SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

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

December 31, 1998                                                33-19107
--------------------------                               ----------------------
(For the fiscal year ended) (Commission File No.)

                                LBO CAPITAL CORP.
             (Exact name of Registrant as specified in its charter)

Colorado                                                        38-2780733
----------------------------                            -----------------------
(State or other jurisdiction                            (I.R.S. Employer
 of organization)                                        Identification Number)


7001 Orchard Lake Road, Suite 424
West Bloomfield, MI                                         48322
-------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)

               Registrant's telephone number, including area code:
                                 (248) 851-5651

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

                                      None

          Securities registered pursuant to Section 12 (g) of the Act:

                         Common Stock, $.0001 Par Value
                         ------------------------------
                                (Title of Class)

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

As of December 31, 1998, a total of 12,100,000  shares of common  stock,  $.0001
par value,  were  outstanding and the aggregate market value of the voting stock
held by nonaffiliates of the Registrant was  approximately  $97,073 based on the
average  of the bid and asked  prices on that date ($ .025) as  reported  by The
National Quotation Bureau, Inc. <PAGE>

                                LBO CAPITAL CORP.
                                    FORM 10-K

                                     PART 1
ITEM 1.           BUSINESS

General

LBO Capital Corp. (the  "Registrant")  was organized under the laws of the State
of Colorado on October 8, 1987. The Registrant was formed based on the belief of
its  management  that there are  business  opportunities  that,  for one or more
reasons, are available for acquisition by the Registrant.

On March 15,  1988,  the  Registrant  completed a public  offering of  3,000,000
Units, each Unit consisting of one share of its common stock, one Callable Class
A Warrant,  one Callable Class B Warrant and one Callable  Class C Warrant.  The
Warrants  are  detachable  from the Units and may be  traded  separately  in the
over-the-counter  market.  Each Class A Warrant  entitles the holder  thereof to
purchase  at a price of  $0.50,  one  share of  Common  Stock at any time  until
February 26, 1989. Each Class B Warrant  entitled the holder thereof to purchase
at a price of $0.75 one share of Common Stock at any time until August 26, 1989.
Each Class C Warrant  entitled  the holder  thereof  to  purchase  at a price of
$1.00,  one share of Common  Stock at any time  until  February  26,  1990.  The
expiration  dates of these warrants were  subsequently  extended by the Board of
Directors to expire on various dates, the latest being July 25, 1999. A Form 8-K
was filed on July 20, 1998 reporting this extension. The Registrant received net
proceeds of approximately $474,300 after payment of all costs of the offering.

Since  its  inception,   the  Registrant  has  directed  its  activities  toward
evaluating  potential  business  opportunities  with the goal of  acquiring  and
continuing  one or more business  opportunities.  The  Registrant may acquire an
existing   business   which   may  be  a   corporation,   partnership   or  sole
proprietorship.  One form which such a business  combination might take would be
an  exchange  of the  Registrant's  stock  for stock of the  acquired  business.
However,  the  Registrant may exchange its common stock to acquire the assets of
this entity, or may purchase a percentage of the entity outright.

The  Registrant  has  evaluated and attempted to acquire a number of entities to
date.
<PAGE>

ACQUISITION OF ASSETS
---------------------

Ajay Sports, Inc.
-----------------

On April 3, 1989 LBO acquired an aggregate of 1,880,000 shares of the restricted
common stock of Ajay Sports,  Inc.  ("Ajay") for a total cash purchase  price of
$182,000.

In 1991, the Registrant  pledged  400,000 shares of Ajay to a bank as collateral
for $300,000 in loans to Hendricks  Manufacturing Company. On July 1, 1991, this
bank declared the loan in default and foreclosed on the shares.

On August 13, 1998,  Ajay  announced  that its board of directors had authorized
the  implementation  of a 1-for-6  reverse split of the company's  common stock,
effective with the commencement of trading on August 14, 1998. The reverse split
was approved by the  stockholders of Ajay at the company's annual meeting on May
29, 1998.

Following the reverse  split,  holders of Ajay's  common stock  received one new
share of $.01 par  value  common  stock for  every  six  shares of common  stock
currently  held.  Therefore,  the number of Ajay  shares  held by the Company is
246,667.  The reverse split also  affected the number and exercise  price of the
Company's warrants, such that the Company now holds 33,333 warrants entitling it
to purchase one share of Ajay's common stock at $1.08 per share.

The 246,667 common stock and 33,333 warrants owned by the Registrant represented
6.7% of the total  shares of Ajay common  stock  outstanding  as of December 31,
1998. The decrease is the result of new shares issued.

