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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

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Form 10-QSB/A





QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2003





Commission file number 0-18204





Ajay Sports, Inc





|Delaware                       | 39-1644025                          
|------------------------------ | ------------------------------------
|State or Other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization) |                                     





37735 Enterprise Court  Suite 600, Farmington Hills, MI 48331

(248) 994-0553

(Address includes the zip code, area code and telephone number of the principal executive offices)







Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]



Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by the report.

Yes [ ]   No [X]



The number of shares outstanding of the Registrants $.01 par value common stock at February 28, 2006 was 4,257,163.

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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements





AJAY SPORTS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands, except share and per share data)







|                                                                |                                                                  |                                    | (Unaudited)
March 31,
2003 | December 31,
2002
|--------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------- | -------------------------- | -----------------
|ASSETS                                                          |                                                                  |                                   
|Current Assets                                                  |                                                                  |                                   
|                                                                | Cash.                                   | $         42                       | $       55                
|                                                                | Accounts receivable, net.                           | 743                                | 656                       
|                                                                | Investment in marketable securities                              | 71                                 | 55                        
|                                                                | Inventories.                                | 21                                 | 11                        
|                                                                | Prepaid expenses and other current assets                        | 322                                | 349                       
|                                                                |                                                                  | Total current assets. | 1,199                      | 1,126            
|                                                                | Fixed assets, net                                                | 66                                 | 69                        
|                                                                | Due from affiliates                                              | 40                                 | 103                       
|                                                                | Intangibles, net..                             | 6,367                              | 6,368                     
|                                                                | Deferred tax benefit                                             | 1,929                              | 1,836                     
|                                                                |                                                                  |                                    | $   9,601                  | $    9,502       
|LIABILITIES AND SHAREHOLDERS EQUITY                            |                                                                  |                                   
|Current liabilities                                             |                                                                  |                                   
|                                                                | Accounts payable                                                 | $      766                         | $       692               
|                                                                | Accrued expenses and other liabilities                           | 483                                | 416                       
|                                                                | Note payable  related party..                         | 2,265                              | 1,556                     
|                                                                | Note payable  bank..                             | 6,353                              | 6,570                     
|                                                                | Note payable  other                                             | 1,530                              | 1,665                     
|                                                                |                                                                  | Total current liabilities          | 11,397                     | 10,899           
|Long-term liabilities                                           |                                                                  |                                   
|                                                                | Accrued expenses  non-current.
Note payable  long term | 23
677                             | 13
660                    
|                                                                | Net liabilities of discontinued operations                       | 8,032                              | 8,734                     
|Total liabilities

Minority interest in subsidiary. | 20,129

(161)                                                    | 20,306

(155)                     



|Shareholders Equity |                                                                                                                                               |           
|-------------------- | --------------------------------------------------------------------------------------------------------------------------------------------- | ----------
|                     | Preferred Stock  10,000,000 shares authorized                                                                                                |           
|                     | Series B, $100 par value, 12,500 shares issued and outstanding                                                                                | 1,250     
|                     | Series C, $10 par value, 208,439 shares issued and outstanding at stated cost                                                                 | 2,084     
|                     | Series D, $.01 par value, 6,000,000 shares issued and outstanding.                                                                 | 60        
|                     | Common stock, $.01 par value, 100,000,000 shares authorized, 4,289,322 issued, 4,257,163 outstanding and 32,147 shares in treasury. | 43        
|                     | Additional paid-in capital                                                                                                                    | 18,344    
|                     | Accumulated deficit                                                                                                                           | (31,841)  
|                     | Accumulated other comprehensive loss.                                                                                                       | (307)     
|                     | Total shareholders equity                                                                                                                    | (10,367)  
|                     | $   9,601                                                                                                                                     | $    9,502



See notes to consolidated financial statements.



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AJAY SPORTS, INC.

CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)



|                                                                                                    |                                                         |             | Three Months Ended March 31,
|--------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------- | ----------------------------
|                                                                                                    |                                                         |             | 2003                        
|Net sales..                                                             | $     663                                               | $     463  
|Cost of sales.                                                            | 1                                                       | 14         
|                                                                                                    | Gross profit..                  | 662         | 449                         
|                                                                                                    |                                                         |             |                             
|Selling, general and administrative expense.                                                 | 639                                                     | 557        
|Operating income.                                                            | 23                                                      | (108)      
|Non-operating expenses                                                                              |                                                         |            
|                                                                                                    | Interest expense, net                                   | 392         | 396                         
|                                                                                                    | Other, net                                              | 28          | 89                          
|Total non-operating expenses                                                                        | 420                                                     | 485        
|Loss from continuing operations before income taxes and minority interest... | (397)                                                   | (593)      
|Income tax benefit..                                                          | (93)                                                    | (160)      
|Loss from continuing operations before minority interest .                                          | (304)                                                   | (433)      
|Minority interest in income of subsidiary..                                                    | 6                                                       | 19         
|Net loss from continuing operations.                                                    | (298)                                                   | (414)      
|                                                                                                    |                                                         |            
|Discontinued Operations                                                                             |                                                         |            
|                                                                                                    | Interest expense from discontinued furniture operations | (51)        | -                           
|                                                                                                    | Gain from settlement of discontinued accounts payable   |             |                             
|                                                                                                    |                                                         | 615         | -                           
|                                                                                                    | Net income from discontinued operations                 | 564         | -                           
|Net income (loss).                                                         | $    266                                                | $     (414)
|                                                                                                    |                                                         |             |                             
|Undeclared preferred dividends                                                                      | (85)                                                    | (85)       
|Net income (loss) available to common shareholders                                                  | 181                                                     | (499)      
|Net income (loss) per common share  basic and diluted                                              |                                                         |            
|Loss available to common shareholders from   continuing operations                                  | (0.09)                                                  | (0.12)     
|Income from discontinued operations                                                                 | 0.13                                                    | -          
|Net income (loss) available to common shareholders per common share                                 | 0.04                                                    | (0.12)     
|Weighted average common shares outstanding  basic and diluted                                      | 4,257                                                   | 4,257      

See notes to consolidated financial statements.

#



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AJAY SPORTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

(Unaudited)

|                                                                                             |                                                                              |           | Three Months Ended March, 31
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | --------- | ----------------------------
|                                                                                             |                                                                              |           | 2003                        
|Cash Flows from operating activities:                                                        |                                                                              |          
|Net loss                                                                                     | $266                                                                         | $   (414)
|Adjustments to reconcile net income (loss) to net cash used in operating activities          |                                                                              |          
|                                                                                             | Depreciation and amortization                                                | 28        | 97                          
|                                                                                             | Changes in assets and liabilities                                            |           |                             
|                                                                                             | Trade accounts receivable, net
(Increase) decrease in inventories            | (87)
(10) | 128
-                       
|                                                                                             | Prepaid expenses and other current assets                                    | 3         | 20                          
|                                                                                             | Trade accounts payable
Deferred tax benefits                                 | 74
(93)   | 6
(159)                     
|                                                                                             | Accrued expenses                                                             | 77        | 60                          
|                                                                                             | Gain from settlement of discontinued accounts payable                        | (615)     | -                           
|                                                                                             | Net cash used in operating activities                                        | (357)     | (311)                       
|                                                                                             |                                                                              |           |                             
|Cash flows from financing activities                                                         |                                                                              |          
|                                                                                             | Net change in notes payable                                                  | (352)     | 293                         
|                                                                                             |                                                                              |           |                             
|                                                                                             | Minority interest in loss of subsidiary                                      | (6)       | 268                         
|                                                                                             | Net cash provided by (used in) financing activities of continuing operations | (358)     | 561                         
|                                                                                             |                                                                              |           |                             
|Cash flows from investing activities                                                         |                                                                              |          
|                                                                                             | Increase in intangibles                                                      | 0         | (313)                       
|                                                                                             | Increase in due to affiliates                                                | 789       | (9)                         
|Net cash provided by (used in) investing activities

