---

SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

xQuarterly
report pursuant to Section 13 OR 15 (d) of the Securities Exchange Act of 1934

For the quarter ended October 4, 2008 or

oTransition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission File Number 0-6966

ESCALADE, INCORPORATED(Exact name of registrant as specified in its
charter)

|                                         |              
|---------------------------------------- | -------------
|Indiana                                  | 13-2739290   
|(State
 of incorporation)                | (I.R.S.
 EIN)
|                                         |              
|817 Maxwell Ave, Evansville, Indiana     | 47711        
|(Address
 of principal executive office) | (Zip
 Code)  

812-467-1334(Registrants
Telephone Number)

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

|                            |                                        
|--------------------------- | ---------------------------------------
|Common
 Stock, No Par Value | The
 NASDAQ Stock Market LLC           
|(Title
 of Class)           | (Name
 of Exchange on Which Registered)
|                            |                                        

Securities registered pursuant to section 12(g) of the Act: NONE

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.


Yes x No o


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

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

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


Yes o No x


Indicate the number of
shares outstanding of each of the issuers classes of common stock, as of the
latest practicable date.

|                      |                                
|--------------------- | -------------------------------
|Class                 | Outstanding
at October 22, 2008
|                      |                                
|Common,
 no par value | 12,616,042                     

---



|          |                                                                                                                                                    |  |            | 
|--------- | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------- | 
|INDEX    
|         
|          |                                                                                                                                                    |  | Page 
 No.
|          |                                                                                                                                                    |  |            | 
|Part
I.   | Financial
 Information:                                                                                                                            |  |            | 
|          |                                                                                                                                                    |  |            | 
|Item 1
 - | Financial
 Statements:                                                                                                                             |  |            | 
|          |                                                                                                                                                    |  |            | 
|          | Consolidated
 Condensed Balance Sheets as of October 4, 2008,
 October 6, 2007, and December 29, 2007                                              |  | 3          | 
|          |                                                                                                                                                    |  |            | 
|          | Consolidated
 Condensed Statements of Operations for the Three 
 Months and Nine Months Ended October 4, 2008 and October 6,
 2007                 |  | 4          | 
|          |                                                                                                                                                    |  |            | 
|          | Consolidated
 Condensed Statements of Comprehensive 
 Income (Loss) for the Three Months and Nine Months EndedOctober 4, 2008 and
 October 6, 2007 |  | 4          | 
|          |                                                                                                                                                    |  |            | 
|          | Consolidated
 Condensed Statements of Cash Flows for the Nine Months Ended October 4,
 2008 and October 6, 2007                                    |  | 5          | 
|          |                                                                                                                                                    |  |            | 
|          | Notes
 to Consolidated Condensed Financial Statements                                                                                              |  | 6          | 
|          |                                                                                                                                                    |  |            | 
|Item 2
 - | Managements
 Discussion and Analysis of Financial Condition 
 and Results of Operations                                                           |  | 9          | 
|          |                                                                                                                                                    |  |            | 
|Item 3
 - | Quantitative
 and Qualitative Disclosures about Market Risk                                                                                        |  | 12         | 
|          |                                                                                                                                                    |  |            | 
|Item 4
 - | Controls
 and Procedures                                                                                                                           |  | 12         | 
|          |                                                                                                                                                    |  |            | 
|Part
 II. | Other
 Information                                                                                                                                 |  |            | 
|          |                                                                                                                                                    |  |            | 
|Item 2
 - | Issuer
 Purchases of Equity Securities                                                                                                             |  | 13         | 
|          |                                                                                                                                                    |  |            | 
|Item 6
 - | Exhibits                                                                                                                                           |  | 14         | 
|          |                                                                                                                                                    |  |            | 
|          | Signatures                                                                                                                                         |  | 14         | 

2

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|        |                       
|------- | ----------------------
|PART I. | FINANCIAL
 INFORMATION
|        |                       
|ITEM 1. | FINANCIAL
STATEMENTS  

ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) 
(All amounts in thousands except share information)

