UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q


MARK ONE:

              (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1998

                                       OR

              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                          OF THE SECURITIES ACT OF 1934

                        For the transition period from to

                           Commission File No. 0-18204

                                AJAY SPORTS, INC.
             ------------------------------------------------------ 
             (Exact name of Registrant as specified in its charter)

         Delaware                                             39-1644025
-------------------------------                              ------------------
(State or other jurisdiction of                              (I.R.S.  Employer
Incorporation or Organization)                               Identification NO.)

1501 E. Wisconsin Street,
Delavan, Wisconsin   53115                                 (414) 728-5521
---------------------------------------              --------------------------
(Address of principal executive offices              (Registrant's  Telephone
including Zip Code)                                  Number,including Area Code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  report),  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

            Yes  /x/                              No  / /


Number of shares of common stock outstanding at 9/30/98 is 3,956,815.




<PAGE>


Item 1.      FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                              AJAY SPORTS, INC. AND SUBSIDIARIES
                                                  CONSOLIDATED BALANCE SHEETS
                                                         (IN THOUSANDS)


                                                                                September 30, 1998                     December 31,
                                                                                       (Unaudited)                             1997
                                                                                -------------------               -----------------
<S>                                                                             <C>                               <C> 
ASSETS                                                                                                                    
Current assets:
     Cash and cash equivalents                                                            $      20                      $      234
     Marketable securities                                                                      500                               - 
     Trade accounts receivable, net                                                           2,823                           5,060
     Inventories                                                                              5,332                           6,398
     Prepaid expenses and other current assets                                                  546                             304
     Deferred tax benefit                                                                       363                             363
                                                                                          ---------                       ---------
                    Total current assets                                                      9,584                          12,359

Fixed assets, net                                                                             1,637                           1,723
Other assets                                                                                    187                             106
Deferred tax benefit                                                                            756                             756
Goodwill                                                                                      1,632                           1,670
                                                                                          ---------                       ---------
                   Total assets                                                           $  13,796                       $  16,614
                                                                                          =========                       =========

LIABILITIES AND STOCKHOLDERS' EQUITY  

Current liabilities:
      Notes payable to affiliates                                                         $     100                       $     160
      Notes payable to bank                                                                     195                             107
      Current portion of capital lease                                                            3                               4
      Accounts payable                                                                        1,219                           3,204
      Accrued expenses                                                                          513                             684
                                                                                          ---------                       --------- 
Total current liabilities                                                                     2,030                           4,159 

Notes payable to affiliates  -  long term                                                     1,587                           4,212
Notes payable to banks  -  long  term                                                         6,416                           9,017
Commitments and contingencies                                                                     -                               -

Stockholders' equity:
      Preferred stock, 10,000,000 shares authorized,
         Series B, $0.01 par value, 12,500 shares
           outstanding at liquidation value                                                   1,250                           1,250
         Series C, $0.01 par value, 296,170 shares
           outstanding at stated value                                                        2,962                           2,962
         Series D, $0.01 par value, 6,000,000 shares                                             60                               -
      Common stock, $0.01 par value 100,000,000 shares authorized,
           3,956,815  shares outstanding                                                         39                             233
Additional paid-in capital                                                                   14,446                           9,313
Accumulated deficit                                                                         (14,994)                        (14,532)
                                                                                         ----------                       --------- 
            Total stockholders' equity                                                        3,763                            (774)
                                                                                         ----------                       ---------
             Total liabilities and stockholders' equity                                  $   13,796                       $  16,614
                                                                                         ==========                       =========

</TABLE>

                                                              1

<PAGE>


<TABLE>
<CAPTION>

                                                AJAY SPORTS, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                            (UNAUDITED)


                                                          Three Months                      Nine  Months
                                                       Ended September 30,               Ended September 30,
                                                       1998            1997              1998           1997
                                                      -----           -----             -----          -----   
<S>                                                <C>             <C>               <C>            <C>    
   
Net sales                                          $  4,214        $  6,854          $ 20,803       $ 24,039

