AJAY SPORTS INC, 424B3, 1995-07-31

AJAY SPORTS INC
424B3, 1995-07-31
SPORTING & ATHLETIC GOODS, NEC

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Filed pursuant to Rule 424(b)(3)
Registration No. 33-58753
PROSPECTUS

[AJAY SPORTS, INC. LOGO APPEARS HERE]

325,000 Shares of Series C 10% Cumulative Convertible Preferred Stock 325,000
Common Stock Purchase Warrants

All of the securities offered hereby are being sold by Ajay Sports, Inc. (the
"Company"). The Series C 10% Cumulative Convertible Preferred Stock (the
"Series C Preferred Stock") and Common Stock Purchase Warrants (the "Warrants")
offered hereby must be purchased together on the basis of one share of Series C
Preferred Stock and one Warrant. The Series C Preferred Stock and Warrants will
be separately transferable immediately. Each share of Series C Preferred Stock
is convertible into approximately 14.5 shares of the Company's Common Stock.
The Series C Preferred Stock will be redeemable at any time at the stated value
of $11.00 per share plus all accrued and unpaid cumulative dividends. See
"Description of Securities--Series C Preferred Stock."

Each Warrant entitles the holder thereof to purchase, at a price of $1.00
(the "Warrant Exercise Price"), one share of Common Stock at any time through
December 31, 1996. The Warrants are subject to redemption by the Company at
$.05 per Warrant at any time on 45 days' prior written notice provided that the
closing high bid price of the Common Stock has exceeded the Warrant Exercise
Price by 50% or more for 20 consecutive trading days. The Company must have on
file a current registration statement pertaining to the Common Stock underlying
the Warrants in order for a holder to exercise the Warrants or in order for the
Warrants to be redeemed by the Company. See "Description of Securities--
Warrants."

Prior to this offering, there has been no public market for the Series C
Preferred Stock. The Company's Common Stock is traded on the NASDAQ Small-Cap
Market under the symbol "AJAY". On July 24, 1995, the closing high bid price
for the Common Stock on NASDAQ was $.56.

See "Risk Factors" for a discussion of certain risks associated with an
investment in the securities offered hereby.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price Underwriting Proceeds to
to Public Discounts (1) Company(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $10.00 $1.00 $9.00
- ------------------------------------------------------------------------------------------
Per Warrant................................... $.10 $.01 $.09
- ------------------------------------------------------------------------------------------
Total(3)...................................... $3,282,500 $328,250 $2,954,250
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) The Company has agreed to pay the Representative a nonaccountable expense
allowance, to pay a financial consulting fee, and to issue warrants to the
Representative (the "Representative's Warrants"). The Company has also
agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933 (the "Act"). See
"Underwriting."

(2) Before deducting expenses payable by the Company estimated at $285,000,
including the nonaccountable expense allowance payable to the
Representative. See "Underwriting."

(3) The Company has granted the Representative an option for 45 days to
purchase up to 48,750 additional shares of Series C Preferred Stock and up
to 48,750 additional Warrants on the same terms set forth above, solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts, and Proceeds to Company will
be $3,774,875.00, $377,487.50, and $3,397,387.50, respectively. See
"Underwriting."

The Series C Preferred Stock and Warrants are offered severally by the
Underwriters, subject to prior sale when, as and if accepted by the
Underwriters and subject to the right to reject orders in whole or in part and
certain other conditions. It is expected that delivery of certificates
representing the Series C Preferred Stock and Warrants will be made on or about
July 31, 1995.

SCHNEIDER SECURITIES, INC.
July 26, 1995
<PAGE>

[photographs of golf products here]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES C
PREFERRED STOCK, COMMON STOCK, OR WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS, SELLING GROUP MEMBERS
AND THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
SERIES C PREFERRED STOCK, COMMON STOCK, OR WARRANTS ON NASDAQ IN ACCORDANCE WITH
RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus.

THE COMPANY

Ajay Sports, Inc. (the "Company") markets and distributes golf bags, golf
accessories, and hand-pulled carts through its wholly-owned subsidiary, Ajay
Leisure Products, Inc. ("Ajay"). The golf products are sold by Ajay under the
Spalding(R), Pro Classic(R), and Private Pro(R) brand names, primarily
to large retailers, such as discount stores, department stores, catalog
showrooms, and other mass merchandise outlets. Ajay has the exclusive right to
market and distribute golf bags, hand-pulled carts, gloves, and other golf
accessories under the Spalding(R) brand name through the mass merchandise
channel. This channel includes national retailers, such as Wal-Mart, K-Mart,
and Target. Based on industry reports, management believes that sales through
the mass merchandise channel will experience continued growth.

Ajay designs and manufactures its golf bags. The preliminary production
of the golf bags is undertaken at its Delavan, Wisconsin facility, where raw
materials are designed and fabricated in preparation for sewing and assembly at
its Mexicali, Mexico facility. Final manufacturing, assembly, and distribution
occur at Ajay's Delavan, Wisconsin facility. Ajay believes that this
manufacturing arrangement enables the Company to manufacture products of high
quality while maintaining competitive costs.

Ajay sells its products through a recently strengthened network of
independent sales representatives throughout the United States. This network
was upgraded in 1994, under new management, through additional sales coverage in
key markets and a focus on representatives that concentrate principally on the
sports business.

The Company also designs, manufactures, and markets casual living
furniture through another wholly-owned subsidiary, Leisure Life, Inc. ("Leisure
Life"). Leisure Life's products are sold under the In-Motion(R) name. The
products utilize a patented design which emphasizes comfort, adjustability,
durability, and value for the porch and patio. The Company expects sales by
Leisure Life, which was acquired in August 1994, to become significant as a
percentage of total sales in 1995. Leisure Life plans to develop an economical
line of indoor furniture later in 1995 for introduction in 1996.

Throughout 1994, new management, experienced in "turnaround" situations,
implemented a plan of action to attain profitability in 1995. Management
instituted a cost reduction program which included a reduction in salary and
labor positions, along with related fringe benefits. The Company also obtained
more favorable material costs, enhanced its material utilization methods, and
instituted more efficient manufacturing techniques. The Company strengthened its
sales coverage by appointing additional experienced independent sales
representatives and increased its emphasis on product development, which
resulted in several new product introductions in late 1994. See "Business."
Based on results of operations for the first quarter of 1995, management
believes that its plan of action will be successful. In 1994, entities with whom
management of the Company is affiliated made an additional commitment to the
Company by providing the Company with its credit facility and $2,400,000 in new
equity. See "Management" and "Certain Transactions."

The Company intends to use the proceeds of this offering to implement its
growth strategy. Following this offering, the enhanced financial resources
available to the Company will provide it with additional inventory and accounts
receivable financing, permit it to improve and enhance its manufacturing
capabilities, and provide it with working capital which may be used to expand
product lines, develop new markets and possibly acquire companies or product
lines compatible with or complementary to its present products in order to
expand its leisure and recreational business. See "Use of Proceeds."

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<PAGE>

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Securities offered (1)................ 325,000 shares of Series C Preferred
Stock and 325,000 Warrants. 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 publicly-held warrants
to purchase Common Stock.
Accordingly, "Warrants" refers to
those offered hereby and the
outstanding publicly-held warrants.
See "Description of Securities."

Common Stock outstanding:
Before the Offering (2)............. 22,545,537 shares
After the Offering assuming
full conversion of Preferred
Stock (2)....................... 27,272,810 shares

NASDAQ symbols
Common Stock........................ AJAY
Preferred Stock..................... AJAYP (Proposed)
Warrants............................ AJAYW

Use of net proceeds................... The Company intends to use the
proceeds of this offering for inventory
and accounts receivable financing, to
improve and enhance its manufacturing
capabilities, and to provide working
capital which may be used to expand
product lines, develop new markets, and
possibly acquire companies or product
lines compatible with or complementary
to its present products in order to
expand its leisure and recreational
business. See "Use of Proceeds."
________________
</TABLE>

(1) Does not include up to 48,750 shares of Series C Preferred Stock and
48,750 Warrants that may be sold by the Company pursuant to the
Representative's over-allotment option. See "Underwriting."

(2) Assumes no exercise of (i) the Warrants offered hereby, (ii) the over-
allotment option, (iii) presently outstanding Series B Preferred Stock,
warrants and options, and (iv) the Representative's Warrants. See
"Description of Securities" and "Underwriting."

RISK FACTORS

This Offering involves substantial risks associated with the Company and its
business including, among others, risks associated with substantial industry
competition, significant indebtedness, reliance on a few significant customers
and dependence on management. See "Risk Factors."

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION

Three Months
Year Ended December 31, Ended March 31,
------------------------------------------------ ---------------
(in thousands, except per share amounts and ratios)
Statement of Operations: 1990 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales...................... $16,937 $20,049 $21,014 $15,902 $12,899 $ 3,663 $ 5,454
Gross profit................... 2,519 3,914 3,858 1,730 608 476 1,092
Operating income (loss)........ (344) 677 962 (1,104) (2,139) (156) 340
Net income (loss).............. (1,080) (2,121) 381 (1,921) (3,080) (320) 155
Net income (loss)
per common share............. (.14) (.26) .02 (.24) (.27) (.04) .01
Weighted average common
shares outstanding........... 7,602 8,270 8,457 8,812 12,218 8,825 22,546
Ratio of earnings to combined
fixed charges and preferred
stock dividends.............. .01 (.51) .86 (.67) (1.44) 1.00
Coverage deficiency............ 1,705 2,746 244 2,546 3,705 --
<CAPTION>
March 31, 1995
-----------------
(in thousands)
As Ad-
Balance Sheet Data: Actual justed (1)
------- -------
<S> <C> <C>
Working capital................................................................... $ 737 $ 3,426
Total assets...................................................................... 11,125 13,814
Long-term debt.................................................................... 106 106
Stockholders' equity.............................................................. 2,195 4,884
</TABLE>

(1) Adjusted to reflect the sale by the Company of 325,000 shares of Series C
Preferred Stock and 325,000 Warrants and the application of the estimated
net proceeds of this offering of $2,689,250 as indicated under "Use of
Proceeds."

The operating and balance sheet data shown above were derived from
audited financial statements of the Company for full fiscal years, as well as
unaudited interim period financial statements. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," as well as the Consolidated Financial Statements of
the Company and notes thereto, included elsewhere in the Prospectus. The results
of operations for the three months ended March 31, 1995 are not necessarily
indicative of the operating results for the full year.

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<PAGE>

THE COMPANY

The Company was organized under Delaware law on August 18, 1988.
Principal manufacturing, distribution and executive offices are located at 1501
E. Wisconsin Street, Delavan, Wisconsin 53115, and its telephone number is (414)
728 5521. The Company's administrative office is at 7001 Orchard Lake Road,
Suite 424, West Bloomfield, Michigan 48322. The Company has an additional
manufacturing and distribution facility at 215 4th Avenue North, Baxter,
Tennessee 38544, headquarters for its Leisure Life subsidiary, and a
manufacturing facility in Mexicali, Mexico.

RISK FACTORS

THIS OFFERING INVOLVES SUBSTANTIAL RISKS ASSOCIATED WITH THE COMPANY AND
ITS BUSINESS INCLUDING, AMONG OTHERS, RISKS ASSOCIATED WITH SUBSTANTIAL INDUSTRY
COMPETITION, SIGNIFICANT INDEBTEDNESS, RELIANCE ON SIGNIFICANT CUSTOMERS AND
DEPENDENCE ON MANAGEMENT.

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, AMONG OTHER FACTORS, THE
RISK FACTORS AND OTHER SPECIAL CONSIDERATIONS RELATING TO THE COMPANY AND THIS
OFFERING SET FORTH BELOW.

THE COMPANY

QUALIFIED AUDITORS' OPINIONS. The report of the Company's auditors on the
financial statements for the last fiscal year contains an explanatory paragraph
related to substantial doubt regarding the Company's ability to continue as a
going concern due to the Company's significant losses for the 1994 and 1993
fiscal years and its reliance upon affiliated companies to fund cash flow
deficiencies through equity infusions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements.

LOSSES FROM OPERATIONS. With the exception of the 1992 fiscal year, the
Company has incurred losses from operations since its inception. At March 31,
1995, the accumulated deficit was $8,241,000 (unaudited) and the net loss for
the 1994 fiscal year was $3,080,000. There is no assurance that the Company will
be profitable in 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements.

SIGNIFICANT INDEBTEDNESS. Ajay had a current indebtedness at March 31,
1995 of $6.8 million due February 1, 1996 under a Loan Agreement with Williams
Controls Industries, Inc., a wholly-owned subsidiary of Williams Controls, Inc.
(the parent and subsidiary companies hereafter referred to collectively as
("Williams Controls"), which was secured by substanially all of the assets of
Ajay. 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 the Loan Agreement with Williams Controls. All of the
Company's subsidiaries and Williams Controls have guaranteed payment of this
credit facility and the Company and its subsidiaries have pledged their
inventory and receivables as collateral. Accordingly, as of July 25, 1995,
approximately $6.4 million is owed to U.S. Bank. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Certain Transactions."

PRICE SENSITIVITY. Sales of golf accessories, golf bags, hand-pulled golf
carts, billiard accessories, indoor and outdoor leisure furniture to mass
merchandisers and regional retailers are highly price-sensitive. Increases in
labor, material and manufacturing costs could adversely affect the Company's
margins and, therefore, its profits. See "Business."

RELIANCE ON FOREIGN SUPPLIES AND THE CONDUCT OF BUSINESS IN FOREIGN
JURISDICTIONS. Ajay purchases certain parts, components, and products abroad.
Accordingly, the relative value of the U.S. dollar against foreign currencies,
the imposition of tariffs, import and export controls, and changes in

6
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governmental policies could significantly affect its margins and, therefore, its
profits. Furthermore, a portion of its manufacturing operations are conducted in
Mexico, where such operations may be subject to local economic, social and
political influences, including but not limited to, transportation delays and
interruptions, political and economic uncertainty and disruptions, and labor
strikes, any of which could adversely affect its operations. To date, the
Company has not experienced any material adverse effects as a result of its
foreign operations. During 1994, Ajay expended approximately $60,000 to
terminate the employment of some of its Mexican employees; however, since the
fourth quarter of 1994, the Mexican currency has suffered a devaluation, thereby
lowering the cost of work done in Mexico in terms of U.S. dollars. See
"Business - Competition."

COMPETITION. Ajay competes with other manufacturers of golf accessories,
golf bags, hand-pulled golf carts and related sports accessories, some of which
have greater assets, name recognition, broader product lines, distribution
networks, and financial, managerial, and marketing resources than the Company.
Leisure Life, the other operating subsidiary of the Company, has had only
limited operations and sales to date. At this time, as compared to the large
number of manufacturers of indoor and outdoor furniture, it is not a significant
competitor. See "Business - Competition."

RELIANCE ON SIGNIFICANT CUSTOMERS. During the years ended December 31,
1993 and 1994 approximately 70% and 72%, respectively, of the Company's sales
were attributable to its top ten customers, most of whom were mass
merchandisers. Furthermore, Ajay's largest customer accounted for approximately
41% of Ajay's sales in 1994. The Company has experienced the loss of a
significant customer in the past, resulting in a marked decrease in sales. The
loss of any of these customers could adversely affect the Company's business.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations" and "Business -Marketing and Distribution."

DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING. Over 92% of the Company's
sales in 1994 were related to sales of golf products. The demand for golf
products is related to the number of persons playing golf and the number of
rounds of golf played, as well as the amount of discretionary spending by
consumers. Each of these factors may be adversely affected by general economic
conditions. A decrease in consumer spending on golf could have an adverse effect
on the Company's financial condition and results of operations. Seasonal weather
condition patterns can significantly affect the golf business and all products
involved. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Results of Operations" and "Business."

DEPENDENCE ON MANAGEMENT. The Company is dependent upon the management of
Ajay and Leisure Life for the day-to-day operation of its business and in
particular is dependent upon the services of Mr. Thomas W. Itin, Chairman and
President of the Company, and Mr. Clarence H. Yahn, President of Ajay and
Leisure Life. The loss of services of either of these officers for any reason
could have a material adverse effect on the Company's business. The Company has
entered into an agreement with Mr. Itin under which he will be paid $1 per year
for fiscal 1995, with salary for 1996 to be determined by the Company's Board
of Directors. There is no agreement with Mr. Yahn. No assurance can be given
that the Company would be able to replace either of these men should the Company
lose their services. The Company does not have key man insurance on Mr. Yahn or
Mr. Itin. See "Management and Key Personnel."

CONFLICTS OF INTEREST. Thomas W. Itin, the Chairman and President of the
Company, is also the chairman, president, treasurer, chief executive officer,
chief operating officer, and a 26.8% beneficial owner of Williams Controls. Ajay
had a current indebtedness at March 31, 1995 of $6.8 million due February 1,
1996 pursuant to a Loan Agreement with Williams Controls. The Company had
guaranteed payment of this loan and had pledged all of the outstanding stock of
Ajay. Mr. Itin had personally guaranteed this debt. This loan was repaid on July
25, 1995 through a new credit facility, for which Williams Controls has provided
its guarantee. There have been other transactions between the Company and
affiliates. See "Certain Transactions." With regard to transactions involving
affiliates of the Company, the Company

7
<PAGE>

utilizes fairness opinions or obtains the approval of the disinterested
directors of the Company. See "Management and Key Personnel - Conflicts of
Interest." It is likely that officers, directors, and affiliates of the Company
will continue to provide financial assistance in the future. If provided, such
assistance will be at a fair market value (i.e., on terms no less favorable to
the Company than those that can be obtained from unaffiliated sources) and
approved by a majority of the disinterested directors of the Company.

PRODUCT LIABILITY. The Company faces the risk of exposure to product
liability claims if consumers using its products are injured in connection with
their use. While the Company will continue to attempt to take appropriate
precautions, there can be no assurance that they will avoid significant product
liability exposure. Although management believes that the Company has adequate
product liability insurance based on its historical coverage, there can be no
assurance that its current insurance coverage is adequate, that economically
affordable insurance coverage can be maintained or will be available at all in
the future, or that a product liability claim would not materially adversely
affect the business or financial condition of the Company. See "Business - Legal
Proceedings."

DEPENDENCE ON LICENSE AGREEMENTS. A significant portion of the Company's
revenues result from the sale of products manufactured and sold pursuant to
various license agreements. No assurance can be given that the Company will be
able to remain a licensee under such agreements and the loss of any such license
could have a material adverse effect on the Company's business. See "Business -
Licensing."

ALLOCATION OF WORKING CAPITAL AND POTENTIAL ACQUISITIONS. The net
Offering proceeds have been allocated for additional inventory and accounts
receivable financing, the improvement and enhancement of the Company's
manufacturing capabilities, and working capital which may be used to expand
product lines, develop new markets and possibly acquire companies or product
lines compatible with or complementary to its products. Investors in this
Offering will not be able to directly control the use of such funds or have any
opportunity to review any such acquisition before the occurrence of such an
event. Accordingly, investors must therefore rely on management of the Company
for directing the expenditure of these funds. Further, there can be no assurance
that any such acquisition will prove successful. See "Use of Proceeds."

GOVERNMENTAL REGULATIONS. The Company is subject to a variety of
regulations at the state, local and federal level and also operates under the
jurisdiction of foreign governments in countries in which the Company does
business. Adverse changes in these regulations could seriously impact the
Company's operations and profits. See "Business - Governmental Regulations."

AUTHORIZATION OF PREFERRED STOCK. The Company is authorized to issue up to
10,000,000 shares of preferred stock, in one or more series, with such rights,
preferences, qualifications, limitations, and restrictions as shall be fixed and
determined by the Company's Board of Directors from time to time. Any such
preferences may operate to the detriment of the rights of the holders of the
Common Stock. There are issued and outstanding 12,500 shares of Series B
Preferred Stock. Prior to this offering, no shares of Series C Preferred Stock
were issued or outstanding. See "Description of Securities - Preferred Stock."

LIMITATIONS ON CHANGE OF CONTROL. The "takeover" statute of the Delaware
General Corporation Law to which the Company is subject could have the effect of
delaying, deferring or preventing a change of control of the Company or the
removal of existing management and, as a result, could prevent the stockholders
of the Company from being paid a premium for their shares of Common Stock. See
"Description of Securities - Certain Provisions of Delaware Law and the
Company's Certificate of Incorporation."

INDEMNIFICATION AND LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS.
Pursuant to the Certificate of Incorporation and Bylaws of the Company, the
officers, directors, employees and agents of the

8
<PAGE>

Company are entitled to indemnification from the Company for liabilities
incurred in connection with the business or activities undertaken in their
official capacities where the acts involved did not constitute intentional
misconduct, a knowing violation of the law, or the receipt of an impermissible
personal benefit. Furthermore, the Certificate of Incorporation of the Company
limits the personal liability of directors to the Company and its shareholders
for monetary damages, except for liability for any breach of the director's duty
of loyalty, for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, for unlawful payment of dividends, for
unlawful stock purchase or redemption, or for any transaction from which the
director derived any improper personal benefit. Therefore, while the directors
and officers may be accountable to the Company and its shareholders as
fiduciaries, the Company and its shareholders have a more limited right of
action than they would, absent the indemnification and limitation of liability
provisions contained in the Company's Certificate of Incorporation and Bylaws.

THE OFFERING

CONTROL BY MANAGEMENT. Following completion of this Offering, the present
management of the Company will own, assuming no exercise of the Warrants or
other stock options and no conversion of the outstanding Preferred Stock,
approximately 68% of the outstanding Common Stock. Given the magnitude of
convertible securities owned by management, the lack of cumulative voting, and
the fact that one-third of the Company's outstanding Common Stock constitutes a
quorum, persons not affiliated with management may not have the power to elect a
single director. As a practical matter, the current management will continue to
effectively control the Company. See "Principal Shareholders."

ABSENCE OF A PUBLIC MARKET. While there currently is a public market for
the Common Stock and the Warrants of the Company, there is no public market for
the Series C Preferred Stock, and no assurance can be given that a market will
develop subsequent to this Offering or that purchasers will be able to resell
their securities at the public offering price, or that a purchaser will be able
to liquidate his/her investment without considerable delay, if at all. If a
market does develop, the price may be highly volatile. Factors such as those
discussed in this "Risk Factors" section may have a significant effect on the
market price of the securities being offered. See "Market for the Company's
Stock and Related Stockholder Matters."