|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | ----------------------------- | - | ----------------------------- |  | - | ------- | 
|                                                                                                                           |  | October 4,
 2008
 (Unaudited) |         | October 6,
 2007
 (Unaudited) |   | December 29,
 2007
 (Audited) | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|ASSETS                                                                                                                     |  |                               |         |                               |   |                               |  |   |         | 
|Current Assets:                                                                                                            |  |                               |         |                               |   |                               |  |   |         | 
|Cash and cash equivalents                                                                                                  |  | $                             | 3,342   |                               | $ | 9,623                         |  | $ | 2,808   | 
|Receivables, less allowance of $950; $1,333; and
$1,087; respectively                                                      |  |                               | 31,549  |                               |   | 46,780                        |  |   | 30,639  | 
|Inventories                                                                                                                |  |                               | 36,070  |                               |   | 39,336                        |  |   | 32,541  | 
|Prepaid expenses                                                                                                           |  |                               | 3,965   |                               |   | 2,487                         |  |   | 2,551   | 
|Deferred income tax benefit                                                                                                |  |                               | 2,069   |                               |   | 969                           |  |   | 1,399   | 
|Income tax receivable                                                                                                      |  |                               | 3,613   |                               |   |                              |  |   | 860     | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|TOTAL CURRENT ASSETS                                                                                                       |  |                               | 80,608  |                               |   | 99,195                        |  |   | 70,798  | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|Property, plant and equipment, net                                                                                         |  |                               | 24,453  |                               |   | 20,206                        |  |   | 20,391  | 
|Intangible assets                                                                                                          |  |                               | 19,340  |                               |   | 20,911                        |  |   | 21,012  | 
|Goodwill                                                                                                                   |  |                               | 25,527  |                               |   | 25,485                        |  |   | 25,803  | 
|Investments                                                                                                                |  |                               | 10,442  |                               |   | 10,325                        |  |   | 12,473  | 
|Interest rate swap                                                                                                         |  |                               |        |                               |   | 107                           |  |   | 54      | 
|Other assets                                                                                                               |  |                               | 1,438   |                               |   | 1,065                         |  |   | 1,485   | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|                                                                                                                           |  | $                             | 161,808 |                               | $ | 177,294                       |  | $ | 152,016 | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                       |  |                               |         |                               |   |                               |  |   |         | 
|Current Liabilities:                                                                                                       |  |                               |         |                               |   |                               |  |   |         | 
|Notes payable                                                                                                              |  | $                             | 49,032  |                               | $ | 23,749                        |  | $ | 13,033  | 
|Current portion of long-term debt                                                                                          |  |                               |        |                               |   | 3,479                         |  |   |        | 
|Trade accounts payable                                                                                                     |  |                               | 7,659   |                               |   | 6,867                         |  |   | 2,938   | 
|Accrued liabilities                                                                                                        |  |                               | 15,915  |                               |   | 26,162                        |  |   | 23,216  | 
|Income tax payable                                                                                                         |  |                               |        |                               |   | 202                           |  |   | 169     | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|TOTAL CURRENT LIABILITIES                                                                                                  |  |                               | 72,606  |                               |   | 60,459                        |  |   | 39,356  | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|Other Liabilities:                                                                                                         |  |                               |         |                               |   |                               |  |   |         | 
|Long-term debt                                                                                                             |  |                               | 2,729   |                               |   | 27,700                        |  |   | 19,135  | 
|Other non-current income tax liability                                                                                     |  |                               | 1,237   |                               |   | 164                           |  |   | 118     | 
|Deferred income tax liability                                                                                              |  |                               | 589     |                               |   |                              |  |   | 589     | 
|Deferred compensation                                                                                                      |  |                               | 1,149   |                               |   | 1,055                         |  |   | 1,076   | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|                                                                                                                           |  |                               | 78,310  |                               |   | 89,378                        |  |   | 60,274  | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|Stockholders equity:                                                                                                      |  |                               |         |                               |   |                               |  |   |         | 
|Preferred stock:                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|Authorized 1,000,000 shares; no par value, none
issued                                                                     |  |                               |         |                               |   |                               |  |   |         | 
|Common stock:                                                                                                              |  |                               |         |                               |   |                               |  |   |         | 
|Authorized 30,000,000 shares; no par value, issued
and outstanding 
 12,616,042; 12,671,846; and 12,673,149; respectively |  |                               | 12,616  |                               |   | 12,672                        |  |   | 12,673  | 
|Retained earnings                                                                                                          |  |                               | 67,238  |                               |   | 70,516                        |  |   | 73,246  | 
|Accumulated other comprehensive income                                                                                     |  |                               | 3,644   |                               |   | 4,728                         |  |   | 5,823   | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|                                                                                                                           |  |                               | 83,498  |                               |   | 87,916                        |  |   | 91,742  | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 
|                                                                                                                           |  | $                             | 161,808 |                               | $ | 177,294                       |  | $ | 152,016 | 
|                                                                                                                           |  |                               |         |                               |   |                               |  |   |         | 

See notes to Consolidated Condensed Financial Statements.

3

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ESCALADE, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED) 
(All amounts in thousands, except per share amounts)

|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|--------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ---------------- | - | ---------------- | ------- | - | - | ------- | -
|                                              |  |                    |        |                   |  
|                                              |  | Three
Months Ended |        | Nine
Months Ended |  
|                                              |  |                    |        |                   |  
|                                              |  | October
4,
 2008   |        | October
6,
 2007  |   | October
4,
 2008 |   | October
6,
 2007 |        
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Net sales                                     |  | $                  | 40,797 |                   | $ | 60,687           |   | $                | 115,759 |   | $ | 144,684 |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Costs, expenses and other income:             |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Cost of products sold                         |  |                    | 31,576 |                   |   | 45,086           |   |                  | 85,594  |   |   | 100,997 |  
|Selling, general and administrative
 expenses |  |                    | 8,520  |                   |   | 8,976            |   |                  | 30,140  |   |   | 29,989  |  
|Amortization                                  |  |                    | 619    |                   |   | 813              |   |                  | 1,788   |   |   | 2,259   |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Operating income (loss)                       |  |                    | 82     |                   |   | 5,812            |   |                  | (1,763  | ) |   | 11,439  |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Interest expense, net                         |  |                    | (552   | )                 |   | (714             | ) |                  | (1,699  | ) |   | (2,183  | )
|Other income (expense)                        |  |                    | (61    | )                 |   | 875              |   |                  | 144     |   |   | 1,729   |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Income (loss) before income taxes             |  |                    | (531   | )                 |   | 5,973            |   |                  | (3,318  | ) |   | 10,985  |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Provision for income tax benefit (expense)    |  |                    | (834   | )                 |   | (2,842           | ) |                  | 401     |   |   | (4,322  | )
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Net income (loss)                             |  | $                  | (1,365 | )                 | $ | 3,131            |   | $                | (2,917  | ) | $ | 6,663   |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|                                              |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Per Share Data:                               |  |                    |        |                   |   |                  |   |                  |         |   |   |         |  
|Basic earnings (loss) per share               |  | $                  | (0.11  | )                 | $ | 0.24             |   | $                | (0.23   | ) | $ | 0.51    |  
|Diluted earnings (loss) per share             |  | $                  | (0.11  | )                 | $ | 0.24             |   | $                | (0.23   | ) | $ | 0.51    |  
|Cash dividend paid                            |  |                    |       |                   |   |                 |   | $                | 0.25    |   | $ | 0.22    |  

CONSOLIDATED
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | - | ------ | - | - | ----- | - | - | ------ | - | - | ----- | -
|Net income (loss)                                                                                                                  |  | $ | (1,365 | ) | $ | 3,131 |   | $ | (2,917 | ) | $ | 6,663 |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|Unrealized gain (loss) onsecurities available
 for sale,net of tax of $175,
$(20), $480 and $(220), respectively                   |  |   | (271   | ) |   | 31    |   |   | (740   | ) |   | 338   |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|Realization of previously unrealized losses on
 securities available for sale, net of tax of $(53), $, $(53) and $, respectively |  |   | 83     |   |   |      |   |   | 83     |   |   |      |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|Foreign currency translationadjustment                                                                                             |  |   | (2,888 | ) |   | 205   |   |   | (1,487 | ) |   | 989   |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|Unrealized gain (loss) on interest rate swap
 agreement, net of tax of $0, $17, $23 and $56,respectively                           |  |   |       |   |   | (26   | ) |   | (35    | ) |   | (86   | )
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  
|Comprehensive income (loss)                                                                                                        |  | $ | (4,441 | ) | $ | 3,341 |   | $ | (5,096 | ) | $ | 7,904 |  
|                                                                                                                                   |  |   |        |   |   |       |   |   |        |   |   |       |  

See notes to Consolidated
Condensed Financial Statements.

