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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

      For the Quarterly Period Ended March 31, 2001

[ ]   TRANSITION REPORT UNDER 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)


       7373 NORTH SCOTTSDALE ROAD, SUITE B-274, SCOTTSDALE, ARIZONA 85253
       ------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (480) 596-6483
                                 --------------
                           (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
March 31, 2001:  3,627,014.

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

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<PAGE>
                              CRAGAR INDUSTRIES, INC.
                             Condensed Balance Sheets
                       March 31, 2001 and December 31, 2000

<TABLE><CAPTION>
                                                                         March 31,       December 31,
                                                                           2001             2000
                                                                       ------------      ------------
                                                                        (unaudited)
<S>                                                                    <C>               <C>
                                     ASSETS
Current Assets
      Cash and cash equivalents                                        $     26,127      $     68,300
      Accounts receivable, net of allowance for
           doubtful accounts of $25,000                                     315,992           294,641
      Non-trade receivables                                                 142,070           117,684
      Investments                                                         1,307,519         1,307,519
      Other current assets                                                   17,914             2,500
                                                                       ------------      ------------
           Total current assets                                           1,809,622         1,790,644

Property and Equipment, net                                                    --              41,926

Other Assets                                                                 36,304            57,624
                                                                       ------------      ------------

Total Assets                                                           $  1,845,926      $  1,890,194
                                                                       ============      ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
      Accounts payable                                                 $    432,377      $    440,882
      Notes payable - related parties                                     1,305,500         1,200,000
      Accrued interest                                                       13,055             9,730
      Accrued expenses                                                      605,674           703,215
                                                                       ------------      ------------
           Total current liabilities                                      2,356,606         2,353,827

Notes Payable - Related Parties - Long Term                                    --             105,500
                                                                       ------------      ------------

Total Liabilities                                                         2,356,606         2,459,327
                                                                       ------------      ------------

Stockholders' Deficit
      Preferred stock, par value $0.01; 200,000 shares authorized,
           0 and 11,000 shares issued and outstanding                          --                 110
           in 2001 and 2000, respectively
      Additional paid-in capital - preferred                                   --           1,093,515
      Common stock, par value $0.01; 10,000,000 shares authorized,
           3,627,014 and 3,016,716 issued and outstanding                    36,270            30,167
           in 2001 and 2000, respectively
      Additional paid-in capital - common                                14,992,052        13,904,530
      Accumulated deficit                                               (15,539,002)      (15,597,455)
                                                                       ------------      ------------
           Total stockholders' deficit                                     (510,680)         (569,133)
                                                                       ------------      ------------

Total Liabilities and Stockholders' Deficit                            $  1,845,926      $  1,890,194
                                                                       ============      ============
</TABLE>

See accompanying notes to condensed financial statements

                                        2
<PAGE>
                              CRAGAR INDUSTRIES, INC.
                        Condensed Statements of Operations
                    Three Months Ended March 31, 2001 and 2000
                                    (unaudited)

<TABLE><CAPTION>
                                                                     Three Months Ended
                                                                           March 31,
                                                                 ----------------------------
                                                                     2001             2000
                                                                 -----------      -----------
<S>                                                              <C>              <C>
Net sales                                                        $      --        $   316,351
Royalty revenues                                                     131,419          142,927
                                                                 -----------      -----------

                  Total revenues                                     131,419          459,278

Cost of goods sold                                                      --            332,051
                                                                 -----------      -----------

                  Gross profit                                       131,419          127,227

Selling, general and administrative expenses                          97,549          187,704
                                                                 -----------      -----------

                  Income (loss) from operations                       33,870          (60,477)
                                                                 -----------      -----------

Non-operating income (expenses), net
          Interest expense                                           (39,151)         (63,979)
          Gain on disposition of assets                               13,001             --
          Other                                                       50,733           26,556
                                                                 -----------      -----------
                  Total non-operating income (expenses), net          24,583          (37,423)
                                                                 -----------      -----------

Net earnings (loss) before income taxes                               58,453          (97,900)

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

Net earnings (loss)                                              $    58,453      $   (97,900)
                                                                 ===========      ===========

Basic earnings (loss) per common share                           $      0.02      $     (0.06)
                                                                 ===========      ===========

