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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


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

                For the Quarterly Period Ended September 30, 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)


                 4620 EAST ARCADIA LANE, PHOENIX, ARIZONA 85018
                 ----------------------------------------------
                    (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 September 30, 2001: 3,699,429.

          Transitional small business disclosure format. Yes [ ] No [X]
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                                       1
<PAGE>
                             CRAGAR INDUSTRIES, INC.
                            Condensed Balance Sheets
                    September 30, 2001 and December 31, 2000

                                                    September 30,  December 31,
                                                        2001           2000
                                                    ------------   ------------
                                                     (unaudited)
      ASSETS

Current Assets
        Cash and cash equivalents                   $    136,821   $     68,300
        Accounts receivable, net of allowance for
            doubtful accounts of $-0- and  $25,000              -       294,641
        Non-trade receivables                             92,560        117,684
        Investments                                    1,307,519      1,307,519
        Prepaid expenses                                 130,344          2,500
                                                    ------------   ------------
               Total current assets                    1,667,244      1,790,644

Property and equipment, net                                    -         41,926

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

Total Assets                                        $  1,703,548   $  1,890,194
                                                    ============   ============

      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
        Accounts payable                            $    426,001   $    440,882
        Line of credit                                 1,305,500      1,200,000
        Accrued interest                                  10,491          9,730
        Accrued expenses                                 402,414        703,215
                                                    ------------   ------------
               Total current liabilities               2,144,406      2,353,827

Long Term Debt                                                 -        105,500
                                                    ------------   ------------

Total Liabilities                                      2,144,406      2,459,327
                                                    ------------   ------------

Stockholders' Deficit
   Preferred stock, par value $ .01; authorized
      200,000 shares 0 and 11,000 shares
      respectively issued and outstanding                      -            110
   Additional paid-in capital - preferred                      -      1,093,515
   Common stock, par value $ .01; authorized
      10,000,000 shares 3,699,429 and 3,016,716
      shares respectively  issued and outstanding         36,994         30,167
   Additional paid-in capital - common                15,399,958     13,904,530
   Accumulated deficit                               (15,877,810)   (15,597,455)
                                                    ------------   ------------
          Total stockholders' deficit                   (440,858)      (569,133)
                                                    ------------   ------------

Total Liabilities and Stockholders' Deficit         $  1,703,548   $  1,890,194
                                                    ============   ============

            See accompanying notes to condensed financial statements

                                        2
<PAGE>

                             CRAGAR INDUSTRIES, INC.
                       Condensed Statements of Operations
         Three Months and Nine Months Ended September 30, 2001 and 2000
                                   (unaudited)
<TABLE><CAPTION>

                                                         Three Months Ended            Nine Months Ended
                                                            September 30,                 September 30,
                                                    ---------------------------   ---------------------------
                                                        2001           2000           2001           2000
                                                    ------------   ------------   ------------   ------------
<S>                                                <C>            <C>            <C>            <C>
Net Sales                                           $      6,000   $     10,242   $      6,000   $    586,393
Royalty revenues                                          92,560         85,744        338,939        365,253
                                                    ------------   ------------   ------------   ------------
        Total revenues                                    98,560         95,986        344,939        951,646

Cost of goods sold                                             -         37,512              -        624,078
                                                    ------------   ------------   ------------   ------------

        Gross profit                                      98,560         58,474        344,939        327,568

Selling, general and administrative expenses             166,512         21,706        346,109        556,075
                                                    ------------   ------------   ------------   ------------

        Income (loss) from operations                    (67,952)        36,768         (1,170)      (228,507)
                                                    ------------   ------------   ------------   ------------

Non-operating income (expenses), net
        Interest expense                                 (64,664)       (29,234)      (139,488)      (150,679)
        Other                                             20,504          3,474        108,031      1,913,158
                                                    ------------   ------------   ------------   ------------
        Total non-operating income (expenses), net       (44,160)       (25,760)       (31,457)     1,762,479
                                                    ------------   ------------   ------------   ------------


Net earnings (loss) before income taxes                 (112,112)        11,008        (32,627)     1,533,972