4

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ESCALADE, INCORPORATED AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(All amounts in thousands)

|                                                                                               |  |                   |         |                 |   |         |  
|---------------------------------------------------------------------------------------------- |  | ----------------- | ------- | --------------- | - | ------- | -
|                                                                                               |  | Nine Months Ended |        
|                                                                                               |  |                   |        
|                                                                                               |  | October 4, 2008   |         | October 6, 2007 |  
|Operating Activities:                                                                          |  |                   |         |                 |   |         |  
|Net income (loss)                                                                              |  | $                 | (2,917  | )               | $ | 6,663   |  
|Depreciation and amortization                                                                  |  |                   | 4,287   |                 |   | 4,214   |  
|Adjustments necessary to reconcile net
 income (loss) to net cash used by operating activities |  |                   | (9,942  | )               |   | (15,397 | )
|                                                                                               |  |                   |         |                 |   |         |  
|Net cash used by operating activities                                                          |  |                   | (8,572, | )               |   | (4,520  | )
|                                                                                               |  |                   |         |                 |   |         |  
|Investing Activities:                                                                          |  |                   |         |                 |   |         |  
|Purchase of property and equipment                                                             |  |                   | (6,838  | )               |   | (1,378  | )
|Acquisition of assets                                                                          |  |                   | (521    | )               |   | (3,623  | )
|Purchase of investments held for sale                                                          |  |                   | (996    | )               |   |        |  
|Proceeds from sale of property and
 equipment                                                  |  |                   | 27      |                 |   | 175     |  
|Proceeds from sale of investments                                                              |  |                   | 1,374   |                 |   |        |  
|Proceeds from reduction in life insurance                                                      |  |                   |        |                 |   | 306     |  
|                                                                                               |  |                   |         |                 |   |         |  
|Net cash used by investing activities                                                          |  |                   | (6,954  | )               |   | (4,520  | )
|                                                                                               |  |                   |         |                 |   |         |  
|Financing Activities:                                                                          |  |                   |         |                 |   |         |  
|Net increase in notes payable                                                                  |  |                   | 19,592  |                 |   | 21,982  |  
|Proceeds from exercise of stock options                                                        |  |                   | 313     |                 |   | 140     |  
|Purchase of common stock                                                                       |  |                   | (921    | )               |   | (3,401  | )
|Dividends paid                                                                                 |  |                   | (3,174  | )               |   | (2,866  | )
|                                                                                               |  |                   |         |                 |   |         |  
|Net cash provided by financing activities                                                      |  |                   | 15,810  |                 |   | 15,855  |  
|                                                                                               |  |                   |         |                 |   |         |  
|Effect of exchange rate changes on cash                                                        |  |                   | 250     |                 |   | (1,021  | )
|                                                                                               |  |                   |         |                 |   |         |  
|Net increase in cash and cash equivalents                                                      |  |                   | 534     |                 |   | 5,794   |  
|Cash and cash equivalents, beginning of
 period                                                |  |                   | 2,808   |                 |   | 3,829   |  
|                                                                                               |  |                   |         |                 |   |         |  
|Cash and cash equivalents, end of period                                                       |  | $                 | 3,342   |                 | $ | 9,623   |  
|                                                                                               |  |                   |         |                 |   |         |  

See notes to
Consolidated Condensed Financial Statements.

5

---



ESCALADE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS (UNAUDITED)

|                                                    
|----------------------------------------------------
|Note A 
 Summary of Significant Accounting Policies
|                                                    

Presentation of Consolidated Condensed
Financial Statements - The significant accounting
policies followed by the Company and its wholly owned subsidiaries for interim
financial reporting are consistent with the accounting policies followed for
annual financial reporting. All adjustments that are of a normal recurring
nature and are in the opinion of management necessary for a fair statement of
the results for the periods reported have been included in the accompanying
consolidated condensed financial statements. The consolidated condensed balance
sheet of the Company as of December 29, 2007 has been derived from the audited
consolidated balance sheet of the Company as of that date. Certain information
and note disclosures normally included in the Companys annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These
consolidated condensed financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Companys Form 10-K annual report for 2007 filed with the Securities and
Exchange Commission.

|                           
|---------------------------
|Note B -
 Reclassifications
|                           

Certain
reclassifications have been made to prior year financial statements to conform
to the current year financial statement presentation. These reclassifications
had no effect on net earnings.

|                          
|--------------------------
|Note C -
 Seasonal Aspects
|                          

The results of
operations for the nine month periods ended October 4, 2008 and October 6, 2007
are not necessarily indicative of the results to be expected for the full year.

|                     
|---------------------
|Note D -
 Inventories
|                     

|                           |  |                 |        |                 |   |                   |  |   |        | 
|-------------------------- |  | --------------- | ------ | --------------- | - | ----------------- |  | - | ------ | 
|(All amounts
in thousands) |  | October 4,
2008 |        | October 6,
2007 |   | December 29,
2007 | 
|                          
|Raw
 materials             |  | $               | 10,406 |                 | $ | 9,694             |  | $ | 9,188  | 
|Work in
 progress          |  |                 | 5,801  |                 |   | 7,814             |  |   | 7,032  | 
|Finished
 goods            |  |                 | 19,863 |                 |   | 21,828            |  |   | 16,321 | 
|                           |  |                 |        |                 |   |                   |  |   |        | 
|                           |  | $               | 36,070 |                 | $ | 39,336            |  | $ | 32,541 | 
|                           |  |                 |        |                 |   |                   |  |   |        | 

|                       
|-----------------------
|Note E 
 Notes Payable
|                       

On June 2,
2008, the Company executed an amendment to the revolving term agreement
effectively maintaining the amount of available funds at $30 million by
delaying the commencement of the annual $5 million step down until May 31,
2009. All other terms and conditions of the agreement were substantially
unchanged. As of October 4, 2008 the outstanding balance on this line of credit
was $29.4 million.