ACQUISITION BY OTHER STOCKHOLDERS AT LESS COST THAN INVESTORS IN THIS
OFFERING. The holder of the Series B Preferred Stock acquired its shares of
Common Stock, and has the right to acquire additional shares of Common Stock,
pursuant to the conversion privileges of that class of stock at a cost ($.34 per
share) substantially less than that which the investors will be able to convert
their Series C Preferred Stock to Common Stock ($.6875 per share). The holder
of the Series B Preferred Stock may be issued up to 6,900 additional shares of
Series B Preferred Stock to satisfy certain obligations owed to it.
Additionally, certain outstanding options and warrants are exercisable to
purchase Common Stock at prices ranging between $.34 to $.80, which are less
than the Warrant Exercise Price of $1.00. To the extent that shares of Common
Stock are issued pursuant to the conversion of the Series B Preferred Stock or
the exercise of these other options and warrants, investors in this Offering
will experience dilution in ownership of the Company and in their investment See
"Dilution".

POTENTIAL FUTURE SALES UNDER RULE 144; EXERCISE OF REGISTRATION RIGHTS.
Of the 22,545,537 shares of Common Stock currently outstanding, 14,261,353 are
"restricted securities" and may in the future be sold in compliance with Rule
144 under the Securities Act of 1933, as amended (the "Securities Act"). Rule
144 generally provides that beneficial owners of shares who have held such
shares for two years may sell within a three-month period a number of shares not
exceeding 1% of the total outstanding shares or the average trading volume of
the shares during the four calendar weeks preceding such sale. Sales of
substantial amounts of Common Stock in the public market after the Offering
pursuant to Rule 144 or otherwise, or the perception that such sales could occur
may adversely affect prevailing market prices of the Common Stock. With regard
to the restricted shares, 5,552,529 are currently eligible for sale under

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Rule 144, 1,650,000 will become eligible in August 1996, and 7,058,824 will
become eligible for sale in October 1996. See "Shares Eligible for Future Sale."

Whenever the Company proposes to register shares of Common Stock under
the Securities Act, either for its own account or for the account of
stockholders exercising registration rights, holders subject to outstanding
options may require the Company, subject to certain limitations, to include all
or part of their shares in the registration. The exercise of any of these
registration rights may hinder the Company in making public offerings of its
securities in the future and may adversely affect the market price of the Common
Stock.

DIVIDENDS. The Company expects to pay dividends on the Series B Preferred
Stock and Series C Preferred Stock, which have a preference as to the payment of
any dividend on any other shares of capital stock of the Company. Accordingly,
the Company does not contemplate paying cash dividends on Common Stock in the
foreseeable future since it will use all of its earnings, if any, after the
payment of dividends on the Series B Preferred Stock and Series C Preferred
Stock, to finance expansion of its operations. See "Dividend Policy" and
"Description of Securities."

RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS.
The ratio of earnings to combined fixed charges and preferred stock dividends
for the last five fiscal years indicates a less than one-to-one coverage. Only
the ratio for the three months ended March 31, 1995 indicates a one-to-one
coverage. There can be no assurance that the Company will continue to generate
sufficient earnings to cover fixed charges and dividends on the Series B
Preferred Stock which is presently outstanding and the Series C Preferred Stock
which is being offered hereby. See "Prospectus Summary - Summary Consolidated
Financial Information" and the Consolidated Financial Statements.

UNDERWRITERS' INFLUENCE ON THE MARKET. A significant amount of the Series
C Preferred Stock and Warrants may be sold to customers of the Underwriters.
Such customers subsequently may engage in transactions for the sale or purchase
of such securities through or with the Underwriters. Although they have no legal
obligation to do so, the Underwriters from time to time in the future may make a
market in and otherwise effect transactions in the Company's securities. To the
extent the Underwriters do so, they may be a dominating influence in any market
that might develop and the degree of participation by the Underwriters may
significantly affect the price and liquidity of the Company's securities. Such
market making activities, if commenced, may be discontinued at any time or from
time to time by the Underwriters without obligation or prior notice. If a
dominating influence at such time, the Underwriters' discontinuance of market
making activities could adversely affect the price and liquidity of the
securities.

CURRENT PROSPECTUS AND STATE REGISTRATION REQUIRED TO EXERCISE WARRANTS.
Holders of Warrants may exercise them only if a current prospectus relating to
the Common Stock underlying the Warrants is then in effect and only if such
shares are qualified for sale or exempt from qualification under applicable
state securities laws of the states in which holders of the Warrants reside. In
the Warrant Agreement, the Company has agreed to register or qualify the shares
in all of the jurisdictions in which the securities offered hereby are
registered or qualified. Although the Company has undertaken to make a good
faith effort to maintain the effectiveness of a current prospectus covering the
Common Stock underlying the Warrants and to register or qualify the shares for
sale in jurisdictions where the holders of Warrants reside, there can be no
assurance that the Company will be able to do so. The Company may determine not
to register or qualify the shares underlying the warrants in certain
jurisdictions where the time and expense involved would not justify such
registration and qualification. The Warrants may be deprived of any value in the
event this Prospectus or another prospectus covering the shares issuable upon
exercise of the Warrants is not kept effective or if such shares are not
registered in the states in which holders of the Warrants reside. See
"Description of Securities - Warrants."

OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES; POTENTIAL DILUTION AND
ADVERSE IMPACT ON ADDITIONAL FINANCING. As of July 25, 1995, the Company had
outstanding options, warrants, and
10
<PAGE>

convertible securities to acquire an aggregate of 18,322,843 shares of
Common Stock. In addition, upon the conclusion of this offering, additional
convertible shares of Series C Preferred Stock and Warrants will be issued. To
the extent that the outstanding options, warrants, and convertible securities
are exercised or converted, dilution to the interests of the Company's
shareholders may occur. For the life of the options, warrants, and convertible
securities described above, the holders will have the opportunity to profit from
a rise in the price of the underlying Common Stock. The existence of such
options, warrants, and convertible securities may adversely affect the terms on
which the Company can obtain additional financing, and the holders of such
options, warrants, and convertible securities can be expected to exercise them
at a time when the Company would, in all likelihood, be able to obtain
additional capital by an offering of its unissued capital stock on terms more
favorable to the Company than those provided by such options, warrants, and
convertible securities. See "Description of Securities" and "Shares Eligible for
Future Sale."

DILUTION

At March 31, 1995, the Company had a net tangible book value of $750,000 or
$.03 per share of Common Stock. Net tangible book value per share of Common
Stock represents total tangible assets reduced by total liabilities and the
liquidation value of outstanding Series B Preferred Stock, divided by the number
of outstanding shares of Common Stock. Without taking into account any changes
in net tangible book value after March 31, 1995, after giving effect to the sale
by the Company of 325,000 shares of Series C Preferred Stock and 325,000
Warrants for net proceeds of $2,689,250 (and attributing no part of the proceeds
to the Warrants), and assuming that all of the shares of Series C Preferred
Stock are converted into shares of Common Stock at a conversion rate of 15
shares of Common Stock for one share of Preferred Stock, the pro forma net
tangible book value of the Company's Common Stock at March 31, 1995 would have
been $3,439,000 or $.13 per share. Accordingly, after the offering, the net
tangible book value of the shares of Common Stock held by the present
shareholders would have increased $.10 per share. Concurrently, new investors
converting shares of Series C Preferred Stock to Common Stock would suffer
substantial immediate dilution of $.87 per share (87%).

The following table illustrates the foregoing dilution of a new investor's
equity in a share of Common Stock assuming the conversion of all Series C
Preferred Stock to Common Stock at a conversion rate of 15 shares of Common
Stock for one share of Preferred Stock:

<TABLE>

<S> <C>
Conversion price per share of Common Stock........ $1.00
Net tangible book value per common share
before offering................................. $0.03
Increase per share attributable to new investors.. $0.10
Pro forma net tangible book value per common
share after offering............................ $0.13
Dilution per common share to new investors.....(87.%)$0.87
</TABLE>

The following table sets forth, as of the date of this Prospectus, a
comparison of the respective investment and equity of the current holders of the
Common Stock and investors purchasing shares of Series C Preferred Stock in this
offering. Such table assumes that the investors purchasing shares of Series C
Preferred Stock in this offering will convert such shares into shares of Common
Stock at a conversion rate of 15 shares of Common Stock for one share of
Preferred Stock.

11
<PAGE>

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------- -------------------- Price per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Officers, directors, and
affiliates............. 15,600,764 56.9% $ 5,040,014 38.9% $0.32
Other existing
shareholders........... 6,944,773 25.3% 4,670,880 36.0% $0.67
New investors............ 4,875,000 17.8% 3,250,000 25.1% $1.00
---------- ----- ----------- -----
Total.................... 27,420,537 100.0% $12,960,894 100.0%
========== ===== =========== =====
</TABLE>

The foregoing gives effect to the liquidation preference of the 12,500
shares of Series B Preferred Stock presently outstanding, but does not give
effect to the possible issuance of up to 6,900 additional shares of Series B
Preferred Stock. Each share of Series B Preferred Stock is convertible into
294.12 shares of Common Stock at the sole discretion of the holder. See
"Certain Transactions" and Description of Securities - Series B Preferred
Stock."

MARKET FOR THE COMPANY'S STOCK AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock has been traded over-the-counter since
November 1989 and is reported by Nasdaq. The following table sets forth the
range of high and low bid quotations given quarterly by Nasdaq for the last two
years. These over-the-counter market quotations reflect inter-dealer prices
without retail mark-up, mark-down or commissions and may not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
1993 HIGH BID LOW BID

<S> <C> <C>
First Quarter..................... $.69 $.47
Second Quarter.................... .69 .38
Third Quarter..................... .47 .31
Fourth Quarter.................... .41 .31

1994

First Quarter..................... $.44 $.31
Second Quarter.................... .44 .13
Third Quarter..................... .59 .25
Fourth Quarter.................... .59 .34

1995

First Quarter..................... $.59 $.38
</TABLE>

On July 24, 1995, the closing high bid price for the Common Stock on
NASDAQ was $.56.

The number of record holders of the Company's Common Stock as of July 24,
1995 was 399 according to the Company's transfer agent.

DIVIDEND POLICY

Holders of shares of Common Stock are entitled to dividends when, and if,
declared by the Board of Directors out of funds legally available therefor. The
Company has never paid any cash dividends on

12
<PAGE>

its Common Stock and intends to retain future earnings, if any, to finance the
development and expansion of its business. The Company's future dividend policy
is subject to the discretion of the Board of Directors and will depend upon a
number of factors, including future earnings, capital requirements, limitation
on distributions from Ajay to the Company, and the financial condition of the
Company.

Holders of both the Series B Preferred Stock and Series C Preferred Stock
have a right to dividends in preference to the payment of any dividend on any
other shares of capital stock of the Company. See "Description of Securities."

USE OF PROCEEDS

The net proceeds to the Company are estimated to be $2,689,250
($3,132,387.50 if the Representative's over-allotment option is exercised in
full) after deduction of underwriting discounts, the Representative's
nonaccountable expense allowance and consulting fee, and other expenses of this
Offering.

The Company anticipates such net proceeds will be utilized substantially
as follows:

APPLICATION OF PROCEEDS AMOUNT PERCENTAGE
<S> <C> <C>
Inventory and accounts receivable financing.................................. $1,500,000 55.8%
Enhancement/improvement of manufacturing capabilities:
Acquisition of additional manufacturing equipment for Mexicali facility... 100,000 3.7%
Acquisition of containers for transport of work in process
inventory between the Delavan and Mexicali facilities................ 40,000 1.5%
Mexicali plant improvements and repair.................................... 60,000 2.2%
Purchase of additional equipment for Leisure Life's
manufacturing operations............................................. 30,000 1.1%
Construction of additional storage for Leisure Life's finished
product inventory and building improvements.......................... 70,000 2.6%
Working capital.............................................................. 889,250 33.1%
---------- ------
Total............................................................. $2,689,250 100.0%
========== ======
</TABLE>

The Company anticipates that conventional revolving credit facilities,
which are typically based on 80-85% of existing accounts receivable and 50-60%
of inventory, will not provide sufficient working capital for expansion. Such
financing tends to lag behind a company whose sales are increasing. Accordingly,
$1,500,000 of the proceeds from this offering has been allocated to furnish
additional financing for the Company's anticipated increase in sales. It should
be noted that all $1,500,000 will not be used at all times. The amount of
financing required fluctuates during the year, since the sales of the Company
are seasonal. Any amounts not being used for financing may be added to the
general working capital of the Company. The amount allocated for working capital
will be used for general corporate purposes, including expanding the Company's
product lines and developing additional markets for its products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations" regarding the results for the quarter ended
March 31, 1995 and changes made to the Company's sales programs.

The proceeds from this Offering are expected to be adequate to meet the
Company's cash requirements during the one year period following this Offering.
The amounts set forth above merely indicate the Company's present intentions for
the use of proceeds. However, events not currently known to the Company may
require a change in the allocation of funds. The Company's business plan
contemplates that the Company may acquire companies or product lines compatible
with or complementary to the Company's present products. Although the Company
has had and will have

13
<PAGE>

discussions with potential acquisition candidates, it does not have any plans,
agreements or understandings with respect to any acquisitions. Moreover, it may
not be able to consummate any such transaction. The amount, if any, to be
applied to any acquisition cannot be determined at this time. Any changes in
proposed expenditures will be made at the discretion of the Board of Directors
of the Company.

The proceeds from the exercise of the Representative's over-allotment
option and Warrants, if any, will be added to working capital.

To the extent that the net proceeds of this Offering are not used
immediately, they will be invested in certificates of deposit, savings deposits,
short-term obligations of the United States Government, other suitable money
market instruments or shares of regulated investment companies investing in such
instruments; or they will be left in checking accounts bearing interest. The
Company does not intend to engage in the business of investing, reinvesting,
owning, holding or trading in securities or otherwise engaging in activities
which would render the Company an "investment company" as that term is defined
in the Investment Company Act of 1940.

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company as of March 31, 1995, and as adjusted to give effect to the sale by
the Company of 325,000 shares of Series C Preferred Stock and 325,000 Warrants
for net proceeds of $2,689,250. The table should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
March 31, 1995
---------------------
Actual As Adjusted
------ -----------
<S> <C> <C>
(in thousands)
Short-term obligations................................. $ 8,824 $ 8,824
======= =======

Long-term debt......................................... $ 106 $ 106
------- -------

Stockholders' equity:
Preferred stock, $.01 par value per share;
10,000,000 shares authorized; 12,500 shares issued
at liquidation value, 337,500 issued as adjusted
for the offering at liquidation value.............. 1,250 4,500
Common stock, $.01 par value per share;
100,000,000 shares authorized, 22,545,537
shares issued and as adjusted for the offering..... 225 225
Additional paid-in capital........................... 8,961 8,400
Accumulated deficit.................................. (8,241) (8,241)
------- -------

Total stockholders' equity............................. 2,195 4,884
------- -------

Total capitalization................................... $ 2,301 $ 4,990
======= =======
</TABLE>

14
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The operating and balance sheet data shown below were derived from audited
financial statements of the Company for full fiscal years, as well as unaudited
interim period financial statements. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," as well as the Consolidated Financial Statements of the Company and
notes thereto, included elsewhere in the Prospectus. The results of operations
for the three months ended March 31, 1995 are not necessarily indicative of the
operating results for the full year.

(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
----------------------------------------------------------- --------------------
Statement of Operations: 1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>

Net sales................... $16,937 $20,049 $21,014 $15,902 $12,899 $ 3,663 $ 5,454
Cost of sales............... 14,418 16,135 17,156 14,172 12,291 3,187 4,362
------- ------- ------- ------- ------- ------- -------

Gross profit................ 2,519 3,914 3,858 1,730 608 476 1,092
Selling, general, and
administrative expenses.... 2,863 3,237 2,896 2,834 2,747 632 752
------- ------- ------- ------- ------- ------- -------

Operating income (loss)..... (344) 677 962 (1,104) (2,139) (156) 340
------- ------- ------- ------- ------- ------- -------
Non-operating income
(expense):
Interest expense - net...... (780) (854) (906) (697) (614) (154) (185)
Loss on write-down of
investment in affiliate.... (36) (2,014) -- (123) -- -- --
Gain on disposition of
investment................. -- -- 275 -- (38) -- --
Other, net.................. 80 70 50 3 (289) (10) --
------- ------- ------- ------- ------- ------- -------

Income (loss) from opera-
tions before income taxes.. (1,080) (2,121) 381 (1,921) (3,080) (320) 155
Income tax expense
(benefit).................. -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------

Net income (loss)........... $(1,080) $(2,121) $ 381 $(1,921) $(3,080) $ (320) $ 155
======= ======= ======= ======= ======= ======= =======

Net income (loss)
per common share........... $(.14) $(.26) $.02 $(.24) $(.27) $(.04) $.01
======= ======= ======= ======= ======= ======= =======

Weighted average common
and common stock equiva-
lent shares outstanding.... 7,602 8,270 8,457 8,812 12,218 8,825 32,629
======= ======= ======= ======= ======= ======= =======
<CAPTION>
December 31, March 31, 1995
----------------------------------------------------------- --------------------
As Ad-
Balance Sheet Data: 1990 1991 1992 1993 1994 Actual justed (1)
------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital............. $ 1,434 $ 6,954 $ 2,754 $ 903 $ 593 $ 737 $ 3,426
Total assets................ 11,959 11,792 12,783 10,507 9,365 11,125 13,814
Long-term debt.............. 2,450 8,254 -- -- 121 106 106
Stockholders' equity........ 1,680 (51) 3,855 1,963 2,035 2,195 4,884
- ----------------------
</TABLE>

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Until October 1993, the Company was controlled, in part, by Roadmaster
and Equitex. TICO, an entity controlled by Thomas W. Itin, the Chairman and
President of the Company, obtained control from Roadmaster and Equitex in
October 1993. Since that date, Mr.Itin has obtained a new credit facility from
an affiliate, brought in new management with experience in "turnaround"
situations, and provided additional capital through various affiliated entities.
Management, through the capital it has provided and the efforts it has expended,
is committed to reversing the losses that occurred in 1993 and 1994, obtaining a
credit facility from an asset-based lender, and improving the financial
condition of the Company.

RESULTS OF OPERATIONS

Quarters Ended March 31, 1994 and 1995. During the quarter ended March 31,
1995 the Company had net sales of $5,454,000, compared to $3,663,000 for the
same period in 1994. The overall sales increase of 49% occurred throughout all
of the golf product lines, with significant percentage increases in golf gloves
and carts (78% and 182%, respectively). The sales increase was attributable to
increased sales to both existing and new customers and with respect to both
large and small retailers. Since Leisure Life was acquired in August 1994,
there were no 1994 comparable period sales. However, sales for the first
quarter of 1995 were $361,000, as compared to sales from August through December
of 1994 of $154,000.

Net Sales by Product Line
(in thousands)

<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Golf bags $2,095 $2,714
Golf accessories 759 893
Golf gloves 594 1,060
Golf carts 118 333
Billiard accessories 97 93
Leisure furniture 0 361
------ ------
Total $3,663 $5,454
====== ======
</TABLE>

Gross profit for the three months ended March 31, 1995 expressed as a
percentage of net sales increased to 20%, compared to 13% for the same period in
1994.

Selling, general, and administrative expenses for the three months ended
March 31, 1995 increased by $120,000 as compared to the same period in 1994, but
decreased as a percentage of sales (13.8% for the first quarter of 1995, versus
17.3% for 1994). The lower percentage in 1995 resulted from increased sales
volume.

Operating income for the first quarter of 1995 was $340,000, an increase of
$496,000 when compared to the operating loss of $156,000 for the first quarter
of 1994. This was due primarily to a

16
<PAGE>

decrease in the cost of sales, which was 80% for 1995 and 87% for 1994, plus the
positive effect of a 49% increase in sales.

Interest expense increased by $31,000 in the first quarter of 1995 compared
to 1994, as a result of higher debt and higher interest rates.

As a result of the above, the net income for the first quarter ending March
31, 1995 was $155,000, compared to a net loss of $320,000 for the same period in
1994.

Years Ended December 31, 1992, 1993 and 1994. In 1994 the Company's net
sales were $12.9 million, or a decrease of $3.0 million, or 18.9% compared to
1993. The overall sales decline occurred throughout all of the Company's product
lines and with respect to both major and secondary customers categories. Sales
declines reflected the trend of major customers reducing the number of their
suppliers. Billiard accessories increased by $155,000 as a result of increased
emphasis on distribution of this product line.

In 1993 the Company's net sales were $15.9 million, or a decrease of $5.1
million, or 24.3% compared to 1992. Management believes this decline was
attributable to poor weather conditions, purchasing delays as major customers
stretched out their buying programs and one customer discontinuing purchases of
two product lines. In the first quarter of 1993 one of the Company's major
customers began purchasing directly from the manufacturer two product lines
which the Company had previously sold to this customer. The sales to this
customer for these two products were $200,000 for the twelve months ended
December 31, 1993, compared to sales of $3,000,000 to that customer in those
product lines during the same period in 1992.

NET SALES BY PRODUCT LINE
(in thousands)

<TABLE>
<CAPTION>
1992 1993 1994

<S> <C> <C> <C>
Golf bags $ 9,135 $ 8,047 $ 6,003
Golf accessories 5,842 4,215 3,720
Golf gloves 3,821 2,030 1,553
Golf carts 1,651 938 642
Billiard accessories 565 672 827
Leisure furniture 0 0 154
------ ------ ------

Total $21,014 $15,902 $12,899
====== ====== ======
</TABLE>

During the years ended December 31, 1993 and 1994 approximately 70% and
72%, respectively, of the Company's sales were attributable to its top ten
customers, most of whom were mass merchandisers. Furthermore, Ajay's largest
customer, Wal-Mart, accounted for approximately 41% of Ajay's sales in 1994.
There were no other customers in 1994 which accounted individually for 10% or
more of sales. As described above in the immediately preceeding paragraph, the
Company has experienced the loss of a significant customer in the past,
resulting in a marked decrease in sales. The loss of Wal-Mart would adversely
affect Ajay's revenues and the Company's chances for profitability.

