<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, 1998


[ ]  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)

                               (602) 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, 1998: 2,453,990.

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


                                       1

<PAGE>

                       PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           CRAGAR INDUSTRIES, INC.
                          CONDENSED BALANCE SHEETS
                     JUNE 30, 1998 AND DECEMBER 31, 1997

<TABLE>
<CAPTION>

ASSETS                                                                       June 30,           December 31,
                                                                               1998                 1997
                                                                          --------------       --------------
                                                                            (Unaudited)
<S>                                                                       <C>                  <C>
Current Assets:

     Cash and cash equivalents                                            $     34,895         $     16,322
     Accounts receivable, less allowance for doubtful accounts of
         $3,713,519 as of 6/30/98 and $3,616,336 as of 12/31/97              3,672,922            2,997,880
     Inventories, net                                                        4,839,081            4,653,480
     Prepaid expenses                                                          190,918               11,153
                                                                          ------------         ------------
             Total current assets                                            8,737,816            7,678,835
                                                                          ------------         ------------

Property and equipment, net                                                    964,386              972,753
Other assets, net                                                              360,487              404,260
                                                                          ------------         ------------

                                                                          $ 10,062,689         $  9,055,848
                                                                          ------------         ------------
                                                                          ------------         ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Accounts payable                                                     $  2,047,609         $  2,147,243
     Accrued expenses                                                          858,195            1,003,295
     Accrued interest                                                           73,900              135,495
     Line of credit                                                          1,102,785            1,518,544
     Current installments of capital lease obligations                           6,407              108,123
     Current installments of long-term debt                                    250,400                    -
                                                                          ------------         ------------
             Total current liabilities                                       4,339,296            4,912,700

Line of credit                                                               4,000,000            4,000,000
Investor notes payable                                                               -              600,000
Long-term debt, less current installments                                      834,867                    -
                                                                          ------------         ------------
             Total liabilities                                               9,174,163            9,512,700
                                                                          ------------         ------------

Stockholders' equity:
     Preferred stock, par value $.01; authorized 200,000 shares,
          22,500  shares issued and outstanding                                    225                    -
     Additional paid-in capital  -  preferred                                2,052,291                    -
     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           11,845,882
     Accumulated deficit                                                   (13,285,645)         (12,327,274)
                                                                          ------------         ------------

             Total stockholders' equity (deficit)                              888,526             (456,852)
                                                                          ------------         ------------

                                                                          $ 10,062,689         $  9,055,848
                                                                          ------------         ------------
                                                                          ------------         ------------
</TABLE>

See Notes to Condensed Financial Statements


                                       2

<PAGE>

                           CRAGAR INDUSTRIES, INC.
                     CONDENSED STATEMENTS OF OPERATIONS
          THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (UNAUDITED)

<TABLE>
<CAPTION>
                                                  Three Months Ended June 30,         Six Months Ended June 30,
                                                 ----------------------------      -----------------------------
                                                     1998             1997             1998             1997
                                                 -----------      -----------      -----------      ------------
<S>                                              <C>              <C>              <C>              <C>
Net sales                                        $ 3,613,535      $ 6,275,309      $ 6,728,732      $ 10,919,830
Cost of goods sold                                 2,946,759        5,036,555        5,434,226         8,899,651
                                                 -----------      -----------      -----------      ------------
     Gross profit                                    666,776        1,238,754        1,294,506         2,020,179

Selling, general & administrative expenses         1,032,265          981,624        1,858,696         1,811,703
Amortization of excess of fair value of          
assets acquired over cost                                  -         (184,367)               -          (368,734)
                                                 -----------      -----------      -----------      ------------
     Income (loss)  from operations                 (365,489)         441,497         (564,190)          577,210

Non-operating (income) expenses, net
   Interest expense                                  159,269          142,323          331,477           253,044
   Other, net                                         51,162           25,440           30,855            41,844
                                                 -----------      -----------      -----------      ------------
     Total non-operating expenses                    210,431          167,763          362,332           294,888

     Income (loss)  before income taxes             (575,920)         273,734         (926,522)          282,322