Ajay's Common Stock ("AJAY") and Units ("AJAYU") are trading on the Nasdaq Small
Cap and the Warrants ("AJAYW") have been traded  over-the-counter since 1989 and
are reported by the National Quotation  Service.  The following table sets forth
the range of high and low trade prices for the common stock:



                                 HI          LOW
                               ------       ------
         1998
         ----
         First Quarter       $  1.50        $  .78
         Second Quarter      $  2.28        $  .78
         Third Quarter       $  3.78        $  .75
         Fourth Quarter      $  1.03        $  .34

On June 10,  1993,  Thomas  W.  Itin,  President  and  Chairman  of the Board of
Directors  of the  Registrant,  was elected to the  positions of Chairman of the
Board of Directors and Chief Executive  Officer of Ajay Sports,  Inc. It is felt
that the direct intervention by the Registrant's  management into the operations
of Ajay would have a positive  effect on the Ajay  earnings and the value of the
Ajay stock held by the Registrant.

Business  Ajay Sports,  Inc.,  through its operating  subsidiaries  Ajay Leisure
Products,  Inc.,  Palm  Springs  Golf  and  Leisure  Life,  Inc.,  is a  leading
manufacturer and distributor of golf bags, clubs, carts,  accessories and casual
living furniture throughout the United States.


<PAGE>

Enercorp, Inc.
-------------

On November 21, 1994, the Registrant  bought 2,667 shares of Enercorp,  Inc. for
$8,702. During 1996, the Registrant bought 12,674 additional shares of Enercorp,
Inc. for $39,694.

Enercorp,  Inc. is a business  development  company under the Investment Company
Act of 1940, as amended.

Competition
-----------

The Registrant  expects to encounter  substantial  competition in its efforts to
locate  businesses  for  acquisition.  The  primary  competition  for  desirable
business  acquisitions is expected to come from other small companies  organized
and funded  for  purposes  similar  to the  Registrant,  small  venture  capital
partnerships and corporations,  small business investment  companies and wealthy
individuals.  Should  the  Registrant  elect to  engage  in a  leveraged  buyout
acquisition,  competition may also be anticipated from investment bankers.  Many
of  these  entities  have  significantly   greater  experience,   resources  and
managerial  capabilities  than  the  Registrant  and are  therefore  in a better
position than the Registrant to obtain access to businesses.

Employees
---------

As of December 31, 1998, the Registrant had no employees.

ITEM 2.  PROPERTIES

The Registrant currently uses office space provided by Acrodyne  Corporation,  a
company  whose  Chairman  and  President is also  Chairman and  President of the
Registrant.  The space is used for purposes of  administration  and development.
While the  Registrant  does not pay any rent,  it does pay a monthly fee of $150
for  the  direct  operating  expenses.   The  Registrant  believes  its  current
facilities are sufficient for its present business activity.



ITEM 3.  LEGAL PROCEEDINGS

The Registrant is not a present party to any material pending legal  proceedings
and no such proceedings were known as of the filing date.

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of the  Registrant's  shareholders  during the
fiscal year ended December 31, 1998.


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



Common Stock
------------

The principal market on which the Registrant's  common stock,  $.0001 par value,
is traded on the Over-The-Counter market.

Prices for the Common Stock have been reported in the National  Daily  Quotation
Service "Pink Sheets" published by the National Quotation Bureau since March 15,
1988. The high and low trade price quotations for the Registrant's  Common Stock
during the quarters ended on the dates listed below is as follows:

                                    Trade Prices
                                    ------------
                                HI                 LOW
                              ------              ------
         1997
         -----
         First Quarter        $  .03              $  .06
         Second Quarter       $  .03              $  .08
         Third Quarter        $  .03              $  .08
         Fourth Quarter       $  .03              $  .08



        1998
        -----
        First Quarter         $  .035             $  .03
        Second Quarter        $  .03              $  .025
        Third Quarter         $  .03              $  .02
        Fourth Quarter        $  .03              $  .02


On December 31, 1998,  the high trade price  reported for the Common Stock was $
 .03* and the low trade price was $.02*.

As of December 31, 1998, the number of record holders of the Registrant's Common
Stock was 243. This figure excludes an undetermined number of shareholders whose
shares are held in "street" or "nominee" name.

The  Registrant  has never paid a dividend  with respect to its Common Stock and
does not intend to pay a dividend in the foreseeable future.
<PAGE>

Units
------

Prices for the Units have been reported in the National Daily Quotation  Service
"Pink Sheets"  published by the National  Quotation Bureau since March 15, 1988.
The high and low quotations for the Registrant's Units during the quarters ended
on the dates listed below is as follows:

                                    Trade Price
                                    ------------
                                HI                 LOW
                              -----               ------
         1997
         -----
         First Quarter        $  .03              $   .08
         Second Quarter       $  .03              $   .08
         Third Quarter        $  .03              $   .08
         Fourth Quarter       $  .03              $   .08


         1998
         -----
         First Quarter        $  .035             $   .03
         Second Quarter       $  .03              $   .025
         Third Quarter        $  .03              $   .02
         Fourth Quarter       $  .03              $   .02


Each Unit consists of one share of the  Registrant's  Common Stock, one Callable
Class A Warrant, one Callable Class B Warrant and one Callable Class C Warrant.