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

Net earnings (loss)                                 $   (112,112)  $     11,008   $    (32,627)  $  1,533,972
                                                    ============   ============   ============   ============

Basic earnings (loss) per share                     $      (0.03)  $      (0.00)  $      (0.01)  $       0.51
                                                    ============   ============   ============   ============

Weighted average shares outstanding                    3,695,868      3,010,883      3,627,236      2,641,621
                                                    ============   ============   ============   ============

Diluted earnings (loss) per share                   $      (0.03)  $      (0.00)  $      (0.01)  $       0.30
                                                    ============   ============   ============   ============

Weighted average shares outstanding                    3,695,868      3,010,883      3,627,236      4,484,329
                                                    ============   ============   ============   ============
</TABLE>
            See accompanying notes to condensed financial statements

                                       3
<PAGE>

                             CRAGAR INDUSTRIES, INC.
                       Condensed Statements of Cash Flows
                  Nine Months Ended September 30, 2001 and 2000
                                   (unaudited)
<TABLE><CAPTION>
                                                                        Nine Months Ended
                                                                           September 30,
                                                                   ---------------------------
                                                                       2001           2000
                                                                   ------------   ------------
<S>                                                               <C>            <C>
Cash flows from operating activities
        Net earnings (loss)                                        $    (32,627)  $  1,533,972
        Adjustments to reconcile net earnings (loss) to net cash
            provided by (used in) operating activities:
        Provision for (write-off of) doubtful accounts                        -        (14,860)
        Reduction in (increase in) provision for obsolete
            and slow moving inventory                                         -     (1,392,430)
        Warrants issued for financing costs                              31,920              -
        Depreciation and amortization of property and equipment               -         30,000
        Gain on sale of property and equipment                                -         78,971
        Gain on sale economic rights to certain investment assets             -     (1,834,188)
        Increase (decrease) in cash resulting from changes in:
            Accounts receivable                                         294,641      1,006,771
            Inventory                                                         -      1,933,006
            Non-trade receivables                                        25,124              -
            Prepaid expenses                                           (127,844)       (37,281)
            Other assets                                                 21,320              -
            Accounts payable and accrued expenses                      (315,682)      (747,170)
            Accrued interest                                                761        (35,980)
                                                                   ------------   ------------
              Net cash provided by (used in) operating activities      (102,387)       520,811
                                                                   ------------   ------------

Cash flows from investing activities
        Purchases in investments                                              -     (1,979,600)
        Dispositions of property and equipment                           41,926              -
        Dispositions of economic rights to certain
            investment assets                                                 -      2,620,000
                                                                   ------------   ------------
              Net cash provided by (used in) investing activities        41,926        640,400
                                                                   ------------   ------------
Cash flows from financing activities
        Net borrowings (repayments) on bank line of credit                    -     (2,331,548)
        Issuance of common stock                                        128,982              -
        Proceeds from short-term debt                                         -      1,200,000
        Proceeds from long-term debt                                          -              -
        Repayments of long-term debt                                          -              -
                                                                   ------------   ------------
              Net cash provided by (used in) financing activities       128,982     (1,131,548)
                                                                   ------------   ------------

              Net increase (decrease) in cash and cash equivalents       68,521         29,663

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

Cash and cash equivalents at end of period                         $    136,821   $     31,050
                                                                   ============   ============

Supplemental disclosure of cash flow information:
        Cash paid for interest                                     $    138,727   $    186,659
                                                                   ============   ============

Non-cash financing and investing activities:
        Conversion of bridge financing to common stock             $          -   $    260,000
        Conversion of bridge financing to sale of economic rights
            to certain investment assets                           $          -   $    100,000
        Issuance of common stock for license fees                  $    120,000   $          -
        Issuance of warrants for financing fees                    $     31,920   $          -
</TABLE>

            See accompanying notes to condensed financial statements

                                        4
<PAGE>

                             CRAGAR INDUSTRIES, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2001
                                   (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION:

   The interim financial data as of and for the three months and nine months
   ended September 30, 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. The results for the nine
   month period ended September 30, 2001 may not be indicative of the results
   for the entire year.

