<PAGE>

                       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, 1995                                                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 13, 1995 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, 1995

                                      INDEX
                                                                           Page
                                                                          Number

Part I.  FINANCIAL INFORMATION

Item 1.      Financial Statements.

             Balance Sheets
                September 30, 1995 (Unaudited) and December 31, 1994          3

             Statements of Operations (Unaudited)
                Three and Nine months ended September 30, 1995 and 1994       4

             Statements of Cash Flows (Unaudited)
                Nine months ended September 30, 1995 and 1994                 5

             Notes to Financial Statements (Unaudited)                        6

Item 2.      Management's Discussion and Analysis of Financial
             Statements (Unaudited)                                          7-8

PART II.     OTHER INFORMATION

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

             Financial Statements of Ajay Sports, Inc.
             as of September 30, 1995                                        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,
                                              1995               1994
                                          ------------       ------------
ASSETS
Current Assets:
  Cash                                       $     12          $     811
  Marketable securities available for sale      9,500              8,702
  Prepaid expenses                                 13                 51
                                                     
    Total Current Assets                        9,525              9,564
                                            ---------          ---------
Equipment, net of accumulated depreciation
  of $86,137 and $81,395 respectively           1,581              6,323

Other Assets:
  Investment in unconsolidated entity             -0-                -0-
                                            ---------          ---------
TOTAL ASSETS                                 $ 11,106          $  15,887
                                            =========          =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
  Accounts payable                           $ 17,491          $  34,262
  Accounts payable related entities             1,853              2,033
  Note payable affiliated                      91,601            342,100
  Note payable bank                           325,000                -0-
  Notes payable related entity                    -0-              5,953
  Accrued expenses and taxes                    2,035             22,758
                                            ---------          ---------
    Total Current Liabilities                 437,980            407,106

Stockholders' Deficit
  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
  Accumulated deficit                      (1,051,976)        (1.015.523)
  Unrealized gain in marketable securities        798                -0-
                                            ---------          ---------
    Total Stockholders' Deficit              (426,874)          (391,219)

TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT    $ 11,106          $  15,887
                                            =========          =========

                       See notes to financial statements.

                                       3
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.

                               LBO CAPITAL CORP.
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                   For the Three Months Ended September 30,     For the Nine Months Ended September 30,
                                            1995               1994                      1995            1994
                                         ----------        ----------                 ----------      ----------

<S>                                      <C>               <C>                        <C>           <C>
REVENUES:                                $      -0-        $      -0-                 $      -0-      $      -0-

EXPENSES:
     Professional services                   (3,217)              196                     (2,806)          9,862
     Management fees                            923               420                      4,013           4,925
     Depreciation                             1,581             4,113                      4,742          12,340
     Interest expense                        10,926             7,076                     29,555          20,635
     Other expenses                             249               107                        948           1,156
                                         ----------        ----------                 ----------      ----------
         Total Expenses                      10,462            11,912                     36,453          48,918
                                         ----------        ----------                 ----------      ----------

OTHER INCOME AND EXPENSES:
     Gain on disposal of assets                 -0-               -0-                        -0-           6,125
                                         ----------        ----------                 ----------      ----------
Loss before income taxes                    (10,462)          (11,912)                   (36,453)        (42,793)

Income tax expense (benefit):
     Currently payable                          -0-               -0-                        -0-             -0-
                                         ----------        ----------                 ----------      ----------
      Net Loss                           $  (10,462)       $  (11,912)                $  (36,453)     $  (42,793)
                                         ==========        ==========                 ==========      ==========
       Net 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>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements.

                               LBO CAPITAL CORP.
                            STATEMENTS OF CASH FLOWS


                                               (Unaudited)
                                               September 30,       September 30,
                                                   1995                1994
                                              ------------          ------------
Cash Flows for Operating Activities:
Net loss                                         $  (36,453)         $  (42,793)
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Depreciation                                      4,742              12,340
    Gain on disposal of fixed assets                    -0-              (6,125)
Changes in assets and liabilities:
  (Increase) decrease in:
    Receivables                                         -0-               9,625
    Prepaid expenses and deposits                        38                  32
  (Decrease) increase in:
    Accounts payable                                (16,771)             (2,893)
    Accounts payable related entities                  (504)             (1,025)
    Accrued expenses                                (20,399)             14,144
                                                 ----------          ----------
        Total Adjustments                           (32,894)             26,098
                                                 ----------          ----------

Net Cash (Used for) Operations                      (69,347)            (16,695)


Cash Provided by Investing Activities
   Proceeds from disposal of fixed assets               -0-               6,125
                                                 ----------          ----------
                                                        -0-               6,125
                                                 ----------          ----------
Cash Flows from Financing Activities:
  Proceeds (Payments) note payable relate            (5,953)              8,600
  Proceeds (Payments) note payable bank             325,000            (342,066)
  Proceeds (Payments) note payable affiliated      (250,499)            341,000
                                                 ----------          ----------
         Net Cash Provided by Financing Activities   68,548               7,534

Net Decrease in Cash                                   (799)             (3,036)

Cash and Cash Equivalents:
  At Beginning of Period                                811              11,912
                                                 ----------          ----------
  At End of Period                               $       12          $    8,876
                                                 ==========          ==========
Supplemental disclosures of cash flow information:
  Interest paid                                  $   50,278          $    6,492
                                                 ==========          ==========


                       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, 1994. 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,
1995 and December 31, 1994, and the results of operations and cash flows for the
three and nine month periods ended September 30, 1995 and 1994.

