<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

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

                 For the Quarterly Period Ended June 30, 2000

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

            For the Transition Period from _________ to __________

                          Commission File No. 1-12559

                             CRAGAR INDUSTRIES, INC.
                (Name of small business issuer in its charter)

         DELAWARE                                86-0721001
 (State or other jurisdiction         (I.R.S. Employer Identification No.)
of incorporation or organization)

                  4636 NORTH 43RD AVENUE, PHOENIX, ARIZONA 85031
                     (Address of principal executive offices)

                                  (623) 247-1300
                            (Issuer's telephone number)

    Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 []

    Number of shares of common stock, $.01 par value, outstanding as of June 30,
2000:  2,456,990.

    Transitional small business disclosure format. Yes [ ] No [X]


                                       1

<PAGE>

                           CRAGAR INDUSTRIES, INC.
                          Condensed Balance Sheets
                     June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
                                                                                  June 30,           December 31,
                                                                                   2000                 1999
                                                                                --------------       --------------
                                                                                  (unaudited)
<S>                                                                             <C>                  <C>
                     ASSETS


Current Assets
       Cash and cash equivalents                                                   $   235,644          $     1,387
       Accounts receivable, net of allowance for
           doubtful accounts of $133,1999 and $150,000                                 608,567            1,443,886
       Inventory, net                                                                   49,947              540,373
       Investments                                                                   1,813,048              437,500
       Prepaid expenses                                                                156,134               78,665
                                                                                --------------       --------------
             Total current assets                                                    2,863,340            2,501,811

Property and equipment, net                                                            174,326              207,245

Other Assets                                                                            57,624               57,624
                                                                                --------------       --------------

Total Assets                                                                       $ 3,095,290          $ 2,766,680
                                                                                ==============       ==============
                    LIABILITIES AND STOCKHOLDERS' DEFICIT


Current Liabilities
       Accounts payable                                                            $   806,809          $   773,474
       Line of credit                                                                1,463,641                  -
       Accrued interest                                                                 49,583               53,947
       Deferred revenue                                                                 56,999              275,000
       Accrued expenses                                                                691,155              826,997
                                                                                --------------       --------------
             Total current liabilities                                               3,068,187            1,929,418

Line of Credit                                                                             -              2,331,548
Long Term Debt                                                                         460,000              460,000
                                                                                --------------       --------------

Total Liabilities                                                                    3,528,187            4,720,966
                                                                                --------------       --------------

Stockholders' Deficit
       Preferred stock, par value $ .01; authorized 200,000 shares
             22,500 shares issued and outstanding                                          225                  225
       Additional paid-in capital - preferred                                        2,166,956            2,166,956
       Common stock, par value $ .01; authorized 10,000,000 shares
             2,456,990 shares issued and outstanding                                    24,570               24,570
       Additional paid-in capital - common                                          12,244,515           12,244,515
       Accumulated deficit                                                         (14,869,163)         (16,390,552)
                                                                                --------------       --------------
             Total stockholders' deficit                                              (432,897)          (1,954,286)
                                                                                --------------       --------------

Total Liabilities and Stockholders' Deficit                                        $ 3,095,290          $ 2,766,680
                                                                                ==============       ==============
See accompanying notes to condensed financial statements
</TABLE>

                                                               2



<PAGE>

                           CRAGAR INDUSTRIES, INC.
                    Condensed Statements of Operations
           Three Months and Six Months Ended June 30, 2000 and 1999
                                 (unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended                Six Months Ended
                                                                             June 30,                          June 30,
                                                                    --------------------------        ----------------------------
                                                                       2000            1999              2000              1999
                                                                    -----------     -----------        ----------        ----------
<S>                                                                <C>               <C>               <C>              <C>
Net Sales                                                          $  229,186        $4,203,093        $ 545,537        $8,389,856
Royalty revenues                                                      136,582               -            279,509               -
                                                                    -----------     -----------        ----------        ----------

           Total revenues                                             365,768         4,203,093          825,046         8,389,856

Cost of goods sold                                                    294,171         3,407,945          626,222         6,721,415
                                                                    -----------     -----------        ----------        ----------

           Gross profit                                                71,597           795,148          198,824         1,668,441

Selling, general and administrative expenses                          284,069           562,951          471,773         1,151,733
                                                                    -----------     -----------        ----------        ----------

           Income (loss) from operations                             (212,472)          232,197         (272,949)          516,708
                                                                    -----------     -----------        ----------        ----------
Non-operating income (expenses), net

       Interest expense                                               (57,466)         (146,155)        (121,445)         (331,260)
       Other                                                        1,889,227           (28,832)       1,915,783           (27,783)
                                                                    -----------     -----------        ----------        ----------
           Total non-operating income (expenses), net               1,831,761          (174,987)       1,794,338          (359,043)
                                                                    -----------     -----------        ----------        ----------

Net earnings before income taxes and
       extraordinary items                                          1,619,289            57,210        1,521,389           157,665

Income taxes                                                              -                 -                -                 -
                                                                    -----------     -----------        ----------        ----------

Net earnings before extraordinary item                              1,619,289            57,210        1,521,389           157,665

Extraordinary item

       Forgiveness of debt                                                -             150,200              -             150,200
                                                                    -----------     -----------        ----------        ----------

Net earnings                                                       $1,619,289         $ 207,410       $1,521,389         $ 307,865
                                                                    ===========     ===========       ==========         =========
Basic earnings per share

       Net earnings before extraordinary item                      $     0.51              0.01       $     0.47         $    0.03
       Extraordinary item                                                  -               0.06               -               0.06
                                                                    -----------     -----------        ----------        ---------
       Net earnings                                                $     0.51         $    0.07       $     0.47              0.09
                                                                    ===========     ===========       ==========         =========

Weighted average shares outstanding                                 2,456,990         2,456,990        2,456,990         2,456,990
                                                                    ===========     ===========       ==========         =========
Diluted earnings per share

       Net earnings before extraordinary item                      $     0.24         $    -          $     0.23         $    0.02
       Extraordinary item                                                  -               0.03               -               0.03
                                                                    -----------     -----------        ----------        ----------
       Net earnings                                                $     0.24              0.03       $     0.23         $    0.05
                                                                    ===========     ===========       ==========         =========

Weighted average shares outstanding                                 5,095,721         5,006,822        5,095,721         5,006,822
                                                                    ===========     ===========       ==========         =========
</TABLE>

See accompanying notes to condensed financial statements


                                            3
<PAGE>

                           CRAGAR INDUSTRIES, INC.
                      Condensed Statements of Cash Flows
                   Six Months Ended June 30, 2000 and 1999
                                (unaudited)
<TABLE>
<CAPTION>
                                                                                                           Six Months Ended
                                                                                                                June 30,
                                                                                                   --------------------------------
                                                                                                          2000             1999
                                                                                                   ---------------    -------------
<S>                                                                                                 <C>                <C>
Cash flows from operating activities
       Net earnings                                                                                 $ 1,521,389        $    307,865
       Adjustments to reconcile net earnings to net cash
             provided by (used in) operating activities:

