UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
Amendment No. 1 to
CURRENT REPORT
Amending Item 7
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 22, 1997
QUESTRON TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-13324 23-2257354
(State of incorporation(Commission File Number)(I.R.S. Employer
or organization) Identification No.)
6400 Congress Avenue, Suite 200A, Boca Raton, Florida 33487
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (561) 241-5251
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 7. Financial Statements and Exhibits
(a) and (b) The financial statements and pro forma financial information
required as part of this item are being filed in this amendment to the initial
report. This amendment is being filed within 60 days of the initial Report on
Form 8-K. The financial statements being filed with this amendment are as
follows:
(1) Questron Technology, Inc. and Subsidiaries Pro Forma Combined Financial
Statements for the nine months ended September 30, 1997 and the year ended
December 31, 1996.
(2) California Fasteners, Inc. balance sheets, related statements of
operations, stockholders' equity and statements of cash flows for the eleven
months ended July 31, 1997 and the year ended August 31, 1996.
(c) Exhibits required by Item 601 of Regulation S-B.
Exhibit No. Exhibit
2.0 Stock Purchase Agreement between Questron Technology, Inc.
and the Shareholders of California Fasteners, Inc., dated
August 29, 1997.*
2.1 Serial Put Agreement between Questron Technology, Inc. and
Doug Zadow and Terry Bastian, dated September 22, 1997.*
* Previously filed.
2
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
I. Pro Forma Financial Statements (Unaudited)
Pro Forma Combined Financial Statements - Introduction.......... F-1
Pro Forma Combined Statement of Operations for the nine months
ended September 30, 1997........................................ F-2
Pro Forma Combined Statement of Operations for the year ended
December 31, 1996............................................... F-3
Notes to Pro Forma Combined Financial Statements................ F-4
II. California Fasteners, Inc.
Report of Independent Auditors ................................. F-5
Balance Sheet as of July 31, 1997............................... F-6 - F-7
Statements of Operations for the eleven months ended
July 31, 1997 and for the year ended August 31, 1996........... F-8
Statement of Stockholders' Equity............................... F-9
Statements of Cash Flows for the eleven months ended
July 31, 1997 and for the year ended August 31, 1996........... F-10
Notes to Financial Statements................................... F-11-F-14
. . . . . . . .
3
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
The following pro forma combined statement of operations for the nine months
ended September 30, 1997 and the year ended December 31, 1996, give effect to
the acquisition of California Fasteners, Inc.
("Calfast"), as described in the following paragraphs.
In September 1997, the Company acquired 100% of the issued and outstanding
capital stock of Calfast, a privately-owned company. The purchase price of
Calfast consisted of:
(i) $6,594,441 in cash;
(ii)the assumption of $1,058,712 in debt net of cash on hand;
(iii475,106 shares of the Company's common stock, including 125,896 shares of
the Company's common stock which sellers of Calfast may put to the Company,
valued at $2,981,288;
(iv)up to $795,559 in cash to be paid if Calfast attains certain earnings
targets for the four month period ending December 31, 1997; and
(v) up to $3,500,000 (50% in cash and 50% in shares of the Company's common
stock) if Calfast attains certain earnings targets for the year ending
December 31, 1998.
The acquisition of Calfast was effected pursuant to a Stock Purchase Agreement
dated as of August 29, 1997. The Company has accounted for such acquisition
using the purchase method of accounting. In connection with this acquisition,
the Company recorded $8,355,314 of cost in excess of net assets of the business
acquired, which will be amortized over 40 years under the straight-line method.
The historical balance sheet of Calfast as of September 30, 1997 is included in
the historical balance sheet of Questron as of September 30, 1997, as filed
under Form 10-QSB, giving effect to the transactions under the purchase method
of accounting.