Diluted earnings (loss) per common share                         $      0.01      $     (0.06)
                                                                 ===========      ===========

Weighted average shares outstanding                                3,627,014        2,456,990
                                                                 ===========      ===========
</TABLE>

See accompanying notes to condensed financial statements

                                        3
<PAGE>
                                CRAGAR INDUSTRIES, INC.
                           Condensed Statements of Cash Flows
                       Three Months Ended March 31, 2001 and 2000
                                   (unaudited)

<TABLE><CAPTION>
                                                                                Three Months Ended
                                                                                     March 31,
                                                                              ------------------------
                                                                                2001           2000
                                                                              ---------      ---------
<S>                                                                           <C>            <C>
Cash flows from operating activities
      Net earnings (loss)                                                     $  58,453      $ (97,900)
      Adjustments to reconcile net earnings (loss) to net cash used
        in operating activities:
            Provision for (write-off of) doubtful accounts                         --          (16,741)
            Reduction in (increase in) provision for obsolete and
                slow moving inventory                                              --          (72,633)
            Depreciation and amortization of property and equipment                --           20,500
            Gain on sale of property and equipment                                 --          (20,609)
            Increase (decrease) in cash resulting from changes in:
                Accounts receivable                                             (21,351)       513,664
                Inventory                                                          --          351,304
                Investments                                                        --          200,000
                Other current assets                                            (39,800)       (24,323)
                Other assets                                                     21,320           --
                Accounts payable and accrued expenses                          (106,046)      (239,945)
                Accrued interest                                                  3,325        (26,864)
                                                                              ---------      ---------
                     Net cash provided by ( used in) operating activities       (84,099)       586,453

Cash flows from investing activities
      Disposition of property and equipment                                      41,926         20,609

Cash flows from financing activities
      Net borrowings (repayments) on bank credit line                              --         (467,468)
                                                                              ---------      ---------

                     Net increase (decrease) in cash and cash equivalents       (42,173)       139,594

Cash and cash equivalents at beginning of period                                 68,300          1,387
                                                                              ---------      ---------

Cash and cash equivalents at end of period                                    $  26,127      $ 140,981
                                                                              =========      =========

Supplemental disclosure of cash flow information:
      Cash paid for interest                                                  $  35,826      $  70,242
                                                                              =========      =========
</TABLE>

See accompanying notes to condensed financial statements

                                        4
<PAGE>

                             CRAGAR INDUSTRIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                        THREE MONTHS ENDED MARCH 31, 2001
                                   (Unaudited)

1.         Summary of Significant Accounting Policies
           Basis of Presentation:

           The interim financial data as of and for the three months ended March
           31, 2001, and 2000 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.         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.

3.         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. During the year ended
           December 31, 2000 and in January 2001, the holders of the Company's
           Series A Preferred Stock converted their 22,500 shares into 1,072,524
           shares of Common Stock. In January 2001, all 333,333 of the warrants
           expired unexercised.

           During March 2001, the Company granted warrants to purchase 7,000
           shares of the Company's common stock at $2.125 per share relating to
           the line of credit provided by a stockholder.

           On March 3, 2001, the Company granted options to each of Marc
           Dworkin, Donald McIntyre, Michael Miller and Mark Schwartz, Directors
           of the Company, to purchase 2,000 shares of common stock at an
           exercise price of $2.125 per share, which was the fair market value
           on the date of grant. This grant was based on a resolution passed on
           May 21, 1999 by the Board of Directors of the Company whereby, it was
           agreed that, in lieu of cash payments for director fees, Directors
           would each be granted options to purchase 2,000 shares of the
           Company's common stock for each board meeting, at an exercise price
           of equal to the closing price of the underlying common stock on the
           date of grant.

