<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               -------------------

                                   FORM 10-K/A
                          AMENDMENT NO. 1 TO FORM 10-K

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

                    For fiscal year ended September 30, 2000

                         Commission file number 0-21630
                              --------------------

                       ACTION PERFORMANCE COMPANIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                                    <C>
                          ARIZONA                                  86-0704792
                 (State of Incorporation)             (I.R.S. Employer Identification No.)
</TABLE>

                              4707 E. Baseline Road
                             Phoenix, Arizona 85040
                                 (602) 337-3700
  (Address, including zip code, and telephone number, including area code, of
                          principal executive offices)

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of Common Stock held by nonaffiliates of the
registrant (14,949,611 shares) based on the closing price of the registrant's
Common Stock as reported on the Nasdaq National Market on December 20, 2000, was
$42,008,407. For purposes of this computation, all officers, directors and 10%
beneficial owners of the registrant are deemed to be affiliates. Such
determination should not be deemed to be an admission that such officers,
directors or 10% beneficial owners are, in fact, affiliates of the registrant.

As of December 20, 2000, there were outstanding 16,964,029 shares of
registrant's Common Stock, par value $.01 per share.

Documents incorporated by reference:  None
<PAGE>   2
                                     PART II

ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Reference is made to the financial statements, the notes thereto, and
reports thereon, commencing at page F-1 of this report, which financial
statements, notes, and report are incorporated herein by reference.

                                    PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

        The following table sets forth certain information regarding our
directors and executive officers.

<TABLE>
<CAPTION>
                NAME                   AGE                   POSITION HELD
                ----                   ---                   -------------
<S>                                    <C>     <C>
           Fred W. Wagenhals.........  59      Chairman of the Board, President, and Chief Executive Officer
           R. David Martin, Jr.......  54      Chief Financial Officer and Director
           Melodee L. Volosin........  36      Executive Vice President - Sales and Director
           John S. Bickford, Sr......  55      Executive Vice President - Strategic Alliances and Director
           Paul G. Lang..............  52      Managing Director of MiniChamps and Director
           Jack M. Lloyd.............  50      Director
           Robert H. Manschot........  56      Director
           Edward J. Bauman..........  75      Director
</TABLE>

        Fred W. Wagenhals has served as our Chairman of the Board, President,
and Chief Executive Officer since November 1993 and served as Chairman of the
Board and Chief Executive Officer from May 1992 until September 1993 and as
President from July 1993 until September 1993.

        R. David Martin has served as our Chief Financial Officer since August
2000 and as a director since December 2000. Mr. Martin joined Deloitte & Touche
in June 1968 and served as a partner of that firm from August 1978 until May
2000. Mr. Martin is a Certified Public Accountant.

        Melodee L. Volosin has served as our Executive Vice President - Sales
since December 1999 and as a director since January 1997. Ms. Volosin served as
our Vice President - Wholesale Division from September 1997 until December 1999.
Ms. Volosin served as the Director of our Wholesale Division from May 1992 to
September 1997. Ms. Volosin's duties include managing all of our wholesale
distribution of die-cast collectibles and other products, including advertising
programs and budgeting.

        John S. Bickford, Sr. has served as our Executive Vice President -
Strategic Alliances since July 1997 and as a director of our company since
January 1997. Mr. Bickford also served as a consultant to our company from
January 1997 to June 1997. From 1976 to present, Mr. Bickford has served as
President of MPD Racing Products, Inc., which manufactures race car parts for
distribution through speed shops and high-performance engine shops. Mr. Bickford
served as President of Bickford Motorsports, Inc., which provided consulting and
special project coordination services to race car drivers, car owners, and other
businesses, from 1990 until 1997. Mr. Bickford also published Racing for Kids
magazine during 1996 and 1997. Mr. Bickford served as General Manager of Jeff
Gordon, Inc. from 1990 to 1995. Mr. Bickford currently serves as a director of
Equipoise Balancing, Inc., a privately held company.

        Paul G. Lang has served as a director of our company since August 1998.
Mr. Lang also serves as Managing Director of Paul's Model Art, GmbH, MiniChamps,
GmbH, Lang Miniaturen, GmbH, and Spielwaren Danhausen, GmbH. Mr. Lang co-founded
the various MiniChamps entities between 1988 and 1996 and served as Managing
Director of each of those companies prior to our acquisition of an 80% ownership
interest in MiniChamps in August 1998.


                                       1
<PAGE>   3
        Jack M. Lloyd has served as a director of our company since July 1995.
Mr. Lloyd served as the President and Chief Executive Officer of Phoenix
Restaurant Group, Inc. (formerly DenAmerica Corp.), a publicly held corporation
that owns and franchises Black-eyed Pea restaurants and is the largest
franchisee of Denny's restaurants in the United States from March 1996 until
September 2000, and as Chairman of the Board of Phoenix Restaurant Group, Inc.
from July 1996 until September 2000. Mr. Lloyd served as the Chairman of the
Board and Chief Executive Officer of Denwest Restaurant Corp., the second
largest franchisee of Denny's restaurants in the United States, from 1987 until
its merger with Phoenix Restaurant Group, Inc. in March 1996. Mr. Lloyd also
served as President of Denwest from 1987 until November 1994. Mr. Lloyd
currently serves as a director of Star Buffet, Inc., a publicly held company.

        Robert H. Manschot has served as a director of our company since July
1995. Mr. Manschot currently serves as the Managing Director and Chairman of
Manschot Investment Group L.L.C., an investment fund that is in the business of
identifying and investing in companies that have significant potential for
growth; as Chairman of Silicon Entertainment, Inc., which develops entertainment
centers that employ interactive virtual-reality technology for simulated stock
car racing; as Chairman and Chief Executive Officer of Seceurop Security
Services and GeldNet, which are privately held emergency services companies
operating in Europe; as Chairman of RHEM International Enterprises, Inc., which
engages in business consulting services and venture capital activities; and as
Chairman of Motorsports Promotions, Inc. Mr. Manschot served as President and
Chief Executive Officer of Rural/Metro Corporation, a publicly held provider of
ambulance and fire protection services, from October 1988 until March 1995. Mr.
Manschot joined Rural/Metro in October 1987 as Executive Vice President, Chief
Operating Officer, and a member of its Board of Directors. Mr. Manschot was with
the Hay Group, an international consulting firm, from 1978 until October 1987,
serving as Vice President and a partner from 1984, where he led strategic
consulting practices in Europe, Asia, and the western United States. Prior to
joining the Hay Group, Mr. Manschot spent 10 years with several leading
international hotel chains in senior operating positions in Europe, the Middle
East, Africa, and the United States. Mr. Manschot currently serves as a director
of Phoenix Restaurant Group, Inc., a publicly traded company, and as a director
of First Wave, TouchScape Corporation, WAM Interactive UK, Thomas Pride
Development, Inc., and Sports Southwest, Inc., all of which are privately held
companies.

        Edward J. Bauman has served as a director of our company since February
1998. Mr. Bauman is the former owner and director of Richmond International
Raceway. Mr. Bauman also served as Chairman of Draper Corporation, a textile
machinery company, from 1987 until 1995 and as the Senior Advisor of Mergers &
Acquisitions for Bankers Trust, New York from 1987 until 1992. Mr. Bauman served
in various capacities with Blue Bell, Inc., the manufacturer of Wranglers,
Jantzen, and other apparel from 1950 until 1987, most recently as Chairman,
President, and Chief Executive Officer. Mr. Bauman currently serves as Chairman
of the Board of Anderson Bauman Tourtellot Vos & Co., a turnaround management
consulting firm. Mr. Bauman also serves as a director of Elk River Development
Corp. and First Union Corporation, both of which are publicly traded companies,
and Jay Garment Company, Precision Fabrics Group, Inc., and American Emergency
Vehicles, all of which are privately held companies.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Exchange Act requires our directors, officers, and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Directors, officers, and greater than 10% shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file. Based solely upon our review of the copies of such forms that we
received during the fiscal year ended September 30, 2000 and written
representations that no other reports were required, we believe that each person
who at any time during such fiscal year was a director, officer, or beneficial
owner of more than 10% of our common stock complied with all Section 16(a)
filing requirements during such fiscal year except that (a) R. David Martin, Jr.
filed a late Form 3 with respect to his election as an officer, and (b) Fred W.
Wagenhals filed a late Form 4 covering one transaction.


                                       2
<PAGE>   4
ITEM 11.       EXECUTIVE COMPENSATION

SUMMARY OF CASH AND OTHER COMPENSATION

        The following table sets forth certain information concerning the
compensation for the fiscal years ended September 30, 1998, 1999, and 2000
earned by our Chief Executive Officer and by two other executive officers whose
cash salary and bonus exceeded $100,000 during fiscal 2000. The table also sets
forth certain information concerning the compensation for the fiscal years ended
1998, 1999, and 2000 earned by two of our former executive officers whose cash
salary and bonus exceeded $100,000 during fiscal 2000.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                       LONG TERM
                                                                     COMPENSATION
                                                                         AWARDS
                                                                     ------------
                                                                      SECURITIES      ALL OTHER
                                                                      UNDERLYING    COMPENSATION
NAME AND PRINCIPAL POSITION(1)       YEAR   SALARY($)(2)  BONUS($)   OPTIONS(#)(3)      ($)(4)
-----------------------------        ----   -----------   -------    -------------  ------------
<S>                                  <C>    <C>           <C>        <C>            <C>
Fred W. Wagenhals................    2000   $  600,000    $     --      50,000          $  200
    Chairman of the Board,           1999      591,731     250,000      50,000           3,200
    President, and Chief Executive   1998      459,616     100,000      60,000(5)        3,200
    Officer

Melodee L. Volosin...............    2000   $  165,000    $ 30,000      40,000          $3,800
    Executive Vice President -       1999      128,173      30,000      20,000           2,748
    Sales and Director               1998      100,000      15,000      10,000           2,300

John S. Bickford, Sr.............    2000   $  194,125    $ 10,000      25,000          $1,407
    Executive Vice President         1999      172,835      35,000      20,000           1,346
                                     1998      150,000      11,000      10,000           3,333(6)

Tod J. Wagenhals(7)..............    2000   $  195,250    $100,000      35,000          $1,100
    Executive Vice President,        1999      182,873      70,000          --           2,875
    Secretary, and Director          1998      160,962      40,000      40,000(8)        3,200

Christopher S. Besing(7).........    2000   $  146,395    $     --          --          $   --
    Vice President, Chief            1999      220,373      60,000      20,000           3,988
    Financial Officer, Treasurer,    1998      160,962      40,000      40,000(8)        3,200
    and Director
</TABLE>

------------------

(1)  We consider Messrs. Wagenhals, Martin, Bickford, and Ms. Volosin to be our
     executive officers. Mr. Martin began his employment with us during August
     2000, and his cash compensation during fiscal 2000 did not exceed $100,000.

(2)  Messrs. Wagenhals, Wagenhals, Besing, and Volosin also received certain
     perquisites, the value of which did not exceed 10% of their salary and
     bonus during fiscal 2000.

(3)  The exercise price of all stock options granted were equal to the fair
     market value of our common stock on the date of grant.

(4)  Amounts shown represent matching contributions we made to our 401(k) Plan.

(5)  Includes 30,000 options that were cancelled and reissued in June 1998.

(6)  Includes $2,000 provided to Mr. Bickford as a car allowance.

(7)  Mr. Besing resigned as an officer and director effective as of December 6,
     1999. Mr. Tod Wagenhals resigned as an officer and director effective as of
     August 2000.

(8)  Includes 20,000 options that were cancelled and reissued in June 1998.


