MOTORCAR PARTS & ACCESSORIES INC, 424B4, 1997-11-20

MOTORCAR PARTS & ACCESSORIES INC
424B4, 1997-11-20
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-37977
PROSPECTUS

[LOGO]

1,550,000 SHARES
MOTORCAR PARTS & ACCESSORIES, INC.
COMMON STOCK

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

Of the 1,550,000 shares of Common Stock offered hereby (the 'Offering'),
1,300,000 shares are being issued and sold by Motorcar Parts & Accessories, Inc.
(the 'Company') and 250,000 shares are being sold by selling shareholders named
under 'Principal and Selling Shareholders.' The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Shareholders.

The Common Stock is included in the Nasdaq National Market under the symbol
'MPAA.' On November 19, 1997, the last reported sale price of the Common Stock
on the Nasdaq National Market was $16.625 per share. See 'Price Range of Common
Stock.'

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

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER ALL OF THE FACTORS SET FORTH IN
'RISK FACTORS' COMMENCING ON PAGE 8 OF THIS PROSPECTUS.
------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share $16.625 $0.96 $15.665 $15.665
Total(3) $25,768,750 $1,488,000 $20,364,500 $3,916,250
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See 'Underwriting.'

(2) Before deducting offering expenses payable by the Company, estimated at
$350,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up
to an additional 232,500 shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any.
See 'Underwriting.' If such option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, Proceeds to Company
and Proceeds to Selling Shareholders will be $29,634,062.50, $1,711,200,
$24,006,612.50, and $3,916,250, respectively.

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

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
November 25, 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.

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

SMITH BARNEY INC. A.G. EDWARDS & SONS, INC.

November 19, 1997

[PHOTOS OF COMPANY PRODUCTS]

The Company is a leading remanufacturer of replacement alternators and
starters for imported cars and light trucks in the United States, currently
providing its customers with a full line of approximately 925 different
alternators and approximately 625 different starters.

The Company recently entered the market for remanufactured replacement
alternators for domestic vehicles.

[PHOTOS OF FACTORY FLOOR]

The Company primarily conducts its remanufacturing operations at its facilities
in Torrance, California, which consist of 352,000 square feet of space.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE 'UNDERWRITING.'

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

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K and the Company's Amendments No. 1
and No. 2 on Form 10-K/A for the fiscal year ended March 31, 1997, the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, which were heretofore filed by the Company with the Commission (File No.
0-23538) pursuant to the Securities Exchange Act of 1934, as amended (the '1934
Act'), are hereby incorporated by reference.

Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document incorporated
by reference in this Prospectus (other than exhibits unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
directed to the Company, 2727 Maricopa Street, Torrance, California 90503, (310)
212-7910, Attention: Richard Marks, President.

FORWARD LOOKING STATEMENTS

Certain statements contained in the Prospectus Summary and elsewhere in
this Prospectus regarding matters that are not historical facts, such as
statements regarding growth trends in the automotive aftermarket industry, the
Company's strategy, the Company's recent entrance into the domestic automotive
aftermarket industry and other future plans, are forward-looking statements (as
such term is defined in the Securities Act of 1933 (the 'Act')). Since such
forward-looking statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such statements. Factors
that could cause actual results to differ materially include, but are not
limited to, those discussed herein under 'Risk Factors,' 'Management's
Discussion and Analysis of Financial Condition and Results of Operations' and
'Business,' as well as those discussed elsewhere in this Prospectus.

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information in this Prospectus assumes that the Underwriters'
over-allotment option will not be exercised. References to a fiscal year are to
the year ended March 31 of that year.

THE COMPANY

The Company is a leading remanufacturer of replacement alternators and
starters for imported cars and light trucks in the United States. During fiscal
1997, the Company commenced remanufacturing replacement alternators and starters
for domestic vehicles. The Company's full line of alternators and starters are
remanufactured for vehicles imported from Japan, Germany, Sweden, England,
France, Italy and Korea and, as recently commenced, for certain domestic
vehicles. The imported vehicles for which the Company remanufactures alternators
and starters also include vehicles produced by General Motors, Chrysler and Ford
that are originally equipped with components produced by foreign manufacturers,
and 'transplants,' which are manufactured in the United States by Toyota,
Nissan, Honda, Mazda and other foreign manufacturers. The Company also assembles
and distributes ignition wire sets for imported and domestic cars and light
trucks.

During the past five years, the Company has experienced significant growth
in net sales and net income. For the five-year period from fiscal 1993 through
fiscal 1997, net sales and net income increased at a compound annual growth rate
of 37.9% and 73.2%, respectively. Net sales and net income for the first six
months of fiscal 1998 increased by 27.0% and 23.9%, respectively, over the first
six months of fiscal 1997. The Company attributes these increases to certain
favorable industry trends, to the Company's continuing success in increasing
sales to existing customers while adding new accounts to its customer base and
to the Company's entrance during fiscal 1997 into the domestic automotive
aftermarket industry for alternators and starters.

The Company's historical market, the import automotive aftermarket for
alternators and starters, has experienced significant growth in recent years.
This growth has resulted from, among other trends, (i) the proliferation of
imported cars and light trucks in use, (ii) the increase in the number of miles
driven each year and (iii) the growth in the number of imported vehicles at the
prime repair age of four years and older. In addition, the Company believes that
its new market, the significantly larger domestic automotive aftermarket for
alternators and starters, represents substantial growth opportunities. The
Company estimates the size of this new market to be approximately $2.4 billion,
or approximately three times the size of the Company's historical market for
imported vehicles.

The Company's products are sold throughout the United States to many of the
nation's largest chains of retail automotive stores, including AutoZone, CSK
Auto, The Pep Boys, O'Reilly Automotive, Trak Automotive and Hi-Lo Automotive,
and throughout Canada to that country's largest chain of retail automotive
stores, Canadian Tire. The Company also supplies remanufactured alternators and
starters for imported vehicles to Delphi Energy and Engine Management Systems
('Delphi'), a division of General Motors. During the last several years, the
Company's marketing and sales of its products for imported vehicles principally
has been to retail automotive chains, which the Company believes has been the
fastest growing segment of the automotive aftermarket industry. During fiscal
1997, approximately 85% of the Company's sales were to retail automotive chains
comprised of approximately 4,500 stores, with the balance of sales primarily to
large warehouse distributors. In connection with its recent expansion into the
remanufacture of products for domestic vehicles, the Company intends to
significantly increase its marketing efforts to warehouse distributors.

STRATEGY

The Company has developed a business strategy to achieve continued growth
while enhancing its competitive position as a leading remanufacturer of
automotive parts. The Company believes that its

future growth principally will be driven by (i) continued growth of the market
for remanufactured parts for imported vehicles and the Company's expansion into
the market for remanufactured products for domestic vehicles, (ii) the growth of
its customer base and (iii) acquisitions to take advantage of the consolidation
trend in the highly fragmented automotive aftermarket remanufacturing industry.
In addition, the Company continually seeks to enhance its competitive position
through a number of initiatives such as pursuing additional manufacturing
efficiencies.

Expand Product and Marketing Focus -- While maintaining its primary
product and market focus of remanufacturing alternators and starters for
imported vehicles, the Company intends to accelerate its expansion into
the significantly larger market for remanufactured alternators and
starters for domestic vehicles. The Company believes that its existing
relationships with the nation's largest chains of retail automotive
stores, established through its leadership in the import automotive
aftermarket industry, provide immediate access for the marketing and sale
to those chains of its products for domestic vehicles. For example, the
Company, in its initial entrance into this new market, recently became the
exclusive supplier to all of the stores of its largest customer of a line
of remanufactured alternators for General Motors vehicles.

Grow With its Customer Base -- As automotive retail chain stores, which
comprise the Company's main customer base, continue to expand their
operations, including by adding more stores, the Company will seek to
maintain its market share and penetration of those chains. Since 1995, the
Company's current seven largest customers have increased their total
number of stores by approximately 27%, from approximately 3,250 stores to
approximately 4,130 stores. The Company currently supplies approximately
94%, or approximately 3,870, of those stores.

Pursue Acquisitions of Complementary Businesses -- The Company's strategy
includes growth through acquisitions of other companies, assets or product
lines that would complement or expand the Company's existing operations.
The Company believes that acquisitions will enable it to leverage its
fixed costs of operation and to expand further the products and services
that it can offer its customers. The Company believes that suitable
acquisition opportunities are available in its industry, which is highly
fragmented and characterized by numerous small, regional rebuilders.

Pursue Additional Manufacturing Efficiencies -- The Company expects to
realize benefits by increasing operating leverage. Management continues to
seek ways to reduce its per unit production costs by continuing automation
of the remanufacturing process, integrating real-time computerized
information on the factory floor and increasing utilization of its
remanufacturing facilities. This increase in utilization includes taking
advantage of the Company's recent significant expansion of production
capacity, including the addition of more production equipment and floor
space for manufacturing.

The executive offices of Motorcar Parts & Accessories, Inc., a New York
corporation, are located at 2727 Maricopa Street, Torrance, California 90503,
and its telephone number is (310) 212-7910.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by:
The Company............................................... 1,300,000 shares
The Selling Shareholders.................................. 250,000 shares
----------
Total................................................ 1,550,000 shares

Common Stock Outstanding after the Offering.................... 6,412,555 shares(1)

Use of Proceeds by the Company................................. For working capital and other general corporate
purposes, including to finance future
acquisitions. Pending such uses, to repay a
portion of outstanding bank indebtedness. The
Company will not receive any of the proceeds
from the sale of shares of Common Stock by the
Selling Shareholders. See 'Use of Proceeds.'

Nasdaq National Market Symbol.................................. MPAA
</TABLE>

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

(1) Does not include 564,400 shares of Common Stock reserved for issuance
pursuant to the Company's 1994 Stock Option Plan, as amended (the '1994
Stock Option Plan'), of which options to purchase 498,400 shares are
currently outstanding, 30,000 shares of Common Stock reserved for issuance
pursuant to the Company's 1996 Stock Option Plan (the '1996 Stock Option
Plan'), of which options to purchase 15,000 shares are currently
outstanding, 15,000 shares of Common Stock reserved for issuance pursuant to
the Company's 1994 Non-Employee Director Stock Option Plan (the
'Non-Employee Director Plan'), of which options to purchase 7,500 shares are
currently outstanding and 1,000 shares of Common Stock reserved for issuance
pursuant to certain outstanding warrants. See 'Principal and Selling
Shareholders.'

SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(1):
Net sales......................................... $24,033 $29,018 $39,235 $64,358 $86,872 $39,740 $50,455
Cost of goods sold................................ 19,038 21,816 30,690 50,965 69,255 31,830 40,464
Research and development.......................... -- -- -- -- 185 -- 267
Selling expenses.................................. 1,441 2,117 1,498 1,984 2,305 1,051 1,177
General and administrative expenses............... 2,134 2,593 3,704 4,577 4,974 2,375 2,720
Moving expenses................................... -- 256 -- -- -- -- --
Operating income.................................. 1,420 2,236 3,343 6,832 10,153 4,484 5,827
Interest expense, net of interest income.......... (352) (453) (540) (833) (1,090) (465) (892)
Income before income taxes........................ 1,068 1,783 2,803 5,999 9,063 4,019 4,935
Provision for income taxes(2)..................... 453 728 1,197 2,353 3,529 1,588 1,924
Net income........................................ $ 615 $ 1,055 $ 1,606 $ 3,646 $ 5,534 $ 2,431 $ 3,011
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Net income per share.............................. $ 0.29 $ 0.52 $ 0.49 $ 0.93 $ 1.11 $ 0.49 $ 0.58
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Weighted average common shares outstanding........ 2,145 2,018 3,295 3,939 5,007 4,993 5,224
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets........................................................................ $88,602 $ 88,602
Working capital..................................................................... 63,805 66,468
Long-term debt and capitalized lease obligations, less current portions............. 25,150 7,798
Shareholders' equity................................................................ 44,516 64,531
</TABLE>

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

(1) Net sales and cost of goods sold for fiscal 1993, 1994, 1995 and 1996 have
been reclassified to increase cost of goods sold, rather than decrease net
sales, by core trade-ins. See Note A[6] to the financial statements
contained herein.

(2) From January 1, 1987 through December 31, 1993, the Company was subject to
taxation as an 'S' corporation in accordance with the Internal Revenue Code
of 1986, as amended (the 'Code'). As a result, the net income of the Company
during that time was taxed for federal (and some state) income tax purposes
directly to the Company's shareholders rather than to the Company. Pro forma
data for fiscal 1993 and fiscal 1994 reflects the income tax expense that
would have been recorded had the Company not been exempt from the payment of
such taxes.

(3) As adjusted to reflect the sale of the shares being offered by the Company
hereby, after deducting underwriting discounts and commissions and estimated
offering expenses and the application of the net proceeds to repay a portion
of outstanding bank indebtedness. See 'Use of Proceeds.'

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the shares of Common Stock offered hereby.
This Prospectus contains forward-looking statements. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the following risk factors. Readers should not place undue
reliance on forward-looking statements, which reflect management's view only as
of the date hereof. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect subsequent events or circumstances.
Readers should also carefully review the information described in other
documents the Company has filed with the Commission incorporated by reference
herein.

DEPENDENCE ON CERTAIN CUSTOMERS

A significant percentage of the Company's sales has been concentrated among
a relatively small number of customers. The Company's three largest customers
accounted for approximately 29%, 18% and 18%, respectively, of net sales during
fiscal 1997, and 42%, 22% and 11%, respectively, for the six months ended
September 30, 1997. The Company's four largest customers accounted for
approximately 21%, 20%, 18% and 11%, respectively, of the Company's net sales
during fiscal 1996. The Company's three largest customers accounted for
approximately 27%, 14% and 12%, respectively, of the Company's net sales during
fiscal 1995. There can be no assurance that this concentration of sales among
customers will not continue in the future. The loss of a significant customer or
a substantial decrease in sales to such a customer would have a material adverse
effect on the Company's sales and operating results. The Company's arrangements
with most of its customers are based on the receipt of purchase orders and
otherwise are not subject to long-term written contracts and generally may be
terminated upon short notice. In addition, customers may demand price
concessions from the Company that could adversely affect profit margins. Also,
as of September 30, 1997, approximately 44% of the Company's accounts receivable
were from the Company's largest customer. See 'Business -- Customers.'

ENTRANCE INTO NEW MARKET

During fiscal 1997, the Company entered the domestic automotive aftermarket
industry for alternators and starters. Prior thereto, the Company had
remanufactured alternators and starters exclusively for the import automotive
aftermarket industry. Although the Company believes that the domestic market
represents substantial growth opportunities, there can be no assurance that the
Company's entrance into that market will be as successful as the Company's
historical operations, if at all. In addition, the entrance into the domestic
market involves certain expenses, management resources and preparation for
anticipated growth. In particular, the Company's inventory as of September 30,
1997 was $58,296,000, which represents an increase of $16,434,000 or 39.3% over
inventory as of March 31, 1997. This increase primarily reflects the Company's
anticipated growth in net sales in connection with its recent entrance into the
domestic market. The Company initially targeted and has sold products for
domestic vehicles to only its largest customer.

MANAGEMENT OF GROWTH

The Company has experienced significant growth of its remanufacturing
operations, which has placed, and is expected to continue to place, significant
demands on the Company's managerial, technical, financial and other resources.
This growth will require the Company to continue to invest in its operations,
including its inventory control, financial and management information systems,
and to retain, motivate and effectively manage its employees. If the Company's
management is unable to manage growth effectively, then the quality of the
Company's products and services, as well as its business, financial condition
and results of operations, could be materially and adversely affected.