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 and 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

                                       5
<PAGE>

similar expressions identify forward-looking statements, which speak only as of
the date the statement was made. Forward-looking statements are inherently
subject to risks and uncertainties, some of which cannot be predicted or
quantified. Future events and actual results could differ materially from those
set forth in, contemplated by, or underlying the forward-looking statements. The
following disclosures, as well as other statements in the Company's report,
including those contained below in this Item 2, "Management's Discussion and
Analysis of Financial Condition or Plan of Operation," and in the Notes to the
Company's Financial Statements, describe factors, among others, that could
contribute to or cause such differences. Specifically, management is uncertain
whether the anticipated cash flow from operations will be sufficient to meet the
Company's anticipated operations and working capital needs. Therefore, the
Company is seeking to secure additional working capital through the sale of
equity or debt securities. There can be no assurance that the Company's cash
flow will be sufficient to finance its operations as currently planned or that
it will be able to supplement its cash flow with additional financing. In
addition, no assurance can be given regarding the Company's ability to obtain
such financing on favorable terms, if at all. If the Company is unable to obtain
additional financing, its ability to meet its anticipated operating and working
capital needs will be materially and adversely affected. As a result of the
Company's stockholders' deficit and the uncertainty surrounding the Company's
ability to meet its anticipated operating and working capital needs, the
independent auditors' report on the Company's 2000 financial statements has been
qualified for a going concern.

INTRODUCTION

      From Cragar's inception in December 1992 through the first nine months of
1999, Cragar designed, produced, and sold high-quality custom vehicle wheels and
wheel accessories. Cragar sold 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
companies.

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

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

      In September 2000, Cragar entered into and completed a similar transaction
with Performance Wheel Outlet, Inc. ("Performance") to manufacture, sell, and
distribute its line of one-piece cast aluminum wheels ("One-Piece Business") in
exchange for a royalty based on sales of the licensed products.

      As a consequence of the transactions with Performance, Weld and Carlisle,
Cragar no longer engages in the manufacture, marketing, sale or distribution of
any products related to its One-Piece Wheel Business, Wrought Wheel Business and
SOR Wheel Business, which together generated approximately 100.00% of Cragar's
revenues in 2000. In general, the outsourcing of the manufacturing, marketing,
sales and distribution operations with respect to the licensed products,
together with the sale of all the related assets, has substantially decreased
Cragar's revenues and related operating and marketing costs.

      Cragar intends to rely on Performance's, Weld's and Carlisle's greater
financial, operational and distribution capabilities to increase net sales of
the licensed products and generate a stream of increasing revenues in the form
of quarterly royalty payments. In addition, Cragar is entitled to royalties
based on the net

                                       6
<PAGE>

sales of any new products developed by Carlisle related to the SOR Wheel
Business under the CRAGAR brand name, including products and related accessories
for vehicles other than automobiles, trucks, and vans, such as all-terrain
vehicles and golf carts. Cragar is also entitled to royalties based on net sales
of any new products developed by Weld related to the Wrought Wheel Business
under the CRAGAR brand name, including motorcycle wheels, two-piece aluminum
wheels and new types of race wheels.

      Because the licensing partners' primary fiduciary obligation is to their
shareholders rather than Cragar's shareholders, they may make decisions or take
steps that may result in lower royalty payments or that could adversely affect
the CRAGAR brand name. See "Factors That May Affect Future Results and Financial
Conditions - Dependence on Third Parties to Generate Royalties."

      As part of its new business strategy, Cragar also intends to pursue
licensing opportunities through the utilization of the CRAGAR brand name for
other products, including but not limited to aftermarket performance automotive
products. Effective April 1, 2001 Cragar entered into a Licensing Representation
Agreement with Trademarketing Resources, Inc. ("TRI"). TRI will act as Cragar's
exclusive agent for the purpose of exercising the merchandising rights in and to
the trademarks owned by Cragar, including CRAGAR(R), CRAGAR Lite(R), Keystone(R)
Klassic(R), S/S(R), Street Pro(R), Star Wire(TM), CRAGAR XLS(TM),
TRU=CRUISER(TM), and TRU=SPOKE(R). In addition, TRI will act as Cragar's
exclusive agent with respect to advertising and promoting all products, services
and premiums in all media.

RECENT DEVELOPMENTS

      In January 2001, the holders of the Company's Series A Preferred Stock
converted their 11,000 shares and accrued dividends into 616,131 shares of
Common Stock. With this conversion all of the Company's Series A Preferred Stock
has been converted.

      In September 2000, the Company entered into a licensing transaction
pursuant to which the Company granted an exclusive worldwide license to
Performance Wheel Outlet, Inc. ("Performance") to manufacture, sell, and
distribute Cragar's line of one-piece cast aluminum wheels ("One-Piece Wheel
Business") in exchange for a royalty based on sales of the licensed products.