On December 31, 1998, the high and the low prices  reported for the Units were $
 .03* and $ .02*, respectively.

Warrants
--------

No ask or bid quotations were reported by the National  Quotation  Bureau,  Inc.
since December, 1989.

         *Prices  are  inter-dealer  quotations  as  reported  by  the  National
         Quotation  Bureau,  Inc.,  New York, New York,  without  adjustment for
         retail mark-up, mark-down or commission and may not necessarily
         represent actual transactions.

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

                                   December 31
                         1998         1997         1996        1995       1994
--------------------------------------------------------------------------------

Working Capital     $(599,097)  $(560,736)   $(498,352)   $(427,094)  $(397,542)
Cash                       73          43           78           78         811
Marketable Securities  46,023      24,972       28,765        8,000           0
Notes Receivable            0           0            0            0           0
Investments in
  operating companies       0           0            0            0           0
Total Assets           46,023      24,972       28,843        8,251      15,887
Total Liabilities     645,193     585,708      527,195      435,345     407,106
Shareholders' Equity (599,097)   (560,736)    (498,352)    (427,094)   (391,219)


                                              December 31
                              1998      1997       1996       1995      1994
--------------------------------------------------------------------------------


Total Operating Revenue         $0       $0        $0         $0        $0
Total Operating  Exp.       59,454     58,549      52,328     35,173    60,014
Net income (loss) before
  equity loss of affiliate (59,454)   (58,549)    (52,328)   (35,173)  (60,014)
Equity in net loss of
   affiliated company            0          0           0          0         0
Net income (loss)          (59,454)   (58,549)    (52,328)   (35,173)  (60,014)
Net Income (loss)
  per common share           ( .00)    (  .00)     (  .00)     ( .00)    ( .00)


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

Working  capital at December  31, 1998 was  decreased by $38,360 from the period
ended December 31, 1997.  This was mainly caused by a net loss of $59,454 and an
increase of $21,094 in the market value of securities available for sale.

On December 2, 1996,  the Registrat had a change in its borrowing  arrangements.
The  Registrant  borrowed  $325,790 from Dearborn  Wheels,  Inc. to repay a note
payable to Michigan  National  Bank.  The  principal  balance as of December 31,
1998, was $514,901.  The loan is at prime plus 2% interest and is secured by all
the  intangible  assets of the  Registrant.  Dearborn  Wheels,  Inc.  is held in
majority by the Registrant's President's spouse.

<PAGE>

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

The Company does not anticipate the year 2000 compliance  requirements will have
a material  impact on earnings.  The Company has  initiated  replacement  of the
Company's most significant computer programs with new updates that are warranted
to be year 2000  compliant.  Installation  of these updates is anticipated to be
completed  prior to June 30,  1999.  All  other  programs  subject  to year 2000
concerns  will  be  evaluated  utilizing  internal  and  external  resources  to
reprogram, replace or test each of them.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial  Statements required to be furnished hereunder are attached hereto
under Item 14.

Supplementary  Financial  Schedules  for which  provision is made in  applicable
Regulations of the Securities and Exchange Commission,  have been omitted or the
required  information  is not required  under the related  instructions,  or the
information is presented in the Financial Statements and Notes thereto.




ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

                  None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Identification of Directors and Executive Officers

The  following  table sets forth the name,  address,  age and  position  of each
officer and director of the Registrant:
                                      Term
Name and Address                    Age           Position           as Director
--------------------------------------------------------------------------------

Thomas W. Itin                      64          President and          Since
7001 Orchard Lake Rd.                           Chairman of the        Inception
West Bloomfield, MI  48322                      Board of Directors

Anthony B. Cashen                   62          Secretary,             Since
RD 2 Box 203                                    Treasurer and          Inception
Ghent, NY 12075                                 Director

Robert W. Schwartz                  54          Director               Since
120 DeFreest Drive                                                     March 28,
Troy, NY  12180                                                        1991
<PAGE>

         All directors of the Registrant will hold office until their successors
have been elected and  qualified or until their death,  resignation  or removal.
The bylaws of the  Registrant  provide that the number on the Board of Directors
shall be determined by resolution of the Board of Directors.

         The officers of the Registrant are elected at the annual meeting of the
Board of  Directors  and hold  office  until  their  successors  are  chosen and
qualified or until their death, resignation or removal.

         The Registrant is subject to Section 13(a) of the  Securities  Exchange
Act of 1934 and is therefore  not  required to identify or disclose  information
concerning its significant employees.

         There are no  family  relationships  between  any  director,  executive
officer or person  nominated or chosen by the Registrant to become a director or
executive officer.
         Below  is  a  summary   description  of  educational  and  professional
background of each executive officer and director of the Registrant.

