U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --------
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
...............................
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --------
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from .................. to ...................
Commission File Number 0-13324
.................................
QUESTRON TECHNOLOGY, INC.
................................................................................
(Exact name of small business issuer as
specified in its charter)
Delaware 23-2257354
...................................... ...................................
(State or other jurisdiction (I. R. S. Employer Identification
of incorporation or organization) Number)
6400 Congress Avenue, Suite 200A, Boca Raton, FL 33487
...............................................................................
(Address of principal executive offices)
(561) 241 - 5251
..............................................................................
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No .
----
As of May 12, 1997, there were 2,139,783 shares of the issuer's Common
Stock and 1,150,000 shares of the issuer's Series B Convertible Preferred Stock
outstanding.
715300.3
<PAGE>
FORWARD LOOKING STATEMENTS
This Quarterly Report of Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995,
which involve certain risks and uncertainties. The Company's actual results or
outcomes may differ materially from those anticipated. Each forward-looking
statement that the Company believe is material is accompanied by a cautionary
statement or statements identifying important factors that could cause actual
results to differ materially from those described in the forward-looking
statement. The cautionary statements are set forth following the forward-looking
statement, and/or elsewhere in this quarterly report on Form 10-Q and the
Company's other documents filed with the Securities and Exchange Commission,
whether or not such documents are incorporated herein by reference. In assessing
the forward-looking statements contained in this quarterly report on Form 10-Q,
readers are urged to read carefully all cautionary statements.
715300.3
(i)
<PAGE>
QUESTRON TECHNOLOGY, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Page No.
----------------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
As of March 31, 1998 (unaudited) and December 31, 1997........................ 1
Consolidated Statement of Operations (unaudited) -
Three Months Ended March 31, 1998 and 1997.................................... 2
Consolidated Statement of Cash Flows (unaudited) -
Three Months Ended March 31, 1998 and 1997.................................... 3
Notes to Consolidated Financial Statements.................................... 4
Item 2. Management's Discussion and Analysis or Plan of Operation..................... 7
PART II. OTHER INFORMATION............................................................. 9
Item 1. Legal Proceedings.............................................................
9
Item 2. Changes in Securities.........................................................
9
Item 3. Defaults Upon Senior Securities...............................................
9
Item 4. Submission of Matters to a Vote of Security Holders...........................
9
Item 5. Other Information.............................................................
9
Item 6. Exhibits and Reports on Form 8-K.............................................. 9
</TABLE>
715300.3
(ii)
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
ASSETS
<CAPTION>
March 31, December 31,
1998 1997
------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 641,104 $ 875,080
Accounts receivable, less allowance for
doubtful accounts of $93,561 and $93,561, respectively 5,660,293 4,740,678
Other receivables 100,750 77,733
Inventories 9,277,771 8,415,777
Other current assets
215,787 158,597
------------- -------------
Total current assets 15,895,705 14,267,865
Property and equipment - net 1,262,329 910,988
Cost in excess of net assets of businesses acquired,
less accumulated amortization of $657,178 and $549,566, respectively 17,042,115 16,549,726
Deferred income taxes 3,135,411 3,192,947
Other assets
311,124 273,321
------------- -------------
Total assets $ 37,646,684 $ 35,194,847
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,166,953 $ 2,378,381
Accrued expenses 648,799 839,514
Income taxes payable 443,080 201,477
Current portion of long-term debt
1,861,667 1,801,667
------------ --------------
Total current liabilities 6,120,499 5,221,039
Deferred income taxes payable 249,477 182,552
Long-term debt
10,555,239 9,893,521
------------ --------------
Total liabilities 16,925,215 15,297,112
------------ --------------
Commitments and contingencies
Common stock subject to put option agreement 455,730 622,857
Shareholders' Equity:
Preferred stock, $.01 par value; authorized 10,000,000
shares; 1,150,000 issued and outstanding 11,500 11,500
Common stock, $.001 par value; authorized 20,000,000
shares; issued 2,139,783 shares in 1998 and 2,122,439 in 1997 2,139 2,122
Additional paid-in capital 33,926,596 33,462,524
Accumulated deficit
(13,319,018) (13,845,790)
------------ --------------
20,621,217 19,630,356
Less: Treasury stock, 11,849 shares, at cost
(355,478) (355,478)
------------ --------------
Total shareholders' equity 20,265,739 19,274,878
------------ --------------
$ 37,646,684 $ 35,194,847
============ ==============
Total liabilities and shareholders' equity
</TABLE>
See Notes to Consolidated Financial Statements.