           Effective April 1, 2001, Cragar has retained the services of
Trademarketing Resources, Inc. ("TRI") a Licensing Agent. TRI will act as
Cragar's exclusive agent for the purpose of exercising the merchandising rights
in and to the trademarks owned by Cragar, including CRAGAR(R), CRAGAR Lite(R),
Keystone(R) Klassic(R), S/S(R), Street Pro(R), Star Wire(TM), CRAGAR XLS(TM),
TRU=CRUISER(TM), and TRU=SPOKE(R). According to the Licensing Representation
Agreement, TRI will act as Cragar's exclusive agent to develop a marketing
strategy to broaden the use of Cragar's intellectual property, including the
CRAGAR brand name. Once Cragar approves the marketing strategy, then TRI will
implement the strategy. There can be no assurance that Cragar, through TRI, will
be successful developing or implementing such a marketing strategy or that any
sales of products utilizing Cragar's intellectual property, including the CRAGAR
brand name and, related royalties, will be material. In addition, TRI will act
as Cragar's exclusive agent with respect to coordinating advertising and
promotion all of Cragar's products, services, and premiums across all media.

RESULTS OF OPERATIONS

           The following table sets forth various items as a percentage of net
sales revenue for the three month periods ended March 31, 2001 and 2000:

                                       7
<PAGE>

                                     THREE MONTHS ENDED MARCH 31,
                                         2001          2000
                                        -----          ----
Total revenues                          100.0%        100.0%
Cost of goods sold                       00.0          72.3
                                        -----          ----
Gross profit                            100.0          27.7
SG&A                                     74.2          40.9
                                        -----          ----
Income (loss) from operations            25.8         (13.2)
Non-operating income (expense), net      18.7           8.1
Income taxes                             --            --
Extraordinary gain                       --            --
                                        -----          ----
Net earnings (loss)                      44.5%        (21.3)%
                                        =====          ====

COMPARISON OF QUARTER ENDED MARCH 31, 2001 AND QUARTER ENDED MARCH 31, 2000

      The comparison of the Company's financial results for the fiscal quarter
ended March 31, 2001 and 2000 set forth below has been significantly affected by
the Company's significant change in business strategy in the fourth quarter of
1999. As a result of this change in strategy, which contemplates royalties from
net sales of CRAGAR brand products from its licensing partners as its primary
source of revenue, the Company has experienced a dramatic reduction in revenues
and related costs and expenses between the periods.

      Total revenues consist of gross sales less discounts, returns and
allowances plus royalties on sale of licensed products. Net sales for the
quarter ended March 31, 2001 were $131,419 compared to $316,351 during the
quarter ended March 31, 2000, representing a 58.5% decrease in sales. Net sales
for the quarter ended March 31, 2001, consisted of royalty income derived from
Carlisle and Weld. The decrease was primarily attributable to the Company having
completely sold off all its remaining inventory during 2000 and having no
product sales during the same period in 2001.

      Gross profit is determined by subtracting cost of goods sold from total
revenues. Historically, cost of goods sold consisted 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
March 31, 2001 was $-0- compared to $127,227 for the quarter ended March 31,
2000. This decrease was attributable to the fact that there were no product
sales during the quarter ended March 31, 2001.

      Selling, general, and administrative ("SG&A") expenses consist primarily
of accounting and legal expenses, office expenses, salaries and wages, marketing
expenses, accounting and legal expenses, and general overhead. These expenses
for the quarter ended March 31, 2001 were $97,549 compared to $187,704 for the
quarter ended March 31, 2001, a 48.0% decrease. This decrease was due primarily
to the Company's completing the change in business strategy in 2000 and
eliminating a substantial portion of the SG&A expenses for the Company.

      Non-operating income, net, for the first quarter of 2001 was $24,583
compared to net non-operating expenses of $37,423 for the first quarter of 2000.
This increase of $62,006, was attributable primarily the Company's lower
interest expenses and the realized gain on disposition of the remaining property
and equipment of the Company.

      Because of carry-forward losses from previous years, the Company had no
income tax provision in the first quarter of 2001 or 2000.