       Provision for (write-off of) doubtful accounts                                                   (16,741)             46,434
       Reduction in (increase in) provision for obsolete
             and slow moving inventory                                                               (1,085,368)           (347,950)
       Depreciation and amortization of property and equipment                                           35,500             146,623
       Gain on sale of property and equipment                                                          (100,438)
       Gain on sale economic rights to certain investment assets                                     (1,824,073)
       Increase (decrease) in cash resulting from changes in:

             Accounts receivable                                                                        786,856            (911,218)
             Inventory                                                                                1,575,795           1,496,303
             Prepaid expenses                                                                           (77,469)           (184,107)
             Accounts payable and accrued expenses                                                     (320,508)           (146,526)
             Accrued interest                                                                            (4,364)              5,577
                                                                                                   ---------------    -------------
                   Net cash provided by (used in) operating activities                                  490,579             413,001
                                                                                                   ---------------    -------------

Cash flows from investing activities
       Purchases in property and equipment                                                                  -               (35,690)
       Purchases in investments                                                                      (2,133,975)                -
       Dispositions of property and equipment                                                             2,580                 -
       Dispositions of economic rights to certain investment assets                                   2,742,980                 -
                                                                                                   ---------------    -------------
                   Net cash provided by (used in) investing activities                                  611,585             (35,690)
                                                                                                   ---------------    -------------

Cash flows from financing activities

       Net borrowings (repayments) on bank line of credit                                              (867,907)           (512,111)
       Proceeds from long-term debt                                                                         -               260,000
       Repayments of long-term debt                                                                         -              (125,200)
                                                                                                   ---------------    -------------
                   Net cash provided by (used in) financing activities                                 (867,907)           (377,311)
                                                                                                   ---------------    -------------

                   Net increase (decrease) in cash and cash equivalents                                 234,257                 -

Cash and cash equivalents at beginning of period                                                          1,387                 -
                                                                                                   ---------------    -------------

Cash and cash equivalents at end of period                                                          $   235,644        $        -
                                                                                                   ===============    =============

Supplemental disclosure of cash flow information:

       Cash paid for interest                                                                       $   125,809        $    325,683
                                                                                                   ===============    =============
</TABLE>

See accompanying notes to condensed financial statements


                                                                     4



<PAGE>

                                                 CRAGAR INDUSTRIES, INC.
                                         NOTES TO CONDENSED FINANCIAL STATEMENTS
                                              SIX MONTHS ENDED JUNE 30, 2000
                                                      (Unaudited)

1.       Summary of Significant Accounting Policies
         Basis of Presentation:

         The interim financial data as of and for the three months and six
         months ended June 30, 2000, and 1999 is unaudited; however, in the
         opinion of the Company, the interim data includes all adjustments,
         consisting only of normal recurring adjustments, necessary for a fair
         presentation of the results for the interim periods.

         The year-end balance sheet information was derived from audited
         financial statements. These interim financial statements should be read
         in conjunction with the Company's audited financial statements.

2.       Inventories

         Inventories consist of the following:
<TABLE>
<CAPTION>
                                                                                               JUNE 30, 2000    DECEMBER 31, 1999
                                                                                               -------------    -----------------
                                                                                                (Unaudited)
<S>                                                                                            <C>               <C>
                  Raw materials                                                                $  357,212        $    682,854
                  Work in process                                                                      -              172,308
                  Finished Goods                                                                       -            1,077,844
                                                                                               -------------    -----------------
                                                                                                  357,212           1,933,006
                  Less allowance for obsolete and slow-moving inventory                           307,265           1,392,633
                                                                                               -------------    -----------------
                  Inventories, net                                                             $   49,947         $   540,373
                                                                                               =============    =================
</TABLE>


         The reduction in inventory was primarily the result of the Company's
         concentrated efforts to continue to sell off all its inventory as part
         of its change in business strategy.

3.       Basic and Diluted Earnings (Loss) per Share

         Basic and Diluted Earnings (loss) per share amounts are based
         on the weighted average number of common shares and common stock
         equivalents outstanding as reflected on Exhibit 11 to this Quarterly
         Report on Form 10-QSB.

4.       Preferred Stock and Warrants

         During the first quarter ended March 31, 1998, the Company issued
         22,500 shares of Series A Preferred Stock for $1,350,000 cash and the
         conversion of $900,000 in principal amount of investor notes payable.
         The Company also granted warrants valued at $229,333 to purchase
         333,333 shares of common stock at a price of $8.75 per share in
         connection with the preferred stock issuance. On April 20, 1998, the
         Company issued warrants to NationsCredit Commercial Funding valued at
         $21,960 to purchase 50,000 shares of common stock at a price of $5.25
         per share. On August 8, 1998, the Company agreed to grant warrants to
         certain individuals who provided bridge loans to the Company in the
         aggregate principal amount of $900,000 during December 1997 and January
         1998. For each $100,000 made available to the Company, the Company
         granted warrants to purchase 1,500 shares of common stock at an
         exercise price of $3.00 per share. The principal amounts of the loans
         were subsequently converted into 90,000 shares of Series A Preferred
         Stock. In addition, the Company agreed to grant warrants to certain
         individuals who continue to pledge assets to secure the Company's
         obligations under the Loan and Credit Agreement with NationsCredit
         Commercial Funding. The Company agreed to grant warrants to purchase
         7,000 shares for each $100,000 in value of the assets pledged on an
         annual basis, which warrants will be exercisable at an exercise price
         equal to the price

                                     5

<PAGE>

         of the Company's common stock on the date of grant. As of June 30, 1999
         the Company had granted warrants to purchase 73,500 shares of the
         Company's common stock at an exercise price equal to the fair market
         value on the date of grant. On May 21, 1999, the Company granted
         options to each of Sidney Dworkin, Donald McIntyre and Mark Schwartz,
         Directors of the Company, to purchase 2,000 shares of common
         stock at an exercise price of $3.75 per share, which was the fair
         market value on the date of grant. Also, on May 21, 1999, the Board of
         Directors of the Company passed a resolution whereby, it was agreed
         that, in lieu of cash payments for director fees, Sidney Dworkin,
         Donald McIntyre and Mark Schwartz, Directors of the Company, would each
         be granted options to purchase 4,000 shares of the Company's common
         stock, at an exercise price of $3.75 per share, which was the fair
         market value on the date of grant. Until the Company's cash position
         improves, the Board of Directors has agreed that for each board meeting
         an outside director attends, the Company will grant options to that
         director to purchase 2,000 shares of the Company's common stock
         exercisable at an exercise price equal to the price of the Company's
         common stock on the date of grant. During the second quarter ended June
         30, 2000, no warrants or options to purchase shares of common stock
         were exercised and no Series A Preferred Stock was converted to common
         stock. Dividends in arrears for outstanding Series A Preferred Stock at
         June 30, 2000 totaled $371,875, which are payable, at the discretion of
         the Company, in cash or additional shares of the Company's Series A
         Preferred Stock. See "Factors That May Affect Future Results and
         Financial Condition - Dependence on External Financing."

