<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-Q
(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 June 30, 2000
-------------------------------
[ ] 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 Registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 23-2257354
--------------------------------------------------------------- ----------------------------------------------
<S> <C>
(State or other jurisdiction of incorporation or organization) (I. R. S. Employer Identification Number)
6400 Congress Avenue, Suite 2000, Boca Raton, FL 33487
--------------------------------------------------------------- ----------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(561) 241 - 5251
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 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 August 9, 2000, there were 8,493,404 shares of the Registrant's
common stock outstanding.
<PAGE> 2
QUESTRON TECHNOLOGY, INC.
INDEX
THIS QUARTERLY REPORT ON 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 MAY DIFFER
MATERIALLY. EACH FORWARD-LOOKING STATEMENT THAT THE COMPANY BELIEVES 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. IN THE CONTEXT OF FORWARD-LOOKING
INFORMATION PROVIDED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OTHER REPORTS,
PLEASE REFER TO THE DISCUSSION OF RISK FACTORS DETAILED IN, AS WELL AS THE OTHER
INFORMATION CONTAINED IN, THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION DURING THE PAST 12 MONTHS.
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
At June 30, 2000 (unaudited) and December 31, 1999 3
Consolidated Statement of Income (unaudited) -
Three Months and Six Months Ended June 30, 2000 and 1999 4
Consolidated Statement of Cash Flows (unaudited) -
Six Months Ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk 11
PART II. Other Information 12
Signature Page 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 55,193 $ 111,102
Accounts receivable, less allowances for
doubtful accounts of $283,666 in 2000 and 1999 25,045,616 16,827,678
Other receivables 357,074 253,057
Inventories 47,033,471 38,301,589
Other current assets 758,752 515,705
------------- -------------
Total current assets 73,250,106 56,009,131
Property and equipment - net 3,984,551 2,898,919
Cost in excess of net assets of businesses acquired,
less accumulated amortization of $3,563,028 in 2000 and $2,699,305 in 1999 73,997,156 71,650,585
Deferred income taxes 3,259,438 3,431,438
Other assets 4,047,627 4,007,768
------------- -------------
Total assets $ 158,538,878 $ 137,997,841
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,427,477 $ 9,668,171
Accrued expenses 1,670,055 1,958,596
Income taxes payable 1,969,971 750,333
Current portion of long-term debt 350,967 1,746,598
------------- -------------
Total current liabilities 20,418,470 14,123,698
Deferred income taxes payable 952,435 993,048
Long-term debt 89,614,490 87,808,934
------------- -------------
Total liabilities 110,985,395 102,925,680
------------- -------------
Commitments and contingencies:
Common stock subject to put option agreement 584,425 622,170
Stockholders' equity:
Preferred stock, $.01 par value; authorized 10,000,000 shares -- --
Common stock, $.001 par value; authorized 20,000,000
shares; issued 8,505,253 shares in 2000 and 7,164,522 in 1999 8,506 7,165
Additional paid-in capital 54,962,332 45,678,802
Accumulated deficit (7,646,302) (10,880,498)
------------- -------------
47,324,536 34,805,469
Less: treasury stock at cost, 11,849 shares (355,478) (355,478)
------------- -------------
Total stockholders' equity 46,969,058 34,449,991
------------- -------------
Total liabilities and stockholders' equity $ 158,538,878 $ 137,997,841
============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS AND SIX MONTHS
ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $41,226,371 $29,973,887 $77,705,273 $49,278,373
Cost of goods sold 25,417,253 18,465,421 47,177,562 30,281,073
----------- ----------- ----------- -----------
Gross Profit 15,809,118 11,508,466 30,527,711 18,997,300
Selling, general & administrative expenses 9,665,392 7,575,498 18,744,546 12,252,134
Depreciation and amortization 621,361 563,468 1,241,839 932,416
----------- ----------- ----------- -----------
Total operating expenses 10,286,753 8,138,966 19,986,385 13,184,550
----------- ----------- ----------- -----------
Operating income 5,522,365 3,369,500 10,541,326 5,812,750
Interest expense 2,940,315 1,790,731 5,798,844 3,042,683
----------- ----------- ----------- -----------
Income before income taxes and extraordinary items 2,582,050 1,578,769 4,742,482 2,770,067
Provision for income taxes 1,071,551 710,446 1,968,130 1,198,879