      Net earnings for the first quarter ended March 31, 2001 were $58,453
compared to net loss of $97,900 for the first quarter ended March 31, 2000.
Basic earnings per share for the first quarter ended March 31, 2001 was $0.02
compared to basic loss per share of $.06 for the first quarter ended March 31,
2000. The loss per

                                       8
<PAGE>

share for the first quarter ended March 31, 2000 is calculated after deducting
the dividends due holders of the Series A Preferred Stock. See Exhibit 11 to
this Quarterly Report on Form 10-QSB.

LIQUIDITY AND CAPITAL RESOURCES

      In April 1998, the Company secured a credit facility (the "NCFC Credit
Facility") with NationsCredit Commercial Funding Corporation ("NCFC"). The terms
of the NCFC Credit Facility specified 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 was secured by substantially all of the Company's
assets and certain pledged assets from three investors. During the third quarter
of 2000, the Company paid off and terminated the NCFC Credit Facility. The
proceeds for the pay-off were provided by a loan from two investors totaling
$1,200,000 at an interest rate of 2.25% above the prime rate. The loan is
secured by substantially all of the Company's assets and expires in August 2001.
During the first quarter of 2001, the Company entered into a similar agreement
with another investor for a loan totaling $105,000 at an interest rate of 2.25%
above the prime rate. The loan is secured by substantially all of the Company's
assets and expires in April 2002.

      At March 31, 2001, the Company had an accumulated deficit of $15,539,002.
For the quarter ended March 31, 2001, the Company's operating activities used
$84,099 of cash, which was primarily attributable to the Company paying down
accounts payable and accrued expenses. During the quarter ended March 31, 2001,
the Company's investing activities provided $41,926 of cash. The increase in
cash from investing activities was primarily attributable to the net proceeds
received on the sale of the remaining property and equipment of the Company.
During the quarter ended March 31, 2001, the Company had no cash flow impact
from investing activities.

      The Company does not anticipate any major capital budget expenditures in
2001. In addition, the Company does not believe its operating activities will
generate sufficient cash flow to meet its operating cash flow requirements and
other current obligations. Consequently, it is likely the Company will be
required to raise additional funds from equity or debt financing or receive an
extension on its loans. No assurance can be given that such additional financing
will be available on terms acceptable to the Company, if at all.

      See "Factors that May Affect Future Results and Financial Condition -
Dependence on External Financing" and "History of Previous Losses; Stockholders'
Deficit; Going Concern Opinion."

ACCOUNTING MATTERS

      The Securities and Exchange Commission ("SEC") issued Staff Accounting
Bulletin ("SAB") No. 101 "Revenue Recognition," which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements
filed with the SEC. SAB No. 101 is applicable beginning with our fourth quarter
fiscal 2001 consolidated financial statements. Based on our current analysis of
SAB No. 101 management does not believe it will have a material impact on the
financial results of the Company.

      The FASB issued interpretation No. 44 "Accounting for Certain transactions
Involving Stock Compensation, the Interpretation of APB Opinion No. 25" ("FIN
44"). The Interpretation is intended to clarify certain problems that have
arisen in practice since the issuance of APB No. 25, "Accounting for Stock
Issued to Employees." The effective date of the Interpretation was July 1, 2000.
The provisions of the Interpretation apply prospectively, but they will also
cover events occuring after December 15, 1998 and after January 12, 2000. The
Company believes the adoption of FIN 44 has not had a material adverse affect on
the current and historical financial statements.

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

                                       9
<PAGE>

added liquidity from income tax refunds during the first half of the year. The
Company expects this seasonality to have an effect on the revenue stream derived
from sales of CRAGAR brand products by the Company's license partners.

INFLATION

      Increases in inflation generally result in higher interest rates. Higher
interest rates on the Company's borrowings would decrease the profitability of
the Company. To date, general price inflation has not had a 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.
See "Factors that May Affect Future Results and Financial Condition - Dependence
on External Financing" and "History of Previous Losses; Stockholders' Deficit;
Going Concern Opinion."

FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION

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

HISTORY OF PREVIOUS LOSSES; STOCKHOLDERS' DEFICIT; GOING CONCERN OPINION

      Cragar was incorporated in December 1992 and has incurred significant
losses in each of its completed fiscal years through December 31, 1998. For the
year ended December 31, 2000, Cragar reported net earnings of $1,075,029 and for
the year ended December 31, 1999, Cragar reported net earnings of $54,678. As of
March 31, 2001, Cragar had an accumulated deficit of $15,539,002 and total
stockholders' deficit of $510,679. There can be no assurance that Cragar will be
profitable in the future.

      As a result of Cragar's total stockholders' deficit and the uncertainty
regarding Cragar's ability to meet its anticipated operating and working capital
needs, the independent auditors' report on Cragar's 2000 financial statements
has been qualified for a going concern.

DEPENDENCE ON THIRD PARTIES TO GENERATE ROYALTIES

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

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

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

                                       10
<PAGE>

DEPENDENCE ON EXTERNAL FINANCING

      During the fiscal quarter ending September 30, 2000, the Company paid off
a prior existing loan with loans provided by two investors totaling $1,200,000
at an interest rate of 2.25% above the prime rate. The loan is secured by
substantially all of the Company's assets and expires in August 2001. During the
first quarter of 2001, the Company entered into a similar agreement with another
investor for a loan totaling $105,000 at an interest rate of 2.25% above the
prime rate. The loan is secured by substantially all of the Company's assets and
expires in April 2002. The Company anticipates that it will be required to raise
additional funds through equity or debt financing. No assurance can be given,
however, that additional financing will be available on terms acceptable to the
Company, if at all.

INVESTMENT IN WRENCHEAD MAY NOT BE PROFITABLE

      The Company has made a substantial investment in Wrenchead, Inc. There can
be no assurance that the investment in Wrenchead will turn out to be profitable.

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

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

CHANGE IN BUSINESS STRATEGY MAY DEPRESS THE PRICE OF COMMON STOCK

      The completion of the sale and licensing of Cragar's One-Piece Cast
Aluminum Wheel, Wrought Wheel and SOR Wheel businesses and any other related
licensing arrangement Cragar may complete in the future represents a significant
change in Cragar's business model. In general, the outsourcing of the
manufacturing, marketing, sales, and distribution operations with respect to the
licensed products, together with the sale of the related assets, will result in
a substantial decrease in Cragar's revenues and operating and marketing costs.
Cragar anticipates that the decrease in revenues and operating and marketing
costs will be replaced by a stream of royalty payments generated by the net
sales of the licensed products by Cragar's licensing partners. As a result,
Cragar only has one year of history of financial results upon which shareholders
can rely to make a determination that the new business strategy will be
successful. Given the uncertainty of the consequences of this change in business
strategy, as well as the significant decrease in revenues expected to occur,
there can be no assurance that the change will result in a profitable stream of
royalty payments. As a result of this uncertainty, the price of Cragar's common
stock may be adversely affected.

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

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

NO DUTY TO DISTRIBUTE ROYALTY PAYMENTS TO ITS SHAREHOLDERS

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

                                       11
<PAGE>

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

      A limited number of customers have historically accounted for a
substantial portion of Cragar's revenues in each year. Given Cragar's change in
business strategy, Cragar expects that its current licensing partners will
account for an even greater percentage of its revenues in the future. The
financial condition and success of its customers and Cragar's ability to obtain
orders from new customers have been critical to Cragar's success and will be
critical to the success of Cragar's licensing partners. For the year ended
December 31, 2000, Cragar's ten largest customers accounted for approximately
100.0% of gross sales, since other than sales of excess inventory, gross sales
were attributable to the lincensing agreements and the larger sale of excess
inventory to PDK, Inc. As a result of its change in business strategy as
described above, Cragar believes revenues will be dependent on royalties from
sales of CRAGAR products by Weld, Carlisle and Performance. There can be no
assurance that any of the licensees will be successful in their sales and
marketing efforts.

HIGHLY COMPETITIVE INDUSTRY

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

GENERAL ECONOMIC FACTORS

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

NO ASSURANCE OF ADDITIONAL SUCCESSFUL ALLIANCES

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

      Moreover, any additional investment by the Company in Wrenchead or other
companies may result in a potentially dilutive issuance of equity securities, or
the incurrence of additional debt, which could adversely affect the Company's
financial position. Alliances, whether licensing or direct investments in
companies,

                                       12
<PAGE>

involve numerous risks, such as the diversion of the attention of the Company's
management from other business concerns and the entrance of the Company into
markets in which it has had no or only limited experience, both of which could
have a material adverse effect on the Company.

