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, 1997                                    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)


                                (248) 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 11, 1997 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, 1997

                                      INDEX
                                                                            Page
                                                                          Number

Part I.  FINANCIAL INFORMATION

Item 1.     Financial Statements.

            Balance Sheets
               September 30, 1997 (Unaudited) and December 31, 1996          3

            Statements of Operations (Unaudited)
               Nine months ended September 30, 1997 and 1996                 4

            Statements of Cash Flows (Unaudited)
               Nine months ended September 30, 1997 and 1996                 5

            Notes to Financial Statements (Unaudited)                        6

Item 2.     Management's  Discussion  and  Analysis  of  Financial
            Statements (Unaudited)                                         6-7

PART II.    OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                                 7

            Financial Statements of Ajay Sports, Inc.
            as of September 30, 1997                                       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.
<TABLE>
<CAPTION>

                                   LBO CAPITAL CORP.
                                     BALANCE SHEETS


                                                          (Unaudited)
                                                          September 30,          December 31,
                                                             1997                   1996
                                                          --------------         --------------
<S>                                                       <C>                    <C>  

                                         ASSETS
Current Assets:
    Cash and Equivalents                                  $          87          $          78
    Marketable Securities - Available for Sale                   25,384                 28,765
                                                           ------------           ------------

      Total Current Assets                                       25,472                 28,843

Equipment, Net of Accumulated Depreciation
    of $8,639 and $8,639 at September 30, 1997 and
    December 31, 1996 respectively                                  -0-                    -0-

Other Assets
    Investments                                                     -0-                    -0-
                                                           ------------           ------------

TOTAL ASSETS                                              $      25,472          $      28,843
                                                           ============           ============


                         LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable                                          $         731          $       3,703
    Accounts Payable - Related Entities                             460                    960
    Notes Payable - Other                                       506,641                501,791
    Accrued Expenses and Taxes                                   60,064                 20,741
                                                           ------------           ------------
      Total Current Liabilities                                 567,896                527,195

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 Securities      (23,012)               (19,632)
    Accumulated Deficit                                      (1,143,717)            (1,103,024)
                                                            ------------           ------------

      Total Stockholders' Deficit                              (542,425)              (498,352)
                                                            ------------           ------------

TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT                 $      25,472          $      28,843
                                                           ============           ============


                       See notes to financial statements.
</TABLE>

                                           3


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.
<TABLE>
<CAPTION>

                                                       LBO CAPITAL CORP.
                                                   STATEMENTS OF OPERATIONS



                                              For the Three Months Ended September 30,    For the Nine Months Ended September 30,
                                                   1997                    1996               1997                  1996
                                              --------------        -----------------   ---------------        -------------
<S>                                            <C>                   <C>                 <C>                   <C>    



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

EXPENSES:
  Professional Services                                 223                     224               160                   143
  Management Fees                                       670                     750             2,300                 2,700
  Interest Expense                                   13,399                  11,437            39,324                32,502
  Recovery of Bad Debt                                    0                      -0-             (810)                   -0-
  Other Expenses                                         75                      46              (283)                  737
                                                 -----------           -------------       -----------         -------------

          Total Expenses                             14,367                  12,457            40,692                36,082
                                                 -----------           -------------       -----------         -------------

Income (Loss) Before Income Taxes                   (14,367)                (12,457)          (40,692)              (36,082)

Income Tax Expense (Benefit):
   Currently Payable                                     -0-                     -0-               -0-                   -0-
                                                 -----------           -------------       -----------         -------------

    Net Income (Loss)                          $    (14,367)         $      (12,457)     $    (40,692)       $      (36,082)
                                                 ===========           =============       ===========         =============

    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
                                                 ===========           =============       ===========         =============






                       See notes to financial statements.

</TABLE>
                                        4

<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.
<TABLE>
<CAPTION>

                                   LBO CAPITAL CORP.
                                       CASH FLOWS


                                                       (Unaudited)
                                                       September 30,             September 30,
                                                          1997                     1996
                                                     ---------------           --------------
<S>                                                    <C>                      <C>    

Cash Flows for Operating Activities:
Net Loss                                               $    (40,692)            $    (36,082)
Adjustments to Reconcile Net Income to Net
  Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
 (Increase) Decrease in:
   Prepaid Expenses and Deposits                                 -0-                     173
  (Decrease) Increase in:
    Accounts Payable                                         (2,973)                  (3,635)
    Accounts Payable - Related Entities                        (500)                   2,700
    Accrued Expenses and Taxes                               39,324                   10,692
                                                         -----------              -----------

        Total Adjustments                                    35,851                    9,930
                                                         -----------              -----------


Net Cash (Used for) Operations                               (4,841)                 (26,152)


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

Cash Flows from Financing Activities:
  Proceeds on Notes Payable                                   4,850                   65,900
                                                         -----------              -----------

            Net Cash Provided by Financing Activities         4,850                   65,900
                                                         -----------              -----------

Net Increase (Decrease) in Cash                                   9                       54

Cash and Cash Equivalents:
  At Beginning of Period                                         78                       78
                                                         -----------              -----------

  At End of Period                                   $           87            $         132
                                                         ===========              ===========

Supplemental Disclosures of Cash Flow Information:
  Interest Paid                                      $           -0-           $      21,810
                                                         ===========              ===========





</TABLE>

                       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,  1996.  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, 1997 and
December 31,  1996,  and the results of  operations  and cash flows for the nine
month periods ended September 30, 1997 and 1996.