Since the most recent fiscal year end of Calfast differs from Questron's most
recent fiscal year end by more than 93 days, Calfast's statements of operations
have been brought to within 93 days of Questron's time period by deducting and
adding interim period results as follows:
Pro forma combined statement of operations for the twelve months ended December
31, 1996:
Deduct four months to December 31, 1995:
Revenue $ (2,276,913)
Net Income $ (362,016)
Add four months to December 31, 1996:
Revenue $ 3,396,295
Net Income $ 670,218
Questron's nine months ended September 30, 1997 historical statement of
operations includes operations for one month of Calfast, including one month's
amortization of goodwill on the acquisition of Calfast.
The pro forma statements of operations give effect to these transactions as if
they had occurred at the beginning of the fiscal year presented (i.e., January
1, 1995) and were carried forward through the interim period presented. The
historical statement of operations will reflect the effects of these
transactions from the date on which they occurred.
The pro forma combined statements have been prepared by the Company's management
based upon the historical financial statements of the Company and Calfast. These
pro forma statements may not be indicative of the results that actually would
have occurred if the combination had been in effect on the date indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the financial statements and notes of the Company
and Calfast appearing elsewhere herein and as filed under Forms 10-KSB and
10-QSB.
F-1
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997.
(UNAUDITED)
<TABLE>
Historicals
Questron Calfast
For the For the
Nine months Twelve months
ended ended
September 30, August 31, Pro Forma Pro Forma
1 9 9 7 1 9 9 7 Adjustments Combined
<S> <C> <C> <C> <C>
Total revenue $15,738,987 $11,947,540 $(3,396,295)[1] $24,290,232
Total operating costs and expenses 14,028,970 10,887,097 139,255 [4] 21,397,409
(931,175)[3]
4,000 [2]
(2,730,738)[1]
Operating income 1,710,017 1,060,443 122,363 2,892,823
Total other expense 206,532 59,233 4,661 [1] 870,426
600,000 [5]
---------- ---------- ----------
Income before income taxes 1,503,485 1,001,210 (482,298) 2,022,397
Provision for income taxes 137,700 472,544 (294,747)[6] 315,497
---------- ---------- ---------- ----------
Net income $1,365,785 $ 528,666 $ (187,551) $1,706,900
========== ========== ========== ==========
Net income used in per common
share calculation (reflecting
deduction of preferred stock
dividends) $1,299,659 $1,640,774
========== ==========
Net income per common share $ .45 $ .49
========== ==========
Average number of common shares
and common share equivalents
outstanding 2,869,330 3,329,103
========== ==========
</TABLE>
See Notes to the Unaudited Pro Forma Combined Financial Statements.
F-2
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996.
(UNAUDITED)
<TABLE>
Historicals
Questron Calfast
For the For the
Year ended Year ended
December 31, August 31, Pro Forma Pro Forma
1 9 9 6 1 9 9 6 Adjustments Combined
<S> <C> <C> <C> <C>
Total revenue $11,036,142 $7,532,634 $(2,276,913)[1] $19,688,158
3,396,295[2]
Total operating costs and expenses 10,121,638 7,424,752 208,883 [5] 17,980,675
(656,982)[4]
50,000 [3]
(1,898,354)[1]
2,730,738 [2]
Operating income 914,504 107,882 685,097 1,707,483
Total other (expense) income (300,669) (30,930) (800,000)[6] (1,143,481)
(16,543)[1]
4,661 [2]
Income before income taxes 613,835 76,952 (126,785) 564,002
Provision for income taxes 64,383 30,119 40,065 [7] 134,567
---------- --------- ---------- ----------
Net income $ 549,452 $ 46,833 $ (166,850)[2] $ 429,435
========== ========= ========== ==========
Net income per common share $ .36 $ .21
========== ==========
Average number of common shares
and common share equivalents
outstanding 1,539,048 2,014,154
</TABLE>
See Notes to the Unaudited Pro Forma Combined Financial Statements.
F-3
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
[UNAUDITED]
Adjustments to Statements of Operations:
For the Nine Months ended September 30, 1997:
[1] To deduct Calfast four months' operations and expenses to December 31,
1996.
