SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-Q

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the Quarter Ended                                      Commission File No.
September 30, 1996                                               33-19107
--------------------                                            ----------

                                LBO Capital Corp.
             (Exact name of Registrant as Specified in its Charter)

Colorado                                                          38-2780733
---------------------------                                  ------------------
(State or Other Jurisdiction                                    (IRS Employer
 of Incorporation or Organization)                          Identification No.)




7001 Orchard Lake Road, Suite 424
West Bloomfield MI                                                  48322-3608
---------------------------------------                           -------------
(Address of Principal Executive Offices)                            (Zip Code)


                                 (810) 851-5651
               (Registrant's Telephone Number Including Area Code)



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

     As of  November  8, 1996 a total of  12,100,000  shares,  $.0001  par value
common stock, were issued and outstanding.

<PAGE>




                                LBO CAPITAL CORP.

              Form 10-Q Filing of Quarter Ended September 30, 1996

                                      INDEX
                                                                          Page
                                                                         Number
                                                                       ---------
Part I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

         Balance Sheets
           September 30, 1996 (Unaudited) and December 31, 1995               3

         Statements of Operations (Unaudited)
           Nine months ended September 30, 1996 and 1995                      4

         Statements of Cash Flows (Unaudited)
           Nine months ended September 30, 1996 and 1995                      5

         Notes to Financial Statements (Unaudited)                          6-7

Item 2.  Management's Discussion and Analysis of Financial
           Statements (Unaudited)                                             7

PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                     8

           Financial Statements of Ajay Sports, Inc.
             as of September 30, 1996                                       9-x


         Signature Page                                                       x


Note:      No other  information is included in answer to any item under Part 11
as those other Items are either not applicable, or if applicable,  the answer is
negative.





<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.

                               LBO CAPITAL CORP.
                                 BALANCE SHEETS


                                                (Unaudited)
                                               September 30,      December 31,
                                                    1996               1995
                                               ------------       -------------
                                 ASSETS
Current Assets:
  Cash and Equivalents                          $       132        $        78
  Marketable Securities - Available for Sale         28,765              8,000
  Prepaid Expenses                                    - 0 -                173
                                                 ----------         ----------
    Total Current Assets                             28,897              8,251
                                              


TOTAL ASSETS                                    $    28,897        $     8,251
                                                 ==========         ==========

            LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
  Accounts Payable                              $       780        $     4,414
  Accounts Payable - Related Entities                 5,320              2,620
  Notes Payable - Other                             165,701             99,801
  Notes Payable - Bank                              325,000            325,000
  Accrued Expenses and Taxes                         14,202              3,510
                                                 ----------         ----------
    Total Current Liabilities                       511,003            435,345

Stockholders' Equity
  Common Stock, $.0001 par value;
    Authorized 100,000,000 Shares;
    Issued and Outstanding 12,100,000 shares          1,210              1,210
  Additional Paid-In Capital                        623,094            623,094
  Unrealized Gain(Loss) on Available for Sale       (19,632)              (702)
  Accumulated Deficit                            (1,086,779)        (1,050,696)
                                                 -----------        -----------
    Total Stockholders' Deficit                    (482,106)          (427,094)
                                                 -----------        -----------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT       $    28,897        $     8,251
                                                 ===========        ===========

                       See notes to financial statements.

                                       3

<PAGE>


                               LBO CAPITAL CORP.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                   For the Three Months Ended September 30,   For the Nine Months Ended September 30,
                                              1996              1995                   1996               1995
                                          ---------         ---------               ---------        -----------
<S>                                     <C>             <C>                      <C>              <C>             

REVENUES:                                $      -0-      $        -0-            $      -0-        $        -0-

EXPENSES:
     Professional Services                      224            (3,217)                  143             (2,806)        
     Management Fees                            750               923                 2,700              4,013         
     Depreciation & Amortization Expense        -0-             1,581                   -0-              4,742         
     Interest Expense                        11,437            10,926                32,502             29,555         
     Other Expenses                              46               249                   737                948         
                                          ----------       -----------             ---------         -----------
         Total Expenses                      12,457            10,462                36,082             36,453         
                                          ----------       -----------             ---------         -----------        
Income (Loss) Before Income Taxes           (12,457)          (10,462)              (36,082)           (36,453)