----------- ----------- ----------- -----------
Income before extraordinary items 1,510,499 868,323 2,774,352 1,571,188
Extraordinary (charge) gain in connection with the early
extinguishment of debt (less applicable income
taxes of $326,214 in 2000 and $1,187,604 in 1999) -- (1,451,516) 459,844 (1,451,516)
----------- ---------- ------------ ----------
Net income (loss) $ 1,510,499 $ (583,193) $ 3,234,196 $ 119,672
=========== ========== ============ ==========
PER COMMON SHARE:
Income before extraordinary items $ .18 $ .15 $ .34 $ .29
Extraordinary (charge) gain -- (.25) .06 (.27)
=========== ========== ============ ==========
Net income (loss) $ .18 $ (.10) $ .40 $ .02
=========== ========== ============ ==========
PER DILUTED COMMON SHARE:
Income before extraordinary items $ .16 $ .15 $ .27 $ .28
Extraordinary (charge) gain -- (.25) .05 (.26)
----------- ---------- ------------ ----------
Net income (loss) $ .16 $ (.10) $ .32 $ .02
=========== ========== ============ ==========
Average number of common shares outstanding 8,418,268 5,913,996 8,089,844 5,461,084
=========== ========== ============ ==========
Average number of diluted common shares outstanding 9,718,250 5,980,365 10,261,125 5,530,352
=========== ========== ============ ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,234,196 $ 119,672
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,241,839 932,416
Recognition of current year income tax benefit of net
operating loss carryforward 172,000 --
Extraordinary (gain) charge in connection with the early
extinguishment of debt (less applicable income taxes of
$326,214 in 2000 and $1,451,516 in 1999) (459,844) 1,451,516
Change in assets and liabilities:
Increase in accounts receivable (7,702,306) (285,378)
Increase in other receivables (104,017) (207,306)
Increase in inventories (7,963,027) (3,771,660)
Increase (decrease) in accounts payable 6,668,950 (344,811)
(Decrease) increase in accrued expenses (602,016) 658,817
Increase (decrease) in income taxes payable 1,249,638 (2,112,068)
(Decrease) increase in deferred income taxes (40,613) 125,477
Increase in other assets (157,293) (287,640)
------------ ------------
Net cash used by operating activities (4,462,493) (3,720,965)
------------ ------------
Cash flows from investing activities:
Net cash consideration paid for acquired business (238,399) (28,799,567)
Acquisition of property and equipment (1,035,931) (194,294)
------------ ------------
Net cash used for investing activities (1,274,330) (28,993,861)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings under revolving facility 4,733,348 1,762,927
Proceeds from long-term debt financing -- 72,500,000
Repayment of long-term debt (249,761) (35,000,000)
Fees and expenses associated with long-term debt financing (233,083) (4,112,982)
Extraordinary gain (charge) in connection with the early
extinguishment of debt (less applicable income taxes of
$326,214 in 2000 and $1,451,516 in 1999) 459,844 (1,451,516)
Proceeds from exercise of options and warrants 1,213,201 --
Payments on capital leases (39,766) (79,772)
Payments in respect of exercise of put options -- (45,293)
Payments on note issued for acquired business (202,869) (95,316)
------------ ------------
Net cash provided by financing activities 5,680,914 33,478,048
------------ ------------
Increase in cash and cash equivalents (55,909) 763,222
Cash and cash equivalents at beginning of period 111,102 229,285
------------ ------------
Cash and cash equivalents at end of period $ 55,193 $ 992,507
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 1. BASIS OF PRESENTATION.
The accompanying unaudited consolidated financial statements include
the accounts of Questron Technology, Inc. (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
Form 10-Q. 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 six month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. The consolidated balance sheet as of December 31, 1999
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-K for the year ended December 31, 1999.
NOTE 2. ACQUISITION OF RSD SALES COMPANY, INC.
Effective March 31, 2000, the Company acquired 100% of the issued and
outstanding stock of RSD Sales Company, Inc., a New York corporation ("RSD"), a
privately owned company.
The purchase price for RSD consisted of 394,619 shares of the Company's
common stock valued at $3,300,000.
The Company has accounted for such acquisition using the purchase
method of accounting. In connection with this acquisition, the Company recorded
$2,026,786 of cost in excess of net assets of the business acquired.
6
<PAGE> 7
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 3. ACQUISITIONS - PRO FORMA FINANCIAL INFORMATION.
