UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K



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

                      For the Fiscal Year Ended December 31, 1996

                                          OR

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

              For the Transition period from_________to____________

                         Commission File Number 0-18204

                                AJAY SPORTS, INC.
             (Exact Name of Registrant as Specified in its Charter)


       Delaware                                                 39-1644025
------------------------------                                ----------------- 
  (State or other jurisdiction of                            (IRS Employer
   Incorporation or Organization)                          Identification No.)


       1501 E. Wisconsin Street
       Delavan, Wisconsin 53115                                (414) 728-5521
--------------------------------------                        -----------------
(Address of Principal Executive Offices           (Registrant'sTelephone Number,
 including Zip Code)                                   including Area Code)

             Securities Registered Pursuant to Section 12(b) of the Act:
                                        NONE

           Securities Registered Pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value
            Units (each consisting of 5 shares of Common Stock and 2
                    Warrants) Common Stock Purchase Warrants
               Series C 10% Cumulative Convertible Preferred Stock

   Indicate by check mark whether the issuer (1) has filed all reports  required
to be filed by Section 13 or 15(d) of the  Exchange  Act of 1934 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

   Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.


<PAGE>


   The aggregate  market value of the voting stock held by  nonaffiliates  as of
April  7,  1997  was  $1,598,711.  The  number  of  shares  outstanding  of  the
Registrant's $.01 par value common stock at April 7, 1997 was 23,274,039.

                         Documents Incorporated by Reference
     Portions of the Registrant's Proxy Statement for annual meeting to be held
           May       23, 1997 ("1997 Proxy Statement") have been incorporated by
                     reference into Part III of this Form 10-K.





                                      
<PAGE>

                               Ajay Sports, Inc.
                                     Index
                               December 31, 1996


PART I.                                                              Page

   Item 1.  Description of Business                                   4-8

   Item 2.  Description of Property                                   8-9

   Item 3.  Legal Proceedings                                           9

   Item 4   Submission of Matters to a Vote of Security Holders         9

PART II.

   Item 5.  Market for Registrant's Common Equity and Related
                 Stockholder Matters                                10-12

   Item 6.  Selected Financial Data                                    13

   Item 7.  Management's Discussion and Analysis                    14-16

   Item 8.  Financial Statements                               F-1 - F-19

   Item 9.  Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure                   16

PART III.

   Item 10  Directors and Executive Officers of the Registrant         17

   Item 11. Executive Compensation                                     17

   Item 12. Security Ownership of Certain Beneficial Owners and
                 Management                                            17

   Item 13. Certain Relationships and Related Transactions             17

PART IV.

   Item 14. Exhibits, Financial Statement Schedules, and Reports on
                 Form 10-K                                          18-21

SIGNATURE PAGE                                                         22



<PAGE>



                                        PART I


Item 1.     Description of Business

General

   Ajay Sports,  Inc. (the "Company")  markets and distributes golf clubs,  golf
bags, golf accessories, hand-pulled golf carts and casual living furniture (such
lines of business hereinafter  collectively referred to as the "Sports Business"
or  "Sports").  The  Company  is  presently  one of the  largest  United  States
distributors  of  golf  accessories,  as  well  as one of the  nation's  largest
manufacturers and distributors of golf bags and hand-pulled golf carts.

   The Company  operates the mass market segment of its sports business  through
Ajay Leisure Products,  Inc.  ("Ajay") a wholly owned subsidiary.  Leisure Life,
Inc. ("Leisure Life"),  another wholly owned operating subsidiary,  manufactures
and markets casual living  furniture.  Palm Springs Golf, Inc. ("Palm Springs"),
another  wholly owned  operating  subsidiary,  manufactures  and/or markets golf
clubs,  golf bags, golf gloves,  accessories  and carts for  distribution to the
off-course pro shop markets. All references to the Company include Ajay, Leisure
Life and Palm Springs unless otherwise specified.

   Ajay's  products  primarily are sold  nationwide to large  retailers  such as
discount stores, department stores, catalog showrooms and other mass merchandise
and sports specialty outlets. The products  manufactured by the Company are sold
primarily  under the  Spalding(R),  Palm  Springs(R),  Pro  Classic(R),  Leisure
Life(R),  and Pro USA(R) brand names. Leisure Life's furniture products are sold
through independent retailers,  hardware store cooperatives and larger chains of
home and garden stores.  Palm Springs products are sold through  off-course golf
specialty shops.

   The  Company  was  organized  under  Delaware  law on August  18,  1988.  Its
administrative  office is  located at 7001  Orchard  Lake  Road,  Suite 424,  W.
Bloomfield,  MI 48322,  where its telephone  number is (810)  851-5651,  and its
executive and principal manufacturing and distribution facilities are located at
1501 E. Wisconsin Street, Delavan,  Wisconsin 53115, (414) 728-5521. The Company
also operates a manufacturing and distribution facility at 215 4th Avenue North,
Baxter, TN 38544, headquarters for its Leisure Life subsidiary. Headquarters for
Palm Springs Golf, Inc. is located at 68-625 Perez Road, Ste.15, Cathedral City,
CA 92234.

Business Strategy

   The  Company's  strategy is to maintain and improve its position as a leading
supplier of golf clubs,  golf bags,  golf carts,  golf  accessories  and leisure
indoor  and  outdoor   furniture.   The  Company  believes  that  the  following
competitive strengths contribute to its position as a market leader:

   Strong Brand Recognition.  Spalding(R),  Palm Springs(R), and Pro Classic(R),
are highly  recognized  names in the golf  accessory  industry  and the  Company
believes  that many of its products hold strong  market  positions.  The Company
believes that its brand  recognition and market position  enhance the ability to
sell  products  through  various  channels,  including  mass  merchandisers  and
regional retailers.  A significant portion of the Company's revenues result from
the sale of products  manufactured and sold pursuant to a license agreement with
Spalding Sports Worldwide ("Spalding").  The Company has been selling golf bags,
golf carts, golf gloves and a broad range of general sports accessories pursuant
to this agreement, which expires June 30, 1998.

   Reputation  for Quality.  The Company  believes that the  performance  of its
products equals or exceeds the performance of its competitors'  products at each
price  point.  To assure the quality of its  products,  the Company  continually
invests in technical design and support,  and tests and monitors the performance
of its products.  At its own  facilities,  the Company relies on its skilled and
experienced  work  force.  To  assure  the  quality  of  products  sourced  from
third-party  manufacturers,  the Company has  established  and works to maintain
close,  long-term  relationships that emphasize service,  quality,  reliability,
loyalty and commitment.

   The Company maintains a sourcing office in its largest foreign source markets
to assure  quality,  reliability,  new product  ideas and a constant  commercial
interface.



<PAGE>



   Tradition of Innovation. Throughout its history, the Company has maintained a
tradition  of new product  development.  A new cart line,  new bag  styles,  new
clubs,  new  furniture  and other new product  designs  for 1997 are  continuing
examples of the Company's commitment in this area.


   Breadth of Product Lines. The Company offers a broad selection of golf clubs,
golf bags,  golf carts and golf  accessories,  and a growing list of outdoor and
indoor  furniture.  Through its broad  product  lines,  the Company  offers mass
merchants  and regional  retailers  the ability to fulfill  product  demands and
needs from a single source.  The Company's  product lines establish it as one of
the nation's leading manufacturers of golf bags along with being a leader in the
golf  related  accessories  category.  Its line of golf bags  consist of over 50
models which vary by size,  color,  type of material and related  features.  The
line of golf related  accessories  consists of mainly  consumable  items such as
tees,  gloves,  head  covers,  practice  balls,  spikes,  golf ball  retrievers,
umbrellas and golf training  devices.  The accessory  category includes over 100
individual items.

   Golf  carts,  golf bags and  related  accessories  historically  account  for
approximately  96% of Ajay's  gross  sales.  Golf clubs  account for 65% of Palm
Springs  sales.  Leisure  Life's  products  consist  100% of indoor and  outdoor
leisure furniture.

Growth Opportunities

   The  Company  believes  that its strong  brand  recognition,  reputation  for
quality,  tradition of innovation  and breadth of product  lines  position it to
take advantage of opportunities for future growth including:

   Increased  Distribution.  The Company's  products  traditionally were sold to
customers through mass merchants and regional retailers. With the acquisition of
certain assets of Palm Springs in October, 1995 the Company now has distribution
through  off-course  golf specialty  shops.  Management  believes that those who
purchase golf products from mass merchants and regional retailers generally play
golf at municipal and other public golf courses.  Based on the increase in these
types of courses in the last few years,  management  believes  that this  market
segment will experience  continued  growth in the near future.  The Company also
believes  that many of its  principal  competitors  service  substantially  more
accounts,  primarily those of smaller stores. Accordingly, and particularly with
the new  distribution  channel  opened  as a  result  of the Palm  Springs  Golf
acquisition, the Company intends to focus on increasing its direct sales efforts
to  include  smaller  golf  specialty  stores  where  it has  historically  been
under-represented, while continuing to maintain and build upon its position with
mass merchandisers and regional retailers.

   New  Product  Development.  The  Company  believes  that it is  important  to
increase its sales of products through design  improvements and modifications to
existing  products as well as the development and  introduction of new products.
The  Company has  continued  to  introduce  new and  redesigned  products to the
market.  The Company has also  increased  its  emphasis in this area by devoting
additional resources in equipment, people and effort.

   The  Company is working on new  products  for sports,  other than golf,  that
utilize the Company's existing manufacturing capabilities,  specifically its cut
and sew  operations,  and that may result in sales during the summer and fall to
offset the  seasonality of the golf lines.  Management  believes that it will be
able to determine the market acceptance for these new products without incurring
a  significant  amount of  expense.  As an  example,  Ajay is in the  process of
developing  a line  of  sports-specific  bag  products,  initially  focusing  on
hunting/shooting.

   Leisure Life has introduced a new line of swing  furniture for the 1997 sales
year.  This  line is  again  less  expensive  than  its  previous  line of swing
furniture,  featuring an improved frame and different canopies. It also plans to
expand on the convertible  combination  bench/table  product.  Other planned new
products  include a line of leisure  dining  tables,  storage  shelving and book
cases.

Sports Business

   Golf,  which is the  primary  market for Ajay's and Palm  Springs'  business,
continues to be a popular  form of  recreation.  According to the National  Golf
Foundation  ("NGF"),  a trade  association,  there were 5.5% more rounds of golf
played in 1995 than 1994. The pace of golf course  development also continues to
grow  steadily.  NGF reports  that 442 golf courses were opened for play in 1996
compared to 468 in the record year of 1995.


<PAGE>



   Licensing.  A significant  portion of Ajay's revenues result from the sale of
products manufactured and sold pursuant to various agreements, the loss of which
could have a material adverse effect on the Company's business.


   Ajay  sells golf bags,  hand-pulled  golf carts and a broad  range of general
sports  accessories  through a license  agreement  with  Spalding.  The  current
agreement  expires June 30, 1998. As  consideration  for this  license,  Ajay is
required to pay royalties to Spalding based on a percentage of sales, subject to
annual  minimums of $550,000  for the years ended June 30, 1997 and 1998.  Other
conditions  of the  agreement  require  Ajay to  expend  2% of sales  under  the
agreement on advertising and related costs,  with 1% remitted to Spalding.  Ajay
must also maintain a ratio of total current assets to total current  liabilities
on a monthly  basis in excess of 1.0.  Spalding has the right to  terminate  the
license  agreement  in the event of any  substantial  change  in the  ownership,
control,  officers or  management  of Ajay.  Approximately  69%, 67%, and 61% of
Ajay's total sales related to products sold under the Spalding license agreement
during the years ended December 31, 1996, 1995, and 1994, respectively.