On June 2,
2008, the Companys wholly owned subsidiary, Indian-Martin, Inc. executed an
amendment to its revolving term agreement revising the schedule of available
funds to $30 million as of June 1, 2008. All other terms and conditions of the
agreement were unchanged. As of October 4, 2008 the outstanding balance on this
line of credit was $19.6 million.

As discussed
in Part I, Item 2 under Financial Condition and Liquidity and in Part II, Item
3, the Company is out of compliance with two financial covenants in its bank
credit facility as of the end of the second and third quarters of fiscal 2008.
Because there is no assurance that the lender will grant a waiver, all amounts
due under the credit facility have been classified as short-term.

6

---



|                      
|----------------------
|Note F -
 Income Taxes
|                      

The provision
for income taxes was computed based on financial statement income.

In accordance
with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes 
an interpretation of FASB Statement No. 109 (FIN 48), which became effective
for the Company on December 31, 2006, the Company has recorded the following
changes in uncertain tax positions under the caption Other non-current income
tax liability on the consolidated condensed balance sheet:

|                                         |  |                   |       |                 |   |     | 
|---------------------------------------- |  | ----------------- | ----- | --------------- | - | --- | 
|                                         |  | Nine Months Ended |      
|                                         |  |                   |      
|In Thousands                             |  | October
4,
2008   |       | October
6,
2007 |  
|                                         |  |                   |       |                 |  
|Beginning
 Balance                       |  | $                 | 118   |                 | $ | 164 | 
|Additions for current year tax positions |  |                   | 38    |                 |   |    | 
|Additions for prior year tax positions   |  |                   | 1,081 |                 |   |    | 
|Settlements                              |  |                   |      |                 |   |    | 
|Reductions Settlements                   |  |                   |      |                 |   |    | 
|Reductions for prior year tax positions  |  |                   |      |                 |   |    | 
|                                         |  |                   |       |                 |   |     | 
|Ending
 Balance                          |  | $                 | 1,237 |                 | $ | 164 | 
|                                         |  |                   |       |                 |   |     | 

The additions
relate to prior year tax positions that were disallowed in a state tax audit.
The Company plans to protest the adjustments, but has recorded the potential
liability given the risks associated with the Companys tax position.

|                                              
|----------------------------------------------
|Note G 
 Fair Values of Financial Instruments
|                                              

In September
2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (Statement
No. 157) which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. This became
effective for the Company on December 30, 2007. The Company holds one type of
financial asset subject to valuation under Statement No. 157: marketable equity
securities available for sale. The Company does not have any liabilities
subject to valuation under Statement 157. Fair values as of October 4, 2008
were calculated as follows:

|                                                 |  |                            |       |                                                                |   |                                               |  |                                           |   |  |   |   | 
|------------------------------------------------ |  | -------------------------- | ----- | -------------------------------------------------------------- | - | --------------------------------------------- |  | ----------------------------------------- | - |  | - | - | 
|(All amounts
in thousands)                       |  | Balance
at
October
4, 2008 |       | Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1) |   | Significant
Other
Observable
Inputs
(Level 2) |  | Significant
unobservable
Inputs
(Level 3) |  
|                                                
|Marketable
 equity securities available for sale |  | $                          | 2,702 |                                                                | $ | 2,702                                         |  | $                                         |  |  | $ |  | 
|                                                 |  |                            |       |                                                                |   |                                               |  |                                           |   |  |   |   | 
|                                                 |  |                            |       |                                                                |   |                                               |  |                                           |   |  |   |   | 
|                                                 |  | $                          | 2,702 |                                                                | $ | 2,702                                         |  | $                                         |  |  | $ |  | 
|                                                 |  |                            |       |                                                                |   |                                               |  |                                           |   |  |   |   | 

|                                     
|-------------------------------------
|Note H 
 Employee Stock Compensation
|                                     

The fair value
of stock-based compensation is recognized in accordance with the provisions of
SFAS No. 123R Share-Based Payments
(SFAS 123R).

7

---



During the
nine months ended October 4, 2008 and pursuant to the 2007 Incentive Plan, the
Company awarded 17,358 restricted stock units to directors and 138,500
restricted stock units to employees. Of the restricted stock units awarded to
the directors, 9,858 vested upon issuance and 7,500 vest after one year
following the grant date. The restricted stock units awarded to employees vest
at the end of three years conditioned on the achievement of specified market
conditions. The number of shares issued to employees can range between 75% and
150% of the award amount depending on the outcome of specified performance
criteria. Restricted stock awards are subject to forfeiture if on the vesting
date the employee is not employed or the director no longer holds a position
with the Company.

The Company
utilizes Monte Carlo techniques to determine the fair value of restricted stock
units granted with market conditions attached to vesting.

During the
three months and nine months ended October 4, 2008, the Company recognized
stock based compensation expense of $166 thousand and $613 thousand,
respectively. During the three months and nine months ended October 6, 2007,
the Company recognized stock based compensation expense of $162 thousand and
$552 thousand, respectively. At October 4, 2008, there was $1.2 million in
unrecognized stock-based compensation expense related to non-vested stock
awards.