[2] To reflect an increase in salary expense related to employment contracts.
[3] To reflect a reduction of commission expense for former owners.
[4] To reflect amortization of goodwill on the acquisition for eight months.
[5] To reflect interest expense on six year term loan in connection with the
Calfast acquisition at prime plus 1 1/2% monthly, for nine months.
[6] To properly reflect income tax expense on a pro forma basis.
For the Year ended December 31, 1996:
[1] To deduct Calfast four months' operations and expenses to December 31,
1995.
[2] To add Calfast four months' operations and expenses to December 31, 1996.
[3] To reflect an increase in salary expense related to employment contracts.
[4] To reflect a reduction of commission expense for former owners.
[5] To reflect amortization of goodwill on the acquisition for twelve months.
[6] To reflect interest expense on six year term loan in connection with the
Calfast acquisition at prime plus 1 1/2% monthly, for twelve months.
[7] To properly reflect income tax expense on a pro forma basis.
. . . . . . . .
F-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To The Board of Directors
Questron Technology Inc.
Boca Raton, Florida
We have audited the accompanying balance sheets of California
Fasteners, Inc. as of July 31, 1997, and the related statements of operations
stockholders' equity, statements of and cash flows for the eleven months then
ended and for the year ended August 31, 1996. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of California
Fasteners, Inc. as of July 31, 1997, and the results of its operations and its
cash flows for the eleven months then ended and for the year ended August 31,
1996, in conformity with generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
September 19, 1997
F-5
<PAGE>
CALIFORNIA FASTENERS, INC.
BALANCE SHEET AS OF JULY 31, 1997.
<TABLE>
Assets:
Current assets:
<S> <C>
Cash and cash equivalents $ 79,364
Account receivable, less allowance for doubtful accounts 1,065,486
Inventory - less allowance 1,866,730
Other related party receivables 5,760
Deferred taxes 25,367
-----------
Total current assets 3,096,722
Property and equipment:
Equipment 234,745
Furniture 81,739
Automobiles 171,806
Leasehold improvements 41,910
-----------
Totals - at cost 530,200
Less: Accumulated depreciation (205,878)
Property and equipment - Net 324,322
-----------
Other assets:
Other assets 1,037
Covenants not-to-compete, net of accumulated amortization 193,750
Total other assets 194,787
Total assets $ 3,615,831
===========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE>
CALIFORNIA FASTENERS, INC.
BALANCE SHEET AS OF JULY 31, 1997.
<TABLE>
Liabilities and stockholders' equity:
Current liabilities:
<S> <C>
Accounts payable and accrued expenses $ 858,289
Income taxes and sales tax payable 367,127
Line of credit 985,720
Current portion of long-term debt 22,994
-----------
Total current liabilities 2,234,130
Long-term liabilities:
Notes payable 73,893
Deferred taxes 39,223
Total long-term liabilities 113,116
Stockholders' equity:
Common stock, $10 par value, 7,500 shares
authorized, 5,100 issued, of which 3,168 are in treasury 51,000
Retained earnings 1,318,798
Less: Treasury stock - at cost (101,213)
-----------
Total stockholders' equity 1,268,585
Total liabilities and stockholders' equity $ 3,615,831
===========
See Notes to Financial Statements.
