<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, 1999

[ ]  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
     of incorporation or organization)                 Identification No.)

               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, 1999:  2,453,990.

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

<PAGE>
                        PART 1 - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           CRAGAR INDUSTRIES, INC.
                           CONDENSED BALANCE SHEETS
                     JUNE 30, 1999 AND DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                                               June 30,         December 31,
                                                                                1999                1998
                                                                           -------------       --------------
                                                                            (unaudited)
<S>                                                                         <C>                <C>
                  ASSETS
Current Assets:

   Cash and cash equivalents                                               $           -       $           -
   Accounts receivable, less allowance
    for doubtful accounts of $155,429
    as of 6/30/99 and $108,995 as of 12/31/98                                  3,744,061           2,879,277
   Inventories, net                                                            3,204,101           4,352,453
   Prepaid expenses                                                              384,124             200,017
                                                                          --------------       -------------
     Total current assets                                                      7,332,286           7,431,747

Property and equipment, net                                                      543,600             654,534
Other assets, net                                                                 21,320              21,320
                                                                          --------------       -------------

                                                                           $   7,897,206       $   8,107,601
                                                                          --------------       -------------
                                                                          --------------       -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

   Accounts payable                                                        $   1,795,308       $   2,376,112
   Accrued expenses                                                            1,466,922           1,032,644
   Accrued interest                                                               80,255              74,678
   Line of credit                                                              1,892,850           2,530,161
   Long-term debt, current installments                                          250,400             250,400
                                                                          --------------       -------------
     Total current liabilities                                                 5,485,735           6,263,995

Line of credit, excluding current installments                                 3,415,533           3,290,333
Long-term debt, excluding current installments                                   844,467             709,667
                                                                          --------------       -------------

Total liabilities                                                              9,745,735          10,263,995
                                                                          --------------       -------------

Stockholders' equity:

   Preferred stock, par value $.01;
    authorized 200,000 shares 22,500
    shares issued and outstanding                                                   225                 225
   Additional paid-in capital - preferred                                     1,950,367           2,090,513
   Common stock, par value $.01; authorized
    5,000,000 shares 2,453,990 shares issued
    and outstanding                                                              24,540              24,540
   Additional paid-in capital - common                                       12,097,115          12,097,115
   Accumulated deficit                                                      (15,920,776)        (16,368,787)
                                                                          --------------       -------------
     Total stockholders' equity (deficit)                                  $ (1,848,529)         (2,156,394)
                                                                          --------------       -------------

                                                                           $  7,897,206        $  8,107,601
                                                                          --------------       -------------
                                                                          --------------       -------------
</TABLE>
See accompanying notes to condensed financial statements

                                       2

<PAGE>

                           CRAGAR INDUSTRIES, INC.
                     CONDENSED STATEMENTS OF OPERATIONS
         THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                (unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended June 30,            Six Months Ended June 30,
                                                          -----------------------------         -----------------------------
                                                             1999               1998               1999              1998
                                                          ----------         ----------         ----------         ----------
<S>                                                       <C>                <C>                <C>                <C>
Net Sales                                                 $4,203,093         $3,613,535         $8,389,856         $6,728,732
Cost of goods sold                                         3,407,945          2,946,759          6,721,415          5,434,226
                                                          ----------         ----------         ----------         ----------
  Gross profit                                               795,148            666,776          1,668,441          1,294,506

Selling, general and administrative expenses                 562,951          1,032,265          1,151,733          1,858,696
                                                          ----------         ----------         ----------         ----------
  Income (loss) from operations                              232,197           (365,489)           516,708           (564,190)
                                                          ----------         ----------         ----------         ----------

Non-operating (income) expenses, net
  Interest expense                                           146,155            159,269            331,260            331,477
  Other, net                                                  28,832             51,162             27,783             30,855
                                                          ----------         ----------         ----------         ----------
     Total non-operating expenses                            174,987            210,431            359,043            362,332
                                                          ----------         ----------         ----------         ----------

Income (loss) before income taxes
 and extraordinary items                                      57,210           (575,920)           157,665           (926,522)

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

Income (loss) before extraordinary item                       57,210           (575,920)           157,665           (926,522)

Extraordinary item
  Gain on forgiveness of debt                                150,200                  -            150,200                  -
                                                          ----------         ----------         ----------         ----------

Net income (loss)                                         $  207,410         $ (575,920)        $  307,865         $ (926,522)
                                                          ----------         ----------         ----------         ----------
                                                          ----------         ----------         ----------         ----------

Basic earnings (loss) per share
  Income (loss) before extraordinary item                 $     0.01         $    (0.25)        $     0.03         $    (0.40)
  Extraordinary item                                            0.06                  -               0.06                  -
                                                          ----------         ----------         ----------         ----------
  Net income (loss)                                       $     0.07         $    (0.25)        $     0.09         $    (0.40)
                                                          ----------         ----------         ----------         ----------
                                                          ----------         ----------         ----------         ----------

