<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------

                                  FORM 10-K/A

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

                    For fiscal year ended September 30, 1998

                         Commission file number 0-21630
                              --------------------

                       ACTION PERFORMANCE COMPANIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                     ARIZONA                           86-0704792
            (State of Incorporation)      (I.R.S. Employer Identification No.)

                              4707 E. Baseline Road
                             Phoenix, Arizona 85040
                                 (602) 337-3700
   (Address, including zip code, and telephone number, including area code, of
                          principal executive offices)

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of Common Stock held by nonaffiliates of the
registrant (14,495,355 shares) based on the closing price of the registrant's
Common Stock as reported on the Nasdaq National Market on December 15, 1998, was
$510,055,304. For purposes of this computation, all officers, directors and 10%
beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed to be an admission that such officers,
directors or 10% beneficial owners are, in fact, affiliates of the registrant.

As of December 15, 1998, there were outstanding 16,657,632 shares of
registrant's Common Stock, par value $.01 per share.

Documents incorporated by reference: Portions of the registrant's definitive
Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Report.

<PAGE>   2
EXPLANATORY NOTE REGARDING AMENDMENT TO FORM 10-K

         Action Performance Companies, Inc. hereby amends its report on Form
10-K for the year ended September 30, 1998, in order to correct a typographical
error in the Report of Independent Public Accountants. No other changes have
been made to the financial statements for the year ended September 30, 1998.

                                    PART II

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Reference is made to the financial statements, the notes thereto, and
report thereon, commencing at page F-1 of this Report, which financial
statements, notes, and report are incorporated herein by reference.


                                       1
<PAGE>   3

                                    PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)      FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

         (1)      Financial Statements are listed in the Index to Consolidated
                  Financial Statements on page F-1 of this Report.

         (2)      No Financial Statement Schedules are included because such
                  schedules are not applicable, are not required, or because
                  required information is included in the Consolidated Financial
                  Statements or Notes thereto.

(b)      REPORTS ON FORM 8-K

         Not applicable.

(c)      EXHIBITS

Exhibit
Number                                Exhibit
------                                -------

1.0      Form of Underwriting Agreement (1)

3.1      First Amended and Restated Articles of Incorporation of Registrant(2)

3.2      Amended and Restated Bylaws of Registrant(2)

4.1      Form of Certificate of Common Stock(3)

4.2      Indenture dated as of March 24, 1998, between Action Performance
         Companies, Inc. and First Union National Bank, as Trustee, including
         forms of Notes(4)

10.4.2   1993 Stock Option Plan, as amended and restated through January 16,
         1997(5)

10.8     Form of Indemnification Agreement entered into with the Directors of
         the Registrant(3)

10.21    Lease between the Company and F.W. Investments dated January 1, 1994(6)

10.27    Manufacturing Agreement between the Company and Early Light
         International (Holdings) Ltd. dated December 5, 1994(7)

10.33    Asset Purchase Agreement dated as of November 7, 1996, among Action
         Performance Companies, Inc., SII Acquisition, Inc., Sports Image, Inc.,
         and R. Dale Earnhardt and Teresa H. Earnhardt(8)

10.34    Promissory Note dated November 7, 1996, in the principal amount of
         $24,000,000 issued by SII Acquisition, Inc., as Maker, to Sports Image,
         Inc., as Payee, together with Guarantee of Action Performance
         Companies, Inc.(8)

10.35    Security Agreement dated November 7, 1996, between Sports Image, Inc.
         and SII Acquisition, Inc.(8)

10.36    Registration Agreement dated as of November 7, 1996, among Action
         Performance Companies, Inc., Sports Image, Inc., and R. Dale Earnhardt
         and Teresa H. Earnhardt(8)

10.37    License Agreement dated as of November 7, 1996, among SII Acquisition,
         Inc., Dale Earnhardt, and Action Performance Companies, Inc.(8)

10.39    Asset Purchase Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., MTL Acquisition, Inc., Motorsport
         Traditions Limited Partnership, Midland Leasing, Inc., and Motorsports
         By Mail, Inc.(9)

10.40    Exchange Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
         Gordon(9)

10.41    Promissory Note dated January 1, 1997, in the principal amount of
         $1,600,000 issued by MTL Acquisition, Inc., as Maker, to Motorsport
         Traditions Limited Partnership, as Payee, together with Guarantee of
         Action Performance Companies, Inc.(9)

10.42    Note Purchase Agreement dated as of January 2, 1997, among Action
         Performance Companies, Inc., Jefferson-Pilot Life Insurance Company,
         Alexander Hamilton Life Insurance Company of America, 



                                       2
<PAGE>   4

         and First Alexander Hamilton Life Insurance Company, together with form
         of Note, form of Subsidiary Guaranty, and form of Subsidiary Joinder(9)

10.42A   First Amendment dated as of March 18, 1998 to Note Purchase Agreement
         dated as of January 2, 1997, among Action Performance Companies, Inc.,
         Jefferson-Pilot Life Insurance Company, Alexander Hamilton Life
         Insurance Company of America, and First Alexander Hamilton Life
         Insurance Company(4)

10.43    Credit Agreement dated as of January 2, 1997, among Action Performance
         Companies, Inc., Sports Image, Inc., MTL Acquisition, Inc., and First
         Union National Bank of North Carolina(9)

10.43A   Amendment and Consent to Credit Agreement dated March 18, 1998, by and
         among Action Performance Companies, Inc., various subsidiary
         guarantees, and First Union National Bank of North Carolina(4)

10.43B   Amended and Restated Credit Agreement dated as of August 5, 1998, among
         Action Performance Companies, Inc., certain subsidiaries and
         affiliates, as guarantors, and First Union National Bank.*

10.44    Registration Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Motorsport Traditions Limited Partnership,
         Midland Leasing, Inc., and Motorsports By Mail, Inc.(9)

10.45    Registration Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
         Gordon(9)

10.46    Employment Agreement dated as of January 1, 1997, between Action
         Performance Companies, Inc. and Kenneth R. Barbee(9)

10.47    Consulting Agreement dated as of January 1, 1997, between Action
         Performance Companies, Inc. and John Bickford(9)

10.48    Common Stock Purchase Agreement dated January 16, 1997, between Hasbro,
         Inc. and Action Performance Companies, Inc.(10)

10.49    Standard Form Industrial Lease dated April 8, 1997, between
         Hewson/Breckner-Baseline, L.L.C. and Action Performance Companies,
         Inc.(11)

10.50    Lease Agreement dated July 9, 1997, by and between Performance Park
         Partners, LLC and Sports Image, Inc.(11)

10.51    Asset Purchase Agreement dated as of December 19, 1997, between Action
         Performance Companies, Inc. and Revell-Monogram, Inc.(12)

10.52    1998 Non-qualified Stock Option Plan(4)

10.53    Purchase Agreement dated March 18, 1998 among Action Performance
         Companies, Inc., NationsBanc Montgomery Securities LLC, CIBC
         Oppenheimer Corp., EVEREN Securities, Inc. and Piper Jaffray Inc.(4)

10.54    Registration Rights Agreement dated March 24, 1998, by and among Action
         Performance Companies, Inc., NationsBanc Montgomery Securities LLC,
         CIBC Oppenheimer Corp., EVEREN Securities, Inc., and Piper Jaffray
         Inc.(4)

11.1     Computation of Primary Earnings Per Share*

11.2     Computation of Fully Diluted Earnings Per Share*

12.1     Computation of Ratio of Earnings to Fixed Charges*

21.1     List of Subsidiaries of Action Performance Companies, Inc.*

23.1     Consent of Arthur Andersen LLP

25.1     Statement of Eligibility of Trustee under the Trust Indenture Act of
         1939 on Form T-1(13)

27.1     Financial Data Schedule*

--------------------
  *      Previously filed.

(1)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 and Amendment No. 1 thereto (Registration No. 333-27485).

(2)      Incorporated by reference to the Registrant's Form 10-QSB for the
         quarter ended March 31, 1996, as filed with the Securities and Exchange
         Commission on May 2, 1996.

(3)      Incorporated by reference to the Registrant's Registration Statement on
         Form SB-2 and amendments thereto (Registration No. 33-57414-LA).

(4)      Incorporated by reference to the Registrant's Form 10-Q for the quarter
         ended March 31, 1998, as filed with the Securities and Exchange
         Commission on May 15, 1998.


                                       3

<PAGE>   5

(5)      Incorporated by reference to the Registrant's Form 10-Q for the quarter
         ended March 31, 1997, as filed with the Securities and Exchange
         Commission on May 15, 1997.

(6)      Incorporated by reference to the Registrant's Form 10-QSB for the
         quarter ended March 31, 1994, as filed with the Securities and Exchange
         Commission on May 16, 1994.

(7)      Incorporated by reference to the Registrant's Form 10-KSB for the year
         ended September 30, 1994, as filed with the Securities and Exchange
         Commission on December 22, 1994.

(8)      Incorporated by reference to the Registrant's Form 8-K filed with the
         Securities and Exchange Commission on November 22, 1996, as amended by
         Form 8-K/A filed on January 13, 1997.

(9)      Incorporated by reference to the Registrant's Form 8-K filed with the
         Securities and Exchange Commission on January 23, 1997, as amended by
         Form 8-K/A filed on February 24, 1997.