</TABLE>
F-7
<PAGE>
CALIFORNIA FASTENERS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
For the
Eleven months For the
ended Year ended
July 31, August 31,
1 9 9 7 1 9 9 6
------- -------
<S> <C> <C>
Sales $10,993,875 $ 7,532,634
----------- -----------
Operating costs and expenses:
Cost of products sold 7,002,920 5,054,129
Selling, general and administrative expenses 2,974,591 2,309,667
Depreciation and amortization 72,624 60,956
---------- -----------
Total operating expenses 10,050,135 7,424,752
---------- -----------
Operating income 943,740 107,882
---------- -----------
Other income (expense):
Miscellaneous income 4,503 4,118
Interest income 9,622 9,753
Interest expense (57,609) (44,801)
---------- -----------
Total other (expense) (43,484) (30,930)
---------- -----------
Income before income taxes 900,256 76,952
Provision for income taxes 400,742 30,119
---------- -----------
Net income $ 499,514 $ 46,833
========== ===========
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
<TABLE>
CALIFORNIA FASTENERS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Total
Common Stock Retained Treasury Stockholders'
Shares Amount Earnings Stock Equity
<S> <C> <C> <C> <C> <C>
Balance - September 1, 1995 5,100 $ 51,000 $ 772,451 $(101,213) $ 722,238
Net income of the year -- -- 46,833 -- 46,833
--------- --------- --------- --------- ---------
Balance - August 31, 1996 5,100 51,000 819,284 (101,213) 769,071
Net income for the eleven months -- -- 499,514 -- 499,514
------- --------- --------- --------- ---------
Balance - July 31, 1997 5,100 $ 51,000 $1,318,798$(101,213) $1,268,585
========= ========= =================== ==========
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE>
<TABLE>
CALIFORNIA FASTENERS, INC.
STATEMENTS OF CASH FLOWS
For the
Eleven months For the
ended Year ended
July 31, August 31,
1 9 9 7 1 9 9 6
------- -------
Operating activities:
<S> <C> <C>
Net income (loss) $ 499,513 $ 46,833
---------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 72,624 60,956
Deferred taxes 9,031 (2,789)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (332,382) (423,043)
Other receivables and prepaid expenses 6,671 25,671
Inventories (1,010,869) (192,793)
Increase (decrease) in:
Accounts payable and accrued expenses 72,196 296,266
Income taxes payable 367,127 --
---------- -----------
Total adjustments (815,602) (235,732)
---------- -----------
Net cash - operating activities (316,089) (188,899)
---------- -----------
Investing activities:
Acquisition of property and equipment (195,358) (36,898)
---------- -----------
Financing activities:
Bank overdraft -- 45,070
Payment of notes payable -- (248,917)
Notes payable 80,819 --
Line of credit 505,737 329,983
Note receivable - related party -- (46,446)
---------- -----------
Net cash - financing activities 586,556 79,690
---------- -----------
Increase [decrease] in cash and cash equivalents 75,109 (146,107)
Cash and cash equivalents - beginning of periods 4,255 150,362
---------- -----------
Cash and cash equivalents - end of periods $ 79,364 $ 4,255
========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest $ 50,786 $ 46,481
Income taxes $ 9,476 $ --
See Notes to Financial Statements.
</TABLE>
F-10
<PAGE>
CALIFORNIA FASTENERS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) Nature of Operations
California Fasteners, Inc. [the "Company"] is a value-added distributor of
fasteners and related products principally sold to customers in the industrial
equipment manufacturing industry, located primarily in the southwest United
States.
(2) Summary of Significant Accounting Policies
Cash and Cash Equivalents - The Company considers certain highly liquid
investments with original maturities of three months or less to be cash
equivalents.
Revenue Recognition - Revenue is recognized when products are shipped. Deposits
from customers are carried as liabilities until delivery of the product.
Inventory - The Company carries its inventory at lower of cost or market. Cost
of goods sold is calculated using the first-in, first-out ("FIFO") method.
Depreciation - Depreciation of furniture, vehicles and equipment is based on an
estimated useful lives of five [5] and seven [7] years using accelerated
methods. Depreciation expense was 49,707 and $35,956 for the periods ended July
31, 1997 and August 31, 1996, respectively.
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, the
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.
Concentration of Credit Risk - The Company extends credit to its customers which
result in accounts receivable arising from its normal business activities. The
Company does not require collateral from its customers, but routinely assesses
the financial strength of its customers and, based upon factors surrounding the
credit risk of its customers, believes that its receivable credit risk exposure
is limited. Such estimate of the financial strength of such customers may be
subject to change in the near term.