715300.3
1
<PAGE>
<TABLE>
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
------------- ----------
<S> <C> <C>
Sales
$ 10,400,966 $ 3,912,277
------------- --------------
Operating costs and expenses:
Cost of products sold 6,181,350 2,328,374
Selling, general & administrative expenses 2,490,567 1,086,020
Depreciation and amortization 163,600 79,870
------------- --------------
8,835,517 3,494,264
------------- --------------
Operating income 1,565,449 418,013
Interest expense 281,375 60,209
------------- --------------
Income before income taxes 1,284,074 357,804
Provision for income taxes
526,470 147,773
------------- --------------
Net income $ 757,604 $ 210,031
============= ==============
Net income $ 757,604 $ 210,031
Deduct: Preferred Stock dividend 33,063 --
Imputed non-cash Preferred Stock dividend
197,769 --
------------- --------------
Net income used in per common share calculation $ 526,772 $ 210,031
============= ==============
Net income per common share $ .25 $ .14
====== ======
Net income per diluted common share $ .16 $ .11
====== ======
Average number of common shares outstanding 2,115,793 1,535,484
============= ==============
Average number of diluted common shares outstanding 4,716,440 1,968,091
============= ==============
</TABLE>
See Notes to Consolidated Financial Statements.
715300.3
2
<PAGE>
<TABLE>
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<CAPTION>
March 31, March 31,
1998 1997
--------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 757,604 $ 325,054
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 163,600 79,870
Provision for doubtful accounts -- 14,112
Recognition of current year income tax benefit of net
operating loss carryforward 57,536 --
Change in assets and liabilities:
Increase in accounts receivable (919,615) (187,102)
Increase in other receivables (23,017) (6,309)
(Increase) decrease in inventories (861,993) 126,220
Increase in accounts payable 788,571 410,428
Decrease in accrued expenses (124,589) --
Increase in income taxes payable 241,603 --
Increase in deferred income taxes 66,925 --
(Increase) decrease in prepaid expenses and other assets
(94,993) 364,874
--------------------- --------------------
Net cash provided by operating activities
51,632 1,127,147
--------------------- --------------------
Cash flows from investing activities:
Net cash consideration paid for acquired business (600,000) (3,796,809)
Acquisition of property and equipment
(407,326) (1,380)
--------------------- --------------------
Net cash used for investing activities
(1,007,326) (3,798,189)
--------------------- --------------------
Cash flows from financing activities:
Proceeds from borrowings under revolving facility 1,340,000 --
Proceeds from Convertible Preferred Stock Unit Offering -- 6,900,000
Proceeds from capital lease for computer system 371,228 --
Payments on capital lease for computer system (14,682) --
Costs associated with Convertible Preferred Stock Unit Offering -- (1,260,447)
Repayment of long-term debt (416,667) (137,500)
Repayment of revolving facilities (525,000) (2,033,193)
Payments on other capital leases (14,626) --
Payments on note issued for acquired business
(18,535) --
--------------------- --------------------
Net cash provided by financing activities
721,718 3,468,860
--------------------- --------------------
Increase in cash and cash equivalents (233,976) 797,818
Cash and cash equivalents at beginning of period
875,080 76,082
--------------------- --------------------
Cash and cash equivalents at end of period $ 641,104 $ 873,900
==================== ===================
</TABLE>
See Notes to Consolidated Financial Statements.