Ajay has undertaken steps to improve results in its 1995 sales programs.
With new product designs, new sales representation, and improved product lines,
management is optimistic that customers will increase their share of Ajay
product purchases for the 1995 season. New product designs include an entirely
new golf cart line with three new carts and Leisure Life's new convertible
combination bench/table product. Improvements have been made to the golf glove
line, including the addition of a washable cabretta leather glove, and the golf
bag line which has been upgraded with new colors, designs, and materials. During
1994, new manufacturer's representatives were hired to replace existing poor

17
<PAGE>

performing representatives and to cover new territory not previously covered.
Management believes that this has resulted in increased sales to existing
customers and sales to new customers, thereby increasing sales in 1995. Based on
results of operations for the first quarter of 1995, management believes its
plan of action will be successful. The acquisition of Leisure Life in August
1994 had minimal impact on the sales and gross profit results for 1994.

Operating loss for the Company was $2.1 million for 1994, an increase of
$1.0 million, compared to an operating loss of $1.1 million in 1993. The higher
loss directly resulted from reduced net sales and losses from closeout sales
tied to the decision to reduce inventory levels plus write-off of $120,000 of
tooling on a discontinued product. A charge off in the amount of $115,000 was
also necessary to write off royalties that were under-absorbed on the reduced
sales volume. Operating loss for the Company was $1.1 million for 1993, a
decrease of $2.0 million, compared to operating income of $0.9 million for 1992.
The decrease in operating earnings attributed to lost sales was $1.0 million.
Additional contributing factors were increased closeout sales resulting in a
$300,000 loss, excessive inventory carrying costs of $100,000, excessive loan
fees of $100,000, and inventory write-offs of $200,000. Each of the factors
described above contributed to variances from the Company's budget-to-actual
amounts related to gross margin.

Selling, general and administrative expenses were $2.7 million and $2.8
million, representing 21.1% and 17.8% of sales in 1994 and 1993, respectively.
This reflects the acquisition of Leisure Life, which contributed $110,000 to
selling, general and administrative expenses, along with special consulting and
termination allowances of $107,000 during 1994. The 18.9% sales volume decline
in 1994 was not equivalently matched by expense reductions due to expenses being
more fixed than variable. Selling, general and administrative expenses for the
Company were $2.8 million for 1993, a decrease of $0.1 million compared to 1992.
In an effort to create additional sales momentum in 1993, the Company increased
sales personnel and also experienced costs of new product introductions, which
resulted in a higher fixed sales, general and administrative expenses in 1993,
as compared to 1992. In an effort to stimulate sales volume, certain advertising
expenses were increased, which did not result in a corresponding sales increase.

The decrease in interest expense in 1994 was a result of less debt to
finance inventory. The decrease in 1993 was a result of eliminating a temporary
increase in letter of credit financing in 1992 to finance inventory purchases.

In 1991 based upon consideration paid by new shareholders, the Company
reduced the carrying value of its investment in affiliate by $2,014,000. In 1992
the Company transferred shares of its investment to Roadmaster in satisfaction
of various obligations in the amount of $376,000 and in exchange for machinery
and equipment previously leased from Roadmaster with an appraised value of
$490,000. A gain of $275,000 was recognized as a result of these transactions in
1992. In 1993 the Company wrote off $123,000 of advances to affiliates as
uncollectible.

The Company provides severance pay to certain employees. Currently, the
liability for such compensation is reflected when the event giving rise to such
payments is known. Under Statement of Financial Accounting Standards No. 112,
Employers' Accounting for Postemployment Benefits, which must be applied in the
preparation of the Company's 1994 financial statements, these liabilities must
be accrued over employees' service lives. The adoption of this new standard did
not significantly impact the Company's financial statements.

The Company had no income tax liability for 1994, 1993 and 1992. The
Company had net operating loss carryforwards for federal tax purposes of
approximately $5,293,000 at December 31, 1994, which expire in varying amounts
in the years 2006 through 2009. Operating loss carryforwards totaling $845,000
and $4,248,000 are available to offset future state taxable income of Sports and
Ajay, respectively, which expire in varying amounts in the years 2006 through
2009.

18
<PAGE>

FINANCIAL CONDITION

March 31, 1995. At March 31, 1995 the Company had working capital of
$737,000, as compared with $593,000 at December 31, 1994. The ratio of current
assets to current liabilities at March 31, 1995 was 1.1, which was unchanged
from December 31, 1994. Working capital was primarily used to finance seasonal
growth in accounts receivable.

At March 31, 1995 the Company had increased its short term borrowings by
$1,420,000 since December 31, 1994. This was primarily due to seasonal
increases in accounts receivable which increased by $2,112,000 because of
increases in sales.

Fiscal Year-End. At December 31, 1994 the Company had working capital of
$593,000, compared with $903,000 at December 31, 1993. This reflects a reduction
in inventories of $1.6 million and a reduction of $1.3 million in payables and
debt. The ratio of current assets to current liabilities at December 31, 1994
was 1.1, which was unchanged from the December 31, 1993 ratio.

Inventories at December 31, 1994 were $5,786,000 compared to $7,381,000
at December 31, 1993. The decrease was a result of management's efforts to
reduce inventory levels to more appropriately correspond to the lower sales
base. This has been accomplished through disposal of excess inventories and an
emphasis on working closely with customers and resulting forecasts to more
appropriately access, communicate, and commit to their needs.

Trade accounts receivable were $1,700,000 at December 31, 1994 compared
to $1,975,000 at December 31, 1993. The lower trade accounts receivable are
principally due to lower fourth quarter sales.

Net machinery and equipment at December 31, 1994 and 1993 were $1,357,000
and $778,000, respectively. As of September 30, 1992 the Company purchased
machinery and equipment at the appraised value of $490,000 from Roadmaster and
cancelled operating leases for these respective assets. The consideration given
in the transaction was 250,000 shares of common stock of MacGregor Sports and
Fitness, Inc. ("MacGregor").

In June 1992 the Company transferred 188,100 shares of MacGregor common
stock and assigned advances due from MacGregor to Roadmaster in satisfaction of
obligations to Roadmaster of $376,000. Also in 1992 additional shares of
MacGregor common stock were transferred to Roadmaster in exchange for machinery
and equipment previously leased from Roadmaster with an appraised value of
$490,000. A gain of $275,000 was recognized as a result of this transaction. See
"Certain Transactions" and Notes 3 and 5 of the Notes to the Consolidated
Financial Statements.

CAPITAL RESOURCES

The Company expended $115,000 in 1994 for capital expenditures, which was
used principally for tooling of new products introduced in 1994. The Company's
capital expenditures for 1993 were $226,000, principally for tooling of new
products introduced in 1993. Capital expenditures for 1995 will be similar to
1994 and financed from operations.

LIQUIDITY

Cash flow from operations was negative by $2,618,000 for the 1994 fiscal
year. This reflects a net loss of $3,080,000. The net loss was primarily a
result of reduced sales volume and liquidation of certain inventory items at
prices which resulted in losses. These inventory items consisted of golf carts
that had been discontinued, golf bags which were unable to be sold, golf
accessory items which exceeded a one-year supply, certain obsolete golf gloves,
and raw materials that were no longer needed due to the discontinuation of the
product. Also contributing were substantial legal and financing fees of

19
<PAGE>

approximately $400,000 connected to financing matters as described in Note 3 of
the Notes to the Consolidated Financial Statements. An inventory reduction of
$1,595,000 has helped to generate funds to reduce accounts payable and partially
offset the net loss.

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

On April 14, 1992, Ajay entered into an amended lending arrangement with
BankAmerica (the "Total Credit Facility"), which included a revolving credit
facility of the lesser of $10,000,000 (including $2.5 million for the purchase
of finished goods and component parts inventory), or an amount based on eligible
accounts receivable and raw materials and finished goods inventories, along with
a seasonal inventory subline of up to $500,000. The Total Credit Facility
contained various wide-ranging restrictive covenants, including restrictions on
capital expenditures, dividends and limitations on distributions to the Company.

On April 14, 1994, the Company was advised by BankAmerica that the Total
Credit Facility had been purchased by Roadmaster Industries, Inc.
("Roadmaster"). On May 5, 1994, Ajay paid Roadmaster in full all outstanding
obligations under the Total Credit Facility and entered into a Loan and Security
Agreement ("Loan Agreement") with Williams Controls for a loan of up to
$7,000,000. On October 3, 1994 the outstanding balance was reduced by $1,400,000
as a result of the election by Williams Controls to exercise its option to
purchase 4,117,647 shares of the Company's Common Stock. At December 31, 1994
and March 31, 1995 Ajay had $5,369,000 and $6,790,000, respectively, outstanding
under this agreement. The Loan Agreement required monthly interest only payments
at the prime rate of First Interstate Bank of Oregon plus 3.25% and was
originally scheduled to expire on November 4, 1994 and was extended to February
1, 1996. The Loan Agreement was secured by a lien on substantially all of the
assets of Ajay and was guaranteed by the Company and was guaranteed by the
Company's Chairman, Thomas W. Itin. The Company's guaranty was secured by a
pledge of all of the outstanding stock of Ajay. See "Certain Transactions."

On July 25, 1995, the Company entered into a Revolving Loan Agreement
with U.S. Bank for a credit faculity of up to $8,500,000 (the "Revolving
Loan"), replacing the Loan Agreement with Williams Controls. All of the
Company's subsidiaries and Williams Controls have guaranteed payment of this
credit facility and the Company and its subsidiaries have pledged their
inventory and receivables as collateral. Accordingly, as of July 25, 1995,
approximately $6,375,000 is owed to U.S. Bank. 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. The Company
may borrow up to $5,000,000 against 80% of eligible accounts receivable and 50%
of eligible inventory. In addition, the Company may borrow up to an additional
$3,500,000. The Company is required to maintain a minimum tangible net worth of
$2,000,000 ($1,750,000 prior to this offering) and a ratio of debt to tangible
net worth of not greater than 4.5 to 1(5.0 to 1 prior to this offering). The
Company has agreed to pay Williams Controls 0.5% per annum of the outstanding
Revolving Loan balance on a quarterly basis in consideration for providing its
guarantee of the Revolving Loan. See "Certain Transactions."

The Company received an equity infusion in early October 1994 of
$2,400,000, as a result of a private placement of 2,941,177 shares of Common
Stock for $1,000,000 to the Acrodyne Profit Sharing Trust and Enercorp, Inc.
both of which are affiliates of the Company, and the exercise of options by
Williams Controls for 4,117,647 shares. Proceeds from the purchase of Common
Stock by Williams Controls were used to reduce Ajay's loan balance to Williams
Controls by $1,400,000. Also in early October 1994, the holder of the Company's
Series B Preferred Stock (TICO) converted 17,000 shares of Series B Preferred
Stock into 5,000,040 shares of Common Stock. See "Certain Transactions."

20
<PAGE>

Additionally, management, recognizing the narrow profit margins which
exist in the mass merchandise market segment, has instituted a cost reduction
program which includes a reduction in salary and labor positions, along with
related fringe benefits. The Company has also obtained more favorable material
costs, enhanced its material utilization methods and instituted more efficient
manufacturing techniques. The Company has strengthened its sales coverage by
appointment of additional experienced independent sales representatives and
increased its emphasis of product development which will result in several new
product line introductions for the 1995 and 1996 selling seasons. Management
believes these factors will contribute to achieving profitability.

With the new credit facility from U.S. Bank, management believes that its
current operations will not require proceeds from this offering if the Company
is profitable for the remainder of the current fiscal year. Proceeds from this
offering would enable the Company to finance its accounts receivable and
inventory which would increase as a result of growth, enhance and improve its
manufacturing capabilities, and provide it with working capital which may be
used to expand product lines, develop additional markets for its products, and
possibly acquire companies or product lines compatible with or complementary to
its present products. Accordingly, proceeds from this offering are expected to
meet the needs of the Company for a period of at least twelve months.

CHANGES IN AND DISAGREEMENTS WITH THE ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 21, 1994, the Company engaged Hirsch & Silberstein, P.C., as the
independent accountants to audit the Company's financial statements for the year
ending December 31, 1994. Hirsch & Silberstein replaced Coopers & Lybrand,
L.L.P. ("Coopers") which, on June 3, 1994, informed the Company that the client-
auditor relationship between the Company and Coopers had ceased.

The report of Coopers on the Company's financial statements for the
fiscal year ended December 31, 1993 included an explanatory paragraph related to
an uncertainty concerning the Company's ability to continue as a going concern
due to significant losses during 1993 and the Company not being in compliance
with certain debt covenants under its bank loan. The bank loan was subsequently
repaid in full on May 5, 1994, at which time the Company entered into the
loan agreement with Williams Controls Industries, Inc. See Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity."

In connection with the audit for the years ended December 31, 1992 and
1993, there were no disagreements with Coopers on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which if not resolved to the satisfaction of Coopers would have
caused them to make reference to the matter in their report. The same was true
as of June 3, 1994, the date that the client-auditor relationship between the
Company and Coopers ceased.

21
<PAGE>

BUSINESS

GENERAL

Ajay Sports, Inc. (the "Company") markets and distributes golf bags, golf
accessories, golf gloves, hand-pulled golf carts, and additional items such as
billiard accessories (such lines of business hereinafter collectively referred
to as the "Sports Business" or "Sports"). The Company operates the sports
business through Ajay Leisure Products, Inc. ("Ajay") a wholly owned subsidiary.
Leisure Life, Inc. ("Leisure Life"), another operating subsidiary, manufactures
and markets casual living furniture for the porch and patio. All references to
the Company include Ajay and Leisure Life unless otherwise specified. Leisure
Life was acquired August 1, 1994.

Ajay's products primarily are sold nationwide to large retailers such as
Wal-Mart, K-Mart, and Target, discount stores, department stores, catalog
showrooms and other mass merchandise outlets. The products manufactured by the
Company are sold primarily under the Spalding(R), Pro Classic(R), and Private
Pro(R) brand names. Leisure Life's products are sold through independent
retailers and larger chains of home and garden stores.

BUSINESS STRATEGY

The Company's strategy is to maintain and improve its position as a
leading supplier of golf bags, golf accessories, golf gloves, golf carts, and
billiard accessories to the mass merchandise distribution channel. The Company
believes that the following competitive strengths contribute to its position as
a significant competitor in the Sports Business in this market segment:

STRONG BRAND RECOGNITION. Spalding(R), Pro Classic(R), and Private Pro(R)
are highly recognized names in the golf accessory industry and the Company
believes that many of its products hold strong market positions. The Company
believes that its brand recognition and market position enhance its ability to
sell products through both mass merchandisers and regional retailers. A
significant portion of the Company's revenues result from the sale of products
manufactured and sold pursuant to a license agreement with Spalding Sports
Worldwide ("Spalding"), the loss of which could have a material adverse effect
on Ajay's business. The Company has been selling golf bags, golf carts, golf
gloves and a broad range of general sports accessories pursuant to this
agreement, which expires June 30, 1998. The predecessor business to the Company
originally obtained its license with Spalding in 1983 and has renewed the
license a number of times since that time through the current June 1998
expiration.

REPUTATION FOR QUALITY. The Company believes that the performance of its
products equals or exceeds the performance of its competitors' products marketed
through the mass merchandise distribution channel. To assure the quality of its
products, the Company continually invests in technical design and support, and
tests and monitors the performance of its products. At its own facilities, the
Company relies on its skilled and experienced work force. To assure the quality
of products sourced from third-party manufacturers, the Company has established
and works to maintain close, long-term sourcing relationships that emphasize
service, quality, reliability, loyalty and commitment.

EMPHASIS ON INNOVATION. Management of the Company is dedicated to working
with its customers to design and maintain a current line of products. Examples
of the Company's commitment in this area are an entirely new golf cart line with
three new carts, improvements to the golf glove line to

22
<PAGE>

include a washable cabretta leather glove, and upgrading the golf bag line with
new colors, designs, and materials.

BREADTH OF PRODUCT LINES. The Company offers a broad selection of golf
bags, golf carts, golf accessories and billiard accessories. Through its broad
product lines, the Company offers mass merchants and regional retailers the
ability to fulfill product demands and needs from a single source. The Company's
product lines have established its strong position among manufacturers of golf
bags and suppliers of golf related accessories category. Its models of golf bags
consist of over 50 models which vary by size, color, type of material and
related features. The line of golf related accessories consists of mainly
consumable items such as tees, head covers, golf ball retrievers, umbrellas and
golf training devices. The accessory category includes over 100 individual
items.

Golf bags, golf carts, and related accessories historically account for
approximately 96% of Ajay's gross sales. Billiard accessories account for
approximately 4%. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations." The Company
expects sales by Leisure Life, which was acquired in August 1994, to become a
more significant percentage of total sales for the Company over the next three
to five years.

With regard to the leisure furniture business, the Company believes that
the following factors have contributed to Leisure Life's success to date and
will position Leisure Life for future growth: the simplified design of the
furniture permitting ease of assembly, the quality and durability of the
construction, the versatility of the furniture to indoor or outdoor uses, and
the ease of manufacturing which can permit the establishment of satellite
factories in strategic geographic locations and in turn provide nationwide
distribution with the lowest possible freight costs.

The Company believes that the strengths described above, combined with
its management team which is experienced in turnaround situations, as well as
manufacturing, marketing, and distribution, should position it for future
growth.

GROWTH OPPORTUNITIES

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

INCREASED DISTRIBUTION. The Company's products are currently sold to
customers through mass merchants and regional retailers. Management believes
that those who purchase golf products from mass merchants and regional retailers
generally play golf at municipal and other public golf courses. Based on the
increase in these types of courses in the last few years (as provided in a 1994
study by the National Golf Foundation ("NGF")), and the growth in sales of golf
equipment through the mass merchandiser channel, management believes that this
market segment will experience continued growth in the near future. The Company
also believes that many of its principal competitors service substantially more
accounts, primarily those of smaller stores. Accordingly, the Company intends to
focus on increasing its direct sales efforts to include smaller stores where it
has historically had limited marketing emphasis, but where better profit margins
can generally be realized, while continuing to maintain and build upon its
strong position with mass merchandisers and regional retailers.

NEW PRODUCT DEVELOPMENT. The Company believes that it is possible to
increase its sales of products through design improvements and modifications to
existing products as well as the development and introduction of new products.
With regard to existing products, the Company uses its own designer to work with
a customer to create a customized look to its golf bags, using design features,
such as color, decals, specialized components and decorative accessories. By
working with the customer, management believes that this builds enhanced
commitment for the resulting product.

23
<PAGE>

The Company is working on new products for sports other than golf that
utilize the Company's existing manufacturing capabilities, specifically its cut
and sew operations, and that may result in sales during the summer and fall to
offset the seasonality of the golf lines. Management believes that it will be
able to determine the market acceptance for these new products without incurring
a significant amount of expense. As an example, Ajay is in the process of
developing a line of sports-specific bag products, initially focusing on
hunting/shooting and in-line skating. The seasonality of these products would
tend to be summer, fall, and early winter. Ajay is developing prototypes of
these bag products, with test marketing scheduled for the fourth quarter of 1995
and, depending upon the results of the test marketing, market introduction
scheduled for mid-1996.

Leisure Life plans to introduce a new line of swing furniture in 1995 for
the 1996 sales year. This line would be less expensive than its existing line
of swing furniture, featuring a smaller frame and different canopies. It also
plans to expand on the convertible combination bench/table product, which was
just recently introduced. Other planned new products include a line of leisure
dining tables and a table with a removable top that can be folded for storage.

SPORTS BUSINESS

Golf, which is the primary market of Ajay's product and accessory
business, continues to be a popular form of recreation. According to the
National Golf Foundation ("NGF"), a trade association, there were 2.5% more
rounds of golf played in 1994 than 1993. The pace of golf course development
also continues to grow steadily. NGF reports that 381 golf courses were opened
for play in 1994, versus 345 in the previous record year of 1993. This marks the
------
fourth straight year that the number of courses opened increased from the
previous year.

Ajay's products include golf bags, golf accessories, golf gloves, hand-
pulled golf carts, and billiard accessories. Ajay has over 50 models of golf
bags which vary by size, color, type of material and related features. The line
of golf related sports accessories consists mainly of consumable items such as
tees, spikes, gloves, head covers, golf ball retrievers, umbrellas and consists
of over 100 individual items. Its line of golf carts consists of 4 models which
differ by frame style, size, color, handle, and wheels.

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

Ajay has been selling golf bags, hand-pulled golf carts and a broad range
of general sports accessories through a license agreement with Spalding. The
current agreement expires June 30, 1998. As consideration for this license, Ajay
is required to pay royalties to Spalding based on a percentage of sales, subject
to annual minimums of $500,000 $550,000, $550,000 and $550,000, for the years
ended June 30, 1995, 1996, 1997 and 1998 respectively. Other conditions of the
agreement require Ajay to expend 2% of sales under the agreement on advertising
and related costs, with 1% remitted to Spalding. Ajay must also maintain a ratio
of total current assets to total liabilities on a monthly basis of 1.0 to 1.0.
Spalding has the right to terminate the license agreement in the event of any
substantial change in the ownership, control, officership or management of Ajay,
as well as the failure to meet certain customer satisfaction standards or to
introduce new products annually. The license agreement also prohibits Ajay from
acquiring any new companies without the prior approval of Spalding.
Approximately $7,637,000, $9,703,000, and $14,829,000, being 61%, 61%, and 68%
of Ajay's total sales, related to products sold under the Spalding license
agreement during the years ended December 31, 1994, 1993, and 1992,
respectively. The termination of the license agreement would have a material
adverse effect on the revenues of Ajay.

MANUFACTURING AND DESIGN. The preliminary production of Ajay's golf bags
is undertaken at its Delavan, Wisconsin facility, where raw materials are
fabricated in preparation for sewing and assembly

24
<PAGE>

at its Mexicali, Mexico facility. In addition, Ajay supplements in-house
production through utilization of subcontractors to produce products according
to its specifications. Final manufacturing, assembly and distribution occur at
its facility located in Delavan, Wisconsin.

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

The Company's lines of various accessory products are acquired primarily
from foreign sources, principally from the Pacific Rim, and repackaged at the
Company's Delavan, Wisconsin facility for domestic distribution. The packaging
designed by Ajay highlights the various features of the products. Ajay's hand-
pulled golf carts are manufactured overseas. Ajay is responsible for all
warehousing and shipping of the golf carts. The Company is not dependent upon
any single source for any of its significant products.

