BRAKE HEADQUARTERS U S A INC, S-1/A, 1996-11-06

BRAKE HEADQUARTERS U S A INC
S-1/A, 1996-11-06
MOTOR VEHICLE SUPPLIES & NEW PARTS

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996

REGISTRATION NO. 333-13533
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 1
TO

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BRAKE HEADQUARTERS U.S.A., INC.

(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 5012 22-3048534
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Organization) Industrial Identification
Classification Code Number)
Number)
</TABLE>

33-16 WOODSIDE AVENUE
LONG ISLAND CITY, NY 11101
(718) 779-4800

(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)

JOSEPH ENDE, PRESIDENT
BRAKE HEADQUARTERS U.S.A., INC.
33-16 WOODSIDE AVENUE
LONG ISLAND CITY, NY 11101
(718) 779-4800

(Name, Address Including Zip Code, and Telephone Number, Including Area Code, of
Agent For Service)

COPY TO:
ELLIOT H. LUTZKER, ESQ.
SNOW BECKER KRAUSS P.C.
605 THIRD AVENUE
NEW YORK, NEW YORK 10158
TELEPHONE: 212 687-3860
FAX: (212) 949-7052

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

[CAPTION]

<TABLE>
<S> <C> <C> <C> <C>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AMOUNT TO BE OFFERING PRICE AGGREGATE OFFER- REGISTRATION
BE REGISTERED REGISTERED PER SHARE (1) ING PRICE (1) FEE
<S> <C> <C> <C> <C>
Units................................. 450,000 Uts. (2) $ 2.50(3) $ 1,125,000 $ 387.93
Common Stock, $.001 par value......... 450,000 Shs. (2) (6) (6) (6)
Common Stock Purchase Warrants........ 900,000 Wts. $ 3.80 $ 3,420,000 $1,179.31
Common Stock, $.001 par value......... 900,000 Shs. (4) (5) (6) (6) (6)
Units................................. 40,000 Uts. (7) $ 2.50 $ 100,000 $ 34.48
Common Stock $.001 par value.......... 40,000 Shs. (7) (6) (6) (6)
Common Stock Purchase Warrants........ 80,000 Wts. (8) $ 3.80 $ 304,000 $ 104.83
Common Stock $.001 par value.......... 80,000 Shs. (6) (6) (6) (6)
Common Stock $.001 par value.......... 174,633 Shs. $ 6.25(3) $1,091,456.25 $ 376.36
Total: $6,040,456.25 $2,082.91
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933, as
amended.

(2) Units issued in an August 1996 private placement (the "Private Placement"),
with each unit consisting of one share of Common Stock and two Common Stock
Purchase Warrants.

(3) The average of the bid and asked prices of the Common Stock of the
Registrant on September 30, 1996, as reported by Nasdaq, was $6.25 per
share.

(4) Issuable upon exercise of the 900,000 Common Stock Purchase Warrants issued
in the Private Placement.

(5) Pursuant to Rule 416, this Registration Statement also covers such
indeterminable additional shares as may become issuable as a result of
anti-dilution adjustment in accordance with the terms of the Common Stock
Purchase Warrants.
(6) Pursuant to Rule 457(g), no additional registration fee is required for
these shares.
(7) Issuable upon exercise of the Placement Agent's Warrants which are each
exercisable for one share of Common Stock and two Common Stock Purchase
Warrants.
(8) Issuable upon exercise of the Placement Agent's Common Stock Purchase
Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC.

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
ITEM
NO. CAPTION IN FORM S-1 LOCATION IN PROSPECTUS

<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.......... Outside Front Cover Page.

2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages.

3. Summary Information, Risk Factors and Ratio of
Earnings To Fixed Charges....................... Prospectus Summary; Risk Factors.

4. Use of Proceeds................................. Use of Proceeds.

5. Determination of Offering Price................. Plan of Distribution

6. Dilution........................................ Dilution.

7. Selling Security Holders........................ Selling Securityholders

8. Plan of Distribution............................ Plan of Distribution

9. Description of Securities to be Registered...... Description of Securities.

10. Interest of Named Experts and Counsel........... Legal Matters; Experts.

11. Information with Respect to the Registrant...... Business; Business -- Properties; Business -- Legal
Proceedings; Financial Statements; Selected Financial
Data; Management's Discussion and Analysis of Financial
Condition and Results of Operation; Management;
Management -- Executive Compensation; Principal
Stockholders; Certain Transactions.

12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities..................................... Management -- Indemnification.
</TABLE>

* Not Applicable

<PAGE>

SUBJECT TO COMPLETION, DATED NOVEMBER 6, 1996

490,000 UNITS
1,644,633 SHARES OF COMMON STOCK
980,000 CLASS A COMMON STOCK PURCHASE WARRANTS
BRAKE HEADQUARTERS U.S.A., INC.

This Prospectus pertains to 1,644,633 shares (the "Shares") of
Common Stock, $.001 par value per share, of Brake Headquarters U.S.A.,
Inc. (the "Company"), as well as 490,000 Units (each consisting of one
share of Common Stock and two redeemable Class A Common Stock Purchase
Warrants (the "Warrants") and 980,000 Warrants that may be sold by the
selling securityholders named herein (the "Selling Securityholders").

The Shares, Units and Warrants offered hereby (collectively, the
"Securities") were issued by the Company to: certain investors in a
private placement (the "Private Placement") of 450,000 units (the
"Units"), at a purchase price of $2.50 per Unit, each Unit consisting
of one share of Common Stock and two Warrants each to purchase one
share of Common Stock at $3.80 per share until August 13, 1999; G-V
Capital Corp., the placement agent of the Private Placement (the
"Placement Agent") in the form of 40,000 Units (the "Placement Agent's
Warrants"), each consisting of one share of Common Stock and two
Warrants; and four private investors who hold "piggyback" registration
rights, concerning an aggregate of 174,633 shares of Common Stock. See
"Selling Securityholders."

The Company will not directly receive any proceeds from the sale
of the Shares by the Selling Shareholders, but will receive the
exercise price of all Warrants exercised. See "Use of Proceeds." On
November 4, 1996, the closing sale price for the Common Stock on the
Nasdaq SmallCap Market ("Nasdaq") was $7.50 per share. The Company
will seek to have its Units and Warrants listed on Nasdaq, although
there can be no assurance it will be successful in its efforts. See
"Price Range of Common Stock."

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

FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY, SEE "RISK FACTORS" COMMENCING ON PAGE 5.

THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1996

<PAGE>

The registration of the Securities offered hereby is being effected in
connection with registration rights granted by the Company pursuant to the terms
of the Private Placement, the Placement Agent's Warrants and the other Selling
Securityholders' Subscription Agreements. In accordance with the terms of such
rights, the Company will bear the expenses of such registration, which are
estimated, except that the Selling Securityholders will bear the cost of all
brokerage commissions and discounts incurred in connection with the sale of
their portion of the Securities and their respective legal expenses.

Commencing on the effective date of this Prospectus, the Securities may be
sold, from time to time, by the Selling Securityholders directly to purchasers
or, alternatively, may be offered through agents, brokers, dealers or
underwriters, who may receive compensation in the form of commissions or
discounts from the Selling Securityholders or purchasers of the Securities.
Sales of the Securities may be made on Nasdaq, in privately negotiated
transactions or otherwise, and such sales may be made at the market price
prevailing at the time of sale, a price related to such prevailing market price
or at a negotiated price.

Any brokers, dealers or agents that participate in the distribution of the
Securities may be deemed to be underwriters under Section 2(11) of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
or discounts received by them on the resale of such Securities may be deemed to
be underwriting compensation under the Securities Act. The sale of the
Securities by the Selling Securityholders is subject to the prospectus delivery
and other requirements of the Securities Act. See "Plan of Distribution."

AVAILABLE INFORMATION

The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Seven World Trade
Center, New York, New York 10048, and at Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may be
obtained, at prescribed rates, by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically. The Company intends to furnish its stockholders with annual
reports containing audited financial statements and such other reports as the
Company deems appropriate or as may be required by law.

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN "RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Brake Headquarters U.S.A., Inc. (the "Company") is a specialized
distributor in the automotive aftermarket of a complete line of brake system
products including brake drums and rotors, brake master cylinders, wheel
cylinders, brake pads, brake shoes and brake hoses for virtually all makes and
models of domestic and foreign passenger cars and light trucks from model year
1976 to the present. The Company also sells a variety of other "undercar" parts
including ride control products, steering/suspension parts, drive shafts, shock
absorbers and clutches. The brake line products are sold primarily under the
name "Brake Headquarters," as well as under the name "Sanyo Automotive" and
other private labels.

The Company was incorporated in the State of Delaware on July 13, 1988 as a
blind pool which did not conduct business operations until July 1992 when it
acquired, in a reverse acquisition (the "Reverse Merger"), all of the
outstanding capital stock of Sanyo Automotive Parts, Ltd. ("Sanyo Automotive").
In connection with the Reverse Merger, the Company amended its Certificate of
Incorporation to change its name to Sanyo Industries, Inc. On August 8, 1995,
the Company changed its name to Brake Headquarters U.S.A., Inc.. The Company is
a publicly-owned holding company that conducts substantially all of its current
business operations through its wholly-owned subsidiary Sanyo Automotive, a New
York corporation formed in 1976, which is currently doing business under the
name Brake Headquarters.

<TABLE>
<S> <C>
Common Stock Outstanding as of November 4, 1996 (1)... 3,868,730

Common Stock to be Outstanding Upon Full Exercise of
Warrants and Conversion of Promissory Note (2)...... 4,980,030

Warrants Offered...................................... The Warrants are exercisable until August 13, 1999 at an
exercise price of $3.80 per share, subject to adjustment
and to redemption by the Company in intervals during the
period following their registration hereby, as described
under "Description of Securities -- Warrants."

Use of Proceeds....................................... The Company will not receive any proceeds from the sale
of shares of Common Stock offered hereby by the Selling
Shareholders but will receive gross proceeds of
$3,824,000 from the full exercise of all warrants offered
by the Selling Stockholders.

Risk Factors.......................................... Prospective investors should carefully consider the
matters set forth under the captions "Risk Factors." An
investment in the shares of Common Stock offered hereby
involves a high degree of risk.

Nasdaq Common Stock Symbol............................ BHQU
</TABLE>

(1) Excludes an aggregate of 349,000 shares of Common Stock reserved for future
issuance upon exercise of options currently outstanding and 131,000 and
120,000 shares reserved for issuance upon options available for issuance
under the Company's 1994 and 1995 Employee Stock Option Plans, respectively
(the "Plans"),

<PAGE>
and 100,000 shares of Common Stock reserved for issuance under the Company's
Employee Stock Bonus Plan. See "Shares Eligible for Future Sale."

(2) Gives effect to the exercise of 900,000 Warrants offered hereby; the
Placement Agent's Warrants to purchase up to 120,000 shares of Common Stock
and the conversion of a promissory note for 91,300 shares of Common Stock,
all of which shares of Common Stock which are issuable are included in this
Prospectus.

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $17,717,023 $25,094,473 $30,463,730 $15,617,040 $16,614,411
Income (loss) from operations..... 370,009 (1,041,037)(1) 566,874 1,192,111 557,899
Interest expense.................. (314,796) (520,602) (774,762) (305,429) (478,108)
Net income (loss)................. 41,187 (1,968,909)(1) (179,072) 546,659 54,791
Net income (loss) per common and
common equivalent share (2)..... $ .00 $ (.92) $ (.06) $ .18 $ .02
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF JUNE 30, 1996
1993 1994 1995 ACTUAL AS ADJUSTED(3)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................. $ 1,823,459 $ 3,706,239 $ 3,288,863 $ 8,050,180 $ 13,082,180(4)
Total assets..................... 10,189,885 11,937,143 15,496,294 17,843,732 22,617,732
Long-term obligations............ 133,927 216,469 630,494 5,230,850 5,230,850
Total stockholders' equity....... 2,176,102 4,124,961 3,855,804 3,966,647 8,998,647(4)
</TABLE>

(1) After a non-cash compensatory charge of $2,314,000 resulting from the
release of escrow shares, the exercisability of warrants and the conversion
of preferred stock, upon the Company's attainment of the specified 1994
pre-tax income level under the Company's July 1992 Reverse Acquisition and
certain cumulative levels for the three-year period ended December 31, 1994.
See "Certain Relationships and Related Transactions" and Note 4 of Notes to
the 1995 Consolidated Financial Statements.

(2) Net income (loss) per share is computed on the basis described in Note 1 of
Notes to Consolidated Financial Statements including, but not limited to,
the adjustment for dividends on preferred stock.

(3) As adjusted to reflect the Company's receipt of proceeds of $4,774,000
consisting of (i) $1,000,000 of net proceeds from the Private Placement in
August 1996; (ii) $3,420,000 from the exercise of all Warrants; and (iii)
$404,000 from full exercise of the Placement Agent's Warrants and after
deducting $50,000 of offering expenses

(4) Includes $258,000 from the conversion of a Selling Securityholder's
promissory note.

<PAGE>
RISK FACTORS

IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, PROSPECTIVE
INVESTORS SHOULD CONSIDER CAREFULLY, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.

HIGHLY COMPETITIVE INDUSTRY. The automotive aftermarket industry in
general, and the brake parts market in particular, is highly competitive. The
direct competitors to the Company's distribution activities include
manufacturers such as Brake Parts, Inc., Wagner Brakes, a subsidiary of Cooper
Industries, Inc., EIS Brake Plants Division of Standard Motor Products, Inc. and
the ITT Automotive Aftermarket Division of ITT/AIMCO. Many of the Company's
competitors are larger and have substantially greater financial resources than
the Company and may be able to sell merchandise at lower prices than the
Company. In addition, manufacturers who compete with the Company are not
dependent on relationships with suppliers as is the Company. See "Business --
Competition."

DEPENDENCE ON AUTOMOTIVE INDUSTRY. The Company's business is dependent upon
the automotive industry which is cyclical and has historically experienced
periodic downturns. These downturns are difficult to predict and have often had
a severe adverse effect on the undercar parts industry. While the Company
believes that it operates in a recession resistant segment of the automotive
industry, its future performance may nevertheless be adversely affected by
automotive industry downturns. See "Business -- Industry Overview."

ANTICIPATED DECREASE IN GROWTH RATES. The Company's sales increased by 30%,
42% and 21% in 1993, 1994 and 1995, respectively, as compared to the applicable
prior year as the Company added new large customers. However, unless the Company
is able to continue to add new large customers at an increasing rate, or new
product lines it is unlikely that it will continue to grow at comparable rates
to the last several years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

MANAGEMENT OF GROWTH. The Company will attempt to expand current levels of
operations which depends on, among other things, its ability to service its
customers, retain skilled management and other personnel, secure adequate
sources of supply on commercially reasonable terms and successfully manage
growth. To manage growth effectively, the Company will need to implement and
maintain more sophisticated operational, financial and management information
systems, procedures and controls than it has to date. There can be no assurance
that the Company will be able to manage its growth effectively, and the
Company's failure to do so would likely have a material adverse effect on the
Company and its operations. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."

RISK OF LOSS OF PRINCIPAL CUSTOMER. During 1995 and the six months ended
June 30, 1996, net sales to the Company's largest customer, Autozone, Inc., a
retail auto chain which became a customer in late 1993, accounted for
approximately 17% and 26% of the Company's total net sales, respectively. There
can be no assurance that such customer will continue to purchase products from
the Company at current levels, or at all. The loss of this customer's business
or a decline in the economic prospects of this customer would, in all
likelihood, have a material adverse effect on the Company and its operations.
See "Business."

DEPENDENCE ON SUPPLIERS. The Company depends upon close relationships with
its suppliers of automotive parts and equipment and its ability to purchase
products from these manufacturers at favorable prices and on favorable terms.
The Company does not maintain supply contracts with any of its suppliers.
Alternative sources exist for most of the products it purchases, and the loss of
any significant supplier, is not expected to have a material adverse effect on
the Company. However, if a new supplier is not obtained in a timely manner and
upon acceptable terms, then the Company may be adversely affected. See
"Business -- Suppliers."

REGULATORY CONSIDERATIONS. The Company is subject to various federal, state
and local laws and regulations concerning workplace safety, zoning and other
matters relating to its business. In addition, the Company's warehouse employees
in New York and Illinois are subject to collective bargaining agreements. From
time to time the Company has been and may continue to be subject to disputes
with its union, none of which has had to date a material adverse effect on the
Company's operations. Although to date, the costs and expenses of complying with
government regulations have not had a material effect on the Company, a material
increase in the cost of such compliance could have a material adverse effect on
the Company and its operations. See "Business -- Government Regulation."

<PAGE>
POSSIBLE NEED FOR ADDITIONAL FINANCING. To date, the Company's capital
requirements have been significant. The Company anticipates, based on the
Company's currently proposed plans and assumptions relating to its operations,
that the proceeds of the August 1996 Private Placement Offering, together with
cash flow from operations and currently available financing arrangements, will
be sufficient to satisfy its anticipated cash requirements for the next 12
months. Thereafter, the Company anticipates that it will require the proceeds
from the exercise of the currently outstanding Warrants and Placement Agent's
Warrants in order to continue to expand its operations, although the exercise of
such warrants cannot be assured. In the event that the Company's plans or
assumptions change or prove to be inaccurate, there can be no assurance that
additional financing will not be required. See "Use of Proceeds."

The Company's business strategy includes the pursuit of acquisitions, which
may also require additional financing or the issuance of additional equity
securities that could result in further dilution to the public stockholders. To
the extent the Company incurs indebtedness in connection with an acquisition,
the Company will be subject to risks associated therewith, including the risks
of interest rate fluctuations and insufficiency of cash flow to pay interest and
principal. There can be no assurance that additional funds, whether in the form
of debt or equity, will be available to the Company on commercially reasonable
terms or at all.

DEPENDENCE ON PRESIDENT. The Company's success is dependent upon the
efforts of Joseph Ende, the Company's President and Chief Executive Officer. In
July 1995, the Company entered into a three-year employment agreement with Mr.
Ende, which automatically renews for consecutive one-year periods unless
terminated on thirty days' prior written notice. The loss of Mr. Ende's services
would have a material adverse effect on the Company and its operations. See
"Management."

CONTROL BY PRESIDENT AND PRINCIPAL STOCKHOLDER AND EFFECTS OF CERTAIN
ANTI-TAKEOVER PROVISIONS. Joseph Ende beneficially owns approximately 68% of the
Company's outstanding Common Stock. In addition, as the sole stockholder of the
Company's Series B Preferred Stock, $.001 par value per share (the "Preferred
Stock"), which votes as a separate class, Mr. Ende has the exclusive right to
elect a majority of the Company's Board of Directors until the earlier of the
redemption date of March 31, 2001 or the reporting by the Company of at least
$75 million in revenues for any year through December 31, 2000. THIS THRESHOLD
HAS BEEN ARBITRARILY SELECTED BY THE COMPANY AND IS NOT TO BE CONSTRUED AS
PROJECTIONS OF FUTURE COMPANY OPERATIONS. In the event of any liquidation,
dissolution or winding-up, the holder of shares of the Preferred Stock will be
entitled to an aggregate preference of $50,000, his basis in the stock; any
remaining proceeds of liquidation will be distributed pro rata to holders of the
Common Stock. The above-stated $75 million revenue level shall be determined by
the Company and reported on its audited financial statements. The Preferred
Stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company. See
"Description of Securities -- Series B Preferred Stock."

The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware ("Delaware GCL"). In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which such person becomes an interested stockholder, unless
(i) the business combination is approved in a prescribed manner or (ii) such
interested stockholder owns at least 85% of the corporation's voting stock
(excluding shares held by certain designated stockholders) upon completion of
the transaction in which such stockholder becomes an interested stockholder.
This provision of the Delaware GCL could delay and make more difficult a
business combination even if the business combination could be beneficial to the
interests of the stockholders. This provision of the Delaware GCL also could
limit the price certain investors might be willing to pay in the future for
shares of the Common Stock. Consequently, Mr. Ende has the ability to direct
substantially all of the Company's affairs. See "Principal and Selling
Stockholders" and "Description of Securities -- Delaware Anti-Takeover Law; and
Series B Preferred Stock."

NO ASSURANCE OF PUBLIC MARKET; VOLATILITY OF STOCK PRICE. Prior to the date
hereof, there has been a limited public trading market for the Common Stock and
no market for the Units or Warrants. There can be no assurance that an active
trading market for such securities will develop or be sustained. Factors such as
the Company's operating results, the proposed expansion of the Company's
operations and various factors affecting the automotive industry generally, may
significantly impact the market price of the Company's securities. In addition,
in recent years, prior to its June 1996 listing on Nasdaq, the Common Stock had
experienced a high

<PAGE>
level of price and volume volatility, not necessarily related to its operating
performance. The market price of the Common Stock may continue to be highly
volatile. See "Price Range of Common Stock."

PAYMENT OF DIVIDENDS. No cash dividends have been paid on the Common Stock
since the Company's inception. On April 30, 1995, a cash dividend in the amount
of $112,730 was declared but not paid to Joseph Ende, President of the Company,
on the Preferred Stock which was issued to him in connection with the Reverse
Merger. No cash dividends are contemplated in the foreseeable future, and the
Company presently intends to retain all of its earnings for the future
operations and growth of its business. In addition, the Company's loan agreement
with one of its lenders prohibits the payment of dividends if such payment would
result in a breach of such loan agreement. See "Dividend Policy," Certain
Relationships and Related Transactions" and "Description of Securities."

EFFECT OF OUTSTANDING WARRANTS AND OPTIONS. An aggregate of 900,000
Warrants each to purchase one share of Common Stock held by certain of the
Selling Securityholders are registered for sale hereby. In addition, the
Company's Placement Agent holds the Placement Agent's Warrants, registered for
sale hereby, to purchase 40,000 Units, each Unit consisting of one share of
Common Stock and two Warrants. There are also additional outstanding options to
purchase 349,000 shares of Common Stock which are or will become exercisable on
various dates through May 2002. The exercise of a significant number of such
Warrants and options at prices substantially below the then current market price
of Common Stock may adversely affect the prevailing market price for the Common
Stock at the time of exercise and will dilute the interests of then existing
stockholders. Moreover, the terms upon which the Company will be able to obtain
additional equity capital, if required, may be adversely affected by the
existence of such outstanding options and warrants, because the holders of such
outstanding securities can be expected to exercise them at a time when the
Company would, in all likelihood, want to obtain any needed capital on terms
more favorable to the Company than those provided in such warrants and options.
See "Plan of Distribution," "Management" and "Executive Compensation."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Of the 3,868,730
shares of Common Stock currently issued and outstanding, approximately 3,217,424
shares of Common Stock (including 525,000 shares registered hereby) are
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act ("Rule 144"), and may not be sold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemption provided by Rule 144.