(10)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-22943).

(11)     Incorporated by reference to the Registrant's Form 10-K for the year
         ended September 30, 1997, as filed with the Securities and Exchange
         Commission on December 22, 1997.

(12)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-45991).

(13)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-53413).








                                       4



<PAGE>   6


                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                  ACTION PERFORMANCE COMPANIES, INC.



Date:  January 6, 1999           /s/ Fred W. Wagenhals                         
                                  ----------------------------------------------
                                  Fred W. Wagenhals, Chairman of the Board,
                                  President, and Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature                                        Capacity                                              Date
---------                                        --------                                              ----
<S>                                     <C>                                                    <C> 
/s/ Fred W. Wagenhals                   Chairman of the Board, President, and Chief            January 6, 1999
------------------------------------    Executive Officer (Principal Executive Officer)
Fred W. Wagenhals                      

/s/ Tod J. Wagenhals                    Executive Vice President, and Director                 January 6, 1999
------------------------------------
Tod J. Wagenhals

/s/ Christopher S. Besing               Vice President, Chief Financial Officer, Treasurer,    January 6, 1999
------------------------------------    and Director (Principal Financial Officer)
Christopher S. Besing                  

/s/ David A. Husband                    Vice President and Chief Accounting Officer            January 6, 1999
------------------------------------    (Principal Accounting Officer)
David A. Husband                        

/s/ Melodee L. Volosin                  Vice President - Wholesale Division and Director       January 6, 1999
------------------------------------
Melodee L. Volosin

/s/ John S. Bickford                    Vice President - Strategic Alliances and Director      January 6, 1999
------------------------------------
John S. Bickford

                                        Director                                               January --, 1999
------------------------------------
Jack M. Lloyd

                                        Director                                               January --, 1999
------------------------------------
Robert H. Manschot                      

------------------------------------    Director                                               January --, 1999
Donald G. Hawk, Jr.

/s/ Edward J. Bauman                    Director                                               January 6, 1999
------------------------------------
Edward J. Bauman

/s/ Paul G. Lang                        Managing Director of MiniChamps and Director           January 6, 1999
------------------------------------
Paul G. Lang
</TABLE>




                                        5
<PAGE>   7
                     ACTION PERFORMANCE COMPANIES, INC.
                INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                          PAGE

Report of Independent Public Accountants...........................        F-2

Consolidated Balance Sheets as of September 30, 1998 and 1997......        F-3

Consolidated Statements of Operations for the Years
       Ended September 30, 1998, 1997, and 1996....................        F-4

Consolidated Statements of Shareholders' Equity for the Years
       Ended September 30, 1998, 1997, and 1996....................        F-5

Consolidated Statements of Cash Flows for the Years
       Ended September 30, 1998, 1997, and 1996....................        F-6

Notes to Consolidated Financial Statements.........................        F-7




                                       F-1
<PAGE>   8
                              ARTHUR ANDERSEN LLP

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Action Performance Companies, Inc.:


We have audited the accompanying consolidated balance sheets of ACTION 
PERFORMANCE COMPANIES, INC. (an Arizona corporation) and subsidiaries as of 
September 30, 1998 and 1997, and the related consolidated statements of 
operations, shareholders' equity and cash flows for each of the three years in 
the period ended September 30, 1998. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Action Performance Companies,
Inc. and subsidiaries as of September 30, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1998, in conformity with generally accepted accounting
principles.

                                        /s/ Arthur Andersen LLP


Phoenix, Arizona,
 November 13, 1998, except with respect
 to matters discussed in Note 12 as to
 which the date is December 1, 1998.


                                      F-2

<PAGE>   9
                       ACTION PERFORMANCE COMPANIES, INC.
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 1998 AND 1997
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
ASSETS                                                       1998          1997
------                                                       ----          ----
<S>                                                        <C>          <C>
CURRENT ASSETS:
  Cash and cash equivalents ..........................     $ 60,867     $ 29,318
  Accounts receivable, net of allowance for
   doubtful accounts of $986 and $837,
   respectively ......................................       36,314       17,802
  Inventories ........................................       35,790       17,855
  Prepaid royalties ..................................        5,745        4,967
  Prepaid expenses and other assets ..................        4,961        2,603
                                                           --------     --------
    Total current assets .............................      143,677       72,545

PROPERTY AND EQUIPMENT, net ..........................       46,053       20,017

GOODWILL AND OTHER INTANGIBLES, net ..................      106,146       46,409

OTHER ASSETS, net ....................................       10,058        2,354
                                                           --------     --------
                                                           $305,934     $141,325
                                                           --------     --------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable ...................................     $ 11,430     $  6,680
  Accrued royalties ..................................       10,589        5,098
  Accrued expenses and other .........................       10,973        2,318
  Current portion of long-term debt ..................       23,746        1,474
                                                           --------     --------
    Total current liabilities ........................       56,738       15,570
                                                           --------     --------

LONG-TERM DEBT:
  Convertible subordinated notes .....................      100,000           --
  Other long-term debt ...............................       11,850       22,586
                                                           --------     --------
    Total long-term debt .............................      111,850       22,586
                                                           --------     --------

MINORITY INTEREST ....................................          914           --
                                                           --------     --------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
  Preferred stock, no par value, 5,000,000 shares
   authorized, no shares issued and outstanding ......           --           --
  Common stock, $.01 par value, 25,000,000 shares
   authorized; 16,423,238 and 15,952,083 shares
   issued and outstanding, respectively ..............          164          160
  Additional paid-in capital .........................       91,974       84,984
  Cumulative translation adjustment ..................        1,682           --
  Retained earnings ..................................       42,612       18,025
                                                           --------     --------
    Total shareholders' equity .......................      136,432      103,169
                                                           --------     --------
                                                           $305,934     $141,325
                                                           ========     ========
</TABLE>


The accompanying notes are an integral part of these consolidated balance sheets

                                       F-3
<PAGE>   10
                       ACTION PERFORMANCE COMPANIES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                               1998         1997         1996
                                               ----         ----         ----
<S>                                         <C>          <C>          <C>
Sales:
Collectibles ............................   $ 129,348    $  63,846    $  40,904
  Apparel and souvenirs .................     106,712       60,430        1,961
  Other .................................      15,817        6,104        1,351
                                            ---------    ---------    ---------
    Net sales ...........................     251,877      130,380       44,216

Cost of sales ...........................     157,079       80,995       25,296
                                            ---------    ---------    ---------

Gross profit ............................      94,798       49,385       18,920
                                            ---------    ---------    ---------

Operating expenses:
  Selling, general and
    administrative expenses .............      45,344       24,564        9,262
  Settlement costs ......................         950        5,400           --
  Amortization of goodwill and
    other intangibles ...................       4,392        1,286            4
                                            ---------    ---------    ---------
    Total operating expenses ............      50,686       31,250        9,266
                                            ---------    ---------    ---------
Income from operations ..................      44,112       18,135        9,654
                                            ---------    ---------    ---------

Other income (expense):
  Interest income and other, net ........       2,588          796          296
  Interest expense ......................      (5,533)      (2,021)         (80)
                                            ---------    ---------    ---------
    Total other income (expense) ........      (2,945)      (1,225)         216
                                            ---------    ---------    ---------

Income before provision for
  income taxes ..........................      41,167       16,910        9,870

Provision for income taxes ..............      16,391        6,764        3,917
Minority interest in earnings ...........         189           --           --
                                            ---------    ---------    ---------

NET INCOME ..............................   $  24,587    $  10,146    $   5,953
                                            =========    =========    =========

NET INCOME PER COMMON SHARE:
  Basic .................................   $    1.52    $    0.72    $    0.50
                                            =========    =========    =========
  Diluted ...............................   $    1.48    $    0.69    $    0.46
                                            =========    =========    =========

WEIGHTED AVERAGE SHARES OUTSTANDING:
  Basic .................................      16,135       14,047       11,789
                                            =========    =========    =========
  Diluted ...............................      16,647       14,624       13,028
                                            =========    =========    =========
</TABLE>


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

                                      F-4
<PAGE>   11
                       ACTION PERFORMANCE COMPANIES, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                     CONVERTIBLE          ADDITIONAL               CUMULATIVE
                                            COMMON STOCK           PREFERRED STOCK         PAID-IN    RETAINED     TRANSLATION
                                        SHARES       AMOUNT       SHARES      AMOUNT       CAPITAL    EARNINGS     ADJUSTMENT
                                        ------       ------       ------      ------       -------    --------     ----------
<S>                                   <C>          <C>            <C>         <C>      <C>           <C>          <C>
BALANCE, SEPTEMBER 30, 1995 .......   11,221,408   $      112          500    $   --   $   16,852    $    1,926   $       --
Common stock issued upon conversion
  of convertible preferred stock ..    1,000,000           10         (500)       --          (10)           --           --
Common stock issued upon exercise
  of options ......................      239,247            2           --        --          801            --           --
Tax benefit from stock options ....           --           --           --        --          838            --           --
Common stock issued upon exercise
 of warrants ......................      149,114            2           --        --          510            --           --
Net income ........................           --           --           --        --           --         5,953           --
                                      ----------   ----------   ----------    ------   ----------    ----------   ----------
BALANCE, SEPTEMBER 30, 1996 .......   12,609,769   $      126           --    $   --   $   18,991    $    7,879   $       --
Common stock issued in conjunction
 with purchase of businesses ......      765,542            8           --        --       10,041            --           --
Common stock issued upon exercise
  of options ......................      296,092            3           --        --        1,708            --           --