Cost of sales                                         3,619           6,248            17,284         20,356
                                                     ------          ------            ------         ------
      Gross profit                                      595             606             3,519          3,683

Selling, general and                                    857           1,248             3,063          3,710
   administrative expenses                           ------          ------            ------         ------

      Operating income  (loss)                         (262)           (642)              456            (27)

Non-operating expense:
      Interest expense, affiliates                       69              96               245            157
      Interest expense, non-affiliates                  194             234               668            889
      Other, net                                        100              24                 2             44
                                                     ------          ------            ------         ------ 
      Total non-operating expense                       363             354               915          1,090
                                                     ------          ------            ------         ------   
Loss before income taxes                               (625)           (996)             (459)        (1,117)

Net loss                                           $   (625)       $   (996)         $   (459)      $ (1,117)
                                                     ======          ======            ======         ======          

Basic and diluted earnings per share*              $  (0.18)       $  (0.28)         $  (0.19)      $  (0.36)
                                                     ======          ======            ======         ======
Weighted average common shares outstanding            3,920           3,879             3,892          3,879
                                                     ======          ======            ======         ====== 



*     Computed by dividing net income or loss,  after  reduction for undeclared,
      cumulative  preferred stock  dividends,  by the weighted average number of
      common shares outstanding.

            Net loss as reported above             $   (625)       $   (996)         $   (459)      $ (1,117)
            Undeclared cumulative preferred dividends   (90)            (99)             (288)          (297)
                                                     ------          ------            ------         ------     
            Loss applicable to common stock        $   (715)       $ (1,095)         $   (747)      $ (1,414)
                                                     ======          ======            ======         ======     




</TABLE>
                                                               2

<PAGE>
<TABLE>
<CAPTION>

                                                  AJAY SPORTS, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (IN THOUSANDS), (UNAUDITED)



                                                                                        Nine Months
                                                                                    Ended  September 30,
                                                                                 1998                1997
                                                                                -------             -------
<S>                                                                             <C>                 <C>               
Cash flows from operating activities:
     Net income (loss)                                                          $  (459)            $  (1,117)
      Adjustments to reconcile net cash flows from
      operating activities:
                  Depreciation and amortization                                     273                   292
      Change in assets [(increase)/decrease] and
       liabilities [increase/(decrease)]:
                    Marketable securities                                          (500)                    -
                    Trade accounts receivable, net                                2,237                  (730)
                    Inventories                                                   1,066                   958
                    Prepaid expenses and other current assets                      (242)                 (418)
                    Other assets                                                    (81)                   86
                    Accounts payable                                             (1,985)                  401
                    Accrued expenses                                               (172)                  333
                                                                                 -------               -------
                    Net cash used in
                    operating activities                                            137                  (195)
                                                                                 -------               -------    
Cash flows from investing activities:
       Acquisitions of property, plant, equipment                                  (153)                 (220)
                                                                                 -------               -------    
                     Net cash used in
                     investing activities                                          (153)                 (220)
                                                                                 -------               -------    
Cash flows from financing activities:
        Net reduction in bank loans                                              (2,513)               (2,500)
        Increases in advances from affiliates                                     2,315                 3,051
        Dividends paid                                                               -                    (82)
                                                                                 -------               -------    
                      Net cash provided by
                      financing activities                                         (198)                  469
                                                                                 -------               -------    
Net increase (decrease) in cash                                                    (214)                   54
Cash at beginning of period                                                         234                    64
                                                                                 -------               -------    
Cash at end of period                                                           $    20               $   118
                                                                                 =======               =======    
Supplemental disclosures of cash flow information:
       Cash paid for interest                                                   $   899               $   880
                                                                                 =======               =======    
       Cash paid for income tax                                                       -                     -
                                                                                 =======               =======    




</TABLE>





                                                                  3

<PAGE>
                                      

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Cautionary Statement: This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, those statements relating to development
of new products, the financial condition of the Company, the ability to increase
distribution  of the Company's  products,  integration of businesses the Company
has  acquired,  disposition  of any  current  business of the  Company,  and the
Company's  relationship with Williams Controls,  Inc., a related company.  These
forward-looking  statements are subject to the business and economic risks faced
by the Company.  The Company's actual results could differ materially from those
anticipated  in these  forward-looking  statements  as a result  of the  factors
described above and other factors described elsewhere in this report.