                                       3
<PAGE>   5
OPTION GRANTS

        The following table provides information on stock options granted to the
officers listed during the fiscal year ended September 30, 2000.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                          INDIVIDUAL GRANTS                          POTENTIAL
                          ---------------------------------------------------    REALIZABLE VALUE
                                        % OF TOTAL                               AT ASSUMED ANNUAL
                          NUMBER OF       OPTIONS                                  RATES OF STOCK
                          SECURITIES    GRANTED TO                                     PRICE
                          UNDERLYING     EMPLOYEES     EXERCISE                   APPRECIATION FOR
                           OPTIONS          IN          PRICE      EXPIRATION       OPTION TERM (1)
        NAME             GRANTED (#)    FISCAL YEAR     ($/SH)       DATE          5%         10%
        ----             ----------     -----------    --------    ----------    --------    --------
<S>                      <C>            <C>            <C>         <C>           <C>         <C>
Fred W. Wagenhals...      20,000(2)        4.2%         $ 9.56       1/27/06     $ 65,000    $147,600
                          22,268(3)        4.7%         $ 9.38       5/09/10     $131,381    $331,125
                           7,732(4)        1.6%         $10.31       5/09/10     $ 50,258    $127,037

Melodee L. Volosin..      10,000(2)        2.1%         $ 9.56       1/27/06     $ 32,500    $ 73,800
                          30,000(2)        6.4%         $ 9.38       5/09/10     $177,000    $448,500

John S. Bickford, Sr.      5,000(2)        1.1%         $ 9.56       1/27/06     $ 16,250    $ 36,900
                          20,000(2)        4.2%         $ 9.38       5/09/10     $118,000    $299,000

Tod J. Wagenhals(5).       5,000(2)(5)     1.1%         $ 9.56       1/27/06     $ 16,250    $ 36,900
                          30,000(6)(5)     6.4%         $ 9.38       5/09/10     $177,000    $448,500

Christopher S.
Besing(7)...........          --            --              --            --           --          --
</TABLE>

------------------

(1)  Potential gains are net of the exercise price, but before taxes associated
     with the exercise. Amounts represent hypothetical gains that could be
     achieved for the respective options if exercised at the end of the option
     term. The assumed 5% and 10% rates of stock price appreciation are provided
     in accordance with the rules of the Securities and Exchange Commission and
     do not represent our estimate or projection of the future price of our
     common stock. Actual gains, if any, on stock option exercises will depend
     upon the future market prices of our common stock.

(2)  One-third of the options vest and become exercisable on each of the first,
     second, and third anniversaries of the date of grant.

(3)  Options to purchase 10,000 shares vest and become exercisable on the first
     anniversary of the date of grant and options to purchase 6,134 shares vest
     and become exercisable on each of the second and third anniversaries of the
     date of grant.

(4)  Options to purchase 3,866 shares vest and become exercisable on each of the
     second and third anniversaries of the date of grant.

(5)  Mr. Tod Wagenhals resigned as an officer and director of our company
     effective August 1, 2000. Pursuant to our separation agreement with Mr. Tod
     Wagenhals, these options became immediately vested and exercisable and will
     expire August 1, 2003. See "Executive Compensation - Employment and
     Separation Agreements."

(6)  All of the options vested and became exercisable on the date of grant.

(7)  Mr. Besing resigned as an officer and director of our company effective
     December 6, 1999.


                                       4
<PAGE>   6
YEAR-END OPTION VALUES AND HOLDINGS

        The following table provides information on options held by the officers
listed and the values of those options as of September 30, 2000. None of these
officers exercised options during fiscal 2000.

               OPTION VALUES AND HOLDINGS AS OF SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
                                  NUMBER OF SECURITIES           VALUE OF UNEXERCISED IN-THE
                                 UNDERLYING UNEXERCISED            MONEY OPTIONS AT FISCAL
                                OPTIONS AT FISCAL YEAR-END              YEAR-END ($)(1)
                               -----------------------------     ------------------------------
NAME                           EXERCISABLE     UNEXERCISABLE     EXERCISABLE      UNEXERCISABLE
----                           -----------     -------------     -----------      -------------
<S>                            <C>             <C>               <C>              <C>
Fred W. Wagenhals........        142,666           93,334          $37,600             --
Melodee L. Volosin.......         23,725          120,001               --             --
John S. Bickford, Sr.....         34,999           40,001               --             --
Tod J. Wagenhals(2)......        144,700               --          $ 4,418             --
Christopher S. Besing (3)             --               --               --             --
</TABLE>

------------------

(1)  Calculated based upon the closing price of our common stock as reported on
     the Nasdaq National Market on September 30, 2000 of $3.44 per share. The
     exercise prices of certain of the options held by our executive officers on
     September 30, 2000 were greater than $3.44 per share.

(2)  Mr. Tod Wagenhals resigned as an officer and director effective as of
     August 2000. In connection with his resignation, all options held by Mr.
     Wagenhals immediately became exercisable. See "Executive Compensation -
     Employment and Separation Agreements."

(3)  Mr. Besing resigned as an officer and director effective December 6, 1999.
     All options held by Mr. Besing subsequent to his resignation were
     cancelled.

EMPLOYMENT AND SEPARATION AGREEMENTS

        In August 1998 our company, Paul G. Lang, and Mr. Lang's spouse entered
into an operating agreement with respect to the management and operations of the
MiniChamps entities. We and Mr. Lang also amended the terms of the then-existing
Managing Director's contract between Mr. Lang and Paul's Model Art GmbH. Under
the agreement, Mr. Lang serves as a Managing Director of our operations in the
European Community at a base salary of approximately $245,000 per annum, plus
reimbursement for certain costs that Mr. Lang may be obligated to pay under
German law. Mr. Lang also will be eligible to receive an annual bonus of 10% of
the pre-tax profits of the MiniChamps entities, not to exceed approximately
$55,000 per annum. Pursuant to the agreement, in August 1998 we also granted Mr.
Lang options to acquire 10,000 shares of common stock at an exercise price of
$25.00 per share. The terms of the agreement require us to reimburse Mr. Lang
for expenses incurred on business trips and to provide Mr. Lang with an
automobile. The agreement contains provisions that prohibit Mr. Lang from (a)
competing with the business of our company, (b) taking certain actions intended
to hire other employees away from their employment with our company, and (c)
making unauthorized use or disclosure of our confidential information. The
agreement expires in August 2002, subject to automatic extension.

        We have no written employment contracts with any of our executive
officers or directors. We offer our employees, including officers, medical, and
life insurance benefits. Our executive officers and other key personnel are
eligible to receive profit sharing distributions and discretionary bonuses, and
are eligible to receive stock options under our stock options plans.

        During August 2000, Mr. Tod Wagenhals resigned as our Executive Vice
President and Director. Upon his resignation, we entered into a Separation
Agreement with Mr. Wagenhals pursuant to which he received: (i) severance pay
and accrued vacation of $368,000; (ii) certain group health insurance benefits
through August 2001; and (iii) up to $40,000 of moving and travel expenses. In
conjunction with that agreement, the options to purchase 144,700 shares of
common stock held by Mr. Wagenhals vested immediately and became exercisable,
however, all options will expire upon the earlier of (a) their expiration date,
or (b) August 1, 2003. The agreement also provides that Mr. Wagenhals will not,
in any manner whatsoever, engage in the same or similar business as our company
in any geographical service area where we are engaged in business through August
2001. During his employment, Mr.



                                       5
<PAGE>   7
Wagenhals lived in a home owned by our company. We paid the maintenance,
insurance, and taxes on the home through December 2000.

        During December 1999, Mr. Besing resigned as our Vice President and
Chief Financial Officer and as Chief Executive Officer of goracing.com, inc.
Upon his resignation, we entered into a Separation Agreement with Mr. Besing
pursuant to which he received approximately $84,500 in salary and accrued
vacation.

        During December 2000, Mr. Husband resigned as our Chief Operating
Officer. Upon his resignation, we entered into a Settlement Agreement with Mr.
Husband pursuant to which Mr. Husband received a payment of $180,000 and certain
medical and dental benefits through December 2001. Pursuant to that agreement,
all options to purchase common stock held by Mr. Husband vested immediately and
became exercisable, however, all options will expire upon the earlier of (a)
their expiration date, or (b) December 2002.

401(k) PROFIT SHARING PLAN

        In October 1994, we established a defined contribution plan that
qualifies as a cash or deferred profit sharing plan under Sections 401(a) and
401(k) of the Internal Revenue Code of 1986, as amended. Under the 401(k) plan,
participating employees may defer from 1% to 15% of their pre-tax compensation,
subject to the maximum allowed under the Internal Revenue Code. We will
contribute $.50 for each dollar contributed by the employee, up to a maximum
contribution of 2% of the employee's defined compensation. In addition, the
401(k) plan provides that we may make an employer profit sharing contribution in
such amounts as may be determined by our board of directors.

1993 STOCK OPTION PLAN

        Our 1993 Stock Option Plan, as amended, provides for the granting of
options to acquire common stock as well as stock-based awards, as described
below. A total of 2,750,000 shares of common stock may be issued under the 1993
Plan. As of January 25, 2001, we have issued an aggregate of 2,062,338 shares of
common stock upon exercise of options granted pursuant to the plan, there were
outstanding options to acquire 666,443 shares of common stock, and an additional
21,219 shares remained available for grant. The plan will remain in effect until
September 24, 2001.

        Options and awards may be granted only to persons who at the time of
grant are either (a) key personnel, including officers and directors of our
company or our subsidiaries, or (b) consultants and independent contractors who
provide valuable services to our company or to our subsidiaries. Options that
are incentive stock options may only be granted to employees of our company or
our subsidiaries. To the extent that granted options are incentive stock
options, the terms and conditions of those options must be consistent with the
qualification requirements set forth in the Internal Revenue Code. No employee
of our company may receive grants of options or awards representing more than
50% of the shares of common stock issuable under the plan.

        The exercise prices, expiration dates, maximum number of shares
purchasable, and the other provisions of the options will be established at the
time of grant. The exercise prices of options that are not incentive stock
options may not be less than 85% of the fair market value of the common stock at
the time of the grant, and the exercise prices of incentive stock options may
not be less than 100% (110% if the option is granted to a shareholder who at the
time the option is granted owns stock possessing more than 10% of the total
combined voting power of all classes of stock of our company) of the fair market
value of the common stock at the time of the grant. Options may be granted for
terms of up to ten years and become exercisable in whole or in one or more
installments at such time as may be determined upon a grant of the options. To
exercise an option, the optionholder will be required to deliver to us full
payment of the exercise price of the shares as to which the option is being
exercised.

        The plan includes an automatic program that provides for the automatic
grant of stock options to non-employee directors. Under the automatic program,
each newly elected non-employee member of our board of directors automatically
receives options to acquire 10,000 shares of common stock on the date of his or
her first appointment or election to our board of directors. In addition,
options to acquire 8,000 shares of common stock are automatically granted to
each non-employee director at the meeting of our board of directors held
immediately after each annual meeting of shareholders. All automatic options
vest and become exercisable immediately upon grant. A non-employee member of our
board of directors is not eligible to receive the 8,000-share automatic option
grant if that option grant date is within 30 days of such non-employee member
receiving the 10,000-share automatic option grant. The exercise price per share
of common stock subject to automatic options granted under the plan will be


                                       6
<PAGE>   8
equal to 100% of the fair market value (as defined in the plan) of our common
stock on the date such options are granted. We believe that the automatic grant
of stock options to non-employee directors is necessary to attract, retain, and
motivate independent directors.

        We also may grant awards to eligible persons under the plan. Stock
appreciation rights, or SARs, entitle the recipient to receive a payment equal
to the appreciation in market value of a stated number of shares of common stock
from the price stated in the award agreement to the market value of the common
stock on the date the SAR is first exercised or surrendered. Stock awards enable
us to make direct grants of common stock to recipients. Cash awards entitle the
recipient to receive direct payments of cash depending on the market value or
the appreciation of our common stock or other securities of our company.

1998 NON-QUALIFIED STOCK OPTION PLAN

        Under the our 1998 Non-Qualified Stock Option Plan, our board of
directors may from time to time grant to key employees of our company, other
than directors or executive officers, non-statutory options to purchase shares
of our common stock. The exercise price, term, vesting conditions, and other
terms for all options granted under the plan will be determined at the time of
grant by our board of directors or a board committee appointed to administer the
plan. A total of 500,000 shares of common stock may be issued pursuant to the
plan. As of January 25, 2001, we have issued an aggregate of 383,000 shares of
common stock upon exercise of options granted pursuant to the plan, there were
outstanding options to acquire 241,832 shares of common stock, and an additional
220,335 shares remained available for grant. The plan expires in 2008.

2000 STOCK OPTION PLAN

        During 2000, our board of directors adopted and our shareholders
approved our 2000 Stock Option Plan. The plan is intended to attract, retain,
and motivate directors, employees, and independent contractors who provide
valuable services to our company by providing them with the opportunity to
acquire a proprietary interest in our company and to link their interests and
efforts to the long-term interests of our shareholders.

        The plan authorizes the issuance of a number of shares equal to 7% of
our outstanding shares of common stock, up to a maximum of 2,000,000 shares. If
the number of shares of common stock increases in the future, the number of
shares authorized for issuance under the plan will automatically increase by 7%
of such increases. Pursuant to this calculation, as of January 25, 2001 there
were 1,187,482 shares reserved for issuance under the 2000 plan. As of that
date, we had granted options to purchase 371,500 shares of common stock under
the 2000 plan, and no shares have been issued upon exercise of those options. As
of January 25, 2001, there were 815,982 shares available for grant under the
2000 plan. The maximum number of shares covered by awards granted to any
individual in any year may not exceed 25% of the total number of shares that may
be issued under the plan.