RISKS RELATING TO ACQUISITIONS

In order to broaden product offerings, capture market share, improve
profitability and capitalize on the consolidation trend in the automotive parts
industry, the Company's business strategy includes growth through acquisitions.
There can be no assurance that the Company will be able to identify or reach
mutually agreeable terms with acquisition candidates, or that the Company will
be able to manage additional businesses profitably or successfully integrate
such additional businesses into the Company without substantial costs, delays or
other problems. Acquisitions may involve a number of special risks, including:
initial reductions in the Company's operating results; diversion of management's
attention; unanticipated problems or legal liabilities; and a possible reduction
in reported earnings due to amortization of acquired intangible assets in the
event that such acquisitions are made at levels that exceed the fair market
value of net tangible assets. Some or all of these items could have a material
adverse effect on the Company. There can be no assurance that businesses
acquired in the future will achieve sales and profitability that justify the
investment therein.

COMPETITION

The Company competes with companies involved in the remanufacture, assembly
and distribution of alternators and starters for imported and domestic
automobiles and, to a lesser extent, with companies that manufacture, assemble
and distribute ignition wire sets for automobiles. The Company also competes
with importers and distributors of alternators and starters for imported and
domestic automobiles. The automotive aftermarket industry is highly competitive
and several companies with which the Company competes are substantially larger
and have significantly greater financial and other resources than the Company.
The Company's competitors include several other relatively large sources of
remanufactured units and numerous smaller, regional rebuilders. Certain of the
Company's competitors sell a wide variety of other automotive parts, thereby
establishing broader name recognition in the entire automotive aftermarket,
including the Company's market. The entrance of new competitors into or
expansion of operations by existing competitors could have a material adverse
effect on the Company's results of operations. See 'Business -- Competition.'

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts and abilities of its Chairman of
the Board and Chief Executive Officer, Mel Marks, its President and Chief
Operating Officer, Richard Marks, and its Vice President of Operations, Steven
Kratz. If the Company were to lose the services of any of Mel Marks, Richard
Marks or Mr. Kratz before a qualified replacement could be obtained, its
business could be materially adversely affected. Each of Mel Marks, Richard
Marks and Mr. Kratz is a party to an employment agreement with the Company, each
of which contains confidentiality and non-competition provisions. In addition,
the Company maintains and is the sole beneficiary of key-person life insurance
policies on the lives of Mel Marks, Richard Marks and Steven Kratz in the
amounts of $1,400,000, $1,650,000 and $1,000,000, respectively. See
'Management -- Employment Agreements' and ' -- Executive Compensation.'

ENVIRONMENTAL REGULATION

The Company's operations are subject to federal, state and local laws and
regulations governing, among other things, emissions to air, discharge to waters
and the generation, handling, storage, transportation, treatment and disposal of
waste and other materials. The Company is not subject to any such laws and
regulations which are specific to the automotive aftermarket industry. The
Company believes that its business, operations and facilities have been and are
being operated in compliance in all material respects with applicable
environmental and health and safety laws and regulations, many of which provide
for substantial fines and criminal sanctions for violations. Potentially
significant expenditures, however, could be required in order to comply with
evolving environmental and health and safety laws, regulations or requirements
that may be adopted or imposed in the future. The Company believes, although
there can be no assurance, that the overall impact of compliance with

regulations and legislation protecting the environment will not have a material
effect on the Company's future financial position or results of operations. See
'Business -- Governmental Regulation.'

ABSENCE OF DIVIDENDS

The Company has not declared or paid dividends on its Common Stock during
the last two fiscal years or the current fiscal year and does not intend to
declare or pay any dividends of any kind to its shareholders in the foreseeable
future. The Company currently intends to reinvest earnings, if any, in the
development and expansion of its business. The Company's current agreement with
its bank prohibits payment of dividends of any kind without the bank's prior
consent. See 'Dividend Policy' and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'

POSSIBLE VOLATILITY OF STOCK PRICE

The market price of the Common Stock could be subject to significant
fluctuations in response to variations in financial results or announcements of
material events by the Company or its competitors. Regulatory changes or changes
in the general condition of the economy or the financial markets could also
adversely affect the market price of the Common Stock. See 'Price Range of
Common Stock.'

ANTI-TAKEOVER EFFECTS OF PREFERRED STOCK

The Company's Restated Certificate of Incorporation, as amended, authorizes
the issuance of 'blank check' preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the holders of the Company's Common Stock. In the event of issuance, the
preferred stock could be used, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future. If the Company issues preferred stock, the issuance may have a
dilutive effect upon the holders of the Company's Common Stock, including the
purchasers of the shares being offered hereby. See 'Description of Capital
Stock.'

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been included in the Nasdaq National Market
since March 23, 1994 under the symbol 'MPAA.' The following table sets forth for
the periods indicated the high and low sale prices for the Common Stock as
reported by the Nasdaq National Market:

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1996
First Quarter........................................................................ 11 81/2
Second Quarter....................................................................... 15 103/8
Third Quarter........................................................................ 157/8 123/4
Fourth Quarter....................................................................... 157/8 113/8
Fiscal 1997
First Quarter........................................................................ 19 141/4
Second Quarter....................................................................... 153/4 93/8
Third Quarter........................................................................ 15 117/8
Fourth Quarter....................................................................... 175/8 131/4
Fiscal 1998
First Quarter........................................................................ 181/2 131/4
Second Quarter....................................................................... 201/2 163/4
Third Quarter (through November 19, 1997)............................................ 201/4 165/8
</TABLE>

On November 19, 1997, the last reported sale price of the Common Stock on
the Nasdaq National Market was $16.625 per share. As of that date, there were 51
holders of record and the Company believes its Common Stock is beneficially
owned by approximately 1,100 holders.

DIVIDEND POLICY

The Company has not declared or paid dividends on the Common Stock during
the last two fiscal years or the current fiscal year and does not intend to
declare or pay any dividends to its shareholders in the foreseeable future. The
Company currently intends to reinvest earnings, if any, in the development and
expansion of its business. The declaration of dividends in the future will be at
the election of the Board of Directors and will depend upon the earnings,
capital requirements and financial position of the Company, general economic
conditions, state law requirements and other relevant factors. In addition, the
Company's agreement with its bank lender prohibits the payment of dividends of
any kind without the bank's prior consent.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
1,300,000 shares offered hereby by the Company, based on an offering price of
$16.625, (after deducting underwriting discounts and commissions and estimated
expenses payable by the Company) are estimated to be approximately $20,015,000.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Shareholders.

The Company currently intends to use the net proceeds from this offering
for working capital and other general corporate purposes, including to finance
future acquisitions. Although the Company currently is evaluating a number of
acquisition opportunities, it has not entered into any commitments or binding
agreements relating thereto and there can be no assurance that any acquisitions
will be consummated. Pending the foregoing proposed uses, the Company currently
intends to use all of the net proceeds from this offering to reduce outstanding
bank indebtedness under its revolving credit facility with Wells Fargo Bank,
National Association (the 'Bank'). The credit facility provides for borrowings
in an aggregate principal amount of up to $30,000,000 (reducing to $25,000,000
on January 1, 1998) and expires in June 1999. The credit facility provides for
an interest rate at the Bank's prime rate less .25% or LIBOR plus 1.375%. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'

CAPITALIZATION

The following table sets forth the capitalization of the Company at
September 30, 1997, and its capitalization at September 30, 1997, as adjusted to
give effect to the sale by the Company of the 1,300,000 shares offered by the
Company hereby and the application of the net proceeds therefrom, which is
estimated to be in the aggregate approximately $20,015,000 (after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company), to repay a portion of outstanding bank indebtedness. See 'Use
of Proceeds,' 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and the Financial Statements and Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Long-term debt................................................................. $25,000 $ 7,648
------- -----------
Capitalized lease obligations, less current portion............................ 150 150
------- -----------
Shareholders' equity:
Preferred stock, $.01 par value; authorized -- 5,000,000 shares; none
issued.................................................................. 0 0
Common Stock, $.01 par value; authorized -- 20,000,000 shares; issued and
outstanding -- actual, 5,104,055 shares; as adjusted, 6,404,055
shares(1)............................................................... 51 64
Additional paid-in capital................................................ 30,934 50,936
Unearned portion of compensatory stock options............................ (119) (119)
Retained earnings......................................................... 13,650 13,650
------- -----------
Total shareholders' equity........................................... 44,516 64,531
------- -----------
Total capitalization................................................. $69,666 $72,329
------- -----------
------- -----------
</TABLE>

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

(1) Does not include, at September 30, 1997, up to 564,400 shares of Common
Stock reserved for issuance pursuant to the 1994 Stock Option Plan, of which
options to purchase 418,400 shares were outstanding, 30,000 shares of Common
Stock reserved for issuance pursuant to the 1996 Stock Option Plan, of which
options to purchase 15,000 shares were outstanding, 15,000 shares of Common
Stock reserved for issuance pursuant to the Non-Employee Director Plan, of
which options to purchase 7,500 shares were outstanding and 9,500 shares of
Common Stock reserved for issuance pursuant to certain outstanding warrants.
See 'Principal and Selling Shareholders.'

SELECTED FINANCIAL INFORMATION

The financial information set forth below for the fiscal years ended March
31, 1995, 1996 and 1997 and the six months ended September 30, 1996 and 1997
should be read in conjunction with the detailed information in the financial
statements and notes thereto appearing elsewhere herein.

The financial information set forth below for the fiscal years ended March
31, 1993 through 1997 has been derived from the Company's financial statements,
which have been audited by Richard A. Eisner & Company, LLP, independent
auditors. The income statement data for the six months ended September 30, 1996
and 1997 and the balance sheet data as of September 30, 1997 are derived from
the unaudited financial statements appearing elsewhere herein. The financial
information for the six months ended September 30, 1996 and 1997, in the opinion
of management of the Company, is a fair presentation of the results for such
periods. The operating results for the six months ended September 30, 1997 are
not necessarily indicative of results to be expected for the fiscal year ending
March 31, 1998.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(1):
Net sales................. $24,033 $29,018 $39,235 $64,358 $86,872 $39,740 $50,455
Cost of goods sold........ 19,038 21,816 30,690 50,965 69,255 31,830 40,464
Research and
development............. -- -- -- -- 185 -- 267
Selling expenses.......... 1,441 2,117 1,498 1,984 2,305 1,051 1,177
General and administrative
expenses................ 2,134 2,593 3,704 4,577 4,974 2,375 2,720
Moving expenses........... -- 256 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Operating income.......... 1,420 2,236 3,343 6,832 10,153 4,484 5,827
Interest expense, net of
interest income......... (352) (453) (540) (833) (1,090) (465) (892)
------- ------- ------- ------- ------- ------- -------
Income before income
taxes................... 1,068 1,783 2,803 5,999 9,063 4,019 4,935
Provision for income
taxes(2)................ 453 728 1,197 2,353 3,529 1,588 1,924
------- ------- ------- ------- ------- ------- -------
Net income.............. $ 615 $ 1,055 $ 1,606 $ 3,646 $ 5,534 $ 2,431 $ 3,011
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Net income per share.... $ 0.29 $ 0.52 $ 0.49 $ 0.93 $ 1.11 $ 0.49 $ 0.58
------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- -------
Weighted average common
shares outstanding...... 2,145 2,018 3,295 3,939 5,007 4,993 5,224

BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.............. $ 9,045 $16,871 $25,823 $60,189 $75,510 $62,045 $88,602
Working capital........... 1,958 12,041 18,096 44,254 51,800 45,590 63,805
Long-term debt and
capitalized lease
obligations, less
current portions........ 149 4,920 9,502 15,135 17,839 15,320 25,150
Shareholders' equity...... 2,274 8,410 10,016 34,031 40,108 36,806 44,516
</TABLE>

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

(2) From January 1, 1987 through December 31, 1993, the Company was subject to
taxation as an 'S' corporation in accordance with the Code. As a result, the
net income of the Company during that time was taxed for federal (and some
state) income tax purposes directly to the Company's shareholders rather
than to the Company. Pro forma data for fiscal 1993 and fiscal 1994 reflects
the income tax expense that would have been recorded had the Company not
been exempt from the payment of such taxes.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED MARCH 31, SEPTEMBER 30,
--------------------------- ----------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................. 78.2 79.2 79.7 80.1 80.2
Gross profit....................................... 21.8 20.8 20.3 19.9 19.8
Research and development........................... 0.0 0.0 0.2 0.0 0.1
Selling expenses................................... 3.8 3.1 2.7 2.6 2.3
General and administrative expenses................ 9.4 7.1 5.7 6.0 5.4
Operating income................................... 8.5 10.6 11.7 11.3 11.5
Interest expense, net of interest income........... 1.4 1.3 1.3 1.2 1.8
Income before income taxes......................... 7.1 9.3 10.4 10.1 9.8
Provision for income taxes......................... 3.1 3.7 4.1 4.0 3.8
Net income......................................... 4.1% 5.7% 6.4% 6.1% 6.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

In its remanufacturing operations, the Company obtains used alternators and
starters, commonly known as 'cores,' from its customers as trade-ins and by
purchasing them from vendors. Such trade-ins are recorded when cores are
received from customers. Credits for cores are allowed only against purchases of
similar remanufactured products and generally are used within 60 days of
issuance by the customer. Due to this trade-in policy, the Company does not
reserve for trade-ins. In addition, since it is unlikely that a customer will
not utilize its trade-in credits, the credit is recorded when the core is
returned as opposed to when the customer purchases new products. The Company
believes that this policy is consistent throughout the remanufacturing and
rebuilding industry.

Beginning with fiscal 1997, the Company implemented a new accounting
presentation with respect to its reporting of sales. In the past, the Company
deducted the value of all cores returned from its customers in order to reach
net sales. Under the new presentation, net sales are reported on a gross basis,
that is core returns from customers are not deducted in order to reach net
sales, but rather are included in cost of goods sold. The Company's financial
information has been reclassified to reflect this new presentation. The Company
believes that this new presentation provides a truer depiction of actual sales
and cost of goods sold and reflects a more proper relationship between sales and
inventory.

SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
1996

Net sales for the six months ended September 30, 1997 were $50,455,000, an
increase of $10,715,000 or 27.0% over the six months ended September 30, 1996.
The increase in net sales is attributable to sales of alternators for domestic
vehicles to one of the Company's largest customers. The increase reflects the
recent expansion of the Company's product line to include remanufactured
products for domestic vehicles.

Cost of goods sold increased over the periods by $8,634,000 or 27.1% from
$31,830,000 to $40,464,000. The increase primarily is attributable to additional
costs incurred during the recent period in connection with increased production
during that period. As a percentage of net sales, cost of goods sold remained
relatively constant at 80.1% for the six months ended September 30, 1996 as
compared to 80.2% for the six months ended September 30, 1997.

Selling expenses increased over the periods by $126,000 or 12.0% from
$1,051,000 to $1,177,000. This increase resulted principally from an increase in
advertising expenses and an expansion of the

Company's sales force and related travel expenses. As a percentage of net sales,
selling expenses decreased slightly from 2.6% to 2.3%.

General and administrative expenses increased over the periods by $345,000
or 14.5% from $2,375,000 for the six months ended September 30, 1996 to
$2,720,000 for the six months ended September 30, 1997. As a percentage of net
sales, these expenses decreased over the periods from 6.0% to 5.4%, reflecting
the leveraging of these costs over the Company's increased net sales.

For the six months ended September 30, 1997, interest expense net of
interest income was $892,000. This represents an increase of $427,000 or 91.8%
over net interest expense of $465,000 for the six months ended September 30,
1996. Interest expense was comprised principally of interest on the Company's
revolving credit facility, borrowings under which increased significantly over
the periods.