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 May 14, 2001, the Company granted options to each of Marc Dworkin, Donald
   McIntyre, Michael Miller and Mark Schwartz, members of the Board of Directors
   of the Company, to purchase 4,000 shares of common stock at an exercise price
   of $2.25 per share, which was the fair market value on the date of grant.
   One-half of 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 equal to the closing price of the underlying common
   stock on the date of grant. The other one-half of the grant, or additional
   2,000 shares of the Company's common stock, is based on the Non-Employee
   Option Plan, which provides for annual grants to directors of options to
   purchase 2,000 shares of the Company's common stock upon their election to
   the Board of Directors.

   During the quarter ended September 30, 2001, the Company granted to each of
   two stockholders warrants to purchase 42,000 shares of the Company's common
   stock at $1.80 per share relating to the extension of a line of credit
   provided by the two stockholders.

   During the quarter ended September 30, 2001, the Company issued 8,400 shares
   of the Company's common stock to a stockholder who exercised a warrant.

                                       5
<PAGE>

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 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, we designed, produced, and sold high-quality custom vehicle
      wheels and wheel accessories. We sold our 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 our business strategy, we
      considered combinations and strategic alliances with other companies that
      could complement Cragar's existing business, including outsourcing our
      manufacturing and sales operations. In furtherance of this business
      strategy, in September 1999, we 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 our 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
      our Wrought Wheel Business. We completed this transaction with Weld in
      October 1999.

          In October 1999, we entered into a similar transaction with Carlisle
      Tire and Wheel Co. ("Carlisle"), pursuant to which we granted an exclusive
      worldwide license to Carlisle to manufacture, sell, and distribute our
      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 our SOR Wheel
      Business. We completed this transaction with Carlisle in December 1999.

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

                                       6
<PAGE>

          As a consequence of the transactions with Performance, Weld, and
      Carlisle, we no longer engage in the manufacture, marketing, sale, or
      distribution of any products related to our One-Piece Wheel Business,
      Wrought Wheel Business and SOR Wheel Business, which together generated
      approximately 100% of our 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 our revenues and related
      operating and marketing costs.

          We intend 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, we are
      entitled to royalties based on the net sales of any new products developed
      by Carlisle related to the SOR Wheel Business under the CRAGAR brand name,
      including products and related accessories for vehicles other than
      automobiles, trucks, and vans, such as all-terrain vehicles and golf
      carts. We are also entitled to receive 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 our licensing partners'
      primary fiduciary obligation is to their shareholders rather than our
      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 our new business strategy, we also intend 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, we retained the services of
      Trademarketing Resources, Inc. ("TRI") a Licensing Agent. TRI will act as
      our exclusive agent for the purpose of exercising the merchandising rights
      in and to the trademarks owned by us, 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 our exclusive agent to develop a
      marketing strategy to broaden the use of our intellectual property,
      including the CRAGAR brand name. Once we approve the marketing strategy,
      then TRI will implement the strategy. TRI will also oversee and coordinate
      the licensing activities of Carlisle, Weld, and Performance. In addition,
      TRI will act as our exclusive agent with respect to advertising and
      promoting all products, services, and premiums in all media. As part of
      the agreement with TRI, we issued 58,182 shares of our common stock to
      certain individuals who will be providing us services directly under the
      TRI agreement. They will receive an additional 58, 182 shares of Cragar
      common stock on April 2, 2002. There can be no assurance that we, through
      TRI, will be successful developing or implementing such a marketing
      strategy or that any sales of products utilizing our intellectual
      property, including the CRAGAR brand name and, related royalties, will be
      material. In addition, TRI will act as our exclusive agent with respect to
      coordinating advertising and promotion all of our products, services, and
      premiums across all media.

      RECENT DEVELOPMENTS

          In January 2001, the holders of our Series A Preferred Stock converted
      their 11,000 shares and accrued dividends into 616,131 shares of Common
      Stock. As a result, we no longer have shares of Series A Preferred Stock
      outstanding.

          Effective July 1, 2001, we extended our arrangement with
      Trademarketing Resources, Inc. ("TRI") a Licensing Agent. TRI will also
      act as our administrative staff with respect to accounting and legal
      services. In addition, TRI has taken on greater responsibility in
      overseeing, coordinating and monitoring our licensing arrangements with
      Weld, Carlisle and Performance.