   Manufacturing and Design.  The preliminary  production of Ajay's golf bags is
undertaken  at  its  Delavan,   Wisconsin  facility,  where  raw  materials  are
fabricated  in  preparation  for sewing and  assembly  at its  Mexicali,  Mexico
facility. In addition,  Ajay supplements in-house production through utilization
of subcontractors  to produce products  according to its  specifications.  Final
manufacturing,  assembly  and  distribution  occur at its  facility  located  in
Delavan,  Wisconsin.  Palm  Springs'  golf  club  components  are  designed  and
purchased by its  California  facility and  assembled  in its  Mexicali,  Mexico
facility.

   Design features, such as color, decals, specialized components and decorative
accessories often determine whether a golf product model is successful. In order
to attract and retain consumers the Company updates and refines its designs on a
continuous basis.

   The Company's lines of various accessory products are acquired primarily from
foreign  sources,  principally  from the Pacific  Rim,  and are  prepackaged  or
repackaged for domestic  distribution.  The packaging  designed by Ajay and Palm
Springs highlights the various features of the products. Ajay's hand-pulled golf
carts are manufactured in-house and overseas.  The Company is not dependent upon
any single source for any of its significant products.

   Marketing and  Distribution.  Ajay's  product lines  traditionally  have been
distributed primarily through discount stores, department stores, catalog stores
and other mass  merchandise  outlets.  The Company also sells through most major
chain  retailers and off-course  golf  specialty  shops.  The Company's  largest
customer is Wal-Mart,  which  accounted for  approximately  29% of the Company's
sales in 1996.  The second largest  customer  accounted for 14% of the Company's
sales. The loss of either of these accounts would have a material adverse effect
on the  Company's  results.  The Company  believes its  relationship  with these
customers is good.

   Except for  certain  major  accounts,  the  majority of Ajay's  accounts  are
serviced by manufacturers'  representatives  working on a commission basis. Ajay
services  its  major   accounts   through  a   combination   of   manufacturers'
representatives and its own in-house sales force. Palm Springs Golf services its
customers  through  its  in-house  and  regional  sales  staffs.  The  Company's
management  regularly  consults  with major  customers to discuss  merchandising
plans and programs, anticipated needs and product development.

   The  Company  believes  it has good  name  recognition  in the  industry  and
attempts  to expand  that  recognition  through  participation  in trade  shows,
advertising in trade  publications and supplying  literature and catalogs to the
retail trade and consumers.

Leisure Furniture Business

   Demographic  changes  have  driven a shift  for the last ten  years  toward a
casual  living  lifestyle.  This is  evidenced  by the  proliferation  of decks,
patios,  and sun rooms.  Americans  are spending  more time at home in a relaxed
casual manner.



<PAGE>



   Leisure furniture, used on porches, decks, patios, in sun rooms and yards has
principally consisted of aluminum,  resin, wrought iron and low to medium priced
wood  products.  The  designs  of  wood  products  have  not  been  stylish  nor
particularly  comfortable  for  seating.  Leisure  Life's "In Motion"  furniture
products,  which feature contoured slings,  adjustability and comfort, have been
received favorably in the leisure furniture market.


   Leisure  Life's  furniture  is  constructed  of a high  grade  pine  which is
pressure-treated and kiln-dried to prevent  deterioration,  warping, and bending
and to withstand  varying climate  conditions.  The seating  products  utilize a
patented   suspension   seating  system  which  permits  simple   adjustment  to
accommodate   users  of  different   heights  and  weights.   This  system  also
incorporates an ergonomically designed sling and deep cushion seating to provide
lower back support.  Management  believes that its seating products are superior
in comfort to any other  leisure  furniture  product.  The  patented  suspension
system is used on swings,  rocking chairs,  stationary  chairs,  love seats, and
couches.

   In addition to the  seating  products,  Leisure  Life also  manufactures  bar
height  dining tables with matching  stools,  cocktail and end tables,  a bench,
canopies,  A-frames,  potting  tables,  shelving  and  bookcases  to  comprise a
coordinated line of leisure  furniture.  Management  believes that a coordinated
casual wood furniture line can be marketed for indoor as well as outdoor use.

   Manufacturing. The pressure treated pine purchased by Leisure Life is planed,
cut,  drilled,  and sanded in the Baxter,  Tennessee  facility  to form  product
components.  A small portion of the wood pieces are purchased  pre-manufactured.
Fabric for pillows,  cushions, slings and canopies are cut and sewn in-house and
by third  party  subcontractors  for final  assembly  in the  Baxter,  Tennessee
facility. Furniture items are packaged in kits containing the wood frame pieces,
slings, pillows, and necessary hardware,  requiring the customer to assemble the
final product.

   Marketing  and  Distribution.  Initially,  marketing  focused  on  individual
retailers of outdoor and unfinished  furniture  within a 300-mile  radius of the
manufacturing  facility.  Currently,  Leisure Life supplies  nearly 600 selected
small dealers,  several with multiple stores and has developed sales to regional
chains.  Leisure Life distributes  through specialty stores,  such as nurseries,
hardware stores, pool and patio dealers,  home centers and garden shops. Leisure
Life  services its accounts  through its in-house  sales force and  commissioned
sales representatives. Leisure Life has display trucks containing samples of its
furniture  line,  which are used to attract  more  dealers.  In  addition,  more
national   coverage  is  being   developed   through  the  use  of  commissioned
manufacturer's  representatives  and through exhibits at trade shows targeted at
hardware and nursery markets.  The export market also shows a growing  potential
with current sales approaching 10% of total sales.

Inventories and Backlog

   Due to the  relatively  short lapse of time  between  placement of orders for
products and  shipments,  the Company  normally does not consider its backlog of
orders to be significant to its business. Because of rapid delivery requirements
of its customers, the Company maintains significant quantities of finished goods
inventories to provide  acceptable  service  levels to its customers.  Inventory
turnover  in mass  market  products  is lower than for  furniture  and  reflects
maintenance of high service  standards for its mass market customer base and the
shorter manufacturing time cycle for furniture products.

   The Company's products tend to have varying degrees of seasonality. Shipments
from February to May historically have been  significantly  higher than the rest
of the year,  due to the nature of the golf and furniture  business.  Management
expects  that  the  indoor  leisure  furniture  line  including  shelving  being
developed will have higher  shipments in the fall. To reflect the seasonality of
the business, inventories will tend to be higher from November to May.

Competition

   Ajay competes in the golf bag, cart and accessory business with several other
domestic companies including in particular,  Voit, Wilson, MacGregor, Dunlop and
others. While increased imports of low cost competitive products, primarily from
the  Pacific  Rim,  continue  to subject  domestic  producers  to intense  price
competition  and have created  extreme  price  sensitivity,  it also  provides a
source of competitive products for the Company to offer.



<PAGE>



   Palm Springs Golf competes for specialty golf store retail space with over 50
competitors.  Retail golf specialty  stores carry many lines. The premium brands
are  represented  by names such as Cobra,  Callaway,  Carsten and  Taylor.  Palm
Springs offers a line of high quality and feature filled  products which sell at
moderate price levels and offer consumers high value to price ratios.


   Leisure Life has had limited but rapidly  growing  operations.  At this time,
Leisure  Life,  as compared to the large number of  manufacturers  of indoor and
outdoor  furniture,  is not a significant  competitor.  In Leisure  Life's niche
market there are no dominant furniture  manufacturers  supplying,  on a national
basis, comparable cushioned,  suspended sling back comfort products specifically
targeted  for  porches,  decks,  patios,  and sun rooms.  There are small  firms
supplying on a regional  basis.  Management  does not believe that there are any
other similar wood furniture  products that are  adjustable.  However,  there is
competition for display space in stores, along with competition from other wood,
resin, aluminum, cushion, and plastic furniture products.

Raw Materials and Components

   Basic materials such as vinyl, nylon, steel and aluminum tubing, plastics and
paint used in the golf product  manufacturing and assembly process are purchased
primarily from domestic  sources.  Many of the component parts such as golf head
covers,  graphite shafts, club heads, golf gloves,  light weight carry golf bags
and various other golf accessories are obtainable economically only from foreign
suppliers  and,  therefore,  are  subject  to  changes  in price as a result  of
fluctuations in foreign currencies against the U.S. dollar.  Alternative sources
for  raw  materials  and  component  supplies  are  available  and  the  Company
anticipates no significant  difficulty in obtaining raw materials or components,
although some such purchases may be at increased prices.

   Leisure Life also purchases pressure treated pine, fabric,  cushion stuffing,
and  miscellaneous  hardware used in the manufacturing and assembly process from
domestic  sources.  Alternative  sources for raw  materials  are  available  and
Leisure Life has not experienced difficulty in obtaining raw materials.

Patents

   Ajay, Leisure Life and Palm Springs own numerous patents and have proprietary
knowledge relating to their product lines.  Management does not believe that the
loss of any of its patents would have a material adverse effect on its business.

Employees

   As of March 12, 1997, the Company had a total of 435 employees: 116 employees
at the  Delavan,  Wisconsin  facility,  240  employees at the  Mexicali,  Mexico
facility, 55 employees at the Baxter, Tennessee facility and 24 at the Cathedral
City, California facility.  The Company considers its current relations with its
employees to be good.

Item 2.     Description of Property

   The  Company's  executive,  and Ajay's  primary  manufacturing,  assembly and
warehouse facility,  is located in Delavan,  Wisconsin,  and consists of 186,300
square feet of manufacturing and warehousing space. This space is leased from an
unaffiliated third party under a long-term lease arrangement expiring June 2001,
with an option to renew for an additional  ten-year  period.  The Company has an
option to purchase  the  property at its fair market  value at the end of either
the initial or renewal lease term.

   Through its wholly-owned  subsidiary,  Ajay Leisure de Mexico,  S.A. de C.V.,
Ajay leases an additional  manufacturing  facility  consisting of  approximately
40,000 square feet in Mexicali,  Mexico.  The lease expires on January 14, 1998,
but is automatically renewed for an additional five-year period if Ajay does not
give written notice six months prior to January 14, 1998.

   Leisure Life owns its  manufacturing,  assembly,  and  warehouse  facility in
Baxter,  Tennessee,  which  consists  of  approximately  40,000  square  feet of
manufacturing and warehousing space,  located on 2.8 acres. The property carries
a mortgage in the amount of $195,000.


<PAGE>



   Palm Springs  leases an  administrative,  assembly and warehouse  facility in
Cathedral City, California, which consists of approximately 17,000 square feet.
The lease expires March 1, 2002.


   These   facilities   adequately  meet  the  Company's   production   capacity
requirements.  The  Company,  on  average,  utilizes  approximately  80%  of its
facility square footage.  In order to avoid periodic total plant shutdowns,  the
Company  adjusts  its  product  production   schedules  to  maintain  sufficient
inventory levels and to maintain a full work force.