|                             
|-----------------------------
|Note I -
 Segment Information
|                             

|                                  |  |                                            |        |                 |   |        |  |       |        |   |   |        |  
|--------------------------------- |  | ------------------------------------------ | ------ | --------------- | - | ------ |  | ----- | ------ | - | - | ------ | -
|                                  |  | For the Three Months
Ended October 4, 2008 |       
|                                  |  |                                            |       
|In thousands                      |  | Sporting
Goods                             |        | Office
Products |   | Corp.  |  | Total |       
|                                  |  |                                            |        |                 |   |        |  |       |       
|                                 
|Revenues
 from external customers |  | $                                          | 28,552 |                 | $ | 12,245 |  | $     |       |   | $ | 40,797 |  
|Operating
 income (loss)          |  |                                            | 106    |                 |   | 989    |  |       | (1,013 | ) |   | 82     |  
|Net income
 (loss)                |  |                                            | (185   | )               |   | 464    |  |       | (1,644 | ) |   | (1,365 | )

|                                  |  |                                                     |        |                 |   |        |  |       |        |   |   |         |  
|--------------------------------- |  | --------------------------------------------------- | ------ | --------------- | - | ------ |  | ----- | ------ | - | - | ------- | -
|                                  |  |                                                     |       
|                                  |  | As of and for the Nine Months
Ended October 4, 2008 |       
|                                  |  |                                                     |       
|In thousands                      |  | Sporting
Goods                                      |        | Office
Products |   | Corp.  |  | Total |       
|                                  |  |                                                     |        |                 |   |        |  |       |       
|                                 
|Revenues
 from external customers |  | $                                                   | 75,282 |                 | $ | 40,477 |  | $     |       |   | $ | 115,759 |  
|Operating
 income (loss)          |  |                                                     | (1,573 | )               |   | 3,116  |  |       | (3,306 | ) |   | (1,763  | )
|Net income
 (loss)                |  |                                                     | (1,856 | )               |   | 1,710  |  |       | (2,771 | ) |   | (2,917  | )
|Total assets                      |  | $                                                   | 92,757 |                 | $ | 45,798 |  | $     | 23,253 |   | $ | 161,808 |  

|                                  |  |                                            |        |                 |   |        |  |       |      |   |   |        | 
|--------------------------------- |  | ------------------------------------------ | ------ | --------------- | - | ------ |  | ----- | ---- | - | - | ------ | 
|                                  |  | For the Three Months
Ended October 6, 2007 |       
|                                  |  |                                            |       
|In thousands                      |  | Sporting
Goods                             |        | Office
Products |   | Corp.  |  | Total |     
|                                  |  |                                            |        |                 |   |        |  |       |     
|                                 
|Revenues
 from external customers |  | $                                          | 47,403 |                 | $ | 13,284 |  | $     |     |   | $ | 60,687 | 
|Operating
 income (loss)          |  |                                            | 4,575  |                 |   | 2,060  |  |       | (823 | ) |   | 5,812  | 
|Net income                        |  |                                            | 3,409  |                 |   | 350    |  |       | (628 | ) |   | 3,131  | 

|                                  |  |                                                     |         |                 |   |        |  |       |        |   |   |         | 
|--------------------------------- |  | --------------------------------------------------- | ------- | --------------- | - | ------ |  | ----- | ------ | - | - | ------- | 
|                                  |  | As of and for the Nine Months
Ended October 6, 2007 |        
|                                  |  |                                                     |        
|In thousands                      |  | Sporting
Goods                                      |         | Office
Products |   | Corp.  |  | Total |       
|                                  |  |                                                     |         |                 |   |        |  |       |       
|                                 
|Revenues
 from external customers |  | $                                                   | 101,973 |                 | $ | 42,711 |  | $     |       |   | $ | 144,684 | 
|Operating
 income (loss)          |  |                                                     | 7,185   |                 |   | 6,960  |  |       | (2,706 | ) |   | 11,439  | 
|Net income
 (loss)                |  |                                                     | 5,145   |                 |   | 3,922  |  |       | (2,404 | ) |   | 6,663   | 
|Total assets                      |  | $                                                   | 108,653 |                 | $ | 55,589 |  | $     | 13,052 |   | $ | 177,294 | 

8

---



|                          
|--------------------------
|Note J 
 Dividend Payment
|                          

On March 21,
2008, the Company paid a dividend of $0.25 per common share to all shareholders
of record on March 14, 2008. The total amount of the dividend was approximately
$3.2 million and was charged against retained earnings.

|                            
|----------------------------
|Note K -
 Earnings Per Share
|                            

The shares
used in computing the Companys basic and diluted earnings per common share are
as follows:

|                                                               |  |                    |        |                   |  |                 |  |                 |        |  |  |        | 
|-------------------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | --------------- |  | --------------- | ------ |  |  | ------ | 
|                                                               |  | Three Months Ended |        | Nine Months Ended | 
|                                                               |  |                    |        |                   | 
|All amounts in thousands                                       |  | October 4,
2008    |        | October 6,
2007   |  | October 4,
2008 |  | October 6,
2007 |       
|                                                               |  |                    |        |                   |  |                 |  |                 |       
|                                                              
|Weighted average common shares outstanding                     |  |                    | 12,616 |                   |  | 12,889          |  |                 | 12,644 |  |  | 12,938 | 
|Dilutive effect of stock options and
 restricted stock units   |  |                    | 30     |                   |  | 13              |  |                 | 32     |  |  | 14     | 
|                                                               |  |                    |        |                   |  |                 |  |                 |        |  |  |        | 
|Weighted average common shares
 outstanding, assuming dilution |  |                    | 12,646 |                   |  | 12,902          |  |                 | 12,676 |  |  | 12,952 | 
|                                                               |  |                    |        |                   |  |                 |  |                 |        |  |  |        | 

Stock options
that are anti-dilutive as to earnings per share and unvested restricted stock
units which have a market condition for vesting that has not been achieved are
ignored in the computation of dilutive earnings per share. The number of stock
options and restricted stock units that were excluded in 2008 and 2007 were
659,117 and 561,843, respectively.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|       
|        |                                                                                       
|ITEM 2. | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This report
contains forward-looking statements relating to present or future trends or
factors that are subject to risks and uncertainties. These risks include, but
are not limited to, the impact of competitive products and pricing, product
demand and market acceptance, new product development, the continuation and
development of key customer and supplier relationships, Escalades ability to
control costs, general economic conditions, fluctuation in operating results,
changes in the securities market and other risks detailed from time to time in
Escalades filings with the Securities and Exchange Commission. Escalades
future financial performance could differ materially from the expectations of
management contained herein. Escalade undertakes no obligation to release
revisions to these forward-looking statements after the date of this report.

