<PAGE>

                                  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, 1996

                                       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 Identification No.)
 Incorporation or Organization)

1501 E. Wisconsin Street,
Delavan, Wisconsin   53115                               (414) 728-5521
-----------------------------------------      ---------------------------------

(Address of principal executive offices          (Registrant's Telephone Number,
including Zip Code)                                     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 10/31/96 is 23,274,039.


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Item 1.           FINANCIAL STATEMENTS

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

                                                                  September 30, 1996                   December 31,
                                                                          (Unaudited)                          1995
<S>                                                                         <C>                            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                $    239                       $    362
   Trade accounts receivable, net                                              4,603                          5,196
   Inventories                                                                 8,206                          8,909
   Prepaid expenses and other current assets                                     540                            365
   Deferred tax benefit                                                          363                            102
                                                                             -------                        -------

            Total current assets                                              13,951                         14,934

Fixed assets, net                                                              1,884                          1,888
Other assets                                                                     397                            236
Deferred tax benefit                                                             223                            106
Goodwill                                                                       1,597                          1,322
                                                                             -------                        -------

            Total assets                                                    $ 18,052                       $ 18,486
                                                                             =======                        =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Note payable to bank                                                     $  5,407                       $  5,793
   Note payable to affiliate                                                     560                              -
   Current portion of capital lease                                                9                              6
   Accounts payable                                                            2,538                          2,181
   Accrued expenses                                                              594                            631
                                                                             -------                        -------

            Total current liabilities                                          9,108                          8,611

Note payable - long term                                                       5,099                          5,111
Long term portion of capital lease                                                17                             --

Stockholders' equity:
   Preferred stock, 10,000,000 shares authorized,
            Series B, $0.01 par value,12,500 shares out at liquidation value   1,250                     1,250
            Series C, $10.00 par value, 296,170 and 313,790 shares
            outstanding at stated value, respectively                          2,962                          3,138
   Common stock, $.01 par value 50,000,000 shares authorized, 23,274,039 and
            23,337,746 shares outstanding, respectively                          233                            234
   Additional paid-in capital                                                  9,313                          9,123
   Accumulated deficit                                                        (9,930)                        (8,981)
                                                                             -------                        -------
            Total stockholders' equity                                         3,828                          4,764
                                                                             -------                        -------

            Total liabilities and stockholders' equity                      $ 18,052                       $ 18,486
                                                                             =======                        =======
</TABLE>



                                        2

<PAGE>

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

                                                                     Three Months                        Nine Months
                                                                  Ended September 30,                Ended September 30,
                                                                   1996         1995                  1996         1995
                                                                   ----         ----                  ----         ----

<S>                                                               <C>          <C>                   <C>          <C>    
Net sales                                                         $ 4,730      $ 3,437               $19,317      $13,376

Cost of sales                                                       4,022        2,926                15,824       10,858
                                                                    -----        -----                ------       ------

            Gross profit                                              708          511                 3,493        2,518

Selling, general and
  administrative expenses                                           1,253          670                 3,711        2,118
                                                                    -----        -----                ------       ------

            Operating income (loss)                                  (545)        (159)                 (218)         400

Non-operating (income) expense:
   Interest expense, net                                              263          167                   840          564
   Other, net                                                          14           14                    19           12
                                                                    -----        -----                ------       ------

   Total non-operating expense                                        277          181                   859          576
                                                                    -----        -----                ------       ------

Income (loss) before income taxes                                    (822)        (340)               (1,077)        (176)

Income tax expense (benefit)                                         (280)         ---                  (360)         ---
                                                                    -----        -----                ------       ------

Net income (loss)                                                 $  (542)     $  (340)              $  (717)     $  (176)
                                                                    =====        =====                ======       ======

Income (loss) per common share outstanding*                       $  (.03)$    $  (.01)              $  (.04)     $  (.01)
                                                                    =====        =====                ======       ======


Income (loss) per common share & equivalents                      $  (.03)$    $  (.01)              $  (.04)     $  (.01)
                                                                    =====        =====                ======       ======
outstanding**

Weighted average common shares outstanding                         23,257      22,687                23,264       22,687
                                                                   ======      ======                ======       ======
</TABLE>



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

** Computed by dividing net income or loss,  after reduction for preferred stock
dividends,  by the  weighted  average  number of common  share and common  share
equivalents outstanding.