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     FORWARD-LOOKING STATEMENTS

         This report contains forward-looking statements. Additional written or
oral forward-looking statements may be made by the Company from time to time in
filings with the Securities Exchange Commission or otherwise. Such
forward-looking statements are within the meaning of that term in Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements may include, but are not
limited to, projections of revenues, income or loss, estimates of capital
expenditures, plans for future operations, products or services, and financing
needs or plans, as well as assumptions relating to the foregoing. The words
"believe," "expect," "anticipate," "estimate," "project," and similar
expressions identify forward-looking statements, which speak only as of the date
the statement was made. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements. The following
disclosures, as well as other statements in the Company's report, including
those contained below in this Item 2, "Management's Discussion and Analysis of
Financial Condition or Plan of Operation," and in the Notes to the Company's
Financial Statements, describe factors, among others, that could contribute to
or cause such differences. Specifically, management is uncertain whether the
anticipated cash flow from operations will be sufficient to meet the Company's
anticipated operations and working capital needs. Therefore, the Company is
seeking to secure additional working capital through the sale of equity or debt
securities. There can be no assurance that the Company's cash flow will be
sufficient to finance its operations as currently planned or that it will be
able to supplement its cash flow with additional financing. No assurance can be
given regarding the Company's ability to obtain such financing on favorable
terms, if at all. If the Company is unable to obtain additional financing, its
ability to meet its anticipated operating and working capital needs could be
materially and adversely affected. As a result of the Company's stockholders'
deficit and the uncertainty surrounding the Company's ability to meet its
anticipated operating and working capital needs, the independent auditors'
report on the Company's 2000 financial statements has been qualified for a going
concern.

     INTRODUCTION

         From the Company's inception in 1992 extending through the first nine
months of 1999 the Company designed, produced, and sold high-quality custom
vehicle wheels and wheel accessories. The Company sold its

                                       6

<PAGE>

wheel products in the automotive aftermarket through a national distribution
network of value-added resellers, including tire and automotive performance
warehouse distributors and retailers and mail order houses.

         In connection with a reassessment of its business strategy, the
Company considered combinations and strategic alliances with other companies
that could complement the Company's existing business, including outsourcing
its manufacturing and sales operations. In furtherance of this business
strategy, on September 30, 1999, the Company granted an exclusive worldwide
license to Weld Racing, Inc. ("Weld") to manufacture, sell, and distribute
its line of wheels with non-cast wrought aluminum alloy outer rims and
related accessories ("Wrought Wheel Business") in exchange for a royalty
based on sales of the licensed products and sold certain assets to Weld
related to its Wrought Wheel Business. The Company and Weld completed this
transaction in October 1999.

         On October 15, 1999, the Company entered into a similar transaction
pursuant to which the Company granted an exclusive worldwide license to
Carlisle Tire and Wheel Co. ("Carlisle") to manufacture, sell, and distribute
its line of wheels with steel outer rims and related accessories ("SOR Wheel
Business") in exchange for a royalty based on sales of the licensed products
and sold certain assets to Carlisle related to its SOR Wheel Business. The
Company and Carlisle completed this transaction in December 1999.

         Because the licensing of the Company's SOR Wheel Business and sale of
related assets to Carlisle, combined with the licensing of the Company's Wrought
Wheel Business and sales of related assets to Weld, may be considered a sale of
substantially all of the Company's assets, the proposed transaction with
Carlisle was submitted for approval by the Company's shareholders in accordance
with Delaware law at a Special Meeting of Shareholders held on December 22,
1999. The proposed transaction was approved by a shareholder vote with over 67%
of the Company's shareholders voting in favor of the proposed transaction.

         With the transactions with Weld and Carlisle completed, the Company
will no longer engage in the manufacture, marketing, sale or distribution of
any products related to its Wrought Wheel Business and SOR Wheel Business. In
general, the outsourcing of the manufacturing, marketing, sales and
distribution operations with respect to the licensed products, together with
the sale of the related assets, will result in a substantial decrease in the
Company's revenues and related operating and marketing costs. The decrease in
revenues will be replaced by a stream of royalty payments generated by the
net sales of the licensed products by the Company's licensing partners. The
Company will rely on Weld's and Carlisle's greater financial, operational and
distribution capabilities to increase net sales of the licensed products and
generate a stream of revenues in the form of quarterly royalty payments. In
addition, the Company is entitled to royalties based on the net sales of any
new products developed by Carlisle related to the SOR Wheel Business under
the CRAGAR brand name and on net sales of any new products developed by Weld
related to the Wrought Wheel Business under the CRAGAR brand name. Because
the licensing partners' primary fiduciary obligation is to their shareholders
rather than the Company's shareholders, they may make decisions or take steps
that may result in lower royalty payments or could adversely affect the
CRAGAR brand name. See "Risk Factors - Dependence on Third Parties to
Generate Royalties."

         As part of the Company's new business strategy, the Company also
intends to pursue licensing opportunities for the Company's remaining line of
one-piece aluminum cast wheels and other aftermarket performance automotive
products through the utilization of the CRAGAR brand name.

RECENT DEVELOPMENTS

     During the fiscal quarter ended December 31, 1999, the Company completed a
Stock Purchase Agreement with an individual investor of Wrenchead.com, Inc. to
exchange $150,000 in cash for 240,000 shares of common stock of Wrenchead.com,
Inc. ("Wrenchead"). Wrenchead.com is a leading provider of e-commerce tools for
both Business-to-Consumer and Business-to-Business for the automotive
aftermarket. Wrenchead.com sells millions of brand name auto and truck parts,
accessories, performance products and consumer items. Wrenchead.com
(www.wrenchead.com) also services "do-it-yourselfers" and professional


                                       7
<PAGE>

mechanics with installation, maintenance and repair expertise. Wrenchead is
headquartered in White Plains, N.Y. Lead investors include Polaris Venture
Partners, SFX Entertainment and CBS.