     Thomas W. Itin.  Mr. Itin has served as the  Chairman and  President of the
Board  of  Directors  of the  Registrant since  inception. Mr. Itin  was elected
Chairman of the Board and  President  of the Ajay Sports,  Inc. in June of 1993,
and is the largest single stockholder.  Mr. Itin has been a director of Williams
Controls, Inc., a publicly  held company since  its inception  in November 1988.
Mr. Itin has been Chairman, President and Owner of TWI International  Inc. since
he founded the firm in 1967. Mr. Itin also has been Owner and Principal Officer
of Acrodyne Corporation  since 1962.  He received a Bachelor of Science  degree
from Cornell University and an MBA from New York University.

     Anthony B. Cashen.  Mr. Cashen has served as  the  Registrant's  Secretary,
Treasurer and Director since inception. He has also served as a director of Ajay
Sports,  Inc.  since 1993.  For more than the past five years, Mr.  Cashen has
served as  managing  partner or senior  partner  of LAI Ward  Howell a  publicly
held  management consulting  and executive  recruiting  firm located in New York
City. He currently serves as a Director of Immucel Corp., and Williams Controls,
Inc., both publicly held companies. Previously, Mr. Cashen  has  been an officer
and principal of the  investment  firms A.G.  Becker Inc. and  Donaldson,  Lukin
and  Jenrette,  Inc. He  received an  MBA from  the Johnson  Graduate  School of
Management at Cornell University, and a Bachelor  of Science  degree fromCornell
University.
<PAGE>

     Robert W.  Schwartz Mr.  Schwartz has served as Director of the  Registrant
since March 28, 1991. Since 1985 he has been Chairman and President of Schwartz,
Gordon, Heslin & Associates, Inc., a management and financial consulting firm in
Troy,  New York.  From 1987 until 1991 he was a Director and Vice  President and
Treasurer of ESARCO International,  Inc., a publicly held company which licenses
and markets  all-terrain  trucks.  Previously  Mr.  Schwartz was  President  and
Director of  Winsources,  Inc., a telephone  equipment  supplier,  President and
Director of Cordian  Corporation  of Latham,  New York,  a  telephone  equipment
manufacturer, and Vice President of Finance of Garden Way Manufacturing Company,
Inc., a manufacturer of rototillers and outdoor equipment. Mr. Schwartz received
a B.S. degree in industrial and labor relations from Cornell  University and did
graduate work at State University of New York at Albany.

ITEM 11. EXECUTIVE COMPENSATION

The  Registrant  reimburses  its  directors  for  expenses  incurred  by them in
connection  with  business  performed  on  the  Registrant's  behalf,  including
expenses incurred in attending meetings. In addition, directors receive a fee of
$250 for each Board of Directors meeting attended.  No such  reimbursements were
made for the period from January 1, 1990 to December 31, 1998. While none of the
officers   received  any  salary,   such  individuals  are  reimbursed  for  all
accountable expenses incurred on behalf of the Registrant.

         See Item 13 - Certain Business  Relationships and Related  Transactions
under Acrodyne Corporation for additional information.

The Registrant has no defined  benefit and actuarial plan providing for payments
to employees  upon  retirement.  The  Registrant  also has no plans for awarding
stock options.  No other  compensation  was paid to officers or directors of the
Registrant from January 1, 1990 to December 31, 1998.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table  contains  information as of March 31, 1998 with respect to
beneficial  ownership of the  Registrant's  Common stock by each person known by
the Registrant to be the beneficial owner of more than five percent thereof,  by
the  executive  officers and  directors of the  Registrant  and by all executive
officers and directors of the Registrant as a group:

<PAGE>



                                      Common Stock
                                      Beneficially                     Percent
                                      Owned (1)                        of Class
                                      ------------------------------------------

Thomas W. Itin                        7,717,073 (3)(4)                57.2%

Anthony B. Cashen                       400,000 (4)                    3.3%

Robert W. Schwartz                      100,000 (4)                     .8%

Officers and Directors                8,217,073 (3)                   60.9%
as a group (3 persons)


James T. Emerson                        695,000                       5.7%
221 E. Colonial Drive
Orlando, FL  32801

         (1)       Without giving effect to the exercise of outstanding Warrants
                   except as noted in footnote 4 below.

         (2)      These shares are held of record by entities of which Mr.  Itin
                  is  either a  principal  or a  beneficiary.

         (3)      Includes  300,000 shares held by Mr.  Itin's wife,  Shirley B.
                  Itin,  either as  beneficiary  or custodian, of which Mr. Itin
                  disclaims any beneficial ownership.

         (4)      These shares include warrants granted on June 3, 1992 expiring
                  December 4, 1999, to purchase one share of common stock per
                  warrant  for  $.04.  (Thomas W. Itin,  1,000,000,  Anthony  B.
                  Cashen, 200,000, Robert W. Schwartz, 100,000)


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others.
----------------------------------------

None of the  Registrant's  officers and directors  devote their full time to the
Registrant's  affairs and such  persons may be  affiliated  with other  business
entities and  enterprises,  some of which may be formed for similar  purposes as
the  Registrant  and thus be in direct  competition  with the  Registrant.  Such
activities  may result in such persons  being  exposed to conflicts of interests
from time to time.  The  Registrant  has adopted no conflict of interest  policy
with respect to such  transactions.  However,  the officers and directors of the
Registrant  recognize their fiduciary obligation to treat the Registrant and its
shareholders fairly in any such future activities.