Weighted average shares outstanding - basic                2,453,990          2,453,990          2,453,990          2,453,990
                                                          ----------         ----------         ----------         ----------
                                                          ----------         ----------         ----------         ----------

Diluted earnings (loss) per share
  Income (loss) before extraordinary item                 $    0.00          $    (0.25)        $     0.02     $        (0.40)
  Extraordinary item                                           0.03                   -               0.03                  -
                                                          ----------         ----------         ----------         ----------
  Net income (loss)                                       $    0.03          $    (0.25)        $     0.05     $        (0.40)
                                                          ----------         ----------         ----------         ----------
                                                          ----------         ----------         ----------         ----------

Weighted average shares outstanding - diluted             5,006,822           2,453,990          5,006,822          2,453,990
                                                          ----------         ----------         ----------         ----------
                                                          ----------         ----------         ----------         ----------
</TABLE>

See accompanying notes to condensed financial statements


                                       3

<PAGE>

                            CRAGAR INDUSTRIES, INC.
                      CONDENSED STATEMENTS OF CASH FLOWS
                    SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                 (unaudited)

<TABLE>
<CAPTION>
                                                                                              Six Months Ended June 30,
                                                                                          ---------------------------------
                                                                                             1999                 1998
                                                                                          ----------         --------------
<S>                                                                                       <C>                <C>
Cash flows from operating activities
  Net earnings (loss)                                                                     $  307,865         $    (926,522)
  Adjustments to reconcile net earnings
   (loss) to net cash used in operating
   activities:
  Provision for (write-off of) doubtful accounts                                              46,434                97,183
  Reduction in provision for obsolete and slow
   moving inventory                                                                         (347,950)
  Depreciation and amortization of property and equipment                                    146,623               145,572
  Amortization of other assets                                                                     -                30,833
  Amortization of warrants issued with line of credit                                              -                21,900
  Increase (decrease) in cash resulting from changes in:
     Accounts receivable                                                                    (911,218)             (772,225)
     Inventory                                                                             1,496,303              (185,601)
     Prepaid expenses                                                                       (184,107)             (179,765)
     Other assets                                                                                  -                12,940
     Accounts payable and accrued expenses                                                  (146,526)             (244,734)
     Accrued interest                                                                          5,577               (61,595)
                                                                                          ----------         --------------
        Net cash povided by (used in) operating activities                                   413,001            (2,062,014)
                                                                                          ----------         --------------

Cash flows from investing activities
  Purchases of property and equipment                                                       (35,690)              (137,205)
                                                                                          ----------         --------------
  Net cash used in investing activities                                                     (35,690)              (137,205)
                                                                                          ----------         --------------

Cash flows from financing activities
  Proceeds from sale of preferred stock                                                           -              1,650,000
  Net borrowings (repayments) on Norwest line of credit                                           -             (5,518,544)
  Net borrowings (repayments) on NCFC line of credit                                       (512,111)             5,102,785
  Proceeds from long-term debt                                                              260,000              1,127,000
  Repayments of long-term debt                                                             (125,200)               (41,733)
  Repayments of capital lease obligations                                                         -               (101,716)
                                                                                          ----------         --------------
        Net cash provided by (used in) financing activities                                (377,311)             2,217,792
                                                                                          ----------         --------------

        Net increase (decrease) in cash and equivalents                                           -                 18,573

Cash and cash equivalents at beginning of period                                                  -                 16,322
                                                                                          ----------         --------------

Cash and cash equivalents at end of period                                                $       -          $      34,895
                                                                                          ----------         --------------
                                                                                          ----------         --------------

Supplemental disclosure of cash flow information:
  Cash paid for interest                                                                 $  325,683          $     393,072
                                                                                          ----------         --------------
                                                                                          ----------         --------------

  Conversion of investor notes payable to preferred stock                                $        -          $     600,000
                                                                                          ----------         --------------
                                                                                          ----------         --------------
</TABLE>

See accompanying notes to condensed financial information

                                       4

<PAGE>

                             CRAGAR INDUSTRIES, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                        SIX MONTHS ENDED JUNE 30, 1999
                                    (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, 1999, and 1998 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, 1999     December 31, 1998
                                                -------------     -----------------
                                                (Unaudited)
     <S>                                        <C>               <C>
     Raw materials                                $1,873,543          $2,612,857
     Work in process                                 327,146             161,164
     Finished Goods                                1,654,710           2,577,681
                                                  ----------          ----------
                                                   3,855,399           5,351,702
     Less allowance for obsolete
       and slow-moving inventory                     651,298             999,249
                                                  ----------          ----------
     Inventories, net                             $3,204,101          $4,352,453
                                                  ----------          ----------
                                                  ----------          ----------
</TABLE>

    The reduction in inventory was primarily the result of the Company's
    concentrated efforts to reduce its inventories of obsolete and
    slow-moving products and better correlation of inventory levels with
    anticipated sales to improve inventory turnover.