The following unaudited pro forma information for the three month and
six month periods ended June 30, 2000 and 1999 presents the combined operating
results of the Company, Action Threaded Products, Inc. ("Action"), Capital
Fasteners, Inc. ("Capital"), Olympic Fasteners ("Olympic"), B&G Supply Company,
Inc. ("B&G") and RSD as though each of the acquisitions had been made on January
1, 1999. The unaudited pro forma combined summary of operations includes the
additional interest expense on debt incurred in connection with the acquisitions
as if the debt had been outstanding since January 1, 1999. The pro forma net
income per common share and diluted common share assume that all shares of
common stock of the Company outstanding as of June 30, 2000 were outstanding as
of January 1, 1999. This pro forma information does not purport to be indicative
of what would have occurred had the acquisitions been completed as of January 1,
1999 or results which may occur in the future:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 41,226,000 $ 31,344,000 $ 78,400,000 $ 61,177,000
------------- ------------- ------------- -------------
Operating income 5,522,000 4,118,000 11,257,000 8,228,000
------------- ------------- ------------- -------------
Net income $ 1,510,000 $ 558,000 $ 2,793,000 $ 1,109,000
============= =========== ============= =============
Pro forma net income per common share $ .18 $ .06 $ .34 $ .14
============= =========== ============= =============
Pro forma net income per diluted common
share $ .16 $ .06 $ .27 $ .14
============= =========== ============= =============
Average number of common shares
outstanding 8,418,268 8,649,555 8,284,985 7,860,379
============= =========== ============= =============
Average number of diluted
common shares outstanding 9,718,250 8,715,923 10,456,266 7,929,646
============= =========== ============= =============
</TABLE>
7
<PAGE> 8
QUESTRON TECHNOLOGY, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
NOTE 4. EARLY EXTINGUISHMENT OF DEBT.
On March 7, 2000, the Company reached agreements with the former
shareholders of Action, Capital and Olympic whereby notes payable aggregating
$5,000,000, plus accrued interest of $286,058 were settled in exchange for
450,000 shares of the Company's common stock. In connection with the early
extinguishment of these notes, the Company realized an extraordinary gain in an
amount equal to the difference between the fair market value of the common stock
issued and the face amount of the notes plus accrued interest. The amount of the
extraordinary gain was $459,844, net of applicable income taxes of $326,214.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2000 COMPARED TO THE
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1999.
The Company's results of operations through June 30, 2000 include
the operating results of the Company's inventory logistics management
business, Questron Distribution Logistics, Inc. (formerly Quest Electronic
Hardware, Inc.) ("QDL"), its master distribution of fasteners business,
Integrated Material Systems, Inc. ("IMS") and its battery distribution
business, Power Components, Inc. ("PCI").
QDL includes the operating results of Webb Distribution ("Webb"), and
California Fasteners, Inc. ("Calfast"), which were acquired in 1997; the
operating results of Fas-Tronics, Inc. ("Fas-Tronics"), Fortune Industries, Inc.
("Fortune") and AFCOM, which were acquired in 1998; the operating results of
Action, Capital, Olympic and B & G, which were acquired in 1999; and, for the
three months ended June 30, 2000, the operating results of RSD, which was
acquired on March 31, 2000. In 1999 the operations of Fas-Tronics and Fortune
began to operate as Questron Aerospace Logistics ("QAL"), a division of QDL,
providing inventory logistics management services to aerospace manufacturers.
The Company's revenues for the three month and six month periods ended
June 30, 2000 amounted to $41,226,371 and $77,705,273, respectively, compared
with $29,973,887 and $49,278,373 for the comparable prior year periods. The
significant growth in the Company's revenues is due to the growth of QDL, which
had revenues of $38,647,895 and $72,409,939 during the three month and six month
periods ended June 30, 2000, compared with $28,720,592 and $46,859,507 for the
comparable prior year periods. The significant growth in QDL's revenues for the
three month period ended June 30, 2000 as compared with the comparable prior
year period is a result of the internal growth of QDL of 32%, as well as the
additional revenues attributable to the acquisitions of B&G and RSD. Revenues
from B&G and RSD for the three month period ended June 30, 2000 amounted to
$1,718,788. The significant growth in QDL's revenues for the six month period
ended June 30, 2000 as compared with the comparable prior year period is a
result of the acquisitions of Action, Capital, Olympic, B&G and RSD, as well as
the internal growth of the other QDL branches of 29%. Revenues from Action,
Capital, Olympic, B&G and RSD for the six month period ended June 30, 2000
amounted to $26,660,542 compared with $12,228,721 for the comparable prior year
period. The internal growth of QDL is attributable to the implementation of
inventory logistics management ("ILM") programs to both new and existing
customers.
The Company's operating income was $5,522,365 and $10,541,326,
respectively for the three month and six month periods ended June 30, 2000,
compared with operating income of $3,369,500 and $5,812,750 for the comparable
prior year periods. Operating income as a percentage of sales for the three
month and six month periods ended June 30, 2000 amounted to 13.4% and 13.6%,
respectively, compared with 11.2% and 11.8% for the comparable prior year
periods. This improvement in operating income as a percentage of
9
<PAGE> 10
sales is the result of increased gross profit margins, as well as the
elimination of some of the redundant costs realized by the integration of
certain of the acquired businesses.