Notwithstanding the foregoing, Joseph Ende, the Company's President and
principal stockholder, has entered into a lock-up agreement with the Placement
Agent wherein he agreed not to sell or otherwise dispose of his 2,609,333
restricted shares of the Company's Common Stock for a one-year period ending
August 13, 1997, without the prior written consent of the Placement Agent,
subject to Mr. Ende's ability to sell shares pursuant to Rule 144 through or at
the direction of the Placement Agent. William Orzolek, a non-affiliated Selling
Securityholder entered into a lock-up agreement with the Placement Agent not to
sell his 75,000 restricted shares prior to August 13, 1997, except pursuant to
the terms of this Registration Statement. See "Shares Eligible for Future Sale"
and "Plan of Distribution."

The Company has granted one demand and "piggyback" registration rights
through January 2000 to an existing stockholder with respect to 131,320 shares
of Common Stock which shares are not part of this Registration Statement. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock pursuant to this Registration Statement, or otherwise, or even the
availability of such shares for sale will have on the market price of the Common
Stock prevailing from time to time. The possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect the
prevailing market price for the Common Stock and could impair the Company's
ability in the future to raise capital through the sale of its equity
securities.

During the respective terms of the Company's outstanding options and
Warrants, the holders thereof may be able to purchase Common Stock at prices
substantially below the then current market price of the Company's Common Stock
with a resultant dilution in the interests of the existing shareholders. The
holders of the Company's options and Warrants may be expected to exercise their
rights to acquire Common Stock at times when the Company would, in all
likelihood, be able to obtain needed capital through a new offering of
securities on terms more favorable than those provided by these outstanding
securities or through other channels, such as traditional

<PAGE>
bank financing. Thus, the terms upon which the Company may obtain additional
financing during the next several years may be adversely affected. In addition,
the exercise of outstanding options and Warrants and the subsequent public sales
of Common Stock by holders of such securities pursuant to a registration
statement effected at their demand, under Rule 144 or otherwise, could have an
adverse effect upon the market for and price of the Company's securities.
"Management -- Executive Compensation -- Stock Options" and "Shares Eligible for
Future Sale."

SECURITIES MARKET FACTORS. In recent years, the securities markets have
experienced a high level of volume volatility and market prices for many
companies, and particularly small and emerging growth companies have been
subject to wide fluctuations in response to quarterly variations in operating
results. The securities of many of these companies which trade in the
over-the-counter market, have experienced wide price fluctuations, which in many
cases were unrelated to the operating performance of, or announcements
concerning, the issuers of the affected stock. Factors such as announcements by
the Company or its competitors concerning proprietary innovations, new products,
government regulations and developments or disputes relating to proprietary
rights and factors affecting the automobile industry generally may have a
significant impact on the market for the Company's securities. General market
price declines or market volatility in the future could adversely affect the
future price of the Company's securities. See "Price Range of Common Stock."

POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET; RISKS
ASSOCIATED WITH LOW-PRICED STOCK. The Company's Common Stock became listed on
Nasdaq SmallCap Market on June 6, 1996. No assurance can be given that the
shares of Common Stock will remain qualified for listing on NASDAQ. In order to
continue to be listed on NASDAQ, the Company must maintain $2,000,000 in total
assets, a $200,000 market value of the public float and $1,000,000 in total
capital and surplus. In addition, continued inclusion requires two market makers
and a minimum bid price of $1.00 per share; provided, however, that if a company
falls below such minimum bid price, it will remain eligible for continued
listing on NASDAQ if the market value of the public float is at least $1,000,000
and the Company has $2,000,000 in capital and surplus. The failure to meet these
maintenance criteria may result in the delisting of the Common Stock from
NASDAQ, and the trading of the Common Stock, if any, would be conducted in the
over-the-counter market through the OTC Electronic Bulletin Board. As a result
of such delisting, an investor may find it more difficult to dispose of, or
obtain accurate quotations as to the market value of, the Company's Common
Stock.

Furthermore, if the Common Stock is not listed on NASDAQ or were to become
delisted from trading on NASDAQ and the trading price of the Common Stock
remains below $5.00 per share, trading in the Common Stock would also be subject
to the requirements of certain rules promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which require additional
disclosure by broker-dealers in connection with any trades involving a stock
defined as a penny stock (generally, any non-NASDAQ equity security that has a
market price of less than $5.00 per share, subject to certain exceptions). Such
rules require the delivery, prior to any penny stock transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various restrictions on sales practices by broker-dealers
who sell penny stocks to persons other than established customers and accredited
investors. For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written consent to the transaction prior to sale. The additional burdens imposed
upon broker-dealers by such requirements may discourage them from effecting
transactions in the Common Stock, which could severely limit the liquidity of
the Common Stock and the ability of the Selling Securityholders to sell the
Common Stock in the secondary market. See "Plan of Distribution."

FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE PURCHASE
OF THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. ANY PERSON
CONSIDERING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF
THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THE SECURITIES SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO ABSORB A TOTAL LOSS OF THEIR
INVESTMENT IN THE COMPANY AND HAVE NO NEED FOR A RETURN ON THEIR INVESTMENT.

<PAGE>
USE OF PROCEEDS

The Securities offered hereby were issued by the Company to: certain
investors in the Private Placement in the form of 450,000 Units consisting of
450,000 shares of Common Stock and 900,000 redeemable Warrants each to purchase
one share of Common Stock, at $3.80 per share; the Placement Agent of the
Private Placement in the form of Placement Agent's Warrants to purchase 40,000
Units consisting of an aggregate of 40,000 shares of Common Stock and Warrants
to purchase 80,000 shares of Common Stock; and four Selling Securityholders in
private placements concerning an aggregate of 174,633 shares of Common Stock.

The Company will not receive the proceeds of sales of the Shares by the
Selling Securityholders. However, upon the full exercise of the Warrants and the
Placement Agent's Warrants, the Company will receive aggregate cash of
$3,420,000, and $404,000, respectively. The Company will use the approximately
$3,774,000 of net proceeds (after deducting $50,000 of offering expenses) from
the payment of the respective exercise prices for working capital and general
corporate purposes.

The Company may also use a portion of the exercise price of the Warrants
and the Placement Agent's Warrants allocated to working capital to expand its
operations by acquiring companies or parts of companies which the Company
believes are compatible with its business. The Company has no plans, agreements,
understandings or arrangements with respect to any such acquisition. There can
be no assurance that the Company will be able to make any such acquisition.

Pending utilization of the net proceeds from the exercise prices of the
Warrants and the Placement Agent's Warrants, the Company may use funds to
temporarily reduce its credit facilities and otherwise invest in interest-
bearing investments.

PRICE RANGE OF COMMON STOCK

The Common Stock has traded on the Nasdaq SmallCap Market since June 6,
1996 under the symbol BHQU. Until then, the Common Stock traded on the
Electronic Bulletin Board maintained by the National Association of Securities
Dealers, Inc. Prior to August 8, 1995, the Common Stock was traded under the
symbol SNYO.

The following table sets forth the high and low bid quotations for the
Common Stock for each quarter of 1994 and 1995 and through June 5, 1996, as
reported by the National Quotation Bureau, Inc. and thereafter as reported by
Nasdaq. Such quotations represent prices in dollars between dealers, do not
include retail mark-ups, mark-downs or commissions, and do not necessarily
represent actual transactions.

<TABLE>
<CAPTION>
BID PRICES
HIGH LOW
<S> <C> <C>

1994
First Quarter.............................................................. $2.00 $1.00
Second Quarter............................................................. $3.00 $2.00
Third Quarter.............................................................. $2.00 $1.25
Fourth Quarter............................................................. $ .375 $ .750
1995
First Quarter.............................................................. $ .813 $ .156
Second Quarter............................................................. $ .750 $ .250
Third Quarter (through August 7, 1995)..................................... $ .350 $ .250
Third Quarter (From August 8, 1995)(1)..................................... $3.50 $2.50
Fourth Quarter............................................................. $5.25 $2.75
1996
First Quarter.............................................................. $3.50 $2.75
Second Quarter............................................................. $5.44 $3.00
Third Quarter ............................................................. $6.625 $5.375
Fourth Quarter (through November 4, 1996).................................. $7.25 $6.00

</TABLE>

(1) The prices from this date forward reflect the Company's August 8, 1995
one-for-ten reverse stock split.

<PAGE>

As of November 4, 1996, the closing bid and asked prices of the Common
Stock were $7.25 and $7.50 per share, respectively.

As of September 27, 1996, there were 527 holders of record of the Common
Stock and one holder of Series B Preferred Stock. The Company reasonably
believes that there are in excess of 5,000 beneficial owners, including the
beneficial owners of Common Stock currently held in the name of depository
institutions.

On December 21, 1992, the United States Securities and Exchange Commission
(the "Commission") suspended trading in the Company's securities from December
21, 1992 through January 5, 1993. The Commission advised the Company that it
initiated this suspension because it appeared to the Commission that there was a
lack of current and accurate information concerning the identity of (i) persons
who may have acquired undisclosed control of the Company and (ii) persons having
beneficial ownership of the Company's securities. The Company was advised after
December 21, 1992 that the beneficiaries of certain trusts, which had beneficial
ownership of approximately 23% of the Common Stock, were the three sons of
Robert E. Brennan, the former President of First Jersey Securities, Inc. (the
"Brennan Trusts"). Furthermore, Mr. Brennan's beneficial ownership of the Common
Stock on a fully diluted basis was approximately 38% On January 8, 1993, trading
in the Company's securities was resumed.

During 1993 and 1994, the Company's President and Principal Stockholder did
not sell any shares of Common Stock, and there were no developments or changes
in the Company's operations which would have accounted for the substantial
decrease in the market price of the Common Stock as disclosed under "Price Range
of Common Stock." However, certain broker-dealers, which were active market
makers in the Common Stock and which were alleged by the Commission to be under
the control of Robert E. Brennan, were investigated by the Commission for, among
other things, trading in the Company's securities, and ultimately ceased doing
business.

In January 1995, Joseph Ende and two non-affiliated persons purchased all
of the Brennan Trusts' shares in the Company, as the Company was without the
funds to do so. Thus, as of January 1995 and at present, management has no
knowledge that Robert E. Brennan, who never attempted to exercise any control
over the Company, or the Brennan Trusts or any of Mr. Brennan's affiliates,
holds any beneficial interest in the Company's securities. See "Principal
Stockholders."

DIVIDEND POLICY

To date, no cash dividends have been paid on the Common Stock. On April 30,
1995, a dividend in the amount of $112,730 was declared, but not paid, to the
Company's President on the Preferred Stock issued in connection with the Reverse
Merger. On April 30, 1995, all of the then outstanding shares of Preferred Stock
were converted into Common Stock in accordance with their terms as a result of
the attainment by the Company of certain performance levels. Of the $112,730 in
accrued dividends, $50,000 was exchanged for the 1,000 shares of newly issued
Series B Preferred Stock issued to the Company's President in March 1996, and
the remaining $62,730 is still owing. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Certain Relationships and
Related Transactions" and "Description of Securities -- Series B Preferred
Stock."

No cash dividends on the Common Stock are contemplated in the foreseeable
future, and the Company presently intends to retain all of its earnings for the
future operations and growth of the business. In addition, the Company's loan
agreement with its senior lender prohibits the payment of dividends if such
payment would result in a breach of the loan agreement.

<PAGE>
CAPITALIZATION

The following table presents the actual capitalization of the Company as of
June 30, 1996 and the capitalization of the Company as of June 30, 1996 as
adjusted for the gross proceeds from the exercise of all Warrants included in
this Prospectus and the Placement Agent's Warrants. This table should be read in
connection with the Consolidated Financial Statements included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
ACTUAL AS ADJUSTED(1)
<S> <C> <C>
(UNAUDITED)
Long-term debt..................................................................... $ 5,230,850 5,230,850
Stockholders' equity:
Series B Preferred Stock, $.001 par value; 1,000 shares authorized, issued and
outstanding................................................................... 1 1
Common Stock, $.001 par value; 6,000,000 shares authorized; 3,418,730 shares
issued and outstanding; and 4,980,030 shares as adjusted...................... 3,418 4,989
Additional paid-in capital....................................................... 13,070,309 18,100,738
Accumulated deficit.............................................................. (9,107,081) (9,107,081)
Total stockholders' equity......................................................... 3,966,647 8,998,647
Total capitalization............................................................... $ 9,197,497 $ 14,229,497
</TABLE>

(1) As adjusted to reflect the Company's receipt of $5,032,000 (after deducting
$50,000 of offering expenses) consisting of: the issuance of 450,000 shares
of Common Stock in the August 1996 Private Placement; the prospective
exercise of 900,000 Warrants issued in the Private Placement exercisable at
$3.80 per share; the prospective exercise of 40,000 Placement Agent's
Warrants, at $2.50 per Warrant, as well as the underlying 80,000 Warrants
exercisable at $3.80 per warrant; and the conversion of a $258,000
convertible promissory note for 91,300 shares of Common Stock offered hereby
by a Selling Securityholder.

<PAGE>
SELECTED FINANCIAL DATA

The selected consolidated financial data as of and for the five-year period
ended December 31, 1995 have been derived from the Company's Consolidated
Financial Statements. This data should be read in conjunction with the
Consolidated Financial Statements and related Notes for the three-year period
ended December 31, 1995 and Management's Discussion and Analysis of Financial
Condition and Results of Operations. The consolidated balance sheet data as of
December 31, 1994 and 1995, and the consolidated statements of operations data
for each of the three years in the period ended December 31, 1995 and the
accountants' reports thereon, are audited and are included in this Prospectus.
The consolidated balance sheet data as of December 31, 1991, 1992 and 1993 and
the consolidated statements of operations data for the years ended December 31,
1991 and 1992 are derived from the audited consolidated financial statements of
the Company and are not presented herein. The selected data presented below for,
and as of the end of, the six months ended June 30, 1995 and 1996 are derived
from the unaudited consolidated financial statements of the Company appearing in
this Prospectus. In the opinion of management, the unaudited consolidated
financial statements for the interim periods include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results for such periods. The results of operations for the six months ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 6 MONTHS ENDED JUNE 30,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $8,868,974 $13,672,234 $17,717,023 $25,094,473 $30,463,730 $15,617,040 $16,614,411
Income (loss) from
operations.................. 298,793 605,845 370,009 (1,041,037)(1) 566,874 1,192,111 557,899
Interest expense.............. (307,874) (261,643) (314,796) (520,602) (774,762) (305,429) (478,108)
Net income (loss)............. 48,409 235,982 41,187 (1,968,909)(1) (179,072) 546,659 54,791
Net income (loss) per common
and common equivalent
share(2).................... $ .02 $ .05 $ .00 $ (.92) $ (.06) $ .18 $ .02

DECEMBER 31, JUNE 30,
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital............... $1,336,197 $ 1,977,053 $ 1,823,459 $ 3,706,239 $ 3,288,863 $ 4,022,620 $ 8,050,180
Total assets.................. 6,064,582 8,070,849 10,189,885 11,937,143 15,496,294 15,132,646 17,843,732
Long-term obligations......... 545,639 80,113 133,927 216,469 630,494 567,716 5,230,850
Total stockholders' equity.... 941,535 2,174,915 2,176,102 4,124,961 3,855,804 4,556,268 3,966,647
</TABLE>

(2) Net income (loss) per share is computed on the basis described in Note 1 of
Notes to the 1995 Consolidated Financial Statements, including, but not
limited to, the adjustment for dividends on preferred stock.

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Consolidated Financial
Statements included elsewhere herein.

RESULTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX MONTHS
ENDED JUNE 30, 1995

Gross sales in the three months ended June 30, 1996 increased by $543,675,
or 6.0%, to $9,572,400 compared to $9,028,725 for the three months ended June
30, 1995. Gross sales for the six months ended June 30, 1996 increased by
$1,905,834, or 11.8%, to $18,018,775 compared to $16,112,941 for the
corresponding period in 1995. These increases were due primarily to the
continued expansion of product lines which includes brake rotors and drums, disc
pads and shoes, wheel cylinders, brake hoses and other hydraulics with current
customers and a successful program for obtaining new customers. The Company
expanded its customer base by approximately 10% during the six months ended June
30, 1996 to include sales to new customers who were not customers during the
comparable period in 1995. In addition, Autozone, Inc., a large retail chain
which became a customer in late 1993, accounted for approximately 26% of the
Company's revenues for the six months ended June 30, 1996, compared to 16% of
the Company's revenues for the six months ended June 30, 1995.

Gross profit in the three months ended June 30, 1996 increased by $111,647,
or 4.7%, to $2,503,163 compared to $2,391,516 for the three months ended June
30, 1995. Gross profit for the six months ended June 30, 1996 was $4,608,361
versus $4,210,248 for the same period in 1995. This represents an increase of
$398,113 or 9.5%. The Company attributes the improved gross profit to the
success of its products and marketing efforts, as well as to improvements made
in its procurement operation.

The Company has agreed to accept the return of merchandise under certain
circumstances. In order to obtain new customers, merchandise is exchanged, and
replaced with current Brake Headquarters merchandise. The merchandise is brought
back to the Company where it is reboxed, relabeled and placed back in inventory.
This is a common occurrence within the industry. As the marketplace has grown
more competitive, the amount of sales returns to the Company has significantly
increased. The merchandise does not deteriorate, and obsolescence is therefore
not a problem. All merchandise which is defective and returned by customers is
returned to or credited by vendors.

Operating expenses during the three months ended June 30, 1996 were
$2,311,553 representing an increase of $628,965, or 37.4%, from $1,682,588 for
the three months ended June 30, 1995. Operating expenses for the first six
months of 1996 were $4,050,462, representing an increase of $1,032,325, or 34.2%
from the $3,018,137 for the same period in 1995. The largest portion of
operating costs is payroll, which increased by approximately $207,000, or 40%,
from the comparable period last year. All other components of operating costs,
consisting primarily of freight, commissions and professional services,
increased proportionately. Operating expenses were 22.5% of gross sales for the
six months ended June 30, 1996 as compared to 18.8% for the six months ended
June 30, 1995. These increases were a result of increased sales, and a continued
building of the infrastructure needed to provide excellent service to the
Company's customers.

Income from operations for the three months ended June 30, 1996 was
$191,610 versus $708,828 for the same period in 1995. This represents a decrease
of $517,218 or 73.0%. For the six months ended June 30, 1996, income from
operations was $557,899 versus $1,192,111 for the same six months in 1995. This
was a decrease of $634,212 or 53.2%. Included within operating expenses in the
three months ended June 30, 1996 is an expense of approximately $212,000 from
the settlement of a lawsuit with a former customer.

Interest expense during the three months ended June 30, 1996 was $211,264,
an increase of $46,790 over the interest expense of $164,474 during the
corresponding period in 1995. For the six months ended June 30, 1996, interest
expense was $478,108, an increase of $172,679 compared to $305,429 for the six
months of 1995. The increase is attributed to increased financing provided by
the Company's banks in support of the growth in sales and assets.

<PAGE>
Most of the Company's payments to vendors are made in United States dollars
and, therefore, the amount of foreign currency more or less is immaterial.

As a result of the foregoing, the Company recorded a net loss for the three
months ended June 30, 1996 of $30,654, or $.01 per share, as compared to net
income of $325,122, or $.10 per share for the three months ended June 30, 1995.
For the six months ended June 30, 1996, the Company's net income was $54,791 or
$.02 per share, as compared to $546,659 or $.18 per share for the same period in
1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994

Gross sales for the year ended December 31, 1995 ("1995"), increased by
$6,254,137, or 24.0%, to $32,383,302 compared to $26,129,165 for the year ended
December 31, 1994 ("1994"). This increase was due primarily to increased sales
to existing customers and the Company's introduction of new undercar parts
product lines. In addition, the Company expanded its customer base during 1995.
Autozone, Inc., which became a customer in late 1993, accounted for
approximately 17% of the Company's net sales for 1995.

Gross profit for 1995 increased by $1,349,646, or 20.1%, to $8,053,798
compared to $6,704,152 for 1994. Gross profit margin for 1995 decreased to 26.4%
compared to 26.7% for 1994. There is no significant difference in gross profit
margin during the two periods.

Operating expenses for 1995 decreased by $258,265, or 3.3%, to $7,486,924,
compared to $7,745,189 for 1994. There was a 39.2% increase in Selling, General
and Administrative ("SG&A") expenses in 1995, resulting from higher costs
(primarily payroll, freight and commissions) associated with increased sales
volume, bad debt expenses of $617,891, and a continued building of the
infrastructure needed to provide a high level of service to the Company's
customers, offset, in part, by the implementation of certain cost controls. An
overall decrease resulted in non-recurring changes from non-cash compensatory
charges (as described below) and settlement of litigation which occurred in
1994. The Company postponed raising additional funds in 1995 through a secondary
public offering due to market conditions. The Company expended costs associated
with the offering totalling $248,000 during 1995.

The Company's attainment of the 1994 pretax income level and certain
cumulative levels for the three-year period ended December 31, 1994 under its
Reverse Merger Agreement, as amended, resulted in the release of the 125,000
escrowed shares, exercisability of the Class F warrants (relating to 1994
earnings) and conversion of the Series A Preferred Stock into shares of common
stock, all by the Company's President/principal stockholder which resulted in a
non-cash compensatory expense of $2,314,000 for 1994. Without giving effect to
the non-cash expense of $2,314,000 for 1994, the Company would have had net
income of $345,091. The non-cash compensatory charges to operations were offset
by an increase in common stock and additional paid-in-capital.

Income from operations for 1995 increased by $1,607,911 to $566,874,
compared to a loss of $1,041,037 for 1994, as a result of increased sales,
combined with certain cost controls and the elimination of certain non-recurring
charges.

Interest expense for 1995 increased by $254,160, or 48.8%, to $774,762
compared to $520,602 for 1994. The increase was a result of additional
borrowings by the Company in support of the growth in sales and assets.

As a result of the foregoing, the Company's net loss for 1995 decreased by
91%, or $1,807,837, to $179,072, or $.06 per share, as compared to $1,968,909,
or $.92 per share for 1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR ENDED DECEMBER 31, 1993

Gross sales for 1994 increased by $7,474,092, or 40.1%, to $26,129,165
compared to the $18,655,073 reported for the year ended December 31, 1993
("1993"). This increase was due primarily to the continued success of the
Company's operations in the undercar market. The Company participated in trade
shows where its products were received favorably and published several new
catalogs of its products. The Company also continued successfully its other
lines of business where it operates as a distributor for major automotive parts
manufacturers.

<PAGE>
As a result of its marketing effort and the favorable acceptance of its
products, the Company obtained several large contracts to sell its products to
major companies in the automotive parts market. No single customer accounted for
more than 10% of the Company's 1994 revenues.

With the increased sales, the Company was able to increase its gross profit
margin to 26.7% of net sales in 1994, which was an increase of 2.2% from 1993.

Selling, general and administrative expenses as a percentage of net sales
decreased from 22.4% in 1993 to 20.7% in 1994, and income from operations
(excluding the noncash compensatory charges and a litigation settlement)
increased from 2.1% of net sales in 1993 to 6.0% in 1994 as a result of
increased sales growth and tighter control of expenses.

The Company's Midwest distribution center commenced operations in January
1994 and almost immediately contributed to the Company's profitability.

Interest expense in 1994 was $520,602, representing an increase of 65.4%
over the 1993 expense of $314,796. The increase is attributed to increased
borrowings which were used to help finance the growth of sales.