Item 3.     Legal Proceedings

   The  Company,  through its  operating  subsidiaries,  Ajay,  Palm Springs and
Leisure Life, are involved in various legal  proceedings which are normal to its
business,  including product  liability and workers'  compensation  claims.  The
Company  believes  that none of this  litigation  is  likely to have a  material
adverse effect on its financial  condition or operations.  The Company faces the
risk of exposure to product  liability  claims if consumers  using the Company's
products  are  injured in  connection  with their use.  While the  Company  will
continue to attempt to take appropriate  precautions,  there can be no assurance
that it will avoid significant product liability  exposure.  Based on historical
experience,  Ajay, Leisure Life and Palm Springs have product liability coverage
which the Company believes is adequate.

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

   There were no matters  submitted  to a vote of  security  holders  during the
   fourth quarter.




<PAGE>



                                       PART II


Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

   The  Company's  Common  Stock,  Units,  Warrants and Series C 10%  Cumulative
Convertible  Preferred  Stock are traded on the NASDAQ Stock  Market's Small Cap
Market.  The following table sets forth the range of high and low bid quotations
given quarterly by NASDAQ for the last two years. These over-the-counter  market
quotations  reflect  inter-dealer  prices without retail  mark-up,  mark-down or
commissions and may not necessarily represent actual transactions.


                                      BID                         ASK
                               High          Low           High       Low
COMMON STOCK
1995
First Quarter              $  .59        $  .38       $  .66      $  .44
Second Quarter             $  .75        $  .47       $  .78      $  .53
Third Quarter              $  .69        $  .56       $  .75      $  .59
Fourth Quarter             $  .63        $  .34       $  .66      $  .41

1996
First Quarter              $  .72        $  .38       $  .75      $  .44
Second Quarter             $  .69        $  .38       $  .75      $  .44
Third Quarter              $  .44        $  .31       $  .50      $  .38
Fourth Quarter             $  .38        $  .25       $  .44      $  .28


UNITS
1995
First Quarter                 $ 2.75        $ 2.00       $ 3.75      $ 2.75
Second Quarter                $ 3.75        $ 2.38       $ 4.63      $ 3.13
Third Quarter                 $ 4.00        $ 3.13       $ 4.50      $ 4.00
Fourth Quarter                $ 4.25        $ 2.00       $ 4.75      $ 2.75

1996
First Quarter                 $ 4.00        $ 1.88       $ 4.94      $ 2.75
Second Quarter                $ 3.50        $ 3.00       $ 4.50      $ 3.63
Third Quarter                 $ 3.00        $ 1.50       $ 4.00      $ 2.25
Fourth Quarter                $ 1.50        $ 1.00       $ 2.50      $ 2.00


WARRANTS
1995
First Quarter              $  .19        $  .13       $  .25      $  .19
Second Quarter             $  .28        $  .16       $  .31      $  .22
Third Quarter              $  .41        $  .19       $  .44      $  .25
Fourth Quarter             $  .22        $  .06       $  .25      $  .13

1996
First Quarter              $  .19        $  .06       $  .25      $  .13
Second Quarter             $  .19        $  .16       $  .25      $  .19
Third Quarter              $  .19        $  .06       $  .22      $  .13
Fourth Quarter             $  .09        $  .03       $  .13      $  .09


<PAGE>







                                      BID                         ASK
                               High          Low           High       Low
SERIES C PREFERRED STOCK
1995
First Quarter                   NA           NA             NA         NA
Second Quarter                  NA           NA             NA         NA
Third Quarter                  $10.13       $ 9.00         $11.00     $ 9.50
Fourth Quarter                $  9.13       $ 5.88        $  9.50     $ 6.50

1996
First Quarter                 $  9.13       $ 6.25         $10.00     $ 7.00
Second Quarter                $  9.50       $ 7.50         $10.13     $ 8.00
Third Quarter                 $  8.00       $ 6.88        $  8.75     $ 7.13
Fourth Quarter                $  7.13       $ 6.00        $  7.75     $ 6.50

Holders

   The number of record holders of the Company's common stock,  units,  warrants
and Series C preferred  stock  according to the Company's  transfer agent, as of
March 31, 1997 are as follows:

                                    Common Stock        397
                                    Preferred C          11
                                    Warrant A            51
                                    Warrant B             3

   The Company  believes  that it has at least an  additional  1,400  beneficial
owners of its common stock whose shares are held in "street" or "nominee" name.

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,  limitation  on  distributions  from Ajay to the  Company  and the
financial  condition of the Company.  In  addition,  Ajay's bank loan  agreement
restricts Ajay from paying cash dividends.

   Holders of the Company's Series C Cumulative  Convertible Preferred Stock are
entitled to cumulative dividends at an annual rate of $1.00 per share. Dividends
on the Series C preferred  stock have been  declared  and paid  through the year
ended  December  31,  1996.  The  Company's  current bank lender has advised the
Company that the bank  contends  that the Company is in technical  default under
its loan  agreement,  and the bank has  restricted  the funds  available  to the
Company  under the loan  agreement.  The Company has,  therefore,  dedicated all
available funds to support continuing operations of the Company, until such time
as a  satisfactory  loan facility is obtained.  As a result,  there are no funds
available to pay the dividend at this time.

   The Company has declared the following  Series C 10%  Cumulative  Convertible
Preferred Stock dividends during the last two years:







<PAGE>



   Declaration Date     Amount per Share  Record DatePayment Date


   09/25/95       $0.1825           10/03/95             10/25/95

   12/19/95       $0.2500           12/31/95             01/25/96

   02/29/96       $0.2500           03/29/96             04/25/96

   06/14/96       $0.2500           06/28/96             07/25/96

   09/19/96       $0.2500           09/30/96             10/25/96

   12/19/96       $0.2500           12/31/96             01/27/97


<PAGE>



Item 6.          Selected Financial Data


Overview
                The following  table presents  summary  historical  consolidated
financial  data  derived from audited  financial  statements  of the Company (in
thousands, except per share amounts).


                                          Year    Ended     December    31,
Statement of Operations:                1996   1995     1994     1993     1992
                                    -------- -------- -------- -------- ------
Net sales                           $24,341  $18,728  $12,899  $15,902  $21,014
Cost of sales                        20,759   15,291   12,291   14,172   17,156
                                     ------   ------   ------   ------   ------
Gross profit                          3,582    3,437      608    1,730    3,858
Selling, general and
   administrative expenses            5,067    3,247    2,747    2,834    2,896
                                    -------   ------   ------  -------   ------

Operating income (loss)              (1,485)     190   (2,139)  (1,104)     962
Nonoperating income (expense):
   Interest expense - net            (1,103)    (801)    (614)    (697)    (906)
Loss on write down of
   advances to affiliate                -        -        -       (123)     -
Gain (loss) on disposition of
   investment in affiliate, net         -        -        (38)       -      275

Other, net                             (38)      (41)    (289)       3       50
                                    -------   -------   ------   ------- -------

Income (loss) from operations before
   income taxes                     (2,626)     (652)  (3,080)   (1,921)    381
                                     ------    ------   ------    ------  ------

Income tax expense (benefit)          (893)     (208)      -         -      -
                                    -------   -------  -------   -------  ------
        
Net income (loss)                  $(1,733) $   (444)  $(3,080)  $(1,921)  $381
                                     ======    ======    ======    ======  ====

Net income (loss) per common share $  (.09) $   (.03)  $  (.27)  $ ( .24)$  .02
                                      ======== ======  ========   ====== ======

Weighted average common and
   common stock equivalent
   shares outstanding                23,242    22,722    12,218    8,812  8,457
                                     ======    ======    ======  ======= =======

Cash dividends per common share         -        -        -        -        -

                                                                    December 31,
<TABLE>
<CAPTION>
<S>                           <C>         <C>         <C>        <C>            <C>

Balance sheet data:                1996       1995      1994       1993          1992
                              ---------   --------    ---------  ----------     ----------
Working capital               $  3,348    $  6,323    $    593   $   903        $  2,754
Total assets                  $ 18,495    $ 18,486    $  9,365   $ 10,507       $ 12,783
Long term debt                $  5,196    $  5,111    $    121        -               -

</TABLE>

<PAGE>





Item 7.  Management's Discussion and Analysis of Financial Condition and Results
      of Operations

   The Company was formed in 1988 to acquire  certain  assets,  liabilities  and
operations  of  the  sports   accessory   business  of  Roadmaster   Corporation
("Roadmaster").   The  Company  was  capitalized  initially  through  a  private
placement of stock and an initial public offering (approximately $3.1 million in
net  proceeds),  a  long-term  debt of $4  million  owed to  Roadmaster  for the
purchase of the business, and a revolving credit facility guaranteed by Equitex,
Inc., an affiliate of Roadmaster.

   Until October 1993,  the Company was  controlled,  in part, by Roadmaster and
Equitex.  TICO,  an entity  controlled  by  Thomas W.  Itin,  the  Chairman  and
President  of the  Company,  obtained  control  from  Roadmaster  and Equitex in
October 1993.  Since that date, Mr. Itin obtained a new credit  facility from an
affiliate, brought in new management with experience in "turnaround" situations,
and provided additional capital through various affiliated entities. Management,
through  the  capital  it has  provided  and the  efforts  it has  expended,  is
committed to reversing the losses that  occurred  during the period 1993 through
1996 and improving the financial condition of the Company.

Results of Operations

   In 1996 the  Company's  net sales were $24.3  million,  an  increase  of $5.6
million,  or 30% compared to 1995. The overall sales  increase  occurred in both
the golf  and  furniture  product  lines  and with  respect  to both  major  and
secondary customer categories.  Sales of golf products increased by $1.2 million
in the mass market and $2.9  million in the golf  specialty  store  market.  The
specialty  market  increase  was due to a full year of ownership of Palm Springs
Golf, Inc.,  acquired in October 1995. The mass market sales increase was due to
increased sales to the second largest  customer as a result of the purchase of a
golf line of business from Korex Corporation in October 1995. Sales of furniture
products increased $1.3 million,  or 93%. The furniture business began in August
1994 and  contributed  $140,000 of sales in that short year.  During  1996,  the
Company found it financially  difficult to integrate the newly acquired  (10/95)
Palm Springs Golf, Inc. business. During this first full year of operations, the
pre-tax loss for Palm Springs was $1.5 million. This resulted from a lack of new
product for the 1996 year, a full year of closing out old products, reorganizing
and  restructuring  the  business,  relocating  production  and  administration,
development  of totally new golf club and bag  products  and  additions  of golf
accessory and golf cart lines and  deploying a regional  sales  organization  in
both Canada and the United States. The turnaround of Palm Springs is much deeper
than originally expected, but management believes these efforts will continue to
reposition Palm Springs for a return to market competitiveness and profitability
in 1998.

   The Leisure  Life  business  continues  to grow at a rapid  pace.  This was a
startup business  acquired in August 1994.  During its first full year, 1995, it
had  sales of $1.4  million  and  grew to $2.7  million  in 1996.  Corresponding
pre-tax  losses were  $742,000 and  $393,000.  Management  expects this business
segment to emerge to  profitability  in 1997 as sales  continue  to grow.  First
quarter sales for 1997 are nearly doubled from $961,000 in 1996 to $1,900,000 in
1997.