Interest expense, which reflects the cost of incremental borrowings
associated with acquisitions and QDL's working capital needs, for the three
month and six month periods ended June 30, 2000 amounted to $2,940,315 and
$5,798,844, respectively. For the comparable periods of the prior year, the
Company's results include interest expense of $1,790,731 and $3,042,683,
respectively. The increase in interest expense principally reflects the costs of
increased borrowings to complete the acquisitions of Action, Capital and
Olympic, as well as the increased borrowings under the Company's revolving
credit facility to finance the working capital required to support the Company's
growth.
The provision for income taxes for the three month and six month
periods ended June 30, 2000 reflects a federal income tax provision at an
effective rate of 36.25% and a state income tax provision at an effective rate
of 5.25% for the states in which the Company does business. The provision for
income taxes for the three month and six month periods ended June 30, 1999
reflects a federal income tax provision at an effective rate of 35% and 39.6%,
respectively, and a state income tax provision at an effective rate of 6% and
5.4%, respectively.
On March 7, 2000, the Company entered into an agreement with the former
shareholders of Action, Capital and Olympic to exchange $5,000,000 of debt, plus
accrued interest of $286,058 for 450,000 shares of the Company's common stock.
This exchange resulted in an extraordinary gain of $459,844, net of $326,214 in
applicable income taxes. In the second quarter of 1999, the Company incurred an
extraordinary charge in connection with the early extinguishment of debt of
$1,451,516, net of $1,187,604 in applicable income taxes. Income for the three
month and six month periods ended June 30, 2000, before the extraordinary item
in connection with the early extinguishments of debt, amounted to $1,510,499 and
$2,774,352, respectively, compared with $868,323 and $1,571,188 for the
comparable prior year periods. After the extraordinary item, the net income for
the three month and six month periods ended June 30, 2000 amounted to $1,510,499
and $3,234,196, respectively, compared with a net loss of $583,193 for the three
months ended June 30, 1999 and net income of $119,672 for the six months ended
June 30, 1999. The increase in income before extraordinary item for the three
months ended June 30, 2000 is primarily due to the internal growth of QDL, as
well as the acquisitions of B&G and RSD. The increase in income before
extraordinary item for the six months ended June 30, 2000 is due to the
acquisitions of Action, Capital, Olympic, B&G and RSD, as well as the internal
growth of the other QDL branches.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the Company had $55,193 in cash, compared to
$111,102 as of December 31, 1999. As of March 31, 2000, the Company had working
capital of $52,831,636, compared with working capital of $41,885,433 as of
December 31, 1999.
For the six months ended June 30, 2000, the net cash used by the
Company's operating activities amounted to $4,462,493, principally reflecting
increases in inventories, receivables and other assets, offset in part by
profits of the Company and increases in accounts payable and income taxes
payable.
10
<PAGE> 11
For the six months ended June 30, 2000, the net cash used in the
Company's investing activities amounted to $1,274,330, including $238,399 of net
cash consideration paid for RSD and $1,035,931 of capital expenditures for the
acquisition of fixed assets associated with the opening of new branches, as well
as the implementation of new ILM programs. The Company does not have significant
commitments for capital expenditures as of June 30, 2000 and no significant
commitments are anticipated for the remainder of 2000, other than the expansion
of the Company's computer system to complete the integration of Fortune,
Fas-Tronics, Action, B&G and RSD.
For the six months ended June 30, 2000, the net cash provided by the
Company's financing activities amounted to $5,680,914, consisting principally of
$4,728,322 of bank borrowings under the Company's revolving credit facility and
$1,213,201 of proceeds from the exercise of options and warrants.
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 additional 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,
together with additional financing opportunities available to the Company, will
be sufficient to meet its obligations through 2001, exclusive of cash
requirements associated with any business acquisitions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's interest expense is sensitive to changes in the general
level of U.S. interest rates. In this regard, changes in the U.S. rates may
effect the interest paid on a portion of its debt. The Company does not enter
into derivative financial instruments.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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:
The exhibits listed on the Exhibit Index immediately
following the signature page are filed as part of
this Quarterly Report on Form 10-Q.
b) Reports on Form 8-K:
None.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
QUESTRON TECHNOLOGY, INC.
(1) Principal Executive Officer:
Date: August 14, 2000 /s/ Dominic A. Polimeni
---------------- -------------------------------------
Dominic A. Polimeni
Chairman and Chief Executive Officer
(2) Principal Financial and Accounting
Officer:
Date: August 14, 2000 /s/ Robert V. Gubitosi
---------------- -------------------------------------
Robert V. Gubitosi
President and Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
*3.0 Certificate of Incorporation, incorporated by reference to
Exhibit 3(i) to the Company'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 Company, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Company's Registration
Statement on Form S-3 filed with the Securities and Exchange
Commission on March 9, 1995 (File No. 33-44331).