Overview

Escalade, Incorporated
(Escalade or Company) manufactures and distributes products for two
industries: Sporting Goods and Office Products. Within these industries the
Company has successfully built a market presence in niche markets. This
strategy is heavily dependent on expanding the customer base, creating barriers
to entry, brand recognition and excellent customer service. A key strategic
advantage is the Companys established relationships with major customers that
allow the Company to bring new products to the market in a cost effective
manner while maintaining a diversified product line and wide customer base. In
addition to strategic customer relations, the Company has over 75 years of
manufacturing and import experience that enable it to be a low cost supplier.

9

---



Results of Operations

Net sales for
the quarter and nine months ended October 4, 2008, were down 32.8% and 20.0%,
respectively, over the same periods last year due principally to lower sporting
goods sales to Sears Holdings, one of the Companys mass retail customers. This
decline in sales volume, combined with lower gross margin ratios, resulted in a
significant decline in profitability. Operating income for the quarter was
essentially breakeven, while a loss was recorded for the nine months ended October
4, 2008. During the third quarter, the Company recorded a one-time adjustment
to the provision for income taxes of $1.1 million relating to a state tax audit
assessment which the Company intends to protest. The result is a net loss for
the quarter and nine months ended October 4, 2008.

The following
schedule sets forth certain consolidated statement of income data as a
percentage of net revenue for the periods indicated:

|                                              |  |                    |       |                   |  |                 |   |                 |       |    |  |       |  
|--------------------------------------------- |  | ------------------ | ----- | ----------------- |  | --------------- | - | --------------- | ----- | -- |  | ----- | -
|                                              |  | Three Months ended |       | Nine Months ended | 
|                                              |  |                    |       |                   | 
|                                              |  | October 4,
2008    |       | October 6,
2007   |  | October 4,
2008 |   | October 6,
2007 |      
|                                              |  |                    |       |                   |  |                 |   |                 |      
|Net revenue                                   |  |                    | 100.0 | %                 |  | 100.0           | % |                 | 100.0 | %  |  | 100.0 | %
|Cost of
 products sold                        |  |                    | 77.4  | %                 |  | 74.3            | % |                 | 73.9  | %  |  | 69.8  | %
|                                              |  |                    |       |                   |  |                 |   |                 |       |    |  |       |  
|Gross margin                                  |  |                    | 22.6  | %                 |  | 25.7            | % |                 | 26.1  | %  |  | 30.2  | %
|Selling,
 administrative and general expenses |  |                    | 22.4  | %                 |  | 16.1            | % |                 | 27.6  | %  |  | 22.3  | %
|                                              |  |                    |       |                   |  |                 |   |                 |       |    |  |       |  
|Operating income (loss)                       |  |                    | .2    | %                 |  | 9.6             | % |                 | (1.5  | )% |  | 7.9   | %

Consolidated Revenue and Gross Margin

Sporting Goods
sales in the third quarter and nine months ended October 4, 2008 declined 39.8%
and 26.2%, respectively, compared to the same periods last year primarily due
to lost product placement at Sears Holdings which was the Companys largest
mass-retail customer accounting for 26% of total sporting goods sales in fiscal
2007. Sporting Goods sales to other mass-retailers remained relatively
unchanged. Due to the lost placement at Sears Holdings and weakening consumer
confidence in the USA, the Company anticipates lower sales to mass-retailers in
the fourth quarter of 2008 compared to 2007. In an effort to limit the
Companys exposure to fluctuations in the mass-retail channel, the Company
continues to pursue a strategy of expanding distribution to specialty retailers
and dealers. Sales to this channel during the third quarter and nine months
ended October 4, 2008 were down 19.3% and 8.5%, respectively. Anticipating a
continued slow down in US consumer spending, specialty retailers and dealers
are exercising extreme caution in buying inventory. The Company anticipates
this trend to continue in the fourth quarter resulting in lower sales in fiscal
2008 compared to the prior year.

Office Product
sales in the third quarter and nine months ended October 4, 2008 were down 7.8%
and 5.2%, respectively, compared to the same periods last year. Approximately
two-thirds of this decline is due to lower sales to office supply
mass-retailers in the USA which are being negatively impacted by the worsening
economy. The remaining third is due to a slow down in European sales due to
slowing economies in Germany, France and Spain. The Company does not expect the
market for Office Products to improve in the fourth quarter. As a result Office
Product sales for fiscal 2008 will be lower than fiscal 2007.

The overall
gross margin was negatively impacted in fiscal 2008 by a combination of
factors. Excess manufacturing capacity in the Sporting Goods business resulted
in significant unfavorable manufacturing overhead variances. To remedy this,
the Company has initiated a plan to reduce the number of manufacturing
facilities. The first step in this process, closing the Evansville, Indiana
factory has been completed and the Company is evaluating further actions and
consolidations. Other factors that are negatively impacting gross margins include
rising raw material prices (steel, particle board and plastic resins);
increasing costs of goods imported from China; and the weak US dollar. The
Company has initiated efforts to mitigate these cost increases by raising
selling prices. However, these actions will have a delayed effect due to the
timing of customer catalogue pricing and sales contracts. Consequently, the
gross margin achieved in the third quarter is expected to be indicative of what
will occur in the fourth quarter.

10

---



Consolidated Selling, General and
Administrative Expenses

Total selling,
general and administrative expenses (SG&A) declined 6.6% and 1.0% in the
third quarter and nine months ended October 4, 2008, respectively, compared to
the same periods last year. The primary reason for the decline in the third
quarter is lower incentive compensation due to the Companys performance.
During the third quarter the Company initiated efforts to reduce SG&A costs
through personnel reductions. The full benefit of these efforts is expected in
fiscal 2009.

Interest Expense and Other Income (Expense)

Interest costs
in the third quarter and nine months ended October 4, 2008 were lower than the
same periods last year due in part to the capitalization of interest related to
the Companys ERP implementation project. The Company has also benefited from
lower interest rates resulting from Federal Reserve rate cuts over the last 12
months.