Common stock issued in
  public offering .................    2,085,000           21           --        --       49,822            --           --
Tax benefit from stock options ....           --           --           --        --        1,651            --           --
Issuance of common stock in
 private placements ...............      195,680            2           --        --        2,771            --           --
Net income ........................           --           --           --        --           --        10,146           --
                                      ----------   ----------   ----------    ------   ----------    ----------   ----------
BALANCE, SEPTEMBER 30, 1997 .......   15,952,083   $      160           --    $   --   $   84,984    $   18,025   $       --
Common stock issued upon exercise
  of options ......................      426,315            4           --        --        1,633            --           --
Tax benefit from stock options ....           --           --           --        --        4,100            --           --
Issuance of common stock in
  private placements ..............       44,840           --           --        --        1,257            --           --
Cumulative translation adjustment .           --           --           --        --           --            --        1,682
Net income ........................           --           --           --        --           --        24,587           --
                                      ----------   ----------   ----------    ------   ----------    ----------   ----------
BALANCE, SEPTEMBER 30, 1998 .......   16,423,238   $      164           --    $   --   $   91,974    $   42,612   $    1,682
                                      ==========   ==========   ==========    ======   ==========    ==========   ==========
</TABLE>


<TABLE>
<CAPTION>


                                          TOTAL
                                          -----
<S>                                    <C>
BALANCE, SEPTEMBER 30, 1995 .......    $   18,890
Common stock issued upon conversion
  of convertible preferred stock ..            --
Common stock issued upon exercise
  of options ......................           803
Tax benefit from stock options ....           838
Common stock issued upon exercise
 of warrants ......................           512
Net income ........................         5,953
                                       ----------
BALANCE, SEPTEMBER 30, 1996 .......    $   26,996
Common stock issued in conjunction
 with purchase of businesses ......        10,049
Common stock issued upon exercise
  of options ......................         1,711

Common stock issued in
  public offering .................        49,843
Tax benefit from stock options ....         1,651
Issuance of common stock in
 private placements ...............         2,773
Net income ........................        10,146
                                       ----------
BALANCE, SEPTEMBER 30, 1997 .......    $  103,169
Common stock issued upon exercise
  of options ......................         1,637
Tax benefit from stock options ....         4,100
Issuance of common stock in
  private placements ..............         1,257
Cumulative translation adjustment .         1,682
Net income ........................        24,587
                                       ----------
BALANCE, SEPTEMBER 30, 1998 .......    $  136,432
                                       ==========
</TABLE>


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


                                      F-5
<PAGE>   12
                       ACTION PERFORMANCE COMPANIES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

             FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                    1998         1997          1996
                                                    ----         ----          ----
<S>                                              <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................   $  24,587    $  10,146    $   5,953
  Adjustments to reconcile net income to
   net cash provided by operating activities:
  Depreciation and amortization ..............      11,839        4,477        1,692
  Undistributed earnings to minority
    shareholders .............................         189           --           --
  Change in assets and liabilities, net of
   businesses acquired:
    Accounts receivable ......................     (12,937)      (3,623)      (3,440)
    Inventories ..............................     (14,406)      (5,009)      (3,143)
    Prepaid royalties ........................        (120)      (2,672)      (1,186)
    Prepaid expenses and other assets ........      (1,233)        (665)         922
    Accounts payable .........................        (373)      (1,633)         565
    Accrued royalties ........................       4,106        2,395          320
    Accrued expenses and other ...............       6,004          917         (823)
                                                 ---------    ---------    ---------
     Net cash provided by operating activities      17,656        4,333          860
                                                 ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment ........     (21,687)     (11,192)      (3,879)
  Proceeds from sale of equipment ............         383          321           --
  Acquisition of businesses and other
   intangibles, less cash acquired ...........     (55,885)     (11,082)          --
                                                 ---------    ---------    ---------
    Net cash used in investing activities ....     (77,189)     (21,953)      (3,879)
                                                 ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on line of credit ...............       9,600        4,879        5,222
  Payments on line of credit .................      (9,600)     (10,279)      (5,222)
  Net proceeds from issuance of
   common stock ..............................       1,637       54,327        1,315
  Issuance of convertible subordinated notes .     100,000           --           --
  Payments for offering-related expenses .....      (3,500)          --           --
  Payments on long-term debt, net ............      (7,096)      (6,972)        (105)
  Issuance of note receivable ................        (150)          --           --
  Collections on notes receivable ............         135           --           32
                                                 ---------    ---------    ---------
   Net cash provided by financing
    activities ...............................      91,026       41,955        1,242
                                                 ---------    ---------    ---------

  Effect of exchange rate changes on
    cash and cash equivalents ................          56           --           --
                                                 ---------    ---------    ---------

  Net change in cash and cash equivalents ....      31,549       24,335       (1,777)
  Cash and cash equivalents,
   beginning of year .........................      29,318        4,983        6,760
                                                 ---------    ---------    ---------
  Cash and cash equivalents, end of year .....   $  60,867    $  29,318    $   4,983
                                                 =========    =========    =========
</TABLE>

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

                                       F-6
<PAGE>   13
                       ACTION PERFORMANCE COMPANIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       SEPTEMBER 30, 1998, 1997, and 1996


(1)      THE COMPANY

OPERATIONS

Action Performance Companies, Inc., an Arizona corporation, (the "Company")
designs and markets licensed motorsports products, including die-cast scaled
replicas of motorsports vehicles, apparel, and souvenirs. The Company also
develops promotional programs for sponsors of motorsports that feature the
Company's die-cast replicas or other products and that are intended to increase
brand awareness of the products or services of the corporate sponsors. In
addition, the Company represents popular race car drivers in a broad range of
licensing and other revenue-producing opportunities, including product licenses,
corporate sponsorships, endorsement contracts, and speaking engagements. The
Company's motorsports collectibles, which are primarily produced in China, and
most of the Company's apparel and souvenirs are manufactured by third parties,
generally utilizing the Company's designs, tools, and dies. The Company screen
prints and embroiders a portion of the licensed motorsports apparel that it
sells.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of the Company and
its wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made in prior period financial statements to
conform to the current presentation.

REVENUE RECOGNITION

The Company recognizes revenue upon shipment. Customer deposits received in
advance of delivery are deferred and recognized when the related product is
shipped.

CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and accounts receivable. The Company
places its cash with federally insured institutions and limits the amount of
credit exposure to any one institution. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers
comprising the Company's credit base and the geographical dispersion of the
customers.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.


                                       F-7
<PAGE>   14
FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts receivable, and accounts payable
approximate fair value because of the short maturity of these financial
instruments. Except for the Convertible Subordinated Notes, the carrying amounts
of long-term debt approximate fair value based on current market prices for
similar debt instruments. The fair value of the Company's Convertible
Subordinated Notes on September 30, 1998 was $78.1 million based on current
market information. Fair value estimates are made at a specific point in time,
based on relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect these estimates.

FOREIGN CURRENCY TRANSLATION

Financial information relating to the Company's foreign subsidiaries is reported
in accordance with FAS No. 52 "Foreign Currency Translation." The financial
statements of non-U.S. subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of these non-U.S. subsidiaries are
translated at exchange rates in effect as of the end of each balance sheet date,
and related revenues and expenses are translated at average exchange rates in
effect during the period.

CASH AND CASH EQUIVALENTS

The Company classifies as cash equivalents all highly liquid investments with
original maturities of three months or less. Cash equivalents principally
consist of commercial paper and United States Treasury securities.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market, and consist of the following at September 30, 1998 and 1997 (in
thousands):

<TABLE>
<CAPTION>
                                                       1998                1997
                                                       ----                ----
<S>                                                  <C>                  <C>
        Purchased components.......................  $  3,252             $ 2,418
        Finished goods.............................    32,538              15,437
                                                     --------             -------
                                                     $ 35,790             $17,855
                                                     ========             =======
</TABLE>

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which range from one to ten years.

Property and equipment consist of the following at September 30, 1998 and 1997
(in thousands):

<TABLE>
<CAPTION>
                                                             1998         1997
                                                           --------     -------
<S>                                                       <C>           <C>
        Building and land..........................       $  6,207      $     -
        Tooling and molds..........................         30,217       15,237
        Furniture, fixtures and equipment..........         15,099        6,667
        Autos and trucks...........................          3,158        2,578
        Leasehold improvements.....................          2,984        2,066
                                                          --------      -------
                                                            57,665       26,548
        Less - accumulated depreciation............        (11,612)      (6,531)
                                                          --------      -------
                                                          $ 46,053      $20,017
                                                          ========      =======
</TABLE>

Maintenance and repairs of approximately $697,000, $277,000, and $64,000 for the
years ended September 30, 1998, 1997, and 1996, respectively, were charged to
expense as incurred. The cost of renewals and betterments that materially extend
the useful lives of assets or increase their productivity are capitalized.