*3.2 Certificate of Amendment, dated June 9, 1989, to Certificate of
Incorporation of the Company, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Company'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 Correction, dated May 17, 1991, to Certificate of
Incorporation of the Company, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 of the Company'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 Amendment, dated December 20, 1993, to Certificate
of Incorporation of the Company, incorporated by reference to
Exhibit 3(i) to the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1993 (File No. 0-13324).
*3.5 Certificate of Correction, dated December 22, 1993, to
Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3.3 to the Company'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 Company, incorporated by reference to
Exhibit 4.1 to Amendment No. 1 to the Company'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 Company, incorporated by reference to
Exhibit 3.5 to the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1995 (File No. 0-13324).
*3.8 Certificate of Amendment, filed December 31, 1996, to Certificate
of Incorporation of the Company, incorporated by reference to
Exhibit 3.10 to Amendment No. 1 to the Company's Form SB-2 filed
with the Securities and Exchange Commission on February 25, 1997
(File No. 333-18243).
14
<PAGE> 15
*3.9 By-Laws of the Company, incorporated by reference to Exhibit
3b(ii) to the Company'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 Company, incorporated by reference to
Exhibit 3.4 of the Company'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 Company's Form SB-2 filed
with the Securities and Exchange Commission on February 25, 1997
(File No. 333-18243).
*4.1 Form of Series IV Warrant Agreement, incorporated by reference to
Exhibit 4.3 to Amendment No. 1 to the Company's Form SB-2 filed
with the Securities and Exchange Commission on February 25, 1997
(File No. 333-18243).
*4.2 Form of Series III Warrant Agreement, dated as of November 7,
1994, incorporated by reference to Exhibit 10.22 to the Company's
Form 10-KSB filed with the Securities and Exchange Commission for
the fiscal year ended December 31, 1994 (File No. 0-13324).
*4.3 Form of Underwriters' Purchase Option, incorporated by reference
to Exhibit 4.5 to Amendment No. 1 to the Company's Form SB-2
filed with the Securities and Exchange Commission on February 25,
1997 (File No. 333-18243).
*4.4 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 Company's Form SB-2 filed
with the Securities and Exchange Commission on February 25, 1997
(File No. 333-18243).
*4.5 Amended Certificate of Designation Establishing Series of
Preferred Stock of Questron Technology, Inc., incorporated by
reference to Exhibit 4.7 to the Company's Quarterly Report on
Form 10-QSB for the three month period ended June 30, 1998 filed
with the Securities and Exchange Commission on May 15, 1998 (File
No. 0-13324).
*4.6 Registration Rights Agreement, dated as of September 24, 1998, by
and between the Company and the persons listed on Schedule A
thereto, incorporated by reference to the Company's Current
Report on Form 8-K, filed with the Securities and Exchange
Commission on October 8, 1998 (File No. 0-13324).
*4.7 Certificate of Designation of Series A Junior Participating
Preferred Stock of Questron Technology, Inc., incorporated by
reference to the Company's Quarterly Report on Form 10-QSB for
the three month period ended September 30, 1998, filed with the
Securities and Exchange Commission on November 16, 1998 (File No.
0-13324).
15
<PAGE> 16
*10.1 The Company's 1994 Director Non-Qualified Stock Option Plan,
incorporated by reference to Exhibit 10.28 of the Company's
Report on Form 10-KSB filed with the Securities and Exchange
Commission for the fiscal year ended December 31 1993 (File No.
0-13324).
*10.2 Employment Agreement, dated March 29, 1999 between Questron
Technology, Inc. and Dominic A. Polimeni incorporated by
reference to Exhibit 10.2 of the Company's Report on Form 10-KSB
filed with the Securities and Exchange Commission for the fiscal
year ended December 31 1998 (File No. 0-13324).
*10.3 Employment Agreement, dated November 29, 1994, between Quest
Electronic Hardware, Inc. and Phillip D. Schwiebert, incorporated
by reference to Exhibit 10.25 to the Company's Form 10-KSB filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1994 (File No. 0-13324).
*10.4 Employment Agreement dated October 1, 1999 between Questron
Technology, Inc. and Robert v. Gubitosi, incorporated by
reference to Exhibit 10.4 of the Company's Annual Report on Form
10-K filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1999 (File No. 0-13324).
*10.5 Non-Statutory Stock Option Agreement between Questron Technology
and Malcolm Tallmon dated Mach 6, 2000, incorporated by reference
to Exhibit 10.5 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.6 Termination of Management Advisory and Consulting Agreement,
dated as of March 1, 1999, between Gulfstream Financial Group,
Inc. and the Company.