Cash flows from discontinued operations | 789                                                                          | (322)    
|                                                                                             | Cash used in discontinued operations                                         | (87)      | -                           
|                                                                                             |                                                                              |           |                             
|Net decrease in cash                                                                         | (13)                                                                         | (72)     
|Cash at beginning of period                                                                  | 55                                                                           | 107      
|Cash at end of period                                                                        | $42                                                                          | $    35  
|                                                                                             |                                                                              |           |                             
|                                                                                             |                                                                              |           |                             
|                                                                                             |                                                                              |           |                             
|                                                                                             |                                                                              |           |                             
|                                                                                             |                                                                              |           |                             



See notes to consolidated financial statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



This report contains forward-looking statements including statements containing words such as believes, anticipates, expects and the like.  All statements other than statements of historical fact included in this report are forward looking statements.  The Company believes that its expectations reflected in its forward looking statements are reasonable, but it can give no assurance that the expectations ultimately will prove to be correct. Important factors including, without limitation, statements relating to planned acquisitions, 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, a change in the Companys relationships with its bank lenders and/or unsecured lenders, could cause the Companys actual results to differ materially from those anticipated in these forward-looking statements.  The Company does not intend to update the forward-looking statements contained in this report.



AJAY SPORTS, INC.

Notes to consolidated condensed unaudited Financial Statements



1.

The Company



Ajay Sports, Inc. (the "Company) owns Pro Golf of America, Inc., the worlds largest franchiser of golf only retail stores, with over 123 stores in the United States, Canada and Europe.  The Company operates the franchise segment of its business through Pro Golf International, Inc. (PGI), a majority-owned subsidiary, which was formed during 1999 and owns 100% of the outstanding stock of Pro Golf of America, Inc. (PGOA or Pro Golf) and a majority of the stock of ProGolf.com, Inc. (PG.com). PGOA is the franchiser of Pro Golf DiscountÒ retail golf stores (PGD stores).  ProGolf.com is a company formed to help drive traffic to its franchisee stores and to facilitate the sale of golf equipment and other golf-related and sporting goods products and services over the Internet.



PGOA provides services to its franchisees in exchange for initial franchise fees and ongoing royalties based on a percentage of retail sales.  The Company plans to enhance its traditional sales and distribution methods by its recently introduced Internet site, ProGolf.com.



The Company was organized under Delaware law on August 18, 1988.  Its administrative office is located at 33735 Enterprise Court, Suite 600, Farmington Hills, MI 48331, where its telephone number is (248) 994-0553.



2. Basis of Presentation



The accompanying unaudited interim financial statements have been prepared by Ajay Sports, Inc., (the Company) pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States 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 Annual Report on Form 10-KSB for the year ended December 31, 2002 filed with the Securities and Exchange Commission.  These consolidated condensed financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for the fair presentation of the financial position, results or operations and cash flows for the periods and dates presented.  Interim operating results are not necessarily indicative of operating results for the full year.



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ materially from those estimates and assumptions.



3. Fixed Assets



Fixed assets are stated at cost.  Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful life of the asset.



4.  Marketable Securities



The Company determines the appropriate classification of its investments at the time of purchase and reevaluates such determination at each balance sheet date.  Traded securities are carried at quoted fair value, with unrealized gains and losses included in earnings.



Item 2. Managements Discussion and Analysis or Plan of Operations



The following discussion should be read in conjunction with the Consolidated Condensed Financial Statements and the related notes that appear elsewhere in the report.



Results of Operations



For the 3 months ended March 31, 2003, the company had net income of $266,007.  This improvement was accomplished mainly through a one time gain from settlement of discontinued accounts payable of $615,115 plus the addition of 2 new franchise locations and the reduction in operating expenses.  Net operating income (EBITDA) was $21,323 which was an improvement of $129,691 versus the prior year.



Net sales increased 44% as compared to the same period in the prior year.  The increase in net sales for the 1st quarter is mainly attributable to the recording of advertising revenue in the amount of $142,000 that was offset with corresponding advertising expenses.  Net sales were up 13% by taking out the increased advertising revenue.  Royalties were $389,234 which was a decrease of 10% in the 1st quarter compared to prior year.  The decrease in royalties is due to a decline in the number of franchise locations.  There were 2 new franchise locations added in the 1st quarter, generating $99,000 in franchise fees, a 100% increase over the prior year.  Miscellaneous income was $35,527, an increase of 22% in the 1st quarter, mainly due to a strong increase in licensing revenue.