         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
period  ended  September  30,  1995 are not  necessarily  indicative  of  future
financial results.

         NOTE 2.  MARKETABLE SECURITIES AVAILABLE FOR SALE

         The  Registrant  owns 200,000  shares of Enercorp,  Inc.  common stock.
These shares are held for sale although the Registrant has no immediate plans to
sell them.  These shares are carried at the average  bid/ask  price as quoted on
NASDAQ's  "pink sheet"  market on  September  29, 1995 of $.0475 per share for a
total of $9,500.

         NOTE 3.  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.  The market value of Ajay
stock on  September  29,  1995 as  listed in the  NASDAQ  Small-Cap  Issues  was
$0.59375 per share. The approximate  market value of the Registrant's  1,480,000
shares was $878,750 on that date.  The 200,000 Ajay warrants that the Registrant
owns with an exercise  price of $.34 per share have a value of $50,750 in excess
of the exercise  price.The  Chairman and President of the Registrant is also the
Chairman and President of Ajay.




                                        6

<PAGE>

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

         (a) Material Changes in Financial Condition

         Working  capital  decreased by ($30,913) in the nine month period ended
September  30, 1995.  This was due to the net loss of ($36,453) for this period,
less depreciation expense of $4,742 and unrealized gain on investments of $798.

         (b) Results of Operations

         Registrant's  operations  for the nine months ended  September 30, 1995
resulted in a loss of ($36,453).  This is a decrease  from a ($42,793)  loss for
the nine months ended  September  30, 1994.  The loss was due mainly to interest
expense  of  $29,555.   Professional   and   management   fees  have   decreased
significantly  from  $14,787 to $1,207 for the nine months ended  September  30,
1994  and 1995  respectively  due in part to a  settlement  that  resulted  in a
partial reversal of a prior year's accrual.  Depreciation  expense has decreased
from $12,340 to $4,742 for the nine months ended September 30, 1994 and 1995.

         On September 21, 1995, the Registrant  borrowed  $325,000 from Michigan
National  Bank to reduce the debt to  Dearborn  Wheels,  Inc.  from  $415,089 to
$91,601. The loan is secured by the Ajay Sports, Inc. common stock shares.

         The  Registrant's  major  investment  is in Ajay  Sports,  Inc.,  whose
financial  statements are attached.  Ajay Sports, Inc., through its wholly owned
subsidiaries,  Ajay  Leisure  Products,  Palm  Springs  Golf and  Leisure  Life,
manufactures and distributes  leisuretime products,  including golf bags, clubs,
carts and accessories,  billiard  equipment and casual living furniture.  Ajay's
net sales for the nine months  ended  September  30, 1995 were  $13,376,000,  an
increase of 25.8%  compared to the  $10,630,000  reported for the same period of
1994. Operating income for the first nine months of 1995 was $400,000,  compared
to a net operating loss of $923,000 for the year ago period.

         The Registrant continues to investigate acquisition  opportunities with
the goal of acquiring one or more additional businesses.  The Registrant has not
incurred  significant  expenses related to these  investigations.  No additional
candidates have been identified at this time.

Liquidity and Capital Resources

         Cash decreased by $799 from  December,  1994 to September 30, 1995. The
Registrant is currently meeting its cash needs from borrowing from an affiliated
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 four years.  These shares are carried at a zero value
on the

                                        7

<PAGE>


Registrant's  Balance Sheet as a result of recording the Registrant's  equity in
net losses of Ajay.  The  Enercorp,  Inc.  shares  along with the Ajay  shares &
warrants are potential sources of funds.



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, 1995 are filed
herewith.

(b)      Reports on Form 8-K.

         None


                                        8

<PAGE>

                                LBO CAPITAL CORP.

                                    FORM 10-Q

                    For the Quarter Ended September 30, 1995


                                 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


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


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


Date signed: November 13, 1995

<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

                                   MARK ONE:

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

                For the quarterly period ended September 30, 1995

                                       OR

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

                  For the transition period from _____ to _____

                           Commission File No. 0-18204

                                AJAY SPORTS, INC.
             (Exact name of Registrant as specified in its charter)

            Delaware                                            39-1644025
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)

               1501 E. Wisconsin Street, Delavan, Wisconsin 53115
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (414) 728-5521
              (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 for such  shorter  period that the  Registrant  was
required  to file  such  report),  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes X No_____

Number of shares of common stock outstanding at November 10, 1995: 22,286,873.