LIQUIDITY AND CAPITAL RESOURCES

AT JUNE 30, 1996

The Company has continued to use funds generated from operations and bank
borrowings to support operations, finance working capital requirements and lease
and improve facilities.

The Company has agreements with two banks to provide lines of credit,
bankers' acceptances, and letters of credit facilities. These facilities
currently provide for aggregate borrowing of up to $10,000,000 at June 30, 1996.
The balance due under these two loan facilities amounted to approximately
$9,599,000 at June 30, 1996. The lines of credit expire at various dates through
February 1998, at which time they will be reviewed for renewal. Interest accrues
on the outstanding principal balances at rates from 7.44% to 9%. Both lines are
secured by a pledge of substantially all of the Company's assets and both lines
are partially guaranteed by the President/majority stockholder if equity is
below $4,250,000. The agreements contain covenants which require the maintenance
of certain amounts of net worth and certain financial ratios.

The covenants in the Company's loan agreement with The Chase Manhattan Bank
N.A. include: (i) a ratio of indebtedness to tangible net worth of not more than
3:1 through and including December 31, 1996 and not more than 2.5:1.0
thereafter; (ii) tangible net worth of not less than $4,250,000, (ii) interest
coverage of not less than 225%; and (iv) a ratio of current assets (less prepaid
expenses) to current liabilities of not less than 1.25:1.00. The Company was in
technical default of number (i), (ii) and (iii) above, as of March 31, 1996,
which default the bank waived and modified the ratios as of June 30, 1996, while
the parties continue to negotiate revisions on a going forward basis.

In January 1996, the Company obtained a $69,700 five-year loan from the
City of Fairfield, Illinois bearing interest at 5% per annum to be used to
purchase equipment for its Fairfield distribution center.

Cash used in operations during the six months ended June 30, 1996 was
$1,678,143 as compared with $889,162 used in operations during the six months
ended June 30, 1995. This change was due mainly to the increase in accounts
receivable of $2,360,554 offset by the corresponding increase in accounts
payable and accrued expenses of $464,317.

Cash received from customers during the six months ended June 30, 1996
amounted to $14,233,857, an increase of $1,596,819, or 12.6%, over the same
period in 1995. At the same time, cash paid to suppliers and employees during
the six months ended June 30, 1996 increased by $2,482,897, or 19.2%, over the
same period in 1995 to $15,436,384, as the Company utilized the proceeds of
sales and increased borrowing to pay suppliers and finance its growth through
conservative cash flow management.

During the six months ended June 30, 1996, the Company made a concerted
effort to control the growth of inventory while ensuring sufficient product
availability. As a result, inventory increased by only $281,046, or 3.6%, to
$8,154,177 from $7,873,131. Accounts receivable increased by $2,124,180, or
39.8%, from January 1,

<PAGE>
1996 to June 30, 1996. The increase in accounts receivable was a result of the
corresponding growth in sales and extended terms given to certain customers
because of market conditions.

The Company signed a contract for a new computer system which Management
believes will improve the efficiency of operations. The $475,000 cost of this
expenditure will be financed by C.I.T. Financial over a five-year period and
will not significantly affect the cash flows of the Company.

As of June 30, 1996, the Company had available approximately $401,000
through its various lines of credit. This would fund the Company's requirements
for cash needs through December 31, 1997. It is expected that cash requirements
for large capital purchases will be funded and secured by separately financed
transactions, as was recently accomplished for the new computer system described
above, although the Company has no commitments for any other material capital
expenditures.

AT DECEMBER 31, 1995

During 1995 and 1994 the Company used funds generated from operations, bank
borrowings and proceeds from exercises of warrants to finance working capital
requirements and lease and improve facilities. The Company received
approximately $1,490,000 from the exercise of warrants during 1994.

The Company's loan agreements provided for aggregate borrowings of up to
$9,000,000 at December 31, 1995. The balance due under these loan facilities
amounted to approximately $7,817,000 at December 31, 1995. The lines of credit
and bankers' acceptances bear interest at rates ranging from 3/4% to 1% per
annum above the bank's prime rate. The lines of credit expire at various dates
through June 30, 1996. In February 1996, the Company refinanced and expanded by
$1,000,000 one of its bank agreements. The Company currently has total available
credit of $10,000,000. The new two-year agreement allows for borrowings of up to
$5,000,000 based upon levels of accounts receivable and inventory. The other
line of credit will be reviewed for renewal. The notes and acceptances payable
are collateralized by substantially all of the assets of the Company and are
partially guaranteed by the Company's President/principal stockholder. One of
the agreements contains covenants which require the maintenance of certain
amounts of net worth and financial ratios. At December 31, 1995, the Company had
outstanding letters of credit of approximately $28,000. In addition, during
1995, the Company obtained a $258,000 short-term loan from an individual which
is due in August 1996, payable in cash or in Common Stock. The loan bears
interest at 8% per annum.

The Company obtained a $100,000 five-year loan in November 1993, from the
City of Fairfield, Illinois, bearing interest at 5% per annum which was used for
capital equipment and working capital requirements to open the Company's Midwest
Distribution Center in June 1995. On January 13, 1995, the Company exercised an
option to purchase the Midwest Distribution Center for $315,000. The purchase
and related construction costs were financed by first and second mortgages from
a bank. The loans bear interest at the rate of 7.36% per annum and the bank's
prime rate, respectively. In July 1995, the Company purchased an additional five
acres of land adjacent to the foregoing property for $10,000.

Cash used in operations in 1995 was $2,704,987 which represents an increase
of $628,786, or 30.3%, from $2,076,201 in 1994. The increase was primarily due
to an increase in inventory and accounts receivable. They rose by $1,593,795 and
$1,937,596, respectively, both related to continued sales growth. Accounts
payable and accrued expenses decreased by $764,220. These changes were financed
primarily with $3,650,000 of additional borrowings.

Cash received from customers during 1995 amounted to $28,526,134, an
increase of $4,444,739, or 18.5%, over the same period in 1994. At the same
time, cash paid to suppliers and employees during 1995 increased by $4,078,392,
or 15.9%, over the same period in 1994 to $29,740,631, as the Company utilized
the proceeds of sales and increased borrowings to pay suppliers and finance its
growth through conservative cash flow management.

AT DECEMBER 31, 1994

Net cash used in operations in 1994 was $2,076,201 which represents an
increase of $313,747, or 18%, from $1,762,454 in 1993. The increase was
primarily due to a decrease in accounts payable and accrued expenses of

<PAGE>
$1,235,690, as the Company made a concerted effort to take advantage of vendor
discounts. Inventory and accounts receivable rose by $707,601 and $596,741,
respectively, both related to continued sales growth.

These increases were financed primarily with an increase of $1,489,750
obtained from the issuance of common stock, as the result of the exercise of
warrants during 1994. In addition, the Company increased its borrowings under
notes and acceptances payable by $637,416.

The Company has maintained good relations with domestic and foreign
suppliers. The Company has agreements with banks to provide lines of credit,
bankers' acceptances, and letters of credit facilities. These facilities
provided for aggregate borrowings of up to $7,250,000 at December 31, 1994.

The Company's credit facilities with both banks were renewed in December
1994, for an additional year. The total credit available to the Company was
increased by 34%. In addition, both banks reduced the interest rate charged to
the Company by 1/2%. Interest accrues on outstanding principal at rates of 1.0%
to 1.5% above the banks' respective prime rates per annum. Both lines are
secured by the Company's assets and are guaranteed by the Company's principal
stockholder. The Company has maintained good relations with its primary lender
for a period of 17 years. The Company also has a $100,000 low interest 5-year
loan from the City of Fairfield, Illinois, which was used for capital equipment
and working capital requirements for the Company's Midwest Distribution Center.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

On June 8, 1994, the Board of Directors of the Company dismissed Borek
Stockel & Marden ("BS&M") as the Company's certified public accountants. The
Board of Directors took such action following the indictment (concerning matters
unrelated to the Company) of the partner of BS&M who handled the Company's
accounts. During the two years and the interim period preceding such
termination, (a) the auditors' report on the financial statements of the Company
did not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles
and (b) there were no disagreements with BS&M as to auditing principles or
practices, financial statements and disclosure or auditing scope or procedure.

The Board of Directors of the Company then voted to retain the firm of
Goldstein Golub Kessler & Company, P.C. ("GGK"). Prior to its appointment, the
Company did not consult with GGK regarding the application of any accounting
principle, the type of opinion that would be rendered on the Company's financial
statements, or any matter that was the subject of disagreement.

On December 28, 1995, the Board of Directors of the Company dismissed GGK
as the Company's certified public accountants. GGK's report on the financial
statements for the year ended December 31, 1994 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. Through December 28, 1995,
there were no disagreements on any matter of auditing principles or practices,
financial statements and disclosure, or auditing scope or procedure with GGK.

The Board of Directors then voted to retain the firm of Deloitte & Touche
LLP ("D&T") to audit the Company's financial statements for the year ended
December 31, 1995. Neither the Company nor anyone on its behalf consulted with
D&T on any accounting principle, the type of opinion that would be rendered on
the Company's financial statements, or any matter that was the subject of
disagreement prior to its engagement.

BUSINESS

The Company is a specialized distributor in the automotive aftermarket of a
complete line of brake system products including brake drums and rotors, brake
master cylinders, wheel cylinders, brake pads, brake shoes and brake hoses for
virtually all makes and models of domestic and foreign passenger cars and light
trucks from model year 1976 to the present. The Company also sells a variety of
other "undercar" parts including ride control products, steering/suspension
parts, drive shafts, shock absorbers and clutches. The brake line products are
sold primarily under the name "Brake Headquarters" as well as under the name
"Sanyo Automotive" and under private labels.

<PAGE>
INDUSTRY OVERVIEW

Management believes based on its knowledge of the automotive aftermarket
industry that there are approximately 2,600 manufacturers and importers who are
in the business of supplying parts to distributors, wholesalers and retailers
throughout the United States. The size of the domestic automotive aftermarket
for replacement hard parts was approximately $7.35 billion in 1994 and was
expected to grow by 2.8% during 1995, according to Frost & Sullivan, marketing
consultants. Undercar parts continue to be a strong, stable category in the
automotive aftermarket and comprise approximately $3.6 billion of the total
replacement hard parts aftermarket with an expected compound annual growth rate
of approximately 3% through the year 2000, also according to Frost & Sullivan.
Frost & Sullivan has not consented to the use of the data presented in this
Prospectus. Frost & Sullivan has not provided any form of consultation, advice
or counsel regarding any aspect of the offering, and it is no way associated
with the offering.

The undercar replacement parts market depends, in part, upon the age and
number of cars and light trucks on the road and the number of miles driven per
year. The Company expects that this market will continue to grow because of,
among other things, projected increases in the size of the United States'
automotive population, the higher cost of new cars which has resulted in an
aging of the automobile population, and the higher cost of replacement parts as
a result of technological changes in more recent vehicle models. In addition,
many of these technological changes have increased the demand on brake systems
by causing more wear and tear.

In addition, changing government standards for automobiles, including
pollution level standards, helped increase the performance demanded by
consumers. These changes caused original equipment manufacturers ("OEMs") to
make cars lighter, by shifting from two-wheel disc brakes and drum brakes to
four-wheel disc brakes which weigh less than drum brakes. The Company believes
that each of such factors has contributed to a significant increase in the
market for brake repairs during the past decade. The standard to bring a vehicle
to a complete stop from 60 MPH has been reduced in the last few years from 150
feet to 75 feet. In order to meet this standard a change in the friction
material of brakes was necessary and a shift was made from inexpensive long
lasting asbestos brake pads (which raised environmental concerns) to more
expensive, shorter life metallic brake pads which are more punishing to the
brake system.

Management believes based on its experience that the brake aftermarket
industry performs well under most economic conditions. In an economic recession,
for example, vehicle owners tend to retain and repair their cars rather than
purchase costly new vehicles. Since brakes are a safety-related item, drivers
normally neglect brake repairs to a lesser degree as they might otherwise do
with other repairs and maintenance less directly related to safety.

BUSINESS STRATEGY

The Company's objective is to become one of the leading undercar parts
distributors in selected markets in the United States, using both a traditional
distribution process and by developing wholesale warehouses for undercar parts
("Undercar Warehouses"). The Company's business strategy is to continue the
growth in its base distribution business by, among other things, adding new
brake and other undercar part product lines (including two new brake product
lines added in the fall of 1995) and upgrading its information system
capabilities. See -- "Management Information Systems; -- Distribution and
Assembly Operations." Management believes that the Company's continued growth
will depend upon, among other things, its ability to respond to market and other
changes in the distribution process for automotive parts and to maintain
state-of-the-art integrated computerized systems to meet its customers demands.

While many of the Company's competitors offer undercar parts for most
popular cars, management believes that no such competitor maintains an inventory
of all brake parts for substantially all cars, as does the Company. Management
also believes that the Company has positioned itself, through investment in
advanced integrated systems, to capitalize on general trends occurring in
distribution.

MARKETING AND SALES

The Company sells products primarily under the name "Brake Headquarters"
but also under the name "Sanyo Automotive" and certain private manufacturers'
labels. The Company distributes its products through

<PAGE>
salaried and independent sales agents or manufacturers' representatives. The
Company's products are sold primarily to warehouse distributors, retail discount
chains, foreign and domestic automotive parts wholesalers, mass merchandisers
and undercar installation chains. The Company maintains a network of over 115
sales representatives covering substantially all of the United States and most
of Canada as well as Mexico, Puerto Rico, Venezuela and the Virgin Islands.
Since 1993, the Company has evolved from 100% reliance on its telemarketing
sales force to having 85% of its 1995 sales generated by representatives in the
field.

The Company's marketing efforts are facilitated by the publication of
several catalogs, each of which contains a description of the parts distributed
by the Company. These catalogs are provided to the Company's sales
representatives who use them to fill customers' orders. See "Research And
Marketing" below. The Company also participates in trade shows throughout the
United States in order to gain exposure for its products.

The Company added new large customers and reached certain critical levels
with existing large customers and, as a result, the Company's sales increased by
42% and 21% in 1994 and 1995, respectively. Autozone, Inc., a large retail chain
with no relationship to the Company, accounted for approximately 26% and 16% of
the Company's revenues for the six months ended June 30, 1996 and the year ended
December 31, 1995, respectively. Unless the Company is able to continue to add
new large customers at an increasing rate, it is unlikely that it will continue
to grow at comparable rates to the last two years.

MANAGEMENT INFORMATION SYSTEMS

In July 1996, the Company contracted to purchase a new IBM AS400 computer
system and is currently updating all of its software systems and installing the
hardware. The Company's computer system implements the fulfillment of customers'
purchase orders. All three of the Company's distribution centers are equipped
with an EDI computer link which enables customers to place orders directly
through the Company's computer system. The Company provides EDI services to its
customers through the Advantis system. The Company has a bar coded inventory
system and advanced shipping notice ("ASN") which, upon receipt of an EDI
generated purchase order, generates a computer notice of the items being
shipped, the shipment date and a tracking number. These systems give the Company
the ability to efficiently service customer needs and, the Company believes,
represent some of the most advanced integrated distribution capabilities in the
automotive parts industry.

DISTRIBUTION AND ASSEMBLY OPERATIONS

The Company maintains its headquarters office and principal distribution
center at a 94,000 square foot warehouse facility in Long Island City, New York.
This facility consists of two adjoining buildings at which activities are
maintained during two eight-hour shifts per day, usually five days per week.

In June 1995, the Company expanded its Midwest distribution center in
Fairfield, Illinois to approximately 40,000 square feet. The Company currently
operates two shifts per day, five days per week, at this facility.

The Company also maintains an approximately 10,000 square foot distribution
center in Portland, Oregon to serve the Company's West Coast customers. At the
Oregon facility, the Company conducts distribution activities generally
operating one shift per day, five days per week.

The Company maintains inventories at its three distribution centers to
maintain maximum service levels. Orders from the Company's customers are
selected, assembled and packaged from these facilities and shipped. The
Company's distribution centers in New York, Illinois and Oregon currently stock
approximately 6,000, 3,000 and 1,000 stock keeping units ("SKUs"), respectively.
The Company maintains leased trucks at each of its facilities, which it uses to
make direct local deliveries to its customers. The Company estimates that about
5% of its sales are delivered by the Company's trucks and the balance by common
carriers, including Federal Express and UPS.

SUPPLIERS

The Company has relationships with many suppliers of parts and equipment
and has alternate sources of supply and supplies readily available. Therefore,
the Company does not maintain supply contracts with any of its suppliers,
because it believes alternative sources exist for most of the products it
distributes. The loss of any one supplier is not expected to have a material
adverse effect on the Company. The Company generally obtains favorable prices
and terms because of its large volume of purchases.

<PAGE>
COMPETITION

Competition within the automotive parts industry is affected principally by
product quality, availability, customer service and price. By expanding its
distribution facilities, the Company anticipates that it will be able to
continue to control costs, while at the same time maintain high standards of
quality for its products. The direct competitors to the Company's distribution
activities include manufacturers, consisting of Brake Parts, Inc., Wagner
Brakes, a subsidiary of Cooper Industries, Inc., EIS Brake Parts Division of
Standard Motor Products, Inc. and the ITT Automotive Aftermarket Division of
ITT/AIMCO. Such manufacturers, who also act as distributors, are not dependent
on relationships with suppliers as is the Company. The Company's direct
competitors as a distributor include ISW, a division of APS, Inc., and Reddi
Brake Supply Corporation.

800 TECHNICAL SERVICE HOTLINE

The Company has instituted an 800 toll free technical hotline (800-221-1393
X 106) serviced by professional advisors to respond to inquiries from the
Company's customers, including personnel of the Undercar Warehouses.

RESEARCH AND MARKETING

The Company has established a special in-house Research and Marketing
("R&M") department. The R&M Department was formed to provide up-to-date
information for the Company's catalogs which the Company believes is useful and
practical to its customers. The Company has been advised by certain of its
retail chain store customers that they rely on the Company's catalogs and the
R&M Department to obtain current information in order to update and maintain
their own inventory. The Company created a part number system which it
publicized through the catalogs and on which its customers now rely. The
Company's customers are also able to provide the Company with input on their
undercar product needs, enabling the Company to increase sales to such
customers. The R&M Department has also been able to supply management with
recommendations for new additions to its product lines and new products.

GOVERNMENT REGULATION

The Company is subject to various laws and governmental regulations
relating to the operation of its business. However, the Company does not believe
that the cost of compliance with such laws and regulations has a material impact
on its operations.

TRADEMARKS

The has obtained a registered trademark from the United States Patent and
Trademark Office for the name "Brake Headquarters U.S.A."

EMPLOYEES

As of September 27, 1996, the Company had 123 employees, including four
executives; five employees in purchasing; 13 administrative personnel; seven in
sales and customer service; 85 employees in warehousing, shipping and receiving;
and nine in Quality First's operations. The Company also retains the services,
as independent contractors, of 115 independent sales representatives who are
paid solely on a commission basis.

The Company is a party to a collective bargaining agreement relating to 28
of its warehouse employees in New York. In April 1996, the Company signed a
collective bargaining agreement at the Company's Fairfield, Illinois
distribution center, covering 19 employees. The Company believes that its
employee relations are currently satisfactory.

<PAGE>
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.

<TABLE>
<CAPTION>
YEAR
1993 1994 1995
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS:
United States..................................................... $16,595,008 $24,802,100 $29,016,025
Canada and Mexico................................................. 250,531 35,490 336,086
South America..................................................... 805,273 241,251 1,102,286
Europe............................................................ 66,211 15,632 9,333
SALES OR TRANSFERS BETWEEN GEOGRAPHIC AREAS:
United States..................................................... -- (251,840) (76,094)
Canada and Mexico................................................. -- 251,840 76,094
South America..................................................... -- -- --
Europe............................................................ -- -- --
OPERATING PROFIT OR (LOSS):
United States..................................................... 370,009 (996,438)(1) 527,874
Canada............................................................ -- (44,599) 39,000
Mexico and South America.......................................... --(2) --(2) --(2)
Europe............................................................ -- -- --
IDENTIFIABLE ASSETS:
United States..................................................... 10,189,885 11,509,646 15,496,294
Canada............................................................ -- 427,497 --
South America..................................................... -- -- --
Europe............................................................ -- -- --
</TABLE>

(1) After a non-cash compensatory charge of $2,314,000 resulting from the
release of escrow shares, the exercisability of warrants and the conversion
of preferred stock, upon the Company's attainment of the specified 1994
pre-tax income level and certain cumulative levels for the three-year period
ended December 31, 1994 under the Company's July 1992 Reverse Acquisition.
See "Certain Relationships and Related Transactions" and Note 4 of Notes to
the 1995 Consolidated Financial Statements.

(2) The Company does not maintain operations in South America or Mexico and is
unable to determine operating profit or loss in those geographic regions.

PROPERTIES

The Company leases approximately 94,000 square feet of office and warehouse
facilities at 33-16 Woodside Avenue, Long Island City, New York. Approximately
34,000 square feet of this facility is leased from the Company's President,
Joseph Ende, pursuant to a lease dated July 1, 1992 at a current rent of
$312,000 per year. The lease term expires July 1, 1999. Mr. Ende was paid
$302,000, $312,000 and $312,000 pursuant to the lease in 1993, 1994, and 1995,
respectively. Based on the Company's review of nearby real estate and an
independent appraisal, the Company believes that the terms of the lease with Mr.
Ende are no less favorable than would otherwise be obtained from unaffiliated
third parties. The remaining 60,000 square feet is leased from a bankruptcy
trustee on a month-to-month basis at $24,000 per year. Should the bankruptcy
trustee decide to terminate this month-to-month lease, and the Company is
obligated to lease another facility, the Company could incur an increase in
lease payments.

The Company owns a facility, purchased in April 1995, comprised of
approximately 40,000 square feet on nine acres at Lot #22, Fairfield Industrial
Park, Fairfield, Illinois, which serves as the Company's Midwest Distribution
Center.

The Company occupies approximately 10,000 square feet of public warehouse
space at 230 East Burnside, Portland, Oregon on a yearly basis. The Company
leases such space for a nominal amount each month and, in addtion, pays the
freight cost of all goods shipped from the facility.

LEGAL PROCEEDINGS

The Company is not currently subject to any legal proceedings other than
any vendor claims in the ordinary course of business.

<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS.

Set forth below are the names, ages and positions of the Company's
executive officers and directors, along with certain information relating to the
business experience of each.

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Joseph Ende 49 Chairman of the Board, President and Chief Executive Officer
Scott Osias 42 Vice President of Sales and Marketing
Marc J. Ruskin 44 Chief Financial Officer
Sandra Ende 44 Secretary and Director
</TABLE>

All directors hold office until the next annual meeting of shareholders and
the election and qualification of their successors. Directors currently receive
no cash compensation for serving on the Board of Directors. Officers are elected
annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board.

JOSEPH ENDE has been President, Chief Executive Officer and Chairman of the
Board of Directors of the Company since July 9, 1992. He has been the President
and a Director of Sanyo Automotive since its inception in June 1976. Mr. Ende is
the husband of the Company's Secretary, Sandra Ende.