        Options granted under the plan may be either incentive stock options, as
defined under the Internal Revenue Code, or nonqualified options. The expiration
date, maximum number of shares purchasable, vesting provisions, and any other
provisions of options granted under the plan will be established at the time of
grant. The plan administrator will set the term of each option, but no options
may be granted for terms of greater than ten years. Options will vest and become
exercisable in whole or in one or more installments at such time as may be
determined by the plan administrator. Any unvested options will automatically
vest and become exercisable upon a change of control of our company.

        The plan includes an automatic grant program that automatically grants
options to our non-employee directors. Under the automatic grant program, each
non-employee serving on our board of directors on the date that the plan was
approved by our shareholders received options to acquire 8,000 shares of our
common stock. Each subsequent newly elected non-employee member of our board of
directors will receive an option to acquire 10,000 shares of common stock on the
date of his or her first appointment or election to our board of directors. In
addition, an option to acquire 8,000 shares of common stock will be granted to
each non-employee director at the meeting of our board of directors held
immediately after each annual meeting of shareholders in subsequent years. A
non-employee member of our board of directors will not be eligible to receive
this annual grant if the grant date of such annual grant would be within 90 days
of the date on which the non-employee member received his or her initial grant.
Each initial grant will vest and become exercisable immediately on the date of
grant.


                                       7
<PAGE>   9
EMPLOYEE STOCK PURCHASE PLAN

        During 1999, our board of directors adopted and our shareholders
approved our 1999 Employee Stock Purchase Plan, or ESPP. The ESPP is intended to
provide an opportunity for our employees to acquire a proprietary interest in
our company by purchasing shares of our common stock through voluntary payroll
deductions. Under the ESPP, eligible employees may purchase shares of our common
stock at a purchase price per share equal to the lower of (a) 85% of the closing
price of our common stock on the offering commencement date, or (b) 85% of the
closing price of our common stock on the offering termination date. The purchase
price is to be paid through periodic payroll deductions not to exceed 15% of the
participant's earnings during each six-month offering period. An employee may
not participate in the ESPP if the purchase would cause him or her to own 5% or
more of our company's combined voting power or value of our common stock. Also,
no participant may purchase more than $25,000 worth of common stock annually.

        The ESPP provides for successive six-month offering periods. In each of
the nine years beginning on February 1, 2000 and ending on January 31, 2009,
there will be two six-month offerings commencing on February 1 and August 1 of
each year and ending on the following July 31 or January 31, respectively.

        We have reserved 200,000 shares of our common stock for issuance under
the ESPP. That number will automatically increase on the first day of each
fiscal year beginning with the fiscal year beginning on October 1, 2001. The
annual increase will be equal to the lesser of (a) 200,000 shares or (b) 1% of
our outstanding shares on the last day of our prior fiscal year. Our board of
directors may reduce the number of shares to be automatically added if the
directors determine that the automatic increase will be too large relative to
the anticipated number of share purchases under the ESPP. Under this formula, a
maximum of 1,800,000 shares of common stock may be issued under the ESPP.

        The purchase right of a participant will terminate automatically in the
event the participant ceases to be an employee of our company or one of our
subsidiaries, and any payroll deductions collected from such individual during
the six-month period in which such termination occurs will be refunded. However,
in the event of the participant's disability or death, such payroll deductions
may be applied to the purchase of the common stock on the next purchase date.

DIRECTOR COMPENSATION AND OTHER INFORMATION

        Employees of our company do not receive compensation for serving as
members of our board of directors. Non-employee directors receive $2,500 for
each meeting attended in person. All directors are reimbursed for their expenses
in attending meetings of our board of directors. Directors who are not employees
of our company are eligible to receive automatic grants of stock options
pursuant to the 1993 Stock Option Plan. Non-employee directors also are eligible
to receive other grants of stock options or awards pursuant to the discretionary
program of the 1993 Stock Option Plan. See Item 11, "Executive Compensation -
1993 Stock Option Plan."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

        During the fiscal year ended September 30, 2000, our Compensation
Committee consisted of Jack M. Lloyd, Robert H. Manschot, and Edward J. Bauman.
None of such individuals had any contractual or other relationships with our
company during such fiscal year except as directors.

LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS

        Our Articles of Incorporation eliminate the personal liability of any
director of our company to us or our shareholders for money damages for any
action taken or failure to take any action as a director of our company, to the
fullest extent allowed by the Arizona Business Corporation Act. Under the
Business Corporation Act, directors of our company will be liable to our company
or our shareholders only for (a) the amount of a financial benefit received by
the director to which the director is not entitled; (b) an intentional
infliction of harm on our company or our shareholders; (c) certain unlawful
distributions to shareholders; and (d) an intentional violation of criminal law.
The effect of these provisions in the articles is to eliminate the rights of our
company and our shareholders (through shareholders' derivative suits on behalf
of our company) to recover money damages from a director for all actions or
omissions as a director (including breaches resulting from negligent or grossly
negligent behavior) except in the


                                       8
<PAGE>   10
situations described in clauses (a) through (d) above. These provisions do not
limit or eliminate the rights of our company or any shareholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a director's duty of care.

        Our Articles of Incorporation require us to indemnify and advance
expenses to any person who incurs liability or expense by reason of such person
acting as a director of our company, to the fullest extent allowed by the
Business Corporation Act. This indemnification is mandatory with respect to
directors in all circumstances in which indemnification is permitted by the
Business Corporation Act, subject to the requirements of the Business
Corporation Act. In addition, we, in our sole discretion, may indemnify and
advance expenses, to the fullest extent allowed by the Business Corporation Act,
to any person who incurs liability or expense by reason of such person acting as
an officer, employee, or agent of our company, except where indemnification is
mandatory pursuant to the Business Corporation Act, in which case we are
required to indemnify such persons to the fullest extent required by the
Business Corporation Act.


                                       9
<PAGE>   11
ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the shares
of our outstanding common stock beneficially owned as of December 31, 2000 by
(i) each director; (ii) the executive officers set forth in the Summary
Compensation Table under the section entitled "Executive Compensation;" (iii)
all of our directors and executive officers as a group; and (iv) each other
person who is known by us to beneficially own or to exercise voting or
dispositive control over more than 5% of our common stock.

<TABLE>
<CAPTION>
                                                                             APPROXIMATE
                                               NUMBER OF SHARES             PERCENTAGE OF
NAME AND ADDRESS OF                             AND NATURE OF                OUTSTANDING
BENEFICIAL OWNER(1)                        BENEFICIAL OWNERSHIP(2)            SHARES(2)
------------------                         ----------------------           -------------
<S>                                        <C>                              <C>
DIRECTORS AND EXECUTIVE OFFICERS
Fred W. Wagenhals...................             2,129,599(3)                    12.4%
R. David Martin, Jr.................                 2,414(4)                     *
Melodee L. Volosin..................                36,225(5)                     *
John S. Bickford, Sr................                55,652(6)                     *
Paul G. Lang........................                31,166(7)                     *
Jack M. Lloyd.......................                40,000(8)                     *
Robert H. Manschot..................                37,000(9)                     *
Edward J. Bauman....................                28,000(10)                    *
Tod J. Wagenhals....................               148,656(11)                    *
Christopher S. Besing...............                45,831(12)                    *
All directors and executive officers
  as a group (eight persons)........             2,360,057                       13.6%

NON-MANAGEMENT 5% SHAREHOLDERS
Lisa K. Wagenhals...................             1,963,600(13)                   11.6%
Strong Capital Management, Inc.(14).             1,479,400(14)                    8.7%
William and Delores Ray(15).........             1,088,599(15)                    6.4%
</TABLE>

*    Less than 1% of outstanding shares of common stock

(1)  Each person named in the table has sole voting and investment power with
     respect to all common stock beneficially owned by him or her, subject to
     applicable community property law, except as otherwise indicated. Except as
     otherwise indicated, each person may be reached at 4707 East Baseline Road,
     Phoenix, Arizona 85040.

(2)  The percentages shown are calculated based upon 16,964,029 shares of common
     stock outstanding on January 25, 2001. The numbers and percentages shown
     include the shares of common stock actually owned as of January 25, 2001
     and the shares of common stock that the identified person or group had the
     right to acquire within 60 days of such date. In calculating the percentage
     of ownership, all shares of common stock that the identified person or
     group had the right to acquire within 60 days of January 25, 2001 upon the
     exercise of options are deemed to be outstanding for the purpose of
     computing the percentage of the shares of common stock owned by such person
     or group, but are not deemed to be outstanding for the purpose of computing
     the percentage of the shares of common stock owned by any other person.

(3)  Represents 1,963,600 shares of common stock and vested options to acquire
     165,999 shares of common stock. Mr. Wagenhals shares voting and dispositive
     power with his spouse with respect to the 1,963,600 shares of common stock.
     See footnote 11.

(4)  Represents 2,000 shares of common stock and 414 shares of common stock
     issuable upon conversion of subordinated notes.

(5)  Represents 2,500 shares of common stock and vested options to acquire
     33,725 shares of common stock.

(6)  Represents 12,318 shares of common stock and vested options to acquire
     43,334 shares of common stock.

(7)  Represents 24,500 shares of common stock and vested options to acquire
     6,666 shares of common stock.

(8)  Represents vested options to acquire 40,000 shares of common stock.

(9)  Represents 5,000 shares of common stock and vested options to acquire
     32,000 shares of common stock.

(10) Represents 2,000 shares of common stock and vested options to acquire
     26,000 shares of common stock.


                                       10
<PAGE>   12
(11) Represents 3,956 shares of common stock and vested options to acquire
     144,700 shares of common stock.

(12) Represents 2,500 shares of common stock and vested options to acquire
     43,331 shares of common stock.

(13) Represents 1,963,600 shares of common stock over which Ms. Wagenhals shares
     voting and dispositive power with Fred W. Wagenhals. See footnote 3.

(14) Represents 1,479,400 shares beneficially owned by Strong Capital
     Management, Inc. and Richard S. Strong, Chairman of the Board and principal
     shareholder of Strong Capital. Strong Capital has discretionary dispositive
     power over its clients' securities and in some instances has voting power
     over such securities. Any and all discretionary authority which has been
     delegated to Strong Capital may be revoked in whole or in part at any time.
     The address of Strong Capital Management, Inc. is 100 Heritage Reserve,
     Menomonee Falls, Wisconsin, 53051.

(15)Represents 948,599 shares beneficially owned by William and Delores Ray and
     White Oaks Partners, an entity owned by the Ray's children and 140,000
     options to purchase common stock beneficially owned by those various
     entities. Mr. and Mrs. Ray beneficially own these shares through various
     entities, and they have shared voting and dispositive power over all of
     such shares and options.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Not Applicable.


                                       11
<PAGE>   13
                                   SIGNATURES


        In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

                                      ACTION PERFORMANCE COMPANIES, INC.



Date:  January 29, 2001               /s/Fred W. Wagenhals
                                      ------------------------------------------
                                      Fred W. Wagenhals, Chairman of the Board,
                                      President, and Chief Executive Officer


        In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature                               Capacity                                              Date
---------                               --------                                              ----
<S>                              <C>                                                    <C>
/s/ Fred W. Wagenhals            Chairman of the Board, President, and Chief            January 29, 2001
-----------------------------
Fred W. Wagenhals                Executive Officer (Principal Executive Officer)

/s/ R. David Martin, Jr.         Chief Financial Officer and Director                   January 29, 2001
-----------------------------
R. David Martin, Jr.             (Principal Financial and Accounting Officer)

/s/ Melodee L. Volosin           Executive Vice President - Sales and Director          January 29, 2001
-----------------------------
Melodee L. Volosin

/s/ John S. Bickford, Sr.        Vice President - Strategic Alliances and Director      January 29, 2001
-----------------------------
John S. Bickford, Sr.