Impairment - Long-term assets of the Company are reviewed at least annually as
to whether their carrying value has become impaired, pursuant to guidance
established in SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets." Management considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations (undiscounted
and without interest charges). If impairment is deemed to exist, the assets will
be written down to fair value or projected discounted cash flows from related
operations. Management also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives. As of July 31, 1997, management expects these assets to be
fully recoverable.
Advertising - Advertising costs are expensed when incurred.
Fair Value of Financial Instruments - The fair value of financial instruments,
which are comprised primarily of its cash, accounts receivable and notes
payable, approximate their carrying values because of their short maturity. The
fair value of long-term debt was determined based on current rates at which the
Company could borrow funds with similar remaining maturities, which amount
approximates.
Accounts Receivable - The majority of the Company's accounts receivable are due
withing thirty [30] days and do not bear interest. The allowance for bad debt is
approximately $9,000 for the periods ended July 31, 1997 and August 31, 1996,
respectively and is based on the Company's experience and economic conditions.
F-11
<PAGE>
CALIFORNIA FASTENERS, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
(2) Summary of Significant Accounting Policies (Continued)
Covenant-not-to-Compete - A former shareholder has agreed not to compete with
the Company for a ten year period beginning May 1, 1995. The Company paid
$250,000 in consideration for such agreement on that date. The asset is being
amortized on a straight-line basis over ten years. Amortization expense amounted
to $22,917 and $25,000 for the periods ended July 31, 1997 and August 31, 1996,
respectively.
(3) Commitments and Contingencies
[A] Leases - The Company leases its facilities and certain vehicles under
various long-term operating leases. The total rent expense for these leases
totaled $167,929 for period ended July 31, 1997 and $166,487 for the period
ended August 31, 1996, respectively.
The following schedule shows future minimum lease payments per year required by
the non-cancelable leases on the facilities and vehicles:
Year ending
August 31,
1998 $ 176,656
1999 154,521
2000 123,889
2001 96,000
Thereafter 205,800
-----------
Total $ 756,866
- ----- ===========
[B] Litigation - On July 6, 1997, Unit Instruments, Inc., a California
corporation ("Unit") filed a complaint against the Company and others, including
the manufacturer of the products involved. The complaint alleges breach of
contract, breach of various warranties and negligence. The action relates to
certain screws allegedly purchased from the Company as a distributor, which Unit
alleges malfunctioned thereby causing Unit to suffer damages. Unit has claimed
damages in an amount to be proved at trial, but alleged damages of no less than
$1,000,000. The Company has referred this litigation to its insurance carrier,
which has assumed the defense of this case without acknowledging liability
under the policy. The stockholders of the Company have provided the Company
with certain indemnities in connection with liabilities arising out of this
litigation. Management of the Company believes that this litigation will not
have a material adverse effect on its business or financial condition.
(4) Related Party Transactions
Leases - The Company leases its Anaheim location from Z&B Associates, a
partnership of current shareholders of California Fasteners, Inc. The current
monthly rent is $8,000.
Rent expense for the Anaheim location was $96,000 and $42,639 for the periods
ended July 31, 1997 and August 31, 1996, respectively.
Note Receivable - The Company on December 20, 1995, loaned Z&B Associates
$75,000 for the above warehouse facility. The note is repayable to the Company
at $1,485 monthly for five years at 7.00% interest.
Commissions - The Company pays commissions based on sales generated by The Z
Group, Inc. an S corporation owned solely by the major shareholder. Commissions
expense on these sales were $722,473 for the period ending July 31, 1997 and
$673,398 for the period ending August 31, 1996 (See Note 10).
(5) Inventory
Inventory consists primarily of finished goods.