Income Tax Expense (Benefit):                                                                             
     Currently Payable                          -0-               -0-                   -0-                 -0- 
                                          ----------       -----------            ----------         -----------
      Net Income (Loss)                  $  (12,457)     $    (10,462)           $  (36,082)       $    (36,453)
                                          ==========       ===========            ==========         ===========
       Net Income (Loss) per Share       $     (.00)      $      (.00)           $     (.00)       $       (.00) 
                                          ==========       ===========            ==========         =========== 
       Weighted Average Number of Common 
          Shares Outstanding              12,100,000        12,100,000         12,100,000       12,100,000 
                                         ===========       ===========        ===========      =========== 

</TABLE>


                       See notes to financial statements.

                                        4

<PAGE>





                               LBO CAPITAL CORP.
                                   CASH FLOWS


                                               (Unaudited)
                                             September 30,        September 30,
                                                  1996                 1995
                                             -------------       --------------
Cash Flows for Operating Activities:
Net Loss                                   $      (36,082)      $      (36,453)
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
    Depreciation and Amortization                     -0-                4,742
Changes in Assets and Liabilities:
  (Increase) Decrease in:
    Prepaid Expenses and Deposits                     173                   38
  (Decrease) Increase in:
    Accounts Payable                               (3,635)             (16,771)
    Accounts Payable - Related Entities             2,700                 (504)
    Accrued Expenses and Taxes                     10,692              (20,399)
                                              -------------       -------------
        Total Adjustments                           9,930              (32,894)
                                              -------------       -------------

Net Cash (Used for) Operations                    (26,152)             (69,347)


Cash (Used for) Investing Activities
  Marketable Securities Available for Sale        (39,694)                 -0-
                                              -------------       -------------
                                                  (39,694)                 -0-

Cash Flows from Financing Activities:
  Proceeds (Payments) on Notes Payable-Related  
         Entity                                       -0-               (5,953)
  Proceeds on Notes Payable - Bank                    -0-              325,000
  Proceeds (Payments) on Notes Payable             65,900             (250,499)
                                              -------------        ------------
    Net Cash Provided by Financing Activities      65,900               68,548
                                              -------------        ------------
Net Increase (Decrease) in Cash                        54                 (799)

Cash and Cash Equivalents:
  At Beginning of Period                               78                  811
                                               ------------         -----------
  At End of Period                            $       132          $        12
                                               ============         ===========
Supplemental Disclosures of Cash Flow Information:
  Interest Paid                               $    21,810          $    50,278
                                               ============         ===========





                       See notes to financial statements.

                                        5

<PAGE>

                                LBO CAPITAL CORP
                    NOTES TO FINANCIAL STATEMENTS (Unaudited)

NOTE 1.  INTERIM FINANCIAL STATEMENTS

     The accompanying  financial statements of LBO Capital Corp. ("the Company")
have been  prepared by the Company  without  audit by  independent  accountants,
except  for the  balance  sheet at  December  31,  1995.  In the  opinion of the
Company's management, the financial statements reflect all adjustments necessary
to present  fairly the  Company's  financial  position at September 30, 1996 and
December 31,  1995,  and the results of  operations  and cash flows for the nine
month periods ended September 30, 1996 and 1995.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  These unaudited financial  statements should be
read in conjunction with the financial  statements and notes thereto included in
the Company's  Annual Report 10-K.  The results for the nine month periods ended
September 30, 1996 are not necessarily indicative of future financial results.

NOTE 2.  INVESTMENTS.

     As previously  reported,  the Company had acquired  1,880,000 shares of the
restricted  common  stock of Ajay  Sports,  Inc.  ("Ajay")  in April  1989,  for
$182,000.  Subsequently,  this was reduced to 1,480,000  shares.  As a result of
recording the Company's equity in net losses of Ajay, the carrying value of this
investment is zero. The Company also obtained  200,000  warrants of Ajay at that
time.  Each  warrant  entitles  the Company to purchase one share of Ajay common
stock at $.34. These warrants expire June 13, 1999.


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

  (a) Material Changes in Financial Condition

     Working  capital  decreased  by  $55,012  in the nine  month  period  ended
September  30,  1996 due to the net loss of $36,082  for the nine  months  ended
September 30, 1996 and loss on the fair market value of stock of $18,930.
 