                                 Director                                               January _, 2001
-----------------------------
Jack M. Lloyd

                                 Director                                               January __, 2001
-----------------------------
Robert H. Manschot

                                 Director                                               January __, 2001
-----------------------------
Edward J. Bauman
</TABLE>


                                       12
<PAGE>   14
                       ACTION PERFORMANCE COMPANIES, INC.
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE




<TABLE>
<CAPTION>
                                                                                              PAGE
                                                                                              ----
<S>                                                                                           <C>
Report of Independent Public Accountants...................................................    F-2

Consolidated Balance Sheets as of September 30, 2000 and 1999..............................    F-3

Consolidated Statements of Operations for the Years
  Ended September 30, 2000, 1999 and 1998..................................................    F-4

Consolidated Statements of Shareholders' Equity for the Years
  Ended September 30, 2000, 1999 and 1998..................................................    F-5

Consolidated Statements of Cash Flows for the Years
  Ended September 30, 2000, 1999 and 1998..................................................    F-6

Notes to Consolidated Financial Statements.................................................    F-7

Schedule II -- Valuation and Qualifying Accounts...........................................    F-25
</TABLE>


                                      F-1
<PAGE>   15
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Action Performance Companies, Inc.:





We have audited the accompanying consolidated balance sheets of ACTION
PERFORMANCE COMPANIES, INC. (an Arizona corporation) and subsidiaries as of
September 30, 2000 and 1999, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended September 30, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Action Performance Companies,
Inc. and subsidiaries as of September 30, 2000 and 1999, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2000, in conformity with accounting principles generally
accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.





/s/ Arthur Andersen LLP

Phoenix, Arizona
December 1, 2000


                                      F-2
<PAGE>   16
                       ACTION PERFORMANCE COMPANIES, INC.
                           CONSOLIDATED BALANCE SHEETS

                           SEPTEMBER 30, 2000 AND 1999
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                        2000             1999
                                                                     ---------        ---------
<S>                                                                  <C>              <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents .................................       $  22,758        $  58,523
   Accounts receivable, net of allowance for doubtful accounts
     of $3,392 and $1,421, respectively ......................          22,901           44,988
   Inventories ...............................................          32,017           45,310
   Prepaid royalties .........................................           7,262            7,271
   Estimated income tax receivable ...........................          14,000               --
   Deferred tax asset ........................................           5,905            2,415
   Prepaid expenses and other assets .........................           1,942            4,852
                                                                     ---------        ---------
      Total current assets ...................................         106,785          163,359
PROPERTY AND EQUIPMENT, net ..................................          48,204           56,162
GOODWILL AND OTHER INTANGIBLES, net ..........................          94,894          111,634
LONG-TERM DEFERRED TAX ASSET .................................           1,423               --
OTHER ASSETS .................................................           4,611            8,906
                                                                     ---------        ---------
                                                                     $ 255,917        $ 340,061
                                                                     =========        =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable ..........................................       $  16,510        $  20,127
   Accrued royalties .........................................           9,998           13,519
   Accrued expenses ..........................................          14,250           14,889
   Current portion of long-term debt .........................           1,503            2,713
                                                                     ---------        ---------
     Total current liabilities ...............................          42,261           51,248
                                                                     ---------        ---------
LONG-TERM LIABILITIES:
   Deferred tax liability ....................................              --            4,314
   Convertible subordinated notes ............................         100,000          100,000
   Other long-term debt ......................................           8,340            9,208
                                                                     ---------        ---------
     Total long-term liabilities .............................         108,340          113,522
                                                                     ---------        ---------
MINORITY INTEREST ............................................           2,598            2,300
                                                                     ---------        ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
   Preferred stock, no par value, 5,000,000 shares authorized,
      no shares issued and outstanding .......................              --               --
   Common stock, $.01 par value, 25,000,000 shares authorized;
   16,964,029 shares issued (16,929,085 in 1999) .............             170              169
   Additional paid-in capital ................................         102,813          102,555
   Treasury Stock at cost, 592,000 shares ....................          (6,520)              --
   Accumulated other comprehensive loss ......................          (6,639)            (714)
   Retained earnings .........................................          12,894           70,981
                                                                     ---------        ---------
      Total shareholders' equity .............................         102,718          172,991
                                                                     ---------        ---------
                                                                     $ 255,917        $ 340,061
                                                                     =========        =========
</TABLE>


The accompanying notes are an integral part of these consolidated balance
sheets.


                                      F-3
<PAGE>   17
                       ACTION PERFORMANCE COMPANIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

             FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                          2000             1999             1998
                                                        ---------        ---------        ---------
<S>                                                     <C>              <C>              <C>
Sales:
   Collectibles .................................       $ 149,032        $ 214,429        $ 142,026
   Apparel and souvenirs ........................          99,322          119,922          106,712
   Other ........................................           6,339            3,139
                                                        ---------        ---------        ---------
                                                                                              8,094
      Net sales .................................         254,693          342,445          251,877
Cost of sales ...................................         205,690          210,768          157,079
                                                        ---------        ---------        ---------
Gross profit ....................................          49,003          131,677           94,798
                                                        ---------        ---------        ---------
Operating expenses:
   Selling, general and administrative expenses .         107,942           68,036           45,344
   Settlement costs .............................              --            3,600              950
   Amortization of goodwill and
     other intangibles ..........................          16,753            6,818            4,392
                                                        ---------        ---------        ---------
     Total operating expenses ...................         124,695           78,454           50,686
                                                        ---------        ---------        ---------
(Loss) income from operations ...................         (75,692)          53,223           44,112
                                                        ---------        ---------        ---------
Other (expense) income:
   Minority interest in earnings ................            (298)          (1,930)            (189)
   Interest income and other, net ...............            (398)           2,531            2,588
   Interest expense .............................          (6,291)          (6,929)          (5,533)
                                                        ---------        ---------        ---------
       Total other expense, net .................          (6,987)          (6,328)          (3,134)
                                                        ---------        ---------        ---------
(Loss) income before (benefit from) provision for
   income taxes .................................         (82,679)          46,895           40,978
(Benefit from) provision for income taxes .......         (24,592)          18,526           16,391
                                                        ---------        ---------        ---------
NET (LOSS) INCOME ...............................         (58,087)          28,369           24,587
                                                        ---------        ---------        ---------
Other comprehensive (loss) income - currency
        Translation adjustment ..................          (5,925)          (2,396)           1,682
                                                        ---------        ---------        ---------
Comprehensive (loss) income .....................       $ (64,012)       $  25,973        $  26,269
                                                        =========        =========        =========
NET (LOSS) INCOME PER COMMON SHARE:
   Basic ........................................       $   (3.52)       $    1.69        $    1.52
                                                        =========        =========        =========
   Diluted ......................................       $   (3.52)       $    1.65        $    1.48
                                                        =========        =========        =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
   Basic ........................................          16,515           16,789           16,135
                                                        =========        =========        =========
   Diluted ......................................          16,515           19,179           16,647
                                                        =========        =========        =========
</TABLE>


The accompanying notes are an integral part of these consolidated financial
statements.


                                      F-4
<PAGE>   18

                       ACTION PERFORMANCE COMPANIES, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

              FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                    ACCUMULATED
                                                                                                      COMPRE-
                                           COMMON STOCK                   ADDITIONAL                  HENSIVE
                                       --------------------   TREASURY      PAID-IN      RETAINED     INCOME/
                                         SHARES      AMOUNT     STOCK       CAPITAL      EARNINGS      (LOSS)         TOTAL
                                         ------      ------     -----       -------      --------      ------         -----
<S>                                    <C>           <C>      <C>         <C>            <C>         <C>            <C>
BALANCE, SEPTEMBER 30, 1997 ......     15,952,083     $160     $  --        $ 84,984     $ 18,025      $  --        $ 103,169
Common stock issued upon exercise
  of options .....................        426,315        4        --           1,633         --           --            1,637
Tax benefit from stock options ...           --        --         --           4,100         --           --            4,100
Common stock issued in
  private placements .............         44,840      --         --           1,257         --           --            1,257
Other comprehensive income,
  translation adjustment .........           --        --         --            --           --          1,682          1,682
Net income .......................           --        --         --            --         24,587         --           24,587
                                       ----------     ----     -------      --------     --------      -------      ---------
BALANCE, SEPTEMBER 30, 1998 ......     16,423,238      164        --          91,974       42,612        1,682        136,432
Common stock issued upon exercise
  of options .....................        332,922        3        --           3,835         --           --            3,838
Tax benefit from stock options ...           --        --         --           2,450         --           --            2,450
Common stock issued in conjunction
  with purchase of businesses ....        172,925        2        --           4,296         --           --            4,298
Other comprehensive loss,
  translation adjustment .........           --        --         --            --           --         (2,396)        (2,396)
Net income .......................           --        --         --            --         28,369         --           28,369
                                       ----------     ----     -------      --------     --------      -------      ---------
BALANCE, SEPTEMBER 30, 1999 ......     16,929,085      169        --         102,555       70,981         (714)       172,991
Common stock issued upon exercise
  of options .....................         20,918        1        --             129         --           --              130
Tax benefit from stock options ...           --        --         --              19         --           --               19
Common stock issued through
  employee stock purchase plan ...         14,026      --         --             110         --           --              110
Repurchase of common stock
  for treasury ...................           --        --       (6,520)         --           --           --           (6,520)
Other comprehensive loss, currency
  translation adjustment .........           --        --         --            --           --         (5,925)        (5,925)
Net loss .........................           --        --         --            --        (58,087)        --          (58,087)
                                       ----------     ----     -------      --------     --------      -------      ---------
BALANCE, SEPTEMBER 30, 2000 ......     16,964,029     $170     $(6,520)     $102,813     $ 12,894      $(6,639)     $ 102,718
                                       ==========     ====     =======      ========     ========      =======      =========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-5
<PAGE>   19
                       ACTION PERFORMANCE COMPANIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 2000             1999             1998
                                                               --------         --------         --------
<S>                                                            <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income .....................................        $(58,087)        $ 28,369         $ 24,587
  Adjustments to reconcile net (loss) income to
   net cash (used in) provided by operating activities:
  Deferred income taxes ...............................          (9,227)             159           (1,090)
  Non cash restructuring and special charges ..........          58,988
  Depreciation and amortization .......................          25,111           22,946           11,839
  Gain on sale of property and equipment ..............            (176)              --               --
  Tax benefit from stock options ......................              19            2,450            4,100
  Undistributed earnings to minority
    shareholders ......................................             298            1,930              189
  Change in assets and liabilities, net of
   businesses acquired:
    Accounts receivable ...............................          10,920           (8,065)         (12,937)
    Estimated income tax receivable ...................         (14,000)              --               --
    Inventories .......................................            (561)          (9,067)         (14,406)
    Prepaid royalties .................................          (7,771)          (3,725)            (120)
    Prepaid expenses and other assets .................          (3,531)          (2,157)          (1,233)
    Accounts payable ..................................          (2,757)           6,731             (373)
    Accrued royalties .................................          (3,502)           2,931            4,106
    Accrued expenses and other ........................          (5,245)           5,418            2,994
                                                               --------         --------         --------
  Net cash (used in) provided by operating activities .          (9,521)          47,920           17,656
                                                               --------         --------         --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment .................         (17,362)         (26,693)         (21,687)
  Proceeds from sale of equipment .....................           1,963              155              383
  Acquisition of businesses less cash acquired
   and other intangibles ..............................          (3,063)          (4,738)         (55,885)
Collections (issuance) on notes receivable ............           1,080            1,043              (15)
                                                               --------         --------         --------
  Net cash (used in) investing activities .............         (17,382)         (30,233)         (77,204)
                                                               --------         --------         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on line of credit ........................              --               --            9,600
  Payments on line of credit ..........................              --               --           (9,600)
  Net proceeds from issuance of
   common stock upon exercise of stock options ........             130            3,838            1,637
  Net proceeds from issuance of
   common stock through employee stock purchase plan ..             110               --               --
  Repurchase of common stock for treasury .............          (6,520)              --               --
  Issuance of convertible subordinated notes, net of
   offering expenses ..................................              --               --           96,500
  Payments on long-term debt, net .....................          (2,015)         (24,143)          (7,096)
                                                               --------         --------         --------
Net cash (used in) provided by financing activities ...          (8,295)         (20,305)          91,041
                                                               --------         --------         --------
  Effect of exchange rate changes on
    cash and cash equivalents .........................            (567)             274               56
                                                               --------         --------         --------
  Net change in cash and cash equivalents .............         (35,765)          (2,344)          31,549
  Cash and cash equivalents, beginning of year ........          58,523           60,867           29,318
                                                               --------         --------         --------
  Cash and cash equivalents, end of year ..............        $ 22,758         $ 58,523         $ 60,867
                                                               ========         ========         ========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                      F-6
<PAGE>   20
                       ACTION PERFORMANCE COMPANIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        SEPTEMBER 30, 2000, 1999 AND 1998




(1)   THE COMPANY

OPERATIONS

Action Performance Companies, Inc., an Arizona corporation, and its U.S.,
German, Australian and United Kingdom subsidiaries (the "Company") designs and
markets licensed motorsports products, including die-cast scaled replicas of
motorsports vehicles, apparel, and souvenirs. The Company also develops
promotional programs for sponsors of motorsports that feature the Company's
die-cast replicas or other products that are intended to increase brand
awareness of the products or services of the corporate sponsors.

