FORM 10-QSB. --- QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB
(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, 1996  TRANSITION  REPORT
      PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from ____________ to ____________

                         Commission file number 1-13518

                             Gaylord Companies, Inc.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

      Delaware                                         31-1421571
--------------------------------------------------------------------------------
State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                    4006 Venture Court, Columbus, Ohio 43228
--------------------------------------------------------------------------------
                     (Address of Principal Executive Office)

                                 (614) 771-2777
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                  Yes    X                                  No

          Statethe  number of  shares  outstanding  of each of the  registrant's
classes of common  equity,  as of the last  practicable  date:  3,176,429  as of
November 14, 1996.



<PAGE>


                             GAYLORD COMPANIES, INC.

                                      INDEX


<TABLE>
<CAPTION>
                                                                                                             Page
                                                                                                            Number
<S>                                                                                                         <C>

PART I - FINANCIAL INFORMATION
        Item 1.           Financial Statements
                          Consolidated Balance Sheet as of September 30, 1996                                 1
                          (unaudited)
                          Consolidated Statements of Operations (unaudited) for the
                          Three and nine months ended September 30, 1996 and 1995                             2

                          Consolidated Statements of Cash Flows (unaudited) for the
                          Three months ended September 30, 1996 and 1995                                      3

                          Notes to the financial statements                                                  4-5
        Item 2.           Management's Discussion and Analysis of Financial Condition
                          and Results of Operations                                                          6-11
PART II - OTHER INFORMATION                                                                                 12
        Item 1.           Legal Proceedings
        Item 2.           Changes in Securities
        Item 3.           Defaults Upon Senior Securities
        Item 4.           Submission of Matters to a Vote of Security Holders
        Item 5.           Other Information
        Item 6.           Exhibits and Reports on Form 8-K
Signature                                                                                                   13

Exhibit Index                                                                                               14-16

</TABLE>



<PAGE>


                             GAYLORD COMPANIES, INC.

                           CONSOLIDATED BALANCE SHEET

                               SEPTEMBER 30, 1996

                                   (UNAUDITED)

                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                             <C>

CURRENT ASSETS:
     Cash                                                                       $          48,572
     Accounts receivable - trade                                                           62,083
     Other receivables                                                                    280,284
     Inventories                                                                        2,041,140
     Deferred income taxes - current                                                      252,000
     Prepaid expenses and other current assets                                            320,661
                                                                                 ----------------
         TOTAL CURRENT ASSETS                                                           3,004,740

PROPERTY AND EQUIPMENT                                                                    582,762

GOODWILL                                                                                  121,632

DEFERRED INCOME TAXES                                                                     459,789

INVESTMENT                                                                                125,000

OTHER ASSETS                                                                               37,847
                                                                                 ----------------

                                                                                $       4,331,770
                                                                                 ================
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                           $       1,754,298
     Line of credit                                                                       395,000
     Convertible notes                                                                    285,000
     Sales tax payable                                                                    122,319
     Current portion of long-term debt                                                    214,493
     Current installments of capital lease obligations                                     11,859
     Other current liabilities                                                            228,646
                                                                                 ----------------
         TOTAL CURRENT LIABILITIES                                                      3,011,615

CAPITAL LEASE OBLIGATIONS                                                                     313
                                                                                 ----------------

                                                                                        3,011,928
                                                                                 ----------------

COMMITMENTS

STOCKHOLDERS' EQUITY:
     Cumulative preferred stock, par value $.01 per share;  1,500,000 shares
         authorized, 60,000 shares issued and outstanding                                 300,000
     Common stock, par value $.01 per share;  10,000,000 shares
         authorized, 3,116,429 shares issued and outstanding                               31,164
     Paid-in-capital in excess of par                                                   1,966,547
     Retained earnings (deficit)                                                         (977,869)
                                                                                 ----------------
         TOTAL STOCKHOLDERS' EQUITY                                                     1,319,842
                                                                                 ----------------

                                                                                $       4,331,770
                                                                                 ================
</TABLE>
                            See notes to consolidated
                             financial statements.
                                        1

<PAGE>
                             GAYLORD COMPANIES, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                              Three Months Ended                   Nine Months Ended
                                                                 September 30,                        September 30,
                                                    --------------------------------------------------------------------------
                                                          1996               1995               1996                1995
                                                    ----------------   ----------------   ----------------    ----------------
<S>                                                <C>                <C>                 <C>                <C>
NET SALES                                          $       2,711,327  $       3,084,108  $       8,252,457   $       8,823,759

COST OF GOODS SOLD, including store occupancy and
     delivery costs                                        2,083,014          2,347,020          6,333,441           6,719,382
                                                    ----------------   ----------------   ----------------    ----------------

GROSS PROFIT                                                 628,313            737,088          1,919,016           2,104,377