VARIABILITY IN OPERATING RESULTS; SEASONALITY

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

CHANGING CUSTOMER TRENDS; NEED FOR PRODUCT DEVELOPMENT

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

REGULATORY COMPLIANCE

      The Company historically has been subject to various federal and state
governmental regulations related to occupational safety and health, labor, and
wage practices as well as federal, state, and local governmental regulations
relating to the storage, discharge, handling, emission, generation, manufacture,
and disposal of toxic or other hazardous substances used to produce the
Company's products. The Company believes that it has been and is currently in
material compliance with such regulations. Prior to November 1999, in the
ordinary course of its business, the Company used metals, oils, and similar
materials, which were stored on site. The waste created by use of these
materials was transported off-site on a regular basis by a state-registered
waste hauler. Although the Company is not aware of any material claim or
investigation with respect to these activities, there can be no assurance that
such a claim may not arise in the future or that the cost of complying with
governmental regulations in the future will not have a material adverse effect
on the Company.

      The Company is subject to regulation as a publicly traded company under
the Securities Exchange Act of 1934. In addition, as a consequence of the sale
and licensing of its Wrought Wheel, SOR Wheel and One-Piece businesses, which
could be considered a sale of substantially all of its assets, in exchange for
the receipt of a stream of royalty payments, the Company could face regulatory
issues under the Investment Company Act of 1940 if the royalty payments are
considered investment securities. If the Company is considered to be an
investment company under the 1940 Act, it would be required to register under
that Act as an investment company. As a registered investment company, the
Company would be subject to further regulatory oversight of the Division of
Investment Management of the Commission, and its activities would be subject to

                                       13
<PAGE>

substantial and costly regulation under the 1940 Act. While the Company does not
believe that its activities will subject it to the 1940 Act and accordingly does
not intend to register as an investment company under the Act, there can be no
assurance that such registration would not be required in the future.

RELIANCE ON INTELLECTUAL PROPERTY

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

CONTROL BY EXISTING STOCKHOLDERS

      The directors, officers, and principal stockholders of the Company
beneficially own approximately 42.5% of the Company's outstanding Common Stock.
As a result, these persons have a significant influence on the affairs and
management of the Company, as well as on all matters requiring stockholder
approval, including electing and removing members of the Company's Board of
Directors, causing the Company to engage in transactions with affiliated
entities, causing or restricting the sale or merger of the Company, and changing
the Company's dividend policy. Such concentration of ownership and control could
have the effect of delaying, deferring, or preventing a change in control of the
Company even when such a change of control would be in the best interest of the
Company's other stockholders.

EFFECT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK

      The Company's Amended and Restated Certificate of Incorporation authorizes
the Board of Directors of the Company to issue "blank check" preferred stock,
the relative rights, powers, preferences, limitations, and restrictions of which
may be fixed or altered from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting, or
other rights that could adversely affect the voting power and other rights of
the holders of Common Stock. In the first quarter of 1998, for example, the
Company issued 22,500 shares of its Series A Preferred Stock for approximately
$2,250,000 in additional capital. During the quarter ended September 30, 2000,
11,500 shares of Series A Preferred Stock and the preferred stock dividends
issued on that stock were converted into 456,393 shares of the Company's common
stock. During the month ended January 30, 2001, an additional 11,000 shares of
Series A Preferred Stock and the preferred stock dividends issued on that stock
were converted into 615,585 shares of the Company's common stock. As of the
month ended January 30, 2001 there was no longer any Series A Preferred Stock
outstanding.