      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,  1997 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 $44,072  in the  nine-month  period  ended
September  30, 1997 due to the net loss of $40,692 and an decrease in unrealized
gain on investments of $3,380 for the nine months ended September 30, 1997.

                                       6
<PAGE>

      (b) Results of Operations
          ---------------------

      Registrant's  operations  for the nine  months  ended  September  30, 1997
resulted  in a loss of  $40,692.  This was due  mainly to  interest  expense  of
$39,324.

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

      The  Registrant is currently  meeting its cash needs from borrowing from a
company.  There is no assurance  that this will be available in future  years.  
The Registrant's principal asset is its investment in marketable securities of 
Ajay, which it has held for over eight 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, 1997 as listed in the  NASDAQ  Small-Cap  Issues  was  $0.1880  
per  share.  The approximate  market value of the  Registrant's  1,480,000 
shares was $277,500 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 $1.50 per share at September  30,  1997,  which  is  $25,384  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. ss.  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, 1997 are filed
herewith.

(b)   Reports on Form 8-K.

      None



                                       7
<PAGE>




                                LBO CAPITAL CORP.

                                    FORM 10-Q

                   For the Quarter Ended September 30, 1997


                                 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



      Date signed:  November 13, 1997








                                       8
<PAGE>
Item 1.      FINANCIAL STATEMENTS

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

<CAPTION>

                                                                                     September 30, 1997          December 31, 
                                                                                         (Unaudited)                     1996


<S>                                                                                <C>                          <C> 

ASSETS
Current assets:
     Cash and cash equivalents                                                            $      118            $          64
     Trade accounts receivable, net                                                            6,004                    5,274
     Inventories                                                                               6,999                    7,957
     Prepaid expenses and other current assets                                                   780                      362
     Deferred tax benefit                                                                        363                      363
                                                                                              ------                   ------    
                    Total current assets                                                      14,264                   14,020

Fixed assets, net                                                                              1,791                    1,822
Other assets                                                                                     226                      320
Deferred tax benefit                                                                             756                      756
Goodwill                                                                                       1,676                    1,709
                                                                                            --------                  -------       
                   Total assets                                                            $  18,713             $     18,627
                                                                                           =========                =========      

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Notes payable to affiliates                                                          $   1,108             $        885
      Notes payable to bank                                                                    2,340                    6,104
      Current portion of capital lease                                                             6                        9
      Accounts payable                                                                         3,508                    3,107
      Accrued expenses                                                                           828                      567
                                                                                            --------                  -------     
                    Total current liabilities                                                  7,790                   10,672

Notes payable to affiliates - long term                                                        2,828                        -
Notes payable to banks - long term                                                             6,460                    5,196 
Long term portion of capital lease                                                                14                       17

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 shares
            outstanding at stated value                                                        2,962                    2,962
      Common stock, $.01 par value 100,000,000 shares authorized, 23,274,039
            shares outstanding                                                                   233                      233
Additional paid-in capital                                                                     9,313                    9,313
Accumulated deficit                                                                          (12,137)                 (11,016)
                                                                                             -------                  --------     
            Total stockholders' equity                                                         1,621                    2,742
                                                                                             -------                  --------
            Total liabilities and stockholders' equity                                     $  18,713              $    18,627
                                                                                             =======                  ========    















                                                                                           1




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


<CAPTION>
                                                                   Three Months                                 Nine  Months
                                                                Ended September 30,                           Ended September 30,
                                                           1997                  1996                       1997              1996

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

Net sales                                           $      6,854           $     4,730               $     24,039      $     19,317

Cost of sales                                              6,248                 4,022                     20,356            15,824
                                                          ------                ------                    -------            -------
      Gross profit                                           606                   708                      3,683             3,493

Selling, general and                                       1,248                 1,253                      3,710             3,711
   administrative expenses
                                                          ------                ------                    -------            -------
      Operating income                                      (642)                 (545)                       (27)             (218)

Non-operating expense:
      Interest expense, net                                  330                   263                       1046               840
      Other, net                                              24                    14                         44                19
                                                          ------                ------                    -------            -------
      Total non-operating expense                            354                   277                       1090               859
                                                          ------                ------                    -------            -------
Income (loss) before income taxes                           (996)                 (822)                    (1,117)           (1,077)