                                       F-8
<PAGE>   15
GOODWILL AND OTHER INTANGIBLES

Goodwill represents the cost in excess of the fair value of net assets acquired
in business combinations and is amortized using the straight-line method over
periods ranging from fifteen to twenty-five years. Other intangibles are
amortized using the straight-line method over their estimated useful lives,
which ranges from three to fifteen years. Amortization expense of $4.4 million,
$1.3 million, and $4,000 is included in the accompanying financial statements
for the years ended September 30, 1998, 1997, and 1996, respectively. The
following table sets forth the components of goodwill and other intangibles as
of September 30, 1998 and 1997, respectively (in thousands).

<TABLE>
<CAPTION>
                  Amortization
                  Period (Years)         1998          1997
                  --------------         ----          ----
<S>                   <C>             <C>            <C>
                       3-5            $  2,190       $     -
                       6-10             11,247             -
                      11-15             11,855         6,263
                      16-25             86,542        41,431
                                      --------       -------
                                       111,834        47,694
Less accumulated amortization           (5,688)       (1,285)
                                      --------       -------
                                      $106,146       $46,409
                                      ========       =======
</TABLE>

LICENSE AGREEMENTS

Royalties paid under various licensing agreements are recorded as expense at the
time the related sales are made.

LONG-LIVED ASSETS

The Company periodically evaluates the carrying value of long-lived assets in
accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." Under SFAS No. 121, long-lived
assets and certain identifiable intangible assets to be held and used in
operations are reviewed for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be fully recoverable. An impairment
loss is recognized if the sum of the expected long-term undiscounted cash flows
is less than the carrying amount of the long-lived assets being evaluated.

SUPPLEMENTAL CASH FLOW INFORMATION

The supplemental cash flow disclosures and non-cash transactions for the years
ended September 30, 1998, 1997, and 1996 are as follows (in thousands):


<TABLE>
<CAPTION>
                                            1998      1997      1996
                                            ----      ----      ----
<S>                                       <C>       <C>       <C>
Supplemental disclosures:
  Interest paid .......................   $ 4,690   $ 1,505   $    79
  Income taxes paid ...................    10,600     5,396     3,992

Non-cash transactions:
  Common stock issued in acquisitions .   $    --   $10,049   $    --
  Debt and liabilities incurred or
    assumed in acquisitions ...........    29,002    44,446        --
  Acquisition of property and equipment
    under notes payable and
    capital leases ....................     2,961     1,515       233
  Tax benefits on various common
    stock options .....................     4,100     1,651       838
  Common stock issued in connection
    with licensing and sponsorship
    agreements ........................     1,257        --        --
Sale of equipment for note receivable .        35       446        --
</TABLE>

                                       F-9
<PAGE>   16
NET INCOME PER COMMON SHARE

Net income per common share is computed based on the weighted average number of
common shares and common share equivalents outstanding using the treasury stock
method, except when common share equivalents have an antidilutive effect. The
Company's Convertible Subordinated Notes (see Note 4) were antidilutive for the
fiscal year ended September 30, 1998. All share amounts and per share data have
been restated to reflect the two-for-one stock split effected as a stock
dividend on May 28, 1996. The calculation of diluted net income per common share
for the years ended September 30, 1998, 1997, and 1996 are as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                              1998      1997      1996
                                              ----      ----      ----
<S>                                          <C>       <C>       <C>
Shares:
Weighted average number of common
  shares outstanding ....................    16,135    14,047    11,789

Additional shares assuming conversion of:
  Stock options .........................       512       577       539
  Warrants ..............................        --        --        33
  Preferred stock .......................        --        --       667
                                            -------   -------   -------

Diluted weighted average shares
  outstanding ...........................    16,647    14,624    13,028
                                            =======   =======   =======

Net income attributable to diluted
  weighted average shares outstanding ...   $24,587   $10,146   $ 5,953
                                            =======   =======   =======

Diluted earnings per share ..............   $  1.48   $  0.69   $  0.46
                                            =======   =======   =======
</TABLE>

ACCOUNTING PRONOUNCEMENTS NOT YET REQUIRED TO BE ADOPTED

In fiscal 1999, the Company will be required to adopt SFAS No. 130, "Reporting
Comprehensive Income," issued by the Financial Accounting Standards Board. The
adoption of SFAS No. 130 is not expected to have a material effect on the
Company's financial position or results of operations.

In fiscal 1999, the Company will be required to adopt SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information", issued by the
Financial Accounting Standards Board. The adoption of SFAS No. 131 is not
expected to have a material effect on the Company's financial position or 
results of operations.

In fiscal 2000, the Company will be required to adopt SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," issued by the Financial
Accounting Standards Board. Statement No. 133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. The new statement requires all derivatives to be recorded in
the balance sheet as either an asset or liability measured at its fair value.
The Company believes the adoption of Statement No. 133 will not have any
material impact in the Company's financial position or results of operations.

(3)      ACQUISITIONS AND LICENSING AGREEMENTS

ACQUISITION OF SPORTS IMAGE, INC.

In November 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of Sports Image, Inc.("Sports Image"). The purchase
price was approximately $30,000,000, consisting of a $24,000,000 promissory note
due January 2, 1997 and 403,361 shares of the Company's Common Stock valued at
$12.10 per share. On January 2, 1997, the Company repaid the $24,000,000
promissory note with the proceeds from the issuance of senior notes and a
portion of the borrowings under the Company's new credit facility. Sports Image
sells and distributes a variety of licensed motorsports products through
wholesale distributor networks, corporate sponsors, and mobile trackside stores.
In fiscal 1996, the Company derived 16% of its net sales from Sports Image, a
distributor of the Company's die-cast collectible products. Sports Image had
sales of approximately $41.8 million of apparel, die-cast replicas, souvenirs,
and other motorsports consumer products during the period from January 1, 1996
to November 7, 1996 (which includes sales of 

                                      F-10
<PAGE>   17
die-cast collectibles purchased from the Company at an aggregate cost of
approximately $5.8 million). This transaction was accounted for as a purchase.

ACQUISITIONS OF MOTORSPORT TRADITIONS LIMITED PARTNERSHIP AND CREATIVE MARKETING
& PROMOTIONS, INC.

On January 8, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Motorsport Traditions Limited Partnership and
acquired all of the stock of Creative Marketing & Promotions, Inc. (collectively
"Motorsport Traditions"). The effective date of the acquisition of Motorsport
Traditions was January 1, 1997. The purchase price paid by the Company for
Motorsport Traditions consisted of (i) cash in the amount of $5.4 million; (ii)
a promissory note in the principal amount of $1.6 million issued by a wholly
owned subsidiary of the Company; and (iii) an aggregate of 342,857 shares of the
Company's Common Stock valued at $13.80 per share. The promissory note bears
interest at 4% per annum, matures on December 31, 1998, and has been guaranteed
by the Company. Motorsport Traditions sells and distributes licensed motorsports
products through a network of wholesale distributors and mobile trackside
stores. Prior to the acquisitions, Motorsport Traditions generated approximately
$33.0 million in annual revenue from its design, manufacturing, and sales and
distribution activities. This transaction was accounted for as a purchase.

ACQUISITION OF ROBERT YATES PROMOTIONS, INC.

In July 1997, the Company acquired all of the outstanding common stock of Robert
Yates Promotions, Inc. ("RYP") for $5.7 million. RYP sells licensed motorsports
products through trackside trailers and generated approximately $5.0 million in
revenue during calendar year 1996. Concurrent with the acquisition of RYP, the
Company entered into a 15-year license agreement with Robert Yates Racing, Inc.
("Yates Racing"). Pursuant to the license agreement, the Company will pay
royalties for the use of certain trademark rights associated with Yates Racing
Nascar Winston Cup teams. This transaction was accounted for as a purchase. RYP
is a defendant in certain litigation. See Note 10. The purchase price is
preliminary with respect to such litigation.

ACQUISITION OF IMAGE WORKS, INC.

In July 1997, the Company acquired substantially all of the assets and assumed
certain liabilities of Image Works, Inc. ("Image Works"). The Company paid $4.25
million in cash and issued a three-year promissory note for a minimum principal
amount of $750,000, with additional contingent payments of up to an aggregate of
$1.4 million based upon the attainment of certain revenue objectives through
September 30, 2000. The Company paid the $750,000 and $1.4 million contingent
payments in May 1998. Image Works designs and manufactures screen printed and
embroidered motorsports apparel items for distribution through mass retailers
and corporate accounts. Image Works generated approximately $22.0 million in
revenue during calendar year 1996. This transaction was accounted for as a
purchase.

ACQUISITION OF COLLECTIBLE BUSINESS FROM SIMPSON PRODUCTS, INC.

In August 1997, the Company acquired certain assets and assumed certain
liabilities related to the licensed mini-helmet collectible business of Simpson
Products, Inc. ("Simpson"). The consideration paid by the Company for the
purchased assets consisted of approximately $653,000 in cash, with additional
contingent payments of up to an aggregate of $1.5 million based upon the
attainment of certain revenue objectives. In connection with the purchase of the
assets and assumption of liabilities of Simpson, the Company also entered into a
25-year license agreement with respect to certain rights used in connection with
the purchased assets. This transaction was accounted for as a purchase.