      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

      Cragar's future success depends, in large part, on the efforts of Michael
L. Hartzmark, Chairman and Chief Executive Officer. The loss of the services of
Dr. Hartzmark could have a material adverse effect on the business of Cragar.
While Dr. Hartzmark does not have an employment agreement with Cragar, Dr.
Hartzmark and his family beneficially held, as of March 31, 2001, more than
16.6% of Cragar's common stock. The successful implementation of Cragar's
business strategies will depend, for the most part, on qualified management and
other personnel being hired by Cragar's licensing partners. In addition, the

                                       14
<PAGE>

successful implementation of Cragar's brand extension strategy will depend, for
the most part, on the qualified management and other personnel working at
Trademarketing Resources, Inc. Cragar has no input in the hiring decisions being
made by Cragar's licensing partners. Cragar does not maintain key man insurance
on any of its personnel or consultants.

NO CASH DIVIDENDS

      Cragar has never paid cash dividends or stock dividends on its common
stock and does not anticipate that it will pay cash dividends in the foreseeable
future. It is anticipated that any earnings will be used to finance growth of
Cragar's business and to reduce its debt.


                           PART II - OTHER INFORMATION
                           ---------------------------

ITEM 1.    LEGAL PROCEEDINGS

      Cragar is an unsecured creditor in the matter of in Re Super Shops, Inc.,
et al., Case No. LA 97-46094-ER, a bankruptcy action filed by Super Shops, Inc.,
previously Cragar's primary customer. Because Cragar 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.

      Cragar has filed a complaint in the matter of Cragar Industries, Inc.
versus Keystone Automotive Operations, Inc. ("Keystone") in the Superior Court
of Arizona, County of Maricopa, Case No. CV99-21619, seeking to recover in
excess of $290,000 in past due amounts for product purchased from CRAGAR by
Keystone. As of April 9, 2001 the parties entered into a Settlement Agreement
and Mutual Release.

      Cragar has filed a complaint in the matter of Cragar Industries, Inc.
versus Titan Wheel International, Inc. and Titan International, Inc. ("Titan")
in the United States District Court for the District of Arizona, Case No.
CIV99-0649, seeking damages of more than $4,500,000, claiming breach of
contract, breach of warranty, and conversion arising out of a supply contract
with Titan's subsidiary Automotive Wheel, Inc. for the delivery of automotive
wheels to Cragar. The Company recently amended its complaint to include the
charge of fraud by Titan.

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

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

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

      During the year ended December 31, 2000 and in January 2001, the holders
of the Company's Series A Preferred Stock converted their 22,500 shares into
1,072,524 shares of Common Stock.

      In connection with the issuance of the Series A Preferred Stock, Cragar
also granted warrants to the holders of the Series A Preferred Stock to acquire
up to 333,333 shares of Cragar's Common Stock at an exercise price of $8.75 per
share on or before January 23, 2001. In January 2001, all 333,333 of the
warrants expired unexercised.

                                       15
<PAGE>

      In connection with a loan of $105,500 made by an investor of the Company,
the Company issued to the investor a warrant to acquire up to 7,000 shares of
Cragar's Common Stock at an exercise price of $2.125 per share on or before
March 1, 2006.

      Each transaction described above was deemed exempt from registration under
the Securities Act of 1933 pursuant to Section 4(2) of that Act regarding
transactions not involving any public offering.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None

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

           None

ITEM 5.    OTHER INFORMATION

           None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)   Exhibits

           Exhibit No.            Description
           -----------            -----------

           3.1              Second Amended and Restated Certificate of
                            Incorporation of the Registrant filed with the State
                            of Delaware on October 1, 1996*

           3.2              Amended and Restated Bylaws of the Registrant*

           10.1             Amendment to Sales Agreement**

           10.2             Form of Loan Agreement with Mark Schwartz (also
                            pledge, warrant, etc.)***

           11               Schedule of Computation of Earnings per Share

           (b)   Reports on Form 8-K

                 None

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

** Incorporated by reference to Company's Quarterly Report on Form 10QSB filed
on August 14, 2000.

*** Incorporated by reference to Company's Annual Report on Form 10KSB filed on
April 2, 2001.


                                       16
<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:  May 14, 2001                        By: /s/ Michael L. Hartzmark
        -------------                         --------------------------
                                              Michael L. Hartzmark
                                              Chairman, CEO and Treasurer

Dated:  May 14, 2001                        By: /s/ Richard P. Franke
        -------------                         --------------------------
                                              Richard P. Franke
                                              Chief Financial Officer
                                              (Principal Financial and
                                              Accounting Officer)

























                                       17