OPERATING EXPENSES:
     Store operating expenses                                602,494            545,221          1,787,735           1,669,344
     Administrative                                          410,246            276,772          1,034,928             854,903
     Depreciation and amortization                            48,146             60,967            144,270             193,507
                                                    ----------------   ----------------   ----------------    ----------------
                                                           1,060,886            882,960          2,966,933           2,717,754
                                                    ----------------   ----------------   ----------------    ----------------

OPERATING INCOME (LOSS)                                     (432,573)          (145,872)        (1,047,917)           (613,377)
                                                    ----------------   ----------------   ----------------    ----------------

OTHER INCOME (EXPENSE):
     Interest expense - net                                   79,783             96,886            229,091             267,204
     Amortization of discount on notes payable                     -             17,292                  -              51,875
     Other income (expense)                                      389               (601)            10,263                (751)
                                                    ----------------   ----------------   ----------------    ----------------
                                                              80,172            113,577            239,354             318,328
                                                    ----------------   ----------------   ----------------    ----------------

INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)           (512,745)          (259,449)        (1,287,271)           (931,705)

INCOME TAX EXPENSE (BENEFIT)                                       -           (103,780)          (311,810)           (372,683)
                                                    ----------------   ----------------   ----------------    ----------------

NET INCOME (LOSS)                                  $        (512,745) $        (155,669) $        (975,461)  $        (559,022)
                                                    ================   ================   ================    ================

EARNINGS (LOSS) PER COMMON SHARE                   $           (0.17) $           (0.08) $           (0.35)  $           (0.28)
                                                    ================   ================   ================    ================

WEIGHTED AVERAGE COMMON SHARES USED                        2,933,215          2,000,000          2,811,072           2,000,000
                                                    ================   ================   ================    ================
</TABLE>


















                            See notes to consolidated
                             financial statements.
                                        2


<PAGE>
                    GAYLORD COMPANIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>

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

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                                     $       (975,461)  $        (559,022)
                                                                                            ---------------    ----------------
     Adjustments  to reconcile net income (loss) to net cash provided  (used) by
     operating activities:
         Depreciation and amortization                                                              144,270             187,185
         Shares issued for services                                                                  42,429                   -
         Changes in assets and liabilities:
            Decrease (increase) in accounts receivable                                              (19,985)            (55,463)
            Decrease (increase) in other receivables                                                (57,577)            (16,769)
            Decrease (increase) in inventory                                                       (230,688)           (142,695)
            Decrease (increase) in prepaid expenses and other assets                               (209,290)           (294,408)
            Decrease (increase) in deferred income taxes                                           (302,728)           (359,793)
            Increase (decrease) in accounts payable                                                 271,984             228,163
            Increase (decrease) in sales tax payable                                                (56,983)            (16,724)
            Increase (decrease) in other current liabilties                                        (107,388)            135,321
                                                                                            ---------------    ----------------
                Total adjustments                                                                  (525,956)           (335,183)
                                                                                            ---------------    ----------------

                NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                 (1,501,417)           (894,205)
                                                                                            ---------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                                                             (14,803)            (12,165)
                                                                                            ---------------    ----------------
                NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                    (14,803)            (12,165)
                                                                                            ---------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of debt                                                               1,017,500             850,000
     Proceeds from excercise of options                                                              70,000                   -
     Repayments of debt                                                                            (414,271)           (154,248)
     Principal payments of capital lease obligations                                                 (7,456)             (9,009)
                                                                                            ---------------    ----------------
                NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                    665,773             686,743
                                                                                            ---------------    ----------------

NET INCREASE (DECREASE) IN CASH                                                                    (850,447)           (219,627)

CASH AT BEGINNING OF PERIOD                                                                         899,019             261,627
                                                                                            ---------------    ----------------

CASH AT END OF PERIOD                                                                      $         48,572   $          42,000
                                                                                            ===============    ================


SUPPLEMENTAL CASH FLOW DISCLOSURES:
     Cash paid during the period for:
         Interest                                                                          $         37,919   $          66,609
                                                                                            ===============    ================

         Income taxes                                                                      $       -          $             100
                                                                                            ===============    ================

</TABLE>
                            See notes to consolidated
                             financial statements.
                                        3
<PAGE>


                    GAYLORD COMPANIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                      NINE MONTHS ENDED SEPTEMBER 30, 1996

                                   (UNAUDITED)



1.       BASIS OF PRESENTATION

                  The  accompanying  financial  statements  are  unaudited,  but
         reflect  all  adjustments  which,  in the  opinion of  management,  are
         necessary for a fair presentation of financial position and the results
         of operations for the interim periods  presented.  All such adjustments
         are of a normal and recurring nature. The results of operations for any
         interim period are not necessarily indicative of the results attainable
         for a full fiscal year.

2.       LOSS PER SHARE

                  Per  share  information  is  computed  based  on the  weighted
         average number of shares  outstanding during the period with net income
         (loss) reduced by preferred stock dividends.