Note 1.  BASIS OF PRESENTATION

The  condensed  consolidated  financial  statements  included  herein  have been
prepared by Ajay Sports,  Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission.  In the opinion
of the Company, the financial statements reflect all adjustments,  which consist
only of normal recurring adjustments,  necessary to present fairly the financial
position of the Company at September 30, 1998 and the results of operations  for
the three and nine-month  periods ended September 30, 1998 and 1997 and the cash
flows for the same nine-month periods.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with  interim  financial  statements.  However,  the Company  believes  that the
disclosures  made in the  condensed  financial  statements  included  herein are
adequate to make the  information  presented  not  misleading.  These  condensed
financial statements should be read in conjunction with the financial statements
and notes thereto  included in the Company's  Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.

The year-end  condensed  balance  sheet data was derived from audited  financial
statements,  but does not include all disclosures required by generally accepted
accounting principles.

The interim period results are not  necessarily  indicative of results which may
be expected for any other interim period or for the full year. Certain costs are
estimated for the full year and  allocated to interim  periods based on activity
associated with the interim period. Accordingly,  such costs are subject to year
end adjustment.


                                       4


<PAGE>



Note 2.  INVENTORIES


The major classes of inventories (rounded to thousands) are as follows:

                                 September 30,             December 31,
                                    1998                      1997
                                 -------------             ------------

Raw Materials                    $    1,261                $    1,499

Work in Process                       1,136                     1,026

Finished Goods                        2,935                     3,873
                                 -------------             ------------

                                 $    5,332                $    6,398
                                 =============             ============

Note 3.  DEBT

On June 30, 1998, the Company  restructured its credit facility with Wells Fargo
Bank, National  Association  ("Wells") to separate its credit facility from that
of  Williams  Controls,  Inc.  and its  subsidiaries  ("Williams").  The  credit
facility as restructured provides for maximum borrowing capacity of $10,025,000,
consisting of a revolving credit facility of up to $9,500,000 and a term loan of
$525,000.  As a result of this transaction,  the Company no longer has joint and
several liability,  cross collateral agreements or guarantees with Williams with
respect to Williams' Wells Fargo credit facility.  The Company's new asset-based
credit facility from Wells provides the Company with  approximately  $700,000 of
increased loan  availabilities  and borrowing  capability  against inventory and
accounts  receivable.  The  interest  rate on the  revolver is prime plus 1% and
prime plus 1.5% on the term loan.

In connection with the  restructuring  of the Wells Fargo Bank credit  facility,
the Company  entered into an agreement with Williams under which Williams agreed
to make  certain  additional  advances  to the  Company.  As a  result  of these
additional  investments  plus  assumption of certain  liabilities  and potential
additional  payments to the bank,  the debt and equity  investments  could reach
$8,650,000  with an initial 3-year  effective  annual cost of 8.75% inclusive of
interest, dividends and fees. On June 30, 1998, Williams converted $5,000,000 of
this debt into 6,000,000  shares of a newly created series of preferred stock of
the Company,  the Series D Cumulative  Convertible  Non-Voting  Preferred Stock.
Series D is convertible  into the Company's  common stock at the rate of 0.55556
common shares for each preferred share. The Company  delivered a promissory note
to Williams for the  unconverted  portion of the debt. This note is secured by a
lien on the Company's  assets which is junior to the liens held by the Company's
bank lenders.  Williams continues to own approximately  17.3% of the outstanding
common  stock of the  Company  and  holds  options  to  purchase  an  additional
1,851,667 shares of common stock.  Williams also continues to have rights, which
were  negotiated in 1994,  to utilize for a fair market fee,  excess floor space
and related resources in the Company's manufacturing facilities in Wisconsin and
Mexico.

