

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Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

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

___________________

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

(b)  Reports on Form 8-K

On January 15, 2002, the Company filed a Current Report on Form 8-K disclosing a press release indicating the promotion of Oliver G. "Chip" Brewer III to Chief Executive Officer with Barney H. Adams remaining as Chairman of the Board.

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

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.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND RELATED FINANCIAL STATEMENT SCHEDULE

Financial Statement Schedule

The following financial statement schedule of the Company for the years ended December 31, 2001, 2000 and 1999 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of the Company.

All other schedules are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.

F-1

The Board of Directors and Stockholders
Adams Golf, Inc.

We have audited the consolidated financial statements of Adams Golf, Inc. and subsidiaries as listed in the accompanying index.  In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index.  The consolidated financial statements and financial statement schedule are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  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.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Adams Golf, Inc. and subsidiaries as of December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related 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.

F-2

See accompanying notes to consolidated financial statements.

F-3

See accompanying notes to consolidated financial statements

F-4

F-5

See accompanying notes to consolidated financial statements

F-6

See accompanying notes to consolidated financial statements.

F-7