   Ajay Leisure's mass market golf and billiards  business  continued its growth
with a 7.5% sales increase during 1996.  Although sales  increased,  mass market
sales were reduced by: a very late spring, (estimated effect on sales $600,000),
three  customers  exiting  the golf  category  ($600,000  sales  lost),  reduced
closeout  sales  ($500,000) due to better  inventory  management and sale of the
billiards  business  line in  October  1996  ($150,000).  Offsetting  the  above
declines was the  acquisition of product lines from a former  competitor,  Korex
Corporation,  in October 1995. This  contributed  approximately  $2.5 million of
additional  sales.  Ajay has undertaken  steps to continue to improve results in
its 1997 sales programs.

   Operating  loss for the Company was  $1,485,000  in 1996,  a decrease of $1.7
million  compared to an operating  profit of $190,000 in 1995.  The $1.7 million
turnaround in operating profit resulted from integrating the newly acquired Palm
Springs  Golf,  Inc.  and the  newly  acquired  golf  product  line  from  Korex
Corporation  in October  1995 . The Palm Springs  acquisition  was a much deeper
turnaround effort than initially anticipated.  This factor contributed operating
losses of $1.1  million and diluted  management  focus and vital  operating  and
financial  resources  from the  Company's  other  business  areas,  resulting in
operating  inefficiencies  and higher costs of  production.  It is believed that
this phase is substantially completed.


<PAGE>



   Selling,  general and administrative expenses were $5.1 million, $3.2 million
and $2.7 million  representing  20.8%,17.3% and 21.3% of sales in 1996, 1995 and
1994  respectively.  The 1996 results  reflect the  acquisition  of Palm Springs
Golf,  which  contributed  $1,400,000  and 32.2% of  related  sales to  selling,
general  and  administrative  expenses.  Without  Palm  Springs,  the  Company's
selling, general and administrative expenses are 18.3% of sales.


Interest  expense was  $1,103,000  for 1996,  an increase  of  $301,000,  or 38%
compared to  interest  expense of  $802,000  in 1995.  The  increase in interest
expense in 1996 was a result of more debt to finance working capital,  fund Palm
Springs' losses and to finance the acquisitions of certain assets of Korex Corp.
and Palm Springs Golf, Co. Inc..
 
  The Company had no income tax liability for the period 1993 - 1996.

Financial Condition

   At December 31, 1996 the Company had working capital of $3,348,000,  compared
with $6,324,000 at December 31, 1995. This $3.0 million decrease reflects losses
from operations  primarily related to its acquisition and subsequent  turnaround
efforts  relative to Palm Springs Golf.  The ratio of current  assets to current
liabilities at December 31, 1996 was 1.3, a decrease of .4 from the December 31,
1995 current ratio of 1.7.

   Inventories  at December 31, 1996 were  $7,957,000  compared to $8,909,000 at
December 31, 1995.  Trade accounts  receivable  were  $5,274,000 at December 31,
1996 compared to $5,196,000  at December 31, 1995.  The decrease in  inventories
was due to inventory control and reduction at Ajay Leisure.

   Net machinery and equipment at December 31, 1996 and 1995 were $1,822,000 and
$1,888,000,  respectively.  The  decrease  reflects  depreciation  in  excess of
capital expenditures and minor asset disposals.

Capital Resources

   The Company  expended  $276,000 in 1996 for capital  expenditures,  which was
used  principally  for  building  and  equipment  improvements  and moving  club
manufacturing  to  Mexico.  The  Company's  capital  expenditures  for 1995 were
$236,000 which was used principally for construction of additional factory space
for Leisure Life and tooling new products.

Liquidity

   Cash flow from  operations  was negative by $598,000,  reflecting  the effect
from a $1.5 million net loss and a partial offset from increased trade payables.
Financing of the  negative  cash flow came from  increased  bank loans and loans
from affiliated parties.

   The Company's liquidity is primarily affected by its financing  requirements.
The seasonal nature of the Company's sales creates fluctuating cash flow, due to
the  temporary  build-up of  inventories  in  anticipation  of, and  receivables
during,  the peak  seasonal  period which  historically  has been from  February
through May of each year.  The Company has relied and  continues to rely heavily
on revolving credit facilities for its working capital requirements.


     The  adverse  operating  results of Palm  Springs  Golf  subsequent  to its
acquisition has used approximately $2.0 million of the Company's liquidity. This
has resulted in the Company's  current bank lender advising the Company that the
bank contends that the Company is in technical  default under its loan agreement
and the bank has  restricted  the funds  available to Ajay under the  agreement.
Ajay had been  operating up until  February  12,1997 on a revolver limit of $8.5
million.  On  February  12,  the  line was  reduced  to a $7.0  million  maximum
facility.  The Company did and has  continued to make all  interest  payments on
time and has  operated  within the limit  amounts  contained  in the old and new
facility  lines,  although  restrictions  during  February  and March  curtailed
operating capability and reduced sales and profitability opportunities otherwise
available.  This  constriction has forced the Company to rely on extended credit
terms from its venders and additional  funds from affiliated  parties.  On April
14, the bank agreed to waive the existing  default and  restructure  the line to
its former $8.5 million limit although requiring a $500,000 term loan payment in
June and  contains  less  favorable  formula  borrowing  rates and an  increased
interest  rate. The  restructured  facility will terminate on June 30, 1997. The
increase in the line will  provide the  liquidity  the Company  needs during the
second quarter.

     In  order  to  find a more  permanent  solution  to  easing  the  liquidity
situation,  the Company has been seeking alternative financing.  The Company has
worked with banks and other lending  institutions  in seeking  sufficient  asset
based  financing to cover its needs through 1998.  The company  believes that it
will be able to put new financing in place by June 30, 1997.

   On July 25, 1995 the Company  entered into a Revolving  Loan  Agreement  with
United States National Bank of Oregon ("U.S.  Bank") for a credit facility of up
to $8,500,000,  replacing a Loan Agreement with an affiliate, Williams Controls,
Inc.  ("Williams").   All  of  the  Company's  subsidiaries  and  Williams  have
guaranteed  payment of this credit facility and the Company and its subsidiaries
have pledged their inventory and  receivables as collateral.  The Revolving Loan
is evidenced by demand  notes,  requires  monthly  interest only payments at the
prime rate of U. S. Bank  (currently  8.50%)  plus a loan  guaranty  fee of 0.5%
payable to Williams  Controls,  Inc. and matures on June 30, 1997. On October 2,
1995 the Company and U.S. Bank agreed to  modifications  to the  Revolving  Loan
Agreement increasing the credit facility from $8,500,000 to $13,500,000 in order
to accommodate two proposed  acquisitions.  The Company was allowed to borrow up
to $8,500,000  against 80% of eligible  accounts  receivable and 50% of eligible
inventory  and up to an  additional  $5,000,000  through  its 2-year  bulge loan
facility.  The increased  facility  provided the Company the funds  necessary to
acquire certain assets of both Korex Corporation ("Korex") and Palm Springs Golf
Company,  Inc. in early October,  1995.  Through a waiver and modification,  the
Company is required to maintain a minimum tangible net worth of $2,500,000 and a
ratio of liabilities to tangible net worth of not greater than 6.0 to 1.

   The Company has agreed to pay Williams 0.5% per annum of the outstanding loan
balance on a quarterly basis in consideration for providing its guarantee of the
Revolving  Loan. From May 5, 1994 through July 25, 1995 Ajay had operated within
a $7,000,000  Loan  Agreement and Joint Venture  Implementation  Agreement  with
Williams . The loan with  Williams was paid off on July 25, 1995 with funds made
available from the present Loan  Agreement with U. S. Bank.  Prior to paying off
the loan with  Williams,  the  Company and  Williams  agreed on April 5, 1995 to
modifications  of  the  terms  of the  Loan  Agreement  and  the  Joint  Venture
Implementation Agreement.

   On July 26, 1995 the  Company's  Registration  Statement  filed in connection
with an  offering  of  325,000  shares  of Series C 10%  Cumulative  Convertible
Preferred  Stock and 325,000  Warrants was  declared  effective.  This  offering
generated  $2.8 million of net  proceeds to the Company.  The Series C Preferred
Stock is convertible  into shares of the Company's  Common Stock at a conversion
price of  $0.6875.  Cumulative  dividends  are payable on the Series C Preferred
Stock at $1.00 per share annually. The Warrants are redeemable by the Company at
$.05 per Warrant  under  certain  conditions.  The terms of these  Warrants  are
identical to the Company's  publicly-held Warrants to purchase Common Stock. The
Company used the $2.8 million net proceeds for inventory and accounts receivable
financing and to acquire certain assets of Korex and Palm Springs.


Item 8.     Financial Statements
   Financial statements are attached hereto following Item 14.


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
   Financial Disclosure





<PAGE>





                                      PART III



Item 10.    Directors and Executive Officers of the registrant

   The applicable information set forth in the Registrant's 1997 Proxy Statement
   is incorporated herein by reference.

Item 11.     Executive Compensation

   The applicable information set forth in the Registrant's 1997 Proxy Statement
   is incorporated herein by reference.


Item 12.     Security Ownership of Certain Beneficial Owners and Management

   The applicable information set forth in the Registrant's 1997 Proxy Statement
   is incorporated herein by reference.


Item 13.     Certain Relationships and Related Transactions

   The applicable information set forth in the Registrant's 1997 Proxy Statement
   is incorporated herein by reference.


<PAGE>



                                       PART IV



Item 14.    Exhibits, Financial Statement Schedules, and Reports on Form 10-K

(a)  1.Financial Statements:

        Ajay Sports, Inc. and Subsidiaries
        Consolidated Financial Statements of Ajay
        Sports, Inc. and Subsidiaries:

        Reports of Independent Accountants

        Consolidated Balance Sheets - December 31, 1996
        and 1995

        Consolidated Statements of Operations - Years
        ended December 31, 1996, 1995 and 1994

        Consolidated Statements of Stockholders' Equity Years ended December 31,
        1996, 1995 and 1994

        Consolidated  Statements of Cash Flows - Years ended  December 31, 1996,
        1995 and 1994

        Notes to Financial Statements

   2. Financial Statement Schedules:

       Ajay Sports, Inc. and Subsidiaries:

       Schedule VIII - Valuation and Qualifying  Accounts - Years ended December
       31, 1996, 1995 and 1994

   3. Exhibits required by Item 601 of Regulation S-K

        The  following  exhibits  designated  with a "+"  symbol  represent  the
        Company's Management Contracts or Compensatory Plans or arrangements
        for executive officers:

      Exhibit 3.1   Articles of Incorporation and
        Bylaws and all amendments thereto  (1)

      Exhibit 4.1   Certificate of Designations of
        Rights and Preferences of the Series A 8%
        Cumulative Convertible Preferred Stock of Ajay
        Sports, Inc.      (2)

      Exhibit  4.2  Amendment  dated  February  9,  1992 to the  Certificate  of
        Designations of Rights and Preferences of the Series A 8% Cumulative
        Preferred Stock of Ajay Sports, Inc.  (4)




<PAGE>







                                       PART IV
                                      CONTINUED


      Exhibit 4.3   Certificate of Designations of Rights
        and Preferences of the Series B 8% Cumulative
        Convertible Preferred Stock of Ajay Sports, Inc.  (7)

      Exhibit 4.4   Certificate of Designations of Rights and
        Preferences of the Series C 10% Cumulative Preferred
        Stock of Ajay Sports, Inc.   (8)