3.       PRIVATE PLACEMENT

                  In June 1996 the Company consummated a private placement to 12
         investors  of an aggregate  of $622,500 of its  Convertible  Notes (the
         "1996  Financing").  The  Convertible  Notes  are  due and  payable  on
         December 11, 1996. Interest is payable at the rate of 5% per annum. The
         principal amount of each Convertible Note is convertible into shares of
         Common  Stock at the rate of $1.50  per  share.  In the  quarter  ended
         September 30, 1996 a total of $337,500 in debt  principal was converted
         into  225,000  shares  of  common  stock.   In  connection   with  this
         conversion,  the Company  wrote off a pro rata  portion of  unamortized
         deferred finance costs,  totaling  approximately  $110,000,  to paid in
         capital.

4.       CONSULTING AGREEMENT

                  As of April 23, 1996,  the Company  entered into a twenty-four
         month financial consulting and investor relations agreement with Solay,
         Inc.  Pursuant  to the  financial  consulting  and  investor  relations
         agreement,  Solay, Inc. is entitled to receive  $135,000,  which amount
         has been prepaid by the  Company.  In addition,  Solay,  Inc.  received
         $65,000 in connection with financial  advisory services rendered to the
         Company  in  connection  with  the  1996  Financing.  Pursuant  to  the
         financial consulting and investor

                                        4

<PAGE>



         relations  agreement,  Solay,  Inc.  has the right to purchase  300,000
         shares of Common Stock and 600,000  Warrants  identical to the warrants
         offered in the Initial Public Offering through October 23, 1996, for an
         aggregate  purchase price of $300,000.  In addition,  Rodika Salter, an
         affiliate  of Solay,  Inc.,  has an option to  purchase  up to  200,000
         shares of Common Stock until  October 23, 1996 for $1.50 per share.  In
         connection with the 1996 Financing,  Worthington Capital Corp. received
         an aggregate of $35,175 of commissions and non-accountable expenses. In
         connection  with the 1996  Financing,  Worthington  Capital  Corp.  was
         granted the right to acquire 100,000 shares of Common Stock and 200,000
         Warrants  identical  to the  Warrants  offered  in the  Initial  Public
         Offering  until October 23, 1996,  for an aggregate  purchase  price of
         $100,000.


5.       BANK DEBT

                  In May 1996,  the  Company  entered  into a revised  financing
         agreement  with  Bank  One.  As of June 30,  1996,  the  Company  had a
         revolving  line of  credit of  $395,000  and  secured  term debt in the
         aggregate amount of $280,491.  The bank debt bears interest at rates of
         2.5%  over the  prime  rate of  interest.  The line of  credit  and the
         secured  term debt  mature on  January  10,  1997.  Under the bank loan
         agreements,  no  additional  advances  will be made  under  the line of
         credit through the maturity date of January 10, 1997.

6.       STOCK OPTIONS

                  During the quarter  ended  September  30,  1996,  Solay,  Inc.
         exercised  options to purchase 141,429 shares of common stock for $1.00
         per option for which each option excercised also received two warrants.


7.       DEFAULT ON BANK LOAN

                  At  September  30,  1996,  the  Company  was in default of the
         financial performance covenants on its bank loan.












                                        5

<PAGE>



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

RESULTS OF OPERATIONS

Three Months Ended September 30, 1995 and 1996

                  Consolidated Operations

         The Company  incurred a net loss of $512,745 in the three  months ended
September  30, 1996 as compared  to a net loss of  $155,669  for the  comparable
period in the prior year. The increase in the net loss in the three months ended
September 30, 1996 as compared to the same period in 1995 was primarily due to a
decrease in net sales,  a lower gross  profit  margin,  higher  store  operating
expenses  and higher  administrative  costs.  Additionally,  the Company did not
record a tax benefit in the three months ended September 30, 1996 as compared to
a benefit of $103,780 for the three months ended September 30, 1995.

         Net sales in the three months ended September 30, 1996 were $2,711,327,
a 12.1% decrease over net sales of $3,084,108  for the comparable  period in the
prior year.  The  decrease  was due  primarily  to the fact that the  Superstore
bookstores  in both  Boardman  and  Cincinnati,  Ohio posted  significant  sales
decreases  as a result of new  competition  from  stores  operated by Barnes and
Noble, Inc. in close proximity during the three months ended September 30, 1996.
Such stores did not encounter such competition in the same period in 1995.

         Cost of goods sold,  including store occupancy and delivery costs,  was
$2,083,014  for the  three  months  ended  September  30,  1996 as  compared  to
$2,347,020  for the three months  ended  September  30, 1995.  Gross profit as a
percentage of net sales was 23.2% for the three months ended  September 30, 1996
as compared to 23.9% during the same period in 1995.  Management  believes  that
the primary  reason for the lower gross profit as a percentage  of net sales for
the three months  ended  September  30, 1996,  as compared to the same period in
1995,  is the lower  gross  profit  as a  percentage  of sales in the  Company's
Superstore in Boardman,  Ohio, due to more aggressive discounting in response to
the early  October  1995 opening of a  superstore  by Barnes and Noble,  Inc. in
close  proximity.  In  addition,  while sales  decreased  in the  Superstore  in
Boardman,  Ohio,  for the three months ended  September 30, 1996, as compared to
the same period in 1995, occupancy costs remained substantially the same.