The Company markets its products to approximately 10,000 specialty retailers
throughout the world either directly or through its wholesale and dealer
distributor network; to motorsports enthusiasts through its Racing Collectables
Club of America; and through mobile trackside souvenir stores, and promotional
programs for corporate sponsors.

In fiscal year 2000, the Company has experienced a significant decline in the
sale of its motorsports products and other factors that have negatively impacted
revenues, operating results, cashflows and liquidity. In response to these
conditions, the Company has undertaken several restructuring initiatives
including a reduction in employees and cost savings initiatives, sales and the
winding down of certain operations and has recorded impairments to the carrying
value of certain assets (See Note 3).

(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of the Company and
its wholly owned and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

Certain reclassifications have been made in prior period financial statements to
conform to the current presentation.

REVENUE RECOGNITION

The Company recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, fee is fixed or determinable and collectibility
is probable. Generally, all of these conditions are met at the time the Company
ships products to customers. Customer deposits received in advance of delivery
are deferred and recognized when the related product is shipped.

CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of cash and accounts receivable. The Company
places its cash with federally insured institutions and limits the amount of
credit exposure to any one institution. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers
comprising the Company's credit base and the geographical dispersion of the
customers.


                                      F-7
<PAGE>   21
USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates are used for, but not limited to, the accounting for
doubtful accounts, inventory values, depreciation, amortization, prepaid royalty
allowances, sales returns, taxes and contingencies. Estimates also affect the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash, accounts receivable, and accounts payable
approximate fair value because of the short maturity of these financial
instruments. Except for the Convertible Subordinated Notes, the carrying amounts
of long-term debt approximate fair value based on current market prices for
similar debt instruments. The fair value of the Company's Convertible
Subordinated Notes on September 30, 2000 and 1999 was approximately $26.5
million and $65.0 million, respectively, based on current market information.
Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect these estimates.

FOREIGN CURRENCY TRANSLATION

Financial information relating to the Company's foreign subsidiaries is reported
in accordance with FAS No. 52 "Foreign Currency Translation." The financial
statements of non-U.S. subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of these non-U.S. subsidiaries are
translated at exchange rates in effect as of each balance sheet date, and
related revenues and expenses are translated at average exchange rates in effect
during the period. The resulting translation adjustments are recorded directly
as a component of shareholder's equity.

CASH AND CASH EQUIVALENTS

The Company classifies as cash equivalents all highly liquid investments with
original maturities of three months or less. Cash equivalents principally
consist of commercial paper.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
estimated market value. Inventories consist of the following at September 30,
2000 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                                   2000           1999
                                                                  -------        -------
<S>                                                               <C>            <C>
Raw Materials (apparel blank stock) ......................        $ 4,595        $ 2,370
Work in Process (apparel in process) .....................             --             --
Finished Goods (diecast collectibles and finished apparel)         27,422         42,940
                                                                  -------        -------
                                                                  $32,017        $45,310
                                                                  =======        =======
</TABLE>

Diecast collectible inventory includes the cost of purchased product and
freight-in. Apparel and other inventory costs includes the cost of purchased
product.

The Company depends upon third parties to manufacture all of its diecast
collectible and most of its apparel and other products. Most significantly, the
Company relies upon one manufacturer to produce approximately 80% of its diecast
collectible product. Any difficulty experienced by this manufacturer in it's
ability to produce and deliver the Company's diecast collectible product could
have an adverse effect on the Company's results of operations.


                                      F-8
<PAGE>   22
PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
which range from one to thirty years. Depreciation of tooling and molds is
included in cost of sales, all other depreciation is included in selling,
general and administration.

Property and equipment consist of the following at September 30, 2000 and 1999
(in thousands):

<TABLE>
<CAPTION>
                                                                        Estimated
                                                                          Useful
                                         2000              1999             Life
                                         ----              ----             ----
<S>                                    <C>              <C>              <C>
Land ..........................        $  1,650         $  1,650
Building ......................           5,686            3,111          30 years
Tooling and molds .............          74,421           63,745         1-3 years
Furniture, fixtures and
  equipment ...................          22,678           22,508         3-5 years
Autos and truck ...............           5,266            3,927           5 years
Leasehold improvements ........           3,010            4,534          10 years
                                       --------         --------
                                        112,711           99,475
Less - accumulated depreciation         (64,507)         (43,313)
                                       --------         --------
                                       $ 48,204         $ 56,162
                                       ========         ========
</TABLE>

During fiscal 2000, the Company revised its estimate of the useful lives of
certain tooling equipment from 5 and 2 years to 3 and 1.5 years respectively.
The revision was based on current information pertaining to the remaining
economic useful lives of these assets, taking into consideration factors such as
changes in the timing of the introduction of auto body design changes by the
major U.S. automobile manufactures and the increased rate at which tooling
equipment is being used in the manufacturing process. As a result of this change
in accounting estimate an additional depreciation charge of approximately $6.6
million (See Note 3) was recorded in fiscal 2000. This change in estimate is
accounted for in the period of change as well as in future applicable periods.

Maintenance and repairs of approximately $771,000, $738,000, and $697,000 for
the years ended September 30, 2000, 1999 and 1998, respectively, were charged to
expense as incurred. The cost of renewals and betterments that materially extend
the useful lives of assets or increase their productivity are capitalized.

GOODWILL AND OTHER INTANGIBLES

Goodwill represents the cost in excess of the fair value of net assets acquired
in business combinations and is amortized using the straight-line method over
periods ranging from seven to twenty-five years which represents the Company's
estimate of the estimated economic lives of the assets. Other intangibles, which
consist of licenses and sponsorships, are amortized using the straight-line
method over their contractual lives, which range from three to fifteen years.
Amortization expense of $16.8 million, including special charges of
approximately $9.5 million (see Note 3) $6.8 million, and $4.4 million is
included in the accompanying financial statements for the years ended September
30, 2000, 1999 and 1998 respectively. The following table sets forth the
components of goodwill and other intangibles as of September 30, 2000 and 1999
(in thousands).


<TABLE>
<CAPTION>
            Amortization
            Period (Years)                                    2000                 1999
            -------------                                   ---------            ---------
<S>                                                       <C>                    <C>
            3-5                                             $   3,190            $   3,882
            6-10                                               13,899               20,610
            11-15                                              15,922               12,294
            16-25                                              80,008               87,344
                                                            ---------            ---------
                                                              113,019              124,130
            Less accumulated amortization                     (18,125)             (12,496)
                                                            ----------           ----------
                                                            $  94,894            $ 111,634
                                                            =========            =========
</TABLE>


                                      F-9
<PAGE>   23
LICENSE AGREEMENTS

Amounts advanced under various licensing agreements are recorded as prepaid
royalties at the time the advance is made. Royalties are recognized as expense
at the contractually stated royalty rate as the related sales are made.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company periodically evaluates long-lived assets and certain identifiable
intangible assets to be held and used in operations for impairment whenever
events or circumstances indicate that the carrying amount of an asset may not be
fully recoverable. Determination of recoverability is based on the sum of the
expected long-term undiscounted cash flows compared to the carrying amount of
the long-lived assets being evaluated. In 2000, $9.5 million of impairments were
recorded. These impairments primarily relate to a $7.6 million charge for the
goracing.com restructuring and a $1.9 million charge relating to the Simpson
product line. (See also Note 3)

TREASURY STOCK

On December 17, 1999, the Board of Directors authorized the repurchase of up to
$40.0 million of common stock in the open market or privately negotiated
transactions. The initial term of the repurchase program was one year. Through
September 30, 2000, 592,000 shares at a cost of $6.5 million have been
repurchased. Through December 1, 2000 an additional 180,000 shares at a cost of
$542,000 have been repurchased.

SUPPLEMENTAL CASH FLOW INFORMATION

The supplemental cash flow disclosures and non-cash transactions for the years
ended September 30, 2000, 1999, and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                              2000           1999           1998
                                             ------        -------        -------
<S>                                          <C>           <C>            <C>
Supplemental disclosures:
  Interest paid .....................        $6,276        $ 4,279        $ 4,690
  Income taxes paid .................         2,332         12,052         10,600
Non-cash transactions:
  Common stock issued in acquisitions            --          4,298             --
  Debt and liabilities incurred or
    assumed in acquisitions .........           833          3,999         29,002
  Acquisition of property and
    equipment under notes payable
    and capital leases ..............            --          1,078          2,961
  Common stock issued in connection
    with licensing and sponsorship
    Agreements ......................            --             --          1,257
  Notes receivable issued in
settlement
       of accounts receivable .......         1,043             --             --
</TABLE>


                                      F-10
<PAGE>   24
NET (LOSS) INCOME PER COMMON SHARE

Net (loss) income per common share is computed based on the weighted average
number of common shares and common share equivalents outstanding using the
treasury stock method, except when common share equivalents have an
anti-dilutive effect. The Company's convertible subordinated Notes (see Note 5)
were antidilutive for the fiscal years ended September 30, 2000 and 1998. The
calculation of diluted net (loss) income per common share for the years ended
September 30, 2000, 1999 and 1998 is as follows (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                   2000            1999           1998
                                                 --------         -------        -------
<S>                                              <C>             <C>            <C>
Shares:
Weighted average number of common
  shares outstanding ....................          16,515          16,789         16,135
Additional shares assuming conversion of:
  Stock options .........................              --             315            512
  Convertible subordinated notes payable               --           2,075             --
                                                 --------         -------        -------
Diluted weighted average shares
  Outstanding ...........................          16,515          19,179         16,647
                                                 ========         =======        =======
Net (loss) income .......................        $(58,087)        $28,369        $24,587
  Interest, net of tax, on convertible
  subordinated notes payable ............              --           3,216             --
                                                 --------         -------        -------
Net (loss) income attributable to diluted
  weighted average shares outstanding ...        $(58,087)        $31,585        $24,587
                                                 ========         =======        =======
Diluted (loss) earnings per share .......        $  (3.52)        $  1.65        $  1.48
                                                 ========         =======        =======
</TABLE>


The diluted share base for the year ended September 30, 2000 excludes
incremental shares of 142,000 related to employee stock options. These shares
are excluded due to their antidilutive effect as a result of the Company's loss
from continuing operations during 2000.

LEASES

In fiscal year 2000, the Company entered into several arrangements to sublease
its facilities and equipment to others under non-cancellable operating leases.
Lease revenue received and earned from these subleases approximate lease rent
incurred on the applicable original leases for the year ended September 30,
2000.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101) which
addresses certain criteria for revenue recognition. SAB 101, as amended by SAB
101A and SAB 101B, outlines the criteria that must be met to recognize revenue
and provides guidance for disclosures related to revenue recognition policies.
The Company has implemented the applicable provisions of SAB 101. The impact of
adopting the provisions of SAB 101 was not material to the accompanying
financial statements.

In September 2000, the Emerging Issues Task Force reached a consensus on Issue
00-10, Accounting for Shipping and Handling Fees and Costs (Issue 00-10). Issue
00-10, requires that all amounts billed to customers related to shipping and
handling should be classified as revenues. In addition, Issue 00-10, specifies
that the classification of shipping and handling cost is an accounting policy
decision that should be disclosed pursuant to APB 22, Disclosure of Accounting
Policies. A company may adopt a policy of including shipping and handling costs
in cost of sales. If shipping and handling costs are not included in costs of
sales, a company should disclose both the amount of such cost and the line item
in the statement of operations which includes those costs. Issue 00-10 will be
effective for the


                                      F-11
<PAGE>   25
Company no later than the fourth quarter of the fiscal year ending September 30,
2001. The Company has yet to quantify the impact of adopting Issue 00-10 on Net
Sales and on Cost of Sales for 2000, 1999 and 1998.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in the Company's contracts) be recorded
in the balance sheet as either an asset or liability measured at its fair value.
The statement requires that changes in the derivative's fair value be recognized
currently in income unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows derivative gains and losses to offset
related results on the hedged item in the statement of operations and require
that the Company must formally document, designate and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS
No. 137 "Accounting for Derivative Instruments and Hedging Activities Deferral
of the Effective Date of FASB Statement No. 133," shall be effective for all
fiscal quarters of the Company's September 30, 2001 fiscal year. SFAS No. 133
cannot be applied retroactively. The Company does not expect that the adoption
of this statement will have a material impact on its financial position or
results of operations.

(3)   RESTRUCTURING AND OTHER CHARGES

As noted in Note 1, during fiscal year 2000 the Company experienced a
significant downturn in its core business and other factors, which adversely
impacted the Company and its operations. In response to these conditions the
Company has undertaken several restructuring and other cost cutting measures as
described below.