<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                       AJAY SPORTS, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                             September 30, 1995     December 31, 1994
                                                                                 (Unaudited)
                                                                             ------------------     -----------------
ASSETS
<S>                                                                               <C>                   <C> 
 Current assets:
   Cash and cash equivalents                                                      $    153              $    105
   Trade accounts receivable, net                                                    3,623                 1,700
   Inventories                                                                       5,256                 5,786
   Prepaid expenses and other current assets                                           373                   211
                                                                                  --------              --------
Total current assets                                                                 9,405                 7,802

Fixed assets, net                                                                    1,307                 1,357

Other Investments                                                                       74                   ---
Other assets                                                                           196                   206
                                                                                  --------              --------
Total assets                                                                       $10,982              $  9,365
                                                                                  ========              ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Note payable to affiliate                                                      $    ---              $  5,378
   Note payable to bank                                                              1,238                    12
   Accounts payable                                                                  1,141                 1,337
   Accrued expenses                                                                    491                   490
                                                                                  --------              --------
Total current liabilities                                                            2,870                 7,209

Note payable  - long term                                                            3,600                   121
Stockholders' equity:
   Preferred stock, $.01 par value, 10,000,000 shares authorized
           Series B, 12,500 shares outstanding at liquidation value                  1.250                 1,250
           Series C, 315,290 shares outstanding, at liquidation value                3,153        
   Common stock, $.01 par value, 100,000,000 shares authorized,
           22,686,873 and 22,533,637 shares outstanding, respectively                  227                   225
   Additional paid-in capital                                                        8,517                 8,961
   Accumulated deficit                                                              (8,635)               (8,401)
                                                                                  --------              --------
           Total stockholders' equity                                                4,512                 2,035
                                                                                  --------              --------
Total liabilities and stockholders' equity                                        $ 10,982              $  9,365
                                                                                  ========              ========
</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,
                                      1995        1994        1995        1994
                                    --------    --------    --------    --------
<S>                                 <C>         <C>         <C>         <C>        
Net sales                           $  3,437    $  2,877    $ 13,376    $ 10,630
Cost of sales                          2,926       2,896      10,858       9,587
                                    --------    --------    --------    --------
Gross profit                             511         (19)      2,518       1,043

Selling, general and
   Administrative expenses               670         688       2,118       1,966
                                    --------    --------    --------    --------

Operating income (loss)                 (159)       (707)        400        (923)

Non-operating (income) expense:
   Interest expense, net                 167         149         564         462
   Other, net                             14           8          12         306
                                    --------    --------    --------    --------
   Total non-operating expense           181         157         576         768
                                    --------    --------    --------    --------
Income (loss) before income taxes       (340)       (864)       (176)     (1,691)

Income taxes                            --          --          --          --

Net income (loss)                   $   (340)   $   (864)   $   (176)   $ (1,691)
                                    ========    ========    ========    ========

Primary earnings per share          $   (.01)   $   (.10)   $   (.01)   $   (.21)
                                    ========    ========    ========    ========

Fully diluted earnings per share$       (.01)   $   (.10)   $   (.01)   $   (.21)
                                    ========    ========    ========    ========
</TABLE>

                                        3

<PAGE>



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

                                                          Nine Months Ended September 30,
                                                                  1995        1994
                                                                --------    -------
<S>                                                              <C>        <C>
Cash flows from operating activities:
   Net income (loss)                                             $  (176)   $(1,691)
   Adjustments to reconcile to net cash
   provided by operating activities:
           Loss on sale of assets                                      1        162
           Depreciation and amortization                             142        102
   Change in assets [(increase)/decrease] and
   liabilities [increase/(decrease)]:
           Trade accounts receivable, net                         (1,923)      (104)
           Inventories                                               530      1,680
           Prepaid expenses and other current assets                (162)       (70)
           Investments                                               (74)
           Other assets                                              (10)       147
           Accounts payable                                         (196)      (996)
           Accrued expenses                                            1        (81)
           Due to affiliates                                        --         (228)
                                                                 -------    -------
           Net cash provided by (used in) operating activities    (1,867)    (1,079)
                                                                 -------    -------
Cash flows from investing activities:
   Purchase of property plant and equipment                          (99)       (81)
   Disposition of fixed assets                                         6          4
   Proceeds from sale of investment                                 --           86
                                                                 -------    -------
           Net cash provided by (used in) investing activities       (93)         9
                                                                 -------    -------
Cash flows from financing activities:
   Net change in bank loan                                         4,705     (5,022)
   Net change in note payable to affiliate                        (5,370)     6,699
   Issuance of preferred shares                                    2,731       --
   Cash acquired in acquisition via non-cash financing              --            2
   Preferred dividends                                               (58)
                                                                 -------    -------
   Net cash provided by (used in)
           financing activities                                    2,008      1,679
                                                                 -------    -------
           Net increase in cash and cash equivalents                  48        609
Cash and cash equivalents at beginning of period                     105          2
                                                                 -------    -------
Cash and cash equivalents at end of period                       $   153    $   611
                                                                 =======    =======
Supplemental disclosures of cash flow information:
   Cash paid for interest                                        $   570    $   442
                                                                 =======    =======
   Cash paid for income taxes                                       --         --
                                                                 =======    =======
Non-cash financing transaction:
   Purchase of Company by issuing stock                          $  --      $   700
                                                                 =======    =======
</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, 1995 and the results of operations  for
the three-month and nine-month periods ended September 30, 1995 and 1994 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  1994 Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.