FISCAL 1997 COMPARED TO FISCAL 1996

Net sales for fiscal 1997 increased $22,514,000 or 35.0%, from $64,358,000
to $86,872,000, over net sales for fiscal 1996. The increase is attributable to
the general growth of business with existing customers, including the
commencement of sales of alternators for domestic vehicles to one of the
Company's largest customers, and an unusually large increase in the number of
stock keeping units ('SKUs') that these customers offer in their stores. In
addition, the Company believes that the continued aging of the import vehicle
fleet also contributed to its increased sales.

Cost of goods sold for fiscal 1997 increased $18,290,000 or 35.9%, from
$50,965,000 to $69,255,000, over cost of goods sold for fiscal 1996. The
increase is primarily attributable to additional costs in connection with
increased production. Cost of goods sold as a percentage of net sales increased
over the periods from 79.2% to 79.7%. While the increase in cost of goods sold
over the periods is minimal, it can be primarily attributed to pricing pressures
experienced by the Company as offset by the continuing lowering of manufacturing
costs by the Company.

Selling expenses for fiscal 1997 increased $321,000 or 16.2%, from
$1,984,000 to $2,305,000, over selling expenses for fiscal 1996. Selling
expenses as a percentage of net sales decreased to 2.7% for fiscal 1997 from
3.1% for fiscal 1996. This decrease in selling expenses as a percentage of net
sales represents the continued leveraging of selling costs over the Company's
increased net sales.

General and administrative expenses for fiscal 1997 increased $397,000 or
8.7%, from $4,577,000 to $4,974,000, over general and administrative expenses
for fiscal 1996. As a percentage of net sales these expenses decreased over the
periods from 7.1% to 5.7%. This decrease represents the continued leveraging of
these costs over the Company's increased net sales. The increase over the
periods was the result of additional insurance costs, general salary increases
and certain non-income-based state and local taxes.

Interest expense net of interest income was $1,090,000 for fiscal 1997.
This represents an increase of $257,000 or 30.9% over interest expense net of
interest income for fiscal 1996. Interest expense was comprised principally of
interest paid on the Company's revolving credit facility, borrowings under which
increased over the periods. The balance of interest expense relates to the
Company's capital leases.

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales for fiscal 1996 increased $25,123,000 or 64.0%, from $39,235,000
to $64,358,000 over net sales for fiscal 1995. The increase in net sales is
attributable to sales to new customers, the general growth of business with
existing customers and, the Company believes, to the continued aging of the
import vehicle fleet. During fiscal 1996, the Company began shipping products to
two significant new customers.

Cost of goods sold over the periods increased $20,275,000 or 66.1%, from
$30,690,000 to $50,965,000. The increase is attributable to additional costs
during the later fiscal year in connection with increased production. As a
percentage of net sales these expenses increased to 79.2% for fiscal 1996 from
78.2% for fiscal 1995. This relatively small percentage increase is primarily
attributable to increased direct production costs, which were partially offset
by benefits the Company experienced from

leveraging indirect production costs over increased net sales. During the later
fiscal year, the Company experienced greater pricing pressures on certain of its
products, which pricing pressures have been partially offset by reductions in
manufacturing costs.

Selling expenses over the periods increased $486,000 or 32.4%, from
$1,498,000 to $1,984,000. This increase was the result of an increase of
approximately $433,000 in advertising and other allowances to customers during
fiscal 1996. The balance of the increase was primarily attributable to increased
salaries of the Company's sales force. Despite these increases, selling expenses
as a percentage of net sales decreased to 3.1% from 3.8% over the periods,
reflecting leveraging of these expenses over increased net sales.

General and administrative expenses over the periods increased $873,000 or
23.6%, from $3,704,000 to $4,577,000. Approximately 69.2% of the increase was
due to costs incurred under the Company's incentive bonus plan, which was
implemented in September 1995. The additional increase is primarily attributable
to increased insurance coverage, computer expenses and professional fees. As a
percentage of net sales, general and administrative expenses decreased from 9.4%
to 7.1% over the periods, reflecting leveraging of these expenses over increased
net sales.

Interest expense net of interest income for fiscal 1996 was $833,000. This
represents an increase of $293,000 or 54.3% over interest expense net of
interest income of $540,000 for fiscal 1995. Interest expense was comprised
principally of interest on the Company's revolving credit facility. The
significantly increased interest expense over the earlier year was due to the
Company's increased borrowing under this facility.

LIQUIDITY AND CAPITAL RESOURCES

The Company's recent operations have been financed principally from the net
proceeds of the Company's second public offering in November 1995, borrowings
under its revolving credit facility and cash flow from operations. As of
September 30, 1997, the Company's working capital was $63,805,000, including
$2,408,000 of cash and cash equivalents.

Net cash used in operating activities during the six months ended September
30, 1997 was $11,392,000. The principal use of cash during the six months
related to an increase in inventory of $16,408,000 and a decrease in accounts
payable and accrued expenses of $1,266,000 offset by a decrease in accounts
receivable of $2,580,000. The increase in inventory was due in large part to the
addition of inventory during the six-month period of approximately $13,600,000
in connection with the Company's recent entrance into the business of
remanufacturing alternators and starters for domestic vehicles. The timing of
this inventory build-up was based in part upon the Company's belief that the
demand for its initial domestic alternator product would be highest in the
summer.

Net cash used in investing activities during the six months ended September
30, 1997 was $366,000 as compared to net cash provided by investing activities
of $7,079,000 during the same period a year earlier.

Net cash provided by financing activities in the six months ended September
30, 1997 was $10,503,000. The net cash provided by financing activities in the
period was primarily attributable to an increase in the Company's revolving line
of credit and proceeds from the exercise of warrants issued in connection with
the Company's initial public offering in March 1994 and stock options issued to
employees as offset by payments on a capital lease obligation.

The Company has a credit agreement expiring in June 1999 with Wells Fargo
Bank, National Association (the 'Bank') that provides for a revolving credit
facility in an aggregate principal amount not exceeding $30,000,000 (reducing to
$25,000,000 on January 1, 1998), which credit facility is secured by a lien on
substantially all of the assets of the Company. The credit facility provides for
an interest rate on borrowings at the Bank's prime rate less .25% or LIBOR plus
1.375%. Under the terms of the credit facility and included in the maximum
amount thereunder, the Bank will issue letters of credit and banker's
acceptances for the account of the Company in an aggregate amount not exceeding
$2,500,000. At October 27, 1997, the outstanding balance on the credit facility
was approximately $29,760,000.

The Company's accounts receivable as of September 30, 1997 was $19,748,000,
representing a decrease of $2,580,000 or 11.6% from accounts receivable on March
31, 1997. In addition, there are times when the Company on occasion extends
payment terms with certain customers in order to help them finance an increase
in the number of SKUs carried by that customer and for other purposes. The
Company partially protects itself from losses due to uncollectible accounts
receivable through an insurance policy with an independent credit insurance
company at an annual premium of approximately $90,000. The Company's policy
generally has been to issue credit to new customers only after the customers
have been included to some extent under the coverage of its accounts receivable
insurance policy. As of September 30, 1997, the Company's accounts receivable
from its largest customer represented approximately 44% of all accounts
receivable.

The Company's inventory as of September 30, 1997 was $58,296,000,
representing an increase of $16,434,000 or 39.3% over inventory as of March 31,
1997. This increase, as discussed above, primarily reflects the Company's
anticipated growth in net sales in connection with domestic vehicles and, to a
lesser extent, increased business from existing customers and the need to have
sufficient inventory to support shorter lead times for deliveries to customers.
Also, the Company continues to increase the number of SKUs sold requiring the
Company to carry raw materials for this wider variety of parts.

The Company currently expects that its capital expenditures (exclusive of
any potential acquisitions) will be approximately $1,500,000 to $3,000,000 in
each of fiscal 1998 and fiscal 1999. However, the Company's capital expenditures
will be affected by, and may be greater than currently anticipated depending
upon, the size and nature of new business opportunities.

During the first six months of fiscal 1998, the Company made capital
expenditures of $1,623,000 (consisting principally of new and upgraded
production equipment), as compared to $297,000 for the first six months of
fiscal 1997. During fiscal 1997, the Company made capital expenditures of
$2,085,000, primarily related to new and upgraded production and distribution
equipment.

BUSINESS

GENERAL

The Company is a leading remanufacturer of replacement alternators and
starters for imported cars and light trucks in the United States. During fiscal
1997, the Company commenced remanufacturing replacement alternators and starters
for domestic vehicles. The Company's full line of alternators and starters are
remanufactured for vehicles imported from Japan, Germany, Sweden, England,
France, Italy and Korea and, as recently commenced, for domestic vehicles. The
imported vehicles for which the Company remanufactures alternators and starters
also include vehicles produced by General Motors, Chrysler and Ford that are
originally equipped with components produced by foreign manufacturers, and
'transplants,' which are manufactured in the United States by Toyota, Nissan,
Honda, Mazda and other foreign manufacturers. The Company also assembles and
distributes ignition wire sets for imported and domestic cars and light trucks.

The Company's products are sold throughout the United States to many of the
nation's largest chains of retail automotive stores, including AutoZone, CSK
Auto, The Pep Boys, O'Reilly Automotive, Trak Automotive and Hi-Lo Automotive,
and throughout Canada to that country's largest chain of retail automotive
stores, Canadian Tire. The Company also supplies remanufactured alternators and
starters for imported vehicles to Delphi, a division of General Motors. During
the last several years, the Company's marketing and sales of its products for
imported vehicles principally has been to retail automotive chains, which the
Company believes has been the fastest growing segment of the automotive
aftermarket industry. During fiscal 1997, approximately 85% of the Company's
sales were to retail automotive chains comprised of approximately 4,500 stores,
with the balance of sales primarily to large warehouse distributors. In
connection with its recent expansion into the remanufacture of products for
domestic vehicles, the Company intends to significantly increase its marketing
efforts to warehouse distributors.

STRATEGY

The Company has developed a business strategy to achieve continued growth
while enhancing its competitive position as a leading remanufacturer of
automotive parts. The Company believes that its future growth principally will
be driven by (i) continued growth of the market for remanufactured parts for
imported vehicles and the Company's expansion into the market of remanufactured
products for domestic vehicles, (ii) the growth of its customer base and (iii)
acquisitions to take advantage of the consolidation trend in the highly
fragmented automotive aftermarket remanufacturing industry. In addition, the
Company continually seeks to enhance its competitive position through a number
of initiatives such as pursuing additional manufacturing efficiencies.

to leverage its fixed costs of operation and to expand further the
products and services that it can offer its customers. The Company
believes that suitable acquisition opportunities are available in its
industry, which is highly fragmented and characterized by numerous small,
regional rebuilders.

INDUSTRY OVERVIEW

The Company estimates that the U.S. aftermarket for remanufactured
alternators and starters was $3.2 billion in 1996, of which the aftermarket for
domestic and imported vehicles accounted for approximately $2.4 billion and $800
million, respectively. The aftermarket for domestic vehicles for professional
installers ('do-it-for-me') and for individual consumers, who purchase parts to
perform repairs on their own vehicles ('do-it-yourself'), accounted for
approximately $1.2 billion and $500 million, respectively. The aftermarket for
imported vehicles in the 'do-it-for-me' market accounted for approximately $400
million, while the Company's main market, the aftermarket for imported vehicles
in the 'do-it-yourself' category, accounted for approximately $168 million. The
Company has been able to grow at a rate in excess of the overall market
principally as a result of its position to benefit from key trends affecting the
aftermarket for remanufactured alternators and starters.

Growing Population of Imported Vehicles -- The Company's historical
market, the import automotive aftermarket for alternators and starters,
has experienced significant growth in recent years. This growth has
resulted from, among other trends, (i) the proliferation of imported cars
and light trucks in use, (ii) the increase in the number of miles driven
each year and (iii) the growth in the number of imported vehicles at the
prime repair age of four years and older. In addition, the Company
believes that its new market, the significantly larger domestic automotive
aftermarket for alternators and starters, represents substantial growth
opportunities. The Company estimates the size of this new market to be
approximately $2.4 billion, or approximately three times the size of the
Company's historical market for imported vehicles.

The Growth of Large Retail Auto Parts Chains -- Two distinct groups of
end-users buy replacement automotive parts: (i) individual
'do-it-yourself' consumers; and (ii) professional 'do-it-for-me'
installers. The individual consumer market is typically supplied through
retailers and through retail arms of warehouse distributors. Automotive
repair shops generally purchase parts through local independent parts
wholesalers, through national warehouse distributors and, at a growing
rate, through automotive parts retailers.

More Complex Electrical Systems in Vehicles -- The increasing complexity
of cars and light trucks and the number of different makes and models of
these vehicles have resulted in a significant increase in the number of
different alternators and starters required to service imported and
domestic cars and light trucks. In addition, as these vehicles are
equipped with increasingly more electrical components, such as cellular
telephones, electrically powered windows, air conditioning equipment, and
radio and stereo systems, the technology used in starters and alternators
has become more advanced and as a result per unit sale prices for such
alternators and starters are higher.

Remanufacturing, which involves the reuse of parts which might otherwise be
discarded, creates a supply of parts at significantly lower cost to the user
than newly manufactured parts, and makes available automotive parts which are no
longer being manufactured. By making readily available parts for automotive
general use, remanufacturing benefits automotive repair shops by relieving them
of the need to rebuild worn parts on an individual basis and conserves material
which would otherwise be used to manufacture new replacement parts. Most
importantly, however, the Company's remanufactured parts are sold at
significantly lower prices than competitive new replacement parts.

COMPANY PRODUCTS

The Company's primary products are remanufactured replacement alternators
and starters for both imported and domestic cars and light trucks. The Company
also assembles and distributes ignition wire sets for the automotive aftermarket
for use in a wide variety of makes and models of foreign automobiles.
Alternators, starters and ignition wire sets are essential components in all
makes and models of automobiles. These products constitute non-elective
replacement parts, which are required for a vehicle to operate. Approximately
17% of the Company's products are sold under its brand name, including the use
of its registered trademark 'MPA,' and the remainder are sold for resale under
customer private labels. Customers that sell the Company's products under
private label include AutoZone, CSK Auto, The Pep Boys, Delphi and APS Holdings.

The Company's alternators and starters are produced to meet or exceed
automobile manufacturer specifications depending upon the make and model of the
automobile. The Company remanufactures a broad assortment of starters and
alternators in order to accommodate the numerous and increasing varieties of
these products currently in use. The Company currently provides a full line of
approximately 925 different alternators and 625 different starters. The
Company's import alternators and starters are provided for virtually all
Japanese manufacturers, including Toyota, Honda, Nissan, Mazda and Mitsubishi,
for certain European manufacturers, including Mercedes Benz, BMW, Volvo and
Volkswagen, for vehicles manufactured by Chrysler, General Motors and Ford that
are equipped with components produced by foreign manufacturers, and for
manufacturers of transplants.

CUSTOMERS

The Company's products are marketed throughout the United States and
Canada. The Company's customers consist of many of the United States' largest
chains of retail automotive stores and automotive warehouse distributors. The
Company also sells its products to Canada's largest chain of retail automotive
stores, Canadian Tire. The Company services automotive retail chain store
accounts servicing approximately 4,500 retail outlets and warehouse distributor
accounts servicing approximately 6,000 jobbers. Each jobber in turn sells to
various automotive repair facilities, such as garages, dealers and service
stations, as well as to individual motorists.