Income tax expense (benefit)                                   -                  (280)                          -             (360)
                                                          ------                ------                    -------            -------
Net income (loss)                                   $       (996)          $      (542)              $     (1,117)       $     (717)
                                                          =======               =======                    =======           =======
Income (loss) per common share outstanding*         $       (.05)          $      (.03)              $       (.06)       $     (.04)
                                                          =======               =======                    =======           =======
Income (loss) per common share & equivalents        $       (.05)          $      (.03)              $       (.06)       $     (.04)
outstanding**
                                                          =======               =======                    =======           =======
Weighted average common shares outstanding                 23,274                23,257                     23,274           23,264
                                                          =======               =======                    =======           =======




*  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.




















                                                                                      2
</TABLE>

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



<CAPTION>
                                                                                                          Nine   Months
                                                                                                      Ended  September 30,
                                                                                                 1997                         1996

<S>                                                                                  <C>                           <C>            


Cash flows from operating activities:
     Net income (loss)                                                                 $       (1,117)               $        (717)
      Adjustments to reconcile net cash flows from
      operating activities:
                  Depreciation and amortization                                                   292                          286
      Change in assets [(increase)/decrease] and
       liabilities [increase/(decrease)]:
                   Trade accounts receivable, net                                                (730)                         592
                    Inventories                                                                   958                          703
                    Prepaid expenses and other current assets                                    (418)                        (192)
                    Other assets                                                                   86                         (162)
                    Deferred tax benefits                                                           -                         (360)
                    Accounts payable                                                              401                          356
                    Accrued expenses                                                              333                          (19)
                    Goodwill                                                                        -                         (300)
                                                                                             ---------                    ---------
                    Net cash used in
                    operating activities                                                         (195)                         187
                                                                                             ---------                    ---------
Cash flows from investing activities:
       Acquisitions of property, plant, equipment                                                (220)                        (194)
      Dispositions  of  fixed assets                                                                 -                         (64)
                                                                                             ---------                    ---------
                     Net cash used in
                     investing activities                                                        (220)                        (258)
                                                                                             ---------                    ---------
Cash flows from financing activities:
        Net change in bank loans                                                               (2,500)                        (396)
        Net change in notes payable to affiliates                                               3,051                          560
        Preferred stock conversion                                                                  -                           12
        Dividends                                                                                 (82)                        (228)
                                                                                             ---------                    ---------
                      Net cash provided by
                      financing activities                                                        469                          (52)
                                                                                             ---------                    ---------
Net increase in cash and cash equivalents                                                          54                         (123)
Cash and cash equivalents at beginning of period                                                   64                          362
                                                                                             ---------                    ---------
Cash and cash equivalents at end of period                                             $          118                  $       239
                                                                                             =========                    =========
Supplemental disclosures of cash flow information:
       Cash paid for interest                                                          $          880                  $       881
                                                                                             =========                    =========
       Cash paid for income tax                                                                     -                            -
                                                                                             =========                    =========













                                                                                   3
</TABLE>
<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, 1997 and the results of operations  for
the three-month and nine-month periods ended September 30, 1997 and 1996 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, 1996.

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.

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

The interim period results are not  necessarily  indicative of results which may
be  expected  for any other  interim  or for the full  year.  Certain  costs are
estimated for the full year and  allocated to interim  periods based on activity
associated with the interim period.
Accordingly, such costs are subject to year end adjustment.

Note 2.  INVENTORIES

The major classes of inventories (rounded to thousands) are as follows:


                           September 30,                         December 31,
                                   1997                                 1996
                       -------------------                   ------------------
Raw Materials                    $2,042                               $4,153
Work in Process                     825                                  995
Finished Goods                    4,132                                2,809
                                  -----                                -----
                                 $6,999                              $ 7,957
                                  =====                                =====


                                      4
<PAGE>

Note 3.  DEBT


On July 11, 1997,  the Company  refinanced  its bank debt through a  $34,088,000
three-year  revolving  credit and term loan  agreement  with a new  lender  (the
"Loan").  This  Loan is a joint  and  several  obligation  of the  Company  with
Williams Controls, Inc. ("Williams"),  under which Williams is the agent for all
of the borrowers. The combined Loan facility consists of a $26,000,000 revolving
loan facility (the "Revolver"),  a $2,658,000 real estate loan (the "Real Estate
Loan"),  a $4,  430,000  machinery  and  equipment  loan ("Term Loan I"),  and a
$1,000,000 term loan II ("Term Loan II").