<PAGE>



Certain Business Relationships.
-------------------------------

In the  Registrant's  last full fiscal year the  Registrant  made  payments  for
property and services in excess of five percent of the Registrant's consolidated
gross  revenues to  Acrodyne,  a company  whose  Chairman,  President  and major
stockholder  of the  Registrant.  The Board of Directors of the  Registrant  has
reviewed  and  approved  the use of Acrodyne  and has  determined  that the fees
charged the  Registrant by Acrodyne are as favorable as could be incurred by any
other independent,  third party business consultant.  It is anticipated that the
Registrant will continue to utilize Acrodyne in the future.  The total sum which
the Registrant paid Acrodyne for the year ended December 31, 1998 was $2,790 for
the above mentioned consulting services and out-of-pocket travel expenses, staff
time spent for accounting,  record keeping,  and utilities,  but did not include
fees for services of the Chairman.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

         The  Financial  Statements  are  listed  in  the  "Index  to  Financial
Statements" filed as part of this Annual Report, on page F-2.

(a) (2) Financial Statement Schedules

         Supplementary  Financial  Schedules  for  which  provision  is  made in
applicable  Regulations  of the Securities  and Exchange  Commission,  have been
omitted  or  the  required   information  is  not  required  under  the  related
instructions,  or the  information is presented in the Financial  Statements and
Notes thereto.

         Pursuant  to the  provisions  of  Rule  3-09  of  Regulation  S-X,  the
Registrant  is required to file  separate  audited  financial  statements of its
equity basis investee,  Ajay Sports,  Inc.  ("Ajay").  Ajay's audited  financial
statements for December 31, 1998 are filed within this report.
<PAGE>

(a) (3)  Exhibits

The Articles of Incorporation and By-Laws of the Corporation are incorporated by
reference to the  Registrant's  Registration  Statement on Form S-18,  effective
December 16, 1987. Exhibit 27.0 Financial Data Schedule is filed herewith.

(b)      Reports on Form 8-K.

A Form 8-K was filed on July 20, 1998  regarding the extension of the expiration
date of the  Registrant's  warrants  from July 25, 1998 to July 25, 1999. A Form
8-K was  filed  on  December  1,  1998 to  extend  the  exercise  period  of the
Registrant's  warrants issued to its directors from December 4, 1998 to December
4, 1999.


<PAGE>




                                   SIGNATURES



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


                                                   LBO CAPITAL CORP.
                                                   (Registrant)




                                                  By: s\Thomas W. Itin
                                                     -------------------------
                                                     Thomas W. Itin, President
                                                     & Chief Financial Officer

Date:  April 14,  1999


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated on the (date)

Signature                                                Title
---------------------                     ------------------------------------


 s\Thomas W. Itin                          Chairman of the Board of Directors,
---------------------                      Chief Executive Officer and President
Thomas W. Itin


 s\Anthony B. Cashen                       Secretary, Treasurer and Director
---------------------
Anthony B. Cashen


 s\Robert W. Schwartz                      Director
---------------------
Robert W. Schwartz





<PAGE>


                                LBO CAPITAL CORP.






                                TABLE OF CONTENTS

                                                                            Page
Independent Auditor's Report

Financial Statements:

   Balance Sheets  .........................................................  F2

   Statements of Operations  ...............................................  F3

   Statements of Changes in Stockholders' Deficit  .........................  F4

   Statements of Cash Flows  ...............................................  F5

Notes to Consolidated Financial Statements  ............................  F6-F10


<PAGE>

                          INDEPENDENT AUDITOR'S REPORT


Board of Directors
LBO Capital Corp.

We have  audited the  accompanying  balance  sheets of LBO Capital  Corp.  as of
December 31, 1998 and 1997, and the related statements of operations, changes in
stockholders'  deficit,  and cash flows for the years ended  December  31, 1998,
1997  and  1996.  These  financial  statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  account  principles  used  and  significant  estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of LBO Capital  Corp.  as of
December 31, 1998 and 1997 and the results of its  operations and its cash flows
for the  years  ended  December  31,  1998,  1997  and 1996 in  conformity  with
generally accepted accounting principles.




s/Hirsch Silberstein & Subelsky, P.C.
-------------------------------------
Hirsch Silberstein & Subelsky, P.C.