MARKETING AND DISTRIBUTION. Ajay's product lines traditionally have been
distributed primarily through discount stores, department stores, catalog stores
and other mass merchandise outlets. The Company also sells through most major
chain retailers. Ajay's largest customer, Wal-Mart, accounted for approximately
41% of Ajay's sales in 1994.

Except for certain major accounts, the majority of the Company's accounts
are serviced exclusively by approximately 40 manufacturers' representatives
working on a commission basis. These representatives concentrate principally on
the sports business. Ajay services its major accounts through a combination of
manufacturers' representatives and its own in-house sales force. Ajay's
management regularly consults with major customers to discuss merchandising
plans and programs, anticipated needs and product development.

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

LEISURE FURNITURE BUSINESS

Demographic changes have driven a shift for the last ten years toward a
casual living lifestyle, as evidenced by the proliferation of decks, patios, and
sunrooms. Americans are spending more time at home in a relaxed casual manner.
Home Furnishings Daily reported that for the year ended December 31, 1992, the
largest 25 outdoor furniture retailers sold $517 million of product. Adding the
2,000 plus other retailers of outdoor furniture to those selling porch and great
room sets, the market is believed by management to exceed $2.5 billion annually.

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

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

25
<PAGE>

In addition to the seating products, Leisure Life also manufactures
matching dining tables, cocktail and end tables, a bench, ottoman, and stool to
comprise a coordinated line of leisure furniture. Management believes that a
coordinated casual wood furniture line can be marketed for indoor as well as
outdoor use.

MANUFACTURING. The pressure treated pine purchased by Leisure Life is
planed, cut, drilled, and sanded in the Baxter, Tennessee facility to form the
frames and tables. A small portion of the wood pieces used in the frame are
purchased pre-manufactured. Fabric for pillows and slings are cut and partially
sewn primarily by a third party subcontractor in Alabama and then shipped back
to Baxter, Tennessee, where the pillows are stuffed and finally sewn and
assembly takes place. Furniture items are packaged in kits containing the wood
frame pieces, slings, pillows, and necessary hardware, requiring the customer to
assemble the final product.

MARKETING AND DISTRIBUTION. Initially, marketing focused on individual
retailers of outdoor and unfinished furniture within a 300-mile radius of the
manufacturing facility. Currently, Leisure Life supplies nearly 600 selected
small dealers, several with multiple stores. As opposed to Ajay's distribution
through mass merchandise outlets, Leisure Life distributes through specialty
stores, such as nurseries, hardware stores, pool and patio dealers, and garden
shops. Leisure Life services its accounts primarily through two in-house sales
people.

Since management believes that the comfort of its seating products is
what Leisure Life from other manufacturers, it is important for prospective
customers to sit in the furniture. Accordingly, Leisure Life has two display
trucks containing samples of its furniture line, which are used to attract more
dealers. Sales are being developed with regional chains. In addition, more
national coverage is being developed through the use of 15 manufacturers'
representatives on a commission basis and through exhibits at trade shows
targeted at hardware and nursery stores.

INVENTORIES AND BACKLOG

Due to the relatively short lapse of time between placement of orders for
products and shipments, Ajay and Leisure Life normally do not consider their
backlog of orders to be significant to their business. Because of rapid delivery
requirements of its customers, Ajay and Leisure Life maintain significant
quantities of finished goods inventories to provide acceptable service levels to
its customers. The majority of Ajay's products are shipped directly from its
Delavan plant. As a result, inventory turnover ratios historically have been
lower than rates for products in the same standard industrial classification
code.

Ajay's products tend to have varying degrees of seasonality. Shipments
from February to May historically have been significantly higher than the rest
of the year, due to the nature of the golf business.

Shipments of Leisure Life's outdoor furniture line tend to be higher from
February to May than the rest of the year. Management expects that the indoor
line being developed will have higher shipments in the fall.

COMPETITION

Within the mass merchandise distribution segment where Ajay presently has
the majority of its sales, Ajay competes in the golf bag, cart and accessory
business with several other domestic companies including in particular, Voit,
Wilson, MacGregor, Dunlop, Korex and others. While increased imports of low cost
competitive products, primarily from the Pacific Rim, continue to subject
domestic producers to intense price competition and have created extreme price
sensitivity, it also provides a source of competitive products for the Company
to offer. As Ajay increases sales to smaller retailers, it is anticipated that
it will compete with different companies.

26
<PAGE>

Leisure Life, the other operating subsidiary of the Company, has had only
limited operations and sales to date. At this time, as compared to the large
number of manufacturers of indoor and outdoor furniture, it is not a significant
competitor. There are no dominant furniture manufacturers supplying, on a
national basis, products specifically targeted for porches, decks, patios, and
sunrooms. There are small firms supplying on a regional basis. Management does
not believe that there are any other wood furniture products that are
adjustable. However, there is competition for display space in stores, along
with competition from other wood, resin, aluminum, cushion, and plastic
furniture products.

RAW MATERIALS AND COMPONENTS

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

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

PATENTS

Ajay and Leisure Life own several patents and have proprietary knowledge
relating to their product lines. Except for the patented suspension seating
system used by Leisure Life, management does not believe that its patents are
significant in the conduct of the Company's business or that the loss of any of
its patents would have a material adverse effect on its business.

GOVERNMENTAL REGULATIONS

The Company is subject to a variety of laws and regulations at the state,
local and federal level, such as those concerning occupational safety and
health, labor and employment, environmental protection, sales taxes, business
and building code regulations, and the import and export of goods. Ajay,
through its subsidiary, Ajay de Mexico, S.A. de C.V., operates under the
jurisdiction of the Mexican government. Its laws and regulations concern the
same areas noted above. Items sent by Ajay to Mexico for assembly and
subsequent return to the United States are subject to the imposition of tariffs
and quotas. Under the North American Free Trade Agreement, the tariffs are
being phased out over a ten-year period. Compliance with governmental
regulations has not had a material adverse effect on the Company.

EMPLOYEES

As of March 17, 1995, the Company, Ajay and Leisure Life had a total of
333 employees: 98 employees at the Delavan, Wisconsin facility, 190 employees at
the Mexicali, Mexico facility, and 45 employees at the Baxter, Tennessee
facility. The Company's employees are not covered by any collective bargaining
agreement and management considers its current relations with its employees to
be good.

PROPERTIES

The Company's executive, and Ajay's primary manufacturing, assembly and
warehouse facility, is located in Delavan, Wisconsin, and consists of 186,300
square feet of manufacturing and warehousing

27
<PAGE>

space. This space is leased from an unaffiliated third party under a long term
lease arrangement expiring June 2001, with an option to renew for an additional
ten-year period. The monthly rental is $27,623, net of the Company's obligation
to pay property taxes and all utilities. The Company has an option to purchase
the property at its fair market value at the end of either the initial or
renewal lease term.

Through its wholly-owned subsidiary, Ajay de Mexico, S.A. de C.V., Ajay
leases an additional manufacturing facility consisting of approximately 31,500
square feet in Mexicali, Mexico. The lease expires on January 14, 1998, but is
automatically renewed for an additional five-year period if Ajay does not give
written notice six months prior to January 14, 1998. The monthly rent until
January 15, 1996 is $11,173 and subsequent years are subject to annual Consumer
Price Index adjustment with an annual cap of 4%.

Leisure Life owns its manufacturing, assembly, and warehouse facility in
Baxter, Tennessee, which consists of approximately 32,000 square feet of
manufacturing and warehousing space, located on 2.8 acres.

These facilities adequately meet the Company's production capacity
requirements. The Company, on average, utilizes approximately 70% of its
facility square footage in Delavan and Mexicali. In order to avoid periodic
total plant shutdowns, the Company adjusts its product production schedules to
maintain sufficient inventory levels and to maintain a full work force.

Recognizing the excess capacity which currently exists at the Delavan and
Mexicali facilities, the Company granted Williams Controls the right, until
August 1, 2002, to establish a manufacturing operation in those facilities,
subject to the availability of space. If manufacturing operations are
established, Williams Controls would have to pay its pro rata share of the space
occupied in the plant and personnel costs, as well as all incremental expenses
to modify the plant, obtain permits, hire personnel, and perform other tasks to
suit its requirements. See "Certain Transactions."

LEGAL PROCEEDINGS

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

On July 7, 1994, Ajay filed a complaint in Walworth County Circuit Court,
State of Wisconsin, against Roadmaster Industries, Inc., Roadmaster Corporation,
Henry Fong, Edward E. Shake and Charles Sanders, seeking damages for claims
arising out of the defendants' alleged misappropriation and/or conversion of
Ajay's confidential business information. The lawsuit is in its early stages and
no prediction can be made of the outcome of this matter at this time. The
parties are in the process of conducting discovery. A status conference with the
Court is scheduled for July 1995.

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<PAGE>

MANAGEMENT AND KEY PERSONNEL

OFFICERS AND DIRECTORS

The officers and directors of the Company, Ajay and of Leisure Life are as
follows:

<TABLE>
<CAPTION>
Name Age Position

<S> <C> <C>
Thomas W. Itin 60 Chairman of the Board, President, Chief Executive Officer
and Treasurer

Clarence H. Yahn 58 Director, President of Ajay and Leisure Life

Duane R. Stiverson 53 Chief Financial Officer of the Company, Ajay and Leisure
Life; Director of Leisure Life

Stanley V. Intihar 61 Director

Anthony B. Cashen 60 Director

Robert R. Hebard 42 Director and Secretary

Robert D. Newman 53 Director, Vice President of Leisure Life
</TABLE>

The directors of the Company and Ajay are elected to hold office until
the next annual meeting of stockholders and until their respective successors
have been elected and qualified. Officers of the Company, Ajay and Leisure Life
are elected annually by the Board of Directors and hold office until their
successors are duly elected and qualified.

Thomas W. Itin. Mr. Itin was elected Chairman of the Board and President
of the Company in June of 1993. Mr. Itin provides the Company with expertise on
long term strategic planning, financing and mergers/acquisitions. Mr. Itin has
been the Chairman, President, Treasurer, Chief Executive Officer, and Chief
Operating Officer of Williams Controls, a publicly held corporation, since March
1989. Mr. Itin has served as Chairman of the Board, Chief Executive Officer and
Chief Operating Officer of LBO Capital Corp. since its inception, and is the
Company's largest single stockholder. In 1987, Mr. Itin was a co-founder of
Roadmaster Industries, Inc.

Mr. Itin has been Chairman, President and Owner of TWI International,
Inc. ("TWI") since he founded the firm in 1967. TWI acts as a consultant for
mergers, acquisitions, financial structuring, new ventures and asset management.
Mr. Itin also has been the Owner and Principal Officer of Acrodyne Corporation
since 1962. From August 1989 to February 1991, Mr. Itin has been an officer and
director of MacGregor Sporting Goods Corporation ("MacGregor Corporation"),
formerly MGS Acquisitions, Inc. a privately held company which acquired
substantially all of the assets of MacGregor Sporting Goods, Inc. from a filing
of Chapter 11 Bankruptcy. In February 1991, MacGregor Sports, Inc., the wholly-
owned operating subsidiary of MacGregor Corporation, filed for protection under
Chapter 11 of the United States Bankruptcy Code. Mr. Itin was a co-founder of
Roadmaster Industries, Inc. in 1987 and served as a director thereof from
October 1987 until June 1993. From December 1987 until October 1993, Mr. Itin
was an officer and director of CompuSonics Video Corporation, a publicly held
company. Mr. Itin received a B.S. degree from Cornell University and was awarded
a Masters of Business Administration degree from New York University. Mr. Itin
spends less than 100% of his working time on the business of the Company.

29
<PAGE>

Clarence H. Yahn. Mr. Yahn is the President of both Ajay and Leisure
Life. He has experience in manufacturing, marketing and general management at
the organizations in which he has worked, and has substantial experience in the
management of company turnarounds for such firms as Wesray Capital Corporation
and Leach McMicking and Company.

Mr. Yahn became a director of the Company in September 1994, and has
served as director of Ajay, since September 1993 and as Ajay Leisure's President
since January 1994. Mr. Yahn is on the Board of Directors of Leisure Life, Inc.,
a subsidiary of the Company. Mr. Yahn received his Bachelor's degree in
mathematics and physics from the University of Wisconsin in 1959 and his Masters
in International Business from the American Graduate School of International
Management in 1962, where he currently serves on their Board of Trustees. He
worked for various divisions of the Sunbeam Corporation including Vice President
of Manufacturing for the Sunbeam Appliance Company and Group President of
European Operations, while resident in London, England. In 1982 he was
transferred by Sunbeam to Aircap Industries as President. From 1988 to May 1991,
Mr. Yahn served as President of Gold Medal, Inc., a manufacturer of
leisure/lifestyle furniture based on Richmond, Virginia. He was a consultant to
Blount Lumber Co., located in Lacona, New York, which manufactured wood products
and was a millwork distributor. Prior to joining Ajay Leisure Products, Mr. Yahn
served as Chief Executive Officer of Melnor, Inc., Moonachie, New Jersey, from
May 1992 to June 1993. Melnor manufactured and distributed lawn and garden
products.

Duane R. Stiverson has been Chief Financial Officer since July 19, 1994.
Prior to joining the Company, Mr. Stiverson was the Vice President of Operations
for VariQuest Technologies, Inc. and held that position since 1991. From 1987 to
1990, Mr. Stiverson was Vice President of Materials for the Ambrosia Chocolate
Company. From 1978-1987 he was the Vice President of Finance for Ambrosia, and
from 1976-78 was its Controller. Mr. Stiverson held various controller and
corporate finance positions with the Bendix Corporation. Mr. Stiverson has a
Bachelor of Science from the University of Nebraska and was later awarded a
Master of Business Administration from Michigan State University.

Stanley V. Intihar. Mr. Intihar became a director of the Company in
September 1994, having been appointed as the designee of Williams Controls,
pursuant to its right granted in the Loan Agreement to have one member on the
board. From March 1994 to the present, Mr. Intihar has been Senior Vice
President of Williams Controls Industries, Inc. and has been a director of
Williams Controls Industries, Inc. since December of 1992. From 1992 to 1994, he
was an independent consultant for Williams. From 1988 to 1991, Mr. Intihar held
various offices with Park Ohio Industries, Inc., including President and Chief
Operating Officer and most recently Chairman of the Board and Chief Executive
Officer. From 1958 to 1988, Mr. Intihar was employed by TRW, Inc., a publicly-
held corporation, in a variety of executive positions including Vice President
and General Manager Engine Components Worldwide, and Vice President, Corporate
Planning and Development Staff. Since 1978, Mr. Intihar has been a director of
Horsburgh & Scott Co., a private company. Mr. Intihar received a B.S. degree in
Mechanical Engineering from Cornell University and graduated from the Harvard
School of Business, Advanced Management Program.

Anthony B. Cashen. Mr. Cashen has served as director of the Company and
Ajay since November 1993. Mr. Cashen has served as Secretary, Treasurer and
director of LBO Capital Corp., since inception. He is currently a Managing
Partner in Lamalie Amrop International, a management consulting and executive
recruiting firm located in New York City. Prior to his joining Lamalie Amrop
International (formerly Flanagan & Webster), he was President and owner of
Elliott Hardwood, an integrated lumber manufacturer located in upstate New York.
Previously, Mr. Cashen had been an officer and principal of the investment firms
of A.G. Becker, Inc. and Donaldson, Lufkin & Jenrette, Inc. He serves as
director of PW Communications and Immucell Corporation, both of which are
publicly-held companies. Mr. Cashen is also President of the Sagamore Institute.
Mr. Cashen has an MBA from the Graduate School of Management (1958) and a B.S.
degree from Cornell University.

30
<PAGE>

Robert R. Hebard. Mr. Hebard has served as a director of the Company and
Ajay Leisure Products, Inc. since June 1989 and as Secretary of the Company
since September of 1990. After receiving a Bachelors Degree in
Marketing/Management from Cornell University in 1975, Mr. Hebard held various
marketing/product management positions with Goldome Bank, a $10 billion savings
bank in Buffalo, N.Y. While there, he received his MBA in 1982 from Canisius
College. Mr. Hebard joined Comerica Bank, Detroit, Michigan as an Assistant Vice
President in September 1982. In July 1984 he became Vice President of Marketing
for U.S. Mutual Financial Corporation, then returned to Comerica as Vice
President and Group Product Manager for Consumer Products. In June 1986 he was
named First Vice President/Director of Product Management for Comerica and in
February 1992 was named director of Retail Marketing for the merged
Comerica/Manufacturers Bank. Mr. Hebard is also currently serving as Vice
President of Woodward Partners, Inc., a real estate development company in
suburban Detroit, Michigan. In June 1993, he was named Chairman of the Board and
President of Enercorp, Inc., a publicly traded business development company
under the Investment Company Act of 1940, as amended, a shareholder of the
Company. In 1993, Mr. Hebard was also named Chief Executive Officer, Chief
Financial Officer, and Treasurer of CompuSonics Video Corporation, a publicly
held company. From December 1993 to August 1994 Mr. Hebard served as director of
Kimbro Imaging Systems, Inc. Mr. Hebard spends less than 100% of his working
time on the business of the Company.

Robert D. Newman. Mr. Newman became a director of the Company in August
1994. Mr. Newman has served as General Manager of Leisure Life, Inc., a wholly
owned subsidiary of the Company since August 1994. Mr. Newman founded Leisure
Life, Inc. in October, 1990 and has served as President since its inception,
until its purchase by the Company in August 1994. Mr. Newman was President and
Chief Executive Officer of Stone Mountain Millworks from 1985 to 1989. Mr.
Newman served as director of Product Development for Gold Medal, Inc. from 1989
to October 1990. Mr. Newman was owner and President of three Atlanta based
consumer products sales agencies: 1981 to 1985 - Southeastern Regional
Representatives, 1979 to 1980 - Newman, Jamison, and Associates, from 1969 to
1979 - Bob Newman Sales. Mr. Newman worked in several sales positions for Ekco
Housewares Company during the period of 1961 to 1969. He attended Northern
Illinois University.

Robert R. Hebard is the son-in-law of Thomas W. Itin. Other than this
relationship, there are no other family relationships between any director or
executive officer.

EXECUTIVE COMPENSATION

The following table shows, for the fiscal years ending December 31, 1994,
1993 and 1992, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the executive officers of the Company in all capacities in which they serve:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
============================================================================================================
Long-Term
Annual Compensation Compensation
-------------------------------------------
Awards
------------------
Securities All Other
Underlying Op- Compen-
Name and Principal Position Year Salary $ Bonus $ tions (#) sation
============================================================================================================
<S> <C> <C> <C> <C> <C>
Thomas W. Itin (1) 1994 $ 1 $ --- --- $ ---
President, Treasurer and Director of 1993 $ --- $ --- --- $ ---
the Company and Treasurer and 1992 $ --- $ --- --- $ ---
Director of Ajay
- -------------------------------------------------------------------------------------------------------------
</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
============================================================================================================
Long-Term
Annual Compensation Compensation
-------------------------------------------
Awards
------------------
Securities All Other
Underlying Op- Compen-
Name and Principal Position Year Salary $ Bonus $ tions (#) sation
============================================================================================================
<S> <C> <C> <C> <C> <C>
Clarence H. Yahn (2) 1994 $101,000 $ --- 350,000 $ ---
Director of the Company and 1993 $ --- $ --- --- $ ---
President of Ajay 1992 $ --- $ --- --- $ ---
- -------------------------------------------------------------------------------------------------------------
Duane R. Stiverson (3) 1994 $ 28,000 $ --- 45,000 $ ---
Chief Financial Officer of the Company 1993 $ --- $ --- --- $ ---
and Vice President and Chief Financial 1992 $ --- $ --- --- $ ---
Officer of Ajay
=============================================================================================================
</TABLE>

(1) On June 21, 1993 Mr. Itin was elected Chairman of the Board, President,
Treasurer and Director of the Company, and Chairman of the Board,
Treasurer and Director of Ajay. Mr Itin's salary for 1995 is $1.

(2) Mr. Yahn joined the Company at year-end 1993. Mr Yahn's salary for 1995
is $90,000.

(3) Mr. Stiverson joined the Company in July 1994. Mr. Stiverson's salary for
1995 is $65,000

The following table sets forth information with respect to the named
executives concerning individual grants of stock options made during the last
fiscal year.

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
====================================================================================================================================
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term
- ------------------------------------------------------------------------------------------------------------------------------------
Number of % of Total Op-
Securities Un- tions Granted to
derlying Options Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Itin 0 0 N/A N/A N/A N/A
CEO
- ------------------------------------------------------------------------------------------------------------------------------------
Clarence H. Yahn 66,667 (a) 7.9% $.40 12/31/99 $ (3,300) $ 2,000
President, Ajay 66,667 (b) 7.9% $.40 12/31/99 $ (3,300) $ 2,000
66,666 (c) 7.9% $.40 12/31/99 $ (3,300) $ 2,000
50,000 (a) 6.0% $.45 12/31/99 $ (5,000) $ (1,000)
50,000 (b) 6.0% $.45 12/31/99 $ (5,000) $ (1,000)
50,000 (c) 6.0% $.45 12/31/99 $ (5,000) $ (1,000)
- ------------------------------------------------------------------------------------------------------------------------------------
Duane R. Stiverson 15,000 (a) 1.8% $.40 12/31/96 $ 800 $ 1,600
VP & CFO 15,000 (b) 1.8% $.40 12/31/97 $ 1,100 $ 2,400
15,000 (d) 1.8% market 07/19/95 07/19/97 $ 600 $ 1,300
15,000 (e) 1.8% market 01/19/96 01/19/98 $ 700 $ 1,300
15,000 (f) 1.8% market 07/19/96 07/19/98 $ 700 $ 1,400
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

32
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================================================
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Individual Grants Term
- ------------------------------------------------------------------------------------------------------------------------------------
Number of % of Total Op-
Securities Un- tions Granted to
derlying Options Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Newman 100,000 (b) 11.9% $.60 12/31/97 $(27,000) $(21,000)
General Manager 100,000 (c) 11.9% $.80 12/31/98 $(45,000) $(37,000)
of Leisure Life
====================================================================================================================================
</TABLE>

(a) Vesting 12/31/94 (c) Vesting 12/31/96 (e) Vesting 01/19/96
(b) Vesting 12/31/95 (d) Vesting 07/19/95 (f) Vesting 07/19/96

The following table sets forth information with respect to the named
executives concerning the unexercised warrants to purchase the Company's Common
Stock held as of the end of the fiscal year. No such executives exercised any
warrants in the last fiscal year.