Other income
in the third quarter and nine months ended October 4, 2008 was less than the
same periods last year due to declining royalties on licensed technology and a
loss of $468 thousand on marketable securities the Company intends to sell in
the fourth quarter to reduce bank debt. Royalty income will continue to decline
as the Company increasingly competes with these licensees in the marketplace.
The marketable securities sold were previously classified as long term
marketable securities held for sale and were included in investments on the
balance sheet.

Provision for Income Taxes

Shortly after
the end of the third quarter of fiscal 2008, the Company received notice from a
state tax agency that deductions claimed in prior years for factoring expenses
were being denied. Although the Company plans to protest the audit assessment,
it has recorded the potential tax of $1.1 million as an addition to uncertain
tax positions under the caption of Other non-current income tax liabilities
on the consolidated condensed balance sheet. Excluding the effect of this
one-time charge, the effective tax rate for the nine months ended October 4,
2008 is roughly equal to the effective tax rate achieved in fiscal 2007. In the
third quarter of fiscal 2007, the Company recorded a tax charge of $756
thousand associated with the repatriation of earnings from its European subsidiary.

Financial Condition and Liquidity

The following
schedule summarizes the Companys total debt:

|                                |  |                 |        |                 |   |                   |  |   |        | 
|------------------------------- |  | --------------- | ------ | --------------- | - | ----------------- |  | - | ------ | 
|In thousands                    |  | October 4,
2008 |        | October 6,
2007 |   | December 29,
2007 | 
|                                |  |                 |        |                 |   |                   | 
|                               
|Notes
 payable short-term       |  | $               | 49,032 |                 | $ | 23,749            |  | $ | 13,033 | 
|Current
 portion long-term debt |  |                 |       |                 |   | 3,479             |  |   |       | 
|Long term
 debt                 |  |                 | 2,729  |                 |   | 27,700            |  |   | 19,135 | 
|                                |  |                 |        |                 |   |                   |  |   |        | 
|Total debt                      |  | $               | 51,761 |                 | $ | 54,928            |  | $ | 32,168 | 
|                                |  |                 |        |                 |   |                   |  |   |        | 

The cyclical
nature of the Companys Sporting Goods business results in a buildup of bank
debt as the Company prepares for the holiday shopping period. This debt is then
paid down as the Company collects on these sales. The total bank debt at the
end of the third quarter is consistent with historical trends and the Company
expects that total bank debt at the end of 2008 will be comparable to the
balance at the end of fiscal 2007. At the end of the second and third quarters
the Company was in violation of two debt covenants: a leverage ratio and debt
service ratio. The Company and its lender have reached an agreement in
principle to amend the debt agreements to waive the covenant deficiencies. The
amended debt agreements are expected to include revised pricing terms and a new
expiration date of March 1, 2009. Accordingly, the Company has classified all
amounts due under the loan agreements as current. The Company has begun
negotiations with its primary lender to secure an asset based loan with a
maturity greater than one year to replace the existing lending facilities.

11

---



During the
nine months ended October 4, 2008, the Company expended $3.2 million on a
dividend to shareholders; $0.9 million on its stock repurchase plan; and $6.8
million on property and equipment of which approximately $4.7 million relates
to the Companys investment in a new global information system. The Company
anticipates additional property and equipment expenditures of $1.0 million in
fiscal 2008.

The Companys
working capital requirements are primarily funded from operating cash flows and
revolving credit agreements with its primary bank. The Companys relationship
with its primary lending bank remains strong and the Company expects to have
access to sufficient levels of credit to continue its operations subject to the
Companys ability to meet or obtain waivers of certain financial covenant
requirements set forth in the loan documents as discussed below in Part II,
Item 3. The Company believes it can secure additional or alternative funding
should the need arise.

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 3. | QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is
exposed to financial market risks, including changes in currency exchange
rates, interest rates and marketable equity security prices. To mitigate these
risks, the Company has utilized derivative financial instruments, among other
strategies but is not currently utilizing any derivative financial instruments.
The Company does not use derivative financial instruments for speculative
purposes.

A substantial
majority of revenue, expense and capital purchasing activities are transacted
in U.S. dollars. However, the Companys foreign subsidiaries enter into
transactions in other currencies, primarily the Euro. To protect against
reductions in value and the volatility of future cash flows caused by changes
in currency exchange rates, the Company carefully considers the use of
transaction and balance sheet hedging programs. Such programs reduce, but do
not entirely eliminate, the impact of currency exchange rate changes. Presently
the Company does not employ currency exchange hedging financial instruments,
but has adjusted transaction and cash flows to mitigate adverse currency
fluctuations. Historical trends in currency exchanges indicate that it is
reasonably possible that adverse changes in exchange rates of 20% for the Euro could
be experienced in the near term. Such adverse changes could have resulted in a
material impact on income before taxes for the three months and nine months
ended October 4, 2008.

An adverse
movement of equity market prices would have an impact on the Companys
long-term marketable equity securities that are included in investments on the
consolidated condensed balance sheet. At October 4, 2008 the aggregate carrying
value of long-term marketable equity securities was $2.7 million. Currently,
the Company does not employ any hedge programs relative to these investments.

|        |                         
|------- | ------------------------
|ITEM 4. | CONTROLS AND
 PROCEDURES

Evaluation of Disclosure Controls and
Procedures

Escalade
maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Companys Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SECs rules and forms, and that such information is accumulated and
communicated to the Companys management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based closely on the definition of disclosure
controls and procedures in Rule 13a-14(c). In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and
management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Also, the
Company has investments in certain unconsolidated entities. As the Company does
not control or manage these entities, its disclosure controls and procedures
with respect to such entities are necessarily substantially more limited than
those it maintains with respect to its consolidated subsidiaries.

12

---



The Company
carried out an evaluation, under the supervision and with the participation of
the Companys management, including the Companys Chief Executive Officer and
the Companys Chief Financial Officer, of the effectiveness of the design and
operation of the Companys disclosure controls and procedures as of the end of
the period covered by this report. Based on the foregoing, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures were effective.