At the closing  date,  the Company  borrowed  $6,825,000  under the Revolver and
$566,000 under Term Loan I. At the date of closing, Williams borrowed a total of
$17,141,000,  consisting of $9,619,000 under the Revolver,  $2,658,000 under the
Real Estate Loan,  $3,864,000  under Term Loan I, and $1,000,000 under Term Loan
II. The proceeds from the Company's and Williams' borrowings under the Loan were
used to repay the  Company's  and Williams'  loans from their  previous  lender,
except for  $2,340,000  which  represents  a bridge  loan to the  Company by the
previous lender. This bridge loan is to be repaid from the sale of assets and/or
excess cash flow and is guaranteed up to $1,000,000 by the Company's President.

Under the Revolver,  the Company and Williams can borrow up to $26,000,000 based
upon a borrowing base  availability  calculated  using specified  percentages of
eligible accounts  receivable and inventory.  The Revolver bears interest at the
Bank's prime rate plus 0.5%.  The Real Estate Loan and Term Loan I bear interest
at the  Bank's  prime  rate plus  0.75%.  At the  Agent's  option,  funds may be
borrowed  under the  Revolver,  the Real  Estate Loan and the Term Loan I at the
London InterBank Offering Rate ("Libor") plus 2.75%, 3% and 3% respectively. The
Revolver,  Real  Estate  Loan and Term  Loan I mature  on July 11,  2000 and are
secured by substantially all of the assets of the Company and Williams. The Real
Estate Loan is being amortized over 20 years and the machinery and Term Loan are
being amortized over seven years with all remaining principal outstanding due on
July  11,  2000.  At July  11,  1997,  after  the  Loan  closing,  approximately
$1,545,000 was available for borrowing  under the New Loan. Term Loan II matures
on June 1, 1999 with principal payments based upon an amortization  period of 24
months plus additional  principal payments equal to any excess proceeds from the
sale of one of Williams'  subsidiaries after repayment of any indebtedness under
the  Revolver  borrowing  due from  the  Williams  subsidiary  being  sold  plus
principal   payments  equal  to  50%  of  the  Company's  and  Williams'  annual
consolidated  excess cash flow as defined.  The Loan agreement restricts payment
of any  dividends  by the  Company,  requires  the Company  and  Williams in the
aggregate to maintain  minimum working  capital of $25,000,000  exclusive of the
Revolver and maintain minimum  tangible net worth of $11,000,000.  The Loan also
restricts  additional  indebtedness  and common stock  repurchases and restricts
combined  Company  and  Williams'  annual  capital  expenditures  and  increased
operating  lease  obligations  to  $2,500,000  and $600,000,  respectively.  The
Company is in compliance with the covenants of the Loan Agreement as of 9/30/97.
The Loan agreement imposes a prepayment penalty of 3%-5%, which is waived if the
Loan is repaid with  proceeds from the sale of assets or equity or is refinanced
with an affiliate of the Bank.


                                        5

<PAGE>



Note 3.  DEBT (Cont'd)


Williams  has made  loans and  provided  capital  to the  Company  to assist the
Company in meeting  its  financing  requirements.  In  addition  to  $560,000 at
closing,  the Company  borrowed  $2,268,000  from Williams in order to close the
loan.  The Company agreed to grant  Williams a security  interest  junior to the
bank's security interest.  The  characterization of the Company's  obligation to
Williams as equity or debt has not yet been determined. The Company and Williams
have, however,  agreed that this is a  long-term  investment.  Accordingly,  the
obligation is reported as a long-term liability. The Company, however, continues
to rely on extended  vendor terms and affiliate  financing to meet its financing
needs.

Ajay continues to focus on obtaining additional financing availability.


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, 1997 (unaudited) are as follows (in thousands):

<TABLE>

                        Quarter Ended September 30, 1997
<CAPTION>
                              Furniture                Golf          Corporate     Consolidated
                             ----------             --------         ---------     ------------
<S>                          <C>                    <C>              <C>           <C>    

Net Sales                        $  403              $6,451          $        -     $   6,854
Operating Profit/(Loss)            (340)               (174)               (128)         (642)
Total Assets                      2,365              16,348                   -        18,713
Depreciation/Amortization            31                  68                   -            99
Capital Expenditures                 47                  74                   -           121

                        Nine Months Ended September 30, 1997
                                Furniture                Golf          Corporate    Consolidated
                               ----------            ---------         ---------    ------------  
Net Sales                         $3,764             $20,275           $       -     $ 24,039
Operating Profit/(Loss)              103                 107               (237)          (27)
Total Assets                       2,365              16,348                   -       18,713
Depreciation/Amortization             67                 225                   -          292
Capital Expenditures                 102                 118                   -          220
</TABLE>


Note 5.  DIVIDENDS

Dividends on Series C Convertible Preferred Stock have not been declared for the
first three quarters of 1997 due to unavailability of funds.  Series C dividends
are  permitted to be paid under the new loan  agreement  when  sufficient  funds
become available.





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