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

     Net earnings (loss)                         $  (575,920)     $   273,734      $  (926,522)     $    282,322
                                                 -----------      -----------      -----------      ------------
                                                 -----------      -----------      -----------      ------------

Basic earnings (loss) per share                  $     (0.25)     $      0.12      $     (0.40)     $       0.13
                                                 -----------      -----------      -----------      ------------
                                                 -----------      -----------      -----------      ------------

Weighted average shares outstanding - basic        2,453,990        2,210,305        2,453,990         2,210,305
                                                 -----------      -----------      -----------      ------------
                                                 -----------      -----------      -----------      ------------

Diluted earnings (loss) per share                $      (.25)     $      0.12      $     (0.40)     $       0.12
                                                 -----------      -----------      -----------      ------------
                                                 -----------      -----------      -----------      ------------

Weighed average shares outstanding - diluted       2,453,990        2,368,601        2,453,990         2,368,601
                                                 -----------      -----------      -----------      ------------
                                                 -----------      -----------      -----------      ------------
</TABLE>

See Notes to Condensed Financial Statements


                                       3

<PAGE>

                          CRAGAR INDUSTRIES, INC.
                     CONDENSED STATEMENTS OF CASH FLOWS
                   SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended June 30,
                                                                            -----------------------------------
                                                                                 1998                1997
                                                                            ---------------     ---------------
<S>                                                                         <C>                 <C>
Cash flows from operating activities:
     Net earnings (loss)                                                    $   (926,522)            282,322
     Adjustments to reconcile net earnings (loss) to net cash used in
      operating activities:
         Provision for (write-off of) doubtful accounts                           97,183              (3,961)
         Reduction in provision for obsolete and slow-moving inventory                 -            (105,453)
         Depreciation and amortization of property and equipment                 145,572             154,487
         Amortization of other assets                                             30,833              67,694
         Amortization of excess fair value of assets acquired over cost                -            (368,734)
         Amortization of warrants issued with line of credit                      21,900                   -
         Increase (decrease) in cash resulting from changes in:
             Accounts receivable                                                (772,225)         (3,782,943)
             Inventories                                                        (185,601)            397,204
             Prepaid expenses                                                   (179,765)           (300,720)
             Other assets                                                         12,940              (7,500)
             Accounts payable and accrued expenses                              (244,734)            656,460
             Accrued interest                                                    (61,595)            (49,215)
                                                                             -----------         -----------
                 Net cash used in operating activities                        (2,062,014)         (3,080,358)
                                                                             -----------         -----------

Cash flows from investing activities:
     Purchases of property and equipment                                        (137,205)           (391,843)
                                                                             -----------         -----------
                 Net cash used in investing activities                          (137,205)           (391,843)
                                                                             -----------         -----------

Cash flows from financing activities:
     Proceeds from the sale of preferred stock                                 1,650,000                   -
     Proceeds from Norwest line of credit                                      4,576,073           2,626,110
     Repayment to Norwest line of credit                                     (10,094,617)                  -
     Proceeds from NCFC line of credit                                         7,517,063                   -
     Repayments to NCFC line of credit                                        (2,414,278)                  -
     Proceeds from long-term debt                                              1,127,000
     Repayments of long-term debt                                                (41,733)             (3,838)
     Repayments of capital lease obligations                                    (101,716)            (33,123)
                                                                             -----------         -----------
                 Net cash provided by financing activities                     2,217,792           2,589,149
                                                                             -----------         -----------

                 Net increase (decrease) in cash and cash equivalents             18,573            (863,049)

Cash and cash equivalents at beginning of period                                  16,322             843,049
                                                                             -----------         -----------

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

Non-Cash Financing Activity:
     Conversion of investor notes payable to preferred stock                $    600,000                   -
                                                                             -----------         -----------
                                                                             -----------         -----------
</TABLE>