*10.7 Purchase of Assets Agreement, dated as of November 29, 1994,
between Quest Electronic Hardware, Inc. and Arrow Electronics,
Inc., incorporated by reference to Exhibit 10.29 to the Company's
Form 10-KSB filed with the Securities and Exchange Commission for
the fiscal year ended December 31, 1994 (File No. 0-13324).
*10.8 1996 Stock Option Plan, incorporated by reference to Exhibit
10.19 to Amendment No. 1 to the Company's Form SB-2 filed with
the Securities and Exchange Commission on February 25, 1997 (File
No. 333-18243).
*10.9 Exchange Agreement, dated November 8, 1996 by and among the
Company, Gulfstream Financial Group, Inc. and Phillip D.
Schwiebert, incorporated by reference to Exhibit 10.21 to
Amendment No. 1 to the Company's Form SB-2 filed with the
Securities and Exchange Commission on February 25, 1997 (File No.
333-18243).
*10.10 Stock Purchase Agreement dated as of December 16, 1996 relating
to Webb Distribution, Inc., incorporated by reference to Exhibit
2.0 to Amendment No. 1 to the Company's Form SB-2 filed with the
Securities and Exchange Commission on February 25, 1997 (File No.
333-18243).
16
<PAGE> 17
*10.11 Form of Underwriting Agreement, incorporated by reference to
Exhibit 2.0 to Amendment No. 1 to the Company's Form SB-2 filed
with the Securities and Exchange Commission on February 25, 1997
(File No. 333-18243).
*10.12 Stock Option Grant Agreement between the Company and Phillip D.
Schwiebert made as of November 8, 1996, incorporated by reference
to Exhibit 10.20 to the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1996 (File No. 0-13324).
*10.13 Stock Purchase Agreement between Questron Technology, Inc. and
the shareholders of California Fasteners, Inc. dated August 29,
1997, incorporated by reference to Exhibit 2.0 to the Company's
Form 8-K, filed October 7, 1997 (File No. 0-13324).
*10.14 Serial Put Agreement between Questron Technology, Inc. and
Douglas D. Zadow and Terry Bastian dated September 22, 1997,
incorporated by reference to Exhibit 2.1 to the Company's
Form 8-K, filed October 7, 1997 (File No. 0-13324).
*10.15 Stock Purchase Agreement, dated as of June 12, 1998, by and
between the Company, Fortune Industries, Inc. and the
Stockholders of the Company listed on Schedule 1.1 thereto (the
"Fortune Stock Purchase Agreement"), incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB for
the three-month period ended June 30, 1998 filed with the
Securities and Exchange Commission on August 14, 1998 (File. No.
0-13324).
*10.16 Stock Purchase Agreement, dated as of June 12, 1998, by and
between the Company, Gregory Fitzgerald, Valerie Fitzgerald and
Fas-Tronics, Inc. (the "Fas-Tronics Stock Purchase Agreement"),
incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-QSB for the three-month period ended
June 30, 1998 filed with the Securities and Exchange Commission
on August 14, 1998 (File. No. 0-13324).
*10.17 Letter Agreement, dated July 29, 1998, by and between the
Company, Fortune Industries, Inc. and the Stockholders listed on
Schedule 1.1 to the Fortune Stock Purchase Agreement,
incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-QSB for the three-month period ended
June 30, 1998 filed with the Securities and Exchange Commission
on August 14, 1998 (File. No. 0-13324).
*10.18 Letter Agreement, dated July 29, 1998 by and between the Company,
Gregory Fitzgerald, Valerie Fitzgerald and Fas-Tronics, Inc.,
incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-QSB filed with the Securities and
Exchange Commission on August 14, 1998 (File No. 0-13324).
*10.19 Second Amendment to the Fas-Tronics Stock Purchase Agreement,
incorporated by reference to the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on October
8, 1998 (File No. 0-13324).
17
<PAGE> 18
*10.20 Settlement Agreement dated as of March 1, 2000, by and among
Questron Technology, Inc., a Delaware corporation, Gregory
Fitzgerald and Valerie Fitzgerald, incorporated by reference to
Exhibit 10.20 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.21 Second Amendment to the Fortune Stock Purchase Agreement,
incorporated by reference to the Company's Current Report on Form
8-K filed with the Securities and Exchange Commission on October
8, 1998 (File No. 0-13324).
*10.22 Rights Agreement, dated as of October 23, 1998, between the
Company and American Stock Transfer & Trust Company, as Rights
Agent, incorporated by reference to the Company's Registration
Statement on Form 8-A filed with the Securities and Exchange
Commission on November 6, 1998 (File No. 0-13324).