Changes in Internal Control over Financial
Reporting

Management of
the Company has evaluated, with the participation of the Companys Chief
Executive Officer and Chief Financial Officer, changes in the Companys
internal controls over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) of the Exchange Act) during the third quarter of 2008.

There have
been no changes to the Companys internal control over financial reporting that
occurred since the beginning of the Companys third quarter of 2008 that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

|         |                                           
|-------- | ------------------------------------------
|PART II. | OTHER
INFORMATION                         
|         |                                           
|Item 1.  | Not
 Required.                            
|         |                                           
|Item 1A. | Not
 Required.                            
|         |                                           
|Item 2.  | (c) ISSUER
 PURCHASES OF EQUITY SECURITIES

|                                                                            |  |                                                 |         |                                            |   |                                                                                                 |  |                                                                                                                             |           |  |   |           | 
|--------------------------------------------------------------------------- |  | ----------------------------------------------- | ------- | ------------------------------------------ | - | ----------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- | --------- |  | - | --------- | 
|Period                                                                      |  | (a) Total
Number of
Shares (or
Units)
Purchased |         | (b)
Average
Price
Paid per
Share (or
Unit) |   | (c) Total
Number of
Shares (or
Units)
Purchased as
Part of
Publicly
Announced
Plans or
Programs |  | (d) Maximum
Number (or
Approximate
Dollar
Value) of
Shares (or
Units) that
May Yet Be
Purchased
Under the
Plans or
Programs |          
|                                                                            |  |                                                 |         |                                            |   |                                                                                                 |  |                                                                                                                             |          
|Shares purchased prior to 07/12/2008 under
 the current repurchase program. |  |                                                 | 982,916 |                                            | $ | 8.84                                                                                            |  |                                                                                                                             | 982,916   |  | $ | 2,273,939 | 
|Third quarter purchases:                                                    |  |                                                 |         |                                            |   |                                                                                                 |  |                                                                                                                             |           |  |   |           | 
|07/13/2008  08/09/2008                                                     |  |                                                 | None    |                                            |   | None                                                                                            |  |                                                                                                                             | No change |  |   | No change | 
|08/10/2008  09/06/2008                                                     |  |                                                 | None    |                                            |   | None                                                                                            |  |                                                                                                                             | No change |  |   | No change | 
|09/07/2008  10/04/2008                                                     |  |                                                 | None    |                                            |   | None                                                                                            |  |                                                                                                                             | No change |  |   | No change | 
|Total share purchases under the current
 program                            |  |                                                 | 982,916 |                                            | $ | 8.84                                                                                            |  |                                                                                                                             | 982,916   |  | $ | 2,273,939 | 

The Company
has one stock repurchase program which was established in February 2003 by the
Board of Directors and which authorized management to expend up to $3,000,000
to repurchase shares on the open market as well as in private negotiated
transactions. The repurchase plan has no termination date. There have been no
share repurchases that were not part of a publicly announced program. In
February 2008, the Board of Directors increased the remaining amount on this
plan to its original level of $3,000,000.

13

---



|        |                                 
|------- | --------------------------------
|Item 3. | Defaults
 Upon Senior Securities

(a) As of the
end of registrants fiscal second and third quarter, the Company is out of
compliance with its financial covenants as to leverage ratio and debt service
ratio set forth in its bank credit facility. The Company has so notified the
lender and is seeking a waiver of such non-compliance. The lender is assessing
the Companys request and has not declared the credit facility to be in
default. Although the Company believes that its relationship with its lender is
strong, there can be no assurances that the lender will grant such a waiver
and/or that the terms of any such waiver will not be disadvantageous to the
Company. See also Part I, Item 2 under Financial Condition and Liquidity.

|               |              
|-------------- | -------------
|Item 4 and
 5. | Not Required.
|               |              
|Item 6.        | Exhibits     

(a)          Exhibits

|                                                                                                                               |                                                                                                                                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number                                                                                                                         | Description                                                                                                                                                                                                        
|                                                                                                                               |                                                                                                                                                                                                                    
|31.1                                                                                                                           | Chief
 Executive Officer Rule 13a-14(a)/15d-14(a) Certification.                                                                                                                                                   
|                                                                                                                               |                                                                                                                                                                                                                    
|31.2                                                                                                                           | Chief
 Financial Officer Rule 13a-14(a)/15d-14(a) Certification.                                                                                                                                                   
|                                                                                                                               |                                                                                                                                                                                                                    
|32.1                                                                                                                           | Chief Executive
 Officer Section 1350 Certification.                                                                                                                                                               
|                                                                                                                               |                                                                                                                                                                                                                    
|32.2                                                                                                                           | Chief
 Financial Officer Section 1350 Certification.                                                                                                                                                               
|                                                                                                                               |                                                                                                                                                                                                                    
|10.1                                                                                                                           | Ninth
 Amendment to Amended and Restated Credit Agreement effective October 24, 2001
 by and between Escalade, Incorporated and JPMorgan Chase Bank, NA. The
 effective date of the Amendment was May 31, 2008. (a)
|                                                                                                                               |                                                                                                                                                                                                                    
|10.2                                                                                                                           | Fourth
 Amendment to Amended and Restated Credit Agreement effective September 5,
 2003 by and between Indian-Martin, Inc. and JPMorgan Chase Bank, NA. The
 effective date of the Amendment was May 31, 2008. (a) 
|                                                                                                                               |                                                                                                                                                                                                                    
|(a) Incorporated
 by reference from the Companys Form 8-K filed with the Securities and
 Exchange Commission on June 5, 2008.

SIGNATURE

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

|                        |                                            
|----------------------- | -------------------------------------------
|                        | ESCALADE,
 INCORPORATED                    
|                        |                                            
|                        |                                            
|Date:
 October 23, 2008 | /s/ Robert
 J. Keller                      
|                        |                                            
|                        | Robert J.
 Keller                          
|                        | Chief
 Executive Officer                   
|                        |                                            
|                        |                                            
|Date:
 October 23, 2008 | /s/ Terry D.
 Frandsen                     
|                        |                                            
|                        | Terry D.
 Frandsen                         
|                        | Vice
 President and Chief Financial Officer

14

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