      Exhibit 10.1  License Agreement dated April 14,
        1992 between Spalding Sports Worldwide and Ajay
        Leisure Products, Inc.  (2)

      Exhibit 10.2  Licensing Agreement dated
        June 15, 1989 between Roadmaster Corporation and
        Ajay Leisure Products, Inc.  (1)

      Exhibit  10.3  First  Amendment  to the April 14,  1992  Spalding  License
        Agreement dated April 2, 1993 (4)

      Exhibit 10.4  Exchange Agreement dated
        October 13, 1993 between TICO, Ajay Sports,
        Inc., Ajay Leisure Products, Inc., Roadmaster
        Industries, Inc., Roadmaster Corporation
        and Equitex, Inc.  (5)

      Exhibit 10.5 Williams/Ajay Loan and Joint Venture Implementation Agreement
        dated May 6, 1994 as amended by Letter Agreement dated April 3, 1995 (7)

      Exhibit 10.6  Second  Amendment  to the April 14,  1992  Spalding  License
        Agreement dated July 1, 1994 (7)

      Exhibit 10.7  Employment Agreement dated July 31,
        1994 between Robert D. Newman, Leisure Life, Inc.
        and Ajay Sports, Inc.   (7)

      Exhibit 10.8  1994 Stock Option Plan   (6)

      Exhibit 10.9  1995 Stock Bonus Plan   (6)

      Exhibit  10.10 Third  Amendment  to the April 14,  1992  Spalding  License
        Agreement dated June 5, 1995 (8)







<PAGE>



                                       PART IV

                                      CONTINUED


      Exhibit 10.11 Revolving Loan Agreement dated July 25, 1995
        Between Ajay Sports, Inc. and United States National Bank of
        Oregon, including Guaranties, Security Agreements, and Other
        Loan Documents   (8)

      Exhibit  10.12  First  Amendment  to the  July  25,  1995  Revolving  Loan
       Agreement dated October 2, 1995,  including amendment to Bulge Loan Note,
       Supplement to Guaranty and Amendment to Revolving Loan Note (9)

      Exhibit 21.0  List of Subsidiaries

      Exhibit 23.0  Consent of Independent Accountants

      Exhibit 27.0  Financial Data Schedule

(1) Previously  filed with and  incorporated by reference from the  Registrant's
Registration Statement on Form S-18 No. 33-30760.

(2)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's Form 10-K filed for the year
ended December 31, 1991.  (SEC File No. 0-18204)

(3)   Previously  filed and  incorporated  by reference  from the  Registrant's
Form 10-Q for the quarterly period
ended September 30,1992.  (SEC File No. 0-18204)

(4)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's Form 10-K filed for December
31, 1992.  (SEC File No. 0-18204)

(5)   Previously    filed   with   and    incorporated    by   reference   from
the Registrant's Form 10-K filed for December
31, 1993.  (SEC File No. 0-18204)

(6)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's Registration Statement on Form
S-8, No. 33-89,650.

(7)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's form 10-K filed for December
31, 1994.  (SEC File No. 0-18204)

(8)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's Registration Statement on Form
S-2, File No. 33-58753.

(9)   Previously   filed  with  and   incorporated   by   reference   from  the
Registrant's Form 10-Q for the Quarterly
period ended September 30, 1995.  (SEC file No. 0-18204)










<PAGE>



                                       PART IV

                                      CONTINUED


(b)  Reports on Form 8-K

      During the last  quarter of the 1996 fiscal  year,  the Company  filed one
   report on Form 8-K.



   Date of
   Report     Subject

   11/11/96  Item 5,  Other  Events -  Extension  of the common  stock  purchase
warrants to June 30, 1997.


<PAGE>



                                    SIGNATURES


     Pursuant to the  requirements  of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, Ajay Sports, Inc. has duly caused this Report on Form 10-K
to be signed on its behalf by the  undersigned,  thereunto duly  authorized,  in
West Bloomfield, Michigan on the 9th day of April, 1997.

                                 AJAY SPORTS, INC.



                                                       By: \s\Thomas W. Itin
                                                            ------------------
                                                       Thomas W. Itin, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  on Form  10-K has been  signed  below by the  following  persons  in the
capacities indicated and on the dates indicated.

SIGNATURES                    TITLE                                       DATE



\s\Thomas W. Itin             Director                           April  9, 1997
-----------------             and Principal
Thomas W. Itin                Executive Officer



\s\Duane R. Stiverson         Chief Financial                    April  9, 1997
----------------------                                           
Duane R. Stiverson            Officer and
                              Principal Accounting
                              Officer


\s\Robert R. Hebard           Director                           April  9, 1997
-------------------
Robert R. Hebard



\s\Anthony B. Cashen          Director                           April  9, 1997
--------------------
Anthony B. Cashen



\s\ Clarence H. Yahn          Director                           April  9, 1997
----------------------                                  
Clarence H. Yahn



\s\ Robert D. Newman          Director                           April  9, 1997
--------------------                                     
Robert D. Newman


<PAGE>








                                         F-





                           INDEPENDENT AUDITOR'S REPORT







Board of Directors
Ajay Sports, Inc. and Subsidiaries


      We have  audited  the  accompanying  consolidated  balance  sheets of Ajay
Sports,  Inc. and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the three years in the period  ended  December  31,  1996.  We have also
audited the related  consolidated  financial  statement  schedules listed in the
index in Item 14 of this  Form 10-K for each of the  three  years in the  period
ended December 31, 1996.  These  financial  statements  and financial  statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedules based on our audits.

      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  accounting  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 and financial statement schedules
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Ajay Sports, Inc. and Subsidiaries as of December 31, 1996 and 1995,
and the results of their  operations  and their cash flows for each of the three
years in the  period  ended  December  31,  1996 in  conformity  with  generally
accepted accounting principles.






\s\Hirsch & Silberstein, P. C.
Hirsch & Silberstein, P.C.

Farmington Hills, Michigan
April 14, 1997



<PAGE>

                       AJAY SPORTS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        as of December 31, 1996 and 1995
                      (in thousands, except share amounts)

                                                      December 31, December 31,
                                                         1996         1995
                                                      -----------  -----------
ASSETS

Current assets:
    Cash                                            $         64 $        362
    Accounts receivable, net of allowance
      of $140 and $287, respectively                       5,274        5,196
    Inventories                                            7,957        8,909
    Prepaid expenses and other                               362          365
    Deferred tax benefit                                     363          102
                                                      -----------  -----------

         Total current assets                             14,020       14,934

Fixed assets, net                                          1,822        1,888
Other assets                                                 320          236
Deferred tax benefit                                         756          106
Goodwill                                                   1,709        1,322
                                                      -----------  -----------

         Total assets                               $     18,627 $     18,486
                                                      ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Notes payable to affiliates                     $        885 $         -0- 
    Notes payable to banks                                 6,104        5,793
    Current portion of capital lease                           9            6
    Accounts payable                                       3,107        2,181
    Accrued expenses                                         567          631
                                                      -----------  -----------

         Total current liabilities                        10,672        8,611

Notes payable - long term                                  5,213        5,111

Stockholders' equity:
  Preferred stock - 10,000,000 shares authorized
   Series B, $0.01 par value, 12,500
     shares outstanding at liquidation value               1,250        1,250
   Series C, $10.00 par value, 296,170
     and 313,790 shares outstanding at 
     stated value, respectively                            2,962        3,138
   Common stock, $0.01 par value, 100,000,000 
     shares authorized, 23,274,039 and 
     23,337,746 shares outstanding, respectively             233          234
     Additional paid-in capital                            9,313        9,123
     Accumulated deficit                                 (11,016)      (8,981)
                                                      -----------  -----------

         Total stockholders' equity                        2,742        4,764
                                                      -----------  -----------

Total liabilities and stockholders' equity          $     18,627 $     18,486 
                                                      ===========  ===========



     The accompanying  notes are an integral part of the consolidated  financial
     statements.

                                        F-2

<PAGE>
                       AJAY SPORTS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Operations
              for the years ended December 31, 1996, 1995 and 1994
                    (in thousands, except per share amounts)

                                                        Year Ended
                                         --------------------------------------
                                         December 31,  December 31, December 31,
                                            1996         1995          1994
                                           -----------   ----------   ----------
Operating data:
    Net sales                            $    24,341  $    18,728  $     12,899
    Cost of sales                             20,759       15,291        12,291
                                          -----------   ----------   -----------
      Gross profit                             3,582        3,437           608
    Selling, general and
     administrative expenses                   5,067        3,247         2,747
                                          -----------   ----------   -----------

    Operating income (loss)                   (1,485)         190        (2,139)
                                          -----------   ----------   -----------

Nonoperating income (expense):
    Interest expense - net                    (1,103)        (801)         (614)
    Gain (loss) on disposition of investment      -0-          -0-          (38)
    Other, net                                   (38)         (41)         (289)
                                          -----------   ----------   -----------

                                              (1,141)        (842)         (941)
                                          -----------   ----------   -----------

Income (loss) before income taxes             (2,626)        (652)       (3,080)

Income tax expense (benefit)                    (893)        (208)           -0-
                                          -----------   ----------   -----------

Net loss                                $     (1,733) $      (444) $     (3,080)
                                          ===========   ==========   ===========

Net loss per share                      $       (0.09) $     (0.03) $     (0.27)
                                           ===========   ==========  ===========

Weighted average common and common stock
    equivalent shares outstanding              23,242       22,722       12,218
                                           ===========   ==========  ===========






















     The accompanying  notes are an integral part of the consolidated  financial
     statements.

                                      F-3
<PAGE>



<TABLE>
<CAPTION>
                                       AJAY SPORTS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994
                               (in thousands, except shares)

<S>                               <C>     <C>      <C>         <C>      <C>       <C>       <C>
                                                                                             
                                  Preferred Stock      Common Stock     Add'l                    Total
                                  ---------------   ------------------  Paid-In    Accum     Stockholders'
                                  Shares  Amount    Shares     Amount   Capital   (Deficit)     Equity
                                  ------- ------    --------    ------  ---------- -------     ------------
Balance at January 1, 1994        29,500  $ 2,950   8,824,773   $ 88    $ 4,246  $ (5,321)    $  1,963    
Common stock issued to fund
  acquisition                        -         -    1,500,000     15        685       -            700

Common stock issued in lieu of
  wages to officer                   -         -      150,000      2         50       -             52
Preferred stock converted into
  common stock                   (17,000)  (1,700)  5,000,040     50      1,650       -              -

Common stock issued to
  affiliate to reduce debt           -         -    4,117,647     41      1,359       -          1,400

Common stock sold to affiliate-      -         -    2,941,177     29        971       -          1,000

Net loss                             -         -        -        -        -      (3,080)        (3,080)
                                  -------   ------ ---------- ------ ---------- -------       ---------
Balances at December 31,1994      12,500    1,250  22,533,637    225      8,961  (8,401)          2,035

Common stock issued to ESOP          -         -       12,000     -           4      -                4

Stock issued to fund acquisition     -         -      895,054      9        572      -              581
 
Common stock issued to affiliate
  for acquisition services           -         -      100,000      1         37      -               38

Common stock issued in lieu of
  wages to officer                   -         -       34,000      1          9      -               10

Preferred stock public offering  325,000    3,250         -        -       (386)     -            2,864