See Notes to Condensed Financial Statements


                                       4

<PAGE>

                            CRAGAR INDUSTRIES, INC.
                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                        SIX MONTHS ENDED JUNE 30, 1998
                                  (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, 1998, and 1997 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, 1998  December 31, 1997
                                                             -------------  -----------------
                                                              (Unaudited)
        <S>                                                  <C>            <C>
        Raw materials                                          $2,707,819       $3,041,710
        Work in process                                           231,743          197,074
        Finished Goods                                          2,426,740        2,123,694
                                                               ----------       ----------
                                                                5,366,302        5,362,478
        Less allowance for obsolete and slow-moving inventory     527,221          708,998
                                                               ----------       ----------
        Inventories, net                                       $4,839,081       $4,653,480
                                                               ----------       ----------
                                                               ----------       ----------
</TABLE>

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, 1998  December 31, 1997
                                         -------------  -----------------
                                           Unaudited
                                           ---------
         <S>                             <C>            <C>
         Stock adjustments and returns     $ 24,341        $109,179
         Rebates reserve                     64,160          39,646
         Warranty reserve                   419,095         348,613
         Other reserves                      11,809          35,500
</TABLE>

5.   Preferred Stock and Warrants

     During January 1998, the Company issued 22,500 shares of preferred stock
     for $1,650,000 cash and the conversion of $600,000 of investor notes
     payable. The Company also granted 333,333 warrants valued at $229,333 to
     purchase shares of common stock 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 $600,000 during December 1997
     and January 1998. For each $100,000 made available to the Company, the
     Company granted warrants to 


                                       5

<PAGE>

     purchase 1,500 shares of common stock at an exercise price of $3.00 per 
     share. The principal amount of the loans were subsequently converted 
     into 60,000 shares of Series A Preferred Stock. In addition, the Company 
     agreed to grant warrants to certain individuals who pledged 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. See "Factors That May Affect Future Results and 
     Financial Condition - Dependence on External Financing. On May 15, 1998, 
     the Company granted option to Directors Sidney Dworkin, Donald McIntrye 
     and Mark Schwartz were each granted options to purchase 2,000 shares at 
     $5.25 per share. During the second quarter ended June 30, 1998, no 
     warrants to purchase shares of Common Stock were exercised. Dividends in 
     arrears for outstanding preferred stock at June 30, 1998 totaled $56,875.

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 not be
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
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, 1997). As of the
year ended December 31, 1997, the balance of the excess of fair value of assets
acquired over cost was zero.


                                       6

<PAGE>

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, 1998 and June
30, 1997:

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED JUNE 30,    SIX MONTHS ENDED JUNE 30,
                                              1998        1997                  1998        1997
                                              ----        ----                  ----        ----
     <S>                                    <C>          <C>               <C>             <C>
     Net sales                               100.0%      100.0%                100.0%      100.0%
     Cost of goods sold                       81.5        80.3                  80.8        81.5
                                             -----       -----                 -----       -----
     Gross profit                             18.5        19.7                  19.2        18.5
     SG&A                                     28.6        15.6                  27.6        16.6
     Amortization of negative goodwill         -          (2.9)                  -          (3.4)
                                             -----       -----                 -----       -----
     Income (loss) from operations           (10.1)        7.0                  (8.4)        5.3
     Non-operating expense, net                5.8         2.7                   5.4         2.7
     Income taxes                              -           -                     -           -
                                             -----       -----                 -----       -----
     Net earnings (loss)                     (15.9)        4.3                 (13.8)        2.6
</TABLE>

COMPARISON OF QUARTER ENDED JUNE 30, 1998 AND QUARTER ENDED JUNE 30, 1997

     Net sales consist of gross sales less discounts, returns and allowances.
Net sales for the quarter ended June 30, 1998 were $3,613,535 compared to
$6,275,309 during the quarter ended June 30, 1997, representing a 42.4% decrease
in sales. The decrease was primarily attributable to the discontinuance of
shipments to the Company's former primary customer, Super Shops, Inc. ("Super
Shops"), which filed for bankruptcy on September 19, 1997 and is currently being
liquidated. Discounts, returns and allowances decreased by 40.4% between the
quarter ended June 30, 1998 and the quarter ended June 30, 1997. The decrease in
discounts, returns and allowances was attributable to seasonal trends,
modifications in customer agreements and lower sales levels for the period ended
June 30, 1998.