     During the fiscal quarter ended December 31, 1999, the Company also
entered into a Stock Option Agreement with an individual investor of
Wrenchead to exchange $300,000 in cash for an irrevocable option to purchase
315,000 shares of Wrenchead's common stock and 312,500 shares of Wrenchead's
Series A Preferred Stock for $8.08 per share ($5,070,000 in cash, less the
$300,000 option premium) and 75,000 shares of common stock of the Company.
The option was exercised on April 27, 2000. During the first quarter ended
March 31, 2000, the Stock Option Agreement was amended, with the Company
assigning its rights to purchase a specified number of shares in Wrenchead to
certain other investors in Wrenchead. For $204,000 in cash, the Company
assigned to certain investors its irrevocable option to purchase 214,602
shares of Wrenchead's common stock and 212,898 shares of Wrenchead's Series A
Preferred Stock, leaving the Company an irrevocable option to purchase
100,398 shares of Wrenchead's common stock and 99,602 shares of Wrenchead's
Series A Preferred Stock for $8.56 per share ($1,712,000 in cash, less the
$96,000 paid with the option). The difference in the option price, or
$204,000, was repaid to the Company during February 2000. This transaction
was completed during the fiscal quarter ended June 30, 2000.

     During the fiscal quarter ended December 31, 1999, the Company entered
into a Sales Agreement with the same individual investor pursuant to which
the Company agreed to pay $363,300 in cash in exchange for 45,000 shares of
Wrenchead common stock. This transaction closed on April 27, 2000. As a
result of these transactions, the Company owns 385,398 shares of Wrenchead
common stock and 99,602 shares of Wrenchead Series A Preferred Stock. This
transaction was completed during the fiscal quarter ended June 30, 2000.

     During the fiscal quarter ended June 30, 2000, the Company formed a
limited partnership to raise the funds necessary to complete the two
Wrenchead transactions. The Company is the general partner of the limited
partnership. As of June 30, 2000, the limited partnership had raised
$2,705,000 which was primarily used to acquire the economic rights to 180,333
shares of Wrenchead common stock owned by the Company.

     During the fiscal quarter ended June 30, 2000, the Company sold all of
its remaining one-piece cast aluminum wheels to PDK, Inc. To date, the
Company has not entered into a licensing agreement involving its one-piece
cast aluminum wheels and related accessories. The Company is still looking
into potential license partners.

RESULTS OF OPERATIONS

         The following table sets forth various items as a percentage of net
sales revenue for the three month and six month periods ended June 30, 2000 and
June 30, 1999:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED JUNE 30,                  SIX MONTHS ENDED JUNE 30,
                                          --------------------------                   -------------------------
<S>                                            <C>       <C>                               <C>      <C>
                                                 2000     1999                              2000     1999
                                                 ----     ----                              ----     ----
     Total revenues                             100.0%   100.0%                            100.0%   100.0%
     Cost of goods sold                          80.4     81.1                              75.9     80.1
                                                 ----     ----                              ----     ----
     Gross profit                                19.6     18.9                              24.1     19.9
     SG&A                                        77.7     13.4                              57.2     13.7
                                                 ----     ----                              ----     ----
     Income (loss) from operations              (58.1)     5.5                             (33.1)     6.2
     Non-operating income (expense), net        500.8     (4.2)                            217.5     (4.3)
     Income taxes                                  -        -                                 -        -
     Extraordinary gain                            -       3.6                                -       1.8
                                                -----    -----                             ------    -----
     Net earnings (loss)                        442.7%     4.9%                            184.4%     3.7%
                                                =====    ======                            ======    =====
</TABLE>

                                       8
<PAGE>


COMPARISON OF QUARTER ENDED JUNE 30, 2000 AND QUARTER ENDED JUNE 30, 1999

         The comparison of the Company's financial results for the fiscal
quarter ended June 30, 2000 and 1999 set forth below has been significantly
affected by the Company's significant change in business strategy in the
fourth quarter of 1999. As a result of this change in strategy, which
contemplates royalties from net sales of CRAGAR brand products from its
licensing partners as its primary source of revenue, the Company experienced
a dramatic reduction in revenues and related costs and expenses between the
periods.

         Total revenues consist of gross sales less discounts, returns and
allowances plus royalties on sale of licensed products. Net sales for the
quarter ended June 30, 2000 were $229,186 compared to $4,203,093 during the
quarter ended June 30, 1999, representing a 94.5% decrease in sales. Net sales
for the quarter ended June 30, 2000, consisted of sales of remaining inventory
not as part of the Weld and Carlisle transactions.

         The decrease in net sales was primarily attributable to the Company
no longer actively manufacturing and distributing wheels. The Company does
not anticipate significant sales of inventory in subsequent periods. The
decrease in net sales was partially offset by royalty income of $136,582
earned under the Weld and Carlisle licensing agreements. Discounts, returns
and allowances decreased by 100% between the quarter ended June 30, 2000 and
the quarter ended June 30, 1999. The decrease in discounts, returns and
allowances was attributable to the Company's decision to no longer
manufacture and distribute wheels. All anticipated returns, discounts and
allowances related to the sale of the remaining inventory had been reserved
for as of December 31, 1999.

         Gross profit is determined by subtracting cost of goods sold from net
sales. Cost of goods sold consists primarily of the costs of labor, aluminum,
steel, raw materials, overhead, and material processing used in the production
of the Company's products, as well as the freight costs of shipping product to
the Company's customers. Gross profit for the quarter ended June 30, 2000 was
$71,597 compared to $795,148 for the quarter ended June 30, 1999. The decrease
was primarily attributable to the Company's change in business strategy. The
Company believes that it set aside adequate reserves as of December 31, 1999 to
account for any pricing discounts necessary to sell the remaining inventory at
current market conditions.

         Selling, general, and administrative ("SG&A") expenses consist
primarily of commissions, marketing expenses, promotional programs, salaries
and wages, product development expenses, office expenses, accounting and
legal expenses, bad debt reserves, and general overhead. These expenses for
the second quarter ended June 30, 2000 were $284,069 compared to $562,951 for
the quarter ended June 30, 1999, a 49.5% decrease. This decrease was due
primarily to the Company's change in business strategy during the quarter
ended December 31, 1999, which resulted in significant reductions in its SG&A
expenses, primarily related to sales, marketing and personnel.

         Non-operating income (expense), net, for the second quarter of 2000,
was $1,831,761 compared to net expense of $174,987 for the second quarter of
1999. The increase of $2,006,748 was primarily attributable to the gain
realized on the sale of the economic rights to 180,333 shares of Wrenchead
common stock. See "Management's Discussion and Analysis or Plan of Operation
- Recent Developments."

         Because of  carry-forward  losses from previous  years,  the Company
had no income tax provision in the second quarter of 2000 or 1999.

         Net earnings for the second quarter ended June 30, 2000 were
$1,619,289 compared to net earnings of $207,410 for the second quarter ended
June 30, 1999. Excluding the extraordinary gain of $150,200, resulting from
the forgiveness of debt by certain material and media vendors, the Company
had net earnings for the three months ended June 30, 1999 of $57,210. Basic
earnings per share for the second quarter ended June 30, 2000 was $.66
compared to basic earnings per share of $.07 for the second quarter ended
June 30, 1999. Diluted earnings per share for the three months ended June 30,
2000 were $.32 compared to diluted earnings per share of $.03 for the same
three month period in 1999. See Exhibit 11 to the Quarterly Report on Form
10-QSB.