Preferred stock converted into
  common stock                   (11,210)    (112)    163,055      2        110      -                            -

Common shares received as
  an acquisition cost adjustment    -          -     (400,000)    (4)      (184)     -           (188)

Dividends                           -          -          -        -        -      (136)         (136)

Net loss                            -          -          -        -        -      (444)         (444)
                                -------     ------ ---------- ------ ----------  -------  ------------
Balances at December 31, 1995    326,290    4,388  23,337,746    234      9,123  (8,981)        4,764

Common shares received as an
  acquisition incentive adjustent   -          -     (350,000)    (3)         4     -              -

Preferred stock converted into
  common stock                   (17,620)    (176)    256,293      2        174     -              -

Stock option exercise               -          -       30,000      -         12     -              12

Dividends                           -          -          -        -        -      (301)         (301)

Net loss                            -          -          -        -        -    (1,733)       (1,733)
                                -------    ------  ----------  ----- ---------- -------  ------------
Balances at December 31, 1996    308,670   $4,212  23,274,039  $ 233  $   9,313 $(11,015    $    2,742   
                                 =======   ======  ========== ====== ========== =======   ============
<FN>

    The accompanying notes are an integral part of the consolidated financial statements
</FN>
</TABLE>
                                        
                                       F-4

                                       
<PAGE>
                       AJAY SPORTS, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
              for the years ended December 31, 1996, 1995 and 1994
                                 (in thousands)
<TABLE>
<CAPTION>
<S>                                                      <C>         <C>       <C>

                                                               1996      1995       1994
                                                           ---------  --------   --------
Cash flows from operating activities:       

    Net loss                                            $   (1,733)$    (444) $  (3,080)
    Adjustments to reconcile to net cash flows
     from operating activities: 
    Loss on sale of assets                                        6        -0-       162
    Depreciation and amortization                               366       219        129
    Stock issued to officer and employees                        -0-       -0-        52
    (Increase) decrease in accounts receivable, net             (78)   (3,496)       299
    (Increase) decrease in inventories                          952    (3,123)     1,662
    (Increase) in deferred tax benefits                        (911)     (208)        -0-
    (Increase) decrease in prepaid expenses                       3      (154)      (112)
    (Increase) decrease in other assets                         (84)      (66)        22
    Increase (decrease) in accounts payable                     945       852     (1,530)
    Increase (decrease) in accrued expenses                     (64)      141         18
    (Decrease) in due to affiliates                              -0-       -0-      (240)
                                                           ---------  --------   --------

      Net cash provided by (used in) operating activities      (598)   (6,279)    (2,618)
                                                           ---------  --------   --------

Cash flows from investing activities:

    Acquisitions of property plant and equipment               (276)     (787)      (115)
    Goodwill associated with acquisitions                      (387)   (1,329)        -0-
    Proceeds from sale of equipment                              -0-        5          4
    Disposal of equipment                                       (29)       -0-        -0-
    Proceeds from sale of investment                             -0-       -0-        86
                                                           ---------  --------   --------

      Net cash (used in) investing activities                  (692)   (2,111)       (25)
                                                           ---------  --------   --------

Cash flows from financing activities:
    Cash acquired in acquisitions                                -0-       -0-         2
    Proceeds from issuance of notes payable to affiliates       885        -0-     6,770
    Net increase (decrease) in bank notes payable               396    10,777     (5,026)
    Payments on notes payable - affiliate                        -0-   (5,369)        -0-
    Dividends paid                                             (301)      (58)        -0-
    Proceeds from preferred stock offering,
       net of related costs                                      -0-    2,864         -0-
    Stock issued in acquisitions                                 -0-      433         -0-
    Proceeds from private placements, net of related costs       -0-       -0-     1,000
    Stock options exercised                                      12        -0-        -0-
                                                           ---------  --------   --------

      Net cash provided by financing activities                 992     8,647      2,746
                                                           --------  --------   --------

Net increase (decrease) in cash                                (298)      257        103

Cash at beginning of period                                     362       105          2
                                                          ---------  --------    --------

Cash at end of period                                    $       64  $    362  $     105
                                                           =========  ========   ========
    

</TABLE>

     The accompanying  notes are an integral part of the consolidated  financial
     statements.

                                       F -5

                                       
<PAGE>

                      AJAY SPORTS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





1.    SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION - The consolidated  financial  statements include the
     accounts of Ajay Sports,  Inc.  ("Sports") and its  wholly-owned  operating
     company subsidiaries,  Ajay Leisure Products, Inc. ("Ajay"),  Leisure Life,
     Inc.   ("Leisure"),   and  Palm  Springs  Golf,  Inc.   ("Palm   Springs"),
     collectively referred to herein as the "Company". The inventories and fixed
     assets purchased from Korex Corporation on October 2, 1995 have been merged
     with Ajay Leisure Products, Inc. All significant  intercompany balances and
     transactions have been eliminated.

     INVENTORIES  -  Inventories  are stated at the lower of cost or market with
     cost determined using the first-in, first-out method.

     FIXED  ASSETS  -  Fixed  assets  are  stated  at  cost,  less   accumulated
     depreciation  of $864,000  and  $545,000  as of December  31, 1996 and 1995
     respectively.  Fixed assets of the Company  consist  primarily of machinery
     and equipment,  office equipment, and a building.  Depreciation is computed
     using the  straight-line  method  over the  estimated  useful  lives of the
     assets, which range from four to thirty-nine years.

     GOODWILL  -  The  Company  has  recorded   goodwill  as  a  result  of  the
     acquisitions  of Palm Springs and Korex.  The  goodwill is being  amortized
     over forty years.  Amortization expense related to the goodwill was $35,732
     for the year ended December 31, 1996.

     OTHER ASSETS - Other  assets at December  31, 1996  consists of patents and
     trademarks  held and applied for by Leisure Life and Palm Springs (See Note
     8c) and a receivable  from Korex at Ajay Leisure.  Other assets at December
     31, 1995 consists of patents and trademarks held and applied for by Leisure
     Life and Palm Springs.

     PRODUCT  LIABILITY  AND  WARRANTY  COSTS - Product  liability  exposure  is
     insured with insurance  premiums provided during the year. Product warranty
     costs are based on  experience  and  attempt  to match  such costs with the
     related product sales.

     REVENUE  RECOGNITION  - The  Company  recognizes  revenue  when  goods  are
     shipped.

     INCOME TAXES - Effective  January 1, 1992, the Company adopted Statement of
     Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
     Under  SFAS No.  109,  deferred  income  taxes are  recognized  for the tax
     consequences  of  temporary  differences  between the  financial  statement
     carrying  amounts  and the tax bases of  existing  assets and  liabilities,
     using enacted statutory rates applicable to future years.








<PAGE>






                      AJAY SPORTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued




2.    RELATED PARTY TRANSACTIONS

      The Company's related parties include the following:

      Roadmaster Industries,  Inc.  ("Roadmaster") - Prior to June 1989, all the
      Company's  common  stock was owned by  Roadmaster  and the  companies  had
      common  investors.  Roadmaster owned all of the Company's  preferred stock
      prior to the consummation of the Exchange  Agreement  (described in Note 2
      (a) ).

      Equitex,  Inc.  ("Equitex")  - Prior to the  consummation  of the Exchange
      Agreement,  Equitex owned 189,000 shares of the Company's common stock and
      1,100,000  warrants to purchase  additional  common  stock.  Additionally,
      prior to and at the time of executing the Exchange Agreement, the chairman
      of Roadmaster was the president of Equitex.

      First  Equity  Corporation  ("First  Equity") - First Equity is owned by a
      family member of the president,  chief executive officer,  and chairman of
      the Company.

      TICO - TICO is  controlled  by the Company's  president,  chief  executive
      officer, and chairman.

      Acrodyne Profit Sharing Trust -  ("Acrodyne")  is a profit sharing trust.
      The Company's  president,  chief executive officer and chairman is trustee
      and beneficiary of the trust.  The trust acquired  1,176,471 common shares
      on October 3, 1994.

      Enercorp, Inc. - ("Enercorp") is a business development company engaged in
      the  business of  investing  in and  providing  managerial  assistance  to
      developing  companies.  The Company's president,  chief executive officer,
      chairman and principal  shareholder  is a major  shareholder  in Enercorp.
      Enercorp  acquired  1,764,706  common  shares on October 3, 1994.  In 1995
      Enercorp  acquired  2,000  shares of  series C  preferred  stock.  In 1995
      Enercorp  also  received  100,000  shares  of common  stock  for  services
      rendered in connection with the Palm Springs acquisition.

     Williams Controls,  Inc. - ("Williams") - Williams has the same chairman as
     the Company, which individual is a major shareholder of each company.

      (a)   Exchange Agreement

            During  1993,  the  Company  entered  into  an  agreement,   whereby
            Roadmaster and Equitex agreed to  substantially  divest of all their
            interest in the Company by transferring to TICO all of the Company's
            outstanding  common  stock  purchase  warrants  held  by  them,  the
            $217,000  principal  amount note payable to  Roadmaster,  the 29,500
            shares of the Company's Series A 8% Cumulative Convertible Preferred
            Stock and all Roadmaster's  outstanding accounts receivable due from
            the Company.


<PAGE>







            Additionally,  Roadmaster  agreed to transfer to TICO all  marketing
            and  distribution  rights for golf  products in Canada,  all tooling
            exclusively  associated  with the  manufacture of  hand-pulled  golf
            carts,  the "Ajay" name and agreed to grant TICO a 10 year exclusive
            license for the use of the "Ajay" trademark and trade name.

            The Company  and TICO agreed to obtain the release and  satisfaction
            in full of any and all  obligation,  guarantees  and  collateral  of
            Equitex under the  revolving  credit  facility,  described in Note 6
            including the release of 1,000,000 shares of Roadmaster common stock
            owned by Equitex and pledged to a bank as collateral.  The Company's
            president and TICO further  agreed to transfer to Roadmaster all the
            Roadmaster  common stock  purchase  warrants  held by the  Company's
            president along with TICO's payment of $200,000 to Roadmaster.

            Based  upon  completion  of  the  Exchange  Agreement  in  1994  and
            refinancing  of debt  obligations,  the  Board of  Directors  of the
            Company  approved a plan to, at the  option of TICO or its  assigns,
            convert  the  value of  instruments  transferred  to TICO  under the
            Exchange Agreement, in whole or in part, into Preferred Stock, which
            could be  converted  to Common  Stock of the Company at a price $.34
            per share.  On October  3, 1994 the  Company  created a new class of
            Series B 8% Cumulative  Convertible  Preferred Stock and allowed for
            its exchange, on a share-for-share  basis, with the Company's Series
            A Preferred  Stock. On that same day, TICO notified the Company that
            it wished to exchange the 29,500 shares of Series A Preferred  Stock
            for 29,500 shares of the newly issued Series B Preferred  Stock,  as
            was permitted  under the  Certificate of  Designations of Rights and
            Preferences of the Series B Preferred  Stock. On that same day, TICO
            notified the Company that it wished to convert  17,000 shares of its
            Series B Preferred Stock for 5,040,000 shares of the Common Stock of
            the Company, as the Series B Preferred Stock allows for a conversion
            rate of 1 share of Series B Preferred Stock for 294.12 shares of the
            Company's Common Stock.