         Store level operating expenses were $602,494 for the three months ended
September 30, 1996 as compared to $545,221 for the three months ended  September
30,  1995.  Management  believes  that the  increase  in such  expenses  was due
primarily to the  reclassification  of certain  payroll  expenses to store level
operating  expenses for the three months ended September 30, 1996. Such expenses
were  classified as  administrative  expenses in the same period in 1995.  Store
level  operating  expenses  were 22.2% of net sales for the three  months  ended
September  30, 1996 as compared to 17.7% in the same period in 1995.  Management
believes  that the increase in such expenses as a percentage of net sales is due
primarily to the fact that while store level operating expenses increased in the
three months ended September 30, 1996 as compared to the same period in the

                                       6


<PAGE>




prior year, net sales  decreased and to the fact that certain  payroll  expenses
were  reclassified to store level operating  expenses for the three months ended
September 30, 1996. Such expenses were classified as administrative  expenses in
the same period in 1995.

         Administrative  expenses for the three months ended  September 30, 1996
were  $410,246  compared to $276,772 for the three months  ended  September  30,
1995.  Management  believes that the increase in administrative  expenses is due
primarily  to the  Company's  anticipated  expansion  and to  the  inclusion  of
expenses related to the Company's convertible debt financing in June of 1996.

         Depreciation  and amortization for the three months ended September 30,
1996 were $48,146  compared to $60,967 for the three months ended  September 30,
1995.  Management believes that the decrease in depreciation and amortization is
due primarily to the fact that some assets had been  completely  depreciated  or
amortized in the three months ended  September  30, 1996 as compared to the same
period in the prior year.

         Interest  expense for the three  months  ended  September  30, 1996 was
$81,287  compared to $96,886 in the same period in the prior year.  Amortization
of discount on notes  payable for the three months ended  September 30, 1996 was
$0  compared to $17,292 for the three  months  ended  September  30,  1995.  The
decrease in  amortization  of discount on notes  payable is due primarily to the
fact that the  amortization  was  accelerated  upon the  repayment of the bridge
loans in the original principal amount of $500,000 (the "Bridge Loans") upon the
completion of the  Company's  initial  public  offering in November of 1995 (the
"Initial Public Offering") and the amortization was subsequently discontinued.

         Cookstore Operations

         Net sales in the three months ended September 30, 1996 were $551,885, a
3.1%  decrease  over net sales of  $569,743  during the same period in the prior
year. All Cookstore net sales are comparable in the period.

         Cost of goods sold,  including store occupancy and delivery costs,  was
$409,466 for the three months ended  September  30, 1996 as compared to $417,189
for the three months ended  September 30, 1995.  Gross profit as a percentage of
net sales was 25.8% for the three months ended September 30, 1996 as compared to
26.8% during the same period in 1995.  Management  believes that the decrease in
gross profit as a percentage of net sales was due primarily to a higher level of
markdowns in the three months ended  September  30, 1996 as compared to the same
period in 1995 and higher  occupancy  costs in the 1996 period  versus  slightly
lower net sales.


                                       7
<PAGE>


         Bookstore Operations

         Net sales in the three months ended September 30, 1996 were $2,159,442,
an 14.1%  decrease over net sales of $2,514,365 in the prior year.  The decrease
was due primarily to significant sales decreases in Superstores in both Boardman
and Cincinnati, Ohio, as discussed above.

         Cost of goods sold,  including store occupancy and delivery costs,  was
$1,673,548  for the  three  months  ended  September  30,  1996 as  compared  to
$1,929,830 for the three months ended  September 30, 1995.  Management  believes
that such  decrease was due  primarily to the  decreased  level of sales.  Gross
profit as a  percentage  of net sales  was  22.5%  for the  three  months  ended
September  30,  1996 as  compared  to  23.3%  during  the same  period  in 1995.
Management  believes  that the primary  reason for the lower  gross  profit as a
percentage  of net sales for the three  months  ended  September  30,  1996,  as
compared to the same period in 1995,  is the lower gross  profit as a percentage
of sales in the Superstore in Boardman, Ohio, due to more aggressive discounting
in response to the early  October  1995  opening of a store by Barnes and Noble,
Inc. in close  proximity.  In addition,  while sales  decreased in the Company's
Book  Superstore  in Boardman,  Ohio,  for the three months ended  September 30,
1996,  as  compared  to the  same  period  in  1995,  occupancy  costs  remained
substantially the same.