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,
                                     1995                     1994
                                 -------------            ----------
<S>                                  <C>                     <C>
Raw Materials                        $3,077                  $2,902
Work in Process                         663                     943
Finished Goods                        1,516                   1,941
                                     ------                  ------
                                     $5,256                  $5,786
                                     ======                  ======
</TABLE>

                                       5

<PAGE>



Note 3.    NOTES PAYABLE

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 Williams Controls,  Inc. 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  8.75%) and will be reviewed on May 31, 1996.  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 may
now 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  $2,000,000  and a ratio of debt to tangible net
worth of not greater than 4.5 to 1. 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.  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  Controls,  Inc.
("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.

Thomas W. Itin, the Chairman,  Treasurer and a Director of the Company,  is also
Chairman, Director and principal stockholder of Williams.


Note 4.    STOCKHOLDERS' EQUITY


At the annual meeting held May 24, 1995, the Shareholders  voted to increase the
number of authorized common shares to 100,000,000 from 50,000,000.

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 at a conversion price
of $.6875.  Cumulative  dividends  are payable on the Series C Preferred  Stock.
Each  Warrant  entitles  the holder to purchase one share of Common Stock at any
time through  December 31, 1996 at a price of $1.00. 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 intends to use the estimated net proceeds of this $3.3
million offering for inventory and accounts receivable financing, to




                                        6

<PAGE>

Note 4.    STOCKHOLDERS' EQUITY (Cont'd)

improve and  enhance  its  manufacturing  capabilities,  and to provide  working
capital  which may be used to expand  product  lines,  develop  new  markets and
acquire  companies or product  lines  compatible  with or  complementary  to its
present products in order to expand its leisure and recreational business.

In 1994 the Company issued 400,000 shares of stock as part of the acquisition of
Leisure Life that were  contingent on certain  performance  requirements.  Those
requirements  have not been met and as such those  shares  will not be  released
from  escrow  to the  former  owners of  Leisure  Life and will be  returned  to
authorized  but unissued  shares in  November,  1995.  During the quarter  9,710
shares of Series C convertible  preferred stock were converted to 141,236 common
shares.


Note 5.    BUSINESS SEGMENT REPORTING

The  relative  contributions  to net sales,  operating  income and  identifiable
assets of the  Company's  two industry  segments for the nine months and quarter
ended September 30, 1995 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>


                                                       NINE MONTHS ENDED SEPTEMBER 30, 1995

                                                                    Golf and
                                           Furniture                Billiards              Consolidated
                                           ----------               ---------              ------------
<S>                                         <C>                      <C>                     <C> 
Net sales                                   $  947                   $12,429                 $13,376
Operating income/loss)                        (417)                      817                     400
Total assets                                 1,825                     9,157                  10,982
Depreciation                                    82                        60                     142
Capital expenditures                            59                        40                      99
</TABLE>

<TABLE>
<CAPTION>

                                                         QUARTER ENDED SEPTEMBER 30, 1995

                                                                     Golf and
                                           Furniture                Billiards              Consolidated
                                           ---------                ---------              ------------
<S>                                         <C>                       <C>                   <C>
Net sales                                   $  164                    $3,273                $  3,437
Operating income(loss)                        (200)                       41                    (159)
Total assets                                 1,825                     9,157                  10,982
Depreciation                                    30                        20                      50
Capital expenditures                             8                        11                      19

</TABLE>

                                        7

<PAGE>


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


FINANCIAL  CONDITION - At September 30, 1995 the Company had working  capital of
$6,535,000,  as compared  with  $593,000 at December 31, 1994.  The $5.9 million
increase in working capital reflects the terms of the new loan agreement with U.
S. Bank, which includes a $3.5 million long-term bulge loan facility (see Note 3
of Notes to  Consolidated  Financial  Statements).  Other factors  affecting the
increase  in working  capital  were an  increase  of $1.9  million  in  Accounts
Receivable  due to the $2.7  million  increase  in sales and a decrease  of $0.7
million  in  external  borrowing.   The  ratio  of  current  assets  to  current
liabilities at September 30, 1995 was 3.3 compared to 1.1 for December 31, 1994.