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.  Other Related Reserves and Allowances

<TABLE>
<CAPTION>
                                          June 30, 1999    December 31, 1998
                                          -------------    -----------------
                                            Unaudited
    <S>                                   <C>              <C>
    Stock adjustments and returns            $254,831          $129,849
    Rebates reserve                            11,458             5,869
    Warranty reserve                          423,140           397,991
    Other reserves                             33,215            72,957
</TABLE>

5.  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

                                      5

<PAGE>

    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 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 (or 2,000 per meeting for the February and May 1999
    board meetings) 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, 1999, 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, 1999 totaled $214,375, 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.

INTRODUCTION

     CRAGAR (the "Company") designs, produces, and sells high-quality custom
vehicle wheels and wheel accessories.  The Company possesses one of the most
widely recognized brand names in the automotive aftermarket industry.  The
Company markets a wide selection of custom wheels and components that are


                                       6


<PAGE>

designed to appeal to automotive enthusiasts who desire to modify the
styling, design, or performance of their cars, trucks, or vans.  CRAGAR sells
its 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.

     The Company was formed in 1992 to acquire certain assets, including the
accounts receivable, inventory, property, equipment, patents, trademarks, and
copyrights in a leveraged buyout from the Wheel and Tire Division of Mr.
Gasket Company, Inc., which had filed for reorganization.  The fair value of
the net assets acquired exceeded the final purchase price, and, accordingly,
the fair value of the property and equipment, patents, trademarks, and
copyrights acquired was reduced to zero.  The remaining balance of $3,687,341
was classified as excess of fair value of assets acquired over cost (commonly
referred to as negative goodwill) and was amortized to income over five years
using the straight-line method ($737,468 per annum through December 31,
1998).  As of the year ended December 31, 1998, the balance of the excess of
fair value of assets acquired over cost was zero.

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, 1999
and June 30, 1998:

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED           SIX MONTHS ENDED
                                                 JUNE 30,                    JUNE 30,
                                          -------------------         -------------------
                                           1999         1998          1999         1998
                                          -----         -----         -----        -----
<S>                                       <C>           <C>           <C>          <C>
Net sales                                 100.0%        100.0%        100.0%       100.0%
Cost of goods sold                         81.1          81.5          80.1         80.8
                                          -----         -----         -----        -----
Gross profit                               18.9          18.5          19.9         19.2
SG&A                                       13.4          28.6          13.7         27.6
Amortization of negative goodwill           --            --           --           --
                                          -----         -----         -----        -----
Income (loss) from operations               5.5         (10.1)          6.2         (8.4)
Non-operating expense, net                 (4.2)         (5.8)         (4.3)        (5.4)
Income taxes                                --            --           --           --
                                          -----         -----         -----        -----
Extraordinary gain                          3.6           --            1.8         --
                                          -----         -----         -----        -----
Net earnings (loss)                         4.9%        (15.9)%         3.7%       (13.8)%
                                          -----         -----         -----        -----
                                          -----         -----         -----        -----
</TABLE>

COMPARISON OF QUARTER ENDED JUNE 30, 1999 AND QUARTER ENDED JUNE 30, 1998

     Net sales consist of gross sales less discounts, returns and allowances.
Net sales for the quarter ended June 30, 1999 were $4,203,093 compared to
$3,613,535 during the quarter ended June 30, 1998, representing a 16.3%
increase in sales. The increase was primarily attributable to continued sales
of the Company's new wire wheel to J. H. Heafner, Inc., the Company's largest
customer, expansion of new wire wheel sales to other existing customers,
additional sales to existing customers and continued reduction in its
inventory of slow-moving and obsolete product. Discounts, returns and
allowances decreased by $59,980, or 14.9%, between the quarter ended June 30,
1999 and the quarter ended June 30, 1998. The decrease in discounts, returns
and allowances was attributable to modifications in customer agreements for
the period ended June 30, 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, 1999 was $795,148 compared to $666,776 for the quarter ended
June 30, 1998. As a percentage of net sales, gross profit increased in the
second quarter of 1999 compared to the second quarter of 1998, from 18.5% to
18.9%. The gross profit improvement in the quarter ended June 30, 1999 was
primarily the result of product mix changes, continued cost reduction
programs, and increased production, which resulted in improved overhead
absorption. The Company, however, also expects its gross profits and overall
results of operations to vary from period to period based upon a variety of
factors, including changes in order levels from customers, the timing of
orders, changes in product mix, the level of net sales and other factors.


                                       7

<PAGE>

     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, 1999 were $562,951 compared to $1,032,265 for the
quarter ended June 30, 1998.  This decrease of $469,314, or 45.5%, was due in
part to the Company's continued focus on reducing SG&A expenses.  The Company
achieved these reductions primarily through reductions in labor and related
costs, the continued implementation of a less costly sales and marketing plan
and lower legal, accounting and professional fees.

     Non-operating expenses, net, for the second quarter of 1999 were
$174,987 compared to $210,431 for the second quarter of 1998.  The decrease
of $35,444, or 16.8%, was primarily attributable to lower related loan fees
and costs charged under its credit facility.

     Because of carry-forward losses from previous years, the Company had no
income tax provision in the second quarter of 1999 or 1998.