Farmington Hills,  Michigan
March 23, 1999






                                      F-1

<PAGE>
<TABLE>
<CAPTION>


                                                              LBO CAPITAL CORP.
                                                               BALANCE SHEETS
                                                      As of December 31, 1998 and 1997
                                                      --------------------------------

                                          ASSETS                                            1998                    1997
                                          ------
                                                                                      -----------------       ------------------
<S>                                                                                 <C>                     <C>

Current Assets
       Cash and Equivalents                                                         $               73      $                43
       Marketable Securities - Available for Sale                                               46,023                   24,929
                                                                                      -----------------       ------------------

       Total Current Assets                                                                     46,096                   24,972

Other Assets
       Investments                                                                                  -0-                      -0-    
                          Total Assets                                              $           46,096      $            24,972
                                                                                      =================       ==================

                                LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
       Accounts Payable                                                             $            3,763      $             4,202
       Accounts Payable - Related Entities                                                         210                    1,060
       Notes Payable - Other                                                                   514,901                  506,971
       Accrued Expenses and Taxes                                                              126,319                   73,475
                                                                                      -----------------       ------------------

          Total Current Liabilities                                                            645,193                  585,708


Stockholders' Deficit
       Common Stock, $.0001 Par Value
          Authorized 100,000,000 Shares:
          Issued and Outstanding 12,100,000
          in 1998 and 1997                                                                       1,210                    1,210
       Additional Paid-In Capital                                                              623,094                  623,094
       Unrealized (Loss) on Available for Sale Securities                                       (2,373)                 (23,467)
       Accumulated Deficit                                                                  (1,221,027)              (1,161,573)
                                                                                      -----------------       ------------------

          Total Stockholders' Deficit                                                         (599,097)                (560,736)
                                                                                      -----------------       ------------------

                          Total Liabilities and Stockholders' Deficit                           46,096                   24,972
                                                                                      =================       ==================



                                                   The accompanying notes are an integral
                                                       part of this financial statement

                                                                        F2
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                 LBO CAPITAL CORP.
                                             STATEMENTS OF OPERATIONS
                                For the Years Ended December 31, 1998, 1997, and 1996



                                                    1998                     1997                     1996
                                             ------------------       ------------------       -----------------
<S>                                        <C>                      <C>                      <C>

Revenues                                   $                -0-     $                -0-     $               -0-
                                             ------------------       ------------------       -----------------

Expenses
       Professional Services                             3,659                    3,820                   3,351
       Management Fees                                   2,790                    2,900                   3,410
       Interest Expenses                                52,843                   52,735                  44,651
       Other Expenses                                      162                     (906)                    916
                                             ------------------       ------------------       -----------------

            Total Expenses                              59,454                   58,549                  52,328
                                             ------------------       ------------------       -----------------

Loss before Income Taxes                               (59,454)                 (58,549)                (52,328)

Income Tax Expense                                          -0-                      -0-                     -0-

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

Net Loss                                   $           (59,454)     $           (58,549)     $          (52,328)
                                             ===================      ===================      =================

Net Loss Per Share                         $             (0.00)     $             (0.00)     $           (0.00)
                                             ===================      ===================      ==================

Weighted Average Number of                          12,100,000               12,100,000              12,100,000
                                             ===================      ===================      ==================
       Common Shares Outstanding




</TABLE>









                                          The accompanying notes are an integral
                                             part of this financial statement
                                                             F3

<PAGE>
<TABLE>
<CAPTION>

                                                               LBO CAPITAL CORP.
                                               STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                                            For the Years Ended December 31, 1998, 1997, and 1996


                                                                                                       Unrealized
                                                                                                       (Loss) on
                                         Common Stock                 Additional                       Available          Total
                                ---------------------------------      Paid-In        Accumulated      For Sale        Stockholders'
                                  Shares                 Amount        Capital          Deficit        Securities         Deficit
                               ------------         ------------   --------------   --------------   --------------   --------------

<S>                            <C>                  <C>            <C>              <C>              <C>              <C>

Balances at
       December 31, 1995          12,100,000          $    1,210    $    623,094     $ (1,050,696)     $      (702)      $ (427,094)

Net Loss for the Year
       Ended December 31, 1996            -0-                 -0-             -0-         (52,328)         (18,930)         (71,258)
                             ----------------       -------------   -------------   ----------------  ---------------  -------------

Balances at
       December 31, 1996          12,100,000          $    1,210    $    623,094     $ (1,103,024)     $   (19,632)      $ (498,352)

Net Loss for the Year
       Ended December 31, 1997            -0-                 -0-             -0-         (58,549)          (3,835)         (62,384)
                             ----------------       --------------  -------------   ----------------  --------------  --------------

Balances at
       December 31, 1997          12,100,000          $    1,210    $    623,094     $ (1,161,573)     $   (23,467)      $ (560,736)

COMPREHENSIVE INCOME

Net Loss for the Year
       Ended December 31, 1998            -0-                 -0-             -0-         (59,454)          21,094          (38,361)
                             ----------------       ---------------  ------------   -----------------  --------------  -------------

Balances at
       December 31, 1998          12,100,000          $    1,210    $    623,094     $ (1,221,027)     $    (2,373)      $ (599,097)
                             ================       ==============  =============   =================  ==============  =============