LIQUIDITY - On July 25, 1995 Ajay improved its liquidity through obtaining a new
$8.5 million credit  facility with U. S. Bank on July 25, 1995. The facility was
increased  to $13.5  million on October 2,  1995,  in order to  accommodate  the
acquisitions  of certain  assets of 2  corporations  in early  October.  The new
credit  facility  interest rate is at prime,  replacing the old credit  facility
rate which was at prime plus 3%.  Further  liquidity  improvement  resulted from
receiving  proceeds from a $3.3 million  preferred  stock and warrants  offering
which went effective on July 26, 1995.  These two important events position Ajay
for future growth.

On October 2, 1995 the Company acquired  certain assets of Korex  Corporation of
Naperville, Illinois. Korex designs, manufactures and distributes a line of golf
bags, carts and accessories.  The Company acquired the inventory,  machinery and
equipment of Korex in exchange for  $1,719,000 and 240,625 shares of Ajay common
stock.

On October 6, 1995 the Company  acquired  certain  assets of Palm  Springs  Golf
Company,   Inc.  Of  Palm  Desert,   California.   Palm  Springs  Golf  designs,
manufactures  and  markets a full line of golf  clubs  along with a line of golf
bags and gloves. In the transaction,  the Company acquired  substantially all of
the  operating  assets in exchange for  1,300,000  shares of Ajay common  stock,
633,333 of which are contingent upon future financial  performance  and/or other
conditions. In addition, the Company will issue 800,000 common stock options and
assumed $3,700,000 of payables and bank debt.

The Company's  Board of Directors,  on September 25, 1995,  declared a quarterly
dividend  of  $.185  per  share  on the  Company's  10%  cumulative  convertible
preferred  stock,  payable October 25, 1995 to shareholders of record October 3,
1995.  This was the first  calendar  quarter end since the preferred  stock went
effective on July 26, 1995 and the $58,000 dividend represents a pro-rata amount
calculated from the effective date through the end of the third quarter.




                                        8

<PAGE>



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

RESULTS OF OPERATIONS - During the quarter ended  September 30, 1995 the Company
had net sales of $3,437,000, compared to $2,877,000 for the same period in 1994.
For the nine  months  ended  September  30,  1995 the  Company  had net sales of
$13,376,000  compared to  $10,630,000  for the same period in 1994.  The 9-month
sales increase of 26% has occurred throughout all product lines and with respect
to several  major  customers,  along with  increases in secondary  customers and
sales to new customers.  The furniture line acquired August 1, 1994  contributed
34% of the nine month sales increase of $2.7 million.

Gross  profit for the three  months  ended  September  30, 1995  expressed  as a
percentage  of net sales,  increased  to 14.9%,  compared to (0.7)% for the same
period in 1994.  Gross  profit for the nine  months  ended  September  30,  1995
expressed as a percentage of net sales, increased to 18.8%, compared to 9.8% for
the same period in 1994.  Golf margins in 1995 improved as a result of increased
sales volume and product mix resulting in  efficiencies  and cost  reductions in
materials  and  manufacturing  costs.  This  improvement  was  diminished by the
unfavorable  results of the furniture  business,  where material costs and labor
were  higher  than  planned.  Through  extensive  redesign,  costs  for the 1996
furniture  line are  being  reduced  and  management  expects  this to result in
improved  margins in 1996.  The  furniture  product line was targeted to smaller
customers  during  1994-95.  The 1996  furniture  products have been designed to
target  the mass  market as well as the  current  customer  base of  independent
dealers.  This  broadens the  available  market and  supports  plans for growth.
Management expects furniture products to be profitable in 1996.

Selling,  general and administrative  expenses were 19.5% of sales for the third
quarter of 1995,  versus 23.9% for 1994.  The nine months results were 15.8% and
18.5%,  respectively  for 1995  and  1994.  Selling  expenses  for the  start-up
furniture  business have been relatively high per sales dollar due to the higher
cost  inherent in the present  effort to develop the sales base of new customers
which will benefit future  periods.  This included such expenses as trade shows,
travel and  advertising  to reach  potential  customers.  Overall  expenses as a
percent of sales were favorable due to the 26% sales increase for the first nine
months.

Operating  loss for the third quarter of 1995 was $159,000,  an  improvement  of
$548,000,  compared to an operating  loss of $707,000  for the third  quarter of
1994.  This was due primarily to a decrease in the cost of sales which was 85.1%
for the third  quarter of 1995 and 100.7% for the third quarter of 1994 plus the
positive  effect of a 19.5%  sales  increase.  The core golf  business  improved
during the year with a  $817,000  operating  profit  for the first  nine  months
compared to a $864,000  operating loss for the same period in 1994.  This profit
was partially offset by a $417,000 operating loss in the furniture business year
to date.