     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, 1998 was
$666,776 compared to $1,238,754 for the quarter ended June 30, 1997. As a
percentage of net sales, gross profit decreased in the second quarter of 1998
compared to the second quarter of 1997, from 19.7% to 18.5%. The decrease in
gross profit from the second quarter of 1997 to the second quarter of 1998 was
attributable to loss of sales to Super Shops, the Company's former primary
customer. Cost reduction efforts including the reduction of production personnel
and outsourcing of selected manufacturing processes positively affected gross
profit in the second quarter of 1998. However, the Company 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.

     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, 1998 were $1,032,265 compared to $981,624 for the quarter ended
June 30, 1997. This increase of 5.2% was due in part to increased legal,
marketing and bad debt expenses which were partially offset by the Company's
focus on reducing expenses, primarily in labor.

     Non-operating expenses, net, for the second quarter of 1998 were 
$210,431 compared to $167,763 for the second quarter of 1997. The increase of 
$42,668 is primarily attributable to origination and closing fees associated 
with the NCFC Credit Facility (as defined herein). See "Management's 
Discussion and Analysis or Plan of Operation -- Liquidity and Capital 
Resources."

                                       7

<PAGE>

     Because of its carry-forward losses from previous years, the Company had no
income tax provision in the second quarter of 1998 or 1997.

     Net loss for the second quarter ended June 30, 1998 was $575,920 compared
to net earnings of $273,734 for the second quarter ended June 30, 1997. Basic
loss per share for the second quarter ended June 30, 1998 was $.25 compared to
basic earnings per share of $.12 for the second quarter ended June 30, 1997.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1998 AND SIX MONTHS ENDED JUNE 30, 1997

     Net sales decreased 38.4% from $10,919,830 in the six month period ended
June 30, 1997 to $6,728,732 for the six month period ended June 30, 1998. The
decrease was primarily attributable to the lack of shipments to the Company's
former primary customer, Super Shops, which filed for bankruptcy on September
19, 1997 and is currently being liquidated.

     Gross profit improved from 18.5% for the six month period ended June 30,
1997 to 19.2% for the six month period ended June 30, 1998. Product mix changes
and the introduction of several new wheel styles at higher margins contributed
to the gross margin improvement. Cost reduction efforts positively effected
gross profit in the first six months of 1998 as programs started to be fully
implemented.

     SG&A expenses for the six months ended June 30, 1998 increased 2.6% from
$1,811,703 to $1,858,696 over the six months ended June 30, 1997. This increase
was due in part to increased legal, marketing and bad debt expenses which were
partially offset by the Company's focus on reducing expenses, primarily in
labor.

     Interest expense increased by $78,433 or 31.0% as outstanding loan amounts
have increased by $669,508 for the six months ended June 30, 1998 as compared to
the same period for 1997.

     Net loss for the six months ended June 30, 1998 was $926,522 compared to
net earnings of $282,322 for the six months ended June 30, 1997. Basic loss per
share for the six months ended June 30, 1998 was $.40 compared to basic earnings
per share of $.13 for the six months ended June 30, 1997. Diluted earnings per
share was $.12 for the six months ended June 30, 1997.

LIQUIDITY AND CAPITAL RESOURCES

     During the quarter ended March 31, 1998, the Company raised $2,250,000
($1,650,000 in cash and conversion of $600,000 in investor notes payable) from a
private placement of 22,500 shares of Series A Convertible Preferred Stock
("Series A Preferred Stock"), which included the issuance of warrants to
purchase 333,333 shares of the Company's common stock at $8.75 per share.
Dividends in arrears for outstanding preferred stock at June 30, 1998 totaled
$56,875.

     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 has a term of four years. The Company was able to fully repay its prior
credit facility from the proceeds of the NCFC Credit Facility. As of June 30,
1998, the outstanding balance under the NCFC Credit Facility was $5,102,785, and
the Company had excess availability of $651,259. The NCFC Credit Facility
contains no financial performance covenants and requires prior approval of any
declarations of dividend payments.