Many of the largest chains of retail automotive stores in the United States
obtain their imported car alternators and starters from the Company. The
following table sets forth the Company's largest retail chain accounts, the
approximate number of stores operating in each chain, the approximate number of
stores that the Company believes it currently supplies in each chain and the
fiscal year in which the chain originally became a customer of the Company:

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE APPROXIMATE
NUMBER OF NUMBER OF INCREASE APPROXIMATE FISCAL
STORES IN STORES IN NUMBER NUMBER OF YEAR
CHAIN IN CURRENTLY OF STORES STORES BECAME
CUSTOMER 1995 IN CHAIN SINCE 1995 SUPPLIED CUSTOMER
- ---------------------------------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
AutoZone, Inc. ................... 1,050 1,730 65% 1,730 1995
CSK Auto, Inc. ................... 550 690 25 690 1979
The Pep Boys-Manny, Moe & Jack.... 450 650 44 390 1995
Canadian Tire Corporation,
Limited......................... 450 430 (4) 430 1996
Trak Automotive, Inc. ............ 300 200 (33) 200 1978
O'Reilly Automotive, Inc. ........ 200 230 15 230 1994
Hi-Lo Automotive, Inc. ........... 250 200 (20) 200 1989
----------- ----------- --- -----------
Total........................ 3,250 4,130 27% 3,870
----------- ----------- --- -----------
----------- ----------- --- -----------
</TABLE>

three largest customers accounted for approximately 27%, 14% and 12%,
respectively, of the Company's net sales during fiscal 1995.

OPERATIONS OF THE COMPANY

CORES

In its remanufacturing operations, the Company obtains used alternators and
starters, commonly known as 'cores,' which are sorted by make and model and
stored until needed. When needed for remanufacturing, the cores are completely
disassembled into component parts. Components which can be incorporated into the
remanufactured product are thoroughly cleaned, tested and refinished. All
components known to be subject to major wear, and those components determined
not to be reusable or repairable, are replaced by new components. The unit is
then reassembled on an assembly line into a finished product. Inspection and
testing are conducted at various stages of the remanufacturing process, and each
finished product is inspected and tested on equipment designed to simulate
performance under operating conditions. Components of cores which are not used
by the Company in its remanufacturing process are sold as scrap.

The majority of the cores remanufactured by the Company are obtained from
customers as trade-ins, which are credited against future purchases. The
Company's customers encourage consumers to exchange their used units at the time
of purchase through the use of credits. To a lesser extent, the Company also
purchases cores in the open market from core brokers, who are dealers
specializing in buying and selling cores. Although the Company believes that the
open market does not and will continue not to represent a primary source of
cores, this market offers a reliable source for maintaining stock balance. Other
materials and components used in remanufacturing are also purchased in the open
market. The ability to obtain cores of the types and quantities required by the
Company is essential to the Company's ability to meet demand and expand
production.

The price of a finished product generally is comprised of a separately
invoiced amount for the core included in the product ('core value') and an
amount for remanufacturing. Upon receipt of a core as a trade-in, credit
generally is given to the customer for the amount originally invoiced with
respect to that core. The Company limits trade-ins to cores for units included
in its sales catalogs and in condition able to be remanufactured. Credit for
cores is allowed only against purchases by a customer of similar remanufactured
products within a specified time period. A customer's total allowable credit for
core trade-ins is further limited by the dollar volume of the customer's
purchases of similar products within such time period. Core values fluctuate on
the basis of several economic factors, including market availability and demand
and core prices then being paid by other remanufacturers and core brokers.

PRODUCTION PROCESS

The initial step in the Company's remanufacturing process begins with the
receipt in boxed quantities of cores from various sources, including trade-ins
from customers and purchases in the open market. The cores are assessed and
evaluated for inventory control purposes and then sorted by part number. Each
core is then completely disassembled into all of its fundamental components. The
components are cleaned in a process that employs customized equipment and
cleaning materials. The cleaning process is accomplished in accordance with the
required specifications of the particular units.

After the cleaning process is complete, the components are then inspected
and tested as prescribed by the Company's rigorous quality control program. This
program, which is implemented throughout the operational process, is known as
statistical process control. Upon passage of all tests, the components are
placed on an automatic conveyor for assembly into the required units. The
assembly process is monitored by designated quality control personnel. Each
fully assembled unit is then subjected to additional testing to ensure
performance and quality. Finished products are then either stored in the
Company's warehouse facility or packaged for immediate delivery. To maximize
efficiency, the Company stores in its warehousing facilities component parts
ready for assembly. The Company's management information systems, including
hardware and software, facilitate the remanufacturing process from cores to
finished products. This process takes approximately four days.

The Company generally assembles ignition wires from components manufactured
by third parties. The assembly process involves the cutting of predetermined
lengths of wire, which have been manufactured to the Company's specifications,
and the attaching of terminals to the ends of such wires. The final product
ultimately is tested and packaged under the Company's name or customers' private
labels.

The Company conducts business through two wholly-owned foreign
subsidiaries, MVR Products Pte Limited ('MVR'), which operates a shipping
warehouse and testing facility and maintains office space and remanufacturing
capability in Singapore, and Unijoh Sdn, Bhd ('Unijoh'), which conducts in
Malaysia remanufacturing operations similar to those conducted by the Company at
its remanufacturing facility in Torrance. These foreign operations are conducted
with quality control standards and other internal controls similar to those
currently implemented at the Company's remanufacturing facilities in Torrance.
The facilities of MVR and Unijoh are located approximately one hour drive apart.
The Company believes that the operations of its foreign subsidiaries are
important because of the lower labor costs experienced by these subsidiaries in
the same remanufacturing process.

PRODUCT TRADE-INS

The Company has a trade-in policy that it believes is typical for the
remanufactured automotive replacement parts industry. A manufacturer typically
provides a product warranty that is honored whether or not the purchaser
continues to do business with the manufacturer. As the Company believes is the
practice in its industry, however, the Company accepts product trade-ins only if
the purchaser makes future purchases from the Company within a specified time
period. Product trade-ins to the Company result only in credits against future
purchases. If a customer ceases doing business with the Company, the Company
recognizes no further obligations to that customer with respect to product
trade-ins and no additional product returns would be accepted by the Company.
The customer would return any returnable products to a new remanufacturer
maintaining the same policy, which remanufacturer would accept the product
trade-ins and grant appropriate credits regardless of whether the units were
originally purchased from that new remanufacturer.

As a result of the product trade-in policy in the Company's industry, the
Company accounts for product trade-ins on a current basis. No reserve is made
for future product trade-ins since there is no on-going obligation to accept
such trade-ins in the absence of continuing sales to the returning customer. The
Company believes that its return rate has been consistent with the return rates
generally experienced in its industry. In addition, the obligation to accept
trade-ins is only recognized as a credit against future sales in the form of a
reduction in the purchase price for those sales. The Company's product trade-in
policy encompasses all product trade-ins, including cores, true warranty
trade-ins, alleged warranty trade-ins and any other product adjustments. The
amount of the credit given in connection with a returned unit is equal to the
sum of the unit price and the core price.

MARKETING AND DISTRIBUTION

The Company markets and distributes its products regionally through
salaried personnel and independent sales representative. The Company's products
are sold under either its registered name and trademark, 'MPA,' or private label
names.

Approximately 85% of the Company's sales are to chains or retail stores,
which, the Company believes, constitute the dominant distribution channel in the
Company's market. Sales to chains or retail stores involve fewer tiers in the
distribution process. Products are delivered directly by or on behalf of the
Company to the chain's distribution centers, which then deliver the merchandise
directly to the retail stores for purchase by consumers. By contrast, sales to
warehouse distributors involve more participants in the distribution network.
Products are delivered to warehouse distributors, which then deliver the
merchandise to jobbers, which then sell the merchandise to automotive repair
facilities as well as to individual motorists. The Company believes that it has
obtained significant marketing and distribution, as well as manufacturing,
efficiencies through its focus on sales efforts to chains of automotive retail
stores.

Each year, the Company exhibits its products at customer-sponsored trade
shows and several major national trade shows, including the trade shows of the
Automobile Parts and Accessories Association,

Automotive Parts and Rebuilders Association, the Automotive Service Industries
Association and the Automotive Warehouse Distributors Association. The Company
believes that its brand name is recognized throughout its industry. The Company
prepares and publishes a comprehensive catalog of its starters and alternators,
including a pictorial product identification guide and a detailed technical
glossary and explanation guide. The Company believes that it maintains one of
its market's most extensive catalog and product identification systems, offering
one of the widest varieties of alternators and starters available in that
market. The Company further believes that certain of its customers' use of and
reliance on the catalog and product identification system provide incentives to
those customers to continue to purchase products from the Company.

COMPETITION

The automotive aftermarket industry of remanufacturers and rebuilders of
alternators and starters for both imported cars and light trucks is highly
competitive. The Company's competitors include several other relatively large
sources of remanufactured units and numerous smaller, regional rebuilders.
Certain of the Company's competitors sell a wide variety of other automotive
parts, thereby establishing broader name recognition in the entire automotive
aftermarket. In addition, certain of the Company's competitors are divisions or
subsidiaries of entities also engaged in other businesses which have
substantially greater resources than those of the Company. The Company also
competes with several large regional remanufacturers and with remanufacturers
which are franchised by certain original equipment manufacturers to
remanufacture their products for regional distribution. Alternators and starters
produced by regional and other small rebuilders typically are not processed and
finished to the same extent as, and do not compete directly with, the Company's
products. The Company also competes with numerous rebuilders which serve
comparatively local areas.

Retailers and other purchasers of replacement automotive parts for resale
are constrained to a finite amount of space in which to display and stock
products. Consequently, the reputation for quality and customer service which a
supplier enjoys is a significant factor in a purchaser's decision as to which
product lines to carry in the limited space available. The Company believes that
these factors favor the Company, which provides quality replacement automotive
products, rapid and reliable delivery capabilities and promotional support. In
this regard, there is increasing pressure from customers, particularly larger
ones, for suppliers to provide 'just-in-time' delivery, which allows delivery on
an as-needed basis to promptly meet customer orders. The Company believes that
its ability to provide 'just-in-time' delivery distinguishes it from many of its
competitors and provides it a significant competitive advantage and also may
represent a barrier to entry to current or future competitors.

The Company's products have not been patented nor does the Company believe
that its products are patentable. The Company will continue to attempt to
protect its proprietary processes and other information by relying on trade
secret laws and non-disclosure and confidentiality agreements with certain of
its employees and other persons who have access to its proprietary processes and
other information.

GOVERNMENTAL REGULATION

EMPLOYEES

The Company has approximately 625 full time employees. Of the Company's
employees, 20 are considered administrative personnel and six are sales
personnel. None of the Company's employees is a party to any collective
bargaining agreement. The Company has not experienced any work stoppages and
considers its employee relations to be satisfactory.

FACILITIES

The Company maintains facilities in Torrance, California, Roslyn Heights,
New York and Nashville, Tennessee. The Torrance facilities contain an aggregate
of approximately 352,000 square feet and accommodate most of the Company's
corporate headquarters and remanufacturing, warehousing and other office
requirements. The Company moved into its initial Torrance facility, consisting
of approximately 125,000 square feet, in September 1993. The lease for the
initial facility provides for a monthly rental of $44,280 through September
1999, increasing thereafter to $47,601 through March 31, 2002, the termination
date of the lease. In September 1995, the Company entered into a lease for an
additional approximately 80,000 square feet in a second facility in the same
industrial area in Torrance and, in October 1996, increased its leased space in
the second facility to a total of approximately 227,000 square feet. The lease
for the second facility provides for a base monthly rental of $60,252 through
September 1999, increasing thereafter to $64,771 through March 31, 2002, the
termination date of the lease. The Company's facilities were designed and
equipped according to specifications generated by the Company in order to
accommodate the Company's current and projected needs. The Company believes that
it operates its facilities and equipment at approximately 50% capacity and that
its facilities are sufficient to satisfy its foreseeable production
requirements. The Company also maintains an East Coast administrative and sales
office in Roslyn Heights, New York. This site contains approximately 1,000
square feet of office space. In October 1995, the Company opened a 31,000-square
foot warehouse and distribution facility in Nashville, Tennessee to service the
Company's growing East Coast and Southern market. The lease for this facility
expires on October 31, 1998 and provides for a monthly rental of $9,331. In
addition, the Company has facilities at its subsidiaries' locations in Malaysia
and Singapore.

LEGAL PROCEEDINGS

There are no pending material legal proceedings to which the Company or any
of its properties is subject nor, to the knowledge of the Company, are any such
legal proceedings threatened.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company, their ages and present
positions with the Company, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
Mel Marks.................................... 70 Chairman of the Board of Directors and Chief
Executive Officer
Richard Marks................................ 45 President, Chief Operating Officer and Director
Steven Kratz................................. 42 Vice President -- Operations
Peter Bromberg............................... 33 Chief Financial Officer and Assistant Secretary
Karen Brenner................................ 41 Director and Director of Financial Planning
Selwyn Joffe*................................ 40 Director
Mel Moskowitz*............................... 64 Director
Murray Rosenzweig*........................... 73 Director
Gary J. Simon................................ 40 Director and Secretary
</TABLE>

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

* Member of Audit and Compensation Committees

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

MEL MARKS founded the Company in 1968. Mr. Marks has served as the
Company's Chairman of the Board of Directors and Chief Executive Officer since
that time. Prior to founding the Company, Mr. Marks was employed for over 20
years by Beck/Arnley-Worldparts, a division of Echlin, Inc., where he served as
Vice President. Mr. Marks is based in the Company's New York office.

RICHARD MARKS joined the Company in 1979. Mr. Marks has served as the
Company's Vice President of Sales and, since 1987, its President and Chief
Operating Officer. He has served as a director of the Company since 1979. Mr.
Marks is based in the Company's Torrance office. Mr. Marks is the son of Mel
Marks.

STEVEN KRATZ has been employed by the Company since 1988. Before joining
the Company, he was General Manager of GKN Products Company, a division of
Beck/Arnley-Worldparts, a division of Echlin, Inc. As Vice
President -- Operations, Mr. Kratz heads the Company's research and development
efforts and manages production, inventory planning and engineering.

PETER BROMBERG, a certified public accountant, has been the Company's Chief
Financial Officer since March 1994. Prior thereto, he was an accountant in the
New York City firm of Kraft Haiken & Bell, certified public accountants.

KAREN BRENNER has served as a director of the Company since September 1997
and as Director of Financial Planning of the Company since October 1997. Since
November 1991, Ms. Brenner has been a Managing Director of Noel Group, Inc.
('Noel'), a company holding diversified interests in various businesses,
including Lincoln Snacks Company ('Lincoln Snacks') and Carlyle Industries, Inc.
('Carlyle'), as discussed below. Since June 1994, Ms. Brenner has served as
Chairman, Chief Executive Officer and a director of Lincoln Snacks, a food
products company. Since May 1996, Ms. Brenner has served as Chairman of Carlyle,
which distributes sewing and craft products. She also has served as President
and Chief Executive Officer of Carlyle since October 1996, and as Vice-Chairman
and a director since February 1996. Ms. Brenner currently is a director of On
Assignment, Inc., a provider of temporary professionals.

SELWYN JOFFE has served as a director of the Company since June 1994. Since
September 1995, Mr. Joffe also has served as a consultant to the Company. From
1989 until June 1996, Mr. Joffe served as President and Chief Executive Officer
of Wolfgang Puck Food Company, LP, which owns and operates restaurants. Since
June 1996, Mr. Joffe has been the Chief Executive Officer of Eatertainment LLC,
which is in the food and restaurant business.

MEL MOSKOWITZ has served as a director of the Company since February 1994.
In 1957, he founded and, until 1989, served as the President and Chief Executive
Officer of Rodi Automotive, Inc., a Company engaged in the automotive parts
distribution business. Since that time, Mr. Moskowitz has acted as a private
investor.

MURRAY ROSENZWEIG has served as a director of the Company since February
1994. Since 1973, Mr. Rosenzweig has been the President and Chief Executive
Officer of Linden Maintenance Corp., which operates one of the largest fleets of
taxicabs in New York City. Mr. Rosenzweig has been a certified public accountant
since 1953.

GARY J. SIMON has served as a director of the Company since September 1997
and has been the Secretary of the Company since August 1995. Mr. Simon has been
a partner in the law firm of Parker Chapin Flattau & Klimpl, LLP, since 1993 and
has been an attorney with that firm since 1987.