The Company believes that the combination of the Wells and Williams  refinancing
agreements  will result in an improved  working  capital  position  enabling the
Company to pay down past due accounts payable. It also has increased  liquidity,
providing  the  Company  with  additional  availability  under  its bank  credit
facility and strengthened the Company's capital structure by increasing equity.

                                       5
<PAGE>



Note 4.  BUSINESS SEGMENT REPORTING


The  relative  contributions  to net sales,  operating  profit and  identifiable
assets of the Company's  industry segments for the quarter and nine months ended
September 30, 1998 and 1997 (unaudited) are as follows (in thousands):

------------------------------------------------------------------------------
                        Quarter Ended September 30, 1998
------------------------------------------------------------------------------
                                    GOLF
                                    ----------------------
                                    Mass     Specialty
                                    -------- ----------
                         Furniture  Merchant Golf Stores Corporate Consolidated
                         ---------  -------- ----------- --------- ------------ 
Net Sales                $    285  $   3,795  $    134   $      -   $    4,214
Operating Profit/(Loss)      (286)       211      (104)       (83)        (262) 
Total Assets                1,875      9,879     2,043          -       13,797  
Depreciation/Amortization      24         57        11          -           92
Capital Expenditures           40         38         -          -           78
------------------------------------------------------------------------------ 
------------------------------------------------------------------------------ 
                        Quarter Ended September 30, 1997
------------------------------------------------------------------------------
                                    GOLF
                                    --------------------
                                    Mass     Specialty
                                    -------- -----------                        
                         Furniture  Merchant Golf Stores Corporate Consolidated
                         ---------  -------- ----------- --------- ------------ 
Net Sales                $    403  $  5,424   $  1,027  $       -   $    6,854
Operating Profit/(Loss)      (340)      200       (374)      (128)        (642)
Total Assets                2,365    11,981      4,367          -       18,713
Depreciation/Amortization      31        54         14          -           99
Capital Expenditures           47        72          2          -          121
------------------------------------------------------------------------------  
------------------------------------------------------------------------------
                      Nine Months Ended September 30, 1998
------------------------------------------------------------------------------
                                    GOLF
                                    -------------------
                                    Mass     Specialty
                                    -------- ---------
                          Furniture Merchant Golf Stores Corporate Consolidated
                          --------- -------- ----------- --------- ------------ 
Net Sales                $  3,235  $ 16,442   $  1,126  $       -   $   20,803
Operating Profit/(Loss)       (27)    1,229       (344)      (402)         456
Total Assets                1,875     9,879      2,043          -       13,797
Depreciation/Amortization      73       167         33          -          273
Capital Expenditures          102        51          -          -          153
------------------------------------------------------------------------------  
------------------------------------------------------------------------------
                      Nine Months Ended September 30, 1997
------------------------------------------------------------------------------
                                    GOLF
                                    ------------------
                                    Mass     Specialty
                                    -------- ---------- 
                          Furniture Merchant Golf Stores Corporate Consolidated
                          --------- -------- ----------- --------- ------------ 
Net Sales                $  3,764  $  16,755  $  3,520 $        -   $   24,039
Operating Profit/(Loss)       103        833      (726)      (237)         (27)
Total Assets                2,365     11,981     4,367          -       18,713
Depreciation/Amortization      67        167        58          -          292
Capital Expenditures          102        105        13          -          220
------------------------------------------------------------------------------

The  year-on-year  $2.3 million  reduction in total assets in the specialty golf
store  segment  results  from the  Company  closing  its  California  golf  club
manufacturing  and office  facility and reducing its golf club  receivables  and
inventories.  Year-to-date  nine-months  sales  are off by $2.4  million  in the
specialty golf store channel due to de-emphasizing golf club sales.

                                       6
<PAGE>


Note 5.  DIVIDENDS

Dividends on Series B and C Convertible  Preferred  Stock have not been declared
for 1997 or 1998 due to  unavailability  of funds.  Dividends  are in arrears on
Series B in the amount of  $981,500  and on Series C in the amount of  $508,620.
Dividends  are permitted to be paid under the Wells bank credit  agreement  when
sufficient funds become available.