715300.3
3
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Note 1. Basis of presentation.
The accompanying unaudited consolidated financial statements
include the accounts of the Company and its subsidiaries. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
the Securities and Exchange Commission's instructions for a quarterly report on
Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
Management believes that all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The consolidated balance sheet as of December 31, 1997
reflects the audited balance sheet at that date. For further information, refer
to the financial statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the year ended December 31, 1997.
Note 2. Acquisition of Webb Distribution.
In March 1997, the Company acquired 100% of the issued and
outstanding capital stock of Comp Ware, Inc. d/b/a Webb Distribution ("Webb"), a
privately owned company. The business of Webb is substantially similar to the
fastener, electronic hardware, and related products value-added distribution
business of the Company, serving customers in the high-technology equipment
manufacturing industry. The purchase price of Webb consisted of:
(i) $3,250,000 in cash;
(ii) Note A in the principal amount of $375,000. Principal and
interest at the rate of 10% are due and payable 18 months
from the effective date of the closing;
(iii) Note B in the principal amount of $375,000. Principal and
interest at the rate of 10% are payable monthly over five
years from the effective date of the closing; and
(iv) 1,500,000 Series IV Warrants (the "Webb Warrants") issued
to the majority shareholder of Webb as a down payment
under the Stock Purchase Agreement.
715300.3
4
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Such acquisition was effected pursuant to a Stock Purchase
Agreement dated as of December 16, 1996. The Company has accounted for such
acquisition using the purchase method of accounting. In connection with this
acquisition, the Company recorded $3,723,277 of cost in excess of net assets of
the business acquired.
In connection with the sale of the Webb warrants by the majority
shareholder of Webb, Note A (as described in (ii) above) was satisfied pursuant
to the terms of the acquisition agreement, effectively resulting in a $375,000
reduction in the cost of the acquisition.
Note 3. Convertible Preferred Stock Unit Offering
In March 1997, the Company completed an offering of 1,150,000
Units (defined below) of its securities. Each Unit consisted of one share of
Series B Convertible Preferred Stock and one Series IV Common Stock Purchase
Warrant (together, a "Unit"). The net proceeds to the Company, after deducting
underwriting discounts and other expenses of the Offering, were $5,639,553.
These proceeds were used in part to finance the cash portion of the purchase
price of Webb. The remaining cash ($2,389,553) was used to repay the outstanding
balance on the Company's revolving credit facility ($750,000) and to repay the
outstanding balance on Webb's revolving credit facility ($1,000,000), with the
remaining balance ($639,553) retained by the Company for working capital.
Note 4. Acquisition of Integrated Material Systems, Inc.
In June 1997, the Company acquired 100% of the issued and
outstanding capital stock of Integrated Material Systems, Inc. ("IMS"), a
privately owned company. The purchase price of IMS consisted of 50,000 shares of
the Company's common stock and an additional 75,000 shares of the Company's
common stock to be earned by the seller if IMS attains certain earnings targets.
In addition, the acquisition agreement calls for deferred purchase payments of
up to $1,500,000 in cash based on the future earnings of IMS.
Note 5. Acquisition of Power Components, Inc.
In September 1997, the Company purchased the net operating assets
of Power Components, Inc. ("PCI"), a privately owned Philadelphia distributor of
lithium batteries and customized battery packs and assemblies, through a
simultaneously acquired wholly-owned subsidiary. The purchase price of PCI
consisted of:
(i) $900,000 in cash;
(ii) 50,000 shares of the Company's common stock;
(iii) a note payable in the principal amount of $250,000; and
(iv) 100,000 shares of the Company's common stock to be earned
if PCI attains certain earnings targets.
715300.3
5
<PAGE>
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Such transactions were effected pursuant to an Asset Purchase
Agreement and a Stock Purchase Agreement, in each case, dated September 4, 1997.
The Company has accounted for such transactions using the purchase method of
accounting. In connection with these transactions, the Company recorded
approximately $1,231,000 of cost in excess of net assets of the business
acquired.