     Net earnings for the second quarter ended June 30, 1999 were $207,410
compared to a net loss of $575,920 for the second quarter ended June 30,
1998.  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, 1999 was $.07
compared to basic loss per share of $.25 for the second quarter ended June
30, 1998. Diluted earnings per share for the three months ended June 30, 1999
was $.03 compared to a diluted loss per share of $.25 for the same three
month period in 1998. See Exhibit 11 to the Quarterly Report on Form 10-QSB.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 AND SIX MONTHS ENDED JUNE 30,
1998

     Net sales increased by $1,661,124 from $6,728,732 in the six month
period ended June 30, 1998 to $8,389,856 for the six month period ended June
30, 1999.  The 24.7% increase was primarily attributable to sales of the
Company's new wire wheel to J. H. Heafner, Inc., the Company's largest
customer, and other existing customers, additional sales to existing
customers, and reduction in its inventory of slow-moving and obsolete
products.

     Gross profit for the six months ended June 30, 1999 was $1,668,441
compared to $1,294,506 for the same period in 1998. As a percentage of sales,
gross profit improved from 19.2% for the six month period ended June 30, 1998
to 19.9% for the six month period ended June 30, 1999. The gross profit
improvement during the six months ended June 30, 1999 was primarily the
result of product mix changes, continued cost reduction programs, and
increased production, which resulted in improved overhead absorption. Cost
reduction efforts, including the reduction of production personnel and
outsourcing of selected manufacturing processes, positively affected gross
profit in the first six months of 1999. However, the Company also expects its
gross profit and overall results of operations to vary from period to period
based upon a variety of factors, including changes in order levels from
customers, the timing of orders, changes in product mix, the level of net
sales and other factors, such as overhead absorption. Overhead absorption
variations result from changes in production levels and efficiencies.

     SG&A expenses for the six months ended June 30, 1999 decreased $706,963
from $1,858,696 to $1,151,733, as compared to the six months ended June 30,
1998. This 38% decrease was due in part to the Company's concentrated focus
on reducing SG&A expenses. The Company achieved these reductions primarily
through reductions in labor and related costs, implementation of a less
costly sales and marketing plan, and lower legal, accounting, and
professional fees.


                                       8

<PAGE>



     Interest expense was $331,260 for the six months ended June 30, 1999 as
compared to $331,477 for the same period for 1998. Though the outstanding
debt was higher during the six months ended June 30, 1999, the interest rate
charged by the Company's lender and related loan fees and costs were less
than the same period in 1998.

     Net earnings for the six months ended June 30, 1999 were $307,865
compared to a net loss of $926,522 for the six months ended June 30, 1998.
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 $157,665.  Basic earnings per share
for the six months ended June 30, 1999 was $.09 compared to a basic loss per
share of $.40 for the six months ended June 30, 1998. Diluted earnings per
share was $.05 for the six months ended June 30, 1999 versus a diluted loss
per share of $.40 for the six months ended June 30, 1998.  See Exhibit 11 to
the Quarterly Report on Form 10-QSB.

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. During the quarter ended June 30, 1999, the
Company negotiated a short-term overadvance provision of $250,000 as part of
its NCFC Credit Facility. The overadvance provision is scheduled to expire
during the third quarter of 1999. There can be no assurance that, if
requested by the Company, NCFC will extend the overadvance provision beyond
the current expiration date. As of June 30, 1999, the outstanding balance
under the NCFC Credit Facility was approximately $6,140,000, and the Company
had excess availability of approximately $195,000, excluding the overadvance
provision. The NCFC Credit Facility contains no financial performance
covenants and requires prior approval rights to any declarations of cash
dividend payments.

     At June 30, 1999, the Company had an accumulated deficit of $15,920,776.
For the six months ended June 30, 1999, the Company's operating activities
provided $413,001 of cash, which was primarily attributable to the Company'
net earnings for the period and the decrease in inventory. During the six
months ended June 30, 1999, the Company's financing activities used $377,311
of cash. The decrease in cash from financing activities was primarily due to
a net decrease of $512,111 in net borrowings under the revolving line of the
NCFC Credit Facility and long-term debt payments of $62,600. The Company
received $260,000 in proceeds from loans provided by private lenders during
the first quarter of 1999.

     Although the Company believes that the amount available under the NCFC
Credit Facility together with cash from operations and its current cash
position will be sufficient to fund the Company's working capital
requirements for 1999, 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.
Therefore, the Company is currently attempting to secure additional funding,
which may include equity or subordinated debt. No assurance can be given of
the Company's ability to obtain such funding on favorable terms, if at all.
If the Company is unable to obtain additional funding, its ability to meet
its current and future business plans could be materially and adversely
affected.

ACCOUNTING MATTERS

     In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS No. 130) which became effective for the Company January 1, 1998.  SFAS
No. 130 establishes standards for reporting and displaying comprehensive
income and its components in a full set of general-purpose financial
statements.  The adoption of SFAS No. 130 did not have a material impact on
the Company.