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

See  "Cautionary  Statement"  at the  beginning  of the  "Notes to  Consolidated
Financial Statements".

FINANCIAL  CONDITION  AND  LIQUIDITY  - At  September  30,  1998 the Company had
working  capital of $7,554,000 as compared with $8,200,000 at December 31, 1997.
The ratio of current assets to current liabilities at September 30, 1998 was 4.7
to 1, as compared to 3.0 to 1 at December 31, 1997.  During the combined  second
and third  quarters of 1998,  the Company was able to reduce its  borrowings  by
$5.2 million from levels  existing at December 31,  1997.  The  reductions  were
effected  through a  restructuring  agreement  between the Company and  Williams
Controls,  Inc. under which Williams converted $5 million of debt into preferred
stock on June 30,  1998.  Williams  advanced  to the  Company an  additional  $1
million during the quarter ended June 30, 1998 and $1 million during the current
quarter. It has advanced a total of $6,512,000,  converted $5,000,000 of this to
equity and  Williams could be  obligated to pay up to $2.0 million  owed to U.S.
Bank under an intercreditor  agreement  with  U.S. Bank. The funds  advanced in
the current  quarter  include  $500,000 of  marketable  securities  which may be
converted to cash as needed in future  periods.  Williams  has no further  legal
obligation to advance  funds to the Company and the Company does not  anticipate
that Williams will make additional  advances to the Company. In conjunction with
the Company's restructuring of its debt to Williams, the Company and Wells Fargo
Bank  entered into a new credit  agreement  as of June 30, 1998.  The new credit
agreement  provides for more favorable asset based lending  availabilities.  The
Williams debt  restructuring and the new credit agreement has added to the short
term liquidity of the Company, allowing the Company to bring its vendors current
and begin operating more  efficiently  through improved  production  scheduling,
consistent material flows and improved vendor relations.

During the first nine months of the year,  the operating  cash flow was $137,000
due to seasonal  decreases in trade receivables of $2.2 million partially offset
by a reduction of $2.0 million in liabilities to trade creditors.  Liquidity was
adequate  during the current  quarter with excess  borrowing  capacity under the
bank  loan  of  $565,000  at  September  30,  1998.   In  accordance   with  the
restructuring  agreement  between the Company and  Williams,  Williams  advanced
$500,000  in cash to the Company and issued  $500,000 of  marketable  securities
during  the  3rd  quarter.  The  marketable  securities  are  anticipated  to be
liquidated  in the  fourth  quarter  of 1998 and the  first  quarter  of 1999 to
supplement  liquidity as needed. The Company has sufficient  long-term liquidity
as a result of the cash advances from Williams,  the marketable securities to be
liquidated  and  cash  flow  from  future  operations.  There  are  no  foreseen
unfundable  commitments  for fixed  capital  as future  needs  are  expected  to
primarily  consist of  working  capital. It  is expected  that  the company  can
generate  sufficient  cash flow from operations over the next 12 months and into
the future through cost reductions in purchased materials and overhead expenses,
improved labor utilization, increased sales of higher margin specialty products,
new products and increased furniture exports.



                                       7

<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Cont'd)


RESULTS OF OPERATIONS - During the quarter ended September 30, 1998, the Company
had net sales of  $4,214,000,  compared to  $6,854,000  for the same  quarter of
1997.  The sales  decrease of  $2,640,000  was  primarily  due to the  following
reasons. Outdoor furniture sales were off $118,000 primarily due to less exports
to Asian markets.  Sales in the mass merchant golf segment were off  $1,629,000.
This  shortfall was made up of two  components:  The first of these accounts for
approximately  $600,000  of  the  shortfall  as  a  result  of  retailers  being
overstocked  on golf product  inventory at the end of the second  quarter due to
lower than  anticipated  sales  levels in that  quarter.  The  second  factor is
estimated  at  $900,000  due to  Ajay's  major  customer  buying  competing  and
replacement products direct from Asia. It is believed that this situation is due
to a cost  element  enhanced by currency  devaluation  and  recession in several
Asian economies.  Sales in the specialty golf store segment were off $893,000 as
a result of de-emphasizing new golf club sales.