F-12
<PAGE>
CALIFORNIA FASTENERS, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
(6) Line of Credit
The Company has a line of credit with a bank. The bank has agreed to make
available a maximum amount of $1,250,000 to the Company under the terms of the
accounts receivable prime line agreement. Advances under the line (subject to
the maximum availability) are limited to 80% of eligible accounts receivable
plus 40% of eligible inventory both terms as defined in the agreement. Advances
under the line are collateralized by substantially all company assets. Interest
on advances is charged at the banks prime rate (approximately 8 1/2% at July 31,
1997) plus 1.5%. All indebtedness of the Company to the bank is guaranteed by
the majority shareholder, a former shareholder and other related parties. The
additional amounts available under the line at July 31, 1997 was approximately
$174,000. The original term of the line of credit will expire on January 10,
1998. On such date, unless the line has been renewed by the bank, no further
advances will be available and the entire outstanding balance shall be due and
payable in full.
As a subfeature under the line, the bank has agreed to issue for the Company's
account commercial and stand by letters of credit, subject to certain
limitations. An aggregate of approximately $28,000 of such letters of credit was
outstanding at July 31, 1997.
(7) Long-Term Debt
Long-term debt consists of the following notes:
July 31,
1 9 9 7
Installment notes to bank with 10.25% interest due various dates
through April 2002. These loans are collateralized by computer
equipment, vehicles, and other equipment. $ 96,887
Less: Current Portion 31,032
Long-Term Debt $ 65,855
-------------- ==========
Maturity of debt is as follows:
Year ended
August 31,
1998 $ 31,032
1999 31,032
2000 21,339
2001 10,536
Thereafter 2,948
----------
Total $ 96,887
----- ==========
(8) Treasury Stock
Treasury stock is stated at cost and consisted of 3,168 common shares for the
period ended July 31, 1997.
F-13
<PAGE>
CALIFORNIA FASTENERS, INC.
NOTES TO FINANCIAL STATEMENTS, Sheet #4
(9) Income Taxes
Provision for income taxes consists of the following:
Eleven months ended Year ended
July 31, August 31,
1 9 9 7 1 9 9 6
------- -------
Currently Payable:
Federal $ 300,922 $ 22,330
State 90,789 10,578
----------- ----------
391,711 32,808
----------- ----------
Deferred:
Federal 8,564 (2,689)
State 467 --
----------- ----------
9,031 (2,689)
----------- ----------
Totals $ 400,742 $ 30,119
------ =========== ==========
Reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
Eleven months ended Year ended
July 31, August 31,
1 9 9 7 1 9 9 6
------- -------
U.S. Statutory Rate 34.0% 34.0 %
State Taxes on Income - Net of Federal Benefit 6.6 9.1
Effect of graduated Federal Rates -- (8.0)
Nondeductible Items:
Travel and Entertainment and Officer's Life
Insurance Premiums 3.9 4.0
----- ----
Effective Income Tax Rate 44.5% 39.1 %
------------------------- ===== ====
(10) Subsequent Events (Unaudited) Subsequent to the Date of the Report of
Independent Auditors
On September 22, 1997, the stockholders of the Company sold their controlling
interest in California Fasteners, Inc. to Questron Technology, Inc., a
publicly-held company, in the same industry. The selling price consisted of
cash, assumption of debt and shares of the acquiring company issued to the
selling stockholders. The stockholders have entered into employment agreements
with the acquiring company. In addition, the Company no longer pays commissions
to the selling shareholders for sales generated by The Z Group, Inc. (See Note
4).
. . . . . . . . .
F-14
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
2.0 Stock Purchase Agreement between Questron Technology, Inc. and
the Shareholders of California Fasteners, Inc. dated
August 29, 1997.*
2.1 Serial Put Agreement between Questron Technology, Inc. and Doug
Zadow and Terry Bastian, dated September 22, 1997.*
* Previously filed.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned, hereunto duly authorized.
QUESTRON TECHNOLOGY, INC.
Date: December 5, 1997 By: /s/ Dominic A. Polimeni
------------------------
Dominic A. Polimeni
Chairman, President and Chief Executive
Officer
5
<PAGE>
6
<PAGE>