     On September  22, 1996,  the note payable of $325,000 to Michigan  National
Bank matured.  Michigan  National Bank extended the maturity date until November
22, 1996.

                                        6
<PAGE>


         (b) Results of Operations

     Registrant's  operations  for the nine  months  ended  September  30,  1996
resulted  in a loss of  $36,082.  This was due  mainly to  interest  expense  of
$32,502.

Liquidity and Capital Resources

     The  Registrant is currently  meeting its cash needs from  borrowing from a
company.  There is no assurance  that this will  continue in future  years.  The
Registrant's  principal asset is its investment in marketable securities of Ajay
which it has held for over seven years. These shares are carried at a zero value
on the  Registrant's  Balance  Sheet as a result of recording  the  Registrant's
equity in net losses of Ajay.  The market value of Ajay stock on  September  30,
1996 as listed in the  NASDAQ  Small-Cap  Issues  was  $0.3750  per  share.  The
approximate  market  value of the  Registrant's  1,480,000  shares  and  200,000
warrants were $562,000 on that date. The  Registrant  also owns 15,341 shares of
Enercorp, Inc. common stock. These shares are carried at their fair market value
of $1.8750 per share at September 30, 1996,  which is $19,632 below cost.  These
shares could be liquidated to meet cash flow needs if necessary.

Part II.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

     Pursuant  to the  provisions  of Reg. @ 210.3-09  of  Regulation  S-X,  the
Registrant is required to file separate financial statements of its equity basis
investee  Ajay,  which  financial  statements  for  September 30, 1996 are filed
herewith.

(b)      Reports on Form 8-K.

         None


                                        7

<PAGE>

                                LBO CAPITAL CORP.

                                    FORM 10-Q

                      For the Quarter Ended September, 1996


                                 Signature Page




                                   SIGNATURES

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

                                                 LBO CAPITAL CORP.
                                                   (Registrant)


                                              By  s\Thomas W. Itin          
                                                 ------------------------------
                                                 Thomas W. Itin, President,
                                                 Chairman of Board of Directors
 


                                              By  s\Frances B. Bucholz      
                                                  -----------------------------
                                                 Frances B. Bucholz, Controller


         Date signed:  November 13, 1996

<PAGE>


Item 1.           FINANCIAL STATEMENTS

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

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

            Total current assets                                              13,951                         14,934

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

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

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

            Total current liabilities                                          9,108                          8,611

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

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

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



                                        2

<PAGE>

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

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

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

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

            Gross profit                                              708          511                 3,493        2,518

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

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

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

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

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

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

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

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


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

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



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

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


                                                             3

<PAGE>

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

                                                                                               Nine Months
                                                                                               Ended September 30,
                                                                                               1996            1995

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

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

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

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

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

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

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

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



                                        4

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  BASIS OF PRESENTATION

The  condensed  consolidated  financial  statements  included  herein  have been
prepared by Ajay Sports,  Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission.  In the opinion
of the Company, the financial statements reflect all adjustments,  which consist
only of normal recurring adjustments,  necessary to present fairly the financial
position of the Company at September 30, 1996 and the results of operations  for
the three-month and nine-month periods ended September 30, 1996 and 1995 and the
cash flows for the same nine-month periods.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with  interim  financial  statements.  However,  the Company  believes  that the
disclosures  made in the  condensed  financial  statements  included  herein are
adequate to make the information presented not misleading.  It is suggested that
these condensed  financial  statements be read in conjunction with the financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the fiscal year ended December 31, 1995.

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


Note 2.  INVENTORIES

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


                                                 September 30,                        December 31,
                                                          1996                                1995

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

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

                                        5

<PAGE>

Note 3.           LIQUIDITY

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


Note 4.           BUSINESS SEGMENT REPORTING

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

                                        6

<PAGE>


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


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

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

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

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

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

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


                                        7

<PAGE>

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


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

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

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

                                        8

<PAGE>


PART II.  OTHER INFORMATION



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


Item 6.        EXHIBITS AND REPORTS ON FORM 8-K

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

               b)  Exhibit #27:   Financial Data Schedule


                                        9
<PAGE>