SCOTT OSIAS has been the Vice President of Sales and Marketing of the
Company since October 1992. Mr. Osias has been employed in the retail automotive
industry for 23 years and was the principal owner and operator of Automotive
Discount Centers, a 14 store retail automotive parts store chain in New York
from 1973 to 1988. Prior to joining the Company, from 1988, Mr. Osias was
General Manager of Prime Automotive Warehouse, a warehouse distribution
automotive parts chain.

MARC J. RUSKIN, CPA, has been the Chief Financial Officer of the Company
since August 1995. He has 19 years of financial experience, including a combined
five years at Ernst & Young LLP and Deloitte & Touche LLP. From 1993 until he
joined the Company, Mr. Ruskin was Vice President of Finance and Administration
for the Nason Group LLC, a Connecticut company formed to purchase and develop
real estate. From 1991 to 1993, Mr. Ruskin was the Chief Financial Officer of
REBO Group Incorporated, a New York based international corporation specializing
in the research, development and production of high definition television. Mr.
Ruskin was Vice President of Finance and Administration of Kaufman Astoria
Studios, a company specializing in film/television and real estate management,
from 1982 to 1991. Mr. Ruskin holds an MBA from the University of Bridgeport.

SANDRA ENDE has been a Director of the Company since July 1992. She has
been employed by Sanyo Automotive since its inception in June 1976 in various
capacities including bookkeeper, Personnel Manager, Director of Marketing and
Office Manager. Ms. Ende is the wife of the Company's President, Mr. Joseph
Ende.

The Company's Placement Agent has the right at its discretion, for a
three-year period ending August 13, 1999 to designate either a member of the
Board of Directors or an advisor to the Board.

<PAGE>
EXECUTIVE COMPENSATION.

The following table sets forth all compensation awarded to, earned by, or
paid for all services rendered to the Company during the years ended December
31, 1995, 1994 and 1993, by the Company's Chief Executive Officer, who was the
Company's only executive officer ("Named Executive Officers") whose total
compensation exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION RESTRICTED
OTHER ANNUAL STOCK
SALARY BONUS COMPENSATION AWARD(S)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
(A) (B) (C) (D) (E) (F)
<S> <C> <C> <C> <C> <C>
Joseph Ende, Chief Executive Officer and
Director 1995 $ 127,500 -0-(1) -0- 180,000(2)
1994 $ 130,000 -0- -0-(3) 120,000(4)
1993 $ 108,000 $ 102,745 -0- -0-
</TABLE>

(1) The Board of Directors has the discretion to grant Mr. Ende a bonus of at
least $50,000 for each of the six-month periods ending June 30 and December
31 during the three-year term of his employment agreement entered into on
July 31, 1995, as amended, provided the Company reports operating income
before taxes, but after payment of such bonus for the applicable six-month
period. No bonus was issued for the period ended December 31, 1995.

(2) On July 31, 1995, Mr. Ende was granted non-qualified stock options under the
Company's 1995 Stock Option Plan, to purchase 180,000 shares of Common Stock
at $3.00 per share terminating on July 30, 2000. See "1995 Employee Stock
Option Plan" below and "Certain Relationships and Related Transactions."

(3) Excludes $7,795,839 and $2,314,000 non-cash compensatory expenses related to
the release of escrow shares, the exercise of warrants, the conversion of
the Series A Preferred Stock and the payment of dividends on the Series A
Preferred Stock during 1992 and 1994, respectively, pursuant to the terms of
the Reverse Merger Agreement. See "Certain Relationships and Related
Transactions."

(4) The Company cancelled 120,000 options, exercisable at $20 per share,
previously granted to Joseph Ende, and re-granted such options to Mr. Ende
at an exercise price of $2.50 per share. See "1994 Employee Stock Option
Plan, below.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS/SARS EXERCISE PRICE APPRECIATION
OPTIONS/SARS GRANTED TO OR BASE FOR OPTION TERM (1)
GRANTED EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
Joseph Ende........................... 180,000 96.7% $ 3.00 12/15/00 $ 149,400 $ 329,400
Marc Ruskin........................... 6,000(2) 3.3% $ 2.25 9/4/00 $ 3,729 $ 8,220
</TABLE>

(1) The potential realizable value through the expiration date of the options
has been determined on the basis of the fair market value of the shares at
the time the options were granted, compounded annually over the term of the
respective option, net of exercise price. These values have been determined
based upon assumed rates of appreciation and are not intended to forecast
the possible future appreciation, if any, of the price or value of the
Company's Common Stock.

<PAGE>
(2) Does not include options to purchase 24,000 shares of Common Stock granted
to Mr. Ruskin during 1996. See "1994 Employee Stock Option Plan" below.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY END OPTION/SAR VALUES(1)

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL AT FISCAL
SHARES YEAR- END YEAR-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) ($)
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C>
Joseph Ende............................................... -0-(1) -0- 80,000/40,000 -0-
</TABLE>

(1) Does not include the exercise of 41,666 Class F Warrants or the issuance of
1,000,000 shares of Common Stock upon the conversion of the Series A
Preferred Stock by Mr. Ende during 1994 pursuant to the terms of the Reverse
Merger Agreement. See "Certain Relationships and Related Transactions."

COMPENSATION OF DIRECTORS

Members of the Board of Directors presently receive no additional
remuneration for acting in that capacity. See 1994 Employee Stock Option Plan
and 1995 Employee Stock Option Plan for a description of options granted to
members of the Board of Directors.

EMPLOYMENT AGREEMENTS

On July 31, 1995, the Company entered into a three-year employment
agreement with Joseph Ende, the President and Chief Executive Officer of the
Company. The agreement automatically renews for consecutive one-year periods
unless terminated on thirty days' prior written notice by either party. In 1995,
Mr. Ende received a base annual salary of $127,500. The Board of Directors has
the discretion to grant Mr. Ende a performance bonus of at least $50,000 for
each of the six-month periods ending June 30 and December 31 during the term of
the agreement, provided the Company reports operating income before taxes, but
after payment of such bonus, for the applicable six-month period. Such bonus
will not accrue in the event the income level is not met. Uner the agreement,
Mr. Ende is also entitled to an automobile or a monthly allowance equal to the
cost of leasing such automobile, and health and other benefits. Mr. Ende has
agreed not to compete with the Company during the term of, and for a one-year
period from the date of termination of, his employment with the Company.

On November 24, 1994, the Company entered into a three-year employment
agreement with Scott Osias, Vice President of Sales and Marketing. The agreement
automatically renews for consecutive one-year periods unless terminated on
thirty days' prior written notice by either party. In 1995, Mr. Osias received a
base annual salary of $52,000. Mr. Osias has agreed not to compete with the
Company during the term of, and for a one-year period from the date of
termination of, his employment with the Company.

EMPLOYEE STOCK BONUS PLAN

In April 1995, the Company adopted an Employee Stock Bonus Plan which
enables all full-time permanent employees to purchase shares of Common Stock at
85% of its then fair market value through payroll deductions. There are 100,000
shares authorized for sale under such Plan without limitation as to the number
of shares which may be purchased by any employee. These shares may be
newly-issued shares or which may be purchased by the Company in the open market.
An aggregate of 5,078 shares have been purchased under such plan as of September
27, 1996. The 100,000 shares of Common Stock reserved under this plan are
registered for sale on the Company's Registration Statment on Form S-8, which
became effective when filed with the Commission on September 27, 1996 (the
"S-8").

<PAGE>
1994 EMPLOYEE STOCK OPTION PLAN

The Company has established the 1994 Employee Stock Option Plan (the "1994
Plan"). The 1994 Plan is intended to provide the employees, directors,
independent contractors and consultants of the Company with an added incentive
to continue their services to the Company and to induce them to exert their
maximum efforts toward the Company's success. The 1994 Plan provides for the
grant of options to qualified directors, employees (including officers),
independent contractors and consultants of the Company to purchase an aggregate
of 300,000 shares of Common Stock. Options to purchase no more than 120,000
shares of Common Stock may be granted to any one person in any two-year period.
The 1994 Plan is currently administered by the Board of Directors. The Board
determines, among other things, the persons to be granted options under the 1994
Plan, the number of shares subject to each option and the option price. The
shares of Common Stock authorized under the 1994 Plan are registered for sale on
the S-8.

The 1994 Plan allows the Company to grant incentive stock options ("ISOs"),
as defined in Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"), Non-Qualified Stock Options ("NQSOs") not intended to qualify
under Section 422(b) of the Code and Stock Appreciation Rights ("SARs";
collectively, with ISOs and NQSOs referred to as "Options") at any time within
10 years from the date the 1994 Plan was adopted. The exercise price of ISOs may
not be less than the fair market value of the Common Stock on the date of grant,
provided that the exercise price of ISOs granted to an optionee owning more than
10% of the outstanding Common Stock may not be less than 110% of the fair market
value of the Common Stock on the date of grant. In addition, the aggregate fair
market value of stock with respect to which ISOs are exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000. Options
may not have a term exceeding ten years, except that ISOs granted to an optionee
owning more than 10% of the outstanding Common Stock may not have a term of more
than five years and ISOs must be granted to, and exercised by, employees of the
Company (including officers). Options are not transferable, except upon the
death of the optionee.

Since the 1994 Plan's adoption, ISOs to purchase 282,000 shares of Common
Stock have been granted (of which options to purchase 123,000 shares have
terminated and are available for reissuance under the 1994 Plan), and no NQSOs
or SARs have been granted under the 1994 Plan. Options to purchase 141,000
shares of Common Stock remain reserved for grant under the 1994 Plan. The
following chart sets forth in further detail, for options outstanding as of the
date hereof, the amount of options granted, the options vested, the exercise
price thereof, the number of options exercised and the expiration dates thereof.

<TABLE>
<CAPTION>
# OF OPTIONS # OF OPTIONS # OF OPTIONS EXPIRATION
GRANTED VESTED EXERCISED EXERCISE PRICE DATE
<S> <C> <C> <C> <C>
9,000 -0- -0- $2.50 11/1/99
120,000 80,000 -0- $2.50 12/15/99
6,000 -0- -0- $2.25 9/4/00
24,000 -0- -0- $3.00 5/8/02
</TABLE>

Scott Osias, Vice President of Sales and Marketing, was granted a stock
option under the 1994 Plan to purchase 9,000 shares of Common Stock at $2.50 per
share, which option becomes exercisable on a cumulative basis on January 1, 1997
to the extent of 4,000 shares; on January 1, 1998 for an additional 3,000
shares, and on January 1, 1999 until November 1, 1999 in full.

In December 1994, the Company cancelled options to purchase 120,000 shares
of Common Stock exercisable at $20 per share, previously granted to Joseph Ende
under the 1994 Plan, and re-granted such options to Mr. Ende at an exercise
price of $2.50 per share. Such options were re-granted because the Company's
Board of Directors determined that such re-grant would provide a greater
incentive to Mr. Ende. Of such options, 80,000 are currently exercisable and the
remaining 40,000 are exercisable at any time on or after December 16, 1996.

Marc J. Ruskin, Chief Financial Officer, was granted a stock option under
the 1994 Plan to purchase 6,000 shares of Common Stock at $2.25 per share, which
option becomes exercisable on a cumulative basis on September 5, 1997 to the
extent of 2,000 shares; on September 5, 1998 to the extent of an additional
2,000 shares, and on September 5, 1999 until September 4, 2000 in full. Mr.
Ruskin was granted a second option under the 1994 Plan to purchase 24,000 shares
of Common Stock at $3.00 per share, which option becomes exercisable on a
cumulative basis on May 29, 1997 to the extent of 8,000 shares; on May 29, 1998
to the extent of 3,000 shares; on

<PAGE>
May 29, 1999 to the extent of 3,000 shares; on May 29, 2000 to the extent of
5,000 shares; and on May 29, 2001 to the extent of 5,000 shares.

1995 EMPLOYEE STOCK OPTION PLAN

In July 1995, the Company's Board of Directors adopted the 1995 Employee
Stock Option Plan (the "1995 Plan" and, together with the Employee Stock Bonus
Plan and the 1994 Plan, the "Plans"). The 1995 Plan provides for the grant of
ISOs, NQSOs and SARs to purchase an aggregate of 300,000 shares of Common Stock.
All such shares are registered for sale on the S-8. The provisions of the 1995
Plan are otherwise identical to the above-stated terms of the 1994 Plan.

Since the adoption of the 1995 Plan, no ISOs or SARs have been granted, and
NQSOs to purchase 180,000 shares of Common Stock have been granted to Joseph
Ende. Options to purchase 120,000 shares of Common Stock remain available for
grant under the 1995 Plan. The following chart sets forth in further detail, as
of the date hereof, the amount of the options granted, the options vested, the
exercise price thereof, the number of options exercised and the expiration dates
thereof.

<TABLE>
<CAPTION>
# OF OPTIONS # OF OPTIONS # OF OPTIONS EXPIRATION
GRANTED VESTED EXERCISED EXERCISE PRICE DATE
<S> <C> <C> <C> <C>
180,000 -0- -0- $3.00 7/30/00
</TABLE>

On July 31, 1995, Mr. Ende was granted, subject to stockholder
ratification, NQSOs under the 1995 Plan, to purchase 180,000 shares of Common
Stock at $3.00 per share terminating on July 30, 2000. The option becomes
exercisable on a cumulative basis in one-third increments on July 31, 1997, 1998
and 1999. The option will become immediately exercisable, in full, upon a change
in control (as defined in the 1995 Plan) of the Company. See "Certain
Relationships and Related Transactions."

REPRICING OF OPTIONS/SARS

<TABLE>
<CAPTION>
LENGTH OF
MARKET EXERCISE ORIGINAL
NUMBER OF PRICE OF PRICE OF OPTION
SECURITIES STOCK AT STOCK AT TERM
UNDERLYING TIME OF TIME OF REMAINING
OPTIONS/SARS REPRICING REPRICING AT DATE OF
REPRICED OR OR OR NEW REPRICING
AMENDED AMENDMENT AMENDMENT EXERCISE OR
NAME DATE (#) ($) ($) PRICE ($) AMENDMENT
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
Joseph Ende......................... 12/16/94 120,000 $2.50 $20.00 $2.50 5 years
</TABLE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company presently has no compensation committee or other board
committee performing equivalent functions. The following officers and employees
of the Company participated in deliberations of the Company's Board of Directors
concerning executive officer compensation: Joseph Ende, President and Chief
Executive Officer and Marc Ruskin, Chief Financial Officer.

INDEMNIFICATION

The Company has agreed to hold the Company's Directors and officers
harmless and to indemnify them, under certain circumstances, with respect to
suits or proceedings to which the Directors and Officers may be a party or
threatened to be made a party by reason of the fact that they are or were
Directors and Officers of the Company. Under such indemnification provisions,
the Company would be required to pay the Directors' and Officers' expenses,
including attorney's fees, and judgments or amounts paid in settlement. If an
action is brought by or in the right of the Company (a derivative action), the
Directors and Officers would be entitled to such indemnification only if they
successfully defended such action (unless the court orders otherwise). If an

<PAGE>
action is brought by a third party, the Directors and Officers would be entitled
to indemnification if they successfully defended such action or, if such action
is not successfully defended, if the Directors and Officers acted in good faith
and not opposed to the best interests of the Company.

It should be noted that the foregoing only briefly mentions derivative
actions and third-party actions, certain remedies available to minority
stockholders under state and Federal law for breach of the fiduciary duty by a
Director, officer or majority stockholder. Therefore, in the event that a
shareholder believes that a breach of fiduciary duty by the Directors, officers
or majority stockholders has occurred, he should consult with his own counsel as
to what rights he may have.

It should also be noted that the cost of litigation against a Director,
officer or majority stockholder for enforcement of his fiduciary obligations may
be prohibitively high and that any judgment obtained may not be collectible. An
investment decision by a prospective investor should be based on his judgment as
to the investment factors described in this Prospectus, rather than upon
reliance on the value of the right to bring legal actions against, or to control
the activities of the management.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with the July 1992 Reverse Merger, the Company and Mr. Ende
entered into a Reverse Merger Agreement, as amended, which provided for the
issuance of additional shares of Common Stock to Mr. Ende upon the conversion or
exercise of convertible preferred stock and warrants, and the forfeiture to the
Company of certain shares of Common Stock held by Mr. Ende, depending upon
whether or not certain earnings levels were achieved by the Company during each
of the three years (and during the three-year period in the aggregate) ended
December 31, 1994. Pursuant to the Reverse Merger Agreement, the Company issued
to Mr. Ende Class D, Class E and Class F Warrants to purchase an aggregate of
125,000 shares of the Common Stock at an exercise price of $.40 per share,
provided that the Company earned pre-tax operating income in the amount of
$375,000, $750,000 and $1,000,000, for the years ended December 31, 1992, 1993
and 1994, respectively.

For the year ended December 31, 1992, the Company earned pre-tax operating
income (exclusive of any noncash compensatory charges against earnings arising
from release of escrowed shares, the conversion of the Series A Preferred Stock
and the exercise of Class D Warrants) of more than $375,000. As a result,
375,000 shares of Common Stock previously issued to Joseph Ende, in connection
with the Reverse Merger were released to him under the terms of the Reverse
Merger Agreement. In addition, Mr. Ende exercised all 41,666 Class D Warrants
(those relating to the 1992 earnings) in consideration for the reduction of the
Company's outstanding note payable to Mr. Ende of $16,667. Total noncash
compensatory charges resulted in a noncash expense to the Company for the year
ended December 31, 1992 of $7,795,839.

The Company earned pre-tax operating income of less than $750,000 for the
year ended December 31, 1993. As a result, Joseph Ende was required under the
Reverse Merger Agreement to return an aggregate of 250,000 shares of escrowed
Common Stock to the treasury of the Company and was unable to exercise Class E
Warrants to purchase 41,666 shares of Common Stock. Mr. Ende disputed this
forfeiture of shares, but waived any claims he had against the Company in
exchange for the July 1995 grant of an option to purchase 180,000 shares of
Common Stock under the 1995 Plan. See "Management -- Executive
Compensation -- 1995 Employee Stock Option Plan."

The Company earned pre-tax operating income of more than $1,000,000 for the
year ended December 31, 1994. As a result, under the terms of the Reverse Merger
Agreement, an aggregate of 125,000 escrowed shares were released to Mr. Ende and
Mr. Ende exercised all Class F Warrants (those relating to 1994 earnings) in
consideration of payment of $16,667.

In connection with the Reverse Merger, Mr. Ende received 2,000,000 shares
of Series A Preferred Stock of the Company in exchange for existing debt of
$507,500 owed by Sanyo Automotive to Mr. Ende. Under the terms of the Reverse
Merger Agreement, the Series A Preferred Stock was converted into 1,000,000
shares of Common Stock as of April 30, 1995, because the Company reached certain
performance goals. Specifically, it had revenues of at least $25,000,000 for
fiscal 1994 and had cumulative pre-tax operating income for the years ended
December 31, 1992, 1993 and 1994 of at least $2,125,000.

<PAGE>
Joseph Ende personally guarantees payment of up to an aggregate of
$1,000,000 of the Company's indebtedness under its credit facility with its
primary lender. He also personally guarantees another line of credit to the
extent the Company's equity falls below $4,250,000.

See "Management -- Executive Compensation -- Employment Agreements" for a
description of the terms of current Employment Agreements between the Company
and Joseph Ende, President, and Scott Osias, Vice President of Sales and
Marketing.

In January 1995, Joseph Ende purchased 386,000 shares of Common Stock, and
two non-affiliated persons purchased 75,000 and 131,320 shares, respectively,
from the Brennan Trusts as described under "Price Range of Common Stock."

In March 1996, the Company amended its Certificate of Incorporation to
authorize 1,000 shares of Series B Preferred Stock, $.001 par value per share,
which shares are held by Joseph Ende. These shares were issued with a view
towards, and could be utilized under certain circumstances as a method of,
discouraging, delaying or preventing a change in control of the Company. See
"Principal Stockholders."

See "Business -- Properties" for a description of a lease between Mr. Ende
and the Company.

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of the date of this
Prospectus adjusted to reflect the exercise of all Warrants and the Placement
Agent's Warrants offered hereby, with respect to the beneficial ownership of the
outstanding shares of the Common Stock by each person known by the Company to be
the beneficial owner of more than 5% of the outstanding shares, by each
director, all Named Executive Officers (See "Management -- Executive
Compensation") and all directors and officers as a group:

<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OWNED
NATURE OF BEFORE AFTER
NAME AND BENEFICIAL OFFERING OFFERING
OF BENEFICIAL OWNER OWNERSHIP (1) (1)(2) (3)
<S> <C> <C> <C>
Joseph Ende (4)..................................................... 2,689,333(5) 68.1 % 53.1 %
Sandra Ende (4)..................................................... 30,000(6) (7) (7)
Scott Osias (4)..................................................... 15,000(8) (7) (7)
Marc Ruskin (4)..................................................... 0(9) -0- -0-
Officers and Directors as a Group (4 Persons)....................... 2,734,333(10) 69.2 % 54.0 %
</TABLE>

(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the effective date of this Prospectus upon the exercise of
warrants or options. Unless otherwise noted, each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date hereof have been
exercised.

(2) Based on 3,868,730 shares of Common Stock outstanding as of November 4,
1996.

(3) Based on 4,980,030 shares of Common Stock outstanding which reflects the
exercise of 900,000 Warrants currently outstanding and the issuance of an
aggregate of 120,000 Shares of Common Stock upon full exercise of the
Placement Agent's Warrants and the issuance of 91,300 shares upon
conversion of a promissory note by a Selling Securityholder. Excludes (i)
349,000 shares of Common Stock issuable upon the exercise of options
outstanding as of the date of this Prospectus, including currently
exercisable options to purchase 80,000 shares of Common Stock; (ii) 141,000
and 120,000 shares reserved for issuance under the 1994 Plan and the 1995
Plan, respectively; and (iii) 94,922 shares reserved for issuance under the
Company's Employee Stock Bonus Plan. See "Management -- Executive
Compensation."

(4) The address of this person is c/o the Company, 33-16 Woodside Avenue, Long
Island City, New York 11101.

<PAGE>
(5) Includes (i) 15,000 shares owned of record by the Joseph and Sandra Ende
Charitable Trust, of which Joseph and Sandra Ende are Trustees, (ii) 80,000
shares which may be obtained upon the exercise of currently exercisable
stock options, but excludes an aggregate of 220,000 shares underlying
options which are not currently exercisable or exercisable within the next
60 days; and (iii) 386,000 shares pledged to Bank Leumi Trust Company as
security for the repayment of the loan made by such Bank to the holder of
such shares to purchase such shares. See "Price Range of Common Stock."

In March 1996, the Company amended its Certificate of Incorporation to
authorize the issuance of 1,000 shares of Series B Preferred Stock held by
Joseph Ende. As sole stockholder of the Series B Preferred Stock, which
will vote as a separate class, Mr. Ende has the exclusive right to elect a
majority of the Company's Board of Directors until the earlier of the
redemption date of March 31, 2001 or the reporting by the Company of at
least $75 million in net sales for any fiscal through December 31, 2000.
See "Certain Relationships and Related Transactions."