All directors of the Company hold office until the next annual meeting of
the shareholders and until their successors have been elected and qualified. The
officers of the Company are elected by the Board of Directors at the first
meeting after each annual meeting of the Company's shareholders and hold office
until their death, until they resign or until they have been removed from
office.

COMMITTEES

The Company has an Audit Committee of the Board of Directors. The function
of the Audit Committee is to oversee the auditing procedures of the Company,
receive and accept the reports of the Company's independent certified public
accountants, oversee the Company's internal systems of accounting and management
controls and make recommendations to the Board of Directors as to the selection
and appointment of the auditors for the Company. The Company also has a
Compensation Committee of the Board of Directors. The function of the
Compensation Committee is to administer, upon delegation of the Board of
Directors of the power to administer, the Company's stock option plans, make
other relevant compensation decisions of the Company and such other matters
relating to compensation as may be prescribed by the Board of Directors.

COMPENSATION OF DIRECTORS

Each of the Company's non-employee directors receives annual compensation
of $10,000, is paid a fee of $2,000 for each meeting of the Board of Directors
attended and $500 for each meeting of a committee of the Board of Directors
attended and is reimbursed for reasonable out-of-pocket expenses in connection
therewith.

The Company's 1994 Non-Employee Director Stock Option Plan, as amended (the
'Non-Employee Director Plan'), provides that each non-employee director of the
Company will be granted thereunder ten-year options to purchase 1,500 shares of
Common Stock upon his or her initial election as a director, which options are
fully exercisable on the first anniversary of the date of grant. The exercise
price of the option will be equal to the fair market value of the Common Stock
on the date of grant. The Non-Employee Director Plan was adopted by the Board of
Directors on October 1, 1994, and by the shareholders in August 1995, in order
to attract, retain and provide incentive to directors who are not employees of
the Company. The Board of Directors does not have authority, discretion or power
to select participants who will receive options pursuant to the Non-Employee
Director Plan, to set the number of shares of Common Stock to be covered by each
option, to set the exercise price or period within which the options may be
exercised or to alter other terms and conditions specified in such plan. To
date, options to purchase 7,500 shares of Common Stock have been granted under
the Non-Employee Director Plan, none of which has been exercised.

In addition, the Company's 1994 Stock Option Plan (the '1994 Stock Option
Plan') provides that each non-employee director of the Company receive formula
grants of stock options as described below. Each person who served as a
non-employee director of the Company during all or part of a fiscal year (the
'Fiscal Year') of the Company, including March 31 of that Fiscal Year, will
receive on the immediately following April 30 (the 'Award Date'), as
compensation for services rendered in that Fiscal Year, an award under the 1994
Stock Option Plan of immediately exercisable ten-year options to purchase 1,500
shares of Common Stock (a 'Full Award') at an exercise price equal to the fair
market

value of the Common Stock on the Award Date. Each non-employee director who
served during less than all of the Fiscal Year is awarded one-twelfth of a Full
Award for each month or portion thereof that he or she served as a non-employee
director of the Company. As formula grants under the 1994 Stock Option Plan, the
foregoing grants of options to directors are not subject to the determinations
of the Board of Directors or the Compensation Committee.

In September 1995, the Company entered into a three-year consulting
agreement with Selwyn Joffe, a director of the Company, pursuant to which Mr.
Joffe provides certain financial advisory and consulting services to the
Company. The agreement provides that Mr. Joffe receive, on that date and on each
of the next two anniversaries of that date, subject to his continuing
performance under the consulting agreement, as compensation for his services
thereunder, a grant of immediately exercisable ten-year options to purchase
15,000 shares of Common Stock at an exercise price equal to the fair market
value of the Common Stock on the date of grant.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the annual
compensation of the Company's chief executive officer and other most highly
compensated executive officers, whose salary and bonus exceeded $100,000 for
fiscal 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------------------------------ SHARES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(2)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------------ ---- ------- ------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Mel Marks .......................... 1997 300,231 150,000 -- -- 16,292
Chairman of the Board and Chief 1996 252,000 175,000 -- -- --
Executive Officer 1995 252,969 50,000 -- -- --
Richard Marks ...................... 1997 300,231 150,000 12,695 50,000 135
President and Chief Operating 1996 252,145 175,000 9,060 -- --
Officer 1995 252,969 50,000 -- -- --
Steven Kratz ....................... 1997 175,214 87,500 6,501 20,000(3) --
Vice President -- Operations 1996 152,395 75,000 4,569 35,000(3) --
1995 128,442 10,000 -- -- --
Peter Bromberg ..................... 1997 119,711 48,000 4,597 12,500(3) --
Chief Financial Officer and 1996 100,057 40,000 3,180 5,000(3) --
Assistant Secretary 1995 85,000 -- -- -- --
</TABLE>

- ------------
(1) Represents amounts subject to the Company's non-qualified deferred
compensation plan contributed on the executive employee's behalf by the
Company.
(2) Consists of the dollar value of split-dollar life insurance benefits.
(3) These options were repriced during fiscal 1997.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERMS
OPTIONS GRANTED EMPLOYEES IN PRICE -----------------------
NAME (#) FISCAL 1997(1) ($/SHARE) EXPIRATION DATE 5%($) 10%($)
- ---------------------- --------------- -------------- --------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard Marks......... 50,000(2) 24.8% 14.69 November 28, 2006 461,923 1,170,604
Steven Kratz.......... 20,000(3) 9.9% 10.63(5) April 17, 2006 133,703 338,830
Peter Bromberg........ 12,500(4) 6.2% 10.63(5) April 17, 2006 83,564 211,769
</TABLE>

- ------------
(1) Does not double-count options repriced during fiscal 1997.
(2) The options are currently exercisable as to 25,000 shares and exercisable as
to 25,000 shares commencing December 2, 1997.
(3) The options are exercisable commencing April 18, 1999.
(4) The options are currently exercisable as to 10,000 shares and exercisable as
to 2,500 shares commencing April 18, 1998.
(5) The options were repriced during fiscal 1997 from $16.00 per share to $10.63
per share.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE AT FISCAL YEAR END AT FISCAL YEAR END(1)
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
- ------------------------------ --------------- -------- -------------------------- --------------------------

<S> <C> <C> <C> <C>
Richard Marks................. 0 0 25,000/25,000 0/0
Steven Kratz.................. 10,000 115,750 45,000/55,000 406,950/132,400
Peter Bromberg................ 5,000 57,250 20,000/12,500 119,100/ 57,925
</TABLE>

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

(1) Based on the fair market value per share of $13.94 on the last day of fiscal
1997.

------------------------
The Company maintains individual term life insurance policies covering each
of Mel Marks, Richard Marks and Steven Kratz in the amount of $1,400,000,
$1,650,000 and $1,000,000, respectively. The Company is the sole beneficiary
under these policies. The Company has obtained directors' and officers'
liability insurance in the amount of $15,000,000. The annual premium for this
insurance is $108,900.

The Company funds on a split dollar basis approximately $6,000,000 of
survivorship life insurance on the joint lives of Mel Marks and his wife. The
aggregate annual premiums are approximately $52,000. The Company also funds on a
split dollar basis approximately $4,500,000 of survivorship life insurance on
the joint lives of Richard Marks and his wife. The aggregate annual premiums are
approximately $24,200. Under the agreements, the Company will be reimbursed for
its premium costs either by insurance proceeds upon the death of the insureds or
out of the cash surrender value or otherwise upon termination of the
arrangement.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement, as amended to date,
with Mel Marks pursuant to which he is employed full-time as the Company's
Chairman of the Board and Chief Executive Officer. The agreement expires in
September 1999 and provides for an annual base salary of $300,000. The Company's
Board of Directors also may grant bonuses or increase the base salary payable to
Mr. Marks. In addition to his cash compensation, Mr. Marks receives an
automobile allowance and other benefits, including those generally provided to
other employees of the Company. The agreement further provides for a severance
payment of one year's salary upon termination of employment under certain
circumstances. In addition, in the event of the termination of employment
(including termination by Mr. Marks for 'good reason') within two years after a
'change in control' of the Company, Mr. Marks will (except if termination is for
cause) be entitled to receive a lump sum payment equal in amount to the sum of
(i) Mr. Marks' base salary and average three-year bonus through the termination
date and (ii) three times the sum of such salary and bonus. In addition, the
Company must in such

circumstances continue Mr. Marks' then current employee benefits for the
remainder of the term of the employment agreement. In no case, however, may Mr.
Marks receive any payment or benefit in connection with a change in control in
excess of 2.99 times his 'base amount' (as that term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended (the 'Code')).

The Company has entered into an employment agreement, as amended to date,
with Mr. Richard Marks pursuant to which he is employed full-time as the
Company's President and Chief Operating Officer. The agreement expires in
September 2000 and provides for an annual base salary of $400,000. The Company's
Board of Directors also may grant bonuses or increase the base salary payable to
Mr. Marks. In addition to his cash compensation, Mr. Marks receives an
automobile allowance and other benefits, including those generally provided to
other employees of the Company. The agreement further provides for a severance
payment of one year's salary upon termination of employment under certain
circumstances. In addition, in the event of the termination of employment
(including termination by Mr. Marks for 'good reason') within two years after a
'change in control' of the Company, Mr. Marks will (except if termination is for
cause) be entitled to receive a lump-sum payment equal in amount to the sum of
(i) Mr. Marks' base salary and average three-year bonus through the termination
date and (ii) three times the sum of such salary and bonus. In addition, the
Company must in such circumstances continue Mr. Marks' then current employee
benefits for the remainder of the term of the employment agreement. In no case,
however, may Mr. Marks receive any payment or benefit in connection with a
change in control in excess of 2.99 times his 'base amount' (as that term is
defined in Section 280G of the Code). Mr. Marks also has been granted options
under the 1994 Stock Option Plan to purchase 50,000 shares of Common Stock at an
exercise price equal to at least 110% of the fair market value of the Common
Stock on the date of grant.

The Company has entered into an employment agreement, as amended to date,
with Mr. Steven Kratz pursuant to which he is employed full-time as the
Company's Vice President -- Operations. The agreement expires in September 1999
and provides for an annual base salary of $225,000. The Company's Board of
Directors also may grant bonuses or increase the base salary payable to Mr.
Kratz. In addition to his cash compensation, Mr. Kratz has exclusive use of a
Company-owned automobile and he receives additional benefits, including those
that are generally provided to other employees of the Company. Pursuant to the
agreement, Mr. Kratz also has been granted options under the 1994 Stock Option
Plan to purchase 120,000 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock on the respective dates of grant,
35,000 of which have been exercised.

The Company has entered into an employment agreement, as amended to date,
with Mr. Peter Bromberg pursuant to which he is employed full-time as the
Company's Chief Financial Officer. The agreement expires in September 1998 and
provides for an annual base salary of $145,000. In addition to his cash
compensation, Mr. Bromberg receives an automobile allowance and additional
benefits, including those that are generally provided to other employees of the
Company. Pursuant to the agreement, Mr. Bromberg also has been granted options
under the 1994 Stock Option Plan to purchase 37,500 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the
respective dates of grant, 7,500 of which have been exercised.

In conformity with the Company's policy, all of its directors and officers
execute confidentiality and nondisclosure agreements upon the commencement of
employment with the Company. The agreements generally provide that all
inventions or discoveries by the employee related to the Company's business and
all confidential information developed or made known to the employee during the
term of employment shall be the exclusive property of the Company and shall not
be disclosed to third parties without prior approval of the Company. The
Company's employment agreements with Messrs. Marks and Bromberg also contain
non-competition provisions that preclude each employee from competing with the
Company for a period of two years from the date of termination of his
employment. The Company's employment agreement with Mr. Kratz contains a
non-competition provision which precludes him from competing with the Company
for a period of one year from the date of termination of his employment. Public
policy limitations and the difficulty of obtaining injunctive relief may impair
the Company's ability to enforce the non-competition and nondisclosure covenants
made by its employees.

EXECUTIVE AND KEY EMPLOYEE INCENTIVE BONUS PLAN

In August 1995, the Board of Directors approved the adoption of the
Company's Executive and Key Employee Incentive Bonus Plan (the 'Bonus Plan').
The purpose of the Bonus Plan is to provide an incentive for (i) each officer of
the Company elected by the Board of Directors and not excluded by the
Compensation Committee, including the executive officers named in the Summary
Compensation Table, and (ii) each key employee expressly included by the
Compensation Committee (collectively, the 'Participants') to achieve substantial
increases in the profitability of the Company in comparison to the Company's
performance in the previous fiscal year by providing bonus compensation tied to
such increases in profitability.

The Bonus Plan is administered by the Compensation Committee, which has the
power and authority to take all actions and make all determinations which it
deems necessary or desirable to effectuate, administer or interpret the Bonus
Plan, including the power and authority to extend, amend, modify or terminate
the Bonus Plan at any time and to change award periods and determine the time or
times for payment of bonuses. The Compensation Committee establishes the bonus
targets and performance goals and establishes any other measures as may be
necessary to meet the objectives of the Bonus Plan.

No bonuses will be awarded under the Bonus Plan unless the earnings before
interest and taxes, exclusive of extraordinary items, of a fiscal year exceeds
such earnings for the prior fiscal year by at least 20%. Under the Bonus Plan,
Participants are grouped into four classes, with each class having a different
range of bonus payments for achieving specified targets of such earnings. The
maximum bonus payments, payable in the event that such earnings for a fiscal
year exceed such earnings for the prior fiscal year by 40%, range among the
groups from 27% to 50% of base salary.

CERTAIN TRANSACTIONS

In April 1997, the Company acquired all of the outstanding capital stock of
MVR Products Pte Limited ('MVR') and Unijoh Sdn, Bhd ('Unijoh') from its
shareholders, Mel Marks, Richard Marks and Vincent Quek (each of whom owned
one-third of each acquired entity). Each of Messrs. Marks is a director,
executive officer and more than five percent shareholder of the Company. Prior
to the acquisition, substantially all of the business of MVR and Unijoh had been
conducted in connection with the business of the Company. MVR operates a
shipping warehouse and testing facility and maintains office space and
remanufacturing capability in Singapore. Unijoh conducts in Malaysia
remanufacturing operations similar to those conducted by the Company at its
remanufacturing facilities in Torrance. The aggregate purchase price for both
acquired entities was 145,455 shares of Common Stock of the Company. The shares
of Common Stock were not registered for sale pursuant to the Securities Act of
1933, nor were any registration rights granted by the Company to the selling
shareholders. In addition, the shares of Common Stock are subject to a lock-up
arrangement with the Company releasing for public resale one-fourth of such
shares on each of the first four anniversaries of the acquisition. The purchase
price and other terms of the acquisitions were determined by the Special
Committee of the Board of Directors of the Company following negotiations with
the selling shareholders. In connection with, and as a condition to, the
acquisitions, the Special Committee received a fairness opinion from Houlihan
Lokey Howard & Zukin, a specialty investment banking firm. The Special Committee
approved the acquisitions on March 21, 1997, on which date the closing price per
share of the Common Stock of the Company on the Nasdaq National Market was
$13.75.

In September 1995, Selwyn Joffe, a director of the Company, entered into a
consulting agreement with the Company pursuant to which he provides certain
financial advisory and consulting services to the Company. The agreement
provided that Mr. Joffe receive, as compensation for his services thereunder, a
grant on the first day of each year during the term of the agreement of
immediately exercisable options to purchase 15,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date of
grant.