                                                             3

<PAGE>

                       AJAY SPORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                           (IN THOUSANDS), (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                               Nine Months
                                                                                               Ended September 30,
                                                                                               1996            1995

<S>                                                                                       <C>               <C>     
Cash flows from operating activities:
   Net income (loss)                                                                      $  (717)          $  (176)
   Adjustments to reconcile to net cash
   provided by operating activities:
            Loss on sale of assets                                                              -                 1
            Depreciation and amortization                                                     286               142
   Change in assets [(increase)/decrease] and liabilities [increase/(decrease)]:
            Trade accounts receivable, net                                                    592            (1,923)
            Inventories                                                                       703               530
            Prepaid expenses and other current assets                                        (192)             (162)
            Investments                                                                         -               (74)
            Other assets                                                                     (162)              (10)
            Deferred tax benefits                                                            (360)                -
            Accounts payable                                                                  356              (196)
            Accrued expenses                                                                  (19)                1
            Goodwill                                                                         (300)                -
                                                                                          -------           -------
            Net cash used in
            operating activities                                                              187            (1,867)
                                                                                          -------           -------

Cash flows from investing activities:
   Purchase of property, plant, equipment                                                    (194)              (99)
     Disposition of fixed assets                                                              (64)                6
                                                                                          -------           -------
            Net cash used in
            investing activities                                                             (258)              (93)
                                                                                          -------           -------

Cash flows from financing activities:
   Net change in bank loan                                                                   (396)            4,705
   Net change in note payable to affiliate                                                    560            (5,370)
   Issuance of preferred shares                                                                 -             2,731
   Preferred stock conversion                                                                  12                -
   Dividends                                                                                 (228)             (58)
                                                                                          -------           -------

            Net cash provided by
            financing activities                                                              (52)            2,008
                                                                                          -------           -------

Net increase in cash and cash equivalents                                                    (123)               48
Cash and cash equivalents at beginning of period                                              362               105
                                                                                          -------           -------

Cash and cash equivalents at end of period                                                $   239           $   153
                                                                                          =======           =======

Supplemental disclosures of cash flow information:
   Cash paid for interest                                                                 $   881           $   570
                                                                                          =======           =======

   Cash paid for income tax                                                                     -                 -
                                                                                          =======           =======
</TABLE>



                                        4

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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, 1996 and the results of operations  for
the three-month and nine-month periods ended September 30, 1996 and 1995 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.  It is suggested that
these condensed  financial  statements 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, 1995.

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.


Note 2.  INVENTORIES

The major classes of inventories (rounded to thousands) are as follows:
<TABLE>
<CAPTION>


                                                 September 30,                        December 31,
                                                          1996                                1995

        <S>                                             <C>                               <C>     
        Raw Materials                                   $4,559                            $  4,608
        Work in Process                                    846                               1,014
        Finished Goods                                   2,801                               3,287
                                                        ------                              ------

                                                        $8,206                            $  8,909
                                                        ======                               =====
</TABLE>

                                        5

<PAGE>

Note 3.           LIQUIDITY

The Company's loan agreement with the United States National Bank of Oregon ("U.
S. Bank") has been renewed as of July 31, 1996 and is subject to a future review
date of May 31,1997.  The renewal includes an increase in the tangible net worth
minimum  covenant  from $2.0  million to $2.5  million.  Additionally,  the debt
leverage  ratio maximum was increased from 4.5 to 5.5 for 1996 and 6.0 for 1997.
At September 30, 1996 the Company's  tangible net worth was  $2,111,000  and the
debt leverage  ratio was 6.74.  During the quarter the Company has made use of a
significant  amount of liquidity as a result of funding additional needs for its
October 1995  acquisition,  Palm Springs Golf,  Inc. Since the  acquisition  the
Company has invested $1.8 million to  reposition  Palm Springs Golf for the 1997
product year.  This is expected to increase  through March 1997. The Company has
taken the  position of  investing  in the future by totally  closing out all old
products  and   shifting  to  totally  new   products  for  future   growth  and
profitability.  This has had a short term adverse  effect on  profitability  for
1996  and  requires   additional   funds  for  the   transition  to  growth  and
profitability.  In this effort the Company has  strengthened its market position
and created, through new product development, a multi-faceted line of golf clubs
and golf bags unique to Palm Springs Golf, Inc. This will be the most innovative
and expanded line of bags in the history of Palm Springs Golf. The new golf club
line  incorporates the latest features and technology  including  oversize woods
and irons and titanium clubs. The line is totally new and is expected to be very
strong in the  marketplace.  Additionally,  the Company has added golf accessory
and golf cart lines to Palm Springs' product offerings for 1997, thus creating a
broad lines  supplier.  In support of this  effort,  Ajay has also  upgraded its
production  capacity in its Mexicali plant for both club  manufacturing  and bag
manufacturing.  This will  support the  expected  sales  increases  for the 1997
product year. To support the present  transition to growth and profitability and
to provide financing for its short and long-term needs, the Company is presently
working on a plan to raise additional capital and debt. The Company  anticipates
additional funds will be available by the end of 1996. The Company had increased
debt of $560,000 as a result of notes to affiliates.