                                9

<PAGE>

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND SIX MONTHS ENDED JUNE 30, 1999

         The comparison of the Company's financial results for the six months
ended June 30, 2000 and 1999 set forth below has been significantly affected
by the Company's significant change in business strategy in the fourth
quarter of 1999. As a result of this change in strategy, which contemplates
royalties from net sales of CRAGAR brand products from its licensing partners
as its primary source of revenue, the Company experienced a dramatic
reduction in revenues and related costs and expenses between the two periods.

         Total revenues consist of gross sales less discounts, returns and
allowances plus royalties on sale of licensed products. Net sales for the six
months ended June 30, 2000 were $545,537 compared to $8,389,856 during the
six months ended June 30, 1999, representing a 93.5% decrease in sales. Net
sales for the six months ended June 30, 2000, consisted of sales of remaining
inventory not as part of the Weld and Carlisle transactions. The decrease in
net sales was primarily attributable to the Company no longer actively
manufacturing and distributing wheels. The Company does not anticipate
significant sales of inventory in subsequent periods.

         The decrease in net sales was partially offset by royalty income of
$279,509 earned under the Weld and Carlisle licensing agreements. Discounts,
returns and allowances decreased by 100% between the six months ended June
30, 2000 and the six months ended June 30, 1999. The decrease in discounts,
returns and allowances was attributable to the Company's decision to no
longer manufacture and distribute wheels. All anticipated returns, discounts
and allowances related to the sale of the remaining inventory had been
reserved for as of December 31, 1999.

         Gross profit is determined by subtracting cost of goods sold from net
sales. Cost of goods sold consists primarily of the costs of labor, aluminum,
steel, raw materials, overhead, and material processing used in the production
of the Company's products, as well as the freight costs of shipping product to
the Company's customers. Gross profit for the six months ended June 30, 2000 was
$198,824 compared to $1,668,441 for the six months ended June 30, 1999. The
decrease was primarily attributable to the Company's change in business
strategy. The Company believes that it set aside adequate reserves as of
December 31, 1999 to account for any pricing discounts necessary to sell the
remaining inventory at current market conditions.

         Selling, general, and administrative ("SG&A") expenses consist
primarily of commissions, marketing expenses, promotional programs, salaries
and wages, product development expenses, office expenses, accounting and
legal expenses, bad debt reserves, and general overhead. These expenses for
the six months ended June 30, 2000 were $471,773 compared to $1,151,733 for
the six months ended June 30, 1999. This decrease of $679,960, or 59.0%, was
due primarily to the Company's change in business strategy during the six
months ended December 31, 1999, which resulted in significant reductions in
its SG&A expenses, primarily related to sales, marketing and personnel.

         Non-operating income (expense), net, for the six months ended June 30,
2000 was $1,794,338 compared to net expense of $359,043 for the same period in
1999. The increase of $2,153,381 was primarily attributable to the gain
realized on the sale of the economic rights to 180,333 shares of Wrenchead
common stock. See "Management's Discussion and Analysis or Plan of Operation -
Recent Developments."

         Because of carry-forward losses from previous years, the Company had no
income tax provision in the six months ended June 30, 2000 or 1999.

         Net earnings for the six months ended June 30, 2000 were $1,521,389
compared to net earnings of $307,865 for the six months ended June 30, 1999.
Excluding the extraordinary gain of $150,200, resulting from the forgiveness
of debt by certain material and media vendors, the Company had net earnings
for the six months ended June 30, 1999 of $57,210. During the six months
ended June 30, 2000, substantially all of the net earnings were attributable
to the sale of assets and economic rights to 180,333 shares of Wrenchead
stock which are not likely to occur in future periods. Basic earnings per
share for the six months ended June 30, 2000 was $.62 compared to basic
earnings per share of $.09 for the six months ended June 30, 1999. Diluted
earnings per share for the six months ended June 30, 2000 was $.30 compared
to diluted earnings per share of $.05 for the same six month period in 1999.
See Exhibit 11 to the Quarterly Report on Form 10-QSB.

                                 10
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     On April 20, 1998, the Company secured a credit facility (the "NCFC
Credit Facility") with NationsCredit Commercial Funding Corporation ("NCFC").
The terms of the NCFC Credit Facility specify a maximum combined term loan
and revolving loan totaling $8.5 million at an interest rate of 1.25% above
the prime rate. The NCFC Credit Facility is secured by substantially all of
the Company's assets and certain pledged assets from three investors and
expires on April 19, 2002. As of June 30, 2000, the outstanding balance under
the NCFC Credit Facility was approximately $1,463,000 and the Company had no
excess availability. The NCFC Credit Facility contains no financial
performance covenants and requires prior approval rights to any declarations
of cash dividend payments.

     At June 30, 2000, the Company had an accumulated deficit of $14,869,163.
For the six months ended June 30, 2000, the Company's operating activities
provided $490,579 of cash, which was primarily attributable to the Company's
net earnings for the period and the sale of inventory. During the six months
ended June 30, 2000, the Company's investing activities provided $611,585 of
cash. The increase in cash from investing activities was primarily
attributable to the proceeds received on the sale of the economic rights to a
portion of the shares of Wrenchead stock owned by the Company. During the six
months ended June 30, 2000, the Company's financing activities used $867,907
of cash. The decrease in cash from financing activities was primarily due to
a net decrease in net borrowings under the revolving line of the NCFC Credit
Facility.

     The Company does not anticipate any major capital budget expenditures in
2000. In addition, the Company does not believe its operating activities will
generate sufficient cash flow to meet its operating cash flow requirements
and other current obligations, including the pay-off of the NCFC Credit
Facility as the remaining inventory and equipment are sold and accounts
receivable are collected. Consequently, the Company will be required to raise
additional funds from equity or debt financings in order to continue its
operations. No assurance can be given that such additional financing will be
available on terms acceptable to the Company, if at all.

ACCOUNTING MATTERS

         In February  1998,  the Financial  Accounting  Standards  Board
issued  Statement of Financial  Accounting  Standards No. 132, "Employer's
Disclosures  about Pensions and Other  Postretirement  Benefits" (SFAS No.
132) which became effective for the Company on January  1,  1999.  SFAS No.
132  establishes  standards  for the  information  that  public  enterprises
report in annual  financial statements. The adoption of SFAS No. 132 did not
have a material impact on the Company.

         In June 1998,  the  Financial  Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No. 133, "Accounting for
Derivative  Instruments and Hedging Activities" (SFAS No. 133) which became
effective for the Company on July 1, 1999. The adoption of SFAS No. 133 did
not have a material impact on the Company.