For the  nine-month  period ended  September  30, 1998,  overall  sales were off
$3,236,000 or 13% when compared to the same nine-month period of the prior year.
The same factors  described above have contributed to the shortfall in sales for
the nine-month period.

Gross profit for the three months ended September 30, 1998 was $595,000 or 14.1%
of sales,  compared  to  $606,000  and 8.8% of sales for the same  period of the
prior year. Two primary factors  contributed to maintaining  gross profit amount
and  improving  gross  profit  as a % of  sales.  The first of these is that the
Company  de-emphasized  golf  club  sales  during  the  year  1998  and  thereby
eliminated  approximately $900,000 of sales during the current quarter which had
generated a gross profit loss in the  comparable  quarter of the prior year. The
second factor resulting in gross profit improvement was a result of improvements
in  manufacturing  cost and efficiency  which  contributed to the balance of the
improvement in gross profit  percentage from 8.8% to 14.1%. Of this  improvement
in efficiency,  approximately  half was achieved in furniture  manufacturing and
the other half in golf product manufacturing. The main sources for these savings
were  improved  liquidity,   quality  improvements  from  changes  in  furniture
manufacturing  and improved labor  utilization  throughout all production areas.
Gross profit for the  nine-months  ended  September  30, 1998 was  $3,519,000 or
16.9% of sales  which  compares  to  $3,683,000  or 15.3% of sales  for the same
period of the prior year. The percentage improvement in gross profit is a result
of those items  mentioned  above and the overall dollar decrease in gross profit
is due to reduced sales volume.

                                       8
<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Cont'd)


Selling,  general and  administrative  expenses were $857,000 and 20.3% of sales
for the current  quarter as compared  to  $1,248,000  and 18.2% of sales for the
same quarter of the prior year. On a year to date basis, SG&A was $3,063,000 and
14.7% of sales as compared to $3,710,000  and 15.4% of sales for the same period
in the prior year.

On a quarter and  year-to-date  basis, the single major  contributing  factor in
reducing  the  amount of SG&A was the  closing  of the golf  club  manufacturing
facility  in  California  in November of 1997 and  consolidating  its  remaining
functions into Ajay's manufacturing facility in Wisconsin. This contributed to a
reduction  in SG&A for the  quarter  of  $190,000  and for the year-  to-date of
$537,000.  The additional  $200,000 reduction during the quarter was a result of
lower  commissions and lower costs  associated with warranty,  advertising,  bad
debts and other selling expenses, all related to reduced volume.

Operating income for the current quarter of 1998 was a loss of ($262,000) versus
a loss of ($642,000) for the same quarter of the prior year. Traditionally,  the
third quarter of the year is the lowest volume and operating  income quarter for
the  Company.  On a year to date basis,  operating  income is $456,000  versus a
prior year operating loss of ($27,000).

Interest  expense  for the current  quarter is  $263,000  versus a prior year of
$330,000 for the equivalent quarter.  On a year to date basis,  interest expense
is $913,000 versus a prior year of $1,046,000. Interest expense on a quarter and
year to date  basis is lower than the prior  year due to better  utilization  of
assets on a nine months basis and lower sales volume levels for the quarter. The
$76,000 increase in  Non-operating Expense - Other is a result  of reclassifying
year-to-date bank fees from selling, general and administrative expense.

The net loss for the quarter was ($625,000)  versus a same quarter prior year of
($996,000).  On a nine months basis, net loss is ($459,000)  versus a prior year
nine months net loss of ($1,117,000).  The year-to-date  improvement of $658,000
is attributable  primarily to de-emphasizing  golf club manufacture and sale and
consolidating these operations into the Wisconsin facility.