In October 1997, Karen Brenner, a director of the Company, entered into a
two-year employment agreement with the Company pursuant to which she serves as
Director of Financial Planning. The agreement provides that Ms. Brenner receive,
as compensation for her services thereunder, an annual salary of $78,000,
ten-year options to purchase 30,000 shares of Common Stock exercisable as to
one-half of such shares commencing on each of the date of grant and the first
anniversary thereof and having an exercise price per share equal to the fair
market value of the Common Stock on the date of grant, and bonuses in the event
of certain acquisition or disposition transactions by the Company.

Gary J. Simon, a director and Secretary of the Company, is a partner in the
law firm of Parker Chapin Flattau & Klimpl, LLP, which is counsel to the
Company. In October 1997, Mr. Simon entered into a two-year employment agreement
with the Company pursuant to which he receives, as compensation for his services
thereunder, an annual salary of $100,000, ten-year options to purchase 50,000
shares of Common Stock exercisable as to one-half of such shares commencing on
each of the date of grant and the first anniversary thereof and having an
exercise price per share equal to the fair market value of the Common Stock on
the date of grant, and a severance benefit in the event of a change in control
of the Company.

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of October 24, 1997 and as
adjusted to reflect the sale of Common Stock by the Company and the Selling
Shareholders in this offering by (i) each of the Company's directors, (ii) each
person named in the Summary Compensation Table, (iii) all executive officers and
directors as a group, (iv) all persons known by the Company to be the beneficial
owners of more than five percent of the Company's Common Stock and (v) the
Selling Shareholders.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER
THE OFFERING SHARES THE OFFERING
-------------------- BEING --------------------
NAME NUMBER(1) PERCENT OFFERED NUMBER(1) PERCENT
- ---------------------------------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Mel Marks..................................... 763,261 14.9 100,000 663,261 10.3
Richard Marks(2).............................. 586,176 11.4 150,000 436,176 6.7
Gary J. Simon(3).............................. 278,714 5.4 -- 278,714 4.3
Steven Kratz(4)............................... 35,000 * -- 35,000 *
Peter Bromberg(5)............................. 28,400 * -- 28,400 *
Karen Brenner(6).............................. 15,000 * -- 15,000 *
Selwyn Joffe(7)............................... 40,750 * -- 40,750 *
Mel Moskowitz(8).............................. 8,000 * -- 8,000 *
Murray Rosenzweig(8).......................... 19,000 * -- 19,000 *
Directors and executive officers as a group (9
persons)(9)................................. 1,631,444 30.7 250,000 1,381,444 20.9
</TABLE>

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

* Less than 1%.

(1) The listed shareholders, unless otherwise indicated in the footnotes below,
have direct ownership over the amount of shares indicated in the table.

(2) Includes 50,000 shares issuable upon exercise of stock options granted under
the 1994 Stock Option Plan, 142,857 shares held by The Richard Marks Trust,
of which Richard Marks is a Trustee and a beneficiary, 4,750 shares held by
Mr. Marks' wife and 8,996 shares held by his son. The Richard Marks Trust is
a family trust set up by Mel Marks for the benefit of certain of his
grandchildren and his son, Richard Marks. Gary J. Simon and Richard Marks
are Trustees of this trust and share voting and dispositive power with
respect to the shares owned by this trust. See footnote (3) below.

(3) Gary J. Simon, by virtue of his shared voting and dispositive power as a
Trustee over the shares held by both The Richard Marks Trust and The Debra
Schwartz Trust (the 'Family Trusts'), may be deemed the beneficial owner of
a total of 250,714 shares, representing the aggregate share holdings of the
Family Trusts. The Debra Schwartz Trust is a family trust set up by Mel
Marks for the benefit of certain of his grandchildren and his daughter,
Debra Schwartz. Mr. Simon and Ms. Schwartz are Trustees of this trust and
share voting and dispositive power with respect to the shares owned by this
trust. See footnote (2) above. Mr. Simon disclaims beneficial ownership of
the shares held by the Family Trusts. The number of shares indicated also
includes 25,000 shares issuable upon exercise of stock options granted under
the 1994 Stock Option Plan. The address for Mr. Simon is c/o Parker Chapin
Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York, New York
10036.

(4) Represents shares issuable upon exercise of stock options granted under the
1994 Stock Option Plan.

(5) Includes 27,500 shares issuable upon exercise of stock options granted under
the 1994 Stock Option Plan.

(6) Represents shares issuable upon exercise of stock options granted under the
1994 Stock Option Plan.

(7) Represents 24,250 shares issuable upon exercise of stock options granted
under the 1994 Stock Option Plan, 15,000 shares issuable upon exercise of
stock options granted under the 1996 Stock Option Plan and 1,500 shares
issuable upon exercise of stock options granted under the Non-Employee
Director Plan.

(8) Includes 4,500 shares issuable upon exercise of stock options granted under
the 1994 Stock Option Plan and 1,500 shares issuable upon exercise of stock
options granted under the Non-Employee Director Plan.

(9) Includes 185,750 shares issuable upon exercise of stock options granted
under the 1994 Stock Option Plan, 15,000 shares issuable upon exercise of
stock options granted under the 1996 Stock Option Plan and 4,500 shares
issuable upon exercise of stock options granted under the Non-Employee
Director Plan.

DESCRIPTION OF CAPITAL STOCK

The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Restated Certificate of
Incorporation.

COMMON STOCK

The Company is authorized to issue up to 20,000,000 shares of Common Stock,
par value $.01 per share. As of the date of this Prospectus, the Company had 51
shareholders of record and the Company believes its Common Stock is beneficially
owned by approximately 1,100 holders.

Holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of shareholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of preferred stock which may from time to time be outstanding, if any,
holders of Common Stock are entitled to receive ratably dividends when, as, and
if declared by the Board of Directors out of funds legally available therefor
and, upon the liquidation, dissolution or winding up of the Company, are
entitled to share ratably in all assets remaining after payment of liabilities
and payment of accrued dividends and liquidation preferences on the preferred
stock, if any. Holders of Common Stock have no preemptive rights and have no
rights to convert their Common Stock into any other securities. The outstanding
Common Stock is, and the Common Stock to be outstanding upon completion of this
Offering will be, duly authorized and validly issued, fully paid and
nonassessable.

Upon completion of this offering and assuming no exercise of the
Underwriters' over-allotment options, certain principal shareholders of the
Company, Mel Marks, Richard Marks and the Family Trusts, will retain ownership
of approximately 18.7% of the outstanding Common Stock. As a result of their
holdings, these principal shareholders, voting together, will have a
disproportionate ability to affect the election of the members of the Company's
Board of Directors and control the affairs and management of the Company and the
outcome of any issues which may be subject to a vote of the Company's
shareholders, including amendments to the Company's Restated Certificate of
Incorporation, as amended (the 'Certificate of Incorporation'), mergers, share
exchanges, the sale of all or substantially all of the Company's assets, going
private transactions and other fundamental transactions. Such control could
adversely affect the market price of the Common Stock.

PREFERRED STOCK

The Company is authorized to issue up to 5,000,000 shares of preferred
stock, par value $.01 per share. The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions.

No shares of preferred stock will be outstanding as of the closing of this
offering and the Company has no present plans for the issuance thereof. The
issuance of any such preferred stock could adversely affect the rights of the
holders of Common Stock and, therefore, reduce the value of the Common Stock.
The ability of the Board of Directors to issue preferred stock could discourage,
delay, or prevent a takeover of the Company. See 'Risk Factors -- Anti-Takeover
Effects of Preferred Stock.'

WARRANTS

In March 1994, in connection with the Company's initial public offering,
the Company issued warrants to purchase 105,000 shares of Common Stock at an
exercise price of $7.20 per share to the representative of the underwriters in
that offering. Warrants to purchase an aggregate of 1,000 shares of Common Stock
are outstanding. The shares underlying such warrants have been registered
pursuant to a registration statement on Form S-3 filed with the Commission.

TRANSFER AGENT

Continental Stock Transfer & Trust Company, New York, New York is the
transfer agent for the Common Stock.

UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each underwriter named below (the
'Underwriters') has severally agreed to purchase, and the Company and the
Selling Shareholders have agreed to sell to each such Underwriter, the number of
shares of Common Stock set forth opposite the name of such Underwriter.

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc........................................................................... 775,000
A.G. Edwards & Sons, Inc................................................................... 775,000
---------
Total................................................................................. 1,550,000
---------
---------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by Cahill Gordon & Reindel, their counsel, and
to certain other conditions. The Underwriters are obligated to take and pay for
all shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc. and A.G. Edwards & Sons, Inc.
are acting as the Representatives, initially propose to offer part of the shares
directly to the public at the public offering price set forth on the cover page
of this Prospectus and part of the shares to certain dealers at a price which
represents a concession not in excess of $0.58 per share below the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers. After the
initial offering of the shares to the public, the public offering price and such
concessions may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 232,500 additional
shares of Common Stock at the price to the public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the Offering of the Common Stock. To
the extent such option is exercised, each Underwriter will be obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares as the number of shares set forth opposite each Underwriter's
name in the preceding table bears to the total number of shares listed in such
table.

In connection with the offering of the Common Stock and in compliance with
applicable law, the Underwriters may overallot (i.e., sell more Common Stock
than the total amount shown on the list of Underwriters and participations which
appears above) and may effect transactions which stabilize, maintain or
otherwise affect the market price of the Common Stock at levels above those
which might otherwise prevail in the open market. Such transactions may include
placing bids for the Common Stock or effecting purchases of the Common Stock for
the purpose of pegging, fixing or maintaining the price of the Common Stock or
for the purpose of reducing a syndicate short position created in connection
with the offering. A syndicate short position may be covered by exercise of the
option described above rather than by open market purchases. In addition, the
contractual arrangements among the Underwriters include a provision whereby, if,
prior to termination of price and trading restrictions, the Representatives
purchase Common Stock in the open market for the account of the underwriting
syndicate and the securities purchased can be traced to a particular Underwriter
or member of the selling group, the underwriting syndicate may require the
Underwriter or selling group member in question to purchase the Common Stock in
question at a cost price to the syndicate or may recover from (or decline to pay
to) the Underwriter or selling group member in question the selling concession
applicable to the securities in question. The Underwriters are not required to
engage in any of these activities and any such activities, if commenced, may be
discontinued at any time.

The Company and its officers and directors have agreed that, for a period
of 90 days from the date of this Prospectus, they will not, without the prior
written consent of Smith Barney Inc., offer, sell, contract to sell, or
otherwise dispose of, any shares of Common Stock of the Company or any
securities convertible into, or exercisable or exchangeable for, Common Stock of
the Company.

The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933.

In connection with the Offering, certain Underwriters and selling group
members (if any) who are qualified market makers on the Nasdaq National Market
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Regulation M under the Securities
Exchange Act of 1934, as amended. Passive market makers must comply with
applicable volume and price limitations and must be identified as such. In
general, a passive market maker must display its bid at a price not in excess of
the highest independent bid for such security; if all independent bids are
lowered below the passive market maker's bid, however, such bid may exceed the
highest independent bid until certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the Common Stock offered hereby and certain other legal
matters will be passed upon for the Company by Parker Chapin Flattau & Klimpl,
LLP, 1211 Avenue of the Americas, New York, New York 10036. Gary J. Simon, a
Partner of Parker Chapin Flattau & Klimpl, LLP, is the Secretary and a Director
of the Company. See 'Management,' 'Certain Transactions' and 'Principal and
Selling Shareholders.' Certain legal matters in connection with the offering
will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), 80 Pine Street, New York, New
York 10005.

EXPERTS

The financial statements of the Company as at March 31, 1997 and 1996 and
for each of the years in the three-year period ended March 31, 1997 included in
this Prospectus have been audited by Richard A. Eisner & Company, LLP,
independent auditors, as indicated in their reports with respect thereto, and
are included herein in reliance upon such reports given upon the authority of
said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, and in accordance therewith files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission, including the Registration
Statement on Form S-2 of which this Prospectus is a part, and the exhibits and
schedules thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington
D.C. 20549, and at the following Regional Offices of the Commission: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the Public
Reference Section to the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains an Internet site on
the World Wide Web that contains reports, proxy and information statements and
other information filed electronically by the Company with the Commission
(http://www.sec.gov). Such reports, proxy statements and other information can
also be inspected at the offices of The Nasdaq Stock Market, 1735 K Street,
N.W., Washington, D.C. 20006.

This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-2 (the 'Registration Statement') of which this
Prospectus forms a part, including exhibits relating thereto, which has been
filed with the Commission in Washington, D.C. Copies of the Registration
Statement and the exhibits thereto may be obtained, upon payment of the fee
prescribed by the Commission, or may be examined without charge, at the offices
of the Commission.

[THIS PAGE INTENTIONALLY LEFT BLANK]

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
MOTORCAR PARTS & ACCESSORIES, INC.

Report of Independent Auditors.......................................................................... F-2

Balance Sheets as of March 31, 1996, March 31, 1997 and September 30, 1997 (unaudited).................. F-3

Statements of Income for Each of the Years in the Three-Year Period Ended March 31, 1997 and for the Six
Months Ended September 30, 1996 (unaudited) and September 30, 1997 (unaudited)........................ F-4

Statements of Changes in Shareholders' Equity for Each of the Years in the Three-Year Period Ended March
31, 1997 and for the Six Months Ended September 30, 1997 (unaudited).................................. F-5

Statements of Cash Flows for Each of the Years in the Three-Year Period Ended March 31, 1997 and for the
Six Months Ended September 30, 1996 (unaudited) and September 30, 1997 (unaudited).................... F-6

Notes to Financial Statements........................................................................... F-7
</TABLE>

F-1

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
MOTORCAR PARTS & ACCESSORIES, INC.
Torrance, California

We have audited the accompanying balance sheets of Motorcar Parts &
Accessories, Inc. as at March 31, 1997 and March 31, 1996 and the related
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended March 31, 1997. 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 generally accepted auditing
standards. 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 enumerated above present fairly,
in all material respects, the financial position of Motorcar Parts &
Accessories, Inc. at March 31, 1997 and March 31, 1996 and the results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.