In fiscal 2000, the Company recorded charges of approximately $17.5 million
arising from its decision to abandon its internet strategy, relating to
goracing.com. The charges include provision for the write-off of goodwill,
endorsements, sponsorship commitments, employee severance and termination costs,
and the withdrawal of the initial public offering of goracing.com.

In addition to the goracing.com charge, the Company recorded other charges
totaling approximately $47.3 million in fiscal 2000. These charges are comprised
of $13.3 million related to inventories due, in part, to anticipated
sponsorships, driver and marketing programs which did not materialize as
anticipated; $6.1 million of additional receivable reserves provided based on
revised estimates of the collectibility of certain customer account balances; a
$3.0 million provision for vendor discounts which were anticipated but not
received due to lower than anticipated volumes; tooling write-downs and
amortization of $8.5 million arising from a change in the estimated useful lives
of tooling equipment and the write off of obsolete items; write downs of prepaid
royalties and sponsorship fees of $7.8 million, reflecting, in part, the
Company's decision to concentrate future production on core drivers and core
programs; and approximately $8.6 million in other asset impairments.


                                      F-12
<PAGE>   26
The charges discussed above are reflected in the accompanying statement of
operations for the year ended September 30, 2000 as follows:

<TABLE>
<CAPTION>
                                                          Amount                  Inclusion in accompanying
                                                          ------                  Statement of Operations
                                                       (in millions)              -------------------------
<S>                                                     <C>            <C>
Non-cash charges:
    Goracing.com related
         Accounts receivable and prepaids.........      $   1.5        Selling general and administrative
         Initial public offering withdrawal.......          2.3        Selling general and administrative
         Other....................................          0.3        Selling general and administrative
         Goodwill and intangibles.................          7.6        Amortization of goodwill and other intangibles
                                                        -------
                                                           11.7
                                                        -------
    Other charges
         Inventory write-downs....................         13.3        Cost of sales
         Vendor discounts.........................          3.0        Cost of sales
         Tooling write-down.......................          1.9        Cost of sales
         Tooling amortization.....................          6.6        Cost of sales
         Prepaid royalty and sponsorship fees.....          7.8        Cost of sales
         Accounts receivable......................          6.1        Selling general and administrative
         Other assets.............................          4.3        Selling general and administrative
         Goodwill and intangible impairments......          1.9        Amortization of goodwill and other intangibles
         Other....................................          0.4        Other income and other, net
         Equity investments.......................          2.0        Other income and other, net
                                                        -------
                                                           47.3
                                                        -------
    Cash charges:
    Goracing.com related
         Professional fees........................          0.8        Selling general and administrative
         Employee severance and termination costs.          0.7        Selling general and administrative
         Endorsements and sponsorships............          4.3        Selling general and administrative
                                                        -------
                                                            5.8
                                                        -------
                                                        $  64.8
                                                        =======
</TABLE>


Accrued amounts on the accompanying balance sheets at September 30, 2000 are as
follows:

<TABLE>
<CAPTION>
                                         Initial         Payments       Remaining
                                         Accrual         to date         Accrual
                                         -------         -------         -------
<S>                                      <C>             <C>             <C>
Employee severance charges ..            $  0.7          $  0.6          $  0.1
Professional fees ...........               0.8             0.7             0.1
Endorsements and sponsorships               4.3             3.8             0.5
                                         ------          ------          ------
                                         $  5.8          $  5.1          $  0.7
                                         ======          ======          ======
</TABLE>

(4)   ACQUISITIONS AND LICENSING AGREEMENTS

      From fiscal 1996 through fiscal 1999 the Company was party to several
acquisitions as described below. These acquisitions, except for Intellectual
Properties Group, Inc., were accounted for as purchases, represent an aggregate
base purchase price, including assumed liabilities, of approximately $151.8
million. The Company also recorded goodwill of approximately $124.1 million in
connection with these acquisitions.


                                      F-13
<PAGE>   27
<TABLE>
<CAPTION>
                ACQUISITIONS                       DATE                              BUSINESS
                ------------                       ----                              --------
<S>                                            <C>                    <C>
Sports Image, Inc.                             November 1996          Markets and distributes licensed motorsports
                                                                      apparel and souvenirs; trackside sales; Dale
                                                                      Earnhardt fan club

Motorsport Traditions Limited Partnership      January 1997           Markets and distributes licensed motorsports
   and Creative Marketing and Promotions,                             apparel and souvenirs; trackside sales
   Inc.

Robert Yates Promotions, Inc.                  July 1997              Markets and distributes licensed motorsports
                                                                      apparel and souvenirs; trackside sales

Image Works, Inc.                              July 1997              Manufactures and markets licensed motorsports
                                                                      apparel through the mass-merchandise markets

Motorsports collectibles product lines of      August 1997            Manufactures and markets licensed
   Simpson Products, Inc.                                             "mini-helmets" and other motorsports
                                                                      collectibles and souvenirs

Richard Childress Racing Enterprises, Inc.     October 1997           10 year licensing agreement with motorsports
                                                                      licensor

Assets related to sales of merchandise         December 1997          Markets and distributes licensed motorsports
   licensed by NASCAR driver Rusty Wallace                            apparel and souvenirs; trackside sales

Assets related to motorsports die-cast         December 1997          Manufactures and markets "Revell" licensed
   collectible product lines of                                       die-cast collectibles; strategic alliance with
   Revell-Monogram, Inc.                                              Revell involving extensive product licensing
                                                                      and distribution arrangements

Brookfield Collectors Guild, Inc.              January 1998           Markets and distributes licensed motorsports
                                                                      collectibles and ensembles

Chase Racewear, L.L.C.                         May 1998               Licensed motorsports apparel and accessories

Paul's Model Art/MiniChamps                    August 1998            Markets and distributes die-cast replicas of
                                                                      Formula One and GT race cars as well as factory
                                                                      production cars, driver figurines, and other
                                                                      motorsports collectibles

Performance Plus Nutritional, L.L.C.           September 1998         Develops and markets driver-endorsed
                                                                      nutritional products, including vitamins,
                                                                      energy bars, and energy drinks

Intellectual Properties Group, Inc.            October 1998           Creates and develops promotional programs for
                                                                      corporate sponsors of motorsports

Tech 2000 Worldwide, Inc.                      November 1998          Operates the "goracing.com" Internet web site;
                                                                      designs, develops, implements, and maintains
                                                                      motorsports-related and other Internet web
                                                                      sites, including electronic commerce
                                                                      capabilities

Goodsports Holdings Pty Ltd.                   January 1999           Markets and distributes licensed Formula One
                                                                      apparel and related products
</TABLE>


                                      F-14
<PAGE>   28
ACQUISITION OF FANTASY SPORTS ENTERPRISES, INC. IN FISCAL 2000

On October 15, 1999, the Company acquired substantially all of the assets and
assumed certain liabilities of Fantasy Sports Enterprises, Inc. ("Fantasy
Sports") for approximately $3.5 million in cash. Fantasy Sports operates Fantasy
Cup Auto Racing through its Web site at www.fantasycup.com. In connection with
the acquisition, the Company recorded goodwill of approximately $4.0 million, to
be amortized straight-line over a 15 year life. This transaction was accounted
for as a purchase. On November 16, 2000, Fantasy Sports was sold to Leisure
Holdings LTD. for an aggregate sale price of $4.2 million. This transaction
resulted in net proceeds to the Company of approximately $4.0 million, which
approximated Fantasy Sports' recorded book value of net assets.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS DATA

The following unaudited pro forma combined statements of operations data for the
years ended September 30, 2000 and 1999 present the results of operations of the
Company as if the acquisitions of Fantasy Sports had occurred as of October 1,
1998. Pro forma results are as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                          2000                 1999
                                                       ---------             --------
<S>                                                    <C>                   <C>
Revenue ...................................            $ 254,801             $345,048

Net (loss) income attributable to diluted
  shares Outstanding ........................            (58,070)              32,004

Net (loss) income per common share, diluted            $   (3.52)            $   1.66
</TABLE>

(5)   FINANCING ACTIVITIES

Long-term debt at September 30, 2000 and 1999 consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                    2000                  1999
                                                                  ---------             ---------
<S>                                                               <C>                   <C>
4-3/4% Convertible Subordinated Notes due 2005 .......            $ 100,000             $ 100,000

Unsecured acquisition notes payable, interest ranging
from 6% to 8% ........................................                7,617                 7,250

Notes payable, interest ranging from 7.9% to 8.5%,
secured by property and equipment ....................                2,215                 4,489

Obligations under capital leases of vehicles and
equipment, interest from 8.0% to 9.5%, payable monthly                   11                   182
                                                                  ---------             ---------
Total ................................................              109,843               111,921

Less:  current portion ...............................               (1,503)               (2,713)
                                                                  ---------             ---------
                                                                  $ 108,340             $ 109,208
                                                                  =========             =========
</TABLE>


CONVERTIBLE SUBORDINATED NOTES

On March 24, 1998, the Company sold $100.0 million of the Notes. The Notes are
convertible, at the option of the holders, into shares of Common Stock at the
initial conversion price of $48.20 per share, subject to adjustments in certain
events. The Notes are generally unsecured obligations of the Company,
subordinated in right of payment to all existing and future senior indebtedness
of the Company, as defined in the Notes. The Indenture governing the Notes does
not limit or prohibit the incurrence of additional indebtedness, including
senior indebtedness, by the Company or its subsidiaries. The Company, at its
option, may redeem the Notes in whole or in part at any time on or after April
1, 2001, at redemption prices set forth in the Indenture governing the Notes.
Upon the occurrence of a


                                      F-15
<PAGE>   29
"change in control" or a "termination of trading," as defined in the Indenture,
the holders of the Notes will have the right to require the Company to
repurchase all or any part of such holders' Notes at 100% of their principal
amount, plus accrued and unpaid interest. The net proceeds to the Company from
this offering were approximately $96.5 million, after deducting offering
expenses and the Initial Purchasers' discount of 3.0%. The offering expenses and
Initial Purchasers discount are included in other assets in the accompanying
financial statements and are being amortized into interest expense using the
effective interest rate method.

CREDIT FACILITY

On September 29 2000, the Company entered into a Loan and Security Agreement
(the "Agreement") with a subsidiary of Bank One (Bank One), providing for
borrowings up to $30.0 million subject to the limitation of a calculated
borrowing base. The loan agreement replaced the Company's previous credit
agreement with First Union National Bank of North Carolina. The Bank One credit
facility consists of a $30.0 million revolving line of credit, which includes up
to $15.0 million of stand by letters of credit. The line of credit bears
interest at the Bank One corporate base plus 0.50 percent or LIBOR plus 2.5
percent. A commitment fee of 0.5% of the average unused line of credit and 1.75
- 2.5% of the average unused letters of credit is payable annually on the credit
facility. The credit facility matures December 2002. The Company had outstanding
purchase commitments of approximately $4.6 and $6.0 under letter of
credit/bankers acceptance facility as of September 30, 2000 and 1999
respectively. The Agreement is secured principally by inventory, receivables and
equipment and restricts the payment of dividends. The agreement contains
covenants, which require the Company to meet certain financial tests principally
related to tangible net worth and EBITDA. As a result of the fourth quarter
loss, the Company was in violation of these covenants. The Company has received
a waiver of these covenant violations and the Agreement has been amended to
reduce the certain assets available to be included in the calculated borrowing
base by $5,000,000. As a result of this reduction and the Company's intention of
reducing outstanding receivables, the Company believes that the calculated
borrowing base will generally be less than $30.0 million.

FUTURE MATURITIES OF LONG-TERM DEBT

Aggregate future maturities of long-term debt are as follows (in thousands):

<TABLE>
<CAPTION>
            Year Ending
            September 30,
<S>                                         <C>
               2001                         $   1,503
               2002                             1,562
               2003                             1,254
               2004                             1,119
               2005                           100,965
               Thereafter                       3,440
                                            ---------
                 Total                      $  109,843
                                            ==========
</TABLE>

(6)   SHAREHOLDERS' EQUITY

ISSUANCE OF STOCK IN PRIVATE PLACEMENTS AND LICENSING AGREEMENTS

In October 1997, the Company issued 34,940 shares of Common Stock valued at
$28.62 per share to Richard Childress Racing, Inc. (See Note 3). In February
1998, the Company issued 9,900 shares of Common Stock valued at $26.00 per share
in connection with a race car sponsorship.