AGGREGATED OPTION EXERCISES
IN 1994 AND DECEMBER 31, 1994 OPTION VALUES

<TABLE>
<CAPTION>
====================================================================================================================================
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at FY-End (#) Options at FY-End ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Acquired
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Itin 0 0 0 0 N/A N/A
CEO
- ------------------------------------------------------------------------------------------------------------------------------------
Clarence H. Yahn 0 0 66,667 133,333 $2,666 $5,333
President, Ajay 50,000 100,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Duane R. Stiverson 0 0 15,000 60,000 $ 600 $ 600
VP & CFO
- ------------------------------------------------------------------------------------------------------------------------------------
Robert D. 0 0 0 200,000 -- --
Newman
General Manager
of Leisure Life
====================================================================================================================================
</TABLE>

BENEFIT PLANS

During April 1992, Ajay implemented a 401(K) benefit plan to cover all
employees with one year of service and had attained 18 years of age. On July 1,
1994, the plan was amended to allow employees with six months of service to
enroll in the plan. Employees may contribute up to 15% of compensation and the
Company has a discretionary matching contribution which will be determined on an
annual basis. The Company's matching contribution for 1992, 1993, and 1994 was
25% of the first 6% of employee contributions.

33
<PAGE>

The Company has no retirement, pension, profit sharing or insurance or
medical reimbursement plans, exclusively covering its officers and directors.

EMPLOYMENT AND CONSULTING AGREEMENTS

On April 14, 1992, Ajay entered into an employment agreement with L. Dean
Cassell, then President of Ajay. Under the terms of the agreement, Mr. Cassell
was to receive an annual salary of $140,000 from June 30, 1992 through June 30,
1994 . Mr. Cassell was also to receive an incentive bonus equal to 8% of Ajay's
operating profits in excess of $500,000 and other fringe benefits as determined
by the Board of Directors. This employment agreement was terminated as of
February 26, 1994 and the Company entered into a consulting agreement with Mr.
Cassell for the period of February 27, 1994 through June 30, 1995. Under the
consulting agreement, Mr. Cassell was to provide a minimum of 4 days of service
per month for $4,000 per month during the period from February 27, 1994 through
June 30, 1994. During the period from July 1, 1994 through June 30, 1995, he is
to provide a minimum of 27 days of service for $27,000. On January 1, 1995, the
consulting agreement was changed to $1,000 per month.

The Company entered into an agreement with Thomas W. Itin on December 10,
1993 pursuant to which Mr. Itin agreed to serve as Chairman and President of the
Company through December 31, 1996, receiving salary of $1 per year for 1994 and
1995, with salary for 1996 to be determined by the Company's Board of Directors.
Such salary is to be at an appropriate level, given the contributions made by
Mr. Itin to the Company's success. This agreement also provided for the
conversion of certain instruments acquired by TICO into preferred stock of the
Company and the repricing and issuance of certain Common Stock purchase
warrants. See "Certain Transactions - TICO/Roadmaster Exchange."

The Company entered into an employment agreement with Robert D. Newman
effective July 31, 1994, pursuant to which Mr. Newman is paid an annual salary
of $65,000 for serving as the Vice President and General Manager of Leisure
Life. If Mr. Newman's employment is terminated within the first year of the
agreement, he is to be paid six months of severance pay. If termination occurs
after the first year of the agreement, he is to be paid nine months of severance
pay. The agreement continues unless and until terminated by Ajay or Leisure
Life.

DIRECTORS' COMPENSATION

The directors receive no compensation for their services as such, but are
reimbursed for reasonable costs incurred on behalf of the Company.

STOCK OPTION PLAN

On October 31, 1994, the shareholders of the Company adopted the 1994
Stock Option Plan, which provides for the granting of both incentive stock
options and non-qualified options to eligible employees, officers, and directors
of the Company. an aggregate of 2,100,000 shares of Common Stock have been
reserved for issuance pursuant to the exercise of stock options under this Plan.
The Plan is administered by the Compensation Committee of the Board of
Directors.

The Plan provides that disinterested directors, defined as non-employee
directors, will receive automatic option grants to purchase 5,000 shares of
Common Stock beginning with the 1994 annual shareholders meeting, and on the
date of each subsequent annual shareholders meeting. Options shall have an
option price equal to 100% of the fair market value of the Common Stock on the
grant date and shall vest in 33-1/3% installments commencing on the first
anniversary of the grant date.

Each option granted under the Plan will be evidenced by a written option
agreement between the Company and the optionee. Incentive stock options may be
granted only to employees (as defined by the Internal Revenue Code). The option
price of any incentive stock option may not be less than 100%

34
<PAGE>

of the fair market value per share on the date of grant of the option; provided,
however, that any incentive stock option granted under the Plan to a person
owning more than 10% of the total combined voting power of the Common Stock will
have an option price of not less than 110% of the fair market value per share on
the date of grant of the incentive stock option. Each non-qualified stock option
granted under the Plan will be at a price no less than 80% of the fair market
value per share on the date of grant thereof, except that the automatic stock
option grants to disinterested directors will be at a price equal to the fair
market value per share on the date of grant. The exercise period of options
granted under the Plan may not exceed ten years from the date of grant thereof.
Incentive stock options granted to a person owning more than 10% of the total
combined voting power of the Common Stock will be for no more than five years.

An option may not be exercised unless the optionee then is an employee,
officer, or director of the Company or a subsidiary of the Company, and unless
the optionee has remained continuously as an employee, officer, or director of
the Company since the date of grant of the option. If the optionee ceases to be
an employee, officer, or director of the Company or subsidiary of the Company
other than by reason of death, disability, retirement, or for cause, all options
granted to such optionee, fully vested to such optionee but not yet exercised,
will terminate three months after the date the optionee ceases to be an
employee, officer, or director of the Company. All options which are not vested
to an optionee, under the conditions stated in this paragraph for which
employment ceases, will immediately terminate on the date the optionee ceases
employment or association.

During 1994, 840,000 options were granted and at December 31, 1994,
131,667 were vested and became exercisable. On May 24, 1995, an additional
180,000 options were granted.

CONFLICTS OF INTEREST

As described more fully in "Certain Transactions," Thomas W. Itin, the
Chairman and President of the Company, is also the chairman, president,
treasurer, chief executive officer, chief operating officer, and a 26.8%
beneficial owner of Williams Controls. Ajay had a current indebtedness at March
31, 1995 of $6.8 million due February 1, 1996 pursuant to a Loan Agreement with
Williams Controls. The Company had guaranteed payment of this loan and had
pledged all of the outstanding stock of Ajay. Mr. Itin had personally guaranteed
this debt. This loan was repaid on July 25, 1995 through a new credit facility,
for which Williams Controls has provided its guarantee. In addition, in
connection with the loan in May 1994 Williams Controls was granted options which
can increase its stock ownership to 15,228,520 shares (45.2%) of the Company's
outstanding Common Stock (without giving effect to this offering).

The Bylaws of the Company permit the Company to buy from, sell to, or
otherwise deal with the officers and directors of the Company and firms,
partnerships, associations, or corporations of which the directors and officers
of the Company may be members, directors, or officers, or in which they have
pecuniary interests. Further, the Bylaws provide that no contract or other
transaction between the Company and its directors, or any other corporation,
firm, association, or entity in which one or more of the directors are officers
or directors or are financially interested, shall be void or voidable solely
because of such relationship or interest, solely because such directors are
present at the meeting of the Company's Board of Directors which authorizes,
approves, or ratifies such contract or transaction, or solely because their
votes are counted for such purpose if any of the following exist: (1) the fact
of such relationship or interest is disclosed or known to the Board of Directors
which authorizes, approves, or ratifies the contract or transaction by a
sufficient vote without counting the votes or consents of the interested
directors; (2) the fact of such relationship is disclosed or known to the
stockholders entitled to vote and the stockholders authorize, approve, or ratify
such contract or transaction; or (3) the contract or transaction is fair and
reasonable to the Company.

Neither Mr. Itin nor Stanley V. Intihar, both of whom are officers and
directors of Williams Controls, vote in any meetings of the Company's Board of
Directors on matters pertaining to Williams Controls.

35
<PAGE>

Similarly, neither Mr. Itin nor Anthony B. Cashen, both of whom are officers and
directors of LBO Capital Corp., vote in any meetings of the Company's Board of
Directors on matters pertaining to LBO Capital Corp.

PRINCIPAL SHAREHOLDERS

The following table sets forth information, as of July 25, 1995 with
respect to the beneficial ownership of shares of Common Stock of the Company,
its only class of voting securities outstanding, by each person known by the
Company to be the beneficial owner of more than five percent thereof, by its
directors, and by its officers and directors as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS (1)
<S> <C> <C>

Thomas W. Itin 13,281,225 47.4%
7001 Orchard Lake Road (2)(3)
Suite 424
West Bloomfield, MI 48322

Williams Controls Inc. 15,228,520 45.2%
14100 S.W. 72nd Avenue (4)
Portland, OR 97204

TICO 8,676,540 33.1%
7001 Orchard Lake Road (5)
Suite 424
West Bloomfield, MI 48322

Acrodyne Profit Sharing Trust 2,773,471 11.5%
7001 Orchard Lake Road (6)
Suite 424
West Bloomfield, MI 48322

Robert R. Hebard 1,799,706 8.0%
7001 Orchard Lake Road (7)
Suite 426
West Bloomfield, MI 48322

Enercorp, Inc. 1,764,706 7.8%
7001 Orchard Lake Road
Suite 426
West Bloomfield, MI 48322

LBO Capital Corp. 1,680,000 7.4%
7001 Orchard Lake Road (8)
Suite 424
West Bloomfield, MI 48322
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS (1)
<S> <C> <C>
Robert D. Newman 1,426,000 6.3%
215 4th Avenue North (9)
P.O. Box 60
Baxter, TN 38544

Clarence H. Yahn 266,667 0.7%
(10)

Duane R. Stiverson 50,000 0.2%
(11)

Stanley V. Intihar 20,000 0.1%

Anthony B. Cashen 0 --

All officers and directors as a 32,072,118 80.8%
group (seven persons) (2)(4)(7)
(9)(10)(11)
</TABLE>

- ---------------

(1) Where persons listed on this table have the right to obtain additional
shares of Common Stock through the exercise of outstanding options or
warrants or the conversion of convertible securities within 60 days from
July 25, 1995, these additional shares are deemed to be outstanding for
the purpose of computing the percentage of Common Stock owned by such
persons, but are not deemed to be outstanding for the purpose of
computing the percentage owned by any other person. Percentages are based
on 22,545,537 shares outstanding.

(2) Includes Common Stock and shares of Common Stock issuable upon the
exercise of presently exercisable warrants and the conversion of
presently convertible Preferred Stock beneficially owned by Mr. Itin's
spouse and affiliates of Mr. Itin as follows:

<TABLE>
<S> <C> <C>
TICO 5,000,040 Common Stock
First Equity Corporation 151,214 Common Stock
Acrodyne Profit Sharing Trust 2,773,471 Common Stock and Warrants
LBO Capital Corp. 1,680,000 Common Stock and Warrants
----------
9,604,725
TICO (12,500 shares of Series B Preferred Stock
convertible at one share for 294.12 shares of Common Stock 3,676,500 Preferred Stock Conversion
----------
13,281,225
==========
</TABLE>

Mr. Itin disclaims beneficial ownership in the securities owned by LBO
Capital Corp. and First Equity Corporation in excess of his pecuniary
interest. See Note 3 below with regard to securities owned by Williams
Controls, the beneficial ownership of which is disclaimed by Mr. Itin.

(3) Does not include 4,117,647 shares of Common Stock and 11,110,873 warrants
owned by Williams Controls Industries, Inc. Mr. Itin is Chairman of the
Board, President, Chief Executive Officer, Chief Operating Officer,
Treasurer and 26.8% beneficial owner of Williams Controls. Even though
Mr. Itin is a director of Williams Controls, he abstains from voting on
matters pertaining to the Company in meetings of the directors of
Williams Controls. If the shares and warrants owned by Williams were
included, the number of shares beneficially owned would be 28,509,745 and
the percentage of class would be 72.9%.

(4) Includes 11,110,873 shares of Common Stock issuable upon exercise of
certain options. See "Certain Transactions."

(5) Includes 3,676,500 shares of Common Stock issuable upon conversion of
12,500 shares of presently convertible Series B Preferred Stock, at a
rate of 294.12 shares of Common Stock for every one share of Preferred
Stock. TICO is a Michigan partnership of which Mr. Itin is the Managing
Partner.

37
<PAGE>

(6) Includes 1,597,000 shares of Common Stock issuable upon exercise of
options. Mr. Itin is trustee and beneficiary of Acrodyne Profit Sharing
Trust.

(7) Includes 1,764,706 shares owned by Enercorp, Inc., a Colorado corporation
of which Mr. Hebard is Chairman of the Board of Directors and President.

(8) Includes 200,000 shares of Common Stock issuable upon exercise of
warrants. LBO Capital Corp. is a Colorado corporation of which Mr. Itin
is a 51% shareholder, Chairman of the Board of Directors, and president.

(9) Includes 400,000 shares of Common Stock being held in escrow pending
release subject to subsequent conditions.

(10) Includes 116,667 shares of Common Stock issuable upon the exercise of
outstanding stock options.

(11) Includes 30,000 shares of Common Stock issuable upon the exercise of
outstanding stock options.

CERTAIN TRANSACTIONS

With regard to transactions involving affiliates of the Company, including
those described below, the Company utilizes fairness opinions or obtains the
approval of the disinterested directors of the Company. See "Management and Key
Personnel - Conflicts of Interest." Management of the Company believes that the
terms of the transactions described below were no less favorable than those
which could be obtained from unaffiliated sources. It is likely that officers,
directors, and affiliates of the Company will continue to provide financial
assistance in the future. If provided, such assistance will be at a fair market
value (i.e., on terms no less favorable to the Company than those that can be
obtained from unaffiliated sources) and approved by a majority of the
disinterested directors of the Company.

TICO/ROADMASTER EXCHANGE

The Company was formed in 1988 to acquire certain assets, liabilities and
operations of the sports accessory business of Roadmaster Corporation
("Roadmaster"). The Company was capitalized initially through a private
placement of stock and an initial public offering (approximately $3.1 million),
a long-term debt of $4 million owed to Roadmaster for the purchase of the
business, and a revolving credit facility guaranteed by Equitex, Inc., an
affiliate of Roadmaster. Until October 1993, the Company was controlled, in
part, by Roadmaster and Equitex. TICO, a partnership of which Thomas W. Itin is
the general partner, obtained control from Roadmaster and Equitex in October
1993, pursuant to the terms of an Exchange Agreement. Mr. Itin is the Chairman
and President of the Company.

In the Exchange Agreement, Roadmaster and Equitex agreed to substantially
divest all of their interest in the Company by transferring to TICO all of the
Company's outstanding Common Stock purchase warrants held by them, a $217,000
principal amount note payable to Roadmaster, 29,500 shares of the Company's
Series A 8% cumulative convertible preferred stock, and all outstanding accounts
receivable due Roadmaster. Additionally, Roadmaster agreed to transfer to TICO
all marketing and distribution rights for golf products in Canada, all tooling
exclusively associated with the manufacture of hand-pulled golf carts, the
"Ajay" name and agreed to grant TICO a ten year exclusive license for the use of
the "Ajay" trademark and trade name. The Company and TICO agreed to obtain the
release and satisfaction in full of any and all obligations, guarantees, and
collateral of Equitex under the credit facility, including the release of
1,000,000 shares of Roadmaster common stock owned by Equitex and pledged to a
bank as collateral. Mr. Itin and TICO further agreed to transfer to Roadmaster
all the Roadmaster common stock purchase warrants held by Mr. Itin, along with
TICO's payment of $200,000 to Roadmaster.

Based upon completion of the Exchange Agreement, the Company entered into
an agreement with Mr. Itin on December 10, 1993 pursuant to which Mr. Itin
agreed to exchange with Ajay certain accounts payable, notes payable, and other
obligations the Company had owed to Roadmaster and Equitex and which were
acquired by Mr. Itin and TICO in the Exchange Agreement. Pursuant to this

38
<PAGE>

agreement, the Board of Directors of the Company approved a plan to convert the
value of accounts payable and the $217,000 note payable transferred to TICO into
preferred stock, which could be converted to Common Stock of the Company at a
price of $.34 per share. These obligations were repaid by the Company and no
shares of preferred stock were issued.

The Board further approved a reduction in the price of the Common Stock
purchase warrants received by TICO under the Exchange Agreement to $.34 per
share and the issuance of warrants in like amount of warrants received at the
date of exchange that had subsequently expired. These warrants were transferred
by TICO to Acrodyne Profit Sharing Trust. On August 12, 1994, the Board
authorized a new Series B 8% Cumulative Convertible Preferred Stock issue (the
"Series B Preferred Stock"), which contained a provision whereby holders of the
Series A 8% Cumulative Convertible Preferred Stock (the "Series A Preferred
Stock") could exchange shares, on a one-for-one share basis, for Series B
shares. Holders of the Series B Preferred Stock may convert one share of the
Series B Preferred Stock for 294.12 shares of the Common Stock of the Company.
On October 3, 1994 the Company was notified by TICO, the only holder of the
Series A Preferred Stock, that it wished to exchange its 29,500 Series A shares
for the same number of Series B shares. In addition, TICO then converted 17,000
shares of the Series B Preferred Stock into 5,000,040 shares of the Common Stock
of the Company. See "Description of Securities-Series B Preferred Stock."

Certain items in the December 10, 1993 agreement have not been performed
by the Company or waived by Mr. Itin. He retains the right (1) to be paid
approximately $590,000 for unpaid and undeclared dividends on the Series A
Preferred Stock either in cash or in 5,900 shares of Series B Preferred Stock;
(2) to convert the $80,000 financing fee obligation owed to Equitex which he
assumed in the Exchange Agreement, plus interest due, to 800 shares of Series B
Preferred Stock; and (3) at his option, to convert the value of the golf cart
tooling acquired from Roadmaster and transferred to the Company to approximately
200 shares of Series B Preferred Stock or to be paid for its current market
value.

Also in this agreement, Mr. Itin agreed to serve as Chairman and
President of the Company through December 31, 1996, receiving salary of $1 per
year for 1994 and 1995, with salary for 1996 to be determined by the Company's
Board of Directors.

LOAN FROM WILLIAMS CONTROLS.

On April 14, 1994 the Company was advised by BankAmerica that the Second
Amended Restated Loan and Security Agreement ("Credit Agreement") between
BankAmerica and the Company's wholly-owned subsidiary, Ajay, had been purchased
by Roadmaster Industries, Inc. On May 5, 1994, Ajay paid Roadmaster Industries
in full all outstanding obligations due under its Credit Agreement and entered
into its Loan Agreement with Williams Controls for a loan of up to $7,000,000.
The Loan Agreement required monthly interest only payments at the prime rate of
First Interstate Bank of Oregon plus 3.25% and was originally scheduled to
expire on November 4, 1994 and was extended to February 1, 1996. The
Loan Agreement was secured by a lien on substantially all of the assets of Ajay
and was guaranteed by the Company and the Company's President. The Company's
guaranty was secured by a pledge of all of the outstanding stock of Ajay.

In addition, concurrent with the establishment of the Loan Agreement with
Williams Controls, in May 1994 the Company and Ajay entered into a Joint Venture
Implementation Agreement with Williams Controls in which the Company granted
Williams Controls an option to purchase up to 51% of the then outstanding Common
Stock of the Company at various option prices ranging between $.34 and $1.00 per
share, together with a one-time right to demand registration of the shares
underlying the options and piggy-back registration rights.

39
<PAGE>

On April 5, 1995, the Company and Williams Controls agreed to
modifications of the terms of the Loan Agreement and the Joint Venture
Implementation Agreement. The changes included (1) a waiver of Williams
Controls' preemptive right to purchase up to 51% so long as the Company
completed this Offering by May 31, 1995 (which date could be extended for up to
120 days), (2) an extension of the due date of the loan until February 1, 1996,
(3) a reduction in the maximum loan amount from $7.0 million to $5.6 million as
of August 1, 1995, (4) a reduction in the number of $1.00 options granted to
Williams Controls from 1,394,979 to 348,745 exercisable at $.50 per share if the
loan was repaid by August 1, 1995, (5) a reduction in the exercise price of all
unexercised options with an exercise price greater than $.50 per share to $.50
if the loan was not repaid by August 1, 1995, (6) an extension of the expiration
date of all options granted to Williams Controls from May 5, 1998 to August 1,
1999, and (7) an additional four-year extension of the manufacturing joint
venture at the Company's Delavan, Wisconsin, and Mexicali, Mexico, facilities
from May 5, 1998 to August 1, 2002. See "Business-Properties."

The agreement, with the modifications, provided Williams Controls with
the following options to purchase the Company's Common Stock:

<TABLE>
<CAPTION>
NUMBER OF OPTIONS IF NUMBER OF OPTIONS IF
OPTION PRICE LOAN WAS REPAID BY 8/1/95 LOAN WAS NOT REPAID BY 8/1/95

- ---------------------

(1) On October 3, 1994, Williams Controls exercised its option to purchase
4,117,647 shares of the Company's Common Stock at a price of $.34 per
share and, in so doing, reduced the outstanding loan balance from the
Company by $1,400,000. Williams Controls retains the right to purchase
another 4,717,219 shares of the Company's Common Stock at $.34 per share.

Mr. Itin, the Chairman and President of the Company, is, and was at the
time of the Loan Agreement, chairman, president, treasurer, chief executive
officer, and chief operating officer of Williams Controls, a publicly-held
corporation. Mr. Itin had personally guaranteed the obligations of the Company
to Williams Controls.