                                      9

<PAGE>

     In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131) which became effective for
the Company January 1, 1998.  SFAS No. 131 establishes standards for the way
that public enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim reports issued to
stockholders.  The adoption of SFAS No. 131 did not have a material impact on
the Company.

     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 will become
effective for the Company on July 1, 1999. Management does not expect the
adoption of SFAS No. 132 to 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.

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
significant impact on the Company's operations; however, increases in metal
prices have from time to time, and could in the future, adversely affect the
Company's gross profit.

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.  There can be no
assurance that the Company will be profitable in the future.  Net sales for
the year ended December 31, 1998 declined to $12,081,884 from $16,545,159 for
the year ended December 31, 1997.  As of June 30, 1999, the Company had
cumulative losses of $15,920,776 and total stockholders' deficit of
$1,848,529.

DEPENDENCE ON KEY DISTRIBUTORS; IMPLEMENTATION OF NEW DISTRIBUTION CHANNELS

     A limited number of customers have accounted for a substantial portion
of the Company's revenue in each year. The financial condition and success of
its current customers and the Company's ability to obtain orders from new
customers are critical to the Company's success. The Company's top ten
customers accounted for


                                       10

<PAGE>


approximately 64.5% of the Company's gross sales for the first six months of
1999. The top three customers accounted for 39.5% of gross sales. For the six
months ended June 30, 1999, J. H. Heafner Company, Inc. accounted for 28.5%
of gross sales, ATECH Motorsports accounted for 6.2% of gross sales, and B &
R/Player Wire Wheels accounted for 4.8% of gross sales. For the year ended
December 31, 1998, the Company's ten largest customers accounted for a total
of approximately 57.2% of gross sales, with J. H. Heafner Company, Inc.
accounting for 13.5%, Keystone Automotive Operations, Inc. 7.7%, and RELCO
Corp. 5.1%. Due to the significant concentration of sales to the Company's
top ten customers, the loss of any one such customer could have a material
impact on the Company's results of operations and financial condition.

     The Company does not have any long-term contractual relationships with
any of its major customers.  While the Company's business strategy calls for
it to expand its product distribution capabilities to additional markets and
to broaden its customer base so that it can become less dependent on
significant customers, any loss, material reduction, or delay of orders by
any of the Company's major customers, including reductions as a result of
market, economic, or competitive pressures in the automotive aftermarket
industry, could adversely affect the Company.

     On September 19, 1997, the Company's then principal customer, Super
Shops, filed for reorganization under Chapter 11 of the Federal Bankruptcy
Code in the United States Bankruptcy Court, Central District of California.
Super Shops has ceased operations and has begun a liquidation plan. While the
Company has continued to establish and improve sales relationships with new
and existing customers since Super Shops, Inc. filed for bankruptcy
protection, it is still uncertain whether those relationships will fully
replace the revenues previously generated by Super Shops. Failure to resolve
this matter satisfactorily could have a material adverse effect on the
Company.

DEPENDENCE ON THIRD PARTY SUPPLIERS

     The Company's business depends upon the assembly of component parts and
the shipment of finished wheels and wheel accessories from third-party
suppliers. From time to time, the Company has experienced delays in the
delivery of component parts and finished products from vendors. In addition,
one of the Company's significant suppliers is located in China, which from
time to time has been subject to numerous trading restrictions by the United
States. The Company also has suppliers in Brazil, Korea and Taiwan. The
purchase of materials from foreign suppliers may be adversely affected by
political and economic conditions abroad over which the Company has no
control. Although to date the Company has generally been able to acquire
adequate supplies of such components and finished product in a timely manner,
any extended interruption in supply, significant increase in the price, or
reduction in the quality of such components could have a material adverse
effect on the Company's business, financial condition, and results of
operations. The Company has begun to outsource selectively the production of
some of its products and may increase such outsourcing in the future. While
the Company anticipates that such outsourcing programs will stabilize costs
and shift certain inventory, warranty, and other risks to its suppliers,
there can be no assurance that the continued or increased outsourcing of its
products will have these desired effects.

LISTING AND MAINTENANCE CRITERIA FOR SECURITIES; PENNY STOCK RULES

     The Company's common stock and warrants are quoted on the OTC Bulletin
Board under the symbol "CRGR" and "CRGRW", respectively. The Company's
capital and surplus and shareholders' equity have fallen below the minimums
required by Nasdaq and the Boston Stock Exchange, primarily as a result of
continuing losses. As a result, the Company's common stock and warrants are
no longer listed on Nasdaq and the Boston Stock Exchange. There can be no
assurance that the Company in the future will meet the requirements for
listing on Nasdaq or the Boston Stock Exchange with respect to the common
stock or warrants. If the Company fails to re-attain such listings, holders
likely would find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of, the common stock and warrants. In
addition, if the Company fails to re-attain Nasdaq listing for its
securities, and no other exclusion from the definition of a "penny stock"
under the Securities Exchange Act of 1934 is available, then any broker
engaging in a


                                       11

<PAGE>


transaction in the Company's securities would be required to provide any
customer with a risk disclosure document, disclosure of market quotations, if
any, disclosure of the compensation of the broker-dealer and its salesperson
in the transaction, and monthly account statements showing the market values
of the Company's securities held in the customer's accounts. The bid and
offer quotation and compensation information must be provided prior to
effecting the transaction and must be contained on the customer's
confirmation. If brokers become subject to the "penny stock" rules when
engaging in transactions in the Company's securities, they would become less
willing to engage in such transactions, thereby making it more difficult for
the Company's security holders to dispose of common stock and warrants.