                                      F-11
<PAGE>   18
LICENSING AGREEMENT WITH RICHARD CHILDRESS RACING ENTERPRISES, INC.

On October 3, 1997, the Company entered into a ten-year license agreement with
Richard Childress Racing Enterprises, Inc. ("RCR") with respect to various
rights used in connection with Dale Earnhardt licensed products. In connection
with this agreement, the Company paid RCR a license fee consisting of cash plus
34,940 shares of the Company's Common Stock. The license agreement also requires
the Company to pay to RCR certain minimum annual royalties during the term of
the agreement, plus royalties based on sales of licensed products in each year
during the term of the agreement.

ACQUISITION OF RUSTY WALLACE MERCHANDISE PROGRAM

On December 9, 1997, the Company acquired certain assets and assumed certain
liabilities related to sales of motorsports merchandise licensed by NASCAR
Winston Cup driver Rusty Wallace from an affiliate of Mr. Wallace. The purchase
price consisted of cash of $6.0 million, of which $2.5 million was paid at the
closing and the remaining $3.5 million was paid during fiscal 1998. In
connection with the acquisition of the assets and assumption of the liabilities,
the Company entered into a seven-year license agreement with another affiliate
of Mr. Wallace for the name and likeness of Mr. Wallace and acquired a five-year
sublicense with a wholly owned subsidiary of Penske Motorsports, Inc. The
license agreement and sublicense agreement both contain options that permit the
Company to renew for two additional five-year terms. The license agreement with
the affiliate of Mr. Wallace requires the Company to pay royalties on sales of
licensed products, plus a license fee if sales of licensed products exceed a
specified amount each year during the initial term of the license. This
transaction was accounted for as a purchase.

ACQUISITION OF DIE-CAST DIVISION OF REVELL MONOGRAM, INC.

On December 19, 1997, the Company acquired the assets and assumed certain
liabilities related to the motorsports die-cast collectible product lines of
Revell-Monogram, Inc. ("Revell"). The preliminary price of $24.8 million, which
is subject to certain adjustments, consists of an initial cash payment of $14.8
million and $1.0 million per year for 10 years, which is treated as a note
payable with an imputed interest rate of 8% in the accompanying financial
statements. Revell distributed die-cast collectibles through a network of
wholesale distributors and a collectible club, which together generated die-cast
collectible sales of approximately $20.0 million during 1997. The Company and
Revell also entered into a 10-year license agreement under which the Company has
the right to utilize certain "Revell" trademarks in connection with sales of its
die-cast products. This transaction was accounted for as a purchase.

ACQUISITION OF BROOKFIELD COLLECTORS GUILD, INC.

On January 8, 1998, the Company acquired certain assets and assumed certain
liabilities of Brookfield Collectors Guild, Inc. ("Brookfield"). The purchase
price consisted of (i) approximately $800,000 in cash and (ii) up to 27,397
shares of Common Stock, subject to certain adjustments, to be issued upon
completion of certain purchase price adjustments by the Company and the seller.
Brookfield distributed various motorsports die-cast collectibles and ensembles
as well as various other die-cast replicas. This transaction was accounted for
as a purchase.

ACQUISITION OF MINORITY INTEREST IN LBE TECHNOLOGIES, INC.

On April 20, 1998, the Company made a $1.0 million equity investment in LBE
Technologies, Inc. ("LBET") and entered into a five-year strategic alliance. The
strategic alliance provides the Company with exclusive merchandising rights at
each of LBET's "NASCAR Silicon Motor Speedway" centers.


                                      F-12
<PAGE>   19
ACQUISITION OF CONTROLLING INTEREST IN CHASE RACEWEAR, LLC

On May 22, 1998, the Company acquired a controlling interest in Chase Racewear,
L.L.C. ("Chase"), a North Carolina motorsports-related apparel branding and
licensing company. Pursuant to the terms of the acquisition and operating
agreements, the Company acquired an 80% interest in Chase for an aggregate of
$10.0 million in cash. The terms of the acquisition agreement also include a
three-year earn-out payment of up to $4.0 million if certain financial criteria
are met. This transaction was accounted for as a purchase.

ACQUISITION OF CONTROLLING INTEREST IN MINICHAMPS

On August 31, 1998, the Company acquired a majority interest in Paul's Model
Art, GmbH; MiniChamps, GmbH; Lang Miniaturen, GmbH; and Spielwaren Danhausen,
GmbH (collectively referred to as "MiniChamps") by purchasing an 80% interest
for approximately $21.5 million in cash. MiniChamps designs and markets die-cast
scaled replicas of motor vehicles, including models of Formula One and GT race
cars as well as factory production cars. Its products are marketed pursuant to
licensing agreements with race car drivers, team owners, and car manufacturers.
MiniChamps generated revenue of approximately $25.0 million during 1997. This
transaction was accounted for as a purchase.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS DATA

The following unaudited pro forma combined statements of operations data for the
years ended September 30, 1998 and 1997 present the results of operations of the
Company as if the acquisitions of the businesses acquired during fiscal 1997 and
fiscal 1998 had occurred as of October 1, 1996. Pro forma results are as follows
(in thousands, except per share data):

<TABLE>
<CAPTION>
                                                       1998*         1997*
                                                     --------      --------
<S>                                                  <C>           <C>
         Revenues...............................     $283,702      $213,954
         Net income.............................       26,728        13,356
         Net income per common share, diluted...     $   1.60      $   0.90
</TABLE>

* Excludes charges for legal settlement costs of $950,000, or $0.03 per share,
in fiscal 1998 and $5.4 million, or $0.22 per share, in fiscal 1997.

 (4)     FINANCING ACTIVITIES

Long-term debt at September 30, 1998 and 1997 consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                                     1998          1997
                                                                                     ----          ----
<S>                                                                                <C>          <C>
Senior notes, interest at 8.05% payable semi-annually, principal payable January
1999, secured by the Company's subsidiaries ....................................   $  20,000    $  20,000

4 3/4% Convertible Subordinated Notes due 2005 .................................     100,000           --

Unsecured notes payable, interest ranging
from 4% to 8% ..................................................................       7,458        2,197

Notes payable, interest ranging from 7.9% to 8.5%,
secured by property and equipment ..............................................       7,839        1,409

Obligations under capital leases of vehicles and
equipment, interest from 8.0% to 9.5%, payable monthly .........................         299          454
                                                                                   ---------    ---------

Total ..........................................................................     135,596       24,060

Less:  current portion .........................................................     (23,746)      (1,474)
                                                                                   ---------    ---------

                                                                                   $ 111,850    $  22,586
                                                                                   =========    =========
</TABLE>


                                      F-13
<PAGE>   20
CONVERTIBLE SUBORDINATED NOTES

On March 24, 1998, the Company sold $100.0 million of 4 3/4% Convertible
Subordinated Notes due 2005 (the "Notes"). The Notes are convertible, at the
option of the holders, into shares of Common Stock at the initial conversion
price of $48.20 per share, subject to adjustments in certain events. The Notes
are general unsecured obligations of the Company, subordinated in right of
payment to all existing and future senior indebtedness of the Company, as
defined in the Notes. The Indenture governing the Notes does not limit or
prohibit the incurrence of additional indebtedness, including senior
indebtedness, by the Company or its subsidiaries. The Company, at its option,
may redeem the Notes in whole or in part at any time on or after April 1, 2001,
at redemption prices set forth in the Indenture governing the Notes. Upon the
occurrence of a "change in control" or a "termination of trading," as defined in
the Indenture, the holders of the Notes will have the right to require the
Company to repurchase all or any part of such holders' Notes at 100% of their
principal amount, plus accrued and unpaid interest. The net proceeds to the
Company from this offering were approximately $96.5 million, after deducting
offering expenses and the Initial Purchasers' discount of 3.0%. The offering
expenses and Initial Purchasers discount are included in other assets in the
accompanying financial statements and are being amortized into interest expense
using the effective interest rate method.

CREDIT FACILITY

On January 2, 1997 the Company entered into a credit facility with First Union
National Bank of North Carolina ("First Union"). On August 5, 1998, the Company
entered into an amended and restated credit agreement with First Union (the
"Credit Facility"). The Credit Facility consists of a revolving line of credit
for up to $20.0 million, which includes up to $5.0 million for standby letters
of credit (the "Line of Credit") and a $30.0 million letter of credit/bankers'
acceptance facility (the "Letter of Credit/BA Facility"). The Company did not
have any outstanding borrowings under the Line of Credit as of September 30,
1998. The Company had outstanding purchase commitments of approximately $3.7
million under the Letter of Credit/BA Facility as of September 30, 1998. The
Line of Credit bears interest, at the Company's option, at a rate equal to (i)
the Alternate Base Rate (as described below) plus an applicable margin as
defined in the credit agreement or (ii) LIBOR plus an applicable margin as
defined in the credit agreement. The "Alternate Base Rate" under the Line of
Credit is the greater of (a) the bank's publicly announced prime rate or (b) the
Federal Funds Effective Rate (as defined) plus 0.5%. The Line of Credit matures
on April 1, 2001 with respect to the revolving line of credit portion of the
Line of Credit, and on April 1, 1999 with respect to the standby letter of
credit portion of the Line of Credit and the Letter of Credit/BA Facility,
subject to extensions by First Union. The Credit Facility is guaranteed by the
Company's subsidiaries.