                                       9

<PAGE>



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



As a result of the above,  the net loss for the nine months ended  September 30,
1995 was $176,000, compared to a net loss of $1,691,000 for the same period last
year. This is an improvement of $1,515,000. For the three months ended September
30, 1995 the net loss was  $340,000  compared to a net loss of $864,000  for the
same period last year. This is an improvement of $524,000.





                                       10

<PAGE>


PART II.  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K


      A)   Exhibits:

           Regulation
           S-K Number          Exhibit
           ----------          -------
           10.1                 First  Amendment to the July 25, 1995  Revolving
                                Loan Agreement dated October 2, 1995,  including
                                amendment  to Bulge  Loan  Note,  Supplement  to
                                Guarantee and Amendment to Revolving Loan Note.

           27                   Financial Data Schedule


      B)   Forms 8-K:  (Incorporated by reference)

           1.     The Company filed a Form 8-K,  dated August 30, 1995 reporting
                  the Letters of Intent signed with Korex  Corporation  and Palm
                  Springs Golf Company, Inc. Forms 8-K were filed, dated October
                  2 and October 6 which  reported  the  acquisitions  of certain
                  assets of Korex Corporation and certain assets of Palm Springs
                  Golf Company, Inc.


                                       11

<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.


AJAY SPORTS, INC.




By:    /s/Robert R. Hebard
       ---------------------
Its:     Corporate Secretary





By:    /s/Duane R. Stiverson
      -------------------------
Its:    Chief Financial Officer



Date:___________________________




                                       12

<PAGE>
                                                                    EXHIBIT 10.1

                   FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT

Dated as of:      October 2, 1995

Between:          UNITED STATES NATIONAL BANK OF OREGON, a national
                  banking association,

And:              AJAY SPORTS, INC., a Delaware corporation

                  WHEREAS United States National Bank of Oregon (the "Bank") and
Ajay Sports,  Inc.,  (the  "Borrower")  entered into a revolving  loan agreement
dated as of July 25, 1995, (the "Loan Agreement"); and

                  WHEREAS the  parties  thereto  desire to amend  certain of the
terms of the Loan Agreement.

                  NOW, THEREFORE,  for valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

                  1. The  following  defined  terms in  Section  1.1 of the Loan
Agreement are amended to read, in full, as follows:

                  "Borrowing  Base" means,  at any time, the amount  computed on
the Borrowing Base  Certificate  most recently  delivered to and accepted by the
Bank in accordance with this Agreement, not to exceed the lesser of:

                  (A)      $8.5 million; or

                  (B) The  aggregate  of 80 percent of Eligible  Accounts of the
           Borrower,  Ajay Leisure Products,  Inc., Leisure Life, Inc., and Palm
           Springs Golf,  Inc., plus fifty percent (50%) of Qualified  Inventory
           of the Borrower, Ajay Leisure Products, Inc., Leisure Life, Inc., and
           Palm Springs Golf,  Inc.,  less fifty percent (50%) of the sum of any
           documentary Letters of Credit Outstanding.

                  "Bulge Loan  Commitment"  means the undertaking of the Bank to
fund the Bulge Loan in accordance  with the terms and  conditions  hereof,  in a
principal  amount  not to  exceed,  at any one time  outstanding,  the sum of $5
million.

                  "Bulge Loan Note" means the  promissory  note  executed by the
Borrower  substantially  in the  form of  Exhibit  B to the Loan  Agreement,  as
amended by Exhibit A attached hereto.

                  "Eligible  Accounts"  means  each  and  every  Account  of the
Borrower,  Ajay Leisure  Products,  Inc.,  Leisure Life,  Inc., and Palm Springs
Golf, Inc., except those (a) as to which payment is not received within 120 days
after date of invoice and the Bank has




                                       13

<PAGE>

not granted its prior approval for payment terms in excess of 120 days from date
of invoice,  (b) as to which the account  debtor has asserted a right of return,
offset, deduction,  credit, defense, or counterclaim of any nature whatsoever, (
c) which are owed by an account debtor who is an Affiliate,  officer,  director,
or employee of the  Borrower,  who is a  government,  foreign or domestic,  or a
branch, department, subdivision, or agency thereof, who is a broker or dealer or
who does not meet  reasonable  credit  standards  adopted  by the  Borrower  and
approved by the Bank,  (d) which are not  enforceable  by  judicial  proceedings
within  the  United  States  unless  supported  by a letter  of  credit  in form
reasonably acceptable to the Bank issued by a financial  institution  acceptable
to the Bank, or is otherwise acceptable,  by guaranty or otherwise, to the Bank,
or (e) which are billings for  retainage or so-called  "progress  billings."  An
account  debtor  will not meet  reasonable  credit  standards  if more  than ten
percent (10%) of that  Person's  account (or  twenty-five  percent (25%) of that
Person's account for certain account debtors approved in advance by the Bank) is
unpaid for more than 60 days past the due date or if the Bank in its  reasonable
judgment determines that such debtor is not creditworthy.