On July 25, 1995, the Company entered int 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 the Loan Agreement with Williams Controls. All of the
Company's subsidiaries and Williams Controls have guaranteed payment of this
credit facility and the Company and its Subsidiaries have pledged their
inventory and receivables as collateral. The Company has agreed to pay Williams
Controls 0.5% per annum of the outstanding Revolving Loan balance on a quarterly
basis in consideration for providing its guarantee of the Revolving Loan.
Williams Controls retains its options to purchase up to 11,110,873 shares of
Common Stock.

OTHER TRANSACTIONS

On October 3, 1994, the Acrodyne Profit Sharing Trust, an entity
controlled by Mr. Itin, purchased 1,176,471 shares of Common Stock for $400,000.
Also on that date, Enercorp, Inc., a business development company purchased
1,764,706 shares of Common Stock for $600,000. The closing bid price of the
Common Stock on October 3, 1994 was $.53, as compared to the purchase price of
$.34 per share. The agreements to purchase the shares were negotiated with the
Company in early August 1994, when the market prices for the stock were between
$.28 and $.41. Robert R. Hebard, the Secretary and a Director of the Company, is
chairman of the board of directors and president of Enercorp, Inc. Mr. Itin

40
<PAGE>

is a significant shareholder of Enercorp, Inc. As of July 25, 1995, Mr. Itin
controlled directly and indirectly 7,807,725 (34.6%) of the outstanding Common
Stock of the Company. See "Principal Shareholders."

In December 1993, First Equity Corporation established a letter of credit
on behalf of the Company, which was amended during 1994, totaling $271,000. This
letter of credit was used to purchase inventory. In addition, First Equity
Corporation advanced the Company $250,000 during January 1994 and was repaid in
June 1994 from the Company's working capital. The total amount of principal and
interest paid was $258,235. First Equity Corporation is a Michigan corporation
of which Mr. Itin's wife is a shareholder, president, and chairman of the board
of directors.

DESCRIPTION OF SECURITIES

The Company is authorized to issue 100,000,000 shares of $.01 par value
common stock (the "Common Stock") and 10,000,000 shares of $.01 par value
preferred stock. As of the date of this Prospectus, there are issued and
outstanding 22,545,537 shares of Common Stock and 12,500 shares of Series B
Preferred Stock.

COMMON STOCK

Holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Holders of the Common Stock
are entitled to receive dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor, and to share ratably in the
assets of the Company legally available for distribution to the common
shareholders in the event of liquidation or dissolution. The Common Stock does
not have cumulative voting rights, which means the holder or holders of more
than half of the shares voting for the election of directors can elect all the
directors then being elected. The holders of Common Stock do not have preemptive
or other rights to acquire or subscribe for additional unissued or treasury
shares. All outstanding shares of Common Stock, and shares of Common Stock
issuable upon conversion of the Series C Preferred Stock or exercise of the
Warrants, when issued and paid for, will be fully paid and not liable for
further call or assessment.

PREFERRED STOCK

Under the Company's Certificate of Incorporation, the Company is
authorized to issue up to 10,000,000 shares of preferred stock, in one or more
series, with such rights, preferences, qualifications, limitations, and
restrictions as shall be set forth in the Certificate of Designation authorizing
the issuance of such stock. The Company has established a Series A 8% Cumulative
Convertible Preferred Stock consisting of 100,000 shares (the "Series A
Preferred Stock), a Series B 8% Cumulative Convertible Preferred Stock
consisting of 100,000 shares (the "Series B Preferred Stock"), and a Series C
10% Cumulative Convertible Preferred Stock consisting of 500,000 shares (the
"Series C Preferred Stock").

As described in "Certain Transactions - TICO/Roadmaster Exchange," all of
the issued and outstanding shares of Series A Preferred Stock were exchanged for
shares of Series B Preferred Stock. Accordingly, there are no shares of Series A
Preferred Stock issued or outstanding. Although the Company can issue shares of
Series A Preferred Stock, it has no plans to issue any such shares. There are
issued and outstanding 12,500 shares of Series B Preferred Stock. Prior to this
offering, no shares of Series C Preferred Stock were issued or outstanding.

SERIES B PREFERRED STOCK

DIVIDENDS. The holders of Series B Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors of the Company, out
of funds legally available therefor, cumulative dividends at the rate of 8% per
annum on the stated value of $100.00 per share, or $8.00 per share per

41
<PAGE>

annum, and no more, such dividends to accrue from the date of first issuance.
Such dividends shall be payable in equal preference and priority to the
obligation to pay dividends on the Company's Series C Preferred Stock, and in
preference to any payment of any dividend on any other shares of capital stock
of the Company. To the extent that the Company does not have a sufficient amount
of cash to pay any dividends declared on both the Series B and Series C
Preferred Stock, the Series C Preferred Stock shall have priority as to payment
in cash and dividends may be paid to holders of the Series B Preferred Stock in
additional shares of Series B Preferred Stock, based on the stated value of
$100.00 per share.

LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary of involuntary, any holder of the
Series B Preferred Stock shall, for each share of Series B Preferred Stock, be
entitled to receive a distribution of $100.00 plus any accrued and unpaid
dividends out of the assets of the Company, on an equal preference basis to the
Series C Preferred Stock, except that such Series C Preferred Stock is entitled
to a distribution of $10.00 per share, but prior to any distribution of assets
with respect to any other shares of capital stock of the Company other than the
Series C Preferred Stock, as a result of such liquidation, distribution or
winding up of the Company.

CONVERSION. Each share of Series B Preferred Stock is convertible into
294.12 shares of Common Stock at the sole discretion of the holder.

OPTIONAL REDEMPTION. The Company shall have the right and option upon
notice to the holders of the Series B Preferred Stock to call, redeem and
acquire any or all of the shares of Series B Preferred Stock at a price equal to
$100.00 per share, plus any accrued and unpaid dividends, at any time to the
extent such shares have not been previously converted to Common Stock pursuant
to the terms described above; provided, however, that the holders of the Series
B Preferred Stock shall, in any event, have the right during the 30-day period
immediately following the date of the Notice of Redemption, which shall fix the
date for redemption (the "Redemption Date"), to convert their shares of Series B
Preferred Stock in accordance with the terms described above. If the shares are
converted during such 30-day period, this call option shall be deemed not to
have been exercised by the Company with respect to such shares so converted.
Said Notice of Redemption shall require the holders to surrender to the Company,
on or before the Redemption Date, to the Company's transfer agent, the
certificates representing the shares of Series B Preferred Stock to be redeemed.
Notwithstanding the fact the certificates representing the shares called for
redemption have not been surrendered for redemption and cancellation on or after
the Redemption Date, such shares shall be deemed to be expired and all rights of
the holders thereof shall cease and terminate.

VOTING AND PREEMPTIVE RIGHTS. The holders of the Series B Preferred
Stock shall have no voting rights except to the extent required by the Delaware
General Corporation Law and the Series B Preferred Stock shall be entitled to no
preemptive rights.

SERIES C PREFERRED STOCK

DIVIDENDS. The holders of Series C Preferred Stock will be entitled to
receive, out of assets legally available for such purpose, in equal preference
and priority to the obligations to pay dividends on the Series B Preferred
Stock, but before any distributions shall be declared, paid, or set aside, or
any other distribution shall be declared or made, upon any other shares of
capital stock of the Company, distributions in cash at the rate of 10% per annum
on the stated value of $10.00 per share, or $1.00 per share per annum. Such
dividend shall be paid on or before the 30th day after the last day of the
fiscal quarter with respect to which such distribution shall be payable
commencing July 1, 1995, such dividends to accrue from the date of first
issuance. If any distributions payable on any share of Series C Preferred Stock
shall not be paid for any reason, the right of the holders of such shares of
Series C Preferred Stock to receive payment of such distribution shall not lapse
or terminate, but each such unpaid distribution (the "Unpaid Dividends") shall
accumulate and shall be paid without interest to such holders, when and as

42
<PAGE>

authorized by the Board of Directors of the Company. To the extent that the
Company does not have a sufficient amount of cash to pay any dividends declared
on both the Series B and Series C Preferred Stock, the Series C Preferred Stock
shall have priority as to payment in cash and dividends may be paid to holders
of the Series B Preferred Stock in additional shares of Series B Preferred
Stock, based on the stated value of $100.00 per share. Holders of shares of
Series C Preferred Stock are not entitled to any dividend, whether payable in
cash, property, or stock, in excess of full cumulative dividends. No
distribution shall be declared, ordered, or made upon any other class of stock
of the Company, nor shall any sums be set aside for or applied to the purchase
or redemption of any shares of any other class of stock of the Company, unless
and until all Unpaid Dividends payable upon each issued and outstanding share of
Series C Preferred Stock shall have been fully paid or a distribution shall have
been declared and a sum sufficient for full payment of the Unpaid Dividends set
apart therefor.

LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary of involuntary, any holder of the
Series C Preferred Stock shall, for each share of Series C Preferred Stock, be
entitled to receive a distribution of $10.00 plus any accrued and unpaid
dividends out of the assets of the Company, on an equal preference basis to the
Series B Preferred Stock, except that such Series B Preferred Stock is entitled
to a distribution of $100.00 per share, but prior to any distribution of assets
with respect to any other shares of capital stock of the Company other than the
Series B Preferred Stock, as a result of such liquidation, distribution or
winding up of the Company.

CONVERSION. At any time at the option of the holder, the Series C
Preferred Stock shall be convertible into shares of Common Stock, based on a
value of $10.00 for each share of Series C Preferred Stock and $.6875 for the
Common Stock. Should the price of the Company's Common Stock reach or exceed a
closing high bid price of $.8125 for ten (10) consecutive business days (the
"Mandatory Conversion Event"), each share of the Series C Preferred Stock shall
automatically convert to shares of Common Stock of the Company. The effective
date of such automatic conversion shall be the day following the Mandatory
Conversion Event for the purpose of determining dividends payable and other
rights and preferences. Upon the occurrence of the Mandatory Conversion Event,
and the subsequent automatic conversion, all dividends accruing as of the
Mandatory Conversion Event shall become payable within 30 days of such date, and
additional dividends shall not accrue nor require payment subsequent to such
date.

OPTIONAL REDEMPTION. The Company shall have the right and option upon
notice to the holders of the Series C Preferred Stock to call, redeem and
acquire any or all of the shares of Series C Preferred Stock at a price equal to
$11.00 per share, plus any accrued and unpaid dividends, at any time to the
extent such shares have not been previously converted to Common Stock pursuant
to the terms described above; provided, however, that the holders of the Series
C Preferred Stock shall, in any event, have the right during the 30-day period
immediately following the date of the Notice of Redemption, which shall fix the
date for redemption (the "Redemption Date"), to convert their shares of Series C
Preferred Stock in accordance with the terms described above. If the shares are
converted during such 30-day period, this call option shall be deemed not to
have been exercised by the Company with respect to such shares so converted.
Said Notice of Redemption shall require the holders to surrender to the Company,
on or before the Redemption Date, to the Company's transfer agent, the
certificates representing the shares of Series C Preferred Stock to be redeemed.
Notwithstanding the fact the certificates representing the shares called for
redemption have not been surrendered for redemption and cancellation on or after
the Redemption Date, such shares shall be deemed to be expired and all rights of
the holders thereof shall cease and terminate.

VOTING AND PREEMPTIVE RIGHTS. The holders of the Series C Preferred
Stock shall have no voting rights except to the extent required by the Delaware
General Corporation Law and the Series C Preferred Stock shall be entitled to no
preemptive rights.

43
<PAGE>

WARRANTS

The Warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement (the "Warrant Agreement") between
the Company and American Securities Transfer, Inc. as warrant agent (the
"Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Securities and Exchange Commission as an exhibit to the Registration Statement
of which this Prospectus is a part. See "Additional Information."

The Company has authorized the issuance of Warrants to purchase an
aggregate of up to 373,750 shares of Common Stock (including Warrants to
purchase up to 48,750 shares of Common Stock issuable pursuant to the
Underwriters' over-allotment option but excluding Warrants underlying the
Representative's Warrants) and has reserved an equivalent number of shares of
Common Stock for issuance upon exercise of such Warrants.

The terms of these Warrants are identical to outstanding publicly-held
warrants to purchase an aggregate of 883,470 shares of Common Stock, which were
sold in the Company's initial public offering. Accordingly, "Warrants" refers to
those offered hereby and the outstanding publicly-held warrants.

The Warrants are subject to redemption by the Company at $.05 per Warrant
at any time on forty-five (45) days written notice provided that the closing
high bid price of the Common Stock has exceeded the Warrant Exercise Price by
50% or more for twenty (20) consecutive trading days within twenty (20) calendar
days preceding the mailing of the notice of redemption. In addition, the Company
must have on file a current registration statement pertaining to the Common
Stock underlying the Warrants in order for the Warrants to be redeemed by the
Company.

Each Warrant entitles the holder thereof to purchase one share of Common
Stock at a price of $1.00 (the "Warrant Exercise Price"). The right to exercise
the Warrants will commence immediately and will terminate at the close of
business on December 31, 1996. The Warrants contain provisions that protect the
Warrant holders against dilution by adjustment of the exercise price in certain
events including, but not limited to, stock dividends, stock splits,
reclassifications, or mergers. A Warrant holder will not possess any rights as a
stockholder of the Company. The shares of Common Stock, when issued upon the
exercise of the Warrants in accordance with the terms thereof, will be fully
paid and non-assessable.

At any time when the Warrants are exercisable and as a condition to
redemption of the Warrants, the Company is required to have a current
registration statement on file with the Securities and Exchange Commission and
to effect appropriate qualifications under the laws and regulations of the
states in which the holders of Warrants reside in order to comply with
applicable laws in connection with the exercise of the Warrants and the resale
of the Common Stock issued upon such exercise. So long as the Warrants are
outstanding, the Company will undertake to file all post-effective amendments to
the registration statement required to be filed under the Securities Act, and to
take appropriate action under federal and state securities laws to permit the
issuance and resale of Common Stock issuable upon exercise of the Warrants. In
the Warrant Agreement, the Company has agreed to register or qualify the shares
in all of the jurisdictions in which the securities offered hereby are
registered or qualified. The Company may determine not to register or qualify
the shares underlying the warrants in certain other jurisdictions where the time
and expense involved would not justify such registration and qualification.
There can be no assurance that the Company will be in a position to effect such
action under the federal and applicable state securities laws, and the failure
of the Company to effect such action may cause the exercise of the Warrants and
the resale or other disposition of the Common Stock issued upon such exercise to
become unlawful. The Company may amend the terms of the Warrants but only by
extending the termination date or lowering the exercise price. The Company has
no present intention of amending such terms.

44
<PAGE>

CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION

TAKEOVER STATUTE. Section 203 of the Delaware General Corporation Law
prohibits business combinations between a public corporation and an "interested
stockholder" for a period of three years subsequent to the interested
stockholder becoming such. An "interested stockholder" is defined as the owner
of 15 percent or more of the outstanding voting stock of the corporation and
includes affiliates and associates of a 15 percent owner, so as to prevent
business combinations with entities related to an interested stockholder.
Prohibited business combinations include a wide range of transactions with or
caused by an interested stockholder in which the interested stockholder receives
or could receive something the other stockholders do not.

The statute contains a number of ways by which one intending to become,
or who has become, an interested stockholder may avoid the three-year
proscription. The following are applicable to the Company: (1) the board of
directors of the corporation approves either the business combination or the
stockholder becoming an interested stockholder prior to his acquiring 15 percent
of the voting stock; (2) the stockholder acquires 85 percent or more of the
outstanding voting stock of the corporation in the transaction by which the
stockholder becomes an interested stockholder; or (3) the combination is
approved by the board of directors of the corporation and is approved by the
holders of two-thirds of the outstanding voting stock of the corporation which
is not owned by the interested stockholder at an annual or special meeting of
stockholders.

Section 203 may deter any potential unfriendly offers or other efforts to
obtain control of the Company that are not approved by the Board of Directors.
Such provisions could also deprive the stockholders of opportunities to realize
a premium on their Common Stock. At the same time, these provisions may have the
effect of inducing any persons seeking control of the Company or a business
combination with the Company to negotiate terms acceptable to the Board of
Directors.

"COMPROMISE" PROVISION. The Company's Certificate of Incorporation
contains a provision pursuant to which application may be made to a court of
equitable jurisdiction in the State of Delaware to order a meeting of the
stockholders of the Company for the purpose of approving a compromise or
arrangement between the Company and its stockholders. Such compromise or
arrangement may be binding on all stockholders if sanctioned by the court and if
holders representing three-fourths of the outstanding shares agree to any
compromise or arrangement. This provision is also applicable to a compromise or
arrangement with creditors or any class of creditors or any class of
stockholders of the Company.

TRANSFER AGENT AND WARRANT AGENT

The Transfer Agent for the Company's Common and Preferred Stock and the
Warrant Agent is American Securities Transfer, Inc., 938 Quail Street, Suite
101, Lakewood, Colorado 80215.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 22,545,537 shares of Common Stock will
be outstanding. Of these shares, 8,284,184 shares are freely tradable without
restriction under the Act and 14,261,353 are restricted. Of the restricted
shares, 13,634,864 are held by "affiliates" of the Company. An "affiliate" of an
issuer is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such issuer. Shares held by an "affiliate" may be sold only if registered under
the Act or pursuant to an applicable exemption from registration, including the
applicable provisions of Rule 144. With respect to the remaining 626,489
restricted shares, 552,489 are currently eligible for sale under Rule 144 and
74,000 will become eligible in August 1996.

<PAGE>

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least two years, is entitled to sell, within any three-month period, that number
of shares that does not exceed the greater of one percent of the then
outstanding shares or the average weekly trading volume of the then outstanding
shares during the four calendar weeks preceding each such sale. Furthermore, a
person who is not deemed an "affiliate" of the Company and who has beneficially
owned shares for at least three years is entitled to sell such shares under Rule
144 without regard to the volume limitations described above.

The Representative has required in the underwriting agreement that sales
of the outstanding restricted Common Stock held by officers, directors, and
holders of 5% or more of the outstanding Common Stock may not commence until 12
months from the date of this Prospectus, without the prior written consent of
the Representative. Of the restricted shares held by persons who are officers,
directors, and holders of 5% or more of the outstanding Common Stock, 5,000,040
shares are currently eligible for sale under Rule 144, 1,576,000 shares will
become eligible for sale under Rule 144 in August 1996 and 7,058,864 shares will
become eligible for sale in October 1996.

There are also outstanding as of the date of this Prospectus, Warrants to
purchase 883,470 shares of Common Stock and options to purchase 2,867,000 shares
of Common Stock, of which 2,032,300 options vested are currently exercisable,
and the remaining 834,700 options will vest and become exercisable at various
times beginning October 31, 1995. Williams Controls has options to purchase up
to 11,110,873 shares of Common Stock. See "Certain Transactions."

In addition, the 12,500 outstanding shares of Series B Preferred Stock
may be converted into 3,676,500 shares of Common Stock at any time.

No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. The Company is unable to
estimate the number of shares that may be sold in the public market under Rule
144, since this will depend on the trading volume, the market price for the
Common Stock, and other factors. Nevertheless, sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could have a
material adverse effect on prevailing market prices.

UNDERWRITING

The Underwriters named below, for whom Schneider Securities, Inc., is
acting as Representative, have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
number of shares of Series C Preferred Stock and Warrants set forth opposite
their names in the table below:

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME SHARES WARRANTS
<S> <C> <C>
Schneider Securities, Inc............... 185,000 185,000
RAF Financial Corporation............... 60,000 60,000
Investors Associates, Incorporated...... 50,000 50,000
L.H. Alton & Company.................... 30,000 30,000
------- -------
Total................................... 325,000 325,000
======= =======
</TABLE>

The Series C Preferred Stock and Warrants are being offered by the
several Underwriters, when, as and if delivered to and accepted by the
Underwriters and subject to their rights to reject orders in whole or in part
and subject to approval of certain legal matters by counsel, to the accuracy of
each of the representations and warranties contained in the Underwriting
Agreement on the part of the Company, to the performance by the Company of all
its agreements contained in the Underwriting Agreement, to

<PAGE>

the fulfillment of or compliance by the Company with all of the covenants and
conditions contained in the Underwriting Agreement, and to various other
conditions set forth in the Underwriting Agreement.

The Company has been advised by the Representative that the Underwriters
propose to offer the Series C Preferred Stock and Warrants purchased by them
directly to the public at the initial public offering prices set forth on the
cover of this Prospectus and to certain selected dealers at those prices less a
concession within the discretion of the Representative. The Underwriters may
allow, and such dealers may reallow, a concession within the discretion of the
Representative. The Underwriters are committed to purchase and pay for all of
the Series C Preferred Stock and Warrants (other than the Series C Preferred
Stock and Warrants subject to the over-allotment option) if any are purchased.
There are no restrictions on the purchase of Series C Preferred Stock and
Warrants by affiliates or persons otherwise associated with the Company or any
subsidiary. The Underwriters do not intend to sell any Series C Preferred Stock
or Warrants offered hereby through the use of discretionary authority. After the
commencement of the offering, the offering prices and the selling terms may be
changed by the Underwriters should market conditions require.

The Company has granted the Representative an over-allotment option,
exercisable during the 45-day period after the date of this Prospectus, to
purchase up to a maximum of an additional 48,750 shares of Series C Preferred
Stock and/or 48,750 Warrants on the same terms as the Series C Preferred Stock
and Warrants being purchased by the Underwriters from the Company. The
Representative may exercise the over-allotment option only to cover over-
allotments in the sale of the Series C Preferred Stock and Warrants offered
hereby.

The Underwriters will purchase the Series C Preferred Stock and Warrants
(including the Series C Preferred Stock and Warrants subject to the over-
allotment option) from the Company at prices per share of Series C Preferred
Stock and per Warrant representing a discount of 10% from the public offering
prices. In addition, the Company has agreed to pay the Representative a
nonaccountable expense allowance of 3% of the aggregate public offering price of
the Series C Preferred Stock and Warrants, which will include the over-allotment
option, if exercised. The payment of this allowance at closing will be reduced
by $35,000 previously advanced to the Representative.