                                       7
<PAGE>

      RESULTS OF OPERATIONS

          The following table sets forth various items as a percentage of total
      revenues for the three-month and nine-month periods ended September 30,
      2001 and 2000:
<TABLE><CAPTION>
                                               NINE MONTHS ENDED        THREE MONTHS ENDED
                                                  SEPTEMBER 30,             SEPTEMBER 30,
                                               2001         2000         2001         2000
                                            ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>
      Total revenues                            100.0%       100.0%       100.0%       100.0%
      Cost of goods sold                            -         39.1            -         65.6
                                            ----------   ----------   ----------   ----------
      Gross profit                              100.0         60.9        100.0         34.4
      SG&A                                      168.9         22.6        100.0         58.4
                                            ----------   ----------   ----------   ----------
      Income (loss) from operations             (68.9)        38.3            -        (24.0)
      Non-operating income (expense), net       (12.4)       (26.8)           -        185.2
      Income taxes                                  -            -            -            -
                                            ----------   ----------   ----------   ----------
      Net earnings (loss)                      (81.3)%        11.5%           -        161.2%
                                            ==========   ==========   ==========   ==========
</TABLE>

      COMPARISON OF QUARTER ENDED SEPTEMBER 30, 2001 AND QUARTER ENDED SEPTEMBER
      30, 2000

          The comparison of our financial results for the fiscal quarter ended
      September 30, 2001 and 2000 set forth below has been significantly
      affected by significant change in our 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 our
      licensing partners as our primary source of revenue, we have 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. Total revenues for
      the quarter ended September 30, 2001 were $98,560 compared to $95,986
      during the quarter ended September 30, 2000, representing a 2.7% increase
      in sales. Total revenues for the quarter ended September 30, 2001,
      consisted principally of royalty income derived from Carlisle and Weld.
      The increase was primarily attributable to increases in royalty fees on
      sales of our licensed products.

          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 our products, as well as the freight
      costs of shipping product to our customers. Gross profit for the quarter
      ended September 30, 2001 was $98,560 compared to $58,474 for the quarter
      ended September 30, 2000. This increase was attributable to our having
      disposed of all inventory during 2000.

          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 September 30, 2001 were
      $166,512 compared to $21,706 for the quarter ended September 30, 2000, a
      667.1% increase. This increase was due primarily to legal fees associated
      with our on-going litigation. In addition, for the quarter ended September
      30, 2000, we made certain reductions in our accruals and reserves that we
      had not previously written down based on our re-evaluation of our business
      strategy

          Non-operating expense, net, for the third quarter of 2001 was $44,160
      compared to net non-operating expense of $25,760 for the third quarter of
      2000. This increase of $18,400, was primarily attributable to the warrants
      issued for the extension of a line of credit during the third quarter
      ended September 30, 2001.

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

          Net loss for the quarter ended September 30, 2001 was $112,112
      compared to net earnings of $11,008 for the quarter ended September 30,
      2000. Basic loss per share for the quarter ended September 30, 2001 was
      $0.03 compared to basic earnings per share of $0.00 for the quarter ended
      September 30, 2000. Diluted loss

                                       8
<PAGE>

      per share for the quarter ended September 30, 2001 was $0.03 compared to
      diluted earnings per share of $0.00 for the quarter ended September 30,
      2000. See Exhibit 11 to this Quarterly Report on Form 10-QSB.

      COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2001 AND NINE MONTHS ENDED
      SEPTEMBER 30, 2000

          The comparison of our financial results for the nine months ended
      September 30, 2001 and 2000 set forth below has been significantly
      affected by significant change in our 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 our
      licensing partners as our primary source of revenue, we 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 the sale of licensed products. Total revenues
      for the nine months ended September 30, 2001 were $344,939 compared to
      $951,646 during the nine months ended September 30, 2000, representing a
      63.8% decrease in sales. Total revenues for the nine months ended
      September 30, 2001, consisted primarily of royalty income derived from
      Carlisle and Weld. The decrease was primarily attributable to our having
      completely sold off all our remaining inventory during 2000 and having
      substantially no similar 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 our products, as well as the freight
      costs of shipping product to our customers. Gross profit for the nine
      months ended September 30, 2001 was $344,939 compared to $327,568 for the
      nine months ended September 30, 2000. This increase was attributable to
      the fact that there were substantially no product sales during the nine
      months ended September 30, 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 nine months ended September 30, 2001 were
      $346,109 compared to $556,075 for the nine months ended September 30,
      2000, a 37.8% decrease. This decrease was due primarily to the completion
      of our change in business strategy in 2000 and the resulting elimination
      of a substantial portion of our SG&A expenses.

          Non-operating expenses, net, for the nine months ended September 30,
      2001 was $31,457 compared to net non-operating income of $1,762,479 for
      the nine months ended September 30, 2000. This decrease of $1,793,936, was
      primarily attributable to the gain we realized in the second quarter of
      2000 on the sale of the economic rights to 180,333 shares of Wrenchead
      common stock.

          Because of carry-forward losses from previous years, we had no income
      tax provision in the nine months ended September 30 of 2001 or 2000.

          Net loss for the nine months ended September 30, 2001 was $32,627
      compared to net earnings of $1,533,972 for the nine months ended September
      30, 2000. Basic loss per share for the nine months ended September 30,
      2001 was $0.01 compared to basic earnings per share of $0.51 for the nine
      months ended September 30, 2000. Diluted loss per share for the quarter
      ended September 30, 2001, was $0.01 compared to diluted earnings per share
      of $0.30 for the quarter ended September 30, 2000. See Exhibit 11 to this
      Quarterly Report on Form 10-QSB.

                                       9
<PAGE>

      LIQUIDITY AND CAPITAL RESOURCES

          In April 1998, we 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 our assets and certain pledged assets from three
      investors. During the third quarter of 2000, we 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 our
      assets and expired in August 2001. The term of the loan has been extended
      until August 2002. During the first quarter of 2001, we 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 our assets and expires in April 2002.

          At September 30, 2001, we had an accumulated deficit of $15,877,810.
      For the nine months ended September 30, 2001, our operating activities
      used $102,387 of cash, which was primarily attributable to our payments on
      accounts payable and accrued expenses. During the nine months ended
      September 30, 2001, our 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 our remaining property and
      equipment. During the nine months ended September 30, 2001, our financing
      activities provided $128,982 in cash. This cash was provided from the
      issuance of our common stock.

          We do not anticipate any major capital budget expenditures in 2001. In
      addition, we do not believe our operating activities will generate
      sufficient cash flow to meet our operating cash flow requirements and
      other current obligations. Consequently, it is likely we 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 us, 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, we do not believe it will have a
      material impact on our financial results.

          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 certain events occurring
      after December 15, 1998 and after January 12, 2000. We believe the
      adoption of FIN 44 has not had a material adverse affect on our current
      and historical financial statements.

          In June 2001 the Financial Accounting Standards Board adopted Opinion
      No. 141, Business Combinations, and Opinion No. 142, Goodwill and Other
      Intangibles. The pronouncements provide for the cessation of the pooling
      method of accounting for business combinations as well as providing that
      goodwill and other intangible assets that have indefinite useful lives
      will not be amortized but rather will be tested at least annually for
      impairment. The Company does not expect the adoption of the standards to
      have a material effect on the financial statements. The effective dates
      for Financial Accounting Standards Nos. 141 and 142 are July 1, 2001 and
      for fiscal years beginning after December 15, 2001, respectively.
      SEASONALITY

          Historically, we have experienced higher revenue in the first two
      quarters of the year than in the latter half of the year. We believe 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

                                       10
<PAGE>

      income tax refunds during the first half of the year. We expect this
      seasonality to have an effect on the revenue stream derived from sales of
      CRAGAR brand products by our licensing partners.