     At June 30, 1998, the Company had an accumulated deficit of $13,285,645.
For the quarter ended June 30, 1998, the Company's operating activities used
$2,062,014 of cash, which was primarily attributable to the 


                                       8

<PAGE>

net loss and increases in accounts receivable and inventories, accounts 
payable and accrued expenses. The Company's increase in inventory at June 30, 
1998 from the year ended December 31, 1997 level used approximately $280,000 
in cash. The Company's financing activities included the sale of preferred 
stock and conversion of debt to preferred stock for a total of $2,250,000, of 
which $1,480,000 was used to reduce the amount owed under the Norwest Credit 
Facility and pay down long-term debt, resulting in net cash provided from 
financing activities of approximately $2,200,000.

     As an ongoing consequence of the bankruptcy of Super Shops, formerly the
Company's principal customer, management is uncertain whether the anticipated
cash flow from operations will be sufficient to meet the Company's anticipated
growth plans and capital needs. Therefore, the Company also is currently
negotiating with other financial institutions to secure additional equity or
subordinated debt. There can be no assurance that the Company's cash flow will
be sufficient to finance its growth plans and capital needs as currently planned
or that it will be able to supplement its cash flow with additional financing.
No assurance can be given of 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 current and future revenue growth 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 on 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 had no material impact on the Company.

     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 on 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 had no material impact on the Company.

     In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" (SFAS No. 132) which became
effective for the Company January 1, 1998. SFAS No. 132 revises and
standardizes, to the extent practicable, employers' disclosures about pension
and other postretirement benefits, requiring additional information on changes
in benefit obligations and changes in fair value of investments to facilitate in
financial analysis. The adoption of SFAS No. 132 had no 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.


                                       9

<PAGE>

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.

RISK ASSOCIATED WITH BANKRUPTCY OF PRINCIPAL CUSTOMER

     On September 19, 1997, formerly the Company's 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. On June
30, 1998, the accounts receivable owed to the Company by Super Shops totaled
$3,523,028, all of which has been reserved. The Company will continue to review
various alternatives with respect to this matter. Since the date of filing for
reorganization, Super Shops has ceased operations and has begun a liquidation
plan. As an unsecured creditor, there is no assurance that the Company will
recover any of the accounts receivable from Super Shops. Furthermore, if the
Company should be able to recover a portion of the account receivable, the
timing and amount of such recovery is uncertain. Accordingly, the Company has
established an allowance for bad debt that includes the entire $3,523,028
account receivable from Super Shops. As a result of Super Shops ceasing
operations, the Company also has lost its largest customer, which resulted in
decreased revenues during the first six months of 1998. It is uncertain whether
other current or new customers can make up for the lost revenues generated by
Super Shops. Failure to resolve this matter satisfactorily could have a material
adverse effect on the Company's results of operations and financial conditions.

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 30,
1998, the Company incurred a net loss of $926,522. There can be no assurance
that the Company will be profitable in the future. Net sales for the year ended
December 31, 1997 declined to $16,545,159 from $18,625,497 for the year ended
December 31, 1996. Net sales for the six months months ended June 30, 1998
declined to $6,728,732 from $10,919,830 for the same period in 1997. As of June
30, 1998, the Company had accumulated deficit of $13,285,645 and total
stockholders' equity of $888,526.

LISTING AND MAINTENANCE CRITERIA FOR SECURITIES; PENNY STOCK RULES

     The Common Stock and Warrants are listed on the Nasdaq Small Cap Market and
the Boston Stock Exchange. The Company's net tangible assets, however, have
fallen below the minimum required by Nasdaq primarily as a result of the
establishment of an allowance for bad debt arising from the bankruptcy of Super
Shops. As of June 30, 1998, the Company's net tangible assets were $888,526,
which fell short of the minimum required to maintain listing on Nasdaq by
approximately $1,111,474, although the Company currently meets the minimum
listing requirements for the Boston Stock Exchange. As a result of the Company's
failure to maintain minimum net tangible assets of at least $2,000,000, Nasdaq
notified the Company of its decision to delist the Company's shares of Common
Stock and related Warrants from the Nasdaq SmallCap Market. The Company appealed
Nasdaq's decision and attempted to demonstrate its 