DEBT COVENANTS

The Company's senior notes and Credit Facility agreements contain certain
provisions that, among other things, require the Company to comply with certain
financial ratios and net worth requirements and will limit the ability of the
Company and its subsidiaries to incur additional indebtedness, pay dividends,
sell assets, or engage in certain mergers or consolidations.

FUTURE MATURITIES OF LONG-TERM DEBT

Aggregate future maturities of long-term debt are as follows (in thousands):

<TABLE>
<CAPTION>
                       Year Ending
                      September 30,
                      -------------
<S>                                               <C>
                          1999                  $ 23,746
                          2000                     1,997
                          2001                     1,662
                          2002                     1,941
                          2003                     1,503
                      Thereafter                 104,747
                                                --------
                         Total                  $135,596
                                                ========
</TABLE>


                                      F-14
<PAGE>   21
(5)      SHAREHOLDERS' EQUITY

All share amounts and per share data have been restated to reflect the
two-for-one stock split effected as a stock dividend on May 28, 1996.

CONVERTIBLE PREFERRED STOCK

In March 1995, the Company completed the sale of 500 shares of Class A
Convertible Preferred Stock (the "Preferred Stock") to an affiliate of its
principal manufacturer of die-cast collectibles, for a purchase price of $2.0
million. The sale was effected primarily as a long-term strategic transaction
intended to align the interests of the manufacturer with those of the Company.
The shares were converted into an aggregate of 1,000,000 shares of Common Stock
during May 1996.

ISSUANCE OF STOCK IN PRIVATE PLACEMENTS

In January 1997, the Company sold 187,500 shares of Common Stock to Hasbro, Inc.
at a price of $14.50 per share, with net proceeds to the Company of
approximately $2.6 million. In August 1997, the Company issued (i) 8,180 shares
of Common Stock valued at $23.02 per share to Dale Jarrett in connection with a
three-year personal services contract, and (ii) 19,324 shares of Common Stock
valued at $22.59 to E.J. Simpson as a portion of the license fee pursuant to a
license agreement. In October 1997, the Company issued 34,940 shares of Common
Stock valued at $28.62 per share to Richard Childress Racing, Inc. See Note (3).
In February 1998, the Company issued 9,900 shares of Common Stock valued at
$26.00 per share in connection with a race car sponsorship.

1997 PUBLIC OFFERING

On June 24, 1997, the Company sold 1,770,000 shares of its Common Stock in
connection with an underwritten public offering. On July 17, 1997, the Company
sold an additional 315,000 shares of its Common Stock pursuant to the exercise
of the underwriters' over-allotment option. The net proceeds to the Company from
this offering were approximately $49.8 million, after deducting offering
expenses and underwriting discounts and commissions.

STOCK OPTIONS

Under the Company's 1993 Stock Option Plan (the "1993 Plan"), the Board of
Directors may from time to time grant to key employees, consultants, and
independent contractors who provide valuable services to the Company (i)
incentive stock options and non-statutory stock options to purchase shares of
the Company's Common Stock, (ii) stock appreciation rights, (iii) shares of the
Company's Common Stock, or (iv) cash awards. The 1993 Plan also includes an
automatic program providing for automatic grants of stock options to
non-employee directors of the Company. The exercise price for all incentive
stock options granted under the 1993 Plan may not be less than the fair market
value of the Company's Common Stock on the date of the grant, except that the
option price may not be less than 110% of the fair market value of the Company's
Common Stock on the date of the grant in the case of incentive stock options
granted to any person possessing more than 10% of the combined voting power of
the Company's Common Stock or any parent or subsidiary corporation. In the case
of non-statutory stock options, the exercise price may not be less than 85% of
the fair market value of the Company's Common Stock on the date of the grant.
Options granted under the 1993 Plan generally have a six-year term. Options that
were granted prior to July 1995 are fully vested and exercisable. The option
agreements for options granted beginning in July 1995 generally provide that
one-third of the options vest and become exercisable on each of the first,
second, and third anniversaries of the date of grant. A total of 2,750,000
shares of Common Stock may be issued pursuant to the 1993 Plan. The 1993 Plan
expires in 2001.

Under the Company's 1998 Non-qualified Stock Option Plan (the "1998 Plan"), the
Board of Directors may from time to time grant to key employees of the Company,
other than directors or executive officers, non-statutory stock options to
purchase shares of the Company's Common Stock. The exercise price, term, vesting
conditions, and other terms for all stock options granted under the 1998 Plan
will be determined at the time of grant by the Board of Directors or a board
committee appointed to administer the 1998 Plan. A total of 500,000 shares of
Common Stock may be issued pursuant to the 1998 Plan. The 1998 Plan expires in
2008.

                                      F-15
<PAGE>   22
A summary of the status of the Company's stock option plans at September 30,
1998, 1997, and 1996 and for the years then ended is presented in the table
below:

<TABLE>
<CAPTION>
                               1998                1997                 1996
                        ------------------  ------------------   -------------------
                                     Wtd                 Wtd        
                        Number       Avg     Number      Avg      Number      Wtd Avg
                          of       Exercise    of      Exercise     of       Exercise
                        Shares      Price    Shares     Price     Shares        Price
                        ------      -----    ------     -----     ------        -----
<S>                    <C>          <C>     <C>         <C>      <C>           <C>
 Outstanding at
  beginning of year.   1,032,710    $ 6.58  1,110,053   $ 4.16   1,111,200     $ 2.90
 Granted............     503,500     27.92    220,250    17.76     240,700       9.28
 Exercised..........    (425,990)     4.01   (296,092)    5.80    (239,247)      3.45
 Canceled...........    (179,409)    30.63     (1,501)    9.43      (2,600)      5.25

 Outstanding at
  end of year.......     930,811     14.61  1,032,710     6.58   1,110,053       4.16

 Options exercisable
  at end of year....     563,058      9.79    714,950     3.09     881,774       2.91

 Options available
  for grant.........     572,860              396,951              365,700

 Weighted average
  fair value of
  options granted...                $11.74              $ 7.33                 $ 3.77
</TABLE>

Options outstanding and exercisable by price range as of September 30, 1998 are
as follows:

<TABLE>
<CAPTION>
                              Options Outstanding                Options Exercisable
                    ---------------------------------------   ----------------------
                                    Weighted
                                     Average       Weighted                  Weighted
                                    Remaining       Average                   Average
   Range of           Options      Contractual     Exercise      Options     Exercise
Exercise Prices     Outstanding       Life           Price     Exercisable     Price
---------------     -----------       ----           -----     -----------     -----
<S>                 <C>            <C>             <C>         <C>           <C>
$ 1.25 - $11.04       447,307         2.32          $ 4.92       407,232      $ 6.22
$11.05 - $22.09       171,169         4.43           18.41        69,825       18.49
$22.10 - $36.81       312,335         6.74           26.40        86,001       28.22
                      -------         ----          ------       -------      ------
$ 1.25 - $36.81       930,811         4.20          $14.61       563,058      $ 9.79
                      =======         ====          ======       =======      ======
</TABLE>

The Company accounts for its stock-based compensation plans under APB No. 25,
under which no compensation expense has been recognized, as all options have
been granted with an exercise price equal to the fair value of the Company's
Common Stock on the date of grant. The Company adopted SFAS No. 123 for
disclosure purposes in fiscal 1997. For SFAS No. 123 purposes, the fair value of
each option grant has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rates ranging between 5.29% and 6.34%; expected life of three years;
dividend rate of 0.0%; and expected volatility of 54.715%. Using these
assumptions, the fair value of the stock options granted, net of cancellations,
is $3,553,957, $1,614,623, and $908,153 for the years ended September 30, 1998,
1997, and 1996, respectively. These amounts would be amortized as compensation
expense over the vesting period of the options. Options generally vest equally
over three years. Had compensation costs been determined consistent with SFAS
No. 123, utilizing the assumptions detailed above, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                       1998              1997             1996
                                                     --------          --------         -------
<S>                                                  <C>               <C>              <C>
  Net Income:
    As Reported.............................         $ 24,587          $ 10,146         $ 5,953
    Pro Forma...............................         $ 22,460          $  9,305         $ 5,650
  Basic EPS:
    As Reported.............................         $   1.52          $   0.72         $  0.50
    Pro Forma...............................         $   1.39          $   0.66         $  0.48
  Diluted EPS:
    As Reported.............................         $   1.48          $   0.69         $  0.46
    Pro Forma...............................         $   1.35          $   0.64         $  0.43
</TABLE>

                                      F-16
<PAGE>   23
(6)      RELATED PARTY TRANSACTIONS

The Company currently leases a building in Tempe, Arizona, containing
approximately 46,000 square feet, which the Company utilized for its corporate,
administrative, sales offices, and warehouse facilities prior to September 1997.
Prior to March 1998, Fred W. Wagenhals, a shareholder, director, and officer of
the Company, owned a one-third interest in F.W. Investments, a partnership that
owned this facility. In March 1998, Mr. Wagenhals became the sole owner of this
facility. The Company paid F.W. Investments or Mr. Wagenhals rent of
approximately $175,000, $183,000, and $177,000 for the years ended September 30,
1998, 1997, and 1996 respectively. During fiscal 1998, the Company made a
refundable deposit of $900,000 to Mr. Wagenhals towards the purchase of the
facility. The Company is currently negotiating the final purchase agreement with
Mr. Wagenhals and intends to either sell or lease the facility to an
unaffiliated third party.