                  "Guarantor"  means each and any of the  following  Persons and
such other Persons who may become guarantors of this credit facility:

                  Williams Controls, Inc., a Delaware corporation
                  Ajay Leisure Products, Inc., a Delaware corporation
                  Ajay Leisure de Mexico C.V. de S.A., a Mexicali, Mexico 
                    corporation
                  Leisure Life, Inc., a Tennessee corporation
                  Palm Springs Golf, Inc., a Colorado corporation

                  "Guaranty  Agreement" means with respect to each Guarantor,  a
duly  authorized  and  executed  agreement  in the form of Exhibit C to the Loan
Agreement, as amended by Exhibit B attached hereto.


                  "Qualified Inventory" means with respect to the Borrower, Ajay
Leisure Products,  Inc.,  Leisure Life, Inc., and Palm Springs Golf, Inc., their
inventory of raw materials,  finished goods, and  work-in-process  not exceeding
$8,500,000 in the aggregate, valued at the lower of cost or market value.

                  "Revolving Loan Commitment"  means the undertaking of the Bank
to fund the Revolving Loan in accordance  with the terms and conditions  hereof,
in a principal  amount not to exceed,  at any one time  outstanding,  the sum of
$8.5 million.

                  "Revolving  Loan Note" means the  promissory  note executed by
the Borrower  substantially  in the form of Exhibit A to the Loan Agreement,  as
amended by Exhibit C attached hereto.

                                       14
<PAGE>

                  "Subsidiaries" means Ajay Leisure Products, Inc., Ajay Leisure
de Mexico C.V. de S.A., Leisure Life, Inc., and Palm Springs Golf, Inc., and any
other Persons in which the Borrower owns a controlling interest.

                  2. In the first sentence of Section 2.4 of the Loan Agreement,
the phrase "sum of $3,500,000" is changed to "Bulge Loan Commitment."

                  3. The  amount  "$1,500,000"  in  Section  2.7(A)  of the Loan
Agreement is changed to "$2,000,000."

                  4.  Exhibit  5.1(A) to the Loan  Agreement  is  replaced  with
Exhibit D  attached  hereto and all  references  in the Loan  Agreement  to such
Exhibit 5.1(A) shall hereafter mean such Exhibit D.

                  5. The Borrower  hereby  certifies  that as of the date hereof
and after giving effect to the terms of this First  Amendment to Revolving  Loan
Agreement,  the  representations and warranties of Borrower contained in Section
5.1 of the Loan  Agreement  are true and  correct,  and no Event of Default  has
occurred and is  continuing.  The Borrower  represents  and warrants to the Bank
that (i) it and each of its Subsidiaries, to the extent each is a party thereto,
has the power and  authority to enter into and perform  this First  Amendment to
Revolving  Loan  Agreement and any other  documents to be executed in connection
herewith,  including  but not limited to any Guaranty or Security  Agreement and
the Notes,  and has taken all actions  necessary  to  authorize  the  execution,
delivery,  and performance  thereof,  and (ii) this First Amendment to Revolving
Loan  Agreement and any other  documents to be executed in  connection  herewith
are, or when delivered  will be valid,  binding,  and  enforceable in accordance
with their respective terms.

                  6. The obligation of the Bank to make the Loans under the Loan
Agreement  as amended by this First  Amendment to  Revolving  Loan  Agreement is
subject to the satisfaction or waiver of the following conditions precedent:

                  (a)  The  Borrower  shall  have  delivered  to the  Bank  duly
completed and executed  amendments to the Bulge Loan Note and the Revolving Loan
Note in the forms of Exhibits A and C hereto.

                  (b) Williams Controls, Inc., Ajay Leisure Products, Inc., Ajay
Leisure  de Mexico  C.V.  de S.A.,  and  Leisure  Life,  Inc.,  shall  have each
delivered to the Bank a duly  completed  and executed  Supplement to Guaranty in
the form of Exhibit B hereto.

                  (c ) Palm Springs Golf, Inc., shall have delivered to the Bank
a duly completed and executed Security Agreement and Guaranty Agreement and such
financing statements and other documents as the Bank may specify.

                                       15
<PAGE>

                  (d) The Borrower and each Guarantor  shall have each delivered
to the Bank a duly executed  Contribution and Indemnity Agreement in the form of
Exhibit E hereto.

                  7. Except as herein modified,  the terms and conditions of the
Loan  Agreement  are  reaffirmed  and ratified as though fully set forth herein.
Undefined  terms used herein that are defined in the Loan  Agreement  shall have
the meaning set forth in the Loan Agreement.

                  IN WITNESS WHEREOF,  the parties hereto have caused their duly
authorized  officers to execute and deliver  this First  Amendment  to Revolving
Loan Agreement effective as of the date first above written.



                                                 AJAY SPORTS, INC.