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 new 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, and has a maturity date of April 2002.
During the quarter ended June 30, 1999, the Company negotiated a short-term
overadvance provision of $250,000 as part of its NCFC Credit Facility. The
overadvance provision is scheduled to expire during the third quarter of
1999. There can be no assurance that, if requested by the Company, NCFC will
extend the overadvance provision beyond the current expiration date. As of
June 30, 1999, the outstanding amount owed by the Company under the NCFC
Credit Facility was approximately $6,140,000, and the Company had excess
availability of approximately $195,000, excluding the $250,000 overadvance
provision. The NCFC Credit Facility is secured by substantially all of the
Company's assets and has a term of four years. The NCFC Credit Facility also
is secured by certain investment property with a value of approximately
$1,500,000 that was pledged to NCFC by three private investors. In exchange
for that pledge, the Company agreed to grant warrants to purchase 7,000
shares of common stock on an annual basis per $100,000 pledged as long as the
pledge remains outstanding, which warrants are exercisable at a price equal
to the price of the Company's common stock on the date of grant. In addition,
during March 1999, the Company obtained additional secured subordinated debt
financing in the amount of $260,000 from three private lenders. The terms of
this financing provide for an annual interest rate of 10% with maturity in
March 2001. This financing is subordinate to the NCFC Credit Facility. In
exchange for the financing, the Company also agreed to grant, to the lenders
warrants to purchase 33,333 shares of common stock at an exercise price of
$3.00 per share for each $100,000 in extended debt.

     Although the Company believes that the amount available under the NCFC
Credit Facility together with cash from operations and funds received from
the additional debt financed during the first quarter ended March 31, 1999,
will be sufficient to fund the Company's working capital requirements for
1999, there can be no assurance that the Company's cash flow from operations,
together with its current cash position and amounts available under the NCFC
Credit Facility, will be sufficient to implement fully its business
strategies especially in the event that the Company is required to refinance
or replace the NCFC Credit Facility. As a result, the Company is attempting
to secure additional funds through equity or debt financings. No assurance
can be given that such additional financing will be available on terms
acceptable to the Company, if at all.

VARIABILITY IN OPERATING RESULTS; SEASONALITY

     The Company's results of operations have been and will continue to be
subject to substantial variations as a result of a number of factors, any of
which could have a material adverse effect on the Company. In particular, the
Company's operating results can vary because of 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 may have an adverse
impact on the Company's cash flow or work flow, and any significant decrease
in orders


                                       12

<PAGE>


could have a material adverse effect on the Company's results of operations.
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.

CHANGING CUSTOMER TRENDS; NEED FOR PRODUCT DEVELOPMENT

     The Company's success depends, in part, on its ability 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 core
products will continue to enjoy acceptance among consumers or that any of the
Company's future product offerings will achieve or maintain market
acceptance. The Company attempts to minimize the risks relating to changing
consumer trends by offering a wide variety of product styles, analyzing
consumer purchases, maintaining active product development efforts, and
monitoring the sales performance of its various product lines. However, any
misjudgment by the Company of the market for a particular product, or its
failure to correctly anticipate changing consumer preferences, could have a
material adverse effect on its business, financial condition, and results of
operations. In order to enhance its product development efforts, the Company
may supplement its existing product development staff by hiring one or more
new employees with product development experience and by engaging an outside
consultant to assist the Company's product development staff. There can be no
assurance that the Company will be able to attract and retain such additional
personnel or that the costs associated with additional product development
efforts will not have an adverse effect on the Company.

HIGHLY COMPETITIVE INDUSTRY

     The market for the Company's products is highly competitive.  The
Company competes 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.  Many of the Company's
competitors have substantially greater financial, personnel, marketing, and
other resources than the Company.  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.

DATA PROCESSING AND TECHNOLOGY AND YEAR 2000

     The Company recognizes the potential business impacts related to the
Year 2000 computer system issue and is implementing a plan to assess and
improve the Company's state of readiness with respect to such issues. The
Year 2000 issue is one where computer systems may recognize the designation
"00" as 1900 when it means 2000, resulting in system failure or
miscalculations.

     The Company has initiated a comprehensive review of its core information
technology systems, which the Company is dependent upon for the conduct of
day to day business operations, in order to determine the adequacy of those
systems in light of future business requirements. Year 2000 readiness was one
of a variety of factors to be considered in the review of core systems.

     In recognition of the Year 2000 issue, the Company has continued a
comprehensive review of all information technology and non-information
technology systems used by the Company. Such review includes testing and
analysis of Company products and inquiries of third parties supplying
information technology and non-information technology systems, computer
hardware and software products and components, and other equipment to the
Company. In addition, the Company has sent requests for information to its
critical suppliers requesting information about their Year 2000 readiness and
plans for Year 2000 compliance.