Nine Months Ended September 30, 1995 and 1996

                  Consolidated Operations

         The Company  incurred a net loss of  $975,461 in the nine months  ended
September  30, 1996 as compared  to a net loss of  $559,022  for the  comparable
period in the prior year.  Management believes that the increase in the net loss
in the nine months  ended  September  30, 1996 as compared to the same period in
1995 was primarily due to lower net sales,  lower gross profit  margins,  higher
store operating  expenses and higher  administrative  costs.  Additionally,  the
Company did not record a tax benefit in the three  months  ended  September  30,
1996 as compared to a benefit of $103,780 for the three  months ended  September
30, 1995.

         Net sales in the nine months ended September 30, 1996 were $8,252,457,a
6.5%  decrease  over net sales of $8,823,759  for the  comparable  period in the
prior year.  The  decrease  was due  primarily  to the fact that the  Superstore
bookstores  in both  Boardman  and  Cincinnati,  Ohio posted  significant  sales
decreases  as a result of new  competition  from  stores  operated by Barnes and
Noble,  Inc. in close proximity during the nine months ended September 30, 1996.
Such stores did not encounter such competition in the same period in 1995.

         Cost of  goods sold, including store  occupancy and delivery costs, was
$6,333,441 for the nine


                                       8
<PAGE>




months ended  September 30, 1996 as compared to  $6,719,382  for the nine months
ended  September  30,  1995.  Management  believes  that such  decrease  was due
primarily to the decreased  level of sales.  Gross profit as a percentage of net
sales was 23.3% for the nine  months  ended  September  30,  1996 as compared to
23.9%  during the same  period in 1995.  Management  believes  that the  primary
reason  for the lower  gross  profit as a  percentage  of net sales for the nine
months ended  September 30, 1996, as compared to the same period in 1995, is the
lower gross  profit as a  percentage  of sales in the  Company's  Superstore  in
Boardman,  Ohio,  due to more  aggressive  discounting  in response to the early
October  1995  opening  of a  superstore  by Barnes  and  Noble,  Inc.  in close
proximity.  In addition,  while sales  decreased in the  Superstore in Boardman,
Ohio,  for the nine months ended  September  30,  1996,  as compared to the same
period in 1995, occupancy costs remained substantially the same.

         Store level  operating  expenses  were  $1,787,735  for the nine months
ended  September  30, 1996 as compared to  $1,669,344  for the nine months ended
September 30, 1995.  Management  believes that the increase in such expenses was
due primarily to the reclassification of certain payroll expenses to store level
operating  expenses for the nine months ended  September 30, 1996. Such expenses
were  classified as  administrative  expenses in the same period in 1995.  Store
level  operating  expenses  were  21.7% of net sales for the nine  months  ended
September  30, 1996 as compared to 18.9% in the same period in 1995.  Management
believes  that the increase in such expenses as a percentage of net sales is due
primarily to the fact that while store level operating expenses increased in the
nine months ended September 30, 1996 as compared to the same period in the prior
year,  net sales  decreased and to the fact that certain  payroll  expenses were
reclassified  to  store  level  operating  expenses  for the nine  months  ended
September 30, 1996. Such expenses were classified as administrative  expenses in
the same period in 1995.

         Administrative  expenses for the nine months ended  September  30, 1996
were  $1,034,928  compared to $854,903 for the nine months ended  September  30,
1995.  Management  believes that the increase in administrative  expenses is due
primarily  to the  Company's  anticipated  expansion  and to  the  inclusion  of
expenses related to the Company's convertible debt financing in June of 1996.

         Depreciation  and  amortization for the nine months ended September 30,
1996 were $144,270  compared to $193,507 for the nine months ended September 30,
1995.  Management believes that the decrease in depreciation and amortization is
due primarily to the fact that some assets had been  completely  depreciated  or
amortized  in the nine months ended  September  30, 1996 as compared to the same
period in the prior year.

         Interest  expense  for the nine  months  ended  September  30, 1996 was
$243,355 compared to $267,204 in the same period in the prior year. Amortization
of discount on notes payable for the nine months ended September 30, 1996 was $0
compared to $51,875 for the nine months ended  September 30, 1995.  The decrease
in  amortization  of discount on notes payable is due primarily to the fact that
the  amortization  was accelerated upon the repayment of the Bridge Loans in the
original  principal amount of $500,000 upon the completion of the Initial Public
Offering in November of 1995 and the amortization was subsequently discontinued.

                                       9

<PAGE>


         Cookstore Operations

         Net sales in the nine months ended September 30, 1996 were  $1,695,272,
a 4.9% increase over net sales of $1,615,561 during the same period in the prior
year. All Cookstore net sales are comparable in the period.

         Cost of goods sold,  including store occupancy and delivery costs,  was
$1,248,365  for  the  nine  months  ended  September  30,  1996 as  compared  to
$1,195,517  for the nine months ended  September 30, 1995.  Management  believes
that such  increase was due  primarily to the  increased  level of sales.  Gross
profit  as a  percentage  of net  sales  was  26.4%  for the nine  months  ended
September  30,  1996 as  compared  to  26.0%  during  the same  period  in 1995.
Management  believes  that the primary  reason for the higher  gross profit as a
percentage  of net  sales for the nine  months  ended  September  30,  1996,  as
compared to the same period in 1995, are that while sales increased for the nine
months  ended  September  30,  1996,  as  compared  to the same  period in 1995,
occupancy costs remained the same.

