CRAGAR Industries, Inc. Reports Recent Developments
13 June 2000
CRAGAR Industries, Inc. Reports Recent Developments
PHOENIX - CRAGAR Industries, Inc. today reported its first quarter 2000
financial results, its recent acquisition of stock in Wrenchead.com, Inc. and
the completion of the transaction to sell its remaining inventory to PDK, Inc.
The first of these two issues are discussed in an interview with CEO Michael
L. Hartzmark, Ph.D. published by the Wall Street Transcript in its June 12,
2000 issue.
Net loss for the first quarter ended March 31, 2000 was $97,900 compared
to net earnings of $100,455 for the first quarter ended March 31, 1999, a
decrease in earnings of $198,355. Basic loss per share for the first quarter
ended March 31, 2000, was $.06 compared to basic earnings per share, after
deducting the value of the in-kind dividends due holders of the Series A
Preferred Stock, equal to $0.02 for the first quarter ended March 31, 1999.
Total revenues consist of gross sales, less returns, discounts, and
allowances, plus royalty revenues. Net sales for the quarter ended March 31,
2000 were $316,351, compared to $4,186,763 during the quarter ended March 31,
1999, representing a 92.4% decrease in net sales. Net sales for the quarter
ended March 31, 2000, also consisted of sales of the remaining inventory not
sold as part of the transactions with Weld Racing, Inc. and Carlisle Tire &
Wheel Company, Inc. The decrease, which was anticipated as a result of the
Company's change in business strategy in late 1999, was primarily attributable
to the Company no longer actively manufacturing and distributing wheels. The
decrease in net sales in the fiscal quarter ended March 31, 2000, was
partially offset by royalty income of $142,927 earned under the Weld and
Carlisle licensing agreements. More detail of the financial performance of
CRAGAR can be found in the Company's Quarterly Report on Form 10-QSB.
"If there can be a highlight with respect to this loss, it is the royalty
income earned by CRAGAR of $142,927 during the first quarter of 2000,"
commented Michael L. Hartzmark, CEO. "This quarter represented the start-up
period for both of our new licensing partners, during which they were
initiating the manufacturing, marketing, distribution and sales of our CRAGAR
branded product. We are very comfortable with these initial figures. As a
result of completing the winding down of our operations in the first and
second quarters we anticipate lower overhead expenses in the future."
Dr. Hartzmark, added, "We have recently completed a transaction in which
PDK, Inc., a large Midwest warehouse/distributor, acquired the remaining
CRAGAR inventory. PDK will serve as a central warehouse and distributor for
all CRAGAR product that has not been licensed to Weld Racing, Inc. and
Carlisle Tire & Wheel Company, Inc." The financial impact of this transaction
will be reported in the Company's Quarterly Report on Form 10-QSB for the
second quarter.
"Finally, we have recently completed the acquisition of 245,000 shares of
common stock and preferred stock in Wrenchead.com, Inc. Overall, we have now
purchased 485,000 shares of Wrenchead.com common and preferred stock."
Dr. Hartzmark, summarized CRAGAR's recent developments, "Overall, the
transactions since October 1999 have transformed CRAGAR from a designer,
assembler, marketer, seller, and distributor of custom wheels to a licensing
company dependent on royalty income and its investment in Wrenchead.com. In
addition, we are currently pursuing other licensing venues. These include
opportunities with other wheel manufacturers for those custom wheel niches
that we have not yet licensed, as well as opportunities we believe exist to
extend the brand into other automotive products. We are looking to partner
with a premier licensing and corporate trademark group, with respect to other
non-wheel products. Through this type of arrangement, we believe the right
partner can expand and extend the CRAGAR product line. For example, we would
like to see our product line reflect our past history. In the past, CRAGAR
manufactured and sold headers, exhaust components, louvers, turbo-chargers and
other automotive products."
With respect to CRAGAR's Internet strategy, Dr. Hartzmark said, "CRAGAR
was fortunate in early 1999 to get involved with a company called
Wrenchead.com, headquartered in White Plains, New York. We purchased an
equity stake in Wrenchead.com and created a relationship wherein we had banner
space on the Wrenchead.com website. CRAGAR has recently completed a
transaction to increase its equity ownership in Wrenchead.com. Information
about Wrenchead.com is available at http://www.wrenchead.com. In a nutshell,
Wrenchead.com is a provider of e-commerce tools for both B2B and B2C
transactions for the automotive aftermarket. Wrenchead.com currently offers
for sale more than 1.5 million brand name auto and truck parts, accessories,
performance products, and consumer merchandise. The company has a strong
group of media partners, including CBS Corporation and SFX Entertainment.
They also have a joint venture with Chilton and they are linked to Nascar.com.
On the financial side, the lead investor is Polaris Venture Partners, while
other financial partners include Goldman Sachs, Wit Capital, and Paine Webber,
among others."
CRAGAR Industries, Inc. was an international designer, producer, and
seller of custom wheels and wheel accessories for cars, trucks, vans, sport
utility vehicles, racing vehicles, and motorcycles. The Company is now a
licensor of the CRAGAR brand name and an investor in Wrenchead.com.
This release includes statements that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 including, among others, statements
regarding the transactions with Weld Racing, Inc., Carlisle Tire & Wheel
Company, Inc. and PDK, Inc. and CRAGAR's intent to implement a new business
strategy regarding the CRAGAR brand name and the investment in Wrenchead.com.
Forward-looking statements are inherently subject to risks and uncertainties,
some of which cannot be predicted or quantified. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Please refer to the Risk Factors
in the Company's filings with the Securities and Exchange Commission, which
identify certain important factors that could cause actual results to differ
materially from those contained in our forward-looking statements. These
factors include, but are not limited to, dependence on royalty income from
Weld Racing, Inc. and Carlisle Tire & Wheel Company, Inc., dependence on
external financing, market conditions, as well as general economic conditions.
In addition, there is no assurance that Weld Racing, Inc. and Carlisle Tire &
Wheel will be able to successfully sell the licensed products, which would
have a material adverse effect on the royalties CRAGAR anticipates from the
licensing arrangements. Finally, there is no assurance that the Company's
brand extension strategy will be implemented, and if so, whether it will be
successful. Finally, there is no assurance that the Company's investment in
Wrenchead.com will provide a positive return.