                                           The accompanying notes are an integral
                                              part of this financial statement

                                                            F4

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                                     LBO CAPITAL CORP.
                                                                  STATEMENTS OF CASH FLOWS
                                                For the Years Ended December 31, 1998, 1997, and 1996


                                                                 1998                        1997                        1996
                                                           ----------------            ----------------            ----------------

<S>                                                      <C>                         <C>                         <C>

Cash Flow From Operating Activities
     Net Loss                                            $         (59,454)          $         (58,549)          $         (52,328)
                                                           ----------------            ----------------            -----------------
     Adjustment to Reconcile Net Loss to
         Net Cash Provided by (Used For)
         Operating Activities
            Depreciation and Amortization                               -0-                         -0-                         -0-
         Decrease In:
            Prepaid Expenses and Deposits                               -0-                         -0-                        173
         Increase (Decrease) In:
            Accounts Payable                                          (440)                        499                      (2,371)
            Accrued Expenses and Taxes                              51,994                      52,836                      17,231
                                                            ----------------            ----------------            ----------------

                Total Adjustments                                   51,554                      53,335                      15,033
                                                            ----------------            ----------------            ----------------

                Net Cash Used For Operations                        (7,900)                     (5,214)                    (37,295)
                                                            ----------------            ----------------            ----------------

Cash Used For Investing Activities
         Purchase of Marketable Securities                              -0-                         -0-                    (39,695)
                                                            ----------------            ----------------            ----------------

Cash Provided by (Used For)  Financing Activities
            Payments  on Notes -  Bank                                  -0-                         -0-                   (325,000)
            Proceeds from Notes - Other                              7,930                       5,180                     401,990
                                                            ----------------            ----------------            ----------------

                Net Cash Provided By
                Financing Activities                                 7,930                       5,180                      76,990
                                                            ----------------            ----------------            ----------------

Increase (Decrease) in Cash and Equivalents                             30                         (35)                          0

Cash and Equivalents at Beginning of Year                               43                          78                          78
                                                            ----------------            ----------------            ----------------

Cash and Equivalents at End of Year                        $            73            $             43            $             78
                                                            ================            ================            ================



                                                  The accompanying notes are an integral
                                                     part of this financial statement

                                                                     F5
</TABLE>


<PAGE>

                                LBO CAPITAL CORP.

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996








Note 1. Summary of Significant Accounting Policies

         Organization and Business

                  LBO Capital Corp. (the "Company") was  incorporated on October
                  8, 1987 under the laws of the State of  Colorado.  The Company
                  is engaged in evaluating and investing in other companies. The
                  Company was considered to be in the development  stage in 1987
                  and began operations on March 15, 1988.

         Cash Equivalents

                  The Company  considers  all highly liquid  investments  with a
                  maturity of three months or less cash equivalents.

         Equipment and Depreciation

                  Equipment  was stated at cost.  Depreciation  was computed for
                  financial  reporting purposes on a straight-line basis over an
                  estimated life of 5 years.  Depreciation expense for the years
                  ended  December  31,  1997,  1996 and  1995 was $0,  $0 and $0
                  respectively.  At December 31, 1995,  the  remaining  computer
                  equipment  that  was  previously  leased  to an  investee  was
                  determined  to be  obsolete  and  written off the books of the
                  Company.

         Income Taxes

                  At December 31,  1998,  the Company has a net  operating  loss
                  available for carryforward  totaling  approximately  $963,332.
                  The operating loss carryforward  expires in various amounts by
                  the year ended December 31, 2018.

<PAGE>

                                LBO CAPITAL CORP.

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996



         Net Loss Per Share

                  Net loss per share is computed using  weighted  average shares
                  outstanding   without   giving  effect  to  the  common  stock
                  warrants, as the effect would be antidilutive.

Note 2. Marketable Securities

         The Company's marketable  securities available for sale are recorded at
fair market value.

                                  Market Value
                                  -------------------------------------------
                                  Investment       Per Share        Aggregate
         1998
         Enercorp, Inc.              $48,397          $3.00          $46,023

         1997
         Enercorp, Inc.             $ 48,397          $1.625        $ 24,929



Note 3. Investments

         On April 3, 1989,  the  Company  acquired  an  aggregate  of  1,880,000
         restricted  common  shares of Ajay  Sports,  Inc.  ("Ajay") for a total
         purchase  price of  $182,000.  As a result of recording  the  Company's
         equity in net losses of Ajay, the carrying value of this  investment is
         zero at December 31, 1998 and 1997.  The Company also obtained  200,000
         stock warrants of Ajay at that time.

         In  March  1991,  the  Company  pledged  400,000  shares  of  its  Ajay
         investment as security for bank loans to an acquisition  candidate.  On
         June 1 1991,  the bank  declared the loan in default and  foreclosed on
         the shares.

<PAGE>
                                LBO CAPITAL CORP.