(6) Includes 15,000 shares owned of record by the Joseph and Sandra Ende
Charitable Trust, of which Joseph and Sandra Ende are Trustees, but does
not include any other shares beneficially owned by Joseph Ende, Sandra
Ende's husband.

(7) Less than one percent of the issued and outstanding shares.

(8) Does not include 9,000 shares of Common Stock which may be purchased
pursuant to stock options held by Mr. Osias which are not currently
exercisable or exercisable within the next 60 days.

(9) Does not include 30,000 shares of Common Stock which may be purchased
pursuant to stock options held by Mr. Ruskin which are not currently
exercisable or exercisable within the next 60 days.

(10) Includes 80,000 shares issuable upon exercise of currently exercisable
stock options, but does not include 259,000 shares of Common Stock which
may be purchased pursuant to stock options which are not currently
exercisable.

<PAGE>
SELLING SECURITYHOLDERS

The table below sets forth, with respect to each Selling Securityholder,
based upon information available to the Company as of the date hereof, the
number of shares of Common Stock beneficially owned, the number of Shares to be
sold, and the number and percentage of outstanding Common Shares beneficially
owned before and after the sale of the Shares offered hereby. None of the
Selling Securityholders has been an affiliate of the Company during the
preceding three years, except as noted. Although there can be no assurance that
the Selling Securityholders will sell any or all of the Shares, the following
table assumes that each of the Selling Securityholders will sell all Securities
offered by this Prospectus.

<TABLE>
<CAPTION>
PERCENT
SHARES OF
AMOUNT AND BENEFICIALLY CLASS
NATURE OWNED (2)
BENEFICIAL SHARES TO AFTER AFTER
NAME OWNERSHIP (1) BE SOLD OFFERING OFFERING
<S> <C> <C> <C> <C>
Lawrence and Helaine Kaplan................................ 120,000(3)(5)(6) 120,000 -0- -0-
Stanley A. Kaplan.......................................... 120,000(3)(6) 120,000 -0- -0-
G-V Capital Corp........................................... 120,000(3) 120,000 -0- -0-
Quad Capital Partners...................................... 60,000(7) 60,000 -0- -0-
Michael Miller............................................. 60,000(7) 60,000 -0- -0-
Manhattan Group Funding.................................... 30,000(8) 30,000 -0- -0-
Universal Partners L.P..................................... 60,000(7) 60,000 -0- -0-
Kenneth Orr................................................ 120,000(3) 120,000 -0- -0-
Murat and Ender Agirnasli.................................. 30,000(8) 30,000 -0- -0-
Kenneth J. Koock........................................... 30,000(8) 30,000 -0- -0-
M.H. Meyerson & Co., Inc................................... 30,000(8)(9) 30,000 -0- -0-
Alliance Capital Investments Corp.......................... 240,000(10) 240,000 -0- -0-
ASN Voice & Data Corp...................................... 15,000(11) 15,000 -0- -0-
Interpacific Capital Corp.................................. 180,000(4) 180,000 -0- -0-
Jeanette Flam and Barry Gresser............................ 60,000(7) 60,000 -0- -0-
Plane Tree Corp. NV........................................ 30,000(8) 30,000 -0- -0-
Theo Muller................................................ 120,000(3) 120,000 -0- -0-
Jerry Kaplan............................................... 15,000(10) 15,000 -0- -0-
OK Associates Pension Trust................................ 30,000(8)(5) 30,000 -0- -0-
William Orzolek............................................ 75,000(12) 75,000 -0- -0-
KanKap, Inc................................................ 91,300(13) 91,300 -0- -0-
Barry Schwartz............................................. 4,167(14) 4,167 -0- -0-
Al D'Ulisse................................................ 4,166(14) 4,166 -0- -0-
</TABLE>

(2) Based on 3,868,730 shares of Common Stock outstanding as of November 4,
1996.

(3) Consists of 40,000 shares of Common Stock and Warrants to purchase 80,000
shares of Common Stock all of which are registered for sale hereby.

(4) Consists of 60,000 shares of Common Stock and Warrants to purchase 120,000
shares of Common Stock all of which are registered for sale hereby.

(5) Does not include any portion of the 40,000 Placement Agent's Warrants held
by G-V Capital Corp. of which Mr. Lawrence Kaplan is an officer, director
and stockholder, or of OK Associates Pension Trust of which Mr. Kaplan is a
partner, or of Quad Capital Partners of which Mr. Kaplan is a partner.

<PAGE>
(6) Does not include any portion of the shares of Common Stock of Quad Capital
Partners of which Mr. Stanley Kaplan is a partner.

(7) Consists of 20,000 shares of Common Stock and Warrants to purchase 40,000
shares of Common Stock all of which are registered for sale hereby.

(8) Consists of 10,000 shares of Common Stock and Warrants to purchase 20,000
shares of Common Stock all of which are registered for sale hereby.

(9) Does not include any shares that may be held by such Selling
Securityholder, a NASD member firm, in its firm trading account.

(10) Consists of 80,000 shares of Common Stock and Warrants to purchase 160,000
shares of Common Stock all of which are registered for sale hereby.

(11) Consists of 5,000 shares of Common Stock and Warrants to purchase 10,000
shares of Common Stock all of which are registered for sale hereby.

(12) See "Shares Eligible for Future Sales," for information concerning Mr.
Orzolek's lock-up agreement concerning these shares.

(13) Issuable upon conversion of a $258,000 promissory note currently held by
KanKap, Inc.

(14) May be issued by the Company at the election of these Selling
Securityholders pursuant to an agreement for the sale of certain assets and
liabilities to the Company.

DESCRIPTION OF SECURITIES

AUTHORIZED STOCK

The authorized capital stock of the Company consists of 6,000,000 shares of
Common Stock, $.001 par value per share and 1,000 shares of Series B Preferred
Stock, $.001 par value per share.

SERIES B PREFERRED STOCK

In March 1996, the Company amended its Certificate of Incorporation to
authorize the issuance of 1,000 shares of Series B Preferred Stock, which shares
were issued to Joseph Ende. See "Principal Stockholders." As sole stockholder of
the Series B Preferred Stock, which votes as a separate class, Mr. Ende has the
exclusive right to elect a majority of the Company's Board of Directors until
the earlier of March 31, 2001 or the reporting by the Company of at least $75
million in net sales for any fiscal year through December 31, 2000 (the
"Redemption Date"). The determination of whether the Company has achieved $75
million in net sales shall be determined by the Company and reported on its
audited financial statements. THIS THRESHOLD HAS BEEN ARBITRARILY SELECTED BY
THE COMPANY AND IS NOT TO BE CONSTRUED AS A PROJECTION OF FUTURE COMPANY
OPERATIONS.

The holder of the Series B Preferred Stock has the right to receive
cumulative dividends in cash at the rate of $4.00 per share per annum (8% of the
$50,000 basis) payable upon the date of conversion or redemption of the Series B
Preferred Stock. Commencing on the Redemption Date, the shares of Series B
Preferred Stock will be convertible at the rate of $5.00 per share into 10,000
shares of Common Stock. The Series B Preferred Stock is non-transferable and
shall automatically be redeemed upon Mr. Ende's death or resignation from the
Company. The holder of the Series B Preferred Stock is otherwise entitled to one
vote per Share on any other matter which the holders of Common Stock of the
Company are entitled to vote their shares. In the event of any liquidation,
dissolution or winding-up of the Company, the holder of shares of Series B
Preferred Stock is entitled to an aggregate preference of $50,000. Any remaining
proceeds of liquidation will be distributed, pro rata, to holders of Common
Stock.

UNITS

Each Unit consists of one share of Common Stock and two Warrants. The
Common Stock and Warrants comprising the Units are immediately detachable and
separately transferable.

<PAGE>
COMMON STOCK

The holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. The holders
of shares of Common Stock do not have cumulative voting rights for the election
of directors. There are no preemptive, subscription, conversion or redemption
rights pertaining to the shares of Common Stock. Holders of shares of Common
Stock are entitled to receive dividends when, as and if declared by the Board of
Directors from funds legally available therefor, and to share ratably in the
assets of the Company available upon liquidation, dissolution or winding up of
the Company, subject to any superior rights of the holders of Preferred Stock.
All of the 3,868,730 outstanding shares of Common Stock are, and the shares of
Common Stock offered hereby, upon issuance and when paid for, will be, duly
authorized, validly issued, fully paid and non-assessable.

WARRANTS

There are 900,000 Class A Common Stock Purchase Warrants issued and
outstanding as of the date of this Prospectus. An additional 80,000 Warrants are
issuable upon exercise of the Placement Agent's Warrants.

The Warrants entitle the registered holder thereof to purchase one share of
Common Stock at a price of $3.80 per share, subject to adjustment under certain
circumstances, at any time until August 13, 1999.

The Warrants contain provisions that protect the holders thereof against
certain types of dilution. The exercise price and the number of common shares or
other securities issuable on exercise of the Warrants are subject to adjustment
in certain circumstances including, but not limited to, dividends, splits or
reclassifications.

During a period commencing sixty (60) days (subject to reduction with the
consent of the Placement Agent) after the effective date of this registration
statement registering the Common Stock underlying the Warrants for sale without
further restriction (the "Effective Date") and continuing for such time as said
registration statement is effective (the "First Redemption Period"), the Company
may redeem up to twenty-five percent (25%) of the Warrants upon thirty (30)
days' prior written notice to the record holders thereof (a "Redemption
Notice"). During a period commencing one hundred eighty (180) days (subject to
reduction with the consent of the Placement Agent) after the Effective Date and
continuing for such time as said registration statement is effective (the
"Second Redemption Period"), the Company may redeem on a cumulative basis, up to
fifty percent (50%) of the Warrants commencing thirty (30) days after the
mailing of a Redemption Notice. During a period commencing two hundred seventy
(270) days (subject to reduction with the consent of the Placement Agent) after
the Effective Date and continuing for such time as said registration statement
is effective (the "Third Redemption Period"), the Company may redeem, on a
cumulative basis, up to one hundred percent (100%) of the Warrants commencing
thirty (30) days after the mailing of a Redemption Notice. Notwithstanding the
foregoing, the Company shall have no right to redeem Warrants unless (i) the
Common Stock underlying the Warrants may be sold by the holders thereof without
restriction upon or after the exercise thereof at all times after the date of a
Redemption Notice until their redemption, (ii) with respect to the First
Redemption period, the Second Redemption Period and the Third Redemption Period,
the closing bid price of the Common Stock has equaled or exceeded $5.25 per
share for any twenty (20) consecutive trading days from and after a date
commencing sixty (60) days prior to the commencement of each such Redemption
Period, and (iii) Warrants are redeemed on a PRO RATA basis among the record
holders thereof as of the date of the Redemption Notice. The holders of Warrants
shall have the right to exercise the Warrants until the close of business on the
date fixed for redemption.

No Warrants will be exercisable unless at the time of exercise there is (i)
a current prospectus covering the issuance of the Warrant Shares upon the
exercise of such Warrants under an effective registration statement filed with
the SEC or (ii) an available exemption from registration applies to the issuance
of the Warrant Shares upon the exercise of such Warrants and such issuance has
been qualified or is exempt from qualification under the securities laws of the
state of residence of the holder of such Warrants.

No fractional shares will be issued upon exercise of the Warrants. However,
if a holder exercises all Warrants then owned of record by him, the Company will
pay to such holder, in lieu of the issuance of any fractional share which is
otherwise issuable, an amount in cash based on the market value of the Common
Stock on the last trading day prior to the exercise date.

<PAGE>
Warrants are generally more speculative than Common Stock which are
purchasable upon the exercise thereof. Historically, the percentage increase or
decrease in the market price of a warrant has tended to be greater than the
percentage increase or decrease in the market price of the underlying common
shares. A warrant may become valueless, or of reduced value, if the market price
of the common shares decreases, or increases only modestly, over the term of the
warrant.

The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Company, with the exercise
form attached to the Warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price for the number of Warrants
being exercised. The holders of Warrants do not have the right or privileges of
holders of Common Stock.

PLACEMENT AGENT'S WARRANTS

In connection with the Private Placement, the Company issued Placement
Agent's Warrants to purchase from the Company 40,000 Units at an exercise price
equal to $2.50 per Unit, or an aggregate of $100,000. Each Unit consists of one
share of Common Stock and two Warrants. The Placement Agent's Warrants are
exercisable for a period of three years ending August 13, 1999. The holders of
the Placement Agent's Warrants have no voting, dividend or other rights as
shareholders of the Company unless and until the exercise of such warrants. The
number of securities deliverable upon any exercise of the Placement Agent's
Warrants are subject to adjustment to protect against dilution upon the
occurrence of certain events. The Placement Agent has been granted certain
demand and piggy-back registration rights with respect to the Common Stock
underlying the Placement Agent's Warrants all of which shares are registered as
part of this Registration Statement.

DELAWARE LAW ANTI-TAKEOVER LAW

Under Section 203 of the Delaware GCL (the "Delaware anti-takeover law"),
certain "business combinations" are prohibited between a Delaware corporation,
the stock of which is generally publicly traded or held of record by more than
2,000 stockholders, and an "interested stockholder" of such corporation for a
three-year period following the date that such stockholder became an interested
stockholder, unless (i) the corporation has elected, in its certificate of
incorporation, not to be governed by the Delaware anti-takeover law (the Company
has not made such an election), (ii) the business combination was approved by
the board of directors of the corporation before the other party to the business
combination became an interested stockholder, (iii) upon consummation of the
transaction that made it an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
commencement of the transaction (excluding voting stock owned by directors who
are also officers or held in employee benefit plans in which the employees do
not have a confidential right to tender or vote stock held by the plan), or (iv)
the business combination was approved by the board of directors of the
corporation and ratified by 66 2/3% of the voting stock which the interested
stockholder did not own. The three-year prohibition also does not apply to
certain business combinations proposed by an interested stockholder following
the announcement or notification of certain extraordinary transactions involving
the corporation and a person who had not been an interested stockholder during
the previous three years or who became an interested stockholder with the
approval of a majority of the corporation's directors. The term "business
combination" is defined generally to include mergers or consolidations between a
Delaware corporation and an interested stockholder, transactions with an
interested stockholder involving the assets or stock of the corporation or its
majority-owned subsidiaries and transactions which increase an interested
stockholder's percentage ownership of stock. The term "interested stockholder"
is defined generally as those stockholders who become beneficial owners of 15%
or more of a Delaware corporation's voting stock.

TRANSFER AGENT, REGISTRAR AND WARRANT AGENT

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.

REPORTS TO SHAREHOLDERS

The Company furnishes its stockholders with annual reports containing
audited financial statements and other periodic reports containing unaudited
financial statements as the Company may determine to be appropriate or as may be
required by law.

<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

The Company had 3,868,730 shares of Common Stock outstanding as of November
4, 1996, of which approximately 3,217,424 shares (including 525,000 shares
registered hereby) are deemed to be "restricted securities," as that term is
defined under Rule 144 promulgated under the Securities Act, in that such shares
were issued and sold by the Company in private transactions not involving a
public offering. In addition, the Company has reserved for issuance 900,000
shares of Common Stock upon exercise of Warrants offered hereby, 120,000 shares
of Common Stock upon full exercise of the Placement Agent's Warrants, 339,000
shares of Common Stock upon exercise of outstanding stock options, up to 261,000
shares for issuance upon exercise of options reserved for grant under the 1994
and 1995 Plans, and up to 94,922 reserved for issuance under the Employee Stock
Bonus Plan. The 700,000 shares authorized under the Plans are registered for
sale on the S-8. Approximately 1,115,141 of the 3,217,424 currently outstanding
restricted securities are currently eligible for sale under Rule 144, however,
2,684,000 of such shares are subject to lock-up agreements with the Company's
Placement Agent, as described below.

In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or person whose shares are aggregated), who has owned restricted
Common Stock beneficially for at least two years is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1%
(currently 38,687 shares) of the total number of outstanding shares of the same
class or, if the Common Stock are quoted on the Nasdaq system, the average
weekly trading volume during the four calendar weeks preceding the sale. A
person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the volume limitations described above.

No prediction can be made as to the effect, if any, that market sales of
Common Stock or the availability of such shares for sale will have on the market
prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.

Joseph Ende, the Company's President and principal stockholder, has entered
into a lock-up agreement with the Placement Agent, not to sell or otherwise
dispose of his 2,609,333 shares of the Company for a one-year period ending
August 13, 1997, without the prior written consent of the Placement Agent.
Notwithstanding the foregoing, the Placement Agent will not unreasonably
withhold its consent to sales made by Mr. Ende pursuant to Rule 144, of up to
the 1% volume limitation of Rule 144; provided such sales are directed through
or at the direction of the Placement Agent and, provided further, that such Rule
144 sales are at: market prices if the closing bid price of the Company's Common
Stock is then below $5 per share; a discount not to exceed 15% if the closing
bid price of the Company's Common Stock is then between $5 and $8 per share, and
a discount not to exceed 20% if the closing bid price of the Company's Common
Stock is above $8 per share.

William Orzolek, a non-affiliated Selling Securityholder has entered into a
lock-up agreement with the Placement Agent not to sell or otherwise dispose of
his 75,000 shares of the Company for a one-year period ending August 13, 1997
without the prior written consent of the Placement Agent. Notwithstanding the
foregoing, Mr. Orzolek was permitted to register for sale such 75,000 shares of
Common Stock on this Registration Statement. The first 15,000 shares may be sold
by Mr. Orzolek without restriction. Commencing 90 days from the Effective Date,
Mr. Orzolek may sell an additional 15,000 shares of Common Stock, and commencing
each 90 day period thereafter an additional 15,000 shares of Common Stock until
an aggregate of 75,000 shares are sold; provided such sales are directed through
or at the direction of the Placement Agent and are at market prices.

ADDITIONAL REGISTRATION RIGHTS

The holder of an additional 131,320 shares of Common Stock of the Company
not offered hereby has been granted one demand registration right and certain
piggyback registration rights relating to such shares of Common Stock through
January 2000. These securities were purchased in a private transactions with an
investor in January 1995. The piggyback registration rights do not apply to
registrations relating to mergers, acquisitions or

<PAGE>
pursuant to Form S-8 (or any successor form), nor do they apply if the
stockholder is able to sell his shares pursuant to Rule 144 under the Securities
Act.

PLAN OF DISTRIBUTION

The Selling Securityholders are offering the Securities for their own
account and not for the account of the Company. The Selling Securityholders may
continue to sell the Securities directly to purchasers or, alternatively, may
offer the Securities from time to time through other agents, brokers, dealers or
underwriters, who may receive compensation in the form of concessions or
commissions from the Selling Securityholders. Sales of the Securities may be
made in one or more transactions on Nasdaq, in privately negotiated transactions
or otherwise, and such sales may be made at the market price prevailing at the
time of sale, a price related to such prevailing market price or a negotiated
price. The sale of the Securities is subject to the Prospectus delivery and
other requirements of the Act.

Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Common Stock of the Company offered by this Prospectus
may not simultaneously engage in market-making activities with respect to the
Common Stock of the Company during the applicable "cooling off" period (9
business days) prior to the commencement of such distribution. In addition, and
without limiting the foregoing, the Selling Securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Common Stock by the
Selling Securityholders.

To the extent required, the Company will use its best efforts to file,
during any period in which offers or sales are being made, one or more
amendments or supplements to this Prospectus or a new registration statement
with respect to the Securities to describe any material information with respect
to the plan of distribution not previously disclosed in this Prospectus,
including the name or names of any additional underwriters, dealers or agents,
if any, the purchase price paid by the underwriter for Securities purchased from
a Selling Securityholder, and any discounts, commissions or concessions allowed
or reallowed or paid to dealers.

COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the issuer pursuant
to the foregoing provisions or otherwise, the issuer has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

LEGAL MATTERS

The legality of the Securities offered hereby will be passed upon for the
Company by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York 10158.

EXPERTS

The consolidated financial statements of the Company as of and for the year
ended December 31, 1995, appearing herein, have been included in reliance upon
the report of Deloitte & Touche LLP, independent auditors, given upon the
authority of said firm as experts in accounting and auditing. The consolidated
financial statements of the Company as of and for the year ended December 31,
1994, appearing herein, have been included in reliance upon the report of
Goldstein Golub Kessler & Company, P.C., independent auditors, given upon the
authority of said firm as experts in accounting and auditing. The consolidated
financial statements of the Company for the year ended December 31, 1993 have
been included in reliance upon the report of Borek, Stockel & Marden,
independent auditors, given upon the authority of said firm as experts in
accounting and auditing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure."

<PAGE>
ADDITIONAL INFORMATION

The Company has filed a Registration Statement on Form S-1 under the
Securities Act of 1933 (File No. 333-13533) with the Commission for the
registration of the securities offered by this Prospectus. The Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering reference is made to the Registration Statement, including the exhibits
filed therewith. The statements contained in this Prospectus as to the contents
of any contract or other document are not necessarily complete and where the
contract or other document has been filed as an exhibit to the Registration
Statement, each such statement is qualified in all respects by such reference to
the applicable document filed with the Commission. The Registration Statement
and other information can be examined without charge at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the following Regional Offices
of the Commission: Northeast Regional Office, 7 World Trade Center, 13th Floor,
New York, New York 10048; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60611-2511. Copies of any such material can be
obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, 450 5th Street, N.W., Washington, D.C.
20549.

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC.

INDEX TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

(AUDITED)

<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Independent Auditor's Reports.......................................................................... F-1-3
Financial Statements:
Balance Sheets....................................................................................... F-4
Statements of Operations............................................................................. F-5
Statements of Stockholders' Equity................................................................... F-6
Notes To Financial Statements........................................................................ F-7-13
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
Balance Sheets....................................................................................... F-14
Statements of Income................................................................................. F-15
Statements of Cash Flows............................................................................. F-16
Notes To Financial Statements........................................................................ F-17-18
</TABLE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
BRAKE HEADQUARTERS USA, INC.

We have audited the accompanying consolidated balance sheet of Brake
Headquarters USA, Inc. and subsidiaries as of December 31, 1995, and the related
statements of operations, shareholders' equity, and cash flows for the year then
ended. These consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Brake Headquarters USA, Inc.
and subsidiaries as of December 31, 1995, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.

As discussed in Note 5 to the consolidated financial statements, the
Company commenced an action against a former customer to collect approximately
$971,000 of accounts receivable. The defendant has filed a counterclaim against
the Company and the Company's President seeking compensatory and punitive
damages. The Company intends to vigorously pursue its claim against the
defendant and has denied the defendant's counterclaims. The ultimate outcome or
such litigation cannot presently be determined. Accordingly, no provision for
any liability that may result upon resolution of the counterclaim has been made
in the accompanying consolidated financial statements.

DELOITTE & TOUCHE LLP

Stamford, Connecticut
February 25, 1994

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
BRAKE HEADQUARTERS USA, INC.

We have audited the accompanying consolidated balance sheet of Brake
Headquarters USA, Inc. and subsidiaries ( formerly Sanyo Industries, Inc.) as of
December 31, 1994, and the related statements of operations, shareholders'
equity, and cash flows for the year then ended. These consolidated 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Brake
Headquarters USA, Inc. and subsidiaries as of December 31, 1994, and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.