The Company has agreed to enter into a financial consulting agreement
with the Representative at the Closing, pursuant to which the Company will agree
to pay the Representative $2,500 per month for a period of 12 months, with
the entire consulting fee payable in advance upon the Closing. The consulting
services shall include, but shall not be limited to, advising the Company in
connection with business and financial planning, corporate organization and
structure, financial matters in connection with the operation of the business of
the Company, private and public equity and debt financing, acquisitions,
mergers, and other similar business combinations, the Company's relations with
its stockholders, preparation and distribution of periodic reports, and analysis
of the Company's financial statements.

If, upon request by the Company, the Representative arranges for equity
or debt financing accepted by and closed with the Company (other than this
Offering) at any time prior to December 9, 1997, the Company has agreed to pay a
10% or 5% commission, respectively, to the Representative based on the amount of
equity or debt financing. If the Representative obtains an increase in the
Company's line of credit, which is accepted by and closed with the Company, the
Company has agreed to pay the Representative a fee equal to 1% of the amount of
increase. If the Representative arranges for the purchase or sale of assets, for
a merger, acquisition, or joint venture accepted by and closed with the Company,
at any time prior to December 9, 1997, the Company has agreed to pay the
Representative a fee based on the value of the transaction ranging from 5% for
the first $1,000,000 to 1% in excess of $4,000,000.

47
<PAGE>

The Company has also agreed to indemnify the Underwriters against certain
liabilities that may be incurred in connection with the Offering, including
liabilities under the Securities Act of 1933, or to contribute the payments that
the Underwriters may be required to make in respect thereof.

The Company's directors, officers, and each holder of 5% or more of the
Company's Common Stock have agreed not to sell their shares of Common Stock in
the Company without the Representative's prior written consent for a period of
one year from the date of this Prospectus.

In connection with this Offering, all or some of the Underwriters may
engage in market making activities in the Common Stock and the Warrants on the
NASDAQ Small-Cap Market in accordance with Rule 10b-6A under the Exchange Act
during the distribution of such securities pursuant to this Offering.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement which is filed as an exhibit to the Registration
Statement. See "Additional Information."

REPRESENTATIVE'S WARRANTS

The Company has agreed to sell to the Representative at the close of this
offering, for $100, Warrants to purchase 32,500 shares of Series C Preferred
Stock and 32,500 Warrants at 120% of the public offering prices set forth on the
cover page of this Prospectus (the "Representative's Warrants"). The
Representative's Warrants will not be transferable or assignable except to the
officers of the Representative, or to selected dealers and their officers or
partners and will not be exercisable for a period of one year after the date of
this Prospectus. After such one year period, the Representative's Warrants will
be assignable and transferable and will be exercisable for a period of four
years, except that the Representative's Warrants to purchase Warrants will be
exercisable during the period provided in the Warrant. If the Representative's
Warrants are not exercised during their term, they will automatically expire.
The Company has agreed to set aside and at all times have available a sufficient
number of shares of Series C Preferred Stock and Warrants to be issued upon the
exercise of the Representative's Warrants.

The Representative's Warrants provide that during the period commencing
one year after the date of this Prospectus and ending five years after the date
of this Prospectus, the Company will, upon written request by the holders of at
least 50% of the Representative's Warrants or the Series C Preferred Stock or
Warrants issuable on exercise of the Representative's Warrants, file one
registration statement or Regulation A offering statement under the Securities
Act of 1933, as amended with the Securities and Exchange Commission and certain
states to permit the public sale of such Representative's Warrants, Series C
Preferred Stock or Warrants.

In addition, the holders of the Representative's Warrants and securities
issued upon exercise of the Representative's Warrants will be entitled,
commencing one year after the date of this Prospectus and ending five years
after the date of this Prospectus, to include all or any portion of the
securities issued upon exercise of the Representative's Warrants in any
registration statement (except for registration statements filed by the Company
on Form S-4, Form S-8, or any other inappropriate form), or in any offering
statement on Form 1-A to the maximum extent permissible, filed by the Company.

In no event will the Company be required to pay any selling commissions
or nonaccountable expenses relating to the sale of such securities.

Holders of the Representative's Warrants are protected against dilution
of the equity interest represented by the underlying securities upon the
occurrence of certain events, including, but not limited to, stock dividends.
Holders of the Representative's Warrants shall have no voting rights, dividend
rights, or any other rights of any equity holder of the Company's securities. In
the event of liquidation,

<PAGE>

dissolution, or winding up of the Company, holders of the Representative's
Warrants are not entitled to participate in the Company's assets.

LEGAL MATTERS

Certain legal matters in connection with the Offering, including the
legality of the Series C Preferred Stock, will be passed upon for the Company by
counsel to the Company, Fay M. Matsukage. Krys Boyle Golz Reich Freedman &
Scott, P.C. has acted as counsel to the Representative in connection with
certain legal matters relating to this Offering.

EXPERTS

The consolidated financial statements of Ajay Sports, Inc. and subsidiary
for the year ended December 31, 1994 included herein and elsewhere in the
Registration Statement have been included herein and in the Registration
Statement in reliance upon the report of Hirsch & Silberstein, P.C., independent
certified public accountants, whose report, which includes an explanatory
paragraph related to substantial doubt about the Company's ability to continue
as a going concern, has been included in the Prospectus and elsewhere in the
Registration Statement upon the authority of that firm as experts in accounting
and auditing.

The consolidated financial statements of Ajay Sports, Inc. and subsidiary
for the years ended December 31, 1992 and 1993 included herein and elsewhere in
the Registration Statement have been included herein and in the Registration
Statement in reliance upon the report of Coopers & Lybrand, L.L.P., independent
certified public accountants, whose report, which includes an explanatory
paragraph related to substantial doubt about the Company's ability to continue
as a going concern, has been included in the Prospectus and elsewhere in the
Registration Statement upon the authority of that firm as experts in accounting
and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the
Commission are incorporated herein by reference:

(a) the Company's Annual Report on Commission Form 10-K for the
fiscal year ended December 31, 1994 (the "Annual Report"), filed pursuant
to Section 13 of the Exchange Act;

(b) the Company's Quarterly Report on Commission Form 10-Q for the
period ended March 31, 1995, filed pursuant to Section 13 of the Exchange
Act; and

The Company will provide without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy
(without exhibits) of any or all documents incorporated by reference in this
Prospectus. Requests for such copies should be addressed to Ajay Sports, Inc.,
Attention: Duane R. Stiverson, CFO, 1501 E. Wisconsin Street, Delavan, WI 53115,
(414) 728 5521.

49
<PAGE>

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at 7 World Trade Center, New York, New
York 10048, and at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-
2511. Copies of such materials can be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Company has filed with the Commission a registration
statement on Form S-2 (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act of 1933,
as amended. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission.

The Company furnishes its stockholders with annual reports containing
financial statements audited by its independent certified public accountants and
intends to distribute quarterly reports for the first three quarters of each
fiscal year containing unaudited interim financial information.

50
<PAGE>

[LETTERHEAD OF HIRSCH & SILBERSTEIN, P.C.]

INDEPENDENT AUDITOR'S REPORT
----------------------------

Board of Directors
Ajay Sports, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Ajay
Sports, Inc. and Subsidiaries as of December 31, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of Ajay
Sports, Inc. and Subsidiaries as of December 31, 1993 and 1992 were audited by
other auditors whose report dated March 25, 1994, included an explanatory
paragraph related to substantial doubt about the Company's ability to continue
as a going concern, as discussed in Note 1 to the consolidated financial
statements.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ajay Sports, Inc. and Subsidiaries as of December 31, 1994, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has suffered
significant losses in the years ended December 31, 1994 and 1993. The Company
has also relied upon affiliated companies to fund it's cash flow deficiencies
through equity infusions. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/ Hirsch & Silberstein
- -----------------------------------
Hirsch & Silberstein, P.C.

Farmington Hills, Michigan
March 7, 1995

F-1
<PAGE>

[LETTERHEAD OF COOPERS & LYBRAND APPEARS HERE]

REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------

To the Shareholders and
Board of Directors
Ajay Sports, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of Ajay
Sports, Inc. and Subsidiary as of December 31, 1993 and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1993 and 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Ajay Sports, Inc. and Subsidiary as of December 31, 1993 and the consolidated
results of their operations and their cash flows for the years ended December
31, 1993 and 1992, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company has suffered significant
losses in the current year and is not in compliance with certain of its debt
covenants, which raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ COOPERS & LYBRAND LLP

Milwaukee, Wisconsin
March 25, 1994

F-2
<PAGE>

AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
December 31, March 31,
---------------------- --------
1993 1994 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 2 $ 105 $ 22
Trade accounts receivable, net of allowance of
$101, $230 and $117 respectively 1,975 1,700 3,812
Inventories 7,381 5,786 5,478

Prepaid expenses and other current assets 89 211 249
-------- -------- --------

Total current assets 9,447 7,802 9,561

Fixed assets, net 778 1,357 1,369
Investments in and advances to affiliates 125 -- --
Other assets 157 206 195
-------- -------- --------

Total assets $ 10,507 $ 9,365 $ 11,125
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Note payable to affiliate $ -- $ 5,369 $ 6,790
Notes payable to banks 5,019 12 12
Current portion of capital lease -- 9 7
Accounts payable 2,813 1,329 1,492
Accrued expenses 472 490 523
Due to affiliates 240 -- --
-------- -------- --------

Total current liabilities 8,544 7,209 8,824

Notes payable - long term -- 121 106
Stockholders' equity:
Preferred stock, $.01 par value, 100,000 shares
authorized, 29,500, 12,500 and 12,500 shares
issued, respectively, at liquidation value 2,950 1,250 1,250
Common stock, $.01 par value, 100,000,000 shares
authorized, 8,824,773, 22,533,637 and
22,545,537 shares outstanding, respectively 88 225 225
Additional paid-in capital 4,246 8,961 8,961
Accumulated deficit (5,321) (8,401) (8,241)
-------- -------- --------

Total stockholders' equity 1,963 2,035 2,195
-------- -------- --------

Total liabilities and stockholders' equity $ 10,507 $ 9,365 $ 11,125
======== ======== ========
</TABLE>

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

F-3
<PAGE>

AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended March 31,
---------------------------------------------------- --------------------------------
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Operating data:
Net sales $ 21,014 $ 15,902 $ 12,899 $ 3,663 $ 5,454
Cost of sales 17,156 14,172 12,291 3,187 4,362
------------ ------------ ------------ ------------ ------------
Gross profit 3,858 1,730 608 476 1,092
Selling, general and admin-
istrative expenses 2,896 2,834 2,747 632 752
------------ ------------ ------------ ------------ ------------
Operating income (loss) 962 (1,104) (2,139) (156) 340
------------ ------------ ------------ ------------ ------------
Nonoperating income
(expense):
Interest expense - net (906) (697) (614) (154) (185)
Loss on write down of
investment in
affiliate -- (123) -- -- --
Gain (loss) on
disposition of
investment 275 -- (38) -- --
Other, net 50 3 (289) (10) --
------------ ------------ ------------ ------------ ------------
(581) (817) (941) (164) (185)
------------ ------------ ------------ ------------ ------------
Income (loss) from
operations before
income taxes 381 (1,921) (3,080) (320) 155
Income tax expense
(benefit) -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) $ 381 $ (1,921) $ (3,080) $ (320) $ 155
============ ============ ============ ============ ============
Net income (loss) per
common share
outstanding* $.02 $(.24) $(.27) $(.04) $ .01
============ ============ ============ ============ ============
Net income (loss) per
common share and
equivalents
outstanding** $.02 $(.24) $(.27) $(.04) $ .00
============ ============ ============ ============ ============
Weighted average common
shares outstanding 8,457 8,812 12,218 8,825 22,546
============ ============ ============ ============ ============
Weighted average common
and common stock
equivalent shares
outstanding 8,457 8,812 12,218 8,825 32,629
============ ============ ============ ============ ============
</TABLE>

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

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

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

F-4
<PAGE>

AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share amounts)

<TABLE>
<CAPTION>
Total
Preferred Stock Common Stock Additional Unamortized Stockholders'
----------------- ----------------- Paid-In Accumulated Compensation Equity
Shares Amount Shares Amount Capital Deficit Expense (Deficit)
-------- ------ -------- ------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1992 -- $ -- 8,278,675 $ 83 $3,848 $(3,781) $(201) $ (51)

Subordinated note converted
into preferred stock 29,500 2,950 -- -- -- -- -- 2,950

Shares forfeited upon termination
of employment of former officer -- -- (233,333) (2) (136) -- 138 --

Amortization of compensa-
tion expense -- -- -- -- -- -- 63 63

Private placement issue,
net of fees of $107 -- -- 729,431 7 505 -- -- 512

Net income -- -- -- -- -- 381 -- 381
------- ------- ---------- ---- ------ ------- ----- -------

Balances at December 31, 1992 29,500 2,950 8,774,773 88 4,217 (3,400) -- 3,855

Common stock grant to
management -- -- 50,000 -- 29 -- -- 29

Net loss -- -- -- -- -- (1,921) -- (1,921)
------- ------- ---------- ---- ------ ------- ----- -------

Balances at December 31, 1993 29,500 2,950 8,824,773 88 4,246 (5,321) -- 1,963

Common stock issued to
fund acquisition -- -- 1,500,000 15 685 -- -- 700

Common stock issued in
lieu of wages to officer -- -- 150,000 2 50 -- -- 52

Preferred stock converted
into common stock (17,000) (1,700) 5,000,040 50 1,650 -- -- --

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

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

Net loss -- -- -- -- -- (3,080) -- (3,080)
------- ------- ---------- ---- ------ ------- ----- -------

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

Common stock issued to
employees -- -- 11,900 -- -- -- -- --

Adjust retained earnings -- -- -- -- -- 5 -- 5

Net income -- -- -- -- -- 155 -- 155
------- ------- ---------- ---- ------ ------- ----- -------

Balances at March 31, 1995
(Unaudited) 12,500 $ 1,250 22,545,537 $225 $8,961 $(8,241) $ -- $ 2,195
======= ======= ========== ==== ====== ======= ===== =======
</TABLE>

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

F-5
<PAGE>

AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------ ----------------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 381 $ (1,921) $ (3,080) $ (320) $ 155
Adjustments to reconcile to net cash
flows from operating activities:
Loss on sale of assets -- -- 162 -- --
(Gain) on disposition of
investment in affiliate (275) -- -- -- --
Depreciation and amortization 86 128 129 47 52
Loss on write down of investment
in and advances to affiliate -- 123 -- -- --
Stock issued to officer in lieu
of compensation -- -- 52 -- --
Adjustment to retained earnings -- -- -- -- 5
Changes in assets [(increase)/decrease]
& liabilities [increase/(decrease)]:
Accounts receivable, net (116) 980 299 (618) (2,112)
Inventories (903) 1,144 1,662 745 308
Prepaid expenses (98) 114 (112) (80) (38)
Other assets -- -- 22 -- 11
Accounts payable 250 611 (1,530) (168) 162
Accrued expenses (57) (108) 18 19 33
Due to affiliates (337) (17) (240) 250 --
-------- -------- -------- -------- --------
Net cash flows provided by
(used in) operating activities (1,069) 1,054 (2,618) (125) (1,424)
-------- -------- -------- -------- --------

Cash flows from investing activities:
Additions to property, plant
and equipment (161) (226) (115) -- (64)
Proceeds from sale of equipment -- -- 4 7 --
Proceeds from sale of investment -- -- 86 -- --
Investments in and advances
to affiliates 151 15 -- 18 --
-------- -------- -------- -------- --------
Net cash (used in)
investing activities (10) (211) (25) 25 (64)
-------- -------- -------- -------- --------

Cash flows from financing activities:
Cash acquired in acquisition
via non-cash financing -- -- 2 -- --
Proceeds from note payable
to affiliate -- -- 6,770 -- 1,420
Increase (decrease) in bank
notes payable 556 (841) (5,026) 102 (15)
Proceeds from private place-
ments, net of related costs 512 -- 1,000 -- --
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities 1,068 (841) 2,746 102 1,405
-------- -------- -------- -------- --------

Net increase (decrease) in cash (11) 2 103 2 (83)
Cash at beginning of period 11 -- 2 2 105
-------- -------- -------- -------- --------

Cash at end of period $ -- $ 2 $ 105 $ 4 $ 22
======== ======== ======== ======== ========
</TABLE>

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

F-6
<PAGE>

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

--------

1. GOING CONCERN PRESENTATION
--------------------------

As discussed in Note 6 to the consolidated financial statements, as of
December 31, 1993 the Company was not in compliance with certain of its debt
covenants. In May, 1994 the existing borrowings were replaced by a Loan
Agreement with an affiliate due November 1, 1994, which has been extended to
February 1, 1996 (See Note 16). If this financing had not been replaced or
extended, the Company would not have had sufficient funds to repay the
outstanding balance. The Company has suffered declines in sales and
significant net losses in 1994 and 1993. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.

The Company continues to work on the refinancing of its working capital
loan and is negotiating with asset based lenders to put this financing in
place. The Company received an equity infusion in October, 1994 of
$2,400,000 as a result of a private placement of 2,941,177 shares of common
stock with affiliated Companies and through the exercise of options to
purchase 4,117,647 shares by a related party, Williams Controls, Inc. Also in
October, 1994 the holder of the Company's Series B 8% Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock") converted 17,000 shares of
Series B Preferred Stock into 5,000,040 shares of common stock.

Additionally, throughout 1994, management instituted a cost reduction
program which included a reduction in salary and labor positions, along with
related fringe benefits. The Company also obtained more favorable material
costs, enhanced its material utilization methods and instituted more
efficient manufacturing techniques. The Company strengthened its sales
coverage by appointment of additional experienced independent sales
representatives and increased its emphasis on product development which
resulted in several new product introductions in late 1994. Management feels
these factors will contribute to achieving future profitability.

2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------

BASIS OF PRESENTATION - The consolidated financial statements include the
accounts of Ajay Sports, Inc. ("Sports") and its wholly-owned operating
company subsidiaries, Ajay Leisure Products, Inc. ("Ajay") and Leisure Life,
Inc. ("Leisure"), collectively referred to herein as the "Company". All
significant intercompany balances and transactions have been eliminated.

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

FIXED ASSETS - Fixed assets are stated at cost, less accumulated depreciation
of $144,000, $181,000 and $223,000 as of December 31, 1993 and 1994 and March
31, 1995 respectively. Fixed assets of the Company consist primarily of
machinery and equipment, office equipment, and a building. Depreciation is
computed using the straight-line method over the estimated useful lives of
the assets, which range from four to thirty-nine years.

OTHER ASSETS - Other assets at December 31, 1994 and March 31, 1995 consists
of patents and trademarks held and applied for by Leisure Life (See Note 8c).
Other assets at December 31, 1993 consists primarily of a receivable of
$318,000, less an allowance for estimated uncollectibility of $162,000, from
a customer then operating under Chapter 11 of the U.S. Bankruptcy Code. This
receivable was collected in June, 1994.

F-7
<PAGE>

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

--------

2. SIGNIFICANT ACCOUNTING POLICIES, Continued
-------------------------------

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

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

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

RECLASSIFICATION - Certain amounts as originally reported in the 1992
financial statements were reclassified to conform with the 1993 presentation.

UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of March
31, 1995, the consolidated statements of operations and cash flows for the
three months ended March 31, 1995 and 1994, and the consolidated statements
of stockholders' equity for the three months ended March 31, 1995 have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows
for all such periods have been made. The results of operations for the three
months ended March 31, 1995 are not necessarily indicative of the operating
results for the full year.

3. RELATED PARTY TRANSACTIONS
--------------------------

The Company's related parties include the following:

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

Pro Mark, Inc. ("Pro Mark") - The Company owns 40% of the outstanding shares
of Pro Mark.

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

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

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

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

F-8

<PAGE>

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

--------

3. RELATED PARTY TRANSACTIONS, Continued
--------------------------

Enercorp, Inc. - ("Enercorp") is a business development company engaged in
the business of investing in and providing managerial assistance to
developing companies. The Company's president, chief executive officer,
chairman and principal shareholder is a significant shareholder in Enercorp
and its president is a Director of the Company. Enercorp acquired 1,764,706
common shares on October 3, 1994.

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

(a) Roadmaster

Ajay purchased various finished goods inventory, primarily hand-pulled
golf carts, from Roadmaster. Purchases in 1993 and 1992 were
approximately $123,000 and $788,000, respectively. Prior to 1993, Ajay
leased certain machinery and equipment from Roadmaster. Rent expense to
Roadmaster was $139,000 for the year ended December 31, 1992. The net
result of this activity represented amounts due to Roadmaster of $42,000
and $39,000 at December 31, 1993 and 1992, respectively. The December
31, 1993 balance was transferred to TICO as part of the Exchange
Agreement and paid during the six months ended June 30, 1994.

During 1992, approximately $2,431,000 in letters of credit were opened by
Roadmaster for inventory purchases by Ajay. Consideration paid to
Roadmaster for use of these facilities totaled $200,000 in 1992.

In June, 1992, the Company transferred 188,100 shares of MacGregor Sports
and Fitness, Inc. ("MacGregor") common stock and assigned advances due
from MacGregor to Roadmaster in satisfaction of obligations to Roadmaster
of $376,000.

Also in 1992, 250,000 shares of MacGregor common stock were transferred
to Roadmaster in exchange for machinery and equipment previously leased
from Roadmaster with an appraised value of $490,000. A gain of $275,000
was recognized as a result of this transaction.

Prior to its conversion to preferred stock (as described in Note 8), the
Company owed Roadmaster $2,950,000 under a subordinated note, and
interest expense on the note for the year ended December 31, 1992 was
$61,000.

During 1993, the Company entered into an agreement with certain parties
(as described in Note 3c), whereby the promissory note owed to Roadmaster
in the amount of $217,000 on December 31, 1992 would be transferred to
TICO. As of December 31, 1993, Ajay owed $197,000 on the promissory note
with accrued interest of $17,000. During the year ended December, 1994
the $197,000 and interest of $24,719 were paid to TICO.

(b) Pro Mark

On April 2, 1991, the Company executed a letter of intent with Pro Mark
for the sale of the Company's "Double Eagle" brand of golf products for
$300,000 ($210,000, net of expenses) and 1,000,000 shares of restricted
common stock of Pro Mark. In order to permit Pro Mark to commence
marketing this product line at the earliest possible date and to allow
time for the comple-

F-9

<PAGE>

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

--------

3. RELATED PARTY TRANSACTIONS, Continued
--------------------------

(b) Pro Mark, Continued

tion of the sale, the parties on May 3, 1991 entered into an exclusive
sales representation agreement pursuant to which, for the same
consideration, Pro Mark was provided the exclusive right to market the
"Double Eagle" product line. The exclusive sales representation agreement
was subsequently replaced by an exclusive marketing agreement for an
initial 20 year period with renewal clauses.