STOCK OPTIONS

Under the Company's 1993 Stock Option Plan (the "1993 Plan"), the Board of
Directors may from time to time grant to key employees, consultants, and
independent contractors who provide valuable services to the Company (i)
incentive stock options and non-statutory stock options to purchase shares of
the Company's Common Stock, (ii) stock appreciation rights, (iii) shares of the
Company's Common Stock, or (iv) cash awards. The 1993 Plan also includes an
automatic program providing for automatic grants of stock options to
non-employee directors of the


                                      F-16
<PAGE>   30
Company. The exercise price for all incentive stock options granted under the
1993 Plan may not be less than the fair market value of the Company's Common
Stock on the date of the grant, except that the option price may not be less
than 110% of the fair market value of the Company's Common Stock on the date of
the grant in the case of incentive stock options granted to any person
possessing more than 10% of the combined voting power of the Company's Common
Stock or any parent or subsidiary corporation. In the case of non-statutory
stock options, the exercise price may not be less than 85% of the fair market
value of the Company's Common Stock on the date of the grant. Options granted
under the 1993 Plan generally have a six-year term. Options that were granted
prior to July 1995 are fully vested and exercisable. The option agreements for
options granted beginning in July 1995 generally provide that one-third of the
options vest and become exercisable on each of the first, second, and third
anniversaries of the date of grant. A total of 2,750,000 shares of Common Stock
may be issued pursuant to the 1993 Plan. The 1993 Plan expires in 2001.

Under the Company's 1998 Non-qualified Stock Option Plan (the "1998 Plan"), the
Board of Directors may from time to time grant to key employees of the Company,
other than directors or executive officers, non-statutory stock options to
purchase shares of the Company's Common Stock. The exercise price, term, vesting
conditions, and other terms for all stock options granted under the 1998 Plan
will be determined at the time of grant by the Board of Directors or a board
committee appointed to administer the 1998 Plan. A total of 500,000 shares of
Common Stock may be issued pursuant to the 1998 Plan. The 1998 Plan expires in
2008.

A summary of the status of the Company's stock option plans at September 30,
2000, 1999, and 1998 and for the years then ended is presented in the table
below:


<TABLE>
<CAPTION>
                                                2000                        1999                        1998
                                          --------------------        --------------------      ---------------------
                                                          Wtd                         Wtd                       Wtd
                                          Number          Avg         Number          Avg        Number         Avg
                                            of         Exercise         of         Exercise        of        Exercise
                                          Shares         Price        Shares         Price       Shares        Price
                                          ------         -----        ------         -----       ------        -----
<S>                                      <C>           <C>           <C>           <C>          <C>          <C>
Outstanding at
  beginning of year...........             996,387      $ 21.52       930,811      $  14.61     1,032,710    $   6.58
Granted.......................             491,500         8.94       419,500         28.50       503,500       27.92
Exercised.....................             (20,918)        6.16      (332,924)        11.53      (425,990)       4.01
Canceled......................            (187,194)       27.48       (21,000)        26.64      (179,409)      30.63
                                         ---------      -------      --------      --------     ----------   --------
Outstanding at
  end of year.................           1,279,775        16.27       996,387         21.23       930,811       14.61
                                         =========      =======      ========      ========     =========    ========
Options exercisable
  at end of year..............             659,323        17.47       460,668         14.88       563,058        9.79
                                         =========      =======      ========      ========     =========    ========
Options available
   for grant..................           1,020,038                    174,360                     572,860
 Weighted average
    fair value of
    options granted...........                          $  7.43                    $  13.93                  $  11.74

</TABLE>


                                      F-17
<PAGE>   31
Options outstanding and exercisable by price range as of September 30, 2000 are
as follows:

<TABLE>
<CAPTION>
                           Options  Outstanding                    Options Exercisable
                   --------------------------------------      --------------------------
                                    Weighted
                                     Average     Weighted                          Weighted
                                    Remaining    Average                             Average
     Range of        Options       Contractual   Exercise         Options           Exercise
 Exercise Prices   Outstanding        Life         Price        Exercisable          Price
 ---------------   -----------        ----         -----        -----------          -----
<S>                <C>              <C>       <C>             <C>              <C>
 $ 1.25 - $11.06     653,627          1.9       $    7.71       258,627          $   6.61

  11.07 -  25.81     198,985          4.2           19.14       166,649             18.92
  25.82 -  29.50     328,163          6.7           26.31       176,985             26.36
  29.51 -  36.88      99,000          7.9           33.74        57,062             34.90
                   ---------                                    -------
   1.25 -  36.88   1,279,775          5.8           16.27       659,323             17.47
                   =========                                    =======
</TABLE>

The Company accounts for its stock-based compensation plans under APB No. 25,
under which no compensation expense has been recognized, as all options have
been granted with an exercise price equal to the fair value of the Company's
Common Stock on the date of grant. The Company adopted SFAS No. 123 for
disclosure purposes in fiscal 1997. For SFAS No. 123, the fair value of each
option grant has been estimated as of the date of grant using the Black-Scholes
option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                      2000                1999                1998
                                    -------             -------             -------
<S>                                 <C>                 <C>                 <C>
Volatility .............             112.64%               7.12%              54.71%
Risk-free interest rate                5.25                5.75                6.34
Dividend rate ..........                0.0%                0.0%                0.0%
Expected life of options            6 years             3 years             3 years
</TABLE>

Options generally vest equally over three years. Had compensation costs been
determined consistent with SFAS No. 123, utilizing the assumptions detailed
above and amortizing the resulting fair value of stock options granted over the
respective vesting period of the options, the Company's net (loss) income and
per share amounts would have been the following pro forma amounts:

<TABLE>
<CAPTION>
                                 2000                   1999                  1998
                              ----------             ----------            ----------
<S>                           <C>                    <C>                   <C>
Net (loss) Income:
    As Reported ..            $  (58,087)            $   28,369            $   24,587
    Pro Forma ....            $  (60,597)            $   25,056            $   22,460
  Basic EPS:
    As Reported ..            $    (3.52)            $     1.69            $     1.52
    Pro Forma ....            $    (3.67)            $     1.49            $     1.39
  Diluted EPS:
    As Reported ..            $    (3.52)            $     1.65            $     1.48
    Pro Forma ....            $    (3.67)            $     1.47            $     1.35
</TABLE>


(7)   PENSION PLAN AND OTHER EMPLOYEE BENEFIT PLANS

In October 1994, the Company established a defined contribution plan that
qualifies as a cash or deferred profit sharing plan under Sections 401(a) and
401(k) of the Internal Revenue Code. The plan is available to substantially all
domestic employees. Under the plan, participating employees may defer from 1% to
15% of their pre-tax compensation. The Company contributes fifty cents for each
dollar contributed by the employee, with a maximum contribution of 2% of the
employee's defined compensation. In addition, the plan provides for an annual
employer profit sharing contribution in such amounts as the Board of Directors
may determine. The Company expensed


                                      F-18
<PAGE>   32
approximately $191,000, $206,000 and $141,000 under the plan for the years ended
September 30, 2000, 1999 and 1998, respectively.

In March 1999, the Company's stockholders approved, and the Company adopted, the
Action Performance Companies, Inc. 1999 Employee Stock Purchase Plan ("Purchase
Plan"). Under the Purchase Plan, the Company has reserved 1,800,000 shares of
the Company's common stock for sale to the employees. The Purchase Plan allows
eligible employees to purchase shares of common stock at the lesser of 85% of
the fair value of such shares at the beginning or end of each semi-annual
offering period. Purchases are limited to 15% of an employee's eligible
compensation, subject to a maximum limitation of $25,000 annually.

The Purchase Plan commenced on August 1, 1999. As of September 30, 2000 and
1999, employee withholdings were approximately $43,000 and $24,000, with share
purchases to be made on a semi-annual basis.

The Company has no other programs that require payment by the Company of
post-employment benefits to current or retired employees.

(8)   INCOME TAXES

The Company provides for income taxes under SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are expected
to reverse. The principal differences arise as a result of the use of
accelerated depreciation and amortization methods for federal income tax
reporting purposes, certain inventory costs required to be capitalized for tax
purposes, and certain reserves expensed currently for financial reporting
purposes.

SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets may not be realized. The
ultimate realization of this deferred tax asset depends on the Company's ability
to generate sufficient taxable income in the future. A valuation allowance of
approximately, 5.0 million has been recorded for net operating losses generated
by the Company's U.K. subsidiary, for state net operating losses and for
deferred tax assets related to reserves as of September 30, 2000.

The Company has capital loss carryforwards of $1,033,000 which will expire on
September 30, 2005.

The (benefit) provision for income taxes consists of the following for the years
ended September 30 (in thousands):

<TABLE>
<CAPTION>
                                                     2000                1999                1998
                                                   --------             -------            --------
<S>                                                <C>                  <C>                <C>
Current:
  Federal .............................            $(15,765)            $14,877            $ 15,300
  State ...............................                  --                 849               2,181
  Foreign .............................                 400               2,641                  --
                                                   --------             -------            --------
                                                    (15,365)             18,367              17,481
Deferred income tax (benefit)
  provision ...........................              (9,227)                159              (1,090)
                                                   --------             -------            --------
(Benefit) provision for income taxes ..            $(24,592)            $18,526            $ 16,391
                                                   ========             =======            ========
</TABLE>


                                      F-19
<PAGE>   33
Reconciliation of the federal income tax rate to the Company's effective rate
for the years ended September 30 are as follows:

<TABLE>
<CAPTION>
                                                 2000                1999               1998
                                               ------              ------             ------
<S>                                            <C>                  <C>                <C>
Statutory federal rate ............             (35.0)%              35.0%              35.0%
State taxes, net of federal benefit              (2.0)                2.0                4.0
Foreign ...........................                --                 2.0                 --
Other non deductible expense ......               2.0                 0.5                1.0
Valuation allowance ...............               5.0                  --                 --
                                               ------              ------             ------
                                                (30.0)%              39.5%              40.0%
                                               ======              ======             ======
</TABLE>

The components of deferred taxes are as follows at September 30 (in thousands):

<TABLE>
<CAPTION>
                                                         2000                1999
                                                        -------             -------
<S>                                                     <C>                 <C>
CURRENT DEFERRED TAX ASSETS (LIABILITIES):
  Inventory cost capitalization ............            $   869             $   665
  Reserves and accruals ....................              8,752               2,243
  Valuation allowance ......................             (3,716)               (493)
                                                        -------             -------
                                                          5,905               2,415
                                                        -------             -------
LONG-TERM DEFERRED TAX ASSETS (LIABILITIES):
  Deferred compensation ....................            $   220             $    25
  Intangible asset capitalization ..........              2,183                  --
  Capital loss carryforward ................                752                  --
  State net operating losses ...............              1,102                  --
  Foreign net operating losses .............              2,583                 493
  Accelerated tax depreciation .............             (1,248)             (3,212)
  Accelerated tax amortization .............             (2,817)             (1,620)
  Reserves and accruals ....................               (457)                 --
  Valuation allowance ......................               (895)                 --
                                                        -------             -------
                                                        $ 1,423             $(4,314)
                                                        -------             -------
Net deferred tax asset/(liability) .........            $ 7,328             $(1,899)
                                                        =======             =======
</TABLE>

The accompanying balance sheets as of September 30, 2000 include an income tax
receivable of $14.0 million representing estimated tax refunds available from
carrying back the current year loss to prior years in which the Company had
taxable income.