RICHARD A. EISNER & COMPANY, LLP
New York, New York
May 16, 1997

F-2

MOTORCAR PARTS & ACCESSORIES, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
-------------------------- SEPTEMBER 30,
1996 1997 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE F)
Current assets:
Cash and cash equivalents (Note A[1]).......................... $ 164,000 $ 3,539,000 $ 2,408,000
Short-term investments (Notes A[2] and B)...................... 8,336,000
Accounts receivable -- net of allowance for doubtful accounts
of $100,000, $200,000 and $200,000, respectively (Note J).... 17,264,000 22,328,000 19,748,000
Inventory (Notes A[3] and C)................................... 28,551,000 41,862,000 58,296,000
Prepaid expenses and other current assets...................... 637,000 593,000 1,014,000
Deferred income tax asset (Notes A[4] and K)................... 226,000 142,000 142,000
----------- ----------- -------------
Total current assets...................................... 55,178,000 68,464,000 81,608,000
Long-term investments (Notes A[2] and B)............................ 2,393,000 1,874,000 617,000
Plant and equipment -- net (Notes A[7] and D)....................... 2,469,000 4,291,000 5,576,000
Other assets........................................................ 149,000 881,000 801,000
----------- ----------- -------------
Total................................................ $60,189,000 $75,510,000 $88,602,000
----------- ----------- -------------
----------- ----------- -------------

LIABILITIES
Current liabilities:
Current portion of capital lease obligations (Note E).......... $ 554,000 $ 743,000 $ 528,000
Accounts payable and accrued expenses.......................... 8,855,000 13,777,000 12,813,000
Income taxes payable (Notes A[6] and K)........................ 1,331,000 2,005,000 1,799,000
Current portion of long-term debt (Note F)..................... 2,663,000
Due to affiliate (Note G)...................................... 184,000 139,000
----------- ----------- -------------
Total current liabilities................................. 10,924,000 16,664,000 17,803,000
Long-term debt (Note F)............................................. 14,541,000 17,496,000 25,000,000
Capitalized lease obligations -- less current portion (Note E)...... 594,000 343,000 150,000
Other liabilities................................................... 570,000 804,000
Deferred income tax liability (Notes A[6] and K).................... 99,000 329,000 329,000
----------- ----------- -------------
Total..................................................... 26,158,000 35,402,000 44,086,000
----------- ----------- -------------
Commitments and other matters (Notes H, I and J)

SHAREHOLDERS' EQUITY (NOTE L)
Preferred stock; par value $.01 per share, 5,000,000 shares
authorized; none issued
Common stock; par value $.01 per share, 20,000,000 shares
authorized; 4,819,750, 4,867,500 and 5,104,055 shares issued and
outstanding....................................................... 48,000 49,000 51,000
Additional paid-in capital.......................................... 28,431,000 28,973,000 30,934,000
Unearned portion of compensatory stock options...................... (119,000)
Retained earnings................................................... 5,552,000 11,086,000 13,650,000
----------- ----------- -------------
Total shareholders' equity................................ 34,031,000 40,108,000 44,516,000
----------- ----------- -------------
Total................................................ $60,189,000 $75,510,000 $88,602,000
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-3

MOTORCAR PARTS & ACCESSORIES, INC.
STATEMENTS OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income:
Net sales (Note A[6])........... $39,235,000 $64,358,000 $86,872,000 $39,740,000 $50,455,000
----------- ----------- ----------- ----------- -----------
Operating expenses:
Cost of goods sold.............. 30,690,000 50,965,000 69,255,000 31,830,000 40,464,000
Research and development........ 185,000 267,000
Selling expenses................ 1,498,000 1,984,000 2,305,000 1,051,000 1,177,000
General and administrative
expenses...................... 3,704,000 4,577,000 4,974,000 2,375,000 2,720,000
----------- ----------- ----------- ----------- -----------
Total operating expenses... 35,892,000 57,526,000 76,719,000 35,256,000 44,628,000
----------- ----------- ----------- ----------- -----------
Operating income..................... 3,343,000 6,832,000 10,153,000 4,484,000 5,827,000
Interest expense (net of interest
income of $73,000, $218,000 and
$219,000 for 1995, 1996 and 1997,
respectively)...................... 540,000 833,000 1,090,000 465,000 892,000
----------- ----------- ----------- ----------- -----------
Income before income taxes........... 2,803,000 5,999,000 9,063,000 4,019,000 4,935,000
Provision for income taxes (Notes
A[4] and K)........................ 1,197,000 2,353,000 3,529,000 1,588,000 1,924,000
----------- ----------- ----------- ----------- -----------
Net income........................... $ 1,606,000 $ 3,646,000 $ 5,534,000 $ 2,431,000 $ 3,011,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares
outstanding (Note A[7])............ 3,295,000 3,939,000 5,007,000 4,993,000 5,224,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income per common share.......... $ 0.49 $ 0.93 $ 1.11 $ 0.49 $ 0.58
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-4

MOTORCAR PARTS & ACCESSORIES, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(NOTE L)

<TABLE>
<CAPTION>
UNEARNED
COMMON STOCK PORTION OF
-------------------- ADDITIONAL COMPENSATORY
NUMBER OF PAID-IN STOCK RETAINED
SHARES AMOUNT CAPITAL OPTIONS EARNINGS TOTAL
--------- ------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance -- March 31, 1994... 3,207,500 $32,000 $ 8,078,000 $ 300,000 $ 8,410,000
Net income........ 1,606,000 1,606,000
--------- ------- ----------- ----------- -----------
Balance -- March 31, 1995... 3,207,500 32,000 8,078,000 1,906,000 10,016,000
Proceeds from exercise
of warrants and stock
options.............. 112,250 1,000 867,000 868,000
Proceeds from public
offering (net of
costs of
$1,874,000).......... 1,500,000 15,000 19,486,000 19,501,000
Net income........ 3,646,000 3,646,000
--------- ------- ----------- ----------- -----------
Balance -- March 31, 1996... 4,819,750 48,000 28,431,000 5,552,000 34,031,000
Proceeds from exercise
of stock options..... 47,750 1,000 355,000 356,000
Tax benefit from
exercise of stock
options.............. 187,000 187,000
Net income........ 5,534,000 5,534,000
--------- ------- ----------- ----------- -----------
Balance -- March 31, 1997... 4,867,500 49,000 28,973,000 11,086,000 40,108,000
Issuance of shares for
MVR and Unijoh....... 145,455 1,000 679,000 (447,000) 233,000
Proceeds from exercise
of stock options and
warrants............. 91,100 1,000 743,000 744,000
Tax benefit from
exercise of stock
options.............. 325,000 325,000
Compensatory stock
options issued....... 214,000 (119,000) 95,000
Net income........ 3,011,000 3,011,000
--------- ------- ----------- ------------ ----------- -----------
Balance -- September 30,
1997 (unaudited).......... 5,104,055 $51,000 $30,934,000 $ (119,000) $13,650,000 $44,516,000
--------- ------- ----------- ------------ ----------- -----------
--------- ------- ----------- ------------ ----------- -----------
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-5

MOTORCAR PARTS & ACCESSORIES, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, SIX MONTHS ENDED SEPTEMBER 30,
------------------------------------------- -----------------------------
1995 1996 1997 1996 1997
----------- ------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 1,606,000 $ 3,646,000 $ 5,534,000 $ 2,431,000 $ 3,011,000
Adjustments to reconcile net income to net cash
(used in) operating activities:
Compensatory stock options issued........... 95,000
Depreciation and amortization............... 306,000 429,000 717,000 282,000 511,000
(Increase) decrease in:
Accounts receivable.................... (6,409,000) (6,589,000) (5,064,000) (4,542,000) 2,580,000
Inventory.............................. (4,886,000) (16,434,000) (13,311,000) (2,748,000) (16,408,000)
Prepaid expenses and other current
assets............................... (115,000) (300,000) 44,000 (28,000) (337,000)
Other assets........................... 29,000 (50,000) (732,000) (40,000) 80,000
Deferred income taxes.................. 20,000 (82,000) 314,000
Increase (decrease) in:
Accounts payable and accrued
expenses............................. 2,486,000 3,094,000 5,134,000 (1,564,000) (1,266,000)
Income taxes payable................... 290,000 785,000 861,000 212,000 119,000
Due to affiliate....................... (48,000) 157,000 (45,000) (2,000)
Other liabilities...................... 570,000 223,000
----------- ------------ ------------ ----------- ------------
Net cash (used in) operating
activities...................... (6,721,000) (15,344,000) (5,978,000) (5,999,000) (11,392,000)
----------- ------------ ------------ ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment........ (375,000) (657,000) (2,085,000) (297,000) (1,623,000)
Change in investments............................ (616,000) (10,113,000) 8,855,000 7,376,000 1,257,000
----------- ------------ ------------ ----------- ------------
Net cash provided by (used in)
investing activities............ (991,000) (10,770,000) 6,770,000 7,079,000 (366,000)
----------- ------------ ------------ ----------- ------------
Cash flows from financing activities:
Net increase (decrease) in line of credit........ 4,683,000 5,552,000 2,955,000 105,000 10,167,000
Payments on capital lease obligation............. (158,000) (254,000) (728,000) (304,000) (408,000)
Proceeds from public offerings................... 19,501,000
Proceeds from exercise of warrants and options... 868,000 356,000 344,000 744,000
----------- ------------ ------------ ----------- ------------
Net cash provided by (used in)
financing activities............ 4,525,000 25,667,000 2,583,000 145,000 10,503,000
----------- ------------ ------------ ----------- ------------
Net increase (decrease) in cash and cash
equivalents......................................... (3,187,000) (447,000) 3,375,000 1,225,000 (1,255,000)
Cash and cash equivalents -- beginning of period...... 3,798,000 611,000 164,000 164,000 3,539,000
Beginning cash balance of pooled entity............... 124,000
----------- ------------ ------------ ----------- ------------
Cash and cash equivalents -- end of period............ $ 611,000 $ 164,000 $ 3,539,000 $ 1,389,000 $ 2,408,000
----------- ------------ ------------ ----------- ------------
----------- ------------ ------------ ----------- ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................... $ 572,000 $ 1,035,000 $ 1,262,000 $ 595,000 941,000
Income taxes................................ 862,000 1,590,000 2,354,000 1,401,000 $ 1,805,000
Noncash investing and financing activities:
Property acquired under capital lease....... 93,000 707,000 454,000 304,000
Property acquired included in accounts
payable and accrued expenses at March 31,
1996 and financed through a capitalizable
lease during fiscal 1997.................. 212,000 212,000
</TABLE>

The accompanying notes to financial statements are an integral part hereof.

F-6

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS

(NOTE A) -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES:

Motorcar Parts & Accessories, Inc. (the 'Company') remanufactures and
distributes alternators and starters and assembles and distributes spark plug
wire sets for the automotive aftermarket industry (replacement parts sold for
use on vehicles after initial purchase). These automotive parts are sold to
automotive retail chains and warehouse distributors throughout the United
States.

[1] CASH EQUIVALENTS:

The Company considers all highly liquid short-term investments purchased
with a maturity of three months or less to be cash equivalents.

[2] INVESTMENTS:

The Company's marketable securities are classified as available for sale
and reported at fair value which approximates amortized cost. Any unrealized
gains or losses are classified as a separate component of shareholders' equity.

[3] INVENTORY:

Inventory is stated at the lower of cost or market; cost being determined
by the average cost method.

[4] INCOME TAXES:

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ('SFAS 109'), 'Accounting for Income
Taxes' which requires the use of the liability method of accounting for income
taxes. The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements. The resulting asset or liability is adjusted to reflect
changes in the tax laws as they occur.

[5] DEPRECIATION AND AMORTIZATION:

Property and equipment are depreciated on the straight-line method over
their estimated useful lives. Leasehold improvements are amortized by the
straight-line method over the shorter of their estimated useful life or the term
of the lease.

[6] REVENUE RECOGNITION:

The Company recognizes sales when products are shipped. The Company obtains
used alternator and starter units, commonly known as cores, from its customers
as trade-ins and by purchasing them from vendors. Cores are an essential
material needed for remanufacturing operations. During the year ended March 31,
1997, the Company implemented a new accounting presentation with respect to its
reporting of sales. In the past, net sales were reduced by the core inventory
value to reflect deductions for cores returned for credit from customers ('core
trade-ins') and by the value of the credits issued in excess of core inventory
value ('product trade-ins'). Cost of goods sold was reduced for core trade-ins
only. As reclassified, net sales are reduced by product trade-ins and other
deductions and allowances only and core trade-ins are included in cost of goods
sold. Net sales and cost of goods sold for the years ended March 31, 1995 and
March 31, 1996 were reclassified to reflect this change.

Trade-ins are recorded upon receipt of cores from customers. Credits for
core and product trade-ins are allowed only against future purchases of similar
remanufactured products and are generally used by the customer within sixty days
of issuance. Due to this unique trade-in policy, the Company does not

F-7

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

provide a reserve for trade-ins. In addition, since it is remote that a customer
will not utilize its trade-in credits, the credit is recorded when the core is
returned as opposed to when the customer purchases new products. This policy is
consistent throughout the remanufacturing and rebuilding industry.

The effect of this policy is as follows:

<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Sales.................................................. $ 45,272,000 $ 73,826,000 $ 97,677,000
Product trade-ins...................................... (6,037,000) (9,468,000) (10,805,000)
------------ ------------ ------------
Net sales.............................................. 39,235,000 64,358,000 86,872,000
Core trade-ins......................................... (10,978,000) (19,445,000) (29,179,000)
------------ ------------ ------------
Net sales as previously classified..................... $ 28,257,000 $ 44,913,000 $ 57,693,000
------------ ------------ ------------
------------ ------------ ------------
Cost of goods sold..................................... $ 30,690,000 $ 50,965,000 $ 69,255,000
Core trade-ins......................................... (10,978,000) (19,445,000) (29,179,000)
------------ ------------ ------------
Cost of goods sold as previously classified............ $ 19,712,000 $ 31,520,000 $ 40,076,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

[7] EARNINGS PER SHARE:

Earnings per share is computed using the weighted average number of shares
outstanding during each year, which include the incremental effect of common
stock equivalents consisting of stock options and warrants.

[8] USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

[9] IMPAIRMENT OF LONG-LIVED ASSETS:

The Company adopted Statement of Financial Accounting Standards No. 121
('SFAS 121'), 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of' during the year. SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable assets, and goodwill related to those assets. There was no effect
of adoption of SFAS 121 on the financial statements.

[10] FINANCIAL INSTRUMENTS:

The carrying amounts of accounts receivable, accounts payable, accrued
expenses, capitalized lease obligations and long-term debt approximate their
fair value.

Estimated fair value of these financial instruments, some of which are for
short durations, has been determined using available market information. In
evaluating the fair value information, considerable judgment is required to
interpret the market data used to develop the estimates. The use of different
market assumptions and/or different valuation techniques may have a material
effect on the estimated fair value amounts. Accordingly, the estimates of fair
value presented herein may not be indicative of the amounts that could be
realized in a current market exchange.

F-8

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

[11] STOCK-BASED COMPENSATION:

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ('SFAS 123'), 'Accounting for
Stock-Based Compensation'. SFAS 123 encourages, but does not require, companies
to record compensation cost for stock-based employee compensation plans at fair
value. The Company has elected to continue to account for its stock-based
compensation plans using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25 ('APB No. 25'), 'Accounting for Stock Issued to
Employees' and disclose the pro forma effects on net income and earnings per
share had the fair value of options been expensed. Under the provisions of APB
No. 25, compensation cost for stock options is measured as the excess, if any,
of the quoted market price of the Company's common stock at the date of the
grant over the amount an employee must pay to acquire the stock. (See Note
L[2]).

[12] RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ('SFAS 128'), 'Earnings per Share'.
This new standard requires dual presentation of basic and diluted earnings per
share ('EPS') on the face of the statement of income and requires reconciliation
of the numerators and the denominators of the basic and diluted EPS
calculations. This statement will be effective for the third quarter of the
Company's 1998 fiscal year and will require restatement of prior EPS
presentations. The Company has not yet quantified what effect the adoption of
SFAS 128 will have on its earnings per share of common stock.

[13] INTERIM FINANCIAL INFORMATION:

The accompanying financial statements as of September 30, 1997 and for the
six month periods ended September 30, 1996 and 1997 are unaudited. In the
opinion of management, they reflect all adjustments (consisting only of normal
and recurring adjustments) necessary for a fair presentation of the Company's
financial position and results of operations.

The results of operations and cash flows for the six months ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the full year ended March 31, 1998.

(NOTE B) -- INVESTMENTS:

The estimated fair value of available for sale investments is as follows:

<TABLE>
<CAPTION>
MARCH 31,
------------------------- SEPTEMBER 30,
1996 1997 1997
----------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
U.S. Treasury bills due in one year or less................ $ 2,272,000 $ -0-
Municipal bonds due in one year or less.................... 4,492,000 -0-
U.S. Treasury notes due in one year or less................ 1,572,000 -0-
----------- ---------- -------------
8,336,000 - 0 - - 0 -
Mortgage-backed securities and municipal bonds due after
one year................................................. 2,393,000 1,874,000 617,000
----------- ---------- -------------
Total................................................. $10,729,000 $1,874,000 $ 617,000
----------- ---------- -------------
----------- ---------- -------------
</TABLE>

The estimated fair value of each investment approximates the amortized cost
and, therefore, there are no unrealized gains or losses as of March 31, 1997 and
September 30, 1997.