                                       9

<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (Cont'd)


Since 1983,  Ajay has held a license from Spalding  Sports  Worldwide to utilize
the Spalding  trademark in conjunction  with the sale and  distribution  of golf
bags, golf gloves,  hand-pulled golf carts and certain other golf accessories in
the U. S. The Spalding  license has been amended  numerous  times since 1983 and
formally  expired on June 30, 1998. Under Wisconsin law, these licenses have the
effect of  continuing  in  perpetuity  whether  formally  renewed or not, if the
Company  performs  without  defaulting  and  without  providing  good  cause for
termination.  The Company and Spalding have not yet decided changes in terms and
conditions  that would lead to a formal renewal of the license.  The Company has
formally  requested an amendment to the Licensing  Agreement  which would reduce
royalty  costs in future  years.  The  Company  and  Spalding  have not  reached
agreement on this formal request.

Approximately  57% of the Company's 1997 and 1998 sales were Spalding  products.
For the contract  period,  July 1, 1997 through June 30, 1998,  the Company paid
Spalding  directly  $781,000  and  indirectly  spent an  additional  $373,000 on
promoting the Spalding name for a total of  $1,154,000.  For the prior  contract
year, the total expended was $964,000.  If, for any reason,  the Company decides
not to sell  under the  Spalding  name in the  future,  these  amounts  would be
savings that would  offset  potential  loss of sales under the  Spalding  brand.
Although there may be a short term  interruption  of sales if the Spalding brand
is discontinued,  the Company expects to recoup those sales through satisfactory
replacement  brands.  Ajay is evaluating the alternatives of further  developing
its own brands over the next two years or continuing  with the Spalding  royalty
agreement at a lower cost if  agreement  can be reached.  The Company  presently
sells under other names such as: Palm Springs(R), Pro Classic(R), Pro USA(R) and
other private label brand names. The Company  continues to work with Spalding to
resolve the licensing issue.


Year 2000 Compliance
--------------------

The Company does not anticipate the Year 2000 compliance  requirements will have
a material effect on earnings.  Year 2000  expenditures have reached $40,000 and
it is  anticipated  an  additional  $25,000 is yet to be spent.  The Company has
surveyed its vendor's  readiness to be Year 2000  compliant and has been assured
in  excess of 70% and  continues  to follow up in this  area.  The  Company  has
upgraded  its  hardware  and  operating  system  software  to Year  2000 - ready
versions.  These upgrades were completed in August,  1998.  Application software
has  been  evaluated,   a  Year  2000  conversion  schedule  is  in  place,  and
reprogramming has progressed well since starting that phase in August,  1997. It
is anticipated that the hardware and software  compliance target completion date
of March 31, 1999 can be met.

                                       10
<PAGE>



 PART II.  OTHER INFORMATION

Item 5.  OTHER INFORMATION.

         On February 23, 1998 new,  increasingly  stringent  rules for continued
         listing of shares on the NASDAQ Small Cap market went into  effect.  In
         spite of the Company using its reasonable  best efforts to maintain its
         listing  for its  common  stock  on the  NASDAQ  SmallCap  Market,  the
         Company's stock price fell below the new $1.00 minimum standard and the
         Company's  common stock was  delisted on September 4, 1998.  The common
         stock now  trades on the OTC  Bulletin  Board.  The  Company  is in the
         process of appealing this decision to a NASDAQ listing hearing panel.



Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         A) Exhibits:

            27       Financial Data Schedule.


         B) Forms 8-K:

         1) The Company filed a Form 8-K dated August 14, 1998  reporting  under
            Item 5 its common stock reverse split.

         2) The Company filed a Form 8-K dated September 9, 1998 reporting under
            Item 5 that its common  stock would cease  NASDAQ  Small Cap trading
            and begin trading on the OTC Bulletin Board.

                                       11
<PAGE>


                                   SIGNATURES


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


AJAY SPORTS, INC.




By:    /s/Robert R. Hebard
  ------------------------ 

Its:     Corporate Secretary





By:    /s/Duane R. Stiverson
  --------------------------

Its:    Chief Financial Officer



Date:  November  13,  1998
    ----------------------
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