GOLDSTEIN GOLUB KESSLER & COMPANY,
P.C.

New York, New York
February 8, 1995

F-2

<PAGE>
INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS
BRAKE HEADQUARTERS USA, INC.

We have audited the accompanying consolidated balance sheet of Brake
Headquarters USA, Inc. and subsidiaries as of December 31, 1993, and the related
statements of operations, shareholders' equity, and cash flows for the year then
ended. These consolidated 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.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Brake Headquarters USA, Inc.
and subsidiaries as of December 31, 1993, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.

BOREK, STOCKEL & MARDEN

Port Chester, New York
February 25, 1994

F-3

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................. $ 17,895 $ 11,991
Accounts receivable, less allowance for doubtful accounts of $287,891 and
$75,000....................................................................... 5,623,117 4,309,862
Inventory........................................................................ 7,873,131 6,439,616
Prepaid expenses and other current assets........................................ 387,767 417,805
Due from President............................................................... 51,604 --
Deferred tax asset............................................................... 345,345 122,678
TOTAL CURRENT ASSETS........................................................ 14,298,859 11,301,952
Property and Equipment -- net...................................................... 921,120 324,769
Other Assets....................................................................... 276,315 310,422
TOTAL ASSETS................................................................ $15,496,294 $11,937,143
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, accrued expenses and other current liabilities................. $ 2,869,762 $ 2,156,690
Notes and acceptances payable.................................................... 8,075,196 5,054,820
Current portion of long-term debt................................................ 65,038 57,667
Income taxes payable............................................................. -- 326,536
11,009,996 7,595,713
Note Payable -- Shareholder........................................................ -- 37,063
Long-term Debt..................................................................... 630,494 179,406
11,640,490 7,812,182
Commitments and Contingencies (see notes)
SHAREHOLDERS' EQUITY:
Series A preferred stock -- $.25 par value; authorized 2,200,000 shares,
2,000,000 shares issued in 1994............................................... -- 500,000
Common stock -- $.001 par value; authorized 20,000,000 shares, issued and
outstanding 3,416,197 and 2,621,467 shares.................................... 3,416 2,622
Additional paid-in capital....................................................... 13,014,260 12,490,455
Accumulated deficit.............................................................. (9,161,872) (8,870,070)
Cumulative foreign currency translation adjustment............................... -- 1,954
TOTAL SHAREHOLDERS' EQUITY.................................................. 3,855,804 4,124,961
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................. $15,496,294 $11,937,143
</TABLE>

See Notes to Consolidated Financial Statements

F-4

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Sales............................................................... $32,383,302 $26,129,165 $18,655,073
Less returns and allowances....................................... 1,919,572 1,034,692 938,050
Net sales........................................................... 30,463,730 25,094,473 17,717,023
Cost of goods sold.................................................. 22,409,932 18,390,321 13,385,242
Gross profit........................................................ 8,053,798 6,704,152 4,331,781
Operating expenses:
Selling, general and administrative............................... 7,238,924 5,198,689 3,961,772
Non-cash compensatory charges..................................... -- 2,314,000 --
Settlement of litigation.......................................... -- 232,500 --
Public offering costs............................................. 248,000 -- --
7,486,924 7,745,189 3,961,772
Income (loss) from operations....................................... 566,874 (1,041,037) 370,009
Other income (expense):
Interest expense.................................................. (774,762) (520,602) (314,796)
Gain (loss) on foreign currency transactions...................... 2,816 (12,270) 3,431
(771,946) (532,872) (311,365)
Income (loss) before provision (benefit) for income taxes........... (205,072) (1,573,909) 58,644
Provision (benefit) for income taxes................................ (26,000) 395,000 17,457
Net income (loss)................................................... $ (179,072) $(1,968,909) 41,187
Net loss per common and common equivalent share..................... $ (0.06) $ (0.92) $ (0.00)
Weighted average number of common and common equivalent shares
outstanding....................................................... 3,058,968 2,188,414 2,618,321
</TABLE>

See Notes to Consolidated Financial Statements

F-5

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TOTAL
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1,
1993..................... 2,000,000 $ 500,000 1,875,500 $1,875 $ 8,634,785 $(6,942,348) -- $ 2,194,312
Net Income................. -- -- -- -- -- 41,187 -- 41,187
BALANCE AT DECEMBER 31,
1993..................... 2,000,000 500,000 1,875,500 1,875 8,634,785 (6,901,161 ) -- 2,235,499
Release of 1994 escrow
shares to President...... -- -- -- -- 273,125 -- -- 273,125
Exercisability of Class F
warrants................. -- -- -- -- 74,375 -- -- 74,375
Excess common shares issued
upon conversion of
preferred stock.......... -- -- -- -- 1,966,500 -- -- 1,966,500
Issuance of common stock in
connection with exercise
of Class D warrants...... -- -- 41,667 42 16,625 -- -- 16,667
Issuance of common stock
for cash in connection
with exercise of
warrants................. -- -- 702,500 702 1,489,048 -- -- 1,489,750
Issuance of common stock
for services............. -- -- 1,800 2 35,998 -- -- 36,000
Net loss................... -- -- -- -- -- (1,968,909 ) (1,968,909 )
Foreign currency
translation adjustment... -- -- -- -- -- -- $ 1,954 1,954
BALANCE AT DECEMBER 31,
1994..................... 2,000,000 500,000 2,621,467 2,621 12,490,456 (8,870,070 ) 1,954 4,124,961
Conversion of preferred
stock.................... (2,000,000) (500,000) 1,000,000 1,000 499,000 -- -- --
Foreign currency
translation adjustment... -- -- -- -- -- -- (1,954 ) (1,954)
Dividends declared......... -- -- -- -- -- (112,730 ) -- (112,730)
Issuance of common stock in
connection with exercise
of Class F warrants...... -- -- 41,666 42 16,625 -- -- 16,667
Employee Stock Bonus
Plan..................... -- -- 3,064 3 7,929 -- -- 7,932
Return of 1993 Escrow
shares to treasury and
retirement of such
shares................... -- -- (250,000) (250 ) 250 -- -- --
Net loss................... -- -- -- -- -- (179,072 ) -- (179,072)
BALANCE AT DECEMBER 31,
1995..................... 0 $ 0 3,416,197 $3,416 $13,014,260 $(9,161,872) $ 0 $ 3,855,804
</TABLE>

F-6

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS ACTIVITY -- Brake Headquarters U.S.A., Inc. (formerly Sanyo
Industries, Inc.) and subsidiaries (the "Company") sells a complete line of
brake system parts and accessories primarily to retailers and other wholesalers.
Revenue from the sale of these products is recorded at the time the products are
shipped. During 1995, the Company closed its Canadian subsidiary and wrote-off
substantially all of its remaining assets and liabilities. This resulted in a
net gain of approximately $39,000.

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Brake Headquarters U.S.A., Inc. and its wholly-owned
subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.

INVENTORY -- Inventory, consisting of brake system finished goods and
accessories, is stated at the lower of cost (first-in, first-out method) or
market.

DEPRECIATION -- Depreciation of property and equipment is provided for by
the straight-line method over the estimated useful lives of the related assets
(5 to 40 years). Leasehold improvements are amortized over the lesser of the
term of the respective lease or the estimated useful lives of the improvements
(5 to 40 years).

INCOME TAXES -- The Company recognizes deferred income tax assets and
liabilities for the expected future tax consequences of temporary differences
between the financial reporting basis and the tax basis of assets and
liabilities.

CONCENTRATION OF CREDIT RISK -- The Company's customer base consists
primarily of retailers and wholesalers of brake system replacement parts
throughout North America. On a geographic basis, no area has a disproportionate
concentration of credit risk. During the years ended December 31, 1995, 1994 and
1993, less than 10% of the Company's sales were derived from foreign customers.
Although the Company is directly affected by the well-being of the brake system
replacement parts industry, management does not believe significant credit risk
exists at December 31, 1995. The Company performs ongoing credit evaluations of
its customers' financial conditions. When amounts on specific accounts
receivable are judged to be uncollectible by management, those amounts are
charged to the allowance for doubtful accounts. During the year ended December
31, 1995, the Company had sales to one customer that accounted for 17% of the
Company's net sales. As of December 31, 1995, the Company has an accounts
receivable of approximately $971,000 from a former customer. See Note 6.

STOCK SPLIT -- In August 1995, the Company effected a 1 for 10 reverse
split of its common stock. In February 1993, the Company effected a 1 for 2
reverse split of its common stock. All references in the accompanying
consolidated financial statements to the number of common shares and per share
amounts have been retroactively restated to reflect the reverse splits.

NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE -- Net loss per common and
common equivalent share is based on the weighted average number of common and
common equivalent shares (when dilutive) outstanding during the year computed in
accordance with the treasury stock method. Net loss used in the determination of
loss per share has been adjusted for preferred dividend requirements.
Contingently returnable shares are not considered outstanding for loss per share
unless all conditions for release have been attained.

MANAGEMENT ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from those estimates.

PUBLIC OFFERING COSTS -- The Company has postponed raising additional funds
through a secondary offering due to market conditions. The Company expensed
costs associated with the offering totaling $248,000 during 1995.

F-7

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- PRINCIPAL BUSINESS ACTIVITY AND SIGNIFICANT ACCOUNTING
POLICIES -- Continued
STOCK OPTIONS -- In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which will be effective for the Company beginning
January 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share.

DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS -- The fair value of
the Company's credit facilities approximates fair value and is estimated based
on the quoted market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining maturities.

NOTE 2 -- NOTES AND ACCEPTANCES PAYABLE

The Company has agreements with two banks to provide lines of credit,
bankers' acceptances and letters of credit. The maximum availability under these
agreements at December 31, 1995 was $9,000,000. The lines of credit and bankers'
acceptances bear interest at rates ranging from 3/4-1% per annum above the
bank's prime rate (8 1/2% at December 31, 1995). The lines of credit expire at
various dates through June 30, 1996. In February 1996, the Company refinanced
and expanded by $1,000,000 one of its bank agreements. The Company currently has
total available credit of $10,000,000. The new 2 year agreement allows for
borrowings of up to $5,000,000 based upon levels of accounts receivable and
inventory. The other line of credit will be reviewed for renewal. The notes and
acceptances payable are collateralized by substantially all of the assets of the
Company and are partially guaranteed by the Company's President/majority
shareholder (the "President"). One of the agreements contains covenants which
require the maintenance of certain amounts of net worth and financial ratios. At
December 31, 1995, the Company had outstanding letters of credit of
approximately $28,000. In addition, during 1995, the Company obtained a $258,000
short-term loan from an individual which is due in August 1996, payable in cash
or in common stock at the option of the Company. The loan bears interest at 8%
per annum.

The outstanding balances are as follows:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Lines of credit....................................................................... $4,030,000 $3,252,678
Bankers' acceptances.................................................................. 3,787,196 1,802,142
Short-term note payable............................................................... 258,000 --
$8,075,196 $5,054,820
</TABLE>

NOTE 3 -- LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Note payable -- economic development loan (a)............................................. $ 65,532 $ 86,564
First mortgage -- bank (b)................................................................ 390,000 --
Second mortgage -- State Finance Authority (c)............................................ 240,000 --
Notes payable -- business improvement loans (d)........................................... -- 150,509
695,532 237,073
Less current portion............................................................... 65,038 57.667
$630,494 $179,406
</TABLE>

F-8

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 3 -- LONG-TERM DEBT -- Continued

(a) The economic development loan bears interest at 5% per annum and is payable
in monthly installments of $2,072 through November 1998. The note is
collateralized by certain property and equipment.

(b) The first mortgage, dated December 8, 1995, is payable to a bank, bears
interest at 7.36% per annum and is secured by the Company's Illinois
facility. This mortgage is being amortized over a ten year period in monthly
principal and interest installments of $4,602.

(c) The second mortgage, dated December 11, 1995, is payable to the Illinois
Development Finance Authority, bears interest at prime and is secured by the
Company's Illinois facility as well as a second lien on certain equipment.
This mortgage is payable in monthly installments of principal and interest
necessary to fully amortize the loan by January 1, 2005.

(d) Six business improvement loans from a Canadian bank bearing interest at the
rate of prime plus 1% (9.25% at December 31, 1994). Each note was payable in
60 monthly installments ranging from $136 to $1,916. The notes were repaid
by the transfer of certain machinery and equipment to the lender.

Aggregate maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1996..................................................................... $ 65,038
1997..................................................................... 69,712
1998..................................................................... 70,556
1999..................................................................... 54,493
2000..................................................................... 59,000
Thereafter............................................................... 376,733
$695,532
</TABLE>

NOTE 4 -- SHAREHOLDERS' EQUITY

ESCROW AGREEMENT -- Pursuant to a business combination in 1992, the Company
and the President entered into an agreement for the issuance of 750,000 shares
of common stock held in escrow (the "Escrow Shares"). The escrow agreement, as
amended, provided for the Escrow Shares to be released upon the Company's
attainment of certain pre-tax income levels, as defined, for the years ended
December 31, 1992, 1993 and 1994. The President was also issued warrants to
purchase an aggregate of 125,000 shares (41,667 shares per year, warrant Classes
D, E, and F, respectively) of the Company's common stock at $.40 per share,
provided that the Company meets the same respective pre-tax income levels
described above. The attainment of the respective pre-tax income levels, which
result in the release of the Escrow Shares and exercisability of the warrants,
were deemed to be compensatory and resulted in a charge to operations equal to
(1) the fair market value of the Escrow Shares measured as of the last day in
the respective year in which the pre-tax income level was attained, and (2) the
fair market value of the shares to be issued upon the exercise of the warrants
measured as of the last day in the respective year in which the pre-tax income
level was attained less the exercise price to be paid. The charges related to
the release and issuance of these shares are not deductible for income tax
purposes.

During the year ended December 31, 1994, the 41,667 Class D warrants were
exercised by the President; in addition, a total of 375,000 shares were released
from escrow since the Company met the 1992 pre-tax income level. The Company did
not meet the 1993 pre-tax income level, and accordingly, 250,000 shares were
returned to the treasury of the Company and the Class E warrants were not
exercisable. Since the Company attained the 1994 pre-tax income levels, as
defined, 125,000 shares were released from escrow to the President and the
41,667 Class F warrants were exercised during 1995.

F-9

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4 -- SHAREHOLDERS' EQUITY -- Continued
The President disputed the 1993 forfeiture of shares, but waived any claims
he had against the Company in exchange for the July 1995 grant of a
non-qualified stock option to purchase 180,000 shares of Common Stock under the
1995 Plan.

On March 30, 1994, Class A, B and C warrants were exercised and converted
into common stock as follows:

<TABLE>
<CAPTION>
EXERCISE
PRICE NUMBER OF
PER WARRANTS
CLASS WARRANT EXERCISED AMOUNT
<S> <C> <C> <C>
A................................................. $.09 6,975,000 $ 627,750
B................................................. .12 6,975,000 837,000
C................................................. .25 100,000 25,000
14,050,000 $1,489,750
</TABLE>

Since each warrant was convertible into one-twentieth share of common
stock, the number of common shares outstanding was increased by 702,500 shares
of common stock and additional paid-in-capital was increased by $702 and
$1,489,048, respectively.

COMMON STOCK -- In August 1995, the Company increased its authorized common
stock (post split) to 20,000,000 shares. In March 1996, the Company decreased
its authorized common stock to 6,000,000 shares.

PREFERRED STOCK -- Each share of Series A preferred stock, all of which was
owned by the President, carried a cumulative dividend of $.02 per share payable
annually. As of December 31, 1994, the Company was in arrears on the preferred
stock dividends in the amount of $99,397. On April 30, 1995, the Company
declared a dividend of $112,730 for all dividends accumulated for the period
from July 9, 1992 to April 30, 1995. The dividends were unpaid as of December
31, 1995. Since certain cumulative financial operating goals were achieved
during the three-year period ended December 31, 1994, each share of Series A
preferred stock was automatically converted into shares of common stock on April
30, 1995. The excess common shares issued (the "Excess Common Shares") upon
attainment of such operating goals were deemed to be compensatory and were
measured by the fair market value of the Excess Common Shares as of December 31,
1994.

In March 1996, the Company amended its Certificate of Incorporation to
authorize the issuance of 1,000 shares of Series B preferred stock to be held by
the President. As the sole shareholder of the Series B preferred stock, which
will vote as a separate class, the President has the exclusive right to elect a
majority of the Company's Board of Directors until the earlier of the redemption
date of March 31, 2001 or the reporting by the Company of at least $75,000,000
in revenue for any year through December 31, 2000. In the event of any
liquidation, dissolution or winding-up, the holder of Series B preferred stock
will be entitled to an aggregate preference of $50,000, his basis in the stock;
any remaining proceeds of liquidation will be distributed pro rata to holders of
the common stock. The amendment also eliminated all remaining authorized shares
of Series A preferred stock.

1994 EMPLOYEE STOCK OPTION PLAN

During 1994, the Company established the 1994 Employee Stock Option Plan
(the "1994 Plan"). The 1994 Plan provides for the grant of options to employees
and other parties to purchase an aggregate of 300,000 shares of common stock.
Options to purchase no more than 120,000 shares of common stock may be granted
to any one person in any two-year period. The 1994 Plan is administered by the
Board of Directors.

The 1994 Plan allows the Company to grant incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs") and stock appreciation rights ("SARs") at
any time within 10 years from the date the 1994 Plan was adopted. The exercise
price of ISOs may not be less than the fair market value of the common stock on
the date of the grant, provided that the exercise price of ISOs granted to an
optionee owning more than 10% of the

F-10

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 4 -- SHAREHOLDERS' EQUITY -- Continued
outstanding common stock may not be less than 110% of the fair market value of
the common stock on the date of grant. In addition, the aggregate fair market
value of common stock with respect to which ISOs are exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000. Options
may not have a term exceeding ten years, except that ISOs granted to an optionee
owning more than 10% of the outstanding common stock may not have a term of more
than five years and ISOs must be granted to and exercised by employees of the
Company. Since the adoption of the 1994 Plan, an aggregate of 258,000 ISOs have
been granted (of which options to purchase, 120,000 have terminated); no NQSOs
or SARs have been granted.

1995 EMPLOYEE STOCK OPTION PLAN

In July 1995, the Company established the 1995 Employee Stock Option Plan
(the "1995 Plan"). The 1995 Plan provides for the grant of options to employees
and other parties of ISOs, NQSOs and SARs to purchase an aggregate of 300,000
shares of common stock. The provisions of the 1995 Plan are identical to the
above-stated terms of the 1994 Plan.

Since the adoption of the 1995 Plan, no ISOs or SARs have been granted.
NQSOs to purchase 180,000 shares of common stock at $3.00 per share, the fair
market value on the date of grant, have been granted to the President. The
options terminate in July 2000 and are exercisable on a cumulative basis in
one-third increments on July 31, 1997, 1998 and 1999. The option becomes
immediately exercisable upon a change in control of the Company. Options to
purchase 120,000 shares of common stock remain available for grant under the
1995 Plan.

A summary of stock option transactions under employee option plans for each
of the three years in the period ended December 31, 1995 are as follows:

<TABLE>
<CAPTION>
OPTIONS OPTION PRICE
<S> <C> <C>
Outstanding January 1, 1993
Granted............................................................................. -- --
Canceled............................................................................ -- --
Outstanding December 31, 1993
Granted............................................................................. 252,000 $ 2.50-$20.00
Canceled............................................................................ (120,000) $ 20.00
Outstanding December 31, 1994......................................................... 132,000 $ 2.50
Granted............................................................................. 186,000 $ 2.25-$3.00
Canceled............................................................................ (3,000) $ 2.50
Outstanding December 31, 1995......................................................... 315,000 $ 2.25-$3.00
Exercisable:
December 31, 1994................................................................... -- --
December 31, 1995................................................................... 80,000 $ 2.50
</TABLE>

In December 1994, the Company canceled options to purchase 120,000 shares
of common stock exercisable at $20 per share, previously granted to the
President under the 1994 Plan, and re-granted such options at an exercisable
price of $2.50 per share.

EMPLOYEE STOCK BONUS PLAN

In April 1995, the Company adopted the Employee Stock Bonus Plan which
enables all full-time employees to purchase shares of common stock at 85% of the
then fair market value through payroll deductions. During 1995, 3,064 shares
were issued from the 100,000 shares available for sale under the plan.

F-11

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- INCOME TAXES

Provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal:
Current.................................................................... $ 81,000 $326,000 $ 25,431
Deferred................................................................... (123,000) (33,000) (18,238)
(42,000) 293,000 7,193
State and Local:
Current.................................................................... 47,000 118,000 15,085
Deferred................................................................... (31,000) (16,000) (4,821)
16,000 102,000 10,264
$ (26,000) $395,000 $ 17,457
</TABLE>

The total provision (benefit) for income taxes differs from that amount
which would be computed by applying the U.S. federal tax rate to the loss before
income taxes. The reasons for these differences are as follows:

<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory federal income tax rate...................................................... (34.0)% (34.0)% 34.0%
Effect of income taxed at reduced federal statutory rates.............................. -- -- (19.0)
State and local income taxes, net of federal benefit................................... 7.7 4.3 13.0
Nondeductible compensatory charges..................................................... -- 50.0 --
Permanent and other differences........................................................ 13.6 4.8 1.8
(12.7)% 25.1% 29.8%
</TABLE>

The temporary differences which give rise to the deferred tax asset of
$348,614 and $122,678 at December 31, 1995 and 1994 consist primarily of
approximately $390,000 and $171,000 of costs which were charged to operations
for financial statement purposes, but were required to be capitalized as
inventory for income tax purposes and the allowance for doubtful accounts of
$288,000 and $75,000 which represents an amount not deductible for income tax
purposes until the related asset is written-off.

The exercise of non-qualified stock options under the Company's stock
option plans give rise to compensation which is includable in the taxable income
of the recipients and deductible by the Company for federal and state income tax
purposes. Utilization of such deductions will increase additional paid-in
capital.

NOTE 6 -- COMMITMENTS AND CONTINGENCIES

The Company leases warehouse and office space under noncancelable operating
leases. Aggregate future minimum lease payments are as follows:

<TABLE>
<S> <C>
Year ending December 31,
1996................................................................... $ 376,000
1997................................................................... 370,000
1998................................................................... 361,000
1999................................................................... 184,000
2000................................................................... 22,000
Thereafter............................................................. 7,000
$1,320,000
</TABLE>

F-12

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 6 -- COMMITMENTS AND CONTINGENCIES -- Continued
Rent expense for the years ended December 31, 1995, 1994 and 1993 amounted
to approximately $354,000, $361,000 and $304,000, respectively, which includes
$312,000 in 1995 and 1994 and $302,000 in 1993 which is paid to the Company's
President.

In May 1995, the Company settled various litigation/claims for $232,500
which has been reflected in the 1994 consolidated financial statements.

In July 1995, the Company entered into a three-year employment agreement
with the President providing for a minimum annual salary of $156,000, with a
bonus at the discretion of the Board of Directors, determined based upon the
profitability of the Company. No bonus was issued for the period ended December
31, 1995.