      INFLATION

          Increases in inflation generally result in higher interest rates.
      Higher interest rates on our borrowings would decrease our profitability.
      To date, general price inflation has not had a significant impact on our
      operations; however, increases in inflation may have an adverse effect on
      net sales of CRAGAR products by our licensing partners which would result
      in our receiving lower royalty payments. 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

          Our future operating results and financial condition are dependent
      upon, among other things, our ability to implement our new business
      strategy. Potential risks and uncertainties that could affect our
      profitability are set forth below.

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

          We were incorporated in December 1992 and have incurred significant
      losses in each of our completed fiscal years through December 31, 1998.
      For the year ended December 31, 2000, we reported net earnings of
      $1,075,029 and for the year ended December 31, 1999, we reported net
      earnings of $54,678. For the nine months ended September 30, 2001 we
      reported a net loss of $32,627. As of December 31, 2000, we had an
      accumulated deficit of $15,597,455 and a total stockholders' deficit of
      $569,133. There can be no assurance that we will be profitable in the
      future.

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

      DEPENDENCE ON THIRD PARTIES TO GENERATE ROYALTIES

          As a result of our change in business strategy, our revenues and
      operating results will be substantially dependent on the efforts and
      success of our third party licensing partners. Because the amount of
      royalties payable to us are determined by the net sales of those products
      by our licensing partners, our revenues will be subject to the abilities
      of our licensing partners to generate substantial net sales and deliver a
      high-quality product on a timely basis to our customers. In addition,
      because the primary fiduciary obligations of our licensing partners are to
      their shareholders rather than our shareholders, they may make decisions
      or take steps that would result in lower royalty payments than would
      otherwise be the case. If any of our licensing partners does not meet its
      obligation under its respective licensing agreement, our primary remedy is
      to terminate that license agreement, which may be an effective remedy only
      if we 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 our licensing partners terminates its license agreement or
      we terminate the license agreement for any reason, we may be forced to
      incur the cost of manufacturing, marketing, selling, and distributing the
      licensed products without the financial resources and distribution
      capabilities of our licensees. In the

                                       11
<PAGE>

      alternative, we would be forced to possibly secure another licensee
      capable of manufacturing, marketing, selling, and distributing the
      licensed products on behalf of us and paying any royalties based on the
      net sales of those products. There can be no assurance that we would be
      able to meet these obligations in the event that one or more of the
      license agreements is terminated.

      DEPENDENCE ON EXTERNAL FINANCING

          During the fiscal quarter ending September 30, 2000, we paid off and
      terminated our credit facility with the proceeds from 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 our assets and expired
      in August 2001. We have extended the term of the loan to August 1, 2002.
      During the fiscal quarter ending March 31, 2001, we entered into a loan
      from an investor totaling $105,500 at an interest rate of 2.25% above the
      prime rate. The loan is secured by substantially all of our assets and
      expires in April 2002. Upon expiration of these loans it is likely we we
      will be required to raise additional funds through equity or debt
      financing to repay such loans and to fund working capital. No assurance
      can be given, however, that additional financing will be available on
      terms acceptable to us, if at all.

      INVESTMENT IN WRENCHEAD MAY NOT BE PROFITABLE

          We have 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 us with two of our current
      licensing partners provides for a decrease in the applicable percentage of
      net sales that determines royalty payments to us as net sales increase
      above certain levels. The consequence of this structure is that our
      ability to realize the benefits of a substantial increase in sales with
      respect to any group of our 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 our one-piece cast
      aluminum wheels and related accessories ("One-Piece Wheel Business"), our
      wheels with non-cast wrought aluminum alloy outer rims and related
      accessories ("Wrought Wheel Business"), our line of wheels with steel
      outer rims and related accessories ("SOR Wheel Business") and any other
      related licensing arrangement we may complete in the future represents a
      significant change in our 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 our revenues and
      operating and marketing costs. We anticipate 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 our
      licensing partners. As a result, we only have 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 our common stock
      may be adversely affected.

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

          Our new business strategy contemplates using the services of
      Trademarketing Resources, Inc. ("TRI") to extend the CRAGAR brand names to
      new products developed by our licensees as well as to non-wheel related
      products within the automotive aftermarket industry. We regard this
      extension of our 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 TRI, our licensees, or we will

                                       12
<PAGE>

      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 our financial
      results.