*10.23 Loan and Security Agreement, dated as of September 24, 1998, by
and among the Company, Questron Distribution Logistics, Inc.,
Integrated Material Systems, Inc., Power Components, Inc.,
California Fasteners, Inc., Comp Ware, Inc., Fas-Tronics, Inc.,
Fortune Industries, Inc., each of the signatures which is a
signatory thereto, Congress Financial Corporation (Florida), as
administrative agent, and Madeleine L.L.C., as collateral agent,
incorporated by reference to Exhibit 10.17 to the Company's
Quarterly Report on Form 10-QSB for the three-month period ended
September 30, 1998, filed with the Securities and Exchange
Commission on November 16, 1998 (File No. 0-13324).
*10.24 Amendment Number One to the Loan and Security Agreement, dated
November 2, 1998, by and among the Company, Questron Distribution
Logistics, Inc., Integrated Material Systems, Inc., Power
Components, Inc., California Fasteners, Inc., Comp Ware, Inc.,
Fas-Tronics, Inc., Fortune Industries, Inc., each of the
signatures which is a signatory thereto, Congress Financial
Corporation (Florida), as administrative agent and Madeleine
L.L.C., as collateral agent, incorporated by reference to Exhibit
10.18 to the Company's Quarterly Report on Form 10-QSB for the
three-month period ended September 30, 1998, filed with the
Securities and Exchange Commission on November 16, 1998 (File No.
0-13324).
*10.25 Asset Purchase Agreement, dated as of January 29, 1999, by and
between the Company, Questron Distribution Logistics, Inc. and
AFCOM, Inc., and each of the persons listed on Schedule 1.1
thereto and signatory thereto, incorporated by reference to
Exhibit 10.19 to the Company's Quarterly Report on Form 10-Q for
the three month period ended March 31, 1999 (File No. 0-13324).
*10.26 Asset Purchase Agreement, dated as of March 11, 1999, by and
between Questron Technology, Inc., Questron Distribution
Logistics, Inc., and Metro Form Corporation, d.b.a. Olympic
Fasteners & Electronic Hardware, and each of the persons listed
on Schedule 1.1 thereto and signatory thereto (the "Olympic
Purchase Agreement"), incorporated by reference to Exhibit 10.20
to the Company's Quarterly Report on Form 10-Q for the
three-month period ended March 31, 1999 (File No. 0-13324).
18
<PAGE> 19
*10.27 Amendment to the Olympic Purchase Agreement, dated June 28, 1999,
incorporated by reference to Exhibit 2.2 to the Company's Current
Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).
*10.28 Settlement Agreement in Connection with the Acquisition of
Olympic dated as of March 7, 2000, by and among Questron Finance
Corp., a Delaware corporation (ii) Questron Technology, Inc., a
Delaware corporation and Sheldon Enterprises, Inc (James Mraz as
notified party), incorporated by reference to Exhibit 10.28 of
the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1999 (File No. 0-13324).
*10.29 Settlement Agreement in Connection with the Acquisition of
Olympic dated as of March 7, 2000, by and among Questron Finance
Corp., a Delaware corporation (ii) Questron Technology, Inc., a
Delaware corporation and Sheldon Enterprises, Inc (Rudolph M.
Petric as notified party), incorporated by reference to Exhibit
10.29 of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended
December 31, 1999 (File No. 0-13324).
*10.30 Stock Purchase Agreement, dated as of April 26, 1999, between
Questron Distribution Logistics, Inc., Questron Technology, Inc.,
James R. Gilchrist and Capital Fasteners, Inc. (the "Capital
Purchase Agreement"), incorporated by reference to Exhibit 2.3 to
the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
*10.31 Amendment to the Capital Purchase Agreement, dated June 25, 1999,
incorporated by reference to Exhibit 2.4 to the Company's Current
Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).
*10.32 Settlement Agreement in Connection with Capital Acquisition dated
as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and James R. Gilchrist, Trustee of James R. Gilchrist
Revocable Trust Under Agreement Dated June 25, 1999, incorporated
by reference to Exhibit 10.32 of the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for
the fiscal year ended December 31, 1999 (File No. 0-13324).
*10.33 Settlement Agreement in Connection with Capital Acquisition dated
as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and James R. Gilchrist, incorporated by reference to
Exhibit 10.33 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.34 Letter Agreement, dated as of June 29, 1999, amending the Capital
Purchase Agreement, incorporated by reference to Exhibit 2.5 to
the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
19
<PAGE> 20
*10.35 Stock Purchase Agreement, dated as of May 7, 1999, by and between
Questron Technology, Inc, Questron Distribution Logistics, a
Delaware corporation, Action Threaded Products, Inc. and the
persons signatory thereto (the "Action Purchase Agreement"),
incorporated by reference to Exhibit 2.6 to the Company's Current
Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).