SEASONALITY

         Historically, the Company has experienced higher revenue in the
first two quarters of the year than in the latter half of the year. The
Company believes that this results from seasonal buying patterns resulting,
in part, from an increased demand for certain automotive parts and
accessories and its ultimate customers having added liquidity from income tax
refunds during the first half of the year. The Company expects this
seasonality to have an effect on the revenue stream derived from sales of
CRAGAR brand products by the Company's license partners.

INFLATION

         Increases in inflation generally result in higher interest rates.
Higher interest rates on the Company's borrowings would decrease the
profitability of the Company. To date, general price inflation has not had a

                                 11

<PAGE>

significant impact on the Company's operations.

FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

         The Company's future operating results and financial condition are
dependent upon, among other things, the Company's ability to implement its
business strategy. Potential risks and uncertainties that could affect the
Company's profitability are set forth below.

HISTORY OF PREVIOUS LOSSES

         The Company was incorporated in December 1992 and has incurred
significant losses in each of its completed fiscal years. For the six months
ended June 20, 2000, however, the Company incurred net earnings of $1,521,389.
There can be no assurance that the Company will be profitable in the future. Net
sales for the year ended December 31, 1999 increased to $12,828,329 from
$12,081,884 for the year ended December 31, 1998. As a result of the Company's
change in business strategy, net sales for the six months ended June 30, 2000
decreased to $545,537 from $8,389,856 for the same period in 1999. As of June
30, 2000, the Company had cumulative losses of $14,869,163 and total
stockholders' deficit of $432,897.

DEPENDENCE ON EXTERNAL FINANCING

     On April 20, 1998, the Company executed the NCFC Credit Facility, a
portion of the proceeds of which were used to pay off the Company's previous
credit facility with Norwest Business Credit, Inc., which expired on April
15, 1998. The terms of this credit facility provide for a maximum combined
term loan and revolving loan totaling $8.5 million at an interest rate of
1.25% above the prime rate. As of June 30, 2000, the outstanding amount owed
by the Company under the NCFC Credit Facility was approximately $1,463,000
and had no excess availability. The NCFC Credit Facility is secured by
substantially all of the Company's assets and has a term of four years. In
addition, since the NCFC Credit Facility is collateralized by accounts
receivable, inventory and equipment, as those assets are converted to cash,
the credit facility will be paid down. There can be no assurance, however,
that the proceeds from the disposition of those assets will be sufficient to
pay-off the NCFC Credit Facility. As a result, the Company will be required to
raise additional funds through equity or debt financings to continue its
operations. No assurance can be given that additional financing will be
available on terms acceptable to the Company, if at all.

DEPENDENCE ON THIRD PARTIES TO GENERATE ROYALTIES

     As a result of the Company's change in business strategy, the Company's
revenues and operating results is substantially dependent on the efforts and
success of its third party licensing partners. Because the amount of
royalties payable to the Company are determined by the net sales of those
products by the Company's licensing partners, the Company's revenues are
subject to the abilities of its licensing partners to generate substantial
net sales and deliver a high-quality product on a timely basis to its
customers. In addition, because the primary fiduciary obligations of the
Company's licensing partners are to their shareholders rather than the
Company's shareholders, they may make decisions or take steps that would
result in lower royalty payments than would otherwise be the case. If either
licensing partner does not meet its obligations under its respective
licensing agreement, the Company's primary remedy is to terminate that
license agreement, which may be an effective remedy only if the Company can
identify and secure other capable licensees of the affected products.

                                12

<PAGE>

INABILITY TO SUPPORT MANUFACTURING, MARKETING, SALE AND DISTRIBUTION IF THIRD
PARTY TERMINATES THE LICENSE AGREEMENT

     If either licensing partner terminates its license agreement or the Company
terminates the license agreement for any reason, the Company will be forced to
incur the cost of manufacturing, marketing, selling and distributing the
licensed products without the financial resources and distribution capabilities
of its licensees. In the alternative, the Company would be forced to secure
another licensee capable of manufacturing, marketing, selling and distributing
the licensed products on behalf of the Company and paying any royalties based on
the net sales of those products. There can be no assurance that the Company
would be able to meet these obligations in the event that one or more of the
license agreements is terminated.

ROYALTY PAYMENTS WILL DECREASE AS A PERCENTAGE OF SALES AS ROYALTIES INCREASE

     The royalty structure negotiated by the Company with its current licensing
partners provides for a decrease in the applicable percentage of net sales that
determines royalty payments to the Company as net sales increase above certain
levels. The consequence of this structure is that the Company's ability to
realize the benefits of a substantial increase in sales with respect to any
group of its licensed products will be limited by the negotiated royalty fee
structure as net sales of the licensed products increase.

CHANGE IN BUSINESS STRATEGY MAY DEPRESS THE PRICE OF COMMON STOCK

     The completion of the sale and licensing of the Company's Wrought Wheel
and SOR Wheel businesses and any other related licensing arrangement the
Company may complete in the future represents a significant change in the
Company's business model. In general, the outsourcing of the manufacturing,
marketing, sales and distribution operations with respect to the licensed
products, together with the sale of the related assets, will result in a
substantial decrease in the Company's revenues and operating and marketing
costs. The Company anticipates that the decrease in revenues and operating
and marketing costs will be replaced, in part, by a stream of royalty
payments generated by the net sales of the licensed products by the Company's
licensing partners. As a result, the Company does not have a history of
financial results upon which shareholders can rely to make a determination
that the new business strategy will be successful. Given the uncertainty of
the consequences of this change in business strategy, as well as the
significant decrease in revenues expected to occur, there can be no assurance
that the change will result in a profitable stream of royalty payments. As a
result of this uncertainty, the price of the Company's common stock may be
adversely affected.

EXTENSION OF CRAGAR BRAND NAMES TO OTHER PRODUCTS MAY NOT BE SUCCESSFUL

     The Company's new business strategy contemplates the extension of the
CRAGAR brand names to new products developed by its licensees as well as to
non-wheel related products within the automotive aftermarket industry. The
Company regards this extension of its brand names to new products as a key
element of a strategy that is designed to increase net sales of CRAGAR brand
products to generate increased royalty revenues. There can be no assurance,
however, that either the Company or its licensees will be successful in
developing and marketing any new products under the CRAGAR brand names, or if
any new products are developed, that the net sales of these products will have a
positive impact on the Company's financial results.

NO DUTY TO DISTRIBUTE ROYALTY PAYMENTS TO ITS SHAREHOLDERS

     Any royalty payments made to the Company pursuant to the licensing
agreements initially will be used by the Company to increase its working capital
and reduce its debt. The Company has never paid any cash dividends on its common
stock and does not anticipate doing so in the foreseeable future. As a result,
shareholders should not anticipate that they will receive any distribution of
the royalties generated by the Company's licensing transactions.