      (b)   Other

            In  1994,  Equitex  earned  a fee  of  $40,000  as a  result  of the
            extension of the revolving credit facility with the bank. As part of
            the Exchange  Agreement this amount was transferred to TICO and paid
            in June, 1994.

            First Equity established a letter of credit on behalf of the Company
            in December, 1993, which was amended during 1994, totaling $271,200.
            This letter was  established  to purchase  inventory.  In  addition,
            First Equity  advanced the Company  $250,000  during  January,  1994
            which was repaid in June, 1994.

            The Company has agreed to pay Williams 0.5% per annum of the
            outstanding U. S. Bank revolving loan balances on a quarterly basis
            in consideration for providing its guarantee of



<PAGE>







            the revolving loan. This fee was $60,411 for the year ended December
            31, 1996 and $18,083 for the year ended December 31, 1995.

            The  Company's  interest  expense for  Williams was $448,000 for the
            year ended December 31, 1995.

            In 1995 the Company issued  Enercorp  100,000 shares of common stock
            for  services   rendered  in   connection   with  the  Palm  Springs
            acquisition.

            During 1996 the Company borrowed from affiliated  parties by issuing
            subordinated notes. As of 12/31/96, the Company owed $885,000 to the
            following affiliated parties:

                      First Equity Corporation, Joseph Giuffre (Former Chairman
of Palm Springs), Tony                                   Cashen (Company
Director), Enercorp, Clarence Yahn (Company Director).


3.    INVENTORIES

            Inventories consist of the following (in thousands):

                                      December 31,
                                      1996    1995

         Raw materials             $4,153   $4,608
         Work-in-progress             995    1,014
         Finished goods             2,809    3,287
                                    -----   ------

                  Total            $7,957   $8,909
                                    =====    =====


4.  INVESTMENT IN AND ADVANCES TO AFFILIATES

         A former  officer  of the  Company  is an  officer  of  MacGregor,  and
    MacGregor  and the  Company  have  common  investors.  During the year ended
    December 31, 1994 the Company sold its remaining 125,106 shares of MacGregor
    for $69,000, resulting in a loss of $38,000.

5.  DEBT

         On April 14,  1994 the Company  was  advised by Bank  America  that the
    Second Amended  Restated Loan and Security  Agreement  ("Credit  Agreement")
    between Bank America and Ajay had been  purchased by  Roadmaster.  On May 5,
    1994 Ajay paid Roadmaster in full all outstanding  obligations due under its
    Credit  Agreement  and entered  into a Loan and  Security  Agreement  ("Loan
    Agreement")  with  Williams  for a term loan of up to  $7,000,000.  The Loan
    Agreement required


<PAGE>

    monthly interest only payments at the prime rate of First Interstate Bank of
    Oregon plus 2%, was  originally  scheduled to expire on November 4, 1994 and
    was extended to May 5, 1995.  The terms and conditions of the Loan Agreement
    were substantially the same as the prior Credit Agreement with Bank America,
    except that the Loan Agreement was a term loan.

          The Williams loan was paid on July 25, 1995,  when the Company entered
     into a Revolving Loan Agreement with United States  National Bank of Oregon
     ("U.  S.  Bank")  for a credit  facility  of up to  $8,500,000.  All of the
     Company's  subsidiaries  and  Williams  guaranteed  payment of this  credit
     facility and the Company and its  subsidiaries  pledged their inventory and
     receivables as collateral. The Revolving Loan is evidenced by demand notes,
     requires  monthly  interest  only  payments at the prime rate of U. S. Bank
     (currently  8.50% as of March 26,  1997) and will be  reviewed  on June 30,
     1997. On October 2, 1995 the Company and U. S. Bank agreed to modifications
     to the  Revolving  Loan  Agreement  increasing  the  credit  facility  from
     $8,500,000  to  $13,500,000.  The  Company  was  permitted  to borrow up to
     $8,500,000 against 80% of eligible accounts  receivable and 50% of eligible
     inventory and up to an additional  $5,000,000 through its 2-year bulge loan
     facility.  The increased  facility provided the Company the funds necessary
     to acquire  certain assets of both Korex  Corporation and Palm Springs Golf
     Company, Inc. in early October, 1995. The Company is required to maintain a
     minimum  tangible net worth of $2,500,000  and a debt leverage ratio of not
     greater than 6.0 to 1. The adverse  operating  results of Palm Springs Golf
     subsequent to its  acquisition has used  approximately  $2.0 million of the
     Company's liquidity.  This resulted in U. S. Bank advising the Company that
     the Company was in  noncompliance  with  certain  covenants  under its loan
     agreement  and the bank  restricted  the funds  available to Ajay under the
     agreement.  Ajay operated  until  February 12, 1997 on a revolver  limit of
     $8.5  million.  On February  12, 1997 U. S. Bank reduced the line to a $7.0
     million  maximum  facility.  The Company has continued to make all interest
     payments on time and has operated within the limit amounts contained in the
     old and new  facility  lines.  This  caused the Company to rely on extended
     credit terms from its venders and additional funds from affiliated parties.
     On April 14,  1997 U. S. Bank  agreed to waive  the  existing  default  and
     restructure the line to its former $8.5 million limit although  requiring a
     $500,000 term loan payment in June, less favorable  formula borrowing rates
     and an increased interest rate. The restructured facility will terminate by
     June 30, 1997.

          The Company has worked with banks and other  lending  institutions  in
     seeking  sufficient  asset based financing to cover its needs through 1998.
     The Company  believes that it will be able to put new financing in place by
     June 30, 1997.

 
          The  Company  has  agreed  to  pay  Williams  0.5%  per  annum  of the
     outstanding  Revolving Loan balance on a quarterly  basis in  consideration
     for  providing its guarantee of the  Revolving  Loan.  Guarantee  fees paid
     Williams were $60,411 in 1996 and $18,083 in 1995.




<PAGE>







         The Company's U. S. Bank borrowings consisted of the following:

                                                  December 31,
                                            1996                 1995
    Revolving credit facility:
      Balance                        $11,103,844                 $10,792,706
      Interest rate                         8.25%                       8.25%
      Unused amount of facility       $2,396,156                 $ 2,707,294
      Average amount outstanding
        during the period             11,059,660                 $ 9,758,991
Weighted average interest
        rate                                8.25%                       8.72%
      Maximum amount outstanding
        during the period             13,481,108                 $10,936,687


         Outstanding commercial letters of credit totaled approximately $322,000
    and $717,000 at December 31, 1996 and 1995 respectively.

         Other 12/31/96  borrowings  consist of $885,000 from affiliated parties
    and a $195,609 real estate loan.

         Debt payments are as scheduled (in thousands):

                        1997             $16,580
                        1998                  22
                        1999                  22
                        2000                  22
                        2001                 172
                        2002 and thereafter    -

         The seasonal nature of the Company's sales creates  fluctuating demands
    on  its  cash  flow,  due  to  the  temporary  build-up  of  inventories  in
    anticipation  of, and  receivables  subsequent to, the peak seasonal  period
    which  historically  has been from  February  through May of each year.  The
    Company has relied and  continues  to rely heavily on its  revolving  credit
    facility for its working capital requirements.

6.  INCOME TAXES

         As  discussed  in Note 2,  the  Company  adopted  SFAS  No.  109 at the
    beginning of 1992. There was no cumulative  effect of this accounting change
    and its adoption had no impact on 1992 net income.




<PAGE>







         The actual  income tax expense  (benefit)  differs  from the  statutory
    income tax expense (benefit) as follows (in thousands):

                                        Year   Ended   December 31,

                                          1996      1995       1994
                                         -----     ------    ------
    Statutory tax expense
      (benefit) at 34%                  $ (893)    $(208)   $(1,047)
    Utilization of net
      operating loss
      carry forward                          -         -          -
    Loss producing no current
      tax benefit                          896        208      1,047
                                         -----      -----    -------
                                      $    -      $    -     $     -
                                      ========    =======   =========


    The components of the net deferred tax  asset/liability  were as follows (in
    thousands):

                                                    December 31,
                                                  1996       1995
    Deferred tax asset,
     principally accrued
     expenses, reserves
     and loss carry forwards                      $ 3,274    $2,339
    Deferred tax liability,
      principally depreciation and amortization      (107)     (83)
    Valuation allowance                            (2,048)  (2,048)
                                                   ------    ------
   Net                                           $  1,119  $   208
                                                   ======   =======

            The Company has assessed its past earnings history and trends, sales
    backlog,  budgeted  sales,  and expiration  dates of  carryforwards  and has
    determined  that it is more  likely than not that  $987,000 of deferred  tax
    assets will be realized.  The remaining valuation allowance of $2,048,000 is
    maintained on deferred tax assets which the Company has not determined to be
    more likely than not  realizable at this time.  The Company will continue to
    review this valuation allowance on a quarterly basis and make adjustments as
    appropriate.

            The Company had net  operating  loss carry  forwards for Federal tax
    purposes of  approximately  $8,501,000 at December 31, 1996, which expire in
    varying  amounts  in the years  2006  through  2011.  Operating  loss  carry
    forwards  totaling  $304,000,  $4,735,000,  $1,244,000  and  $1,752,000  are
    available to offset future state  taxable  income of Sports,  Ajay,  Leisure
    Life and Palm Springs  respectively,  which expire in varying amounts in the
    years 2006 through 2011.  Future  changes in ownership as defined by section
    382 of the Internal  Revenue  Code,  could limit the amount of net operating
    loss carryforwards used in any one year.


<PAGE>







7.  STOCKHOLDERS' EQUITY

    (a)     Preferred Stock

                  On October 3, 1994 the Company created a new class of Series B
            8%  Cumulative  Convertible  Preferred  Stock  and  allowed  for its
            exchange,  on a  share-for-share  basis, with the Company's Series A
            Preferred Stock. On that same day, TICO notified the Company that it
            wished to exchange the 29,500 shares of Series A Preferred Stock for
            29,500 shares of the newly issued Series B Preferred  Stock,  as was
            permitted  under the  Certificate  of  Designations  of  Rights  and
            Preferences of the Series B Preferred  Stock. On that same day, TICO
            notified the Company that it wished to convert  17,000 shares of its
            Series B Preferred Stock for 5,040,000 shares of the Common Stock of
            the Company, as the Series B Preferred Stock allows for a conversion
            rate of 1 share of Series B Preferred Stock for 294.12 shares of the
            Company's Common Stock.

                  Cumulative  dividends  are  payable on the Series C  Preferred
            Stock at any time  through  December  31,  1997 at an annual rate of
            $1.00 per share.  The Warrants are redeemable by the Company at $0.5
            per Warrant under certain  conditions.  The terms of these  Warrants
            are  identical to the Company's  publicly-held  Warrants to purchase
            Common Stock.  The Company used the $2.8 million of net proceeds for
            inventory and accounts  receivable  financing and to acquire certain
            assets of Korex and Palm Springs.

                  On July 26, 1995 the Company's Registration Statement filed in
            connection  with an  offering  of  325,000  shares  of  Series C 10%
            cumulative  Convertible  Preferred  Stock and 325,000  Warrants  was
            declared effective. The Series C Preferred Stock is convertible into
            shares of the Company's  Common Stock based on a value of $10.00 for
            each Preferred share and $.6875 for the Common.