Note 6. Acquisition of California Fasteners, Inc.
In September 1997, the Company acquired 100% of the issued and
outstanding capital stock of California Fasteners, Inc. ("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;
(iii) 475,106, 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.
Note 7. Revolving Credit Facility and Long-Term Debt
In connection with the acquisitions of PCI and Calfast, the
Company entered into a loan agreement with a bank. The agreement provides for a
$14,000,000 credit facility consisting of a six-year term loan for $10,000,000
and a $4,000,000 revolving credit facility. The loan agreement contains a
provision for the calculation of a borrowing base, which determines the amount
of borrowings available under the revolving facility. At March 31, 1998,
$1,760,000 of the $4,000,000 revolving credit facility was available to the
Company. Interest on the revolving facility is due monthly at the prime rate
plus 1%. Interest on the six-year term loan is due monthly at the prime rate
plus 1.5%.
715300.3
6
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
For the three months ended March 31, 1998
The results of operations through March 31, 1998 include the
operating results of (i) the Company's inventory logistics business, Questron
Distribution Logistics ("QDL"), (ii) its master distribution of fasteners
business, Integrated Material Systems, Inc. ("IMS"), and (iii) its lithium
battery and battery pack distribution business, Power Components, Inc. (PCI").
QDL includes the operating results of Quest Electronic Hardware, Inc. ("Quest"),
Webb Distribution ("Webb") and California Fasteners, Inc. ("Calfast").
The Company's revenues for the three months ended March 31, 1998
amounted to $10,400,966, compared with $3,912,277 for the three months ended
March 31, 1997. The significant growth in the Company's revenues is due to the
growth of QDL, which had revenues of $9,238,508 in the 1998 period, representing
a record level of sales for the business, compared with $3,896,764 for the
comparable prior year period. The significant growth in QDL's revenues for the
period ended March 31, 1998 is due to the acquisitions of Webb and Calfast, as
well as the continued internal growth of Quest. Revenues from Webb and Calfast
for the three months ended March 31, 1998 amounted to $5,572,822, compared with
$715,377 for Webb for the one month ended March 31, 1997, which is included in
the Company's 1997 first quarter results.
The Company's operating income was $1,565,449 for the three months
ended March 31, 1998 compared with operating income of $418,013 for the prior
year period. The increase in operating income for the three month period ended
March 31, 1998, compared with the comparable prior year period, is primarily due
to the increased operating income achieved by QDL as a result of the acquisition
of Webb and Calfast, as well as the continued internal growth of Quest. The
increase in operating income of QDL resulted in a record level of operating
income for the Company. QDL's operating income for the three month period ended
March 31, 1998 represents approximately 19% of the Company's revenues, a
relationship which continues to show improvement as compared with the historical
performance of QDL. This improvement is attributable to the successful
transition of the acquired businesses and the resulting cost savings of the
combination of these businesses.
Interest expense, which reflects the cost of borrowings associated
with the acquisition of Calfast in September 1997 and borrowings associated with
QDL's working capital needs, amounted to $281,375 for the three months ended
March 31, 1998 compared with $60,209 for the comparable prior year period. The
increase in interest expense principally reflects the costs of increased
borrowings to complete the acquisition of Calfast.
The provision for income taxes for the three months ended March
31, 1998 reflects a federal income tax provision at an effective rate of 35% and
a state income tax provision at an effective rate of 6% for the states in which
the Company does business. The Company is not expected, however, to have a
regular federal income tax liability for 1997 as a result of the availability of
net operating loss carryforwards of approximately $13.1 million as of December
31, 1996, expiring in the years 2000 through 2010.
Net income for the three months ended March 31, 1998 amounted to
$757,604 compared with net income of $210,031 for the comparable period of the
prior year. This improvement reflects the increased operating income of QDL,
resulting from the acquisition of Webb and Calfast, as well as the continuing
internal growth of Quest, partially reduced by increased corporate expenses,
interest expense, and income taxes.