In December 1995, the Company commenced an action against a former customer
to collect $971,000 of accounts receivable. The defendant has filed a
counterclaim against the Company and the Company's President seeking
compensatory and punitive damages of $25 million. The Company believes its claim
is meritorious and believes the counter claim against the Company is without
merit and will not have a material impact on the consolidated financial
condition of the Company.

F-13

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE
30,1996 DECEMBER
(UNAUDITED) 31, 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash............................................................................. $ 139,756 $ 17,895
Accounts receivable, less allowance for doubtful accounts of 77,821 and 287,891
respectively.................................................................. 7,747,297 5,623,117
Inventory........................................................................ 8,154,177 7,873,131
Prepaid expenses and other current assets........................................ 277,963 387,767
Due from President............................................................... 31,878 51,604
Deferred tax asset............................................................... 345,345 345,345
TOTAL CURRENT ASSETS........................................................ 16,696,415 14,298,859
Property and Equipment -- net...................................................... 921,756 921,120
Other Assets....................................................................... 225,561 276,315
TOTAL ASSETS................................................................ $17,843,732 $15,496,294
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other current liabilities................. $ 3,284,079 $ 2,869,762
Notes and acceptances payable.................................................... 5,281,456 8,075,196
Current portion of long-term debt................................................ 80,700 65,038
TOTAL CURRENT LIABILITIES................................................... 8,646,235 11,009,996
Long-term Debt..................................................................... 5,230,850 630,494
TOTAL LIABILITIES........................................................... 13,877,085 11,640,490
Commitments and Contingencies (see notes)
Shareholders' Equity:
Series A preferred stock -- $.25 par value; authorized 2,200,000 shares, none
issued........................................................................ -- --
Series B preferred stock -- $.001 par value; authorized, isssued and outstanding
1,000 shares.................................................................. 1 --
Common stock -- $.001 par value; authorized 6,000,000 and 20,000,000 shares,
issued and outstanding 3,418,730 and 3,416,197 shares......................... 3,418 3,416
Additional paid-in capital....................................................... 13,070,309 13,014,260
Accumulated deficit.............................................................. (9,107,081) (9,161,872)
TOTAL SHAREHOLDERS' EQUITY.................................................. 3,966,647 3,855,804
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................................. $17,843,732 $15,496,294
</TABLE>

See Notes to Consolidated Financial Statements

F-14

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE
SIX MONTHS ENDED JUNE 30, 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales.................................................. $18,018,775 $16,112,941 $9,572,400 $9,028,725
Less returns and allowances............................ (1,404,364) (495,901) (791,870) (205,640)
Net sales.............................................. 16,614,411 15,617,040 8,780,530 8,823,085
Cost of goods sold..................................... 12,006,050 11,406,792 6,277,367 6,431,569
Gross profit........................................... 4,608,361 4,210,248 2,503,163 2,391,516
Selling, general and administrative expenses........... 4,050,462 3,018,137 2,311,553 1,682,588
Income from operations................................. 557,899 1,192,111 191,610 708,828
Other income (expense):
Interest expense....................................... (478,108) (305,429) (211,264) (164,474)
Gain (loss) on foreign currency transactions........... -- 8,977 -- (1,390)
(478,108) (296,452) (211,264) (165,864)
Income (loss) before provision for income taxes........ 79,791 895,659 (19,654) 542,964
Provision for income taxes............................. 25,000 349,000 11,000 217,842
Net income (loss)...................................... $ 54,791 $ 546,659 $ (30,654) $ 325,122
Net income per common and common equivalent share...... 0.02 0.18 (.01) 0.10
Weighted average number of common and common equivalent
shares outstanding................................... 3,687,054 2,990,991 3,687,054 3,324,244
</TABLE>

See Notes to Consolidated Financial Statements

F-15

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers.................................................... $ 14,233,857 $ 12,637,038
Cash paid to suppliers and employees............................................ (15,436,384) (12,953,487)
Interest paid................................................................... (418,010) (305,429)
Taxes paid...................................................................... (57,606) (267,284)
NET CASH USED IN OPERATING ACTIVITIES...................................... (1,678,143) (889,162)
Cash flows used in investing activity-capital expenditures........................ (48,053) (574,036)
Cash flows from financing activities:
Net borrowings (repayments) under notes and acceptances payable................. (2,793,740) 1,146,547
Proceeds from issuance of long-term debt........................................ -- 461,040
Principal payments on long-term debt............................................ -- (58,442)
Proceeds from common stock issuance............................................. 6,052 --
Loans to President.............................................................. (20,357) --
NET CASH PROVIDED BY FINANCING ACTIVITIES.................................. 1,782,392 1,549,145
Net increase in cash.............................................................. 121,861 85,947
Cash at beginning of period....................................................... 17,895 11,991
Cash at end of period............................................................. $ 139,756 $ 97,938
Reconciliation of net loss to net cash used in operating activities:
Net income...................................................................... $ 54,791 $ 546,659
Adjustments to reconcile net income to net cash used in operating activities:
(Gain) on foreign currency transactions...................................... -- (8,977)
Depreciation and amortization................................................ 47,417 80,248
Provision for doubtful accounts.............................................. 236,374 --
Changes in assets and liabilities:
Accounts receivable........................................................ (2,360,554) (2,980,002)
Inventory.................................................................. (281,046) 230,785
Prepaid expenses and other current assets.................................. 109,804 105,834
Other assets............................................................... 50,754 27,615
Accounts payable and accrued expenses...................................... 464,317 1,108,676
NET CASH USED IN OPERATING ACTIVITIES................................... $ (1,678,143) $ (889,162)
</TABLE>

SUPPLEMENTAL INFORMATION OF NON-CASH FINANCING ACTIVITIES:

The President purchased 1,000 shares of Series B stock for $50,000 which
was paid for by a reduction in dividends payable to him.

See Notes to the Consolidated Financial Statements

F-16

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements of Brake
Headquarters U.S.A., Inc. and subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the six months
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. 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, 1995. There has
been no significant changes of accounting policies since December 31, 1995.

Earnings per common and common equivalent share is based on the weighted
number of common and common equivalent shares (when dilutive) outstanding during
the year computed in accordance with the treasury stock method. Net income used
in the determination of earnings per share has been adjusted for preferred
dividend requirements.

NOTE 2 -- NOTES AND ACCEPTANCES PAYABLE:

In February 1996, the Company refinanced one of its bank agreements with a
new two year agreement with a new bank that allows for borrowings of an
additional $1,000,000. The Company has combined lines of credit totaling
$10,000,000. The Company's second line of credit was renewed until May 1, 1997.
The notes and acceptances payable are collateralized by substantially all the
assets of the Company. The President/majority shareholder has guaranteed a
portion of one of the bank facilities when equity falls below $4,250,000. The
second loan provides for a guarantee of $1,000,000. The Company was in technical
default of several financial ratios on one of its current loans, however the
bank has provided the Company a waver for these technical defaults, and revised
certain ratios on a going forward basis.

In January 1996, the Company obtained a $69,700 loan from the City of
Fairfield, Illinois at a rate of 5% per annum, for the purpose of purchasing
equipment for the Fairfield, Illinois distribution center.

NOTE 3 -- STOCKHOLDERS' EQUITY

COMMON STOCK -- In March 1996, the Company decreased its shares of
authorized common stock to 6,000,000 shares from 20,000,000 and also eliminated
all remaining authorized shares of Series A preferred stock.

In March 1996, the Company amended its Certificate of Incorporation to
authorize the issuance of 1,000 shares of Series B preferred stock to be held by
the President. As the sole shareholder of the Series B preferred stock, which
will vote as a separate class, the President has the exclusive right to elect a
majority of the Company's Board of Directors until the earlier of the redemption
dates of March 31, 2001 or the reporting by the Company of at least $75,000,000
in revenue for any year through December 31, 2000. In the event of any
liquidation, dissolution or winding-up, the holder of the Series B preferred
stock will be entitled to an aggregate preference of $50,000, his basis in the
stock; any remaining proceeds of liquidation will be distributed pro rata to
holders of the common stock.

In March 1996, the President purchased the 1,000 shares of Series B
preferred stock. The $50,000 purchase price was funded by a reduction of the
$112,730 dividend payable to him.

In August 1996 the Company completed the initial phase of raising
additional capital through a private placement. The Company sold 450,000 units
at a purchase price of $2.50 per unit. Each unit consists of one share

F-17

<PAGE>
BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 3 -- STOCKHOLDERS' EQUITY -- Continued
of common stock and two Redeemable Common Stock Purchase Warrants each to
purchase one share of common stock of the Company at $3.80 per share until the
third anniversary of the initial closing.

NOTE 4 -- COMMITMENTS AND CONTINGENCIES

In June 1996, the Company settled an action against a former customer to
collect $971,000 of accounts receivable. Inventory totaling approximately
$459,000, was returned to the Company. The Company was required to pay the
customer $85,000. As a result of the above settlement and available reserves the
Company recorded an expense of a $212,000 in the financial statements for six
months ended June 30, 1996. Mutual releases were exchanged for all claims and
counter claims.

In July 1996, the Company entered into an agreement to purchase a new
computer system for approximately $475,000 which is financed over a five year
period.

F-18

<PAGE>

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED BY THIS
PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY, BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION IN THIS
PROSPECTUS IS CORRECT AS OF BY ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 5
Use of Proceeds...................................... 9
Price Range of Common Stock.......................... 9
Dividend Policy...................................... 10
Capitalization....................................... 11
Selected Financial Information....................... 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 13
Business............................................. 17
Management........................................... 22
Certain Relationships and Related Transactions....... 27
Principal Stockholders............................... 28
Selling Securityholders.............................. 30
Description of Securities............................ 31
Shares Eligible for Future Sale...................... 34
Plan of Distribution................................. 35
Commission Position on Indemnification for Securities
Act Liabilities.................................... 35
Legal Matters........................................ 35
Experts.............................................. 35
Additional Information............................... 36
Index to Financial Statements........................ 37
Financial Statements................................. F-1
</TABLE>

BRAKE HEADQUARTERS U.S.A., INC.

490,000 UNITS

1,644,633 SHARES
COMMON STOCK

980,000 WARRANTS

PROSPECTUS

NOVEMBER , 1996

<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses payable by the Company in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts and commissions) are estimated below:

<TABLE>
<S> <C>
SEC Registration Fee................................................................................ $ 2,082.91
Transfer Agent's Fee................................................................................ 2,000.00
Printing and Engraving Expenses..................................................................... 5,000.00
Legal Fees and Expenses............................................................................. 20,000.00
State Securities Qualification Fees and Expenses.................................................... 3,000.00
Accounting and Auditing Fees and Expenses........................................................... 15,000.00
Miscellaneous....................................................................................... 2,917.09
Total........................................................................................ $50,000.00
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Except to the extent hereinafter set forth, there is no statute, charter
provision, by-law, contract or other arrangement under which any controlling
person, director or officer of Brake Headquarters U.S.A., Inc., a Delaware
corporation (the "Company") is insured or indemnified in an manner against
liability which he may incur in his capacity as such.

The Placement Agent Agreement dated July 10, 1996 by and between the
Company and G-V Capital Corp. (the "Placement Agent") contains provisions under
which the Company has agreed to indemnify the Placement Agent (including
officers and directors of the Company and the Placement Agent and any person who
may be deemed to control the Placement Agent or the Company) against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act").

Article Seventh of the Company's Certificate of Incorporation and Article
VI of the Company's By-laws provide for the indemnification of officers and
directors to the fullest extent allowed by Section 145 of the Delaware General
Corporation Law (the "GCL").

The GCL provides, in part, that no director shall be personally liable to a
corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director, except:

(i) for breach of the director's duty of loyalty to the corporation or its
stockholders;

(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

(iii) pursuant to Section 174 of the GCL; or

(iv) for any transaction from which the director derived an improper
personal benefit. The Company shall, to the full extent permitted by the GCL, as
amended from time to time, indemnify all persons indemnifiable pursuant thereto.

ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES

1. On August 13, 1996, the Registrant issued an aggregate of 450,000 Units
of the Registrant (each Unit consisting of one share of Common Stock and two
Redeemable Common Stock Purchase Warrants each to purchase one share of Common
Stock) to 18 accredited investors, at a purchase price of $2.50 per Unit. The
Placement Agent for this offering received a commission of $84,375. The issuance
of these shares was exempt from registration under Section 4(6) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.

2. On August 13, 1996, the Registrant issued warrants to purchase 40,000
Units of the Registrant (each Unit consisting of one share of Common Stock and
two Redeemable Common Stock Purchase Warrants each to purchase one share of
Common Stock) to the Placement Agent in the above offering in consideration for
services rendered. The issuance of these shares was exempt from registration
under Section 4(2) of the Securities Act.

II-1

<PAGE>
3. From April 1, 1995 through September 27, 1996, the Registrant issued an
aggregate of 5,078 shares of Common Stock to employees of the Registrant
pursuant to the Registrant's Employee Stock Bonus Plan, at purchase prices
ranging from $1.91 to $4.62. The issuance of these shares was exempt from
registration under Rule 701 of the Securities Act.

4. From January 1, 1994 through January 5, 1996, the Registrant issued an
aggregate of 2,338 shares of Common Stock to four employees of the Company, as
bonus consideration for services rendered. The issuance of these shares was
exempt from registration under Section 4(2) of the Securities Act.

5. On May 19, 1995, the Registrant issued 1,000,000 shares of Common Stock
to Joseph Ende upon conversion of 2,000,000 shares of Preferred Stock issued to
Mr. Ende in connection with the acquisition of Sanyo Automotive. The issuance of
these shares was exempt from registratin under Section 3(a)(9) of the Securities
Act.

6. On May 19, 1995, the Registrant issued 41,666 shares of Common Stock to
Joseph Ende upon the exercise of all of the Registrant's Class F Warrants for an
aggregate consideration of $16,667. The issuance of these shares was exempt from
registration under Section 4(2) of the Securities Act.

7. On December 16, 1994, the Registrant regranted to Joseph Ende options to
purchase 120,000 shares of Common Stock at an exercise price of $2.50 per share,
pursuant to the Registrant's 1994 Employee Stock Option Plan. The grant of these
options was exempt from registration under Rule 701 of the Securities Act.

8. From November 21, 1994, through May 29, 1996, the Registrant granted
options to purchase an aggregate of 42,000 shares of Common Stock to officers of
the Registrant at exercise prices ranging from $2.25 to $3.00 per share,
pursuant to the Registrant's employee stock option plans, of which 3,000 such
options terminated upon the resigation of the Registrant's former Chief
Financial Officer in 1995. The grant of these options was exempt from
registration under Rule 701 of the Securities Act.

9. On October 25, 1994, the Registrant issued 41,666 shares of Common Stock
to Joseph Ende upon the exercise of all of the Registrant's Class D Warrants for
an aggregate consideration of $16,667. The issuance of these shares was exempt
from registration under Section 4(2) of the Securities Act.

10. On March 30, 1994, the Registrant issued 348,750 shares of Common Stock
to certain warrantholders upon the exercise of the Registrant's Class A
Warrants, at an exercise price of $1.80 per share, as follows:

<TABLE>
<CAPTION>
NUMBER OF WARRANTS
NAME EXERCISED NUMBER OF SHARES
<S> <C> <C>
The Christopher Trust..................................................... 2,241,100 112,055
REB Trust................................................................. 1,841,100 92,055
KAB Trust................................................................. 1,841,100 92,055
Ruth Greer................................................................ 100,000 5,000
Alvin Abrams.............................................................. 951,700 47,585
</TABLE>

The issuance of these shares was exempt from registration under Section
4(2) of the Securities Act.

11. On March 30, 1994, the Registrant issued 348,750 shares of Common Stock
to certain warrantholders upon the exercise of the Registrant's Class B
Warrants, at an exercise price of $2.40 per share, as follows:

<TABLE>
<CAPTION>
NUMBER OF WARRANTS
NAME EXERCISED NUMBER OF SHARES
<S> <C> <C>
The Christopher Trust..................................................... 2,241,100 112,055
REB Trust................................................................. 1,841,100 92,055
KAB Trust................................................................. 1,841,100 92,055
Ruth Greer................................................................ 100,000 5,000
Estelle Abrams............................................................ 951,700 47,585
</TABLE>

The issuance of these shares was exempt from registration under Section
4(2) of the Securities Act.

12. On March 30, 1994, the Registrant issued 5,000 shares of Common Stock
to Ruth Greer upon the exercise of 100,000 of the Company's Class C Warrants, at
an exercise price of $5.00 per share. The issuance of these shares was exempt
from registration under Section 4(2) of the Securities Act.

II-2

<PAGE>
There were no underwriters with respect to any of the above transactions.

<TABLE>
<CAPTION>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<C> <S>
1.1 Placement Agent Agreement dated July 10, 1996, by and between the Company and G-V Capital
Corp.
3.1 Certificate of Incorporation of the Company, as amended and restated.(5)
3.2 By-laws of the Company.(1)
4.1 Form of Common Stock Certificate.(1)
4.2 1994 Employee Stock Option Plan.(2)
4.3 1995 Employee Stock Option Plan.(5)
4.4 Form of Stock Option Agreement.(5)
4.5 Employee Stock Bonus Plan.(5)
4.6 Form of Private Placement Warrant
*5.1 Opinion of Snow Becker Krauss P.C.
10.1 Unlimited Guaranty made by Joseph Ende on behalf of Sanyo Automotive Parts, Ltd. in favor of
Bank Leumi dated April 25, 1990.(2)
10.2 Lease Agreement between the Company and Joseph Ende dated July 1, 1992.(2)
10.3 Loan Agreement between Sanyo Automotive Parts, Ltd. and the City of Fairfield dated November
9, 1993.(2)
10.4 Employment Agreement between the Company and Scott Osias dated November 24, 1994.(4)
10.5 Amendment dated April 17, 1995 to Agreement and Plan of Reorganization by and among Unified
Capital, Inc. (now known as Sanyo Industries, Inc.), Sanyo Automotive Parts, Ltd. and Joseph
Ende dated July 9, 1992.(4)
10.6 Loan Agreement between Sanyo Automotive Parts, Ltd., The Fairfield National Bank and Illinois
Development Authority dated January 13, 1995.(4)
10.7 Employment Agreement between the Company and Joseph Ende dated July 31, 1995.(5)
10.8 Promissory Note in the principal amount of $258,000 made by Brake Headquarters U.S.A., Inc. to
Dean Petkanas dated November 17, 1995.(5)
10.9 Mortgage between Sanyo Automotive Parts, Ltd. and Fairfield National Bank dated December 8,
1995.(5)
10.10 Promissory Note in the principal amount of $390,000 made by Sanyo Automotive Parts, Ltd. to
Fairfield National Bank dated December 8, 1995.(5)
10.11 Second Mortgage between Sanyo Automotive Parts, Ltd. and the Illinois Development Finance
Authority ("IDFA") dated December 7, 1995.(5)
10.12 Loan Agreement between Sanyo Automotive Parts, Ltd. and IDFA dated December 11, 1995.(5)
10.13 Promissory Note in the principal amount of $240,000 made by Sanyo Automotive Parts, Ltd. to
IDFA dated December 11, 1995.(5)
10.14 Absolute, Unconditional and Continuing Guaranty of Payment made by Brake Headquarters U.S.A.,
Inc. in favor of IDFA dated December 11, 1995.(5)
10.15 Loan Agreement between Sanyo Automotive Parts, Ltd. and the Chase Manhattan Bank, N.A. dated
February 22, 1996.(5)
10.16 Note in the principal amount of $5,000,000 made by Sanyo Automotive Parts, Ltd., to the Chase
Manhattan Bank, N.A. dated February 22, 1996.(5)
10.17 Security Agreement between Sanyo Automotive, Ltd. and the Chase Manhattan Bank, N.A. dated
February 22, 1996.(5)
10.18 Corporate Guaranty made by Brake Headquarters U.S.A., Inc. in favor of the Chase Manhattan
Bank, N.A. dated February 22, 1996.(5)
10.19 Individual Guaranty made by Joseph Ende on behalf of Sanyo Automotive Parts, Ltd. in favor of
the Chase Manhattan Bank, N.A. dated February 22, 1996.(5)
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
10.20 Grid Promissory Note in the amount of $4,300,000 made by Sanyo Automotive Parts, Ltd. to Bank
Leumi Trust Company of New York dated May 1, 1996.
<C> <S>
*10.21 Master Lease dated June 27, 1996 between Brake Headquarters U.S.A. Inc. and Corporate Capital
Services, Inc.
21.1 Subsidiaries of the Company.(5)
*23.1 Consent of Snow Becker Krauss P.C. (contained in Exhibit 5.1).
*23.2 Consent of Deloitte & Touche LLP.
*23.3 Consent of Goldstein Golub Kessler & Company, P.C.
*23.4 Consent of Borek, Stockel & Marden.
*24.1 Power of Attorney (see Signature Page to this Registration Statement).
</TABLE>

* Filed with this Amendment.

(1) Incorporated by reference from the Company's Registration Statement on Form
S-18, No. 33-30933-NY.

(2) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1993.

(3) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 21, 1992 and as amended by Form 8 dated August 19, 1992 and
September 21, 1992.

(4) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.

(5) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995.

ITEM 17. UNDERTAKINGS

The Company hereby undertakes:

(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:

(i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");

(ii) reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or together,
represent a fundamental change in the information in the registration
statement; and

(iii) include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been

II-4

<PAGE>

settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(5) For determining any liability under the Act, to treat the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
small business issuer under Rule 424(b)(1), or (4) or 497(h) under the Act as
part of this registration statement as of the time the Commission declared it
effective.

(6) For determining any liability under the Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.

II-5

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York, on November 6, 1996.

BRAKE HEADQUARTERS U.S.A., INC.

By: /s/ JOSEPH ENDE
JOSEPH ENDE, PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following person in the
capacities and on the dates indicated:

<TABLE>
<S> <C> <C>
/s/ JOSEPH ENDE Chairman of the Board of Directors, November 6, 1996
JOSEPH ENDE President and Chief Executive
Officer (Principal Executive Officer)

/s/ * Chief Financial Officer November 6, 1996
MARC J. RUSKIN (Principal Accounting and
Financial Officer)

/s/ * Director November 6, 1996
SANDRA ENDE

* /s/ JOSEPH ENDE
JOSEPH ENDE
(ATTORNEY-IN-FACT)
</TABLE>

II-6

EXHIBIT 5.1

SNOW BECKER KRAUSS P.C.
605 Third Avenue
New York, NY 10158

November 5, 1996

Board of Directors
Brake Headquarters U.S.A., Inc.
33-16 Woodside Avenue
Long Island City, NY 11101

Re: Registration Statement on Form S-1
----------------------------------

Gentlemen:

We have acted as counsel to Brake Headquarters U.S.A., Inc.,
a Delaware corporation (the "Company"), in connection with the
registration by the Company pursuant to a Registration Statement on
Form S-1 (the "Registration Statement"), which has been filed with
the Securities and Exchange Commission on this date pursuant to the
Securities Act of 1933, as amended. The Registration Statement
relates to (a) 980,000 Class A Common Stock Purchase Warrants,
consisting of (i) 900,000 such warrants outstanding (the
"Warrants") and (ii) 80,000 warrants (the "Placement Agent's Common
Stock Warrants"); (b) 1,644,633 shares of common stock, $.001
par value (the "Common Stock"), consisting of (i) 616,300 shares
outstanding (the "Shares"), (ii) 8,333 shares to be issued upon the
purchase of certain assets by the Company (the "Asset Shares"),
(iii) 900,000 shares issuable upon exercise of the Warrants (the
"Warrant Shares"), (iv) 40,000 shares (the "Placement Agent's
Warrant Shares") issuable upon exercise of warrants issued to the
placement agent in the Company's August 13, 1996 Private Placement
(the "Placement Agent's Warrants"), and (v) 80,000 shares issuable
upon the exercise of the Placement Agent's Common Stock Warrants
(the "Placement Agent's Common Stock Warrant Shares"); and (c) 490,000
Units each consisting of one share of Common Stock and two Warrants.