         Bookstore Operations

         Net sales in the nine months ended September 30, 1996 were  $6,557,186,
a 9.0%  decrease  over net sales of  $7,208,198  in the prior  year.  Management
believes that the decrease was due primarily to significant  sales  decreases in
Superstores in both Boardman and Cincinnati, Ohio, as discussed above.

         Cost of goods sold,  including store occupancy and delivery costs,  was
$5,085,078  for  the  nine  months  ended  September  30,  1996 as  compared  to
$5,523,865  for the nine months ended  September 30, 1995.  Management  believes
that such  decrease was due  primarily to the  decreased  level of sales.  Gross
profit  as a  percentage  of net  sales  was  22.5%  for the nine  months  ended
September  30,  1996 as  compared  to  23.4%  during  the same  period  in 1995.
Management  believes  that the primary  reason for the lower  gross  profit as a
percentage  of net  sales for the nine  months  ended  September  30,  1996,  as
compared to the same period in 1995,  is the lower gross  profit as a percentage
of sales in the Superstore in Boardman, Ohio, due to more aggressive discounting
in response to the early  October  1995  opening of a store by Barnes and Noble,
Inc. in close  proximity.  In addition,  while sales  decreased in the Company's
Book Superstore in Boardman, Ohio, for the nine months ended September 30, 1996,
as compared to the same period in 1995,  occupancy costs remained  substantially
the same.



                                       10

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Through September 30, 1996, the Company funded its requirements for working
capital  and  capital  expenditures  from net  proceeds  of its  Initial  Public
Offering,  through  borrowings under its bank credit  facilities and convertible
notes,  through the  conversion  to equity of $337,500 of the $622,500  original
principal of the convertible notes and $70,000 in proceeds from the excercise of
options. As of September 30, 1996, the Company had a revolving line of credit of
$395,000  and  secured  term  debt  in the  aggregate  amount  of  $214,493  and
subordinated  notes in the  aggregate  amount of  $285,000.  The bank debt bears
interest at rates of 2.5% over the prime rate of interest  and the  subordinated
notes bear an interest  rate of 5.0%.  The line of credit and the  secured  term
debt mature on January 10, 1997. The  subordinated  notes mature on December 10,
1996. Under the bank loan agreements,  no additional advances will be made under
the line of credit through the maturity date of January 10, 1997. The failure of
the Company to refinance  the Company's  existing  credit  facilities,  of which
there can be no assurance, would have a material adverse affect on the Company.

         At  September  30,  1996,  the Company was in default of the  financial
performance covenants on its bank loan.

         The Company's capital  expenditures totaled $307,100 in fiscal 1994 and
$26,775 in fiscal 1995 and $14,803 in the nine months ended  September  30, 1996
and $12,165 in the nine months ended  September 30, 1995.  Capital  expenditures
were higher in 1994 because the Company  opened two new  Cookstores.  Management
believes that capital expenditures, including the funds needed for opening three
or  possibly  four new  retail  stores,  during  the next 12 to 18 months  would
aggregate approximately $750,000.

          At September 30, 1996, the Company had recorded deferred tax assets of
approximately  $711,789,  primarily  connected  with net  operating  loss  carry
forwards.  The Company  believes,  although there can be no assurance,  that the
benefits of these tax assets will be realized through future operations. Taxable
inc ome would need to average  approximately  $127,000 per year over the next 14
years for the Company to realize the full benefit of these deferred tax assets.

         On November 7, 1995, the Company consummated an Initial Public Offering
of  750,000  shares of common  stock and  1,725,000  warrants  at a price to the
public  of  $3.00  and  $0.10,  respectively.  In  addition,  certain  principal
stockholders of the Company  purchased  60,000 shares of the Company's  Series A
Preferred Stock at a price of $5.00 per share.

         In September  1996 the Company  consummated  a private  placement to 12
investors of an aggregate of $622,500 of its convertible  notes. The convertible
notes are due and payable on December 11, 1996.  Interest is payable at the rate
of 5% per annum.  The principal  amount of each  Convertible Note is convertible
into shares of Common Stock at the rate of $1.50 per share. The shares of Common
Stock  issuable upon the  conversion of the  Convertible  Notes were  registered
under the  Securities  Act of 1933,  as  amended.  As of  September  30, 1996 an
aggregate  principal  amount  of  $337,500  of the  convertible  notes  had been
converted to 225,000 shares of the Company's Common Stock.

                                       11

<PAGE>





PART II - OTHER INFORMATION

Item 1.           LEGAL PROCEEDINGS - None

Item 2.           CHANGES IN SECURITIES - None

Item 3.           DEFAULTS UPON SENIOR SECURITIES
                  At  September  30,  1996,  the  Company  was in default of the
                  financial performance covenants on its bank loan.

Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - None

Item 5.           OTHER INFORMATION - None

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  a)       Exhibit Index

                  b)       Reports on Form 8-K - None


















                                       12

<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.



                             GAYLORD COMPANIES, INC.


                                           /s/ John Gaylord____________________
                                  By:      John Gaylord
                                           Chairman and Chief Executive Officer
Date:      November 14, 1996


















                                       13


<PAGE>


                           GAYLORD INDEX OF EXHIBITS.


Number     Description of Exhibit


1.1   --  Form of Underwriting Agreement between the Company and the
          Underwriters.+
3.1   --  Certificate of Incorporation of the Company.+
3.2   --  By-Laws of the Company.+
4.1       -- Form of Warrant Agreement between the Company and Continental Stock
          Transfer & Trust Company, as warrant agent.+
4.2   --  Specimen Certificate of the Company's Common Stock.+
4.3   --  1994 Stock Option Plan, as amended.+
4.4   --  Specimen Certificate of the Company's Warrant.+
4.5   --  Form of Underwriter's Warrants.+
4.6   --  Option Agreement between the Company and Lido Equities Corp.**
4.7   --  Option Agreement between the Company and Solay, Inc.**
4.8   --  Stock Option Agreement between the Company and Rodika Salter.**
4.9   --  Form of Convertible Note.**
10.1  --  Form of Employment Agreement between the Company and John D. Critser.+
10.2  --  Form of Employment Agreement between the Company and John Gaylord.+
10.3  --  Form of Employment Agreement between the Company and George Gaylord.+
10.4  --  Agreements between the Subsidiaries and Bank One, Columbus, N.A.+
10.5  --  Exchange Agreement, dated as of August 1, 1994, by and among George
          Gaylord, John Gaylord, Janet Gaylord Goodburn, Susan Gaylord Noble,
          Judy Gaylord, Jennifer Lynn Gaylord, John D. Critser and Gaylord
          Companies, Inc.+
10.6      -- Lease, dated September 30, 1987, between UAP-Columbus  JV326132, as
          Landlord,  and  Gaylord  Book  Company,  as Tenant,  as  amended,  for
          premises  located  at 1655 and 1657  West  Lane  Avenue,  Lane  Avenue
          Shopping Center, Upper Arlington, Ohio.+
10.7  --  Lease,  dated  December  15,  1988,  between  Retail  Projects  of
          Cincinnati,  Inc.,  as Landlord,  and Little  Professor  Enterprises,
          Inc.,  as Tenant,  as  subsequently  assigned to  Gaylord's  Inc. and
          amended,  for premises located at Space 180, Forest Fair Mall, Forest
          Park, Ohio.+
10.8      -- Lease,  dated June 13,  1989,  between  UAP-Columbus  JV326132,  as
          Landlord, and The Cookstore, Inc., as Tenant, as amended, for premises
          located at 1677 West Lane Avenue,  M-1/4 and M-6, Lane Avenue Shopping
          Center, Upper Arlington, Ohio.+
10.9      -- Lease,  dated  September  24,  1990,  between  Planned  Communities
          Company,  as Landlord,  and Little  Professor  Enterprises,  Inc.,  as
          Tenant,  for premises  located at Worthington  Square Shopping Center,
          Worthington, Ohio.+
10.10     -- Lease, dated July 16, 1992, between Sawmill Place Plaza Associates,
          as Landlord,  and Little Professor  Enterprises,  Inc., as Tenant,  as
          amended, for premises known as Space 122, Plaza at Sawmill Place, 2700
          Sawmill Place Blvd., Columbus, Ohio.+
10.11     -- Lease, dated September 10, 1993, between UAP-Columbus, JV326132, as
          Landlord,  and Gaylord  Book Co.,  Inc.,  as Tenant,  as amended,  for
          premises located at 1595 West Lane Avenue, Upper Arlington, Ohio.+
10.12     -- Lease,  dated  September  13, 1993,  between  Aetna Life  Insurance
          Company,  as Landlord,  and Gaylord  Companies,  Inc., as Tenant,  for
          premises located at Worthington Mall, Worthington, Ohio.+
10.13 --  Lease, dated October 21, 1993, between Greater Boardman Plaza, Inc.,
          as Landlord, and Gaylord Enterprises, Inc., as Tenant, for premises
          located at Room No. 101, Greater Boardman Plaza Shopping Center, 255
          Boardman-Canfield Road, Youngstown, Ohio.+