*10.36 Letter Agreement, dated as of June 29, 1999, amending the Action
Purchase Agreement, incorporated by reference to Exhibit 2.7 to
the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
*10.37 Settlement Agreement in Connection with the Action Acquisition
dated as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and Gerald H. Ablan, incorporated by reference to
Exhibit 10.37 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.38 Settlement Agreement in Connection with the Action Acquisition
dated as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and Robert A. Lehman, incorporated by reference to
Exhibit 10.38 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.39 Settlement Agreement in Connection with the Action Acquisition
dated as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and William P. Hackett, incorporated by reference to
Exhibit 10.39 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.40 Settlement Agreement in Connection with the Action Acquisition
dated as of March 7, 2000, by and among Questron Finance Corp., a
Delaware corporation, Questron Technology, Inc., a Delaware
corporation and Charles W. Gozder, incorporated by reference to
Exhibit 10.40 of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the fiscal year
ended December 31, 1999 (File No. 0-13324).
*10.41 Securities Purchase Agreement (identical agreement executed
separately with each of four purchasers), dated as of June 29,
1999, by and between Questron Technology, Inc., Questron
Operating Company, Inc., and, separately, each of Albion Alliance
Mezzanine Fund, L.P., Alliance Investment Opportunities Fund,
L.L.C., The Equitable Life Assurance Society of the United States
and IBJ Whitehall Bank & Trust Company, incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K,
dated June 30, 1999 (File No. 0-13324).
20
<PAGE> 21
*10.42 Note Agreement, dated as of June 29, 1999, among Questron
Operating Company, Inc. and Albion Alliance Mezzanine Fund, L.P.,
Alliance Investment Opportunities Fund, L.L.C., The Equitable
Life Assurance Society of the United States and IBJ Whitehall
Bank & Trust Company, incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
*10.43 Investors Rights Agreement, dated as of June 29, 1999, among
Questron Technology, Inc. and Albion Alliance Mezzanine Fund,
L.P., Alliance Investment Opportunities Fund, L.L.C., The
Equitable Life Assurance Society of the United States and IBJ
Whitehall Bank & Trust Company, incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K, dated
June 30, 1999 (File No. 0-13324).
*10.44 Unconditional Guaranty, dated as of June 30, 1999, by Questron
Technology, Inc., Questron Finance Corp., Questron Distribution
Logistics, Inc., Integrated Material Systems, Inc., Power
Components, Inc., Fortune Industries, Inc., Fas-Tronics, Inc.,
California Fasteners, Inc., Comp Ware, Inc., Action Threaded
Products, Inc., Action Threaded Products of Georgia, Inc., Action
Threaded Products of Minnesota, Inc. and Capital Fasteners, Inc.,
in favor of each of Albion Alliance Mezzanine Fund, L.P.,
Alliance Investment Opportunities Fund, L.L.C., The Equitable
Life Assurance Society of the United States and IBJ Whitehall
Bank & Trust Company, incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
*10.45 Amended and Restated Loan and Security Agreement, dated as of
June 29, 1999, by and between Questron Technology, Inc. and its
subsidiaries and Congress Financial Corporation (Florida) and
Ableco Finance LLC, incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K, dated June 30, 1999
(File No. 0-13324).
*10.46 Amendment Number One to Amended and Restated Loan and Security
Agreement, dated as of October 1, 1999, by and among Questron
Technology, Inc., certain of its direct and indirect Subsidiaries
identified therein, each of the Lenders signatory thereto,
Congress Financial Corporation and Ableco Finance LLC,"),
incorporated by reference to Exhibit 10.26 to the Company's
Quarterly Report on Form 10-Q for the three month period ended
September 30, 1999 (File No. 0-13324).
*10.47 Amendment to Note Agreement, dated as of September 29, 1999, by
and among Questron Operating Company, Inc. and Albion Alliance
Mezzanine Fund, L.P., Alliance Investment Opportunities Fund,
LLC, The Equitable Life Assurance Society of the United States
and IBJ Whitehall Bank & Trust Company"), incorporated by
reference to Exhibit 10.27 to the Company's Quarterly Report on
Form 10-Q for the three month period ended September 30, 1999
(File No. 0-13324).
*21.1 Subsidiaries of the Company, as amended, incorporated by
reference to Exhibit 21.1 to the Company's Quarterly Report on
Form 10-Q for the three month period ended March 31, 2000 (File
No. 0-13324).
21
<PAGE> 22
+27 Financial Data Schedule.
* previously filed
+ filed herewith
22