F-9

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(NOTE C) -- INVENTORY:

Inventory is comprised of the following:

<TABLE>
<CAPTION>
MARCH 31,
-------------------------- SEPTEMBER 30,
1996 1997 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................................. $17,568,000 $24,046,000 $32,691,000
Work-in-process........................................... 3,466,000 4,270,000 3,960,000
Finished goods............................................ 7,517,000 13,546,000 21,645,000
----------- ----------- -------------
Total................................................ $28,551,000 $41,862,000 $58,296,000
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

(NOTE D) -- PLANT AND EQUIPMENT:

Plant and equipment, at cost, are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------ SEPTEMBER 30,
1996 1997 1997
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Machinery and equipment..................................... $2,311,000 $4,362,000 $ 6,079,000
Office equipment and fixtures............................... 891,000 1,272,000 1,689,000
Leasehold improvements...................................... 365,000 472,000 737,000
---------- ---------- -------------
3,567,000 6,106,000 8,505,000
Less accumulated depreciation and amortization (including
assets held under capital lease).......................... (1,098,000) (1,815,000) (2,929,000)
---------- ---------- -------------
Total.................................................. $2,469,000 $4,291,000 $ 5,576,000
---------- ---------- -------------
---------- ---------- -------------
</TABLE>

(NOTE E) -- OBLIGATIONS UNDER CAPITAL LEASES:

The Company has various capital leases for machinery and computer
equipment. Assets aggregating approximately $2,338,000 have been capitalized.

Future minimum lease payments at March 31, 1997 for the capitalized leases
are as follows:

<TABLE>
<S> <C>
1998.................................................................. $ 829,000
1999.................................................................. 306,000
2000.................................................................. 61,000
----------
1,196,000
Amount representing imputed interest.................................. 110,000
----------
Present value of future minimum lease payments........................ 1,086,000
Less current maturities............................................... 743,000
----------
Long-term obligation at March 31, 1997................................ $ 343,000
----------
----------
</TABLE>

(NOTE F) -- LONG-TERM DEBT:

In November 1996, the Company amended its revolving line of credit
agreement. The agreement provides for a credit facility in an aggregate
principal amount not exceeding $25,000,000 and is collateralized by a lien on
substantially all of the assets of the Company. The agreement expires on June 1,
1998 and provides for interest on borrowings at a fluctuating rate per annum
.25% below the bank's prime rate or at a fixed rate at 1.65% above LIBOR. The
agreement allows the Company to obtain from the bank letters of credit, and
banker's acceptances in an aggregate amount not exceeding

F-10

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$2,500,000 and requires the Company to maintain certain financial ratios. As of
March 31, 1997 balances due under this agreement amounted to $17,496,000.

The Company previously had a $15,000,000 revolving line of credit agreement
with the same bank. Balances due under this agreement amounted to $14,541,000 as
of March 31, 1996.

In August 1997, the Company further amended its revolving line of credit
agreement. The agreement provides for a credit facility in an aggregate
principal amount not exceeding $30,000,000 until December 31, 1997, reducing to
$25,000,000 on January 1, 1998, and is collateralized by a lien on substantially
all of the assets of the Company. The agreement expires on June 1, 1999 and
provides for interest on borrowings at a fluctuating rate per annum .25% below
the bank's prime rate or at a fixed rate at 1.375% above LIBOR. The agreement
also amends the requirements of certain financial ratios.

(NOTE G) -- RELATED PARTIES

The Company conducts business with MVR Products Pte Ltd. ('MVR'). MVR
operates a shipping warehouse which conducts business with Unijoh Sdn, Bhd
('Unijoh'). Unijoh operates a remanufacturing facility similar to the Company.
MVR's warehouse is located in Singapore and Unijoh's factory is located in
Malaysia. Two shareholders/officers/directors of the Company owned 67% of both
MVR and Unijoh, with the remaining 33% owned by an unrelated third party. All of
the cores processed by Unijoh are produced for the Company on a contract
remanufacturing basis. The cores and other raw materials used in production by
Unijoh are supplied by the Company and are included in the Company's inventory.
Inventory owned by the Company and held by MVR and Unijoh was $920,000 and
$762,000 as at March 31, 1996 and March 31, 1997, respectively. The Company
incurred costs of approximately $1,349,000, $1,432,000 and $1,574,000 from the
affiliates for the years ended March 31, 1995, March 31, 1996 and March 31,
1997, respectively. The amount due to affiliate as at March 31, 1996 and March
31, 1997 was due to MVR.

In April 1997, MVR and Unijoh became wholly owned subsidiaries of the
Company in a stock-for-stock merger which was accounted for in a manner similar
to a pooling of interests. Under the terms of the merger agreement, the Company
issued 145,455 shares of common stock. The financial statements prior to the
date of merger have not been restated as the effects are not material to the
Company's consolidated financial condition and consolidated results of
operations. The combined assets and combined liabilities of MVR and Unijoh
aggregated approximately $553,000 and $320,000, respectively, at the date of
merger. In addition, the equity in the underlying net assets of the subsidiaries
approximated the amount included in due to affiliate.

(NOTE H) -- EMPLOYMENT AGREEMENT AND BONUS PLAN

The Company has employment agreements with six officers, expiring from
September 1, 1997 through September 1, 2000, which provide for annual base
salaries aggregating $1,295,000. In addition, four of the officers were granted
options pursuant to the Company's Stock Option Plan (Note L[2]) for the purchase
of 317,500 shares of common stock (135,000, 90,000 and 92,500 granted in fiscal
years 1995, 1996 and 1997, respectively). Of these options, 70,000 and 25,000
were exercised during the years ended March 31, 1996 and March 31, 1997,
respectively.

The Company has established a bonus plan for the benefit of executives and
certain key employees. The bonus is calculated as a percentage of the base
salary ranging from 18% to 50%. The bonus percentage varies according to the
percentage increase in earnings before income taxes and other predetermined
parameters.

(NOTE I) -- COMMITMENTS

The Company leases offices and warehouse facilities in New York, California
and Tennessee under operating leases expiring through 2002. The aggregate
rentals under these leases and leases which have

F-11

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

been terminated was $435,000, $609,000 and $819,000 for the years ended March
31, 1995, March 31, 1996 and March 31, 1997, respectively. Certain leases
contain escalation clauses for real estate taxes and operating expenses.

The Company also leases office equipment and machinery under noncancellable
operating leases having remaining terms in excess of one year.

At March 31, 1997, the future minimum rental payments under the above
operating leases are as follows:

<TABLE>
<CAPTION>
REAL
TOTAL ESTATE MACHINERY
---------- ---------- ---------
<S> <C> <C> <C>
1998........................................ $1,493,000 $1,366,000 $ 127,000
1999........................................ 1,401,000 1,319,000 82,000
2000........................................ 1,334,000 1,301,000 33,000
2001........................................ 1,353,000 1,348,000 5,000
2002........................................ 1,348,000 1,348,000
---------- ---------- ---------
Total.................................. $6,929,000 $6,682,000 $ 247,000
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

(NOTE J) -- MAJOR CUSTOMERS AND CREDIT CONCENTRATION

The Company partially protects itself from losses due to uncollectible
accounts receivable through the purchase of credit insurance. Accounts
receivable balances not covered by credit insurance are primarily due from
leading automotive parts retailers.

The Company's four largest customers accounted for the following percentage
of net sales:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
MARCH 31, SEPTEMBER 30,
-------------------- ------------------------------
CUSTOMER 1995 1996 1997 1996 1997
- --------------------------------------------- ---- ---- ---- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
A............................................ 27% 21% 18% 21% 22%
B............................................ 14 11 18 20 11
C............................................ 12 20 29 20 42%
D............................................ 18 8 8 3
</TABLE>

Customer A accounted for approximately 50%, 25%, 13% and 26% of the
accounts receivable at March 31, 1995, March 31, 1996, March 31, 1997 and
September 30, 1997. In addition, Customer C accounted for approximately 35%, 57%
and 44% of the accounts receivable at March 31, 1996 and March 31, 1997 and
September 30, 1997.

(NOTE K) -- INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED MARCH 31, ENDED SEPTEMBER 30,
-------------------------------------- -------------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal.................... $ 900,000 $1,913,000 $2,750,000 $1,253,000 $1,645,000
State...................... 277,000 522,000 465,000 360,000 279,000
Deferred........................ 20,000 (82,000) 314,000 (25,000)
---------- ---------- ---------- ---------- ----------
Total...................... $1,197,000 $2,353,000 $3,529,000 $1,588,000 $1,924,000
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

F-12

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the tax provision and the amount that would be
computed by applying the statutory federal income tax rate to income before
taxes is attributable to the following:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Income tax provision at 34%................................... $ 953,000 $2,040,000 $3,081,000
State and local taxes, net of federal benefit................. 183,000 345,000 307,000
Permanent differences......................................... 11,000 18,000 (20,000)
Other......................................................... 50,000 (50,000) 161,000
---------- ---------- ----------
Total.................................................... $1,197,000 $2,353,000 $3,529,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Deferred income tax asset of $226,000 and $142,000 at March 31, 1996 and
March 31, 1997, respectively, is comprised of temporary differences in tax and
financial reporting resulting primarily from capitalization of certain inventory
costs for tax purposes. Deferred tax liability of $99,000 and $329,000 at March
31, 1996 and March 31, 1997, respectively, is comprised of differences resulting
from using accelerated depreciation rates for tax purposes.

(NOTE L) -- SHAREHOLDERS' EQUITY:

[1] CAPITAL STOCK:

In November 1995, the Company effected a public offering of its securities.
The Company issued 1,500,000 shares for $14.25 a share, yielding net proceeds of
approximately $19,501,000 after underwriting commissions and expenses totalling
approximately $1,874,000. Also, two principal shareholders sold an aggregate of
344,500 shares in connection with this offering.

[2] STOCK OPTION PLAN:

In January 1994, the shareholders approved the 1994 Stock Option Plan (the
'1994 Plan') which was amended in October 1996 to provide for the granting of
options to purchase 720,000 common shares to key employees and directors.
Options granted may be either 'incentive stock options' within the meaning of
Section 422A of the Internal Revenue Code or nonqualified options. The Plan is
administered by the Board of Directors, which determines the terms of options
exercised, including the exercise price, the number of shares subject to the
option and the terms and conditions of exercise.

In August 1995, the shareholders approved a Nonemployee Director Stock
Option Plan (the 'Directors Plan') which provides for the granting of options to
purchase 15,000 common shares to directors. The Directors Plan is administered
by the Board of Directors.

In September 1997, the shareholders approved the 1996 Stock Option Plan
(the '1996 Plan'), which provides for the granting of options to purchase 30,000
common shares to key employees, consultants and directors. The Plan is
administered by the Board of Directors.

F-13

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes the activity under these Plans:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, SIX MONTHS
------------------------------------------------------------- ENDED
1995 1996 1997 SEPTEMBER 30, 1997
------------------ ------------------ ------------------- ------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year............ 85,000 $ 6.00 250,000 $ 7.40 335,000 $ 9.23 488,500 $10.31
Granted........................ 165,000 8.13 109,000 12.96 381,500 12.98 37,500 16.41
Exercised...................... (23,000) 7.19 (47,750) 7.46 (85,100) 8.23
Cancelled...................... (1,000) 8.13 (180,250) 14.69
------- ------- -------- -------
Options outstanding at end of
year......................... 250,000 7.40 335,000 9.23 488,500 10.31 440,900 11.21
------- ------- -------- -------
------- ------- -------- -------
Options exercisable at end of
year......................... 173,000 7.47 278,000 8.83 290,417 9.34 332,816 10.82
------- ------- -------- -------
------- ------- -------- -------
</TABLE>

The following table presents information relating to stock options
outstanding at March 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF EXERCISE LIFE IN EXERCISE
EXERCISE PRICE SHARES PRICE YEARS SHARES PRICE
- -------------------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 6.000 -- $ 8.125.. 178,000 $ 7.41 7.06 178,000 $ 7.41
$ 9.000 -- $10.625.. 184,500 10.59 8.72 61,250 10.51
$11.875 -- $12.250.. 51,500 12.31 9.13 15,000 13.13
$14.690 -- $17.313.. 74,500 15.20 9.68 36,167 15.26
------- -------
Total............... 488,500.. 10.31 8.30 290,417 9.34
------- -------
------- -------
</TABLE>

As of March 31, 1997, 165,000 options are available for future grant under
the 1994 Plan and 10,500 options are available for future grant under the
Directors Plan.

The following table presents information relating to stock options
outstanding at September 30, 1997 (unaudited):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
RANGE OF EXERCISE LIFE IN EXERCISE
EXERCISE PRICE SHARES PRICE YEARS SHARES PRICE
- -------------------- ------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 6.000 -- $ 8.125.. 111,900 $ 7.51 6.57 111,900 $17.51
$ 9.000 -- $10.625.. 174,250 10.60 8.21 125,000 10.59
$11.875 -- $13.440.. 57,750 12.48 8.84 37,249 12.75
$14.690 -- $19.125.. 97,000 15.85 9.33 58,667 16.41
------- -------
Total............... 440,900.. 11.21 8.12 332,816 10.82
------- -------
------- -------
</TABLE>

As of September 30, 1997, 146,000 options are available for future grant
under the 1994 Plan and 7,500 options are available for future grant under the
Directors Plan and 15,000 options are available for future grant under the 1996
Plan.

F-14

MOTORCAR PARTS & ACCESSORIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The weighted-average fair value at date of grant for options granted during
the years ended March 31, 1996, 1997 and the six months ended September 30, 1997
was $5.63, $5.50 and $7.70 per option, respectively. The fair value of options
at date of grant was estimated using the Black-Scholes option pricing model
utilizing the following assumptions:

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30, 1997
-------------------------------------------- ------------------
1996 1997 (UNAUDITED)
--------------------- ---------------------
<S> <C> <C> <C>
Risk-free interest rates.................. 6.1% - 6.9% 5.8% - 6.5% 6%
Expected option life in years............. 5 5 5
Expected stock price volatility........... 38% 36% 41%
Expected dividend yield................... 0% 0% 0%
</TABLE>

Had the Company elected to recognize compensation cost based on the fair
value of the options at the date of grant as prescribed by SFAS 123, net income
for the years ended March 31, 1996, 1997 and for the six month periods ended
September 30, 1996 and 1997 would have been $3,425,000, $5,180,000, $2,254,000
and $2,805,000 or $0.87 per share, $1.03 per share, $0.44 per share, and $0.54
per share, respectively.

[3] WARRANTS:

In connection with the Company's initial public offering the Company issued
to the underwriter 105,000 warrants to purchase common stock at an exercise
price of $7.20. In connection with a public offering in November 1995, 90,000
warrants were exercised.

F-15

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[THIS PAGE INTENTIONALLY LEFT BLANK]

Photographs of
Motorcar Operations

__________________________________ _________________________________

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................................................................................................. 4
Risk Factors....................................................................................................... 8
Price Range of Common Stock........................................................................................ 11
Dividend Policy.................................................................................................... 11
Use of Proceeds.................................................................................................... 12
Capitalization..................................................................................................... 12
Selected Financial Information..................................................................................... 13
Management's Discussion and Analysis of Financial Condition and Results of Operations.............................. 14
Business........................................................................................................... 18
Management......................................................................................................... 25
Certain Transactions............................................................................................... 31
Principal and Selling Shareholders................................................................................. 32
Description of Capital Stock....................................................................................... 33
Underwriting....................................................................................................... 34
Legal Matters...................................................................................................... 35
Experts............................................................................................................ 35
Available Information.............................................................................................. 35
Index to Financial Statements...................................................................................... F-1
</TABLE>

1,550,000 SHARES
MOTORCAR PARTS &
ACCESSORIES, INC.
COMMON STOCK

[LOGO]

------------
PROSPECTUS
NOVEMBER 19, 1997
------------
SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.

__________________________________ _________________________________