                                      10

<PAGE>

ability to meet and sustain compliance with all applicable maintenance 
criteria at a hearing held on July 24, 1998. As of the date of this report, 
no decision regarding the appeal had been communicated to the Company. If the 
Company's appeal is denied, the Company's Common Stock and related Warrants 
will be delisted from the Nasdaq SmallCap Market. Even if the appeal is 
granted, the Company will be required to raise additional capital of at least 
$1,111,474 by August 30, 1998 to avoid delisting of the Common Stock or 
Warrants. There can be no assurance that the Company's appeal will be 
successful or that the Company will be able to achieve and maintain 
compliance with the requirements for continued listing on the Nasdaq SmallCap 
Market or the Boston Stock Exchange with respect to the Common Stock or 
Warrants. If the Common Stock or the Warrants fail to maintain such listings, 
the market value of the Common Stock and Warrants likely would decline and 
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 maintain Nasdaq SmallCap Market listing 
for its securities, and no other exclusion from the definition of a "penny 
stock" under the Securities Exchange Act of 1934, as amended (the "Exchange 
Act") is available, then any broker engaging in a 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. 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 $800,000
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 on an
annual basis as long as the pledge remains outstanding, which warrants are
exercisable at an exercise price equal to the price of the Company's Common
Stock on the date of grant. Although the Company believes that the amount
available under the NCFC Credit Facility together with cash from operations will
be sufficient to fund the Company's working capital requirements into 1999,
there can be no assurance that the Company's cash flow from operations, together
with amounts currently available under the NCFC Credit Facility, will be
sufficient to implement fully its business strategics especially in the event
that the Company is required to refinance or replace the NCFC Credit Facility.
As a result, the Company may be required to raise 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.

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 approximately 54.6% of the Company's gross sales for the first six months of
1998. The top three customers accounted for 22.3% of gross sales. For the six
months ended June 30, 1998, J. H. Heafner Company, Inc. accounted for 10.3% of
gross sales, PDK accounted for 6.3% of gross sales and Reliable Automotive
Company, Inc. accounted for 5.7% of gross sales. For the year ended December 31,
1997, the Company's ten 


                                      11

<PAGE>

largest customers accounted for a total of approximately 66.3% of gross 
sales, with Super Shops accounting for 27.5%, J. H. Heafner Company, Inc. 
9.6%, and Keystone Automotive 6.2%.

     On June 30, 1998, the Company engaged Trenwith Securities, Inc. to, among
other responsibilities, raise additional capital for the Company. In addition,
the Company has been discussing various alternatives with other private
investors. There can to no assurance that suitable financing can be arranged in
the time period or the amount required. 

The Company's former primary customer, Super Shops, filed for Chapter 11 
bankruptcy protection on September 19, 1997 in the United States Bankruptcy 
Court, Central District of California. Super Shops subsequently ceased 
operations and start a liquidation plan. 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.

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.

GENERAL ECONOMIC FACTORS

     The Company's business 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
it serves, 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 business in the future
or prevent the Company from successfully implementing its business strategies.

DATA PROCESSING AND TECHNOLOGY AND YEAR 2000

     The Company has commenced a study of its computer systems in order to
assess its exposure to Year 2000 issues. The Company expects to make necessary
modifications or changes to its computer information systems to enable proper
processing of transactions relating to the Year 2000 and beyond, or to migrate
its operations to systems that are Year 2000 complaint. The Company believes the
cost to modify its existing systems, or migrate to other systems will not be
material. The Company will evaluate appropriate courses of action, including
replacement of certain systems whose associated costs would be recorded as
assets and subsequently amortized, or modification of its existing systems,
which costs would be expensed as incurred. There can be no assurance that the
Company will be able to completely resolve all Year 2000 issues in a timely
fashion or that the ultimate cost to identify and implement solutions to all
Year 2000 problems will not be material to the Company.


                                      12

<PAGE>

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 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 selectively outsource 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.