(7)      EMPLOYEE BENEFIT PLANS

In October 1994, the Company established a defined contribution plan that
qualifies as a cash or deferred profit sharing plan under Sections 401(a) and
401(k) of the Internal Revenue Code. The plan is available to substantially all
domestic employees. Under the plan, participating employees may defer from 1% to
15% of their pre-tax compensation. The Company contributes fifty cents for each
dollar contributed by the employee, with a maximum contribution of 2% of the
employee's defined compensation. In addition, the plan provides for an annual
employer profit sharing contribution in such amounts as the Board of Directors
may determine. The Company expensed approximately $141,000, $41,000, and $26,000
under the plan for the years ended September 30, 1998, 1997, and 1996
respectively.

The Company has no other programs that require payment by the Company of
post-employment benefits to current or retired employees.

(8)      INCOME TAXES

The Company provides for income taxes under SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are expected
to reverse. The principal differences arise as a result of the use of
accelerated depreciation and amortization methods for federal income tax
reporting purposes, certain inventory costs required to be capitalized for tax
purposes, and certain reserves expensed currently for financial reporting
purposes.

SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. The
ultimate realization of this deferred tax asset depends on the Company's ability
to generate sufficient taxable income in the future. A valuation allowance has
not been recorded as of September 30, 1998 or 1997.

The provision for income taxes consists of the following for the years ended
September 30 (in thousands):

<TABLE>
<CAPTION>
                                    1998             1997              1996
                                  -------           ------           -------
<S>                               <C>              <C>               <C>
Current:
    Federal.....................  $15,300          $ 5,828           $ 3,258
    State.......................    2,181              822               753
                                  -------          -------           -------
                                   17,481            6,650             4,011

Deferred income taxes...........   (1,090)             114               (94)
                                  -------          -------           -------

Provision for income taxes......  $16,391          $ 6,764           $ 3,917
                                  =======          =======           =======
</TABLE>



                                      F-17
<PAGE>   24
Reconciliation of the federal income tax rate to the Company's effective rate
for the years ended September 30 are as follows:

<TABLE>
<CAPTION>
                                         1998        1997       1996
                                        ------      ------     ------
<S>                                    <C>          <C>        <C>
Statutory federal rate..................35.00%      35.00%     34.00%

State taxes, net of federal benefit
  and other............................. 5.00        5.00       5.69
                                        ------      ------     ------
                                        40.00%      40.00%     39.69%
                                        ======      ======     =======
</TABLE>

The components of deferred taxes are as follows at September 30 (in thousands):

<TABLE>
<CAPTION>
                                              1998         1997
                                             ------       -------
<S>                                          <C>          <C>
  Deferred tax assets (liabilities):
    Accelerated tax depreciation........     $ (438)      $ (391)
    Accelerated tax amortization........       (675)        (306)
    Inventory cost capitalization.......      1,179          547
    Valuation reserves and accruals.....      1,902          821
    Deferred compensation...............         40          247
                                             ------       ------
      Net deferred tax asset............     $2,008       $  918
                                             ======       ======
</TABLE>

(9)      LEGAL SETTLEMENTS

In June 1997, the Company agreed to settle a breach of contract suit with Action
Products, Inc. for $4.9 million (the "API Settlement"). Pursuant to the API
Settlement, in July 1997 the Company made a payment of $4.9 million to the
plaintiff, and all parties executed mutual releases. The accompanying 1997
financial statements include a charge of $5.4 million for the API Settlement and
related legal fees.

In March 1998, the Company agreed to settle a lawsuit with Petty Enterprises,
Inc. and an affiliate of Petty Enterprises, Inc. Under the financial terms of
the settlement, the Company will pay a total of approximately $700,000 to Petty
Enterprises, Inc. as payment in full for royalties and other fees in connection
with licenses for future sales of licensed products. The settlement is subject
to the execution of definitive settlement agreements. The accompanying 1998
financial statements include a charge of $950,000 incurred as a result of this
settlement and related charges.

In March 1998, the Company and other defendants settled an environmental lawsuit
with the State of Arizona. Under the agreement, the former shareholders of F.W.
& Associates, Inc., including Fred W. Wagenhals, the Company's Chairman of the
Board, President, and Chief Executive Officer, paid an aggregate of $800,000 to
the state and certain parties seeking indemnity from the Company. The Company
did not incur any costs in connection with this settlement.

(10)     COMMITMENTS AND CONTINGENCIES

On March 4, 1997, two class action lawsuits were filed against the Company and
approximately 28 other defendants in the United States District Court for the
Northern District of Georgia. The lawsuits allege that the defendants engaged in
price fixing and other anti-competitive activities in violation of federal
anti-trust laws. The Company was named as a defendant based upon actions alleged
to have been taken by Sports Image, Inc., a North Carolina corporation ("Sports
Image N.C.") and Creative Marketing & Promotions, Inc. ("CMP") prior to the
Company's acquisitions of the assets and capital stock, respectively, of those
entities. The actions were subsequently consolidated by order of the court. The
caption of the consolidated action is "In re Motorsports Merchandise Antitrust
Litigation" and the files are maintained under Master File No. 1-97-CV-0569-CC.
On May 30, 1997, a consolidated amended complaint was filed, which deleted the
Company as a defendant with respect to claims based upon actions alleged to have
been taken by Sports Image N.C. and named the Company's wholly owned subsidiary,
Sports Image, Inc., an Arizona corporation ("Sports Image AZ"), as a defendant
with respect to those claims. The Company remains a defendant with respect to
claims based upon actions alleged to have been taken by CMP. On July 31, 1997,
the Company acquired all of the outstanding capital stock of RYP, which is
another defendant in this matter. Accordingly, the Company has assumed the
defense of this matter with respect to claims based upon actions alleged to have
been taken by RYP and has agreed to be responsible for and to pay any costs,
fees, expenses, damages, payments, credits,



                                      F-18
<PAGE>   25
rebates, and penalties, if any, arising out of this matter with respect to RYP.
The seller of RYP has agreed to be responsible for amounts, if any, in excess of
$400,000 (the "$400,000 Cap"). The $400,000 Cap excludes attorneys fees and
certain other costs and expenses that the Company may incur in defending or
settling this matter. The plaintiffs have requested injunctive relief and
monetary damages of three times an unspecified amount of damages that the
plaintiffs claim to have actually suffered. On August 1, 1997, answers were
filed on behalf of the Company and Sports Image AZ denying the allegations of
the complaint. Pursuant to an agreement between the plaintiffs and Sports Image
AZ to toll the running of the statute of limitations with respect to any claims
against Sports Image AZ, on November 17, 1997 the plaintiffs filed a motion to
dismiss Sports Image AZ from the case without prejudice. The court granted the
motion on March 20, 1998. On March 2, 1998, the plaintiffs filed, pursuant to a
court order, a second consolidated amended complaint intended to set forth
certain allegations with greater specificity. The Company intends to vigorously
defend the claims asserted in this lawsuit.

The Company leases certain equipment and office space under noncancellable
operating leases. Rent expense related to these lease agreements totaled
approximately $ 3.1 million, $935,000, and $437,000 for the fiscal years ended
September 30, 1998, 1997, and 1996 respectively.

Future lease payments under the noncancellable operating leases are
approximately as follows (in thousands):

<TABLE>
<CAPTION>
            Year Ending
            September 30,
<S>                                   <C>
                 1999                 $ 3,299
                 2000                   2,933
                 2001                   2,441
                 2002                   2,115
                 2003                   1,872
              Thereafter               23,782
                                      -------
                Total                 $36,442
                                      =======
</TABLE>

Certain of the Company's licensing agreements require the Company to make
minimum annual guaranteed royalty payments through the term of the agreements.
To date, the Company has recovered all such minimum annual guaranteed royalty
payments through normal product sales. There can be no assurance, however, that
the Company will generate sufficient product sales in the future to recover such
payments.

The Company is subject to certain other asserted and unasserted claims
encountered in the normal course of business. In the opinion of management, the
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.

(11)     SUBSEQUENT EVENTS

On October 27, 1998, the Company acquired all of the outstanding stock of
Intellectual Properties Group, Inc. ("IPG") in exchange for 35,000 shares of the
Company's restricted common stock. IPG creates and develops promotional programs
for corporate sponsors of motorsports. The transaction will be accounted for as
a pooling-of-interests. Prior period financial statements will not be restated
because IPG's historical operating results and financial position are not
material in relation to the Company's operating results and financial position.