                                       14
<PAGE>


Number    Description of Exhibit



10.14    -- Lease,  dated July 15, 1994,  between  Glimcher  Properties  Limited
         Partnership,  as  Landlord,  and  Gaylord  Companies,  as  Tenant,  for
         premises  located  at the  Mall  at  Fairfield  Commons,  Store  #E181,
         Beavercreek, Ohio.+
10.15    -- Lease, dated August 19, 1994, between DeBartolo Capital Partnership,
         as Landlord, and The Cookstore Inc., as Tenant, for premises located at
         Room 240, Summit Mall Shopping Center, 3265 West Market Street,  Akron,
         Ohio.+
10.16    --  Sublease,  dated  August  31,  1994,  between  J.E.  Hanger,  Inc.,
         sublessor and The Gaylord  Companies,  Inc.,  sublessee,  as a sublease
         under the master lease dated April 23, 1991 between Teachers  Insurance
         and Annuity Association,  as lessor, and J. E. Hanger, Inc., as lessee,
         for premises located at 4006 Venture Court, Columbus, Ohio.+
10.17    --  Consignment  Agreement,  dated  February 25, 1989,  between  Ingram
         Industries,  Inc., as  Consignor,  and  Gaylord's,  Inc., as Consignee,
         relating to the store  located at 1018  Forest Fair Drive,  Cincinnati,
         Ohio.+
10.18    --  Consignment  Agreement  dated May 21,  1991,  between  Ingram  Book
         Company,  as  Consignor,  and Little  Professor  Enterprises,  Inc., as
         Consignee,  relating to the store  located at 155  Worthington  Square,
         Worthington, Ohio.+
10.19 -- Consignment Agreement, dated February 10, 1993, between Ingram Book
         Company, as Consignor, and Gaylord Book Company, as Consignee, relating
         to the store located at 1646 W. Lane Avenue, Columbus, Ohio.+
10.20    -- Consignment Agreement,  dated February 10, 1993, between Ingram Book
         Company,  as  Consignor,  and Little  Professor  Enterprises,  Inc., as
         Consignee,  relating  to  the  store  located  at  6490  Sawmill  Road,
         Columbus, Ohio.+
10.21    -- Consignment  Agreement,  dated  December  1993,  between Ingram Book
         Company,  as Consignor,  and Gaylord  Enterprises,  Inc., as Consignee,
         relating to the store located at 101 Boardman-Canfield  Road, Boardman,
         Ohio.+
10.22 -- License Agreement, dated as of January 1, 1994, between Sawworth Book
         Company, as License Owner, and Little Professor Book Centers, Inc., as
         Franchisor, relating to 155 Worthington Square, Worthington, Ohio. +
10.23    -- License  Agreement,  dated as of January 1, 1994,  between  Sawworth
         Book Company,  as License  Owner,  and Little  Professor  Book Centers,
         Inc., as Franchisor, relating to 6490 Sawmill Road, Columbus, Ohio.+
10.24    -- License  Agreement,  dated as of January  1, 1994,  between  Gaylord
         Enterprises, Inc., as License Owner, and Little Professor Book Centers,
         Inc., as Franchisor,  relating to 101 Boardman-Canfield Road, Boardman,
         Ohio.+
10.25    -- License  Agreement,  dated as of January 1, 1994, between Gaylord's,
         Inc., as License Owner,  and Little  Professor  Book Centers,  Inc., as
         Franchisor, relating to 1018 Forest Fair Drive, Cincinnati, Ohio.+
10.26 -- License Agreement, dated as of January 1, 1994, between Gaylord Book
         Company, as License Owner, and Little Professor Book Centers, Inc., as
         Franchisor, relating to 1657 W. Lane Avenue, Columbus, Ohio.+
10.27    --  Agreement,  dated as of January 1, 1994,  between  the  Company and
         Little Professor Book Centers, Inc.+
10.28 -- Letter Agreement, dated September 12, 1994, from Little Professor Book
         Centers, Inc. to Gaylord Family Limited.+
10.29 -- Mutual Release Agreement, dated September 12, 1994, among Little
         Professor Book Centers, Inc. and the Company Gaylord's, Inc., Gaylord
         Family Investments, Inc., Gaylord Book Company, Sawworth Book Company,
         Gaylord Enterprises, Inc., Gaylord Family Limited, George Gaylord and
         John Gaylord.+

                                       15
<PAGE>


Number   Description of Exhibit

10.30 -- Form of Engagement Agreement: Financial Consultant Services between
         the Underwriter and the Company.+
10.31 -- Consulting Agreement dated as of April 23, 1996 by and between Solay,
         Inc. and the Company.**
10.32 --  Consulting  Agreement  between the Company and Lido  Equities  Corp.**
10.33 -- Amendments to Agreements between the Company and Bank One Columbus,
         N.A.**
10.34 -- Amendment No. 1 to Employment Agreement between the Company and John
         Critser.**
10.35 -- Amendment No. 1 to Employment Agreement between the Company and John
         Gaylord.**
10.36 -- Amendment No. 1 to Employment Agreement between the Company and George
         Gaylord.**
16.1  -- Letter from KPMG Peat Marwick, LLP on change in certifying accountant.+
21.1  -- List of Subsidiaries.+
27.1  -- Financial Data Schedule.


+  Previously filed with the Registration Statement on Form SB-2, Registration
   No. 33-90832.
** Previously filed with the Registration Statement on Form SB-2, Registration
   No. 33-07324.






                                       16