NO ASSURANCE OF SUCCESSFUL ACQUISITIONS

     On June 30, 1998, the Company engaged Trenwith Securities Inc. to assist
the Company in identifying, negotiating, closing and funding possible
acquisitions. The Company is considering acquisitions of and alliances with
other companies that could complement the Company's existing business, including
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 integrate successfully the 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.

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 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.


                                      13

<PAGE>

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.

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
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 effect 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.


                                      14

<PAGE>

RISKS ASSOCIATED WITH INTERNATIONAL SALES; CURRENCY FLUCTUATIONS

     As part of the Company's business strategy, it intends to expand into
selected international markets. In 1997 and 1996, the Company derived
approximately 4.8% and 4.0%, respectively, of total gross sales from
international markets. 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 approximately 23.3% (assuming conversion of all preferred
stock, and exercise of all warrants and options) of the Company's outstanding
Common 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 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 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 $2,250,000 in
additional capital, which, as the date of this report, could be converted into
approximately 588,000 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.

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 currently hold over 14.21% of the Company's Common Stock
(assuming exercise of all warrants and options). The successful implementation
of the Company's business strategies depends on 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.


                                      15

<PAGE>

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
with additional shares of Common or Preferred Stock. In addition, the Company's
NCFC Credit Facility prohibits the payments of cash dividends without
NationsCredit Commercial Funding's consent.


                                      16

<PAGE>


                          PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     The Company from time to time is involved in routine litigation 
incidental to the conduct of its business. In addition, the Company is 
involved with the legal proceedings associated with the filing of Chapter 11 
bankruptcy protection of Super Shops, formerly the Company's primary 
customer. On September 19, 1997, Super Shops, filed for reorganization under 
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy 
Court, Central District of California. As an unsecured creditor, there is no 
assurance that the Company will recover any of the accounts receivable from 
Super Shops. Otherwise, there are currently no material pending proceedings 
to which the Company is a party or to which any of its property is subject. 
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.  DEFAULTS UPON SENIOR SECURITIES

     None. See ITEM 2. "Management's Discussion and Analysis or Plan of 
Operation - Liquidity and Capital Resources."

ITEM 3.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

<TABLE>
<CAPTION>
          Exhibit No.   Description
          -----------   -----------
          <S>           <C>
          4.4(f)        Fourth Amendment to Security and Credit Agreement, dated as
                        of November 12, 1997 executed by and between the Company and
                        Norwest Business Credit, Inc.
                       
          4.4(g)        Fifth Amendment to Security and Credit Agreement, dated as
                        of January 8, 1998 executed by and between the Company and
                        Norwest Business Credit, Inc.
                       
          4.4(h)        Sixth Amendment to Security and Credit Agreement, dated as
                        of April 16, 1998 executed by and between the Company and
                        Norwest Business Credit, Inc.
                       
          4.4(i)        NationsCredit Loan and Security Agreement dated as of April
                        20, 1998 executed by and between the Company and
                        NationsCredit Commercial Funding.
                       
          11            Schedule of Computation of Earnings per Share
                       
          22            Published Report regarding matters submitted to vote.

          27.1          1998 Financial Data Schedule
                       
          27.2          1997 Financial Data Schedule
</TABLE>

          (b)           Reports on Form 8-K 
                        Report on Form 8-K filed on January 15, 1998
                        Report on Form 8-K/A filed on January 23, 1998


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

     The Annual Meeting of Shareholders of the Company, was held on May 15, 
1997. 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           2,051,523           0               1,000
      Sidney Dworkin                 2,051,523           0               1,000
      Mark Schwartz                  2,051,523           0               1,000
      Donald E. McIntyre             2,051,523           0               1,000
</TABLE>

                                      17

<PAGE>

                                  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, 1998             By: /s/Michael L. Hartzmark
       -----------------               ------------------------
                                    Michael L. Hartzmark
                                    President and CEO
                                   
Dated:  August 13, 1998             By: /s/Anthony Barrett
       -----------------               -------------------
                                    Anthony Barrett
                                    Vice President of Sales Operations
                                    (Principal Financial and Accounting Officer)


                                      18