As counsel to the Company, we have examined the Company's
Certificate of Incorporation, By-laws, records of corporate
proceedings, and such other documents as we have deemed necessary
or appropriate as a basis for the opinions set forth below. In
such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the accuracy and completeness of all documents submitted
to us as copies and the authenticity of the originals of such
latter documents. As to any facts material to such opinions which
we did not independently establish or verify, we have relied upon
statements or representations of officers and other representatives

<PAGE>

of the Company, public officials or others.

Based on the foregoing, we are of the opinion that:

1. The Company has been duly organized, is validly existing,
and in good standing under the laws of the State of Delaware.

2. The Warrants, the Placement Agent's Warrants and the Units have
been duly authorized and are legally issued and enforceable in
accordance with their terms.

3. The Placement Agent's Common Stock Warrants have been duly
authorized and, when duly issued and paid for, as contemplated by
the terms of the Placement Agent's Warrants and the Registration
Statement, will be legally issued and enforceable in accordance
with their terms.

4. The Shares have been duly authorized, legally issued and
are fully paid and non-assessable.

5. The Asset Shares, the Warrant Shares, the Placement
Agent's Warrant Shares, the Placement Agent's Common Stock
Warrant Shares and the Units have been duly authorized and are reserved
for issuance and, when duly issued and paid for, as contemplated by the
terms of the Asset Purchase Agreement, the Warrants, the Placement
Agent's Warrants and the Placement Agent's Common Stock Warrants,
respectively, and by the terms of the Registration Statement, will
be legally issued, fully paid and non-assessable.

We hereby consent to the reference of our name in the Prospectus
under the caption "Legal Matters" and to inclusion of this opinion
as Exhibit 5.1 to the Registration Statement and all amendments
thereto.

Very truly yours,

/s/ Snow Becker Krauss P.C.

SNOW BECKER KRAUSS P.C.

<PAGE>
EXHIBIT 10.21

MASTER LEASE
<TABLE>
<S> <C>
AGREEMENT OF LEASE dated as of June 27 , 19 96 between Corporate Capital Services, Inc. (Lessor), having a place of business
--------------- ----- --------------------------------

at 77 Arkay Drive Happauge NY 11788, and Brake Headquarters, U.S.A. Inc. ("Lessee"),
------------------------------------------------------ --------------------------------------------
Address City State Zip Code
having a place of business at 33-16 Woodside Avenue Long Island City NY 11101,
-----------------------------------------------------------------------------------------------
Address City State Zip Code
</TABLE>

Lessee wants from time to time to lease from Lessor personal property to be
described in one or more schedules of leased equipment ("Schedule"). Lessor is
willing to lease such personal property to Lessee at the rent, for the term and
upon the conditions provided hereinafter. Any present and future Schedule
executed by Lessor and Lessee which is identified as being part of this Lease,
shall be deemed to incorporate by reference all the terms and conditions of this
Lease except as provided in any such Schedule. Each Schedule shall constitute a
separate and independent lease and contractual obligation of Lessee. The term
"Lease" when used herein shall refer to an individual Schedule which
incorporates this Master Lease.

1. EQUIPMENT LEASED AND TERM.

This Lease shall cover such personal property as is described in any Schedule
executed by or pursuant to the authority of Lessee, accepted by Lessor in
writing and identified as a part of this Lease (which personal property with all
replacement parts, additions, repairs, accessions and accessories incorporated
therein and/or affixed thereto is hereinafter call the "Equipment"). Lessor
hereby leases to Lessee and Lessee hereby hires and takes from Lessor, upon and
subject to the covenants and conditions hereinafter contained, the Equipment
described in any Schedule. NOT WITHSTANDING THE COMMENCEMENT DATE OF THE TERM OF
THIS LEASE WITH RESPECT TO ANY ITEM OF EQUIPMENT, LESSEE AGREES THAT ALL RISK OF
LOSS OF THE EQUIPMENT SHALL BE ON THE LESSEE FROM AND AFTER SHIPMENT OF THE
EQUIPMENT TO LESSEE BY THE SELLER THEREOF, F.O.B. seller's point of shipment,
the date of such shipment being hereinafter called "date of shipment". The term
of this Lease with respect to any item of Equipment shall be for the period as
set forth in the Schedule. Lessee authority to insert the actual commencement
date and date of first monthly rental for any item of Equipment in any Schedule
as well as such items as serial numbers if such are not already inserted when
such Schedule is executed by Lessee. "Seller" as used in this Lease means the
supplier from which Lessor acquired any item of Equipment.

2. RENT.

The aggregate rent payable with respect to each item of Equipment shall be in
the amount shown with respect to such item on the Schedule. Lessee shall pay to
Lessor the aggregate rental for each item of Equipment for the full period and
term for which the Equipment is leased, such rental to be payable at such times
and in such amounts for each item of Equipment as shown in the applicable
Schedule.

All rent shall be paid at Lessor's place of business shown above, or such other
place as Lessor may designate by written notice to the Lessee. ALL RENTS SHALL
BE PAID WITHOUT NOTICE OR DEMAND AND WITHOUT ABATEMENT, DEDUCTION OR SET OFF OF
ANY AMOUNT WHATSOEVER. The operation and use of the Equipment shall be at the
risk of Lessee and not of Lessor and the obligation of Lessee to pay rent
hereunder shall be unconditional.

3. DESTRUCTION OF EQUIPMENT.

If any Equipment is lost, totally destroyed, damaged beyond repair or taken by
governmental action, the liability of the Lessee to pay rent therefor may be
discharged by paying to Lessor all the rent due thereon, plus all the rent to
become due thereon less the net amount of the recovery, if any, actually
received by Lessor from insurance or otherwise for such loss or damage.

In the event of partial destruction of any Equipment, the rent due and to become
due thereon shall not abate and Lessee shall, at its own expense, cause such
Equipment to be restored to usable condition, but Lessor shall, upon receiving
satisfactory evidence of such restoration, promptly pay Lessee the proceeds of
any insurance or compensation received by reason of such damage. If the
estimated cost for restoring such Equipment exceeds 50% of the unmatured rent
therefor, such Equipment shall, on notice by Lessee, be deemed, for all purposes
hereof, to be totally destroyed and the liability of the Lessee to pay rent
therefor shall be discharged if Lessee pays the rent described in the preceding
paragraph of this Section.

Lessor shall not be obligated to undertake by litigation or otherwise the
collection of any claim against any person for loss or damage to the Equipment.

Except as expressly provided above, the total or partial destruction of any
Equipment or the total or partial loss of use or possession thereof to Lessee
shall not release or relieve Lessee from the duty to pay the rent herein
provided.

4. NO WARRANTIES BY LESSOR; MAINTENANCE AND COMPLIANCE WITH LAWS.

Lessor, not being the manufacturer of the Equipment, nor manufacturer's agent,
MAKES NO WARRANTY OR REPRESENTATION, ETHER EXPRESS OR IMPLIED, AS TO THE
FITNESS, QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR
PERFORMANCE OF THE EQUIPMENT OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING
AGREED THAT THE EQUIPMENT IS LEASED "AS IS" AND THAT ALL SUCH RISKS, AS BETWEEN
LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE AT ITS SOLE RISK AND EXPENSE,
Lessee accordingly agrees not to assert any claim whatsoever against Lessor
based thereon. Lessee further agrees, regardless of cause, not to assert any
claim whatsoever against Lessor for loss of anticipatory profits or
consequential damages. Lessor shall have no obligation to install, erect, test,
adjust or service the Equipment. Lessee shall look to the manufacturer and/or
Seller for any claims related to the Equipment. Lessor hereby acknowledges that
any manufacturer's and/or Seller's warranties are for the benefit of both Lessor
and Lessee.

<PAGE>

4. NO WARRANTIES BY LESSOR; MAINTENANCE AND COMPLIANCE WITH LAWS (CONTINUED)

No oral agreement, guaranty, promise, condition, representation or warranty
shall be binding; all prior conversations, agreements or representations related
hereto and/or to the Equipment are integrated herein, and no modification hereof
shall be binding unless in writing signed by Lessor. Lessee agrees, at its own
cost and expense:

(a) to pay all shipping charges and other expenses incurred in connection with
the shipment of the Equipment by the Seller to Lessee;

(b) to pay all charges and expenses in connection with the operation of each
item of Equipment;

(c) to comply with all governmental laws, ordinances, regulations, requirements
and rules with respect to the use, maintenance and operation of the
Equipment; and

(d) to make all repairs and replacements required to be made to maintain the
Equipment in good condition, reasonable wear and tear excepted.

5. INSURANCE.

Lessee shall maintain at all times on the Equipment, at its expense, all-risk
physical damage insurance and comprehensive general and/or automobile (as
appropriate) liability insurance (covering bodily injury and property damage
exposures including, but not limited to, contractual liability and products
liability) in such amounts, against such risks, in such form and with such
insurers as shall be satisfactory to Lessor; provided, that the amount of
all-risk physical damage insurance shall not on any date be less than the
greater of the full replacement value or a sum equal to all the rent due
thereon, plus all rent to become due. Each physical damage insurance policy will
name Lessor as loss payee. Each liability insurance policy will name Lessor as
additional insured. Each insurance policy will also require that the insurer
give Lessor at least thirty (30) days prior written notice of any alteration in
or cancellation of the terms of such policy and require that Lessor's interests
be continued insured regardless of any breach or violation by Lessee or others
of any warranties, declarations or conditions contained in such insurance
policy. In no event shall Lessor be responsible for premiums, warranties, or
representations to any insurer or any agent thereof. Lessee shall furnish to
Lessor a certificate or other evidence satisfactory to Lessor that such
insurance coverage is in effect, but Lessor shall be under no duty to ascertain
the existence or adequacy of such insurance. The insurance maintained by Lessee
shall be primary without any right of contribution from insurance which may be
maintained by Lessor. Lessee shall be liable for all deductible portions of all
required insurance. Lessor may, at its own expense, for its own benefit,
purchase insurance in excess of that required under this Lease Agreement.
Physical damage insurance proceeds shall be applied as set forth in Section 6.

6. LOSS AND DAMAGE.

Lessee agrees to assume and bear the entire risk of any partial or complete loss
with respect to the Equipment from any and every cause whatsoever including
theft, loss, damage, destruction or governmental taking, whether or not such
loss is covered by insurance or caused by any default or neglect of Lessee.
Lessee agrees to give Lessor prompt notice of any damage to or loss of any
Equipment. All physical damage insurance proceeds shall be payable directly to
Lessor. Following payment of such loss, and if no Event of Default as defined in
Section 11 has occurred and remains continuing, Lessor will then:

(a) transfer to Lessee's Lessor's rights to such Equipment "as-is, where-is and
with all defects", without recourse and without representation or warranty,
express or implied, other than a warranty that the Equipment is free and
clear of any liens created by Lessor; and

(b) remit to Lessee any physical damage insurance proceeds arising out of such
loss in excess of the sum due the Lessor.

Lessee shall determine in the exercise of its reasonable judgment whether the
Equipment is damaged beyond repair, subject to Lessor's approval. In the event
of damage or loss which does not result in damage beyond repair or a total loss
of the Equipment or any item thereof, Lessee shall cause the affected Equipment
to be restored to the condition required by the terms of this Lease. Upon
completion of such repair and after supplying Lessor with satisfactory evidence
thereof ( and provided no Event of Default has occurred and remains continuing),
Lessee shall be entitled to receive any insurance proceeds or other recovery to
which Lessor would otherwise be entitled in connection with such loss up to the
amount expended by Lessee in making the repair.

Lessor shall not be obligated to undertake by litigation or otherwise the
collection of any claim against any person for loss of, damage to, or
governmental taking of the Equipment, but Lessor will cooperate with Lessee at
Lessee's expense to pursue such claims.

Except as expressly provided above, the total or partial destruction of any
Equipment or Lessee's total or partial loss of use or possession thereof shall
not release or relieve Lessee from its obligations under this Master Lease or
any Schedule including the duty to pay the rent(s) herein provided.

7. TAXES.

Lessee agrees that, during the term of this Lease, in addition to the rent and
all other amounts provided herein to be paid, it will promptly pay all taxes,
assessments and other governmental charges (including penalties and interest, if
any, and fees for titling or registration, if required) levied or assessed:

(a) upon the interest of Lessee in the Equipment or upon the use or operation
thereof or on the earnings arising therefrom; and

(b) against Lessor on account of its acquisition or ownership of the Equipment
or any part thereof, or the use or operation thereof or the leasing
hereof to Lessee, or the rent herein provided for, or the earnings
arising therefrom, exclusive, however, of any taxes based on net income of
Lessor.

<PAGE>

7. TAXES (CONTINUED)

Lessee agrees to file, in behalf of Lessor, all required tax returns and reports
concerning the Equipment with all appropriate governmental agencies, and within
not more than 45 days after the due date or such filing to send Lessor
confirmation, in form satisfactory to Lessor, of such filing.

8. LESSOR'S TITLE, RIGHT OF INSPECTION AND IDENTIFICATION OF EQUIPMENT.

TITLE TO THE EQUIPMENT SHALL AT ALL TIMES REMAIN IN LESSOR and Lessee will at
all times protect and defend, at its own cost and expense, the title of Lessor
from and against all claims, liens and legal processes of creditors of Lessee
and keep all the Equipment free and clear from all such claims, liens and
processes. The Equipment is and shall remain personal property. Upon the
expiration or termination of this Lease with respect to any item of Equipment:

(a) Lessee at Lessee's sole expense shall return such Equipment unencumbered to
Lessor at the place where the rent is payable or to such other place as
Lessor and Lessee agree upon, and in the same condition as when received by
Lessee, reasonable wear and tear resulting from use thereof alone excepted;
or

(b) in lieu of returning such Equipment to Lessor, Lessee agrees that Lessee
will, upon request of Lessor, store such Equipment on Lessee's premises, at
an inside location protected from the weather and elements, without charge
to Lessor for a period of 180 days following the date of expiration or
termination of this Lease. During such storage period Lessee shall not use
the Equipment for any purpose. Upon expiration of such storage period
Lessee will return such Equipment to Lessor in accordance with the
provisions of (a) above.

Lessor shall have the right from time to time during reasonable business hours
to enter upon Lessee's premises or elsewhere for the purpose of confirming the
existence, condition and proper maintenance of the Equipment and during any
period of storage Lessor shall also have the right to demonstrate and show the
Equipment to others. The foregoing rights of entry are subject to any applicable
governmental laws, regulations and rules concerning industrial security. Lessee
shall, upon the request of Lessor, and at its own expense firmly affix to the
Equipment, in a conspicuous place, such a decalcomania or metal plate as shall
be supplied by Lessor showing the Lessor as the owner and lessor of such
Equipment.

9. POSSESSION, USE AND CHANGES IN LOCATION OF EQUIPMENT.

So long as Lessee shall not be in default under the Lease is shall be entitled
to the possession and use of the Equipment in accordance with the terms of this
Lease. The Equipment shall be used in the conduct of the lawful business of
Lessee, and no item of Equipment shall be removed from its location shown on the
Schedule, without the prior written consent of Lessor. Lessee shall not, without
Lessor's prior written consent, part with possession or control of the Equipment
or attempt or purport to sell, pledge, mortgage or otherwise encumber any of the
Equipment or otherwise dispose of or encumber any interest under this Lease.

10. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR.

In the event that the Lessee shall fail duly and promptly to perform any of its
obligations under the provisions of Sections 4, 5, 6, 7, and 8 of this Lease,
Lessor may, at its option, perform the same for the account of Lessee without
thereby waiving such default, and any amount paid or expense (including
reasonable attorneys' fees), penalty or other liability incurred by Lessor in
such performance, together with interest at the rate of 1 1/2% per month thereon
(but in no event greater than the highest rate permitted by relevant law) until
paid by Lessee to Lessor, shall be payable by Lessee upon demand as additional
rent for the Equipment.

11. DEFAULT.

An Event of Default shall occur if:

(a) Lessee fails to pay when due any installment of rent and such failure
continues for a period of 10 days;

(b) Lessee shall fail to perform or observe any covenant, condition or
agreement to be performed or observed by it hereunder and such failure
continues uncured for 15 days after written notice thereof to Lessee by
Lessor;

(c) Lessee ceases doing business as a going concern, makes an assignment for
the benefit of creditors, admits in writing its inability to pay its debts
as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law
or regulation or files an answer admitting the material allegations of a
petition filed against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee, receiver, or liquidator of it or of all or
any substantial part of its assets or properties, or if it or its
shareholders shall take any action looking to its dissolution or
liquidation;

(d) within 60 days after the commencement of any proceedings against Lessee
seeking reorganization, arrangement, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation,
such proceedings shall not have been dismissed, or if within 60 days after
the appointment without Lessee's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated; or

(e) Lessee attempts to remove, sell, transfer, encumber, part with possession or
sublet the Equipment or any item thereof.

Upon the occurrence of an Event of Default, Lessor shall have all the rights and
remedies provided by applicable law and by this Lease. Notwithstanding that this
Agreement is a lease and title to the Equipment is at all times in Lessor,
Lessor may nevertheless at its option choose those rights and remedies of a
secured party under the Uniform Commercial Code. In addition, Lessor, at its
option, may:

<PAGE>

11. DEFAULT (CONTINUED)

(a) declare all sums due and to become due hereunder immediately due and
payable, but in no event shall the Lessee, upon demand by Lessor for
payment of the unpaid rent, upon acceleration of the maturity thereof or
otherwise, be obligated to pay any amount in excess of that permitted by
law;

(b) proceed by appropriate court action or actions or other proceedings either
at law or equity to enforce performance by the Lessee of any and all
covenants of this Lease and to recover damages for the breach thereof;

(c) demand that Lessee deliver the Equipment forthwith to Lessor at
Lessee's expense at such place as Lessor may designate; and

(d) Lessor and/or its agents may without notice or liability or legal process,
enter into any premises of or under control or jurisdiction of Lessee or
any agent of Lessee where the Equipment may be or by Lessor is believed to
be, and repossess all or any item thereof, disconnecting and separating all
thereof from any other property and using all force necessary or permitted
by applicable law so to do, Lessee hereby expressly waiving all further
rights to possession of the Equipment and all claims for injuries suffered
through or loss caused by such repossession; but the Lessor shall
nevertheless, be entitled to recover immediately as liquidated damages for
loss of the bargain and not as a penalty any unpaid rent that accrued on or
before the occurrence of the event of default plus an amount equal to the
difference between the aggregate rent reserved hereunder for the unexpired
term of this Lease and the then aggregate rental value of all Equipment for
such unexpired term, provided, however, that if any statute governing the
proceeding in which such damages are to be proved specifies the amount of
such claim, Lessor shall be entitled to prove as and for damages for the
breach an amount equal to that allowed under such statute. The provisions
of this paragraph shall be without prejudice to any rights given to the
Lessor by such statute to prove for any amounts allowed thereby. Should any
proceedings be instituted by or against Lessor for monies due to Lessor
hereunder and/or for possession of any or all of the Equipment or for any
other relief, Lessee shall pay a reasonable sum as attorney's fees.

No remedy of Lessor hereunder shall be exclusive of any remedy herein or by law
provided, but each shall be cumulative and in addition to every other remedy.

12. INDEMNITY.

Lessee agrees that Lessor shall not be liable to Lessee for, and Lessee shall
indemnify and save Lessor harmless from and against any and all liability, loss,
damage, expense, causes of action, suits, claims or judgments arising from or
caused directly or indirectly by:

(a) Lessee's failure to promptly perform any of its obligations under the
provisions of Sections 4, 5, 6, 7 and 8 of this Lease; or

(b) injury to persons or damage to property resulting from or based upon actual
or alleged use, operation, delivery or transportation of any or all of the
Equipment or its location or condition; or

(c) inadequacy of the Equipment, or any part thereof, for any purpose or any
deficiency or defect therein or the use or maintenance thereof or any
repairs, servicing or adjustments thereto or any delay in providing or
failure to provide any thereof or any interruption or loss of service or
use thereof or any loss of business; and shall, at its own cost and
expense, defend any and all suits which may be brought against Lessor,
either alone or in conjunction with others upon any such liability or claim
or claims and shall satisfy, pay and discharge any and all judgments and
fines that may be recovered against Lessor in any such action or actions,
provided, however, that Lessor shall give Lessee written notice of any such
claim or demand. Lessee agrees that its obligations under this Section 12
shall survive the expiration or termination of this Lease.

13. ASSIGNMENT, NOTICES AND WAIVERS.

This Lease and all rights of Lessor hereunder shall be assignable by Lessor
without Lessee's consent, but Lessee shall not be obligated to any assignee of
Lessor except after written notice of such assignment from Lessor or Lessor's
assignee. After such assignment, Lessor shall not be assignee's agent for any
purpose. Lessee will settle all claims arising out or alleged breach of
warranties or otherwise, defenses, set-offs and counterclaims it may have
against Lessor directly with Lessor, and not set up any such against Lessor's
assignee, Lessor hereby agreeing to remain responsible therefor. Lessee upon
receiving notice of any such assignment shall abide thereby and make payment as
may therein be directed. Following such assignment, solely for the purpose of
determining assignee's rights hereunder, the term "Lessor" shall be deemed to
include or refer to Lessor's assignee. Without the prior written consent of
Lessor, Lessee shall not assign this Lease or its interests hereunder or enter
into any sub-lease with respect to the Equipment covered hereby, it being agreed
Lessor will not unreasonably withhold its consent to a sub-lease of the
Equipment. All notices to Lessor shall be delivered in person to an officer of
the Lessor, or shall be sent certified mail return receipt requested to Lessor
at its address shown herein or at any later address last known to the sender.
All notices to Lessee shall be in writing and shall be delivered by mail at its
address shown herein or at any later address last known to the sender. A waiver
of a default shall not be a waiver of any other or a subsequent default.

14. FURTHER ASSURANCES.

Lessee shall execute and deliver to Lessor, upon Lessor's request such
instruments and assurances as Lessor deems necessary or advisable for the
confirmation or perfection of this Lease and Lessor's rights hereunder. Lessee
may not terminate any Schedule without the