                                  13

<PAGE>

DEPENDENCE ON KEY CUSTOMERS; LICENSEES ABILITY TO MARKET AND SELL TO EXISTING
AND NEW CUSTOMERS

     A limited number of customers have historically accounted for a substantial
portion of the Company's revenues in each year. Given the Company's change in
business strategy, the Company expects that its current licensing partners will
account for an even greater percentage of its revenues in the future. The
financial condition and success of its customers and the Company's ability to
obtain orders from new customers have been critical to the Company's success and
will be critical to the success of the Company's licensing partners. As a result
of its change in business strategy as described above, the Company expects that
its revenues will decline and that an increasing percentage of revenues will be
dependent on royalties from sales of CRAGAR products by Weld and Carlisle. There
can be no assurance that any of the licensees will be successful in their sales
and marketing efforts.

INVESTMENT IN WRENCHEAD MAY NOT BE PROFITABLE

     The Company has made a substantial investment in Wrenchead and has
increased that investment in 2000. There can be no assurance that the current
or future investment in Wrenchead will turn out to be profitable.

HIGHLY COMPETITIVE INDUSTRY

     The market for the Company's products is highly competitive. The Company
historically competed primarily on the basis of product selection (which
includes style and vehicle fit), timely availability of product for delivery,
quality, design innovation, price, payment terms, and service. The Company
anticipates that its licensing partners will compete on those same terms. The
Company believes that Weld and Carlisle have superior financial, operational and
distribution capabilities to compete effectively within the custom aftermarket
wheel industry. However, there can be no assurance that the Company's licensing
partners, Weld and Carlisle, will be successful in marketing custom aftermarket
wheels under the CRAGAR brand names. Increased competition could result in price
reductions (which may be in the form of rebates or allowances), reduced margins,
and loss of market share, all of which could have a material adverse effect on
the Company's licensing partners, possibly resulting in the reduction or
elimination of royalty payments due to the Company.

GENERAL ECONOMIC FACTORS

     The automobile aftermarket industry is directly impacted by certain
external factors, such as the general demand for aftermarket automotive parts,
prices for raw materials used in producing the Company's products, fluctuations
in discretionary consumer spending, and general economic conditions, including
employment levels, business conditions, interest rates, and tax rates. While the
Company believes that current economic conditions favor stability in the markets
in which its products are sold, various factors, including those listed above,
could lead to decreased sales and increased operating expenses. There can be no
assurance that various factors will not adversely affect the Company's licensing
partners' businesses in the future, causing a decrease

                                  14

<PAGE>

in royalty payments due the Company, or prevent the Company from successfully
implementing its business strategies.

NO ASSURANCE OF ADDITIONAL SUCCESSFUL ALLIANCES

     In furtherance of the the Company's change in business strategy and sale
of the Company's Wrought Wheel and SOR Wheel businesses, the Company
continues to consider alliances with other companies that could complement
the Company's new business strategy, including other licensing opportunities
involving one-piece cast aluminum wheels or other complementary automotive
aftermarket product lines where the Company can capitalize on the CRAGAR
brand name. There can be no assurance that suitable licensing candidates can
be identified, or that, if identified, adequate and acceptable licensing
terms will be available to the Company that would enable it to consummate
such transactions. Furthermore, even if the Company completes one or more
licensing agreements, there can be no assurance that the licensing partners
will be successful in manufacturing, marketing, selling and distributing the
licensed products.

     Moreover, any additional investment by the Company in Wrenchead or other
companies may result in a potentially dilutive issuance of equity securities, or
the incurrence of additional debt which could adversely affect the Company's
financial position. Alliances, whether licensing or direct investments in
companies, involve numerous risks, such as the diversion of the attention of the
Company's management from other business concerns and the entrance of the
Company into markets in which it has had no or only limited experience, both of
which could have a material adverse effect on the Company.

VARIABILITY IN OPERATING RESULTS; SEASONALITY

     The Company's results of operations have historically been subject to
substantial variations as a result of a number of factors. In particular, the
Company's operating results have varied due to the size and timing of customer
orders, delays in new product enhancements and new product introductions, vendor
quality control and delivery difficulties, market acceptance of new products,
product returns, product rebates and allowances, seasonality in product
purchases by distributors and end users, and pricing trends in the automotive
aftermarket industry in general and in the specific markets in which the Company
participates. Historically, the Company's net sales have been highest in the
first and second quarters of each year. Significant variability in orders during
any period has had an impact on the Company's cash flow or workflow. The Company
believes that any period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance. The Company expects that its licensing partners will be subject to
the same variations and industry seasonality as the Company has experienced in
the past. These variations may cause fluctuations in the sales of CRAGAR branded
products thereby causing fluctuations in the royalties due the Company.

CHANGING CUSTOMER TRENDS; NEED FOR PRODUCT DEVELOPMENT

     The Company's success will depend, in part, on the ability of its licensing
partners to correctly and consistently anticipate, gauge, and respond in a
timely manner to changing consumer preferences. There can be no assurance that
the Company's licensed products will continue to enjoy acceptance among
consumers or that any of the future CRAGAR branded products developed and
marketed by its licensing partners will achieve or maintain market acceptance.
Any misjudgment by the Company's licensing partners of the market for a
particular product or product extension, or their failure to correctly
anticipate changing consumer preferences, could have a material adverse effect
on their businesses, financial condition, and results of operations. Any
material adverse effect experienced by either of the Company's licensing
partners may have an adverse effect on the Company and its financial condition
and results of operations.

                                     15

<PAGE>

REGULATORY COMPLIANCE

     The Company historically has been subject to various federal and state
governmental regulations related to occupational safety and health, labor, and
wage practices as well as federal, state, and local governmental regulations
relating to the storage, discharge, handling, emission, generation, manufacture,
and disposal of toxic or other hazardous substances used to produce the
Company's products. The Company believes that it has been and is currently in
material compliance with such regulations. In the ordinary course of its
business, the Company used metals, oils, and similar materials, which were
stored on site. The waste created by use of these materials was transported
off-site on a regular basis by a state-registered waste hauler. Although the
Company is not aware of any material claim or investigation with respect to
these activities, there can be no assurance that such a claim may not arise in
the future or that the cost of complying with governmental regulations in the
future will not have a material adverse effect on the Company.

     The Company is subject to regulation as a publicly-traded company under the
Securities Exchange Act of 1934. In addition, as a consequence of the sale and
licensing of its Wrought Wheel and SOR Wheel businesses, which could be
considered a sale of substantially all of its assets, in exchange for the
receipt of a stream of royalty payments, the Company could face regulatory
issues under the Investment Company Act of 1940 if the royalty payments are
considered investment securities. If the Company is considered to be an
investment company under the 1940 Act, it would be required to register under
that Act as an investment company. As a registered investment company, the
Company would be subject to further regulatory oversight of the Division of
Investment Management of the Commission, and its activities would be subject to
substantial and costly regulation under the 1940 Act. The Company does not
believe that its activities will subject it to the 1940 Act and accordingly does
not intend to register as an investment company under the Act, although there
can be no assurance that such registration would not be required in the future.