                                By  /s/Thomas W. Itin
                                    --------------------------------------------
                                Name:   Thomas W. Itin
                                Title:  President and Chief Executive Officer




                                UNITED STATES NATIONAL BANK OF OREGON



                                BY  /s/Diane M. Sellers
                                   ---------------------------------------------
                                Name:   Diane M. Sellers
                                Title:  Vice President




                                       16

<PAGE>


APPROVED:

AJAY LEISURE PRODUCTS, INC.


By: /s/Thomas W. Itin
   ------------------------------------
Name:   Thomas W. Itin
Title:  Chairman of the Board



AJAY LEISURE DE MEXICO C.V. de S.A.


By: /s/Clarence H. Yahn
   ------------------------------------
Name:   Clarence H. Yahn
Title:  Sole Administrator



LEISURE LIFE, INC.


By: /s/Thomas W. Itin
   ------------------------------------
Name:  Thomas W. Itin
Title: Chairman of the Board



PALM SPRINGS GOLF, INC.


By: /s/Thomas W. Itin
   ------------------------------------
Name:   Thomas W. Itin
Title:  Chief Executive Officer



WILLIAMS CONTROLS, INC.


By: /s/Thomas W. Itin
   ------------------------------------
Name:   Thomas W. Itin
Title:  President and Chief Executive Officer




                                       17

<PAGE>


                                    EXHIBIT A

                          AMENDMENT TO BULGE LOAN NOTE


DATE:             October 2, 1995



                  The  undersigned do hereby agree that the amount  "$3,500,000"
set forth twice on the first page of that certain Bulge Loan Note dated July 25,
1995, shall be amended to be "$5,000,000."



                  Except as expressly  modified herein, the terms and conditions
of the Bulge Loan Note are ratified and affirmed.




                                  AJAY SPORTS, INC.



                                  By: /s/Thomas W. Itin
                                     -------------------------------------------
                                  Name:   Thomas W. Itin
                                  Title:  President and Chief Executive Officer



                                  UNITED STATES NATIONAL BANK OF OREGON



                                  By: /s/Diane M. Sellers
                                     -------------------------------------------
                                  Name:  Diane M. Sellers
                                  Title: Vice President




                                       18

<PAGE>

                                    EXHIBIT B

                             SUPPLEMENT TO GUARANTY


                  The undersigned  agrees that the principal  amount  guaranteed
under its guaranty dated July 25, 1995 (the "Guaranty"), shall be increased from
$8,500,000  to  $13,500,000,  so as to take into  account  the  increase  in the
Revolving Loan Commitment and the Bulge Loan Commitment made pursuant to a First
Amendment to Revolving  Loan  Agreement of even date between Ajay Sports,  Inc.,
and United States National Bank of Oregon (the "Amendment").

                  [Note:  The  Supplement  to  Guaranty   executed  by  Williams
Controls, Inc., shall also contain the following:

                  "In  addition,  the  following  paragraph  shall  be  added as
paragraph (i) of Section 10 of the Guaranty:

                  "(i) If  Guarantor  pays any  amounts to Bank to  satisfy  the
Indebtedness or any portion thereof,  upon payment in full of all  Indebtedness,
Bank shall, at Guarantor's request,  assign to Guarantor all of Bank's rights in
any security interests granted to Bank pursuant to the Loan Agreement and in any
documents filed to perfect such security interests."]

                  Except as herein  modified,  the terms and  conditions  of the
Guaranty are reaffirmed and ratified as though fully set forth herein. Undefined
terms used herein that are defined in the  Amendment  shall have the meaning set
forth in the Amendment.

                  Dated: October 2, 1995

                                                 GUARANTOR:

                                                 _______________________________



                                                 By:____________________________
                                                 Name:__________________________
                                                 Title:_________________________

APPROVED:

UNITED STATES NATIONAL BANK OF OREGON


By: /s/Diane M. Sellers
   --------------------------
Name:   Diane M. Sellers
Title:  Vice President




                                       18

<PAGE>


                                    EXHIBIT C

                        AMENDMENT TO REVOLVING LOAN NOTE




Date:             October 2, 1995



                  The  undersigned do hereby agree that the amount  "$5,000,000"
set forth twice on the first page of that certain Revolving Loan Note dated July
25, 1995, shall be amended to be "$8,500,000."


                  Except as expressly  modified herein, the terms and conditions
of the Revolving Loan Note are ratified and affirmed.




                                   AJAY SPORTS, INC.


                                   By: /s/Thomas W. Itin
                                      ------------------------------------------
                                   Name:   Thomas W. Itin
                                   Title:  President and Chief Executive Officer




                                   UNITED STATES NATIONAL BANK OF OREGON


                                   By: /s/Diane M. Sellers
                                      ------------------------------------------
                                   Name:   Diane M. Sellers
                                   Title:  Vice President






                                       20
<PAGE>