      NO DUTY TO DISTRIBUTE ROYALTY PAYMENTS TO OUR SHAREHOLDERS

          Any royalty payments made to us pursuant to the licensing agreements
      initially will be used by us to increase our working capital and reduce
      our debt. We have never paid any cash dividends on our common stock and do
      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 our licensing transactions.

      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 our revenues in each year. Given our change in
      business strategy, we expect that our current licensing partners will
      account for an even greater percentage of our revenues in the future. The
      financial condition and success of our customers and our ability to obtain
      orders from new customers have been critical to our success and will be
      critical to the success of our licensing partners. For the year ended
      December 31, 2000, our 10 largest customers accounted for approximately
      100% of gross sales, since other than sales of excess inventory, gross
      sales were attributable to the licensing agreements and the larger sale of
      excess inventory to PDK, Inc. For the year ended December 31, 1999, our 10
      largest customers accounted for approximately 65.2% of gross sales
      (excluding sales in the amount of $1,676,948, recorded as part of the
      sales of assets to Weld Racing, Inc., a Missouri Corporation ("Weld") and
      Carlisle Tire and Wheel Company, a Delaware Corporation and a wholly owned
      subsidiary of the Carlisle Companies, Inc. ("Carlisle")) with J.H. Heafner
      Company, Inc. accounting for 22.7% of gross sales, Buckeye Sales, Inc.
      accounting for 8.2% and Autosales, Incorporated accounting for 7.9% of
      gross sales. The sales recorded as part of the sales of assets to Weld and
      Carlisle represented 11.9% of the aggregate gross sales (gross sales
      including sales recorded as a part of the sales of assets to Weld and
      Carlisle). As a result of our change in business strategy as described
      above, we believe an increasing percentage of revenues will be dependent
      on royalties from sales of CRAGAR products by our licensing partners.
      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 our products is highly competitive. We 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. We anticipate that
      our licensing partners will compete on those same terms. We believe 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 our
      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 our licensing partners, possibly resulting in
      the reduction or elimination of royalty payments due to us.

      GENERAL ECONOMIC FACTORS

          The automotive aftermarket is directly impacted by certain external
      factors, such as the general demand for aftermarket automotive parts,
      prices for raw materials used in producing our products, fluctuations in
      discretionary consumer spending, and general economic conditions,
      including employment levels, business conditions, interest rates, and tax
      rates. While we believe that current economic conditions favor stability
      in the markets in which our 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 our licensing partners' businesses in the future, causing
      a decrease in royalty payments due us, or prevent us from successfully
      implementing our business strategies.

                                       13
<PAGE>

      NO ASSURANCE OF ADDITIONAL SUCCESSFUL ALLIANCES

          In furtherance of our change in business strategy and sale of our
      licensing rights in the Wrought Wheel, SOR Wheel and One-Piece Wheel
      businesses, we continue to consider alliances with other companies that
      could complement our new business strategy, including other complementary
      automotive aftermarket product lines where we 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 us that would enable us to consummate
      such transactions. Furthermore, even if we complete one or more licensing
      agreements, there can be no assurance that our licensing partners will be
      successful in manufacturing, marketing, selling and distributing the
      licensed products.

          Moreover, any additional investment by us 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 our financial position. Alliances, whether licensing or direct
      investments in companies, involve numerous risks, such as the diversion of
      the attention of our management from other business concerns and our
      entrance into markets in which we have had no or only limited experience,
      both of which could have a material adverse effect on us.

      VARIABILITY IN OPERATING RESULTS; SEASONALITY

          Our results of operations have historically been subject to
      substantial variations as a result of a number of factors. In particular,
      our 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 we participate. Historically, our 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 our cash flow or workflow. We
      believe that any period-to-period comparisons of our financial results are
      not necessarily meaningful and should not be relied upon as an indication
      of future performance. We expect that our licensing partners will be
      subject to the same variations and industry seasonality as we have
      experienced in the past. These variations may cause fluctuations in the
      sales of CRAGAR branded products thereby causing fluctuations in the
      royalties due us.