715300.3
7
<PAGE>
Liquidity and Capital Resources
As of March 31, 1998, the Company had $641,104 in cash and
short-term investments, compared to $875,080 as of December 31, 1997. As of
March 31, 1998, the Company had working capital of $9,775,206, compared with
working capital of $9,046,826 as of December 31, 1997.
For the three months ended March 31, 1998, the net cash provided
by the Company's operating activities amounted to $51,632, principally
reflecting the profits of QDL and the increases in accounts payable, income
taxes payable and deferred income taxes, offset by the increases in accounts
receivable, prepaid expenses and other assets, and a decrease in accrued
expenses.
For the three months ended March 31, 1998, the net cash used in
the Company's investing activities amounted to $1,007,326, including $600,000
net cash consideration paid in connection with the deferred purchase price of
Calfast. The Company also had capital expenditures of $407,326 for the
acquisition of fixed assets, $392,040 of which represents the purchase and
installation of an on-line real-time computer system. The Company does not have
significant commitments for capital expenditures as of March 31, 1998 and no
significant commitments are anticipated for the remainder of 1998.
For the three months ended March 31, 1998, the net cash provided
by the Company's financing activities amounted to $721,718, which consists of
$1,340,000 of bank borrowings under the Company's revolving credit facility, as
well as $371,228 of net proceeds from a capital lease for the purchase of the
Company's computer system, reduced by long-term debt principal payments of
$416,667, revolving facility repayments of $525,000, principal payments of
$14,626 on various capital leases, principal payments of $18,535 on a note
issued for an acquired business and principal payments on the capital lease for
the computer system of $14,682.
In connection with the acquisition of Calfast, the Company
increased its revolving facility to $4,000,000, under terms and conditions
generally consistent with those of its original facility. At March 31, 1998,
$2,240,000 was borrowed and outstanding under the revolving facility. The
remaining amount of the $4,000,000 revolving credit facility, or $1,760,000, was
fully available at March 31, 1998 for future working capital needs. Amounts
outstanding under the revolving facility bear interest at a rate equal to 1.0%
above the lender's prime rate. As of May 12, 1998, the interest rate under the
revolving facility was 9.5%. In order to secure the obligations of the Company
and its subsidiaries under the revolving facility and the related term loan
facility under the loan and security agreement with the lender, the Company
entered into a stock pledge agreement with the lender whereby the Company
pledged to the lender the shares of capital stock of each of its subsidiaries at
the date of such agreement and any shares of its subsidiaries in which the
Company may thereafter acquire an interest. In addition, the Company and its
subsidiaries granted a security interest in substantially all of their assets to
the lender.
The Company intends to continue to identify and evaluate potential
merger and acquisition candidates engaged in businesses complementary to its
business. While certain of such potential acquisition opportunities are at
various stages of consideration and evaluation, none is at any definitive stage
at this time. Management believes that its working capital, funds available
under its credit agreement, and funds generated from operations will be
sufficient to meets its obligations through 1998, exclusive of any cash
requirements which may come about as a result of other business acquisitions.
715300.3
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes In Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission Of Matters To a Vote Of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits.
See Exhibit Index immediately following the signature page
below.
(b) Reports on Form 8-K.
No current reports on Form 8-K were filed by the registrant
during the quarterly period ended March 31, 1998.
715300.3
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
QUESTRON TECHNOLOGY, INC.