(9)   SEGMENT REPORTING

The Company has two reportable segments based on geographic points of
distribution: Domestic and Foreign. The Company's reportable segments are based
on operating divisions operating geographically within the continental United
States as "Domestic" and abroad as "Foreign." The Company evaluates performance
and allocates resources based on segment profits (losses). The accounting
policies of the reportable segments are the same as those described in Note 2,
"Summary of Significant Accounting Policies." Segment profits are comprised of
segment net revenues less cost of goods sold and selling, general and
administrative expenses. Excluded from segment profits, however, are settlement
costs, interest income and interest expense. Financial information for the
Company's reportable segments is as follows:


                                      F-20
<PAGE>   34
<TABLE>
<CAPTION>
                                                               Domestic              Foreign                 Total
                                                               --------              -------                 -----
<S>                                                            <C>                   <C>                  <C>
FISCAL YEAR ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)
  Collectibles ....................................            $ 129,371             $ 19,661             $ 149,032
  Apparel and souvenirs ...........................               89,831                9,491                99,322
  Other ...........................................                6,014                  325                 6,339
                                                               ---------             --------             ---------
     Total segment revenue ........................              225,216               29,477               254,693
     Segment losses ...............................              (72,888)              (2,804)              (75,692)
     Depreciation and amortization included
       in segment losses (Includes
       restructuring charges, see Note 3) .........               40,215                2,896                43,111
  Total Assets ....................................              216,572               39,345               255,917
</TABLE>


<TABLE>
<CAPTION>
                                                                Domestic            Foreign             Total
                                                                --------            -------             -----
<S>                                                             <C>                 <C>                <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1999 (IN THOUSANDS)
  Collectibles .....................................            $185,147            $29,282            $214,429
  Apparel and souvenirs ............................             113,606              6,316             119,922
  Other ............................................               7,669                425               8,094
                                                                --------            -------            --------
     Total segment revenue .........................             306,422             36,023             342,445
     Segment profits ...............................              50,657              6,166              56,823
     Depreciation and amortization included
       in segment profits ..........................              19,243              3,703              22,946
  Total Assets .....................................             296,849             43,212             340,061

FISCAL YEAR ENDED SEPTEMBER 30, 1998  (IN THOUSANDS)
  Collectibles .....................................            $140,445            $ 1,581            $142,026
  Apparel and souvenirs ............................             106,712                 --             106,712
  Other ............................................               3,139                 --               3,139
                                                                --------            -------            --------
     Total segment revenue .........................             250,296              1,581             251,877
     Segment profits ...............................              44,772                290              45,062
     Depreciation and amortization included
       in segment profits ..........................              11,688                151              11,839
  Total Assets .....................................            $269,596            $36,338            $305,934
</TABLE>


Reconciliation of segment profits (losses) to consolidated income (loss) before
taxes, is as follows: (in thousands)


<TABLE>
<CAPTION>
                                                      2000                 1999                 1998
                                                    --------             --------             --------
<S>                                                 <C>                  <C>                  <C>
Fiscal Year Ended September 30,
  Segment (losses) profits                          $(75,692)            $ 56,823             $ 45,062
  Settlement costs                                        --                3,600                  950
 Total other expense, net                             (6,987)              (6,328)              (3,134)
                                                    --------             --------             --------
 Consolidated (loss) income before taxes            $(82,679)            $ 46,895             $ 40,978
                                                    ========             ========             ========
</TABLE>

(10)  LEGAL SETTLEMENTS

In March 1998, the Company agreed to settle a lawsuit with Petty Enterprises,
Inc. and an affiliate of Petty Enterprises, Inc. Under the financial terms of
the settlement, the Company paid a total of approximately $700,000 to Petty
Enterprises, Inc. as payment in full for royalties and other fees in connection
with licenses for future sales of licensed products. The accompanying 1998
financial statements include a charge of $950,000 incurred as a result of this
settlement and related charges.

In March 1998, the Company and other defendants settled an environmental lawsuit
with the State of Arizona. Under the agreement, the former shareholders of F.W.
& Associates, Inc., including Fred W. Wagenhals, the Company's Chairman of the
Board, President, and Chief Executive Officer, paid an aggregate of $800,000 to
the


                                      F-21
<PAGE>   35
state and certain parties seeking indemnity from the Company. The Company did
not incur any costs in connection with this settlement.

On March 4, 1997, two class action lawsuits were filed against the Company and
approximately 28 other defendants in the United States District Court for the
Northern District of Georgia. The lawsuits allege that the defendants engaged in
price fixing and other anti-competitive activities in violation of federal
anti-trust laws. The alleged class of plaintiffs consists of all purchasers of
souvenirs or merchandise from licensed vendors at any NASCAR Winston Cup race or
supporting event during the period commencing January 1, 1991. The Company was
named as defendant based upon actions alleged to have been taken by Sports
Image, Robert Yates Promotions, Inc., and Creative Marketing & Promotions, Inc.
prior to the acquisitions of those entities. The actions were subsequently
consolidated by order of the court. The caption of the consolidated action is
"In re Motorsports Merchandise Antitrust Litigation" and the files are
maintained under Master File No. 1-97-CV-0569-CC. The plaintiffs requested
injunctive relief and monetary damages of three times an unspecified amount of
damages that the plaintiffs claim to have actually suffered. In order to avoid
further expense and the distraction of Company management that protracted
litigation might create, on September 30, 1999, the Company and the plaintiffs
entered into a memorandum of understanding with respect to the settlement of
this lawsuit. In connection with the settlement, the Company recorded a
non-recurring pretax charge of $3.6 million during the fourth quarter of fiscal
1999 to reflect the financial terms of the settlement, as well as legal and
other expenses related to the lawsuit and settlement. During September 2000, the
court approved a settlement between the plaintiffs and the Company. The
principle financial terms of the settlement require the Company to pay
approximately $1.9 million in cash and approximately $1.1 million in coupons in
consideration of the dismissal and release with prejudice of our company and
affiliates. The Company paid the cash portion of the settlement during June
2000. Race fans may redeem the $1.1 million in coupons in connection with the
purchase of products at the Company's trackside stores over the course of the
2001 and 2002 NASCAR race seasons. In the event the entire $1.1 million is not
redeemed by the end of the 2002 season, 25% of the balance will be paid in cash
to a charity of the settlement parties' choice, which will satisfy the Company's
obligations in full.

(11)  COMMITMENTS AND CONTINGENCIES

The Company leases certain equipment and office space under noncancellable
operating leases. Rent expense related to these lease agreements totaled
approximately $5.7 million, $4.8 million, and $3.1 million for the fiscal years
ended September 30, 2000, 1999, and 1998 respectively.

Future lease receipts and payments under noncancellable operating leases and
subleases are as follows (in thousands):

<TABLE>
<CAPTION>
             Year Ending                       Lease      Sublease
            September 30,                    Payments     Receipts
            -------------                    --------     --------
<S>                                          <C>          <C>
               2001.......................   $  3,590     $  2,482
               2002.......................      3,173        2,070
               2003.......................      2,700          368
               2004.......................      2,191          334
               2005.......................      2,003          111
               Thereafter.................     14,081            0
                                             --------     --------
               Total......................   $ 27,738     $  5,365
                                             ========     ========
</TABLE>


Certain of the Company's licensing agreements require the Company to make
minimum annual guaranteed royalty payments through the term of the agreements.
To date, the Company has recovered such minimum annual guaranteed royalty
payments through normal product sales. Royalties paid in connection with these
licensing agreements, including guaranteed minimums, were approximately $48.4
million $49.7 million and $28.4 million for the fiscal years ended September 30,
2000, 1999 and 1998, respectively. The Company expects that future amounts
payable under these licensing agreements will approximate historical amounts.
There can be no assurance, that the Company will generate sufficient product
sales in the future to recover minimum royalty payments.


                                      F-22
<PAGE>   36
Future minimum annual guaranteed royalty payments under various licensing
contracts are as follows (in thousands):

<TABLE>
<CAPTION>
             Year Ending
            September 30,
<S>                                          <C>
               2001                          $ 15,440
               2002                            12,856
               2003                            11,393
               2004                            11,446
               2005                            11,087
               Thereafter                      12,915
                                             --------
               Total                         $ 75,137
                                             ========
</TABLE>


The Company has entered into contractual agreements providing severance benefits
to certain key employees in the event of a potential change of Company ownership
or termination of employment. Commitments under these arrangements totaled
approximately $1.8 million at September 30, 2000.

The Company is subject to certain other asserted and unasserted claims
encountered in the normal course of business. In the opinion of management, the
resolution of these matters will not have a material adverse effect on the
Company's financial position or results of operations.

On January 11, 1999, the Company acquired all of the outstanding stock of
Goodsports Holding Pty. LTD., an Australian-based marketer of Formula One,
related apparel and other merchandise. The consideration paid by the Company
consisted of the assumption of certain liabilities and contingent payments of up
to $3.6 million to be paid over a four year period based upon the attainment of
certain performance objectives. The Company does not currently anticipate that
any payments will be due under this contingent liability.

On March 28, 2000, the Company signed a series of sublease agreements whereby a
third-party assumed responsibility for certain operating lease obligations
related to goracing.com's infrastructure, including its physical facility and
all related computer equipment. The Company remains the guarantors under the
terms of the original agreement.

On March 28, 2000 the Company entered into an agreement whereby a third party
was to provide web-hosting environments. The agreement provides for a three year
term, however the Company can terminate for any reason upon two months notice.
The monthly fee under this agreement is $87,000. Prior to December 1, 2000, the
Company elected its option to terminate this agreement. Also on March 28, 2000,
the Company entered into a service agreement with its web hosting environment
provider. Under this agreement the Company is committed to purchase $2.0 million
worth of normal business services over a two year period. As of September
30,2000 the Company had fulfilled $751,000 of the $2.0 million purchase
commitment.

On November 30, 1999, a class action lawsuit was filed against the Company in
the United Stated District Court for the District of Arizona, case No. CIV'99
2106 PHXROS. Fred W. Wagenhals, director and officer of the Company, and Tod J.
Wagenhals and Christopher S. Besing, former directors and officers of the
Company, also were named as defendants. The lawsuit alleges that the Company and
the other defendants violated the Securities Exchange Act of 1934 by (a) making
allegedly false statements about the state of the Company's business and the
shipment of certain products to a customer, or (b) participating in a fraudulent
scheme that was intended to inflate the price of the Company's common stock. The
alleged class of plaintiffs consists of all persons who purchased the Company's
publicly traded securities between July 27, 1999 and December 16, 1999. The
plaintiffs are requesting an unspecified amount of monetary damages. The Company
has filed a motion to dismiss the lawsuit, which is scheduled to be heard by the
court during April 2001. The Company intends to vigorously defend the claims
asserted in the lawsuit.


                                      F-23
<PAGE>   37
(12)  RELATED PARTY TRANSACTIONS

The Company owns a building in Tempe, Arizona, containing approximately 46,000
square feet, which the Company utilized for its corporate, administrative, sales
offices, and warehouse facilities prior to September 1997. Prior to March 1998,
Fred W. Wagenhals, a shareholder, director, and officer of the Company, owned a
one-third interest in F.W. Investments, a partnership that owned this facility.
In March 1998, Mr. Wagenhals became the sole owner of this facility. The Company
paid F.W. Investment or Mr. Wagenhals rent of approximately $120,000 and
$175,000 for the years ended September 30, 1999, and 1998, respectively. During
fiscal 1998, the Company made a refundable deposit of $900,000 to Mr. Wagenhals
towards the purchase of the facility. During 1999 the Company paid the remaining
balance of $1.2 million as final payment and purchase of the facility. The land
and building are included in property and equipment in the accompanying
financial statements. This building is currently held for sale and during fiscal
year 2000 the Company reduced the recorded value to estimated current market
value.


                                      F-24
<PAGE>   38
                                                                     SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

                      FOR THE YEAR ENDED SEPTEMBER 30, 2000
                             (DOLLARS IN THOUSANDS)

                                    ADDITIONS

<TABLE>
<CAPTION>
                                                                Charged to
                             Balance at       Charged to        other
                             beginning        costs and         accounts -       Deductions -       Balance at end
Description                  of period        expenses          describe         describe (A)       of period
-----------                  ---------        --------          --------         ------------       ---------
<S>                          <C>              <C>               <C>              <C>                <C>
Allowance for doubtful        $1,421           $7,022                             $(5,051)              $3,392
accounts

Restructuring reserves            --           $5,800                             $(5,100)              $  700
</TABLE>


                      FOR THE YEAR ENDED SEPTEMBER 30, 1999
                             (DOLLARS IN THOUSANDS)

                                    ADDITIONS

<TABLE>
<CAPTION>
                                                                Charged to
                             Balance at       Charged to        other
                             beginning        costs and         accounts -       Deductions -       Balance at end
Description                  of period        expenses          describe         describe           of period
-----------                  ---------        --------          --------         --------           ---------
<S>                          <C>              <C>               <C>              <C>                <C>
Allowance for doubtful          $986           $1,130                             $(695)              $1,421
accounts
</TABLE>


                      FOR THE YEAR ENDED SEPTEMBER 30, 1998
                             (DOLLARS IN THOUSANDS)

                                    ADDITIONS

<TABLE>
<CAPTION>
                                                                Charged to
                             Balance at       Charged to        other
                             beginning        costs and         accounts -       Deductions -       Balance at end
Description                  of period        expenses          describe         describe           of period
-----------                  ---------        --------          --------         --------           ---------
<S>                          <C>              <C>               <C>              <C>                <C>
Allowance for doubtful          $837             $627                              $(478)                $986
accounts
</TABLE>

(A) Amounts indicated as deductions are for amounts charged against these
reserves in the ordinary course of business and/or payments to date on cash
charges.



                                      F-25
<PAGE>   39
                             EXHIBIT INDEX


Exhibit Number                         Description of Exhibit
--------------                     ------------------------------

     23                            Consent of Arthur Andersen, LLP