(12)     EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT

On November 23, 1998, the Company acquired Tech 2000 Worldwide, Inc. ("Tech
2000"), a privately held Massachusetts-based Internet company, through a merger
of Tech 2000 and Action Interactive, Inc., a wholly owned subsidiary of the
Company. Under the terms of the merger agreement, the Company issued 137,925
shares of its restricted common stock in exchange for all of the issued and
outstanding common stock of Tech 2000. The transaction will be accounted for as
a pooling-of-interests. Prior period financial statements will not be restated
because Tech 2000's historical operating results and financial position are not
material in relation to the Company's operating results and financial position.


                                      F-19
<PAGE>   26
On November 30, 1998, the Company entered into an exclusive licensing agreement
with CART Licensed Products, L.P., the licensing arm of Championship Auto Racing
Teams, Inc. ("CART"). Under the terms of the licensing agreement, the Company
obtained the exclusive rights to the CART series and FedEx Championship Series
logos, as well as exclusive rights to five teams in the CART series, including
Newman/Haas Racing, PacWest Racing Group, Target/Chip Ganassi Racing, Team
Green, Inc., and Team Rahal, Inc. In addition, the Company also obtains the
non-exclusive rights for a minimum of 75% of the other teams and drivers that
participate in CART sanctioned race events. The rights granted under the
agreement allow the Company to create a line of collectible vehicles consistent
with the detail and quality featured in its existing die-cast collectibles and
allow the Company to market or sublicense a broad range of toy products such as
plastic and remote control vehicles, action figures, miniature helmets, board
games, plush toys, and puzzles. The initial term of the agreement is for five
years with a five-year renewal option.



                                      F-20
<PAGE>   27

Exhibit
Number                                Exhibit Index
------                                -------------

1.0      Form of Underwriting Agreement (1)

3.1      First Amended and Restated Articles of Incorporation of Registrant(2)

3.2      Amended and Restated Bylaws of Registrant(2)

4.1      Form of Certificate of Common Stock(3)

4.2      Indenture dated as of March 24, 1998, between Action Performance
         Companies, Inc. and First Union National Bank, as Trustee, including
         forms of Notes(4)

10.4.2   1993 Stock Option Plan, as amended and restated through January 16,
         1997(5)

10.8     Form of Indemnification Agreement entered into with the Directors of
         the Registrant(3)

10.21    Lease between the Company and F.W. Investments dated January 1, 1994(6)

10.27    Manufacturing Agreement between the Company and Early Light
         International (Holdings) Ltd. dated December 5, 1994(7)

10.33    Asset Purchase Agreement dated as of November 7, 1996, among Action
         Performance Companies, Inc., SII Acquisition, Inc., Sports Image, Inc.,
         and R. Dale Earnhardt and Teresa H. Earnhardt(8)

10.34    Promissory Note dated November 7, 1996, in the principal amount of
         $24,000,000 issued by SII Acquisition, Inc., as Maker, to Sports Image,
         Inc., as Payee, together with Guarantee of Action Performance
         Companies, Inc.(8)

10.35    Security Agreement dated November 7, 1996, between Sports Image, Inc.
         and SII Acquisition, Inc.(8)

10.36    Registration Agreement dated as of November 7, 1996, among Action
         Performance Companies, Inc., Sports Image, Inc., and R. Dale Earnhardt
         and Teresa H. Earnhardt(8)

10.37    License Agreement dated as of November 7, 1996, among SII Acquisition,
         Inc., Dale Earnhardt, and Action Performance Companies, Inc.(8)

10.39    Asset Purchase Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., MTL Acquisition, Inc., Motorsport
         Traditions Limited Partnership, Midland Leasing, Inc., and Motorsports
         By Mail, Inc.(9)

10.40    Exchange Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
         Gordon(9)

10.41    Promissory Note dated January 1, 1997, in the principal amount of
         $1,600,000 issued by MTL Acquisition, Inc., as Maker, to Motorsport
         Traditions Limited Partnership, as Payee, together with Guarantee of
         Action Performance Companies, Inc.(9)

10.42    Note Purchase Agreement dated as of January 2, 1997, among Action
         Performance Companies, Inc., Jefferson-Pilot Life Insurance Company,
         Alexander Hamilton Life Insurance Company of America, 



<PAGE>   28

         and First Alexander Hamilton Life Insurance Company, together with form
         of Note, form of Subsidiary Guaranty, and form of Subsidiary Joinder(9)

10.42A   First Amendment dated as of March 18, 1998 to Note Purchase Agreement
         dated as of January 2, 1997, among Action Performance Companies, Inc.,
         Jefferson-Pilot Life Insurance Company, Alexander Hamilton Life
         Insurance Company of America, and First Alexander Hamilton Life
         Insurance Company(4)

10.43    Credit Agreement dated as of January 2, 1997, among Action Performance
         Companies, Inc., Sports Image, Inc., MTL Acquisition, Inc., and First
         Union National Bank of North Carolina(9)

10.43A   Amendment and Consent to Credit Agreement dated March 18, 1998, by and
         among Action Performance Companies, Inc., various subsidiary
         guarantees, and First Union National Bank of North Carolina(4)

10.43B   Amended and Restated Credit Agreement dated as of August 5, 1998, among
         Action Performance Companies, Inc., certain subsidiaries and
         affiliates, as guarantors, and First Union National Bank.*

10.44    Registration Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Motorsport Traditions Limited Partnership,
         Midland Leasing, Inc., and Motorsports By Mail, Inc.(9)

10.45    Registration Agreement dated as of January 1, 1997, among Action
         Performance Companies, Inc., Kenneth R. Barbee, and Jeffery M.
         Gordon(9)

10.46    Employment Agreement dated as of January 1, 1997, between Action
         Performance Companies, Inc. and Kenneth R. Barbee(9)

10.47    Consulting Agreement dated as of January 1, 1997, between Action
         Performance Companies, Inc. and John Bickford(9)

10.48    Common Stock Purchase Agreement dated January 16, 1997, between Hasbro,
         Inc. and Action Performance Companies, Inc.(10)

10.49    Standard Form Industrial Lease dated April 8, 1997, between
         Hewson/Breckner-Baseline, L.L.C. and Action Performance Companies,
         Inc.(11)

10.50    Lease Agreement dated July 9, 1997, by and between Performance Park
         Partners, LLC and Sports Image, Inc.(11)

10.51    Asset Purchase Agreement dated as of December 19, 1997, between Action
         Performance Companies, Inc. and Revell-Monogram, Inc.(12)

10.52    1998 Non-qualified Stock Option Plan(4)

10.53    Purchase Agreement dated March 18, 1998 among Action Performance
         Companies, Inc., NationsBanc Montgomery Securities LLC, CIBC
         Oppenheimer Corp., EVEREN Securities, Inc. and Piper Jaffray Inc.(4)

10.54    Registration Rights Agreement dated March 24, 1998, by and among Action
         Performance Companies, Inc., NationsBanc Montgomery Securities LLC,
         CIBC Oppenheimer Corp., EVEREN Securities, Inc., and Piper Jaffray
         Inc.(4)

11.1     Computation of Primary Earnings Per Share*

11.2     Computation of Fully Diluted Earnings Per Share*

12.1     Computation of Ratio of Earnings to Fixed Charges*

21.1     List of Subsidiaries of Action Performance Companies, Inc.*

23.1     Consent of Arthur Andersen LLP

25.1     Statement of Eligibility of Trustee under the Trust Indenture Act of
         1939 on Form T-1(13)

27.1     Financial Data Schedule*

--------------------
  *      Previously filed.

(1)      Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 and Amendment No. 1 thereto (Registration No. 333-27485).

(2)      Incorporated by reference to the Registrant's Form 10-QSB for the
         quarter ended March 31, 1996, as filed with the Securities and Exchange
         Commission on May 2, 1996.

(3)      Incorporated by reference to the Registrant's Registration Statement on
         Form SB-2 and amendments thereto (Registration No. 33-57414-LA).

(4)      Incorporated by reference to the Registrant's Form 10-Q for the quarter
         ended March 31, 1998, as filed with the Securities and Exchange
         Commission on May 15, 1998.



<PAGE>   29

(5)      Incorporated by reference to the Registrant's Form 10-Q for the quarter
         ended March 31, 1997, as filed with the Securities and Exchange
         Commission on May 15, 1997.

(6)      Incorporated by reference to the Registrant's Form 10-QSB for the
         quarter ended March 31, 1994, as filed with the Securities and Exchange
         Commission on May 16, 1994.

(7)      Incorporated by reference to the Registrant's Form 10-KSB for the year
         ended September 30, 1994, as filed with the Securities and Exchange
         Commission on December 22, 1994.

(8)      Incorporated by reference to the Registrant's Form 8-K filed with the
         Securities and Exchange Commission on November 22, 1996, as amended by
         Form 8-K/A filed on January 13, 1997.

(9)      Incorporated by reference to the Registrant's Form 8-K filed with the
         Securities and Exchange Commission on January 23, 1997, as amended by
         Form 8-K/A filed on February 24, 1997.

(10)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-22943).

(11)     Incorporated by reference to the Registrant's Form 10-K for the year
         ended September 30, 1997, as filed with the Securities and Exchange
         Commission on December 22, 1997.

(12)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-45991).

(13)     Incorporated by reference to the Registrant's Registration Statement on
         Form S-3 (Registration No. 333-53413).