(1) Principal Executive Officer:
Date: May 14, 1998 /s/ Dominic A. Polimeni
-----------------------
Dominic A. Polimeni
Chief Executive Officer
(2) Principal Financial and Accounting
Officer:
Date: May 14, 1998 /s/ Milton M. Adler
-------------------
Milton M. Adler
Treasurer
715300.3
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this quarterly report on Form
10-Q:
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
--- ----------- --------
<S> <C>
3.0 Certificate of Incorporation, incorporated by reference to
Exhibit 3(i) to the Registrant's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1987 (File No. 0-13324)
3.1 Certificate of Amendment, dated March 20, 1985, to Certificate of
Incorporation of the Registrant, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on March 9, 1995 (File No. 33-44331)
3.3 Certificate of Amendment, dated June 9, 1989, to Certificate of
Incorporation of the Registrant, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on March 9, 1995 (File No. 33-44331)
3.4 Certificate of Correction, dated May 17, 1991, to Certificate of
Incorporation of the Registrant, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on March 9, 1995 (File No. 33-44331)
3.5 Certificate of Amendment, dated December 20, 1993, to Certificate
of Incorporation of the Registrant, incorporated by reference to
Exhibit 3(i) to the Registrant's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1993 (File No. 0-13324)
3.6 Certificate of Correction, dated July 19, 1994, to Certificate of
Incorporation of the Registrant, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on March 9, 1995 (File No. 33-44331)
3.7 Certificate of Amendment, dated April 2, 1996, to Certificate of
Incorporation of the Registrant, incorporated by reference to
Exhibit 3.5 to the Registrant's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1995 (File No. 0-13324)
</TABLE>
715300.3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
--- ----------- --------
<S> <C>
3.8 Certificate of Amendment, filed December 31, 1996, to Certificate
of Incorporation of the Registrant, incorporated by reference to
Exhibit 3.10 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
3.9 By-Laws of the Registrant, incorporated by reference to Exhibit
3b(ii) to the Registrant's Form 10-KSB filed with the Securities
and Exchange Commission for the fiscal year ended December 31,
1987 (File No. 0-13324)
3.10 Amendment to By-Laws of the Registrant, incorporated by reference
to Exhibit 3.4 of the Registrant's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1992 (File No. 0-13324)
4.0 Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4.0 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
4.1 Specimen Preferred Stock Certificate, incorporated by reference
to Exhibit 4.1 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
4.2 Certificate of Designations, Preferences and Rights of the
Registrant's Series B Convertible Preferred Stock, incorporated
by reference to Exhibit 4.2 to Amendment No. 1 to the
Registrant's Form SB-2 filed with the Securities and Exchange
Commission on February 25, 1997 (File No. 333-18243)
4.3 Form of Series IV Warrant Agreement, incorporated by reference to
Exhibit 4.3 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
4.4 Form of Series III Warrant Agreement, dated as of November 7,
1994, incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1994 (File No.
0-13324)
4.5 Form of Underwriters' Purchase Option, incorporated by reference
to Exhibit 4.5 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
4.6 Stock Purchase Warrant Certificate for Purchase of Common Stock
of Questron Technology, Inc., incorporated by reference to
Exhibit 4.6 to Amendment No. 1 to the Registrant's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243)
</TABLE>
715300.3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
--- ----------- --------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
715300.3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME FOR THE 3 MONTHS ENDED MARCH 31, 1998 AND
THE CONSOLIDATED BALANCE SHEET FOR THE QUARTER ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 641,104
<SECURITIES> 0
<RECEIVABLES> 5,660,293
<ALLOWANCES> 93,561
<INVENTORY> 9,277,771
<CURRENT-ASSETS> 15,895,705
<PP&E> 1,262,329
<DEPRECIATION> 535,961
<TOTAL-ASSETS> 37,646,684
<CURRENT-LIABILITIES> 6,120,499
<BONDS> 0
0
11,500
<COMMON> 2,139
<OTHER-SE> 20,252,100
<TOTAL-LIABILITY-AND-EQUITY> 19,373,950
<SALES> 10,400,966
<TOTAL-REVENUES> 10,400,966
<CGS> 6,181,350
<TOTAL-COSTS> 8,671,917
<OTHER-EXPENSES> 163,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 281,375
<INCOME-PRETAX> 1,284,074
<INCOME-TAX> 526,470
<INCOME-CONTINUING> 757,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 757,604
<EPS-PRIMARY> .25
<EPS-DILUTED> .16
</TABLE>