Note 4.           BUSINESS SEGMENT REPORTING

The  relative  contributions  to net sales,  operating  profit and  identifiable
assets of the  Company's  two industry  segments for the quarter and nine months
ended September 30, 1996 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
                                 Quarter Ended                               Nine Months Ended
                                 September 30, 1996                          September 30, 1996
                                 Furniture       Golf      Consolidated   Furniture    Golf       Consolidated
<S>                                  <C>      <C>               <C>           <C>       <C>             <C>    
Net Sales                            $ 178    $ 4,552           $ 4,730       $1,901    $17,416         $19,317
Operating Profit/(Loss)               (237)      (308)             (545)        (175)       (43)           (218)
Total Assets                         1,695     16,357            18,052        1,695     16,357          18,052
Depreciation/Amortization               21         36                57           75        211             286
Capital Expenditures                     2         31                33           11        183             194
</TABLE>

                                        6

<PAGE>


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


FINANCIAL  CONDITION - At September 30, 1996 the Company had working  capital of
$4,843,000  as compared  with  $6,324,000  at December  31,  1995.  The ratio of
current  assets to  current  liabilities  at  September  30,  1996 was 1.5 to 1,
compared to 1.7 at December 31, 1995.

At September  30, 1996 the Company had  decreased  its short term  borrowings by
$386,000 since December 31, 1995.

LIQUIDITY - At September 30, 1996 the Company had $10,407,000  outstanding under
its  $13,500,000  loan  agreement  with U. S. Bank.  The seasonal  nature of the
Company's sales creates fluctuating cash flow. With the October 1995 acquisition
of Palm Springs Golf,  Inc. the Company has  undertaken an effort to discontinue
existing  products  within Palm Springs  Golf's lines and replaced them with all
new  product for 1997.  This has had an adverse  impact on Palm  Springs  Golf's
earnings for 1996 and additional  demands for working  capital.  The effort will
result in a complete  new  line-up  for golf  clubs,  golf bags,  gloves and two
additional lines not heretofore  carried,  those being golf accessories and golf
carts.  All of this is targeted to provide the  off-course  specialty  golf shop
market with one source purchasing.  The off course golf specialty sporting goods
market is believed to be four times the size of the mass market. The company has
expanded  its  golf bag and  golf  club  production  facilities  to  accommodate
anticipated additional volume for 1997. This effort has resulted in an increased
cash use at Palm  Springs  Golf of $1.8  million  and is  expected  to  continue
through March 1997. To provide for the additional short and long-term cash needs
and to improve  liquidity,  the Company is working on a plan to raise additional
capital and debt but it is uncertain if this can be concluded by year end 1996.

RESULTS OF OPERATIONS - During the quarter ended  September 30, 1996 the Company
had net sales of $4,730,000, compared to $3,437,000 for the same period in 1995.
For the nine-month period sales were $19,317,000 compared to $13,376,000 for the
same period in 1995. The overall sales increase  respectively of 38% and 44% was
a result of the two fourth quarter 1995  acquisitions and respectively a 23% and
26% increase in sales on existing operations.

Gross profit for the three months ended September 30, 1996 was 15% of net sales,
compared to 15% for the same  period in 1995.  Gross  profit for the  nine-month
period was 18.1% in 1996 and 18.8% in 1995. The decrease in margin is attributed
to the  acquisition  of Palm  Springs  Golf in October  1995 and the  subsequent
inclusion of its results for the nine-month period in 1996.

Selling,  general and administrative expenses expressed as a percentage of sales
were  26.5% for the third  quarter of 1996,  versus  20% for 1995.  SG&A for the
nine-month  period was 19.2% of sales in 1996 and 15.8% in 1995.  The percentage
increase is due to a soft  furniture  sales  quarter and the  inclusion  of Palm
Springs Golf's financial results in the 1996 periods.  They were not part of the
Company in the same periods of 1995.


                                        7

<PAGE>

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


Operating  loss for the  third  quarter  of 1996  was  $545,000  compared  to an
operating loss of $159,000 for the third quarter of 1995. The operating loss for
the  nine-month  period was $218,000  which  compares to an operating  profit of
$400,000  for  the  same  period  of  1995.  The  increased  operating  loss  is
attributable to the inclusion of Palm Springs Golf.

Interest expense  increased $96,000 in the third quarter of 1996 compared to the
third quarter of 1995 as a result of higher debt to finance the needs of two 4th
quarter  acquisitions,  offset by a lower rate that the Company paid on its bank
lines in the third quarter of 1996 versus the same period of 1995.

As a result of the above,  the net loss for the third quarter  ending  September
30, 1996 was $542,000  compared to net loss of $340,000 for the same period last
year.

                                        8

<PAGE>


PART II.  OTHER INFORMATION



Item           5. In October 1996 the billiards  line was  discontinued  and the
               inventory was sold to a third party.  Billiard  sales  aggregated
               less than 3% of annual sales.


Item 6.        EXHIBITS AND REPORTS ON FORM 8-K

               a)  No reports on  Form 8-K were filed  during the quarter  ended
                   September 30, 1996.

               b)  Exhibit #27:   Financial Data Schedule


                                        9
<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
      --------------------
         Robert R. Hebard
Its:     Corporate Secretary





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

        Duane Stiverson
Its:    Chief Financial Officer




Date:   November 12, 1996





















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