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996



         On August 13, 1998,  Ajay  announced  that its board of  directors  had
         authorized  the  implementation  of a  1-for-6  reverse  split  of  the
         company's  common stock,  effective with the commencement of trading on
         August 14,  1998.  The  stockholders  of Ajay at the  company's  annual
         meeting on May 29, 1998 approved the reverse split.

         Following the reverse  split,  holders of Ajay's common stock  received
         one new share of $.01 par value  common  stock for every six  shares of
         common stock currently held. Therefore,  the number of Ajay shares held
         by the Company is 246,667.  The reverse  split also affected the number
         and exercise price of the Company's warrants, such that the Company now
         holds  33,333  warrants  entitling  it to purchase  one share of Ajay's
         common stock at $1.08 per share. These warrants expire June 13, 1999.

         All of the Ajay shares are pledged as security  for a note payable (see
         note 4).

         The stock of Ajay is traded  over-the-counter  and is  reported  by the
         National Quotation Service. The following table sets forth the range of
         high and low trade prices given quarterly by NASDAQ.


                                                 HI              LOW
                                               ------           ------
                  1997
                  First Quarter                $ 1.50           $  .78
                  Second Quarter               $ 2.28           $  .78
                  Third Quarter                $ 3.78           $  .75
                  Fourth Quarter               $ 1.03           $  .34

Note 4. Notes Payable

         During 1998, the Company borrowed $7,930 from Dearborn Wheels, Inc. The
         proceeds were used to meet current operating needs.

         On  December  2, 1996,  the  Registrant  had a change in its  borrowing
         arrangements.  The Registrant  borrowed  $325,790 from Dearborn Wheels,
         Inc. to repay a note payable to Michigan  National  Bank. The principal
         balance as of December 31,  1998,  was  $514,901.  The loan is at prime
         plus 2%  interest  and is secured by all the  intangible  assets of the
         Registrant.   Dearborn  Wheels,   Inc.  is  held  in  majority  by  the
         Registrant's President's spouse. This note bears interest of prime plus
         2%,  matures  on June 20,  1999 and is secured by all the assets of the
         Company.
<PAGE>

                                LBO CAPITAL CORP.

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996



Note 5. Capital Stock

         The Company completed a public offering on March 15, 1988 consisting of
         3,000,000  units at $.20 each. Each unit consisted of one common share,
         one callable class A common stock purchase warrant,  one callable Class
         B common stock  purchase  warrant and one callable Class C common stock
         purchase  warrant.  Each Class A warrant entitles the warrant holder to
         purchase  one share of common  stock  for  $.50,  each  Class B warrant
         entitles  the warrant  holder to purchase one share of common stock for
         $.75,  and each Class C common  stock  purchase  warrant  entitles  the
         warrant holder to purchase one share of common for $1.00.  The Class A,
         B and C warrants were originally  exercisable  within twelve,  eighteen
         and  twenty-four  months  respectively,  from  February 26,  1988.  All
         warrants  have been  extended  until July 25, 1999.  As of December 31,
         1998, no warrants had been exercised. The Company has the right to call
         any or all warrants at a redemption price of $.0001 per warrant.

         On June 3, 1992 the  Company  issued  3,000,000  shares  of its  common
         stock,  valued at $.04 per share (fair market  value on that date,  per
         the National  Quotation  Bureau,  Inc.),  to an officer and director in
         exchange for a reduction of $120,000 in a note to a related company.

         The Company  granted to its  directors a total of  1,300,000  warrants,
         expiring  December 4, 1999.  Each warrant enables the owner to purchase
         one share of common stock for $.04 per share.


<PAGE>
                                LBO CAPITAL CORP.

                          NOTES TO FINANCIAL STATEMENTS
                        December 31, 1998, 1997 and 1996



Note 6.  Management Fees

         The  Company  does not  employ  any  personnel.  Per a  management  fee
         agreement with Acrodyne Corporation, a related entity, the Company pays
         direct labor costs plus overhead for management services rendered.

Note 7.  Cash Flows Disclosure

         Interest and income  taxes paid for the years ended  December 31, 1998,
1997 and 1996 were as follows:

                             1998                 1997               1996
                           ----------          ----------         -----------

         Interest          $        -0-        $          -0-     $     27,420
                           ============        ==============      ============

         Income Taxes      $        -0-        $          -0-     $         -0-
                           ============        ==============      ============


Note 8.  Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and assumptions  that affect certain  reported amounts and disclosures.
         Accordingly, actual results could differ from those estimates.


Note 9: Year 2000 Compliance

         The Company does not anticipate the year 2000  compliance  requirements
         will have a material  impact on  earnings.  The Company  has  initiated
         replacement of the Company's most  significant  computer  programs with
         new updates that are warranted to be year 2000 compliant.  Installation
         of these updates is anticipated to be completed prior to June 30, 1999.
         All other  programs  subject to year 2000  concerns  will be  evaluated
         utilizing internal and external resources to reprogram, replace or test
         each of them.