Due to operating losses of Pro Mark, the Company did not assign any value
to the shares of Pro Mark common stock received in the transaction and no
gain or loss was recognized on this transaction.

During 1993, the Company wrote off advances to Pro Mark totaling $87,000.

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

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

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

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

F-10
<PAGE>

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

--------

3. RELATED PARTY TRANSACTIONS, Continued
--------------------------

conversion rate of 1 share of Series B Preferred Stock for 294.12 shares
of the Company's Common Stock.

(d) Other

In May, 1994 Williams entered into a Loan Agreement with the Company (See
Note 6).

In 1992, the Company paid Equitex $100,000 for services rendered and
reimbursement of costs associated with the private placement. In 1994,
Equitex earned a fee of $40,000 as a result of the extension of the
revolving credit facility with the bank. As part of the Exchange
Agreement this amount was transferred to TICO and paid in June, 1994.

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

4. INVENTORIES
-----------

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31, March 31,
---------------------- --------
1993 1994 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>

Raw materials $ 4,014 $ 2,901 $ 3,164
Work-in-progress 1,010 919 908
Finished goods 2,357 1,966 1,406
-------- -------- --------
$ 7,381 $ 5,786 $ 5,478
======== ======== ========
</TABLE>

5. INVESTMENT IN AND ADVANCES TO AFFILIATES
----------------------------------------

Investment in and advances to affiliates includes the following as of
December 31, 1993 and 1994 and March 31, 1995 (in thousands):

<TABLE>
<CAPTION>
December 31, March 31,
---------------------- --------
1993 1994 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>

Investment in MacGregor $ 107 $ -- $ --
Interest receivable - MacGregor $ -- $ -- $ --

Advances to:
Pro Mark, Inc. $ -- $ -- $ --
Roadmaster $ 18 $ -- $ --
-------- -------- --------
$ 125 $ -- $ --
======== ======== ========
</TABLE>

F-11
<PAGE>

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

--------

5. INVESTMENT IN AND ADVANCES TO AFFILIATES, Continued
----------------------------------------

The investment in MacGregor represented 125,106 shares of MacGregor
(which was less than 5% of MacGregor's outstanding stock) as of December 31,
1993. A former officer of the Company is an officer of MacGregor, and
MacGregor and the Company have common investors. During 1992, as disclosed in
Notes 3 and 13, the Company disposed of 188,100 and 250,000 shares of this
investment in satisfaction of payables to Roadmaster and to acquire equipment
from Roadmaster, respectively. In conjunction with the disposition of the
188,100 shares of MacGregor, the Company assigned, to Roadmaster, its rights
to collection of amounts due from MacGregor totalling $215,000. During the
year ended December 31, 1994 the remaining 125,106 shares were disposed of
for $69,000, resulting in a loss of $38,000.

6. DEBT
----

The December 31, 1993 note payable to bank represented Ajay's revolving
credit facility with BankAmerica Business Credit, Inc. ("BankAmerica"),
maturing April 30, 1994, not to exceed the lesser of $7.5 million or an
amount based on eligible trade accounts receivable and inventories, including
a letter of credit facility not to exceed $2.5 million. Borrowings under the
revolving credit facility bore interest at prime plus 2%. A $500,000
seasonal subline bore interest at prime plus 3%. This subline was cancelled
in the fourth quarter of 1993. The letter of credit facility required a fee
of 1.5% per annum on outstanding letters of credit. A commitment fee of .5%
per year on the unused balance of the revolving credit facility and the
letter of credit facility was required. The note contained certain
restrictions on the payment of dividends. The note was collateralized by
substantially all assets of Ajay and was guaranteed by the Company and up to
$1.5 million by Equitex.

Primarily as a result of net losses experienced in 1993, the Company was
not in compliance with financial covenants regarding interest coverage ratios
and adjusted tangible net worth under its revolving credit facility. As a
result, the revolving credit facility was reduced to $6 million effective
April 1, 1994.

On April 14, 1994 the Company was advised by BankAmerica that the Second
Amended Restated Loan and Security Agreement ("Credit Agreement") between
BankAmerica and Ajay had been purchased by Roadmaster. On May 5, 1994 Ajay
paid Roadmaster in full all outstanding obligations due under its Credit
Agreement and entered into a Loan and Security Agreement ("Loan Agreement")
with Williams for a loan of up to $7,000,000. The Loan Agreement requires
monthly interest only payments at the prime rate of First Interstate Bank of
Oregon plus 3.25%, was originally scheduled to expire on November 4, 1994,
and has been extended to February 1, 1996 (See Note 16). The Loan Agreement
is secured by a lien on substantially all of the assets of Ajay and is
guaranteed by the Company and the Company's President. The Company's guaranty
is secured by a pledge of all of the outstanding common stock of Ajay. At
December 31, 1994 and March 31, 1995 the borrowing under the loan was
$5,369,000 and $6,790,000, respectively. In connection with the Loan
Agreement Williams was granted certain options (See Note 8d).

F-12
<PAGE>

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

--------

6. DEBT, Continued
----

Ajay's borrowings consisted of the following:

<TABLE>
<CAPTION>
December 31, March 31,
----------------------- ----------
1993 1994 1995
---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C>
Revolving credit facility:
Balance $5,019,000 $5,369,000 $6,790,000
Interest rate 8.0% 10.5% 12.25%
Unused amount of facility $2,481,000 $1,631,000 $ 210,000
Average amount outstanding
during the period $6,100,261 $5,626,861 $6,430,733
Weighted average interest rate 8.3% 8.0% 11.7%
Maximum amount outstanding
during the period $7,748,959 $6,651,341 $6,790,000
</TABLE>

Ajay had outstanding commercial letters of credit totaling approximately
$62,000, $1,100,000 and $700,000 at December 31, 1993 and 1994 and March 31,
1995 respectively.

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

7. INCOME TAXES
------------

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

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

<TABLE>
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
------------------------------------ --------
1992 1993 1994 1995
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Statutory tax expense
(benefit) at 34% $ 130 $ (653) $ (1,047) $ 53
Utilization of net operating
loss carryforward (130) -- -- (53)
Loss producing no current
tax benefit -- 653 1,047 --
-------- -------- -------- --------
$ -- $ -- $ -- $ --
======== ======== ======== ========
</TABLE>

F-13
<PAGE>

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

--------

7. INCOME TAXES, Continued
------------

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

<TABLE>
<CAPTION>
December 31, March 31,
---------------------- --------
1993 1994 1995
-------- -------- --------
(Unaudited)
<S> <C> <C> <C>
Deferred tax asset, principally accrued
expenses, reserves and loss carryforwards $ 1,086 $ 2,116 $ 2,065
Deferred tax liability, principally depreciation (52) (68) (72)
Valuation allowance (1,034) (2,048) (1,993)
-------- -------- --------
Net $ -- $ -- $ --
======== ======== ========
</TABLE>

The Company had net operating loss carryforwards for Federal tax
purposes of approximately $5,293,000 at December 31, 1994, which expire in
varying amounts in the years 2006 through 2009. Operating loss carryforwards
totaling $845,000 and $4,248,000 are available to offset future state taxable
income of Sports and Ajay, respectively, which expire in varying amounts in
the years 2006 through 2009.

8. STOCKHOLDERS' EQUITY
--------------------

(a) Preferred Stock

Effective March 31, 1992, the Company designated 100,000 shares of its
$.01 par value preferred stock as Series A 8% Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"). The Series A Preferred
Stock was convertible into the Company's common stock at a conversion price
of $2.25 per share beginning January 1, 1994. Beginning January 1, 1994, the
Series A Preferred Stock was entitled to receive annual dividends of 8% per
share that are cumulative from the date of issuance, and it participated
equally in any dividends on common stock. Cumulative dividends as of
December 31, 1993 totaled $413,000. The Series A Preferred Stock, which had
no voting rights, had a liquidation preference value of $100 per share plus
accrued and unpaid dividends. The Company had the right to redeem the Series
A Preferred Stock at a price equal to $100 per share plus accrued and unpaid
dividends.

Effective March 31, 1992, 29,500 shares of Series A Preferred Stock were
issued to Roadmaster in full satisfaction of the remaining balance due on a
$2,950,000 subordinated note due to Roadmaster. No gain or loss was recorded
as a result of this debt restructuring.

During 1993, the Company entered into an agreement, finalized in 1994,
whereby Roadmaster transferred to TICO the 29,500 shares of the Company's
Series A Preferred Stock.

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

F-14
<PAGE>

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

--------

8. STOCKHOLDERS' EQUITY, Continued
--------------------

(a) Preferred Stock, Continued

Common Stock of the Company, as the Series B Preferred Stock allows for a
conversion rate of 1 share of Series B Preferred Stock for 294.12 shares of
the Company's Common Stock.

(b) Stock issued to officers

In 1992, the Company established a stock incentive plan for an
officer of the Company, under which up to 150,000 shares of the Company's
stock may be granted. During 1993, 50,000 shares were issued under this
plan. In 1994, the Company issued 150,000 shares of common stock to an
officer in lieu of compensation.

On August 1, 1994 the Company reached an agreement in principle to
acquire the outstanding common stock of Leisure Life, Inc. In exchange
for acquiring all the common stock of Leisure Life, the Company issued
1,500,000 shares of its common stock to the owners of Leisure Life, with
400,000 of those shares being issued subject to certain performance
requirements being met by Leisure Life. The purchase method was used to
account for the acquisition. Results of operations of Leisure Life are
included in the Company's statements effective on August 1, 1994. The
purchase value was established at $700,000 based on fair value of assets
acquired consisting of working capital, patents, machinery, land and
building. The full value of the purchase was represented by 1,100,000
shares. Goodwill was not booked; however 400,000 shares were placed in
escrow to be distributed based on profit performance of Leisure Life
during 1995. It is unlikely that the escrow shares will be distributed.

(d) Warrants and Options

A summary of activity related to warrants and options to purchase
Company common stock is as follows:

<TABLE>
<CAPTION>
Warrants Price
and Options per Share
----------- ---------
<S> <C> <C>

Balance, January 1, 1992 2,585,970 $.34-1.00

Issued 250,000 .34 (i)
Issued 250,000 .34 (i)
Issued 270,217 .34 (ii)
Issued 94,500 .34 (iii)
---------- ---------

Balance, December 31, 1992 3,450,687 .34-1.00

Expired (564,717) .34
---------- ---------

Balance, December 31, 1993 2,885,970 .34-1.00
</TABLE>

F-15
<PAGE>

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

--------

8. STOCKHOLDERS' EQUITY, Continued
--------------------

(d) Warrants and Options, Continued
<TABLE>
<CAPTION>
Warrants Price
and Options per Share
----------- ---------
<S> <C> <C>
Balance, December 31, 1993 2,885,970 .34-1.00

Expired (450,000) .80-1.00
Reissued 200,000 .34 (iv)
Reissued 94,500 .34 (v)
Issued to Employees 840,000 .40- .80 (vi)
Issued to Williams 16,274,754 .34-1.00 (vii)
Exercised by Williams (4,117,647) .34 (viii)
---------- ---------

Balance, December 31, 1994 15,727,577 $.34-1.00

Adjustment to Williams' Options (1,046,234) .50-1.00 (vii)
---------- ---------
Balance, March 31, 1995 (Unaudited) 14,681,343 $.34-1.00
========== =========
</TABLE>

(i) Warrants originally issued to Equitex which were transferred
to TICO under the Exchange Agreement (as described in Note 3c)
and subsequently assigned to Acrodyne, exercisable through
December 2000, replacing the previously issued warrants to
purchase 2,500,000 shares at an exercise price of $1.50 to
$1.00, subject to adjustment. During 1994, the exercise price
was adjusted to $.34.

(ii) Warrants issued in connection with the Company's private
placement. As a result of the reset provision provided for in
the Warrant Agreement, the exercise price dropped from $1.00
to $.33 per share. The warrants expired in October, 1993.

(iii) Warrants originally issued to Equitex in connection with the
Company's private placement. Warrants were transferred to TICO
under the Exchange Agreement (as described in Note 3c), and
subsequently assigned to Acrodyne. The exercise price was
adjusted to $.34 in 1994.

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

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

(vi) Employee stock options of which 131,667 shares have vested at
December 31, 1994.

(vii) In May 1994 the Company and Williams entered into a Joint
Venture Implementation Agreement in which Williams was granted
an option to purchase up to 51% of the then outstanding Common
Stock (23,714,641 shares) of the Company. That agreement
provided that if the loan were repaid in full by May 5, 1995,
Williams would lose 7,439,887 of the options. This agreement
was been modified. (See Note 16.)

(viii) See Note 8e.

F-16
<PAGE>

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

--------

8. STOCKHOLDERS' EQUITY, Continued
--------------------

(e) Private Placements

In 1992, the Company issued, via private placement, 729,431
shares of common stock and warrants to purchase 364,717 shares and
received proceeds of $512,000, net of related costs.

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

9. MAJOR CUSTOMERS
---------------

The Company operates in two lines of business, the manufacture and
distribution of sports equipment and in outdoor leisure furniture. The
Company's customers are principally in the retail sales market.

To reduce credit risk, the Company performs ongoing credit evaluations of
its customers' financial conditions and does not generally require
collateral.

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

<TABLE>
<CAPTION>
Three
Months
Ended
Year Ended December 31, March 31,
---------------------------------- --------
Customer 1992 1993 1994 1995
- -------- -------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>

A 25% 32% 41% 35%
B 20% * * *
C 19% 12% * 11%
</TABLE>

* Amounts are less than 10% of net sales.

10. SPALDING LICENSE AGREEMENT
--------------------------

Ajay has a license from Spalding Sports Worldwide to utilize the Spalding
trademark in conjunction with the sale and distribution of golf bags, golf
gloves, hand pulled golf carts and certain other golf accessories in the
United States. As consideration for this license, Ajay is required to pay
royalties to Spalding based on a percentage of sales, subject to annual
minimums of $650,000, $500,000 and $550,000, for the years ended June 30,
1994, 1995 and 1996, respectively. The current agreement expires June 30,
1996. Other conditions of the agreement require the Company to expend 2% of
sales under the agreement on advertising and related costs, with 1% remitted
to Spalding. The Company must also maintain a current ratio of 1.0 to 1.0.
Approximately 61% of the Company's 1994 and 1993 sales were Spalding
products. See Note 16.

Royalty expense due Spalding was $735,000, $702,000 and $494,000 for the
years ended December 31, 1992, 1993 and 1994 respectively , and $165,000 for
the three months ended March 31, 1995.

F-17
<PAGE>

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

--------

11. LEASES
------

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

<TABLE>

<S> <C>
1995 $ 518
1996 378
1997 352
1998 337
1999 336
2000 and thereafter 497
------
$2,418
======
</TABLE>

Total rental expense (in thousands) under operating leases (net of
sublease rental income from an affiliate of $37, $38 and $8, respectively)
was $524, $409 and $556 for the years ended December 31, 1992, 1993 and
1994, respectively. Total rental expense (in thousands) under operating
leases was $130 for the three months ended March 31, 1995.

12. NET INCOME (LOSS) PER COMMON SHARE
----------------------------------

Earnings or loss per share has been computed by dividing net income or
loss, after reduction for preferred stock dividends in 1992 ($177,000),
1993 ($236,000), 1994 ($202,000), and the quarter ended March 31, 1995
($25,000), by the weighted average number of common shares outstanding. No
exercise of warrants outstanding was assumed in 1992, 1993 or 1994, since
any exercise of warrants would be antidilutive. For the quarter ended March
31, 1995, the exercise prices of 10,083,000 warrants were less than the
market price and therefore were considered as exercised for purposes of
calculating fully diluted earnings per share.

13. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------

Cash paid for interest was $876,000, $633,000, and $607,000 for the
years ended December 31, 1992, 1993, and 1994, respectively, and $185,000
for the three months ended March 31, 1995.

Noncash financing and investing transactions were as follows:

. As discussed in Note 3, the Company exchanged 250,000 shares of
MacGregor in 1992 for certain machinery and equipment with an appraised
value of $490,000. A gain of $275,000 was recognized on the
transaction.

. The Company also settled certain obligations to Roadmaster totaling
$376,000 by transferring 188,100 shares of MacGregor to those affiliates
in 1992. The book value of the shares was $161,000 (see Note 3.)
Additionally, in conjunction with this transaction, the Company assigned
its rights to collection of amounts due from MacGregor totalling
$215,000.

. A subordinated note payable to Roadmaster of $2,950,000 was converted to
29,500 shares of preferred stock during 1992.

. During 1993, 50,000 shares of the Company's common stock valued at
$29,500 were issued to an officer of the Company. This was recorded in
accrued expenses at December 31, 1992.

F-18
<PAGE>

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

--------

13. SUPPLEMENTAL CASH FLOW INFORMATION, Continued
----------------------------------

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

. In exchange for acquiring in 1994 all of the common stock of Leisure
Life, Inc. the Company issued 1,500,000 shares of its common stock to
the owners of Leisure Life.

. During 1994, 4,117,647 shares of the Company's common stock were issued
to a related party resulting in a reduction in debt totaling $1,400.000.

14. CONTINGENCIES
-------------

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

15. BUSINESS SEGMENT REPORTING - MARCH 31, 1995
-------------------------------------------

The relative contributions to net sales, operating profit and identifiable
assets of the Company's two industry segments for the quarter ended March
31, 1995 (unaudited) are as follows (in thousands):

<TABLE>
<CAPTION>
Business Segment
--------------------------------------------
Furniture Sports Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 361 $ 5,093 $ 5,454
Operating profit/(loss) (134) 474 340
Interest expense -- -- 185
Income before taxes -- -- 155
Assets 1,767 9,358 11,125
Depreciation 19 33 52
Capital expenditures 35 29 64
</TABLE>

16. SUBSEQUENT EVENTS
-----------------

On April 5, 1995, the Company and Williams agreed to modifications of the
terms of the Loan Agreement and Joint Venture Implementation Agreement. The
changes included (1) a waiver of Williams' preemptive right to purchase up
to 51% so long as the Company completed its proposed offering of securities
by May 31, 1995 (which date could be extended for up to 120 days), (2) an
extension of the due date of the loan until February 1, 1996, (3) a
reduction in the maximum loan amount from $7.0 million to $5.6 million as
of August 1, 1995, (4) a reduction in the number of $1.00 options granted
to Williams Controls from 1,394,979 to 348,745 exercisable at $.50 per
share if the loan was repaid by August 1, 1995, (5) a reduction in the
exercise price of all unexercised options with an exercise price greater
than $.50 per share to $.50 if the loan was not repaid by August 1, 1995,
(6) an extension of the expiration date of all options granted to Williams
Controls from May 5, 1998 to August 1, 1999, and (7) an additional four-
year extension of the manufacturing joint venture at the Company's Delavan,
Wisconsin, and Mexicali, Mexico, facilities from May 5, 1998 to August 1,
2002.
F-19
<PAGE>

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

--------

16. SUBSEQUENT EVENTS, Continued
-----------------

On April 28, 1995, the Company extended the expiration date of certain
Common Stock purchase warrants which were sold in its initial public
offering to December 31, 1996. Each Warrant is exercisable to purchase one
share of Common Stock for $1.00 per share.

On June 5, 1995, the Company extended its agreement with Spalding. The
current agreement expires June 30, 1998. As consideration for this license,
Ajay is required to pay royalties to Spalding based on a percentage of
sales, subject to annual minimums of $500,000, $550,000, $550,000 and
$550,000, for the years ended June 30, 1995, 1996, 1997 and 1998,
respectively.

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 (the "Revolving Loan"), replacing the Loan Agreement
with Williams. All of the Company's subsidiaries and Williams have
guaranteed payment of this credit facility and the Company and its
subsidiaries have pledged their inventory and receivables as collateral.
Accordingly, as of July 25, 1995, approximately $6,375,000 is owed to U.S.
Bank. 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. The Company may borrow up to $5,000,000
against 80% of eligible accounts receivable and 50% of eligible inventory.
In addition, the Company may borrow up to an additional $3,500,000. The
Company is required to maintain a minimum tangible net worth of $2,000,000
($1,750,000 prior to this offering) and a ratio of debt to tangible net
worth of not greater than 4.5 to 1 (5.0 to 1 prior to this offering). 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.

F-20
<PAGE>

[photographs of leisure furniture products here]
<PAGE>

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No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus. Any information or representations not herein contained, if given
or made, must not be relied upon as having been authorized by the Company or
the Underwriters. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof. This
Prospectus does not constitute an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.

----------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS SUMMARY......................................................... 3
THE COMPANY................................................................ 6
RISK FACTORS............................................................... 6
DILUTION................................................................... 11
MARKET FOR THE COMPANY'S STOCK AND RELATED STOCKHOLDER MATTERS............. 12
DIVIDEND POLICY............................................................ 12
USE OF PROCEEDS............................................................ 13
CAPITALIZATION............................................................. 14
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA......................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................ 16
CHANGES IN AND DISAGREEMENTS WITH THE ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE...................................................... 21
BUSINESS................................................................... 22
MANAGEMENT AND KEY PERSONNEL............................................... 29
PRINCIPAL SHAREHOLDERS..................................................... 36
CERTAIN TRANSACTIONS....................................................... 38
DESCRIPTION OF SECURITIES.................................................. 41
SHARES ELIGIBLE FOR FUTURE SALE............................................ 45
UNDERWRITING............................................................... 46
LEGAL MATTERS.............................................................. 49
EXPERTS.................................................................... 49
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 49
ADDITIONAL INFORMATION..................................................... 50
FINANCIAL STATEMENTS....................................................... F-1
</TABLE>

325,000 Shares of Series C 10% Cumulative Convertible Preferred Stock and
325,000 Common Stock Purchase Warrants

[AJAY SPORTS, INC. LOGO APPEARS HERE]

------------------

PROSPECTUS

------------------

SCHNEIDER SECURITIES, INC.
July 26, 1995

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