                  Dividends on the Series C 10% Cumulative Convertible Preferred
            Stock  have  been paid  through  the  fourth  quarter  of 1996.  The
            dividend  for the first  quarter  ended  March 31, 1997 has not been
            declared.  The Company has dedicated all available  funds to support
            continuing operations of the Company until a new loan facility is in
            place.

    (b)     Stock issued to officers

                  The Company  has a stock  incentive  plan for  officers of the
            Company, under which up to 150,000 shares of the Company's stock may
            be granted  annually.  In 1994, the Company issued 150,000 shares of
            common stock to an officer in lieu of  compensation  and in 1995 the
            Company issued 34,000 shares.  No stock was issued to officers under
            this plan in 1996.





<PAGE>







    (c)     Stock Issued for Acquisitions

                  On  August  1,  1994  the  Company  reached  an  agreement  in
            principle to acquire the  outstanding  common stock of Leisure Life,
            Inc. In exchange for acquiring all the common stock of Leisure Life,
            the  Company  issued  1,500,000  shares of its  common  stock to the
            owners of Leisure  Life,  with  400,000 of those shares being issued
            subject to  certain  performance  requirements  being met by Leisure
            Life.

                  In November  1995 the former  owner of Leisure  Life  returned
            400,000  shares of stock to the Company  and in March 1996  returned
            200,000  shares due to not achieving  performance  requirements.  An
            additional 150,000 1996 performance  incentive shares held in escrow
            since March 1996 were returned to the Company in April 1997.

    (d)     Warrants and Options

                  A summary of  activity  related  to  warrants  and  options to
            purchase Company common stock is as follows:
                                            Warrants and           Price
         Options        Per  Share
            Balance, January 1, 1994           2,885,970    $ .34 - 1.00
            Expired                             (450,000)     .80 - 1.00
            Reissued                             200,000      .34         (i)
            Reissued                              94,500      .34         (ii)
            Issued to Williams                16,274,754      .34 - 1.00 (iii)
            Exercised by Williams             (4,117,647)     .34         (iv)
            Issued to Directors                   10,000      .44          (v)
            Issued to Employees                  840,000      .40  - .80  (vi)
                                             -----------
            Balance, December 31, 1994        15,737,577      .34 - 1.00

            Issued to employees                  295,000      .625 - .6875(vii)
            Williams options adjusted         (1,046,234)     .50 - 1.00 (viii)

            Issued - public offering             373,750      1.00        (ix)
            Issued to Directors                   10,000       .66         (x)
                                           -------------
            Balance, December 31, 1995        15,370,093      .34 - 1.00

            Exercised by Employees               (30,000)     .40
            Issued to Directors                   10,000      .625         (xi)
            Issued to Employees                  700,000      .40         (xii)
            Issued for Acquisition               800,000      .75 - .90  (xiii)
            Expired                             (242,500)     .80 - 1.00
                                             -----------

            Balance, December 31, 1996        16,607,593    $ .34 - 1.00



          (I) Warrants originally issued to Roadmaster in 1990. Transferred to
                Acrodyne under the Exchange Agreement, expired and reissued.

         (ii) Warrants originally issued to Equitex in connection with the
                Company's private placement. Transferred to Acrodyne,
                expired and reissued.

        (iii) Warrants issued to Williams as consideration for loans to
                Ajay Leisure as part of a joint venture implementation 
                agreement dated May 1994.

         (iv) Exercised and applied proceeds ($1,400,000) against debt.

          (v) Director stock options of which 6,667 have vested.

         (vi) Employee stock options of which 786,250 shares have vested.

        (vii) Employee stock options of which 147,500 shares have vested.

       (viii) Warrants returned by Williams as consideration for early
               loan payoff.

         (ix) Public offering of 7/26/95.

          (x) Director stock options of which 3,333 have vested.

         (xi) Director stock options of which none have vested.

        (xii) Employee stock options of which none have vested.

       (xiii) Issued to former  shareholders  of Palm Springs Golf Company,
               Inc., a business acquired by the Company in October 1995.

    (e)  Private Placements

            In  1994,  the  Company  issued  to  related  parties,  via  private
      placement,  2,941,177  shares of common  stock and  received  proceeds  of
      $1,000,000.  The Company also issued 4,117,647 shares of common stock to a
      related party in exchange for a reduction of debt totaling $1,400,000.

8.  MAJOR CUSTOMERS

         The Company  operates in two lines of  business,  the  manufacture  and
    distribution  of  sports  equipment  and  outdoor  leisure  furniture.   The
    Company's  customers are principally in the retail sales market. The Company
    performs ongoing credit evaluations of its customers'  financial  conditions
    and does not generally require collateral.



<PAGE>







         Sales to customers  which represent over 10% of the Company's net sales
    are as follows:

                         Year  ended  December 31,
      Customer             1996      1995       1994
         A                  29%       36%        41%
         B                  14%        *          *

      * Amounts are less than 10% of net sales.

9.    BUSINESS SEGMENT REPORTING

         The  relative   contributions  to  net  sales,   operating  profit  and
      identifiable  assets of the Company's  two industry  segments for the year
      ended December 31, 1996 are as follows (in thousands):

                                Furniture      Golf  Corporate  Consolidated
                                ---------    ------- ---------  ------------  
      Sales                       $2,701     $21,640        -      $24,341
      Operating profit/(loss)       (193)       (806)    (486)      (1,485)
      Assets                       2,512      15,983        -       18,495
      Depreciation/Amortization       98         268        -          366
      Capital Expenditures            63         213        -          276

10.   SPALDING LICENSE AGREEMENT

         Ajay has a license  from  Spalding  Sports  Worldwide  to  utilize  the
      Spalding  trademark in conjunction  with the sale and distribution of golf
      bags,  golf  gloves,  hand  pulled  golf  carts  and  certain  other  golf
      accessories in the United States. As consideration for this license,  Ajay
      is required to pay  royalties to Spalding  based on a percentage of sales,
      subject to annual  minimums of $500,000  for the year ended June 30, 1995,
      and $550,000 for the years ended June 30, 1996 through June 30, 1998.  The
      current agreement expires June 30, 1998. Other conditions of the agreement
      require  the  Company  to  expend  2% of  sales  under  the  agreement  on
      advertising and related costs,  with 1% remitted to Spalding.  The Company
      must also maintain a current ratio of 1.0 to 1.0. Approximately 52% of the
      Company's 1996 and 53% of 1995 sales were Spalding products.

         Royalty expense due Spalding was $480,000,  $484,000,  and $494,000 for
      the years ended December 31, 1996, 1995 and 1994, respectively.

11.   LEASES

         Future aggregate minimum lease payments under  noncancelable  operating
      leases  with  initial  or  remaining  terms in  excess  of one year are as
      follows (in thousands):




<PAGE>







                  1997                        $    703
                  1998                             550
                  1999                             527
                  2000                             499
                  2001                             298
                  2002 and thereafter              145
                                               -------
                                                $2,722


            Total rental expense (in thousands)  under operating  leases (net of
      sublease rental income from an affiliate of $8, $13 and $8,  respectively)
      was $504,  $627, and $556 for the years ended December 31, 1996,  1995 and
      1994, respectively.

12.   NET  (LOSS) PER COMMON SHARE

            Earnings or loss per share has been  computed by dividing net income
      or loss, after reduction for preferred stock dividends in 1996 ($301,000),
      in 1995 ($136,000) and 1994  ($202,000) by the weighted  average number of
      common shares outstanding. No exercise of warrants outstanding was assumed
      in  1996,  1995,  or  1994,  since  any  exercise  of  warrants  would  be
      antidilutive.

13.   SUPPLEMENTAL CASH FLOW INFORMATION

            Cash paid for interest was  $1,098,819,  $762,157,  and $607,000 for
      the years ended December 31, 1996, 1995 and 1994, respectively.

      Non cash financing and investing transactions were as follows:

             During  1994,  150,000  shares of the  Company's  common stock were
            issued to an officer of the Company in lieu of wages.

             In  exchange  for  acquiring  in 1994  all of the  common  stock of
            Leisure Life, Inc. the Company issued 1,500,000 shares of its common
            stock to the owner of Leisure  Life.  In  November,  1995 the former
            owner of Leisure Life  surrendered  400,000  shares of the Company's
            common stock and in March,  1996  surrendered  200,000 shares of the
            Company's common stock due to unmet performance requirements.

             During 1994,  4,117,647  shares of the Company's  common stock were
            issued  to a  related  party in  exchange  for a  reduction  in debt
            totaling $1,400,000.

             In 1995 11,210  preferred  stock shares were converted into 163,055
            shares of common stock.


<PAGE>







             During 1995 the Company issued common stock as follows:

                  Issued to                                       Shares
                  ---------                                      ------- 
                  Employees                                       12,000
                  Fund acquisitions                              895,054
                  Affiliate in lieu of payment for services      100,000
                  Officer in lieu of bonus                        34,000

             During 1996, 17,620  preferred  stock shares were  converted  into
            256,293 shares of common stock.

            In 1996 an  employee  exercised  options to acquire  30,000  common
            shares.

14.   CONTINGENCIES

            The  Company is subject  to certain  claims in the normal  course of
      business which management intends to vigorously  contest.  The outcomes of
      these  claims are not  expected to have a material  adverse  affect on the
      Company's consolidated financial position or results of operations.




<PAGE>





                                                                 Schedule VIII


                      AJAY SPORTS, INC. AND SUBSIDIARIES
                       Valuation and Qualifying Accounts
                 Years ended December 31, 1996, 1995, and 1994
                            (Amounts in Thousands)




                                 Balance    Charged to                 Balance
                                beginning   costs and    Deductions     at end
                                 expenses    expenses    (describe)   of period

Reserve for Product Warranty:

   Year ended:

     December 31, 1996              $136       $203        $254   (1)    $  85
     December 31, 1995               139        198         201            136
     December 31, 1994               112        276         249            139


Allowance for Doubtful Receivables:

   Year ended:

     December 31, 1996               $287       $ 91        $238  (2)     $140
     December 31, 1995                101        330         144           287
     December 31, 1994                230         62         191           101


Reserve for Inventory Obsolescence:

   Year ended:

     December 31, 1996               $384       $498        $391           $491
     December 31, 1995                430        378         424            384
     December 31, 1994                160        430         160            430


Notes:

(1)  Represents amounts paid for product warranty claims.

(2)  Represents amounts charged off as uncollectible.




<PAGE>







                                                                EXHIBIT   21.0





                               LISTING OF SUBSIDIARIES





               SUBSIDIARIES                           STATE OF INCORPORATION
               ------------                           ---------------------- 
               Ajay Leisure Products, Inc.               Delaware

               Leisure Life, Inc.                        Tennessee

               Palm Springs Golf, Inc.                   Colorado



<PAGE>








                                                                   EXHIBIT 23.0




                          INDEPENDENT   AUDITORS'   CONSENT


     We consent to the incorporation by reference in the Registration Statements
     of Ajay  Sports,  Inc.  and  Subsidiaries  on  Form  S-3  Registration  No.
     333-11365  and Form S-8 of our report  dated April 14,  1997,  appearing in
     this Annual Report on Form 10-K of Ajay Sports,  Inc. and  Subsidiaries for
     the year ended December 31, 1996.





\s\Hirsch & Silberstein, P.C.
----------------------------
Hirsch & Silberstein, P.C.
April 14, 1997



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