      CHANGING CUSTOMER TRENDS; NEED FOR PRODUCT DEVELOPMENT

          Our success will depend, in part, on the ability of our licensing
      partners to correctly and consistently anticipate, gauge, and respond in a
      timely manner to changing consumer preferences. There can be no assurance
      that our licensed products will continue to enjoy acceptance among
      consumers or that any of the future CRAGAR branded products developed and
      marketed by our licensing partners will achieve or maintain market
      acceptance. Any misjudgment by our 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 our licensing
      partners may have an adverse effect on us and our financial condition and
      results of operations.

                                       14
<PAGE>

      REGULATORY COMPLIANCE

          We historically have 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 our products. We believe that we have been and
      are currently in material compliance with such regulations. Prior to
      November 1999, in the ordinary course of our business, we 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 we are 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 us.

          We are 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 our Wrought Wheel, SOR Wheel and One-Piece businesses,
      which could be considered a sale of substantially all of our assets, in
      exchange for the receipt of a stream of royalty payments, we could face
      regulatory issues under the Investment Company Act of 1940 if the royalty
      payments are considered investment securities. If we are considered to be
      an investment company under the 1940 Act, we would be required to register
      under that Act as an investment company. As a registered investment
      company, we would be subject to further regulatory oversight of the
      Division of Investment Management of the Commission, and our activities
      would be subject to substantial and costly regulation under the 1940 Act.
      While we do not believe that our activities will subject us to the 1940
      Act and accordingly do 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

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

      CONTROL BY EXISTING STOCKHOLDERS

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

      EFFECT OF PREFERRED STOCK ON RIGHTS OF COMMON STOCK

          Our Amended and Restated Certificate of Incorporation authorizes our
      Board of Directors 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 our Board of Directors. Accordingly,
      our 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

                                       15
<PAGE>

      Stock. In the first quarter of 1998, for example, we issued 22,500 shares
      of 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 our 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 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 our company that stockholders might consider to be in
      our company's best interests. There can be no assurance that we will not
      issue additional shares of preferred stock in the future.

      DEPENDENCE ON KEY PERSONNEL

          Our future success depends, in large part, on the efforts of Michael
      L. Hartzmark, our Chairman and Chief Executive Officer. The loss of the
      services of Dr. Hartzmark could have a material adverse effect on our
      business. While Dr. Hartzmark does not have an employment agreement with
      us, Dr. Hartzmark and his family beneficially held, as of September 30,
      2001, more than 16.6% of our common stock. The successful implementation
      of our business strategies will depend, for the most part, on qualified
      management and other personnel being hired by our licensing partners. In
      addition, the successful implementation of our brand extension strategy
      will depend, for the most part, on the qualified management and other
      personnel working at Trademarketing Resources, Inc. We have no input in
      the hiring decisions being made by our licensing partners. We do not
      maintain key man insurance on any of our personnel or consultants.

      NO CASH DIVIDENDS

          We have never paid cash dividends or stock dividends on our common
      stock and do not anticipate that we will pay cash dividends in the
      foreseeable future. It is anticipated that any earnings will be used to
      finance growth of our business and to reduce our 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 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.

                                       16
<PAGE>

          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

          As part of the agreement with TRI, we issued 58,182 shares of our
      common stock to certain individuals who will be providing us consulting
      services directly under the TRI agreement. They will receive an additional
      58, 182 shares of Cragar common stock on April 2, 2002.

          During the quarter ended September 30, 2001, the Company granted to
      each of two stockholders warrants to purchase 42,000 shares of the
      Company's common stock at $1.80 per share relating to the extension of a
      line of credit provided by the two stockholders.

          During the quarter ended September 30, 2001, the Company issued 8,400
      shares of the Company's common stock to a stockholder who exercised a
      warrant.

      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.)***

            10.3         Form of Restricted Stock Agreement with Trademarketing
                         Resources, Inc.****

            10.4         Licensing Representation Agreement with Trademarketing
                         Resources, Inc.*****

              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.
****    Incorporated by reference to Company's Registration Statement on Form
        S-8 filed on May 22, 2001.
*****   Incorporated by reference to Company's Quarterly Report on Form 10QSB
        filed on August 15, 2001.

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


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