RELIANCE ON INTELLECTUAL PROPERTY

     The Company owns the rights to certain trademarks and patents, relies on
trade secrets and proprietary information, technology, and know-how, and seeks
to protect this information through agreements with employees and vendors. There
can be no assurance that the Company's patents will preclude the Company's
competitors from designing competitive products, that proprietary information or
confidentiality agreements with licensees, employees, both current and former,
and others will not be breached, that the Company's patents will not be
infringed, that the Company would have adequate remedies for any breach or
infringement, or that the Company's trade secrets will not otherwise become
known to or independently developed by competitors.

CONTROL BY EXISTING STOCKHOLDERS

     The directors, officers, and principal stockholders of the Company
beneficially own approximately 51.5% of the Company's outstanding Common Stock.
As a result, these persons have a significant influence on the affairs and
management of the Company, as well as on all matters requiring stockholder
approval, including electing and removing members of the Company's Board of
Directors, causing the Company to engage in transactions with affiliated
entities, causing or restricting the sale or merger of the Company, and changing
the Company's dividend policy. Such concentration of ownership and control could
have the effect of delaying, deferring, or preventing a change in control of the
Company even when such a change of control would be in the best interest of the
Company's other stockholders.

EFFECT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK

     The Company's Amended and Restated Certificate of Incorporation authorizes
the Board of Directors of the Company to issue "blank check" preferred stock,
the relative rights, powers, preferences, limitations, and restrictions of which
may be fixed or altered from time to time by the Board of Directors.
Accordingly, the

                               16

<PAGE>

Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting, or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. In the first quarter of 1998, for example, The
Company issued 22,500 shares of its Series A Preferred Stock for
approximately $2,250,000 in additional capital, which, as of June 30, 2000,
could have been converted into approximately 792,620 shares of Common Stock
at the option of the holders of the Series A Preferred Stock. Additional
series of preferred stock could be issued, under certain circumstances, as a
method of discouraging, delaying, or preventing a change in control of the
Company that stockholders might consider to be in the Company's best
interests. There can be no assurance that the Company will not issue
additional shares of preferred stock in the future.

                      PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company is an unsecured creditor in the matter of in Re Super Shops,
Inc., et al., Case No. LA 97-46094-ER, a bankruptcy action filed by Super Shops,
Inc., previously the Company's primary customer. Because the Company is an
unsecured creditor in this matter, the amount and timing of the recovery, if
any, on its account receivable from Super Shops, Inc. is uncertain.

     The  Company  has filed a  complaint  in the  matter of Cragar
Industries,  Inc.  versus  Keystone  Automotive  Operations,  Inc.
("Keystone") in the Superior Court of Arizona,  County of Maricopa,  Case No.
CV99-21619,  seeking to recover in excess of $290,000 in past due amounts for
product purchased from the Company by Keystone.

     The Company has filed a complaint in the matter of Cragar Industries, Inc.
versus RELCO Corporation ("RELCO") in the United States District Court for the
District of Arizona, Case No. CIV00-0210, seeking to recover in excess of
$247,000 in past due amounts for product purchased from the Company by RELCO.

                                    17

<PAGE>

     The Company has filed a complaint  in the matter of Cragar  Industries,
Inc.  versus  Titan Wheel  International,  Inc. and Titan International,
Inc. ("Titan") in the United States District Court for the District of
Arizona,  Case No.  CIV99-0649,  seeking damages of more than  $2,250,000,
claiming  breach of contract,  breach of warranty,  and  conversion  arising
out of a supply  contract  with Titan's subsidiary Automotive Wheel, Inc. for
the delivery of automotive wheels to the Company.

     There are currently no other material pending proceedings to which the
Company is a party or to which any of its property is subject, although the
Company from time to time is involved in routine litigation incidental to the
conduct of its business.

         The Company currently maintains discontinued product liability
insurance, with limits of $1.0 million per occurrence and $2.0 million in the
aggregate per annum. However, such coverage is becoming increasingly expensive
and difficult to obtain. There can be no assurance that the Company will be
able to maintain adequate product liability insurance at commercially
reasonable rates or that the Company's insurance will be adequate to cover
future product liability claims. Any losses that the Company may suffer as a
result of claims in excess of the Company's coverage could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     The Company had dividends in arrears for outstanding Series A Preferred
Stock at June 30, 2000 totaling $371,875, which are payable, at the discretion
of the Company, in cash or additional shares of the Company's Series A Preferred
Stock.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Annual Meeting of Shareholders of the Company was held on May 15,
2000. The shareholders elected the following persons to serve for one-year terms
as directors of the Company (with votes cast for, against, or withheld):

<TABLE>
<CAPTION>
                                         VOTES FOR         VOTES AGAINST          VOTES WITHHELD
                                         ---------         -------------          --------------
<S>                                      <C>                   <C>                      <C>
Election of Directors
     Michael L. Hartzmark                2,057,355             1,200                    0
     Sidney Dworkin                      2,057,355             1,200                    0
     Mark Schwartz                       2,057,355             1,200                    0
     Donald E. McIntyre                  2,057,355             1,200                    0
     Michael Miller                      2,057,355             1,200                    0
</TABLE>

     In addition, the shareholders approved the amendment to the Company's
second amended and restated Certificate of Incorporation increasing the number
of authorized shares of common stock of the Company from 5,000,000 to 10,000,000
with 2,027,085 votes "For", 31,470 votes "Against", and zero votes withheld.

ITEM 5.  OTHER INFORMATION

         None
                                              18

<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

   (a) Exhibits
   EXHIBIT NO.               DESCRIPTION
   ------------              -----------
<S>                          <C>
     3.1                     Second Amended and Restated Certificate of
                             Incorporation of the Registrant filed with the State
                             of Delaware on October 1, 1996*
     3.2                     Amended and Restated Bylaws of the Registrant*
    10.1                     Stock Option Agreement
    10.2                     Sales Agreement
    10.3                     Amendment to Sales Agreement
    11                       Schedule of Computation of Earnings per Share
    27.1                     2000 Financial Data Schedule for the Three and Six Months Ended June 30, 2000

   (b)                       Reports on Form 8-K

                             None
</TABLE>
-----------------------------

* Incorporated by reference to the Company's Registration Statement on Form
  SB-2 (No. 333-13415).

                                  SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                             CRAGAR INDUSTRIES, INC.
<TABLE>
<CAPTION>
<S>                                                      <C>
Dated:  AUGUST 14, 2000                                  By: /s/MICHAEL L. HARTZMARK
        -------------------                                -------------------------
                                                         Michael L. Hartzmark
                                                         CEO

Dated:  AUGUST 14, 2000                                  By: /s/RICHARD P. FRANKE
        -------------------                                -------------------------
                                                         Richard P. Franke
                                                         Chief Financial Officer
                                                         (Principal Financial and Accounting Officer)
</TABLE>

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