     As a result of its review to date, the Company has determined that
certain of its internal software systems are inadequate for the Company's
future business needs, and need to be upgraded because of various
considerations, including Year 2000 non-compliance. In certain cases the
timing of system upgrades is being accelerated because of the Year 2000
issue, although the Company believes upgrades, modification or


                                      13

<PAGE>

replacement would have been necessary in the near future regardless of such
issues. The Company expects to make necessary upgrades to its computer
information systems, related to Year 2000 non-compliance, prior to the Year
2000. Other upgrades, modifications or replacement identified through this
review process that are not critical to the Year 2000 issue will be
undertaken in an orderly manner so as to not disrupt the Company's on-going
operations. These non-critical upgrades, changes or modifications may not be
started or completed by the Year 2000. The costs for upgrades or replacement
of systems will be capitalized as assets and subsequently amortized over the
estimated life of the assets. The costs for modification of systems will be
expensed in the period incurred. The Company believes the costs of upgrades
to the current information technology systems will not exceed $75,000,
including internal payroll costs, and will not have a material affect on its
financial position or results of operations. The upgrades are expected to be
made early in the third quarter 1999 and the full integration of the upgrades
are expected to be complete by September 30, 1999.

     Based on the responses from the Company's critical suppliers, the
suppliers are either Year 2000 compliant or have developed plans to be Year
2000 compliant by December 31, 1999. The Company plans to continue monitoring
its critical suppliers for Year 2000 compliance and take appropriate steps if
it appears any critical suppliers will not be Year 2000 compliant by December
31, 1999.

     At this time, the Company has not developed Year 2000 contingency plans,
other than the review and remedial actions described above, and does not
intend to do so unless the Company believes such plans are merited by the
results of its continuing Year 2000 review.

     If the Company or the third parties with which it has relationships were
to cease or not successfully complete its or their Year 2000 remediation
efforts, the Company could encounter disruptions to its business that could
have a material adverse effect on its business, financial position and
results of operations. The Company could be materially and adversely impacted
by widespread economic or financial market disruption or by Year 2000
computer system failures at third parties with which it has relationships.

NO ASSURANCE OF SUCCESSFUL ACQUISITIONS

     The Company continues to consider acquisitions of and alliances with
other companies that could complement the Company's existing business,
including outsourcing its manufacturing and sales operations and acquisitions
of complementary product lines. There can be no assurance that suitable
acquisition or joint venture candidates can be identified, or that, if
identified, adequate and acceptable financing sources will be available to
the Company that would enable it to consummate such transactions.
Furthermore, even if the Company completes one or more acquisitions, there
can be no assurance that the Company will be able to successfully integrate
such acquired companies or product lines into its existing operations, which
could increase the Company's operating expenses in the short-term and
materially and adversely affect the Company's results of operations.
Moreover, any acquisition by the Company may result in a potentially dilutive
issuance of equity securities, the incurrence of additional debt, and
amortization of expenses related to goodwill and intangible assets, all of
which could adversely affect the Company's profitability. Acquisitions
involve numerous risks, such as the diversion of the attention of the
Company's management from other business concerns, the entrance of the
Company into markets in which it has had no or only limited experience, and
the potential loss of key employees of the acquired company, all of which
could have a material adverse effect on the Company.

REGULATORY COMPLIANCE

     The Company is 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 is currently in
material compliance with such regulations. Failure to comply with current or
future environmental regulations


                                      14

<PAGE>

could result in the imposition of substantial fines on the Company,
suspension of production, alteration of its production processes, cessation
of operations, or other actions which could have a material adverse affect on
the Company. In the ordinary course of its business, the Company uses metals,
oils, and similar materials, which are stored on site. The waste created by
use of these materials is 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.

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 employees 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.

RISKS ASSOCIATED WITH INTERNATIONAL SALES; CURRENCY FLUCTUATIONS

     In 1998 and 1997, the Company derived approximately 3.1% and 4.8%,
respectively, of total gross sales from international markets. The Company
does not anticipate that sales from international markets will increase
significantly. The Company's international sales efforts are subject to the
customary risks of doing business abroad, including exposure to regulatory
requirements, political and economic instability, barriers to trade, trade
restrictions (including import quotas), tariff regulations, foreign taxes,
restrictions on transfer of funds, difficulty in obtaining distribution and
support, and export licensing requirements, any of which could have a
material adverse effect on the Company. In addition, a weakening in the value
of foreign currencies relative to the U.S. dollar and fluctuations in foreign
currency exchange rates could have an adverse impact on the price of the
Company's products in its international markets.

CONTROL BY EXISTING STOCKHOLDERS

     The directors, officers, and principal stockholders of the Company
beneficially own more than 48.9% of the Company's outstanding common stock,
assuming exercise of all outstanding options and warrants and conversion of
Series A Preferred Stock. As a result, these persons will 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 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 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 $2.25 million in additional capital, which as of June 30,
1999, could have been converted into approximately 781,721 shares of common
stock. Additional series of preferred stock could be


                                       15

<PAGE>

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.