Selling, general and administrative expenses (SG&A) increased in the 1st quarter by 15% mainly due to the $141,314 increase in advertising expenses.  SG&A expenses were down 11% by taking out the increased advertising expenses.  Compensation and benefits were down 28% in the 1st quarter due to the decreased number of personnel.  Commissions were up 77% due to the signing of 2 new franchise locations in the 1st quarter.  Legal fees were down 17% and accounting charges were also down 22%.  Rental expense was up 41% due to the elimination of a tenant from the prior year.  Travel was up 75% due to increased management travel and field visitations.  Miscellaneous expenses were down 11% in the quarter.



Cost of sales recorded no change from the prior year.



Allowance for Doubtful Accounts



The Company estimates an allowance for uncollectible accounts resulting from the failure of its customers to satisfy their obligations.  This estimate is based upon managements historical experience, the joint agreement of management and the collections staff, the financial condition of the customer, or immediately if a customer declares bankruptcy.



Liquidity



The Companys liquidity varies with the seasonality of its business, which, in turn, influences its financing requirements.  The seasonal nature of the Companys royalty revenue creates fluctuating cash flow.  The Company has relied on internally generated cash from operating activities to fund its operations and pay its debt.



The Companys primary focus for 2004-2005 will be to help its Pro Golf Discount storeowners increase sales, reduce operating costs, and become more profitable.  The Company also plans to expand the Pro Golf Franchise Network in the United States and Internationally by signing new franchisees.  In addition, the Company is also planning to open a minimum of one Company owned retail store as funds become available.



Foreign Currency Risk



The Company conducts business globally in three currencies.  Currently, international royalty revenue accounts for approximately 10% of the Companys total revenue.  These transactions expose the Company to fluctuations in currency exchange rates relative to the United States dollar.  Historically, the Company has been favorably impacted by the effects of fluctuation in currency exchange rates.



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Concentrations of Credit Risk



For cash management purposes, the company concentrates its cash holdings in at a single financial institution.  The balance in these accounts may exceed the federally insured limit of $100,000 by the Federal Deposit Insurance Corporation in case of bank failure.



Dividends



Holders of shares of Common Stock are entitled to dividends when, and if, declared by the Board of Directors out of funds legally available.  The Company has not paid any dividends on its Common Stock and intends to retain future earnings to finance the development and expansion of its business.  The Company's future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, capital requirements, bank credit agreement restrictions and the financial condition of the Company. Holders of the Companys Series B Cumulative Convertible Preferred Stock are entitled to cumulative dividends at an annual rate of 8% based on a stated value of $100 per Series B share, or $8 per Series B share per year.   Due to a shortage of operating funds to run the business, dividends have not been paid since January 1997.  Until the Company has cash available for dividends, it does not anticipate declaring or paying dividends on its Series B preferred stock.





Item 3. Controls and Procedures



Evaluation of Disclosure Controls and Procedures.



The Companys management evaluated, with the participation of the chief executive officer and chief financial officer, the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report. The chief executive officer and chief financial officer have concluded that, to their knowledge on the basis of that evaluation, the Companys disclosure controls and procedures were effective as of the end of the period covered by this report except as to the deficiencies described below. There has been no change in the Companys internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; however, management intends to implement the changes described below. In the past the Company has not filed on a timely basis certain of its quarterly Forms 10-QSB and annual Form 10-KSB with the Securities Exchange Commission (SEC) within the required due dates. This, under Section 404 of the Sarbanes Oxley Act, constitutes a deficiency in internal controls over financial reporting. The Company seeks to implement a short and long term correction of these internal control deficiencies and believes it can make progress toward correction of these matters.



Changes in Internal Controls



There have been no changes in the Companys internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f)under the Exchange Act) during the quarter ended March 31, 2003 to which this report relates, that have materially affected, or are reasonably likely to affect, the Companys internal control over financial reporting.