DEPENDENCE ON KEY PERSONNEL

     The Company's future success depends, in large part, on the efforts and
abilities of its management team, including Michael L. Hartzmark, Ph.D., its
President and Chief Executive Officer. The loss of the services of Dr.
Hartzmark could have a material adverse effect on the business of the
Company. While Dr. Hartzmark does not have an employment agreement with the
Company, Dr. Hartzmark and his family beneficially held, as of June 30, 1999,
over 20.3% of the Company's common stock assuming exercise of all outstanding
options and warrants and conversion of Series A Preferred Stock. The
successful implementation of the Company's business strategies may involve
the hiring and retention of additional management, engineering, marketing,
product development, and other personnel. There can be no assurance that the
Company will be able to identify and attract additional qualified management
and other personnel when needed or that the Company will be successful in
retaining such additional management and personnel if added. Moreover, there
can be no assurance that the additional costs associated with the hiring of
additional personnel will not adversely affect the Company's results of
operations. The Company does not maintain key man life insurance on any of
its personnel.

LIMITED LIABILITY OF DIRECTORS

     The Company's Certificate of Incorporation provides, with certain
exceptions, that the Company's directors will not be personally liable for
monetary damages for breach of the directors' fiduciary duty of care to the
Company or its stockholders.  This provision does not eliminate the duty of
care, and in appropriate circumstances, equitable remedies such as an
injunction or other forms of non-monetary relief would remain available under
Delaware law.  This provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws.

NO CASH DIVIDENDS

     The Company has never paid cash or stock dividends on its common stock
and does not anticipate that it will pay cash dividends in the foreseeable
future.  It is contemplated that any earnings will be used to finance the
growth of the Company's business.  The Company will be paying dividends on
its Series A Preferred Stock, however it anticipates those dividends will be
paid in kind rather than in cash.  In addition, the Company's NCFC Credit
Facility prohibits the payments of cash dividends without the lender's
consent.

                        PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     On September 19, 1997, Super Shops, Inc., formerly the Company's
principal customer, filed for reorganization under Chapter 11 of the Federal
Bankruptcy Code in the United States Bankruptcy Court, Central District of
California, Case No. LA 97-46094-ER. 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. In connection
with this proceeding, the Company incurred an obligation of $125,000 in 1998,
which is due to be paid in the third quarter of 1999, for preference payments
as a result of the on-going liquidation of the bankruptcy estate.

     The Company filed suit against Titan Wheel International, Inc., a/k/a
Automotive Wheels, Inc., and Titan International, Inc. ("Titan") in the
Superior Court of Maricopa County, Arizona on February 17, 1999.  The suit
has since been removed to, and is currently pending in, the United States
District Court for the District of Arizona.


                                      16

<PAGE>

The suit claims breach of agreement, breach of warranty and conversion in
connection with an agreement between the Company and Titan dated April 3,
1996.  The suit claims damages in excess of $2.25 million.

     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 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.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     During March 1999, the Company obtained additional secured subordinated
debt financing in the amount of $260,000 from three private lenders. The
terms of this financing provides for an annual interest rate of 10% with
maturity in March 2001.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     The Company had dividends in arrears for outstanding Series A Preferred
Stock at June 30, 1999 totaling $214,375, 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 21,
1999.  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         2,105,131            0                0
     Sidney Dworkin               2,105,131            0                0
     Mark Schwartz                2,105,131            0                0
     Donald E. McIntyre           2,105,131            0                0
     Michael Miller               2,105,131            0                0
</TABLE>

ITEM 5.  OTHER INFORMATION

     During the second quarter ended June 30, 1999, the Company entered into
a Stock Purchase Agreement with an individual investor of Wrenchead.com, Inc.
to exchange 75,000 shares of the Company's common stock for 240,000 shares of
common stock of Wrenchead.com, Inc. Wrenchead.com, Inc. is a start-up company
engaged in internet e-commerce with a focus on providing a comprehensive
website to market and sell aftermarket automotive products, including
Cragar's products. The Company anticipates that this transaction will
formally close during the third quarter of 1999.


                                       17

<PAGE>



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

<TABLE>
<CAPTION>
         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*
          11               Schedule of Computation of Earnings per Share
          27.1             1999 Financial Data Schedule for the Three and Six Months
                           Ended June 30, 1999
</TABLE>
         (b)               Reports on Form 8-K

                           The Company filed a Form 8-K on May 21, 1999
                           regarding the change in the Company's independent
                           accountant.
----------------
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.

Dated:  August 13, 1999                         By: /s/ Michael L. Hartzmark
        -----------------                           -------------------------
                                                    Michael L. Hartzmark
                                                    President and CEO

Dated:  August 13, 1999                         By: /s/ Richard P. Franke
        -----------------                           ---------------------------
                                                    Richard P. Franke
                                                    Chief Financial Officer
                                                    (Principal Financial and
                                                    Accounting Officer)


                                     18