PART II. OTHER INFORMATION



Item 1. Legal Proceedings



The Company is involved in various legal proceedings that are normal to its businesses.  The Company believes that none of this litigation is likely to have a material adverse effect on its financial condition or operations.



In January 2004, Ronald Silberstein, the former Chief Financial Officer of the Company, who was serving at will, was terminated from employment by unanimous vote of the board of directors.  Mr. Silberstein is suing the Company for wrongful termination and is asking for a minimum of $25,000.  Management feels that Mr. Silbersteins claim is without merit and has filed a counter-suit against Mr. Silberstein.  Discovery is now complete in the case, and we are now awaiting the facilitation stage before proceeding to trial.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

NONE



Item 3. Defaults upon Senior Securities

NONE

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

NONE











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/ THOMAS W. ITIN

Thomas W. Itin

Chairman and Chief Executive Officer







By:  /s/ BRIAN T. DONNELLY

Brian T. Donnelly

President and Chief Operating Officer













Date: February 28, 2006



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CERTIFICATION  PURSUANT  TO 18  USC,  SECTION  1350, AS  ADOPTED PURSUANT  TO SECTIONS  302  AND  906  OF  THE  SARBANES-OXLEY  ACT  OF  2002



In connection with the Report of Registrant on Form 10-QSB for the quarter ended March 31, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Thomas W. Itin, Chairman and Chief Executive Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 USC 1350, as adopted pursuant to Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that:



A.

The Report referenced above has been read and reviewed by the undersigned.

B.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

C.

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

D.

Based upon my knowledge, the Report referenced above does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to makes the statements made, in light of the circumstances under which such statements were made, not misleading.

E.

Based upon my knowledge, the financial statements, and other such financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Registrant as of, and for, the periods presented in the Report.

I acknowledge that the Chief Executive Officer and Chief Operating Officer:



A.

are responsible for establishing and maintaining "disclosure controls and procedures" for the Registrant;



B.

have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report was being prepared;



C.

have evaluated the effectiveness of the Registrant's disclosure controls and procedures within 90 days of the date of the Report; and



D.

have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation.



E.

the Registrant (or persons fulfilling the equivalent function):



(i)

all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize, and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls;

(ii)

and any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and



F.

have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.







/s/ Thomas W. Itin

------------------------------------------

Chairman and Chief Executive Officer

Dated: February 28, 2006





CERTIFICATION  PURSUANT  TO 18  USC,  SECTION  1350, AS  ADOPTED PURSUANT  TO SECTIONS  302  AND  906  OF  THE  SARBANES-OXLEY  ACT  OF  2002



In connection with the Report of Registrant on Form 10-QSB for the quarter ended March 31, 2003 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Brian T. Donnelly, President and Chief Operating Officer of the Registrant, certify to the best of my knowledge, pursuant to 18 USC 1350, as adopted pursuant to Sec.302 and promulgated as 18 USC 1350 pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that:



A.

The Report referenced above has been read and reviewed by the undersigned.

B.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

C.

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.

D.

Based upon my knowledge, the Report referenced above does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to makes the statements made, in light of the circumstances under which such statements were made, not misleading.

E.

Based upon my knowledge, the financial statements, and other such financial information included in the Report, fairly present in all material respects the financial condition and results of operations of the Registrant as of, and for, the periods presented in the Report.

I acknowledge that the Chief Executive Officer and Chief Operating Officer:



A.

are responsible for establishing and maintaining "disclosure controls and procedures" for the Registrant;



B.

have designed such disclosure controls and procedures to ensure that material information is made known to us, particularly during the period in which the Report was being prepared;



C.

have evaluated the effectiveness of the Registrant's disclosure controls and procedures within 90 days of the date of the Report; and



D.

have presented in the Report our conclusions about the effectiveness of the disclosure controls and procedures based on the required evaluation.



E.

the Registrant (or persons fulfilling the equivalent function):



(i)

all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize, and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls;

(ii)

and any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal controls; and



F.

have indicated in the Report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.







/s/ Brian T. Donnelly

------------------------------------------

President and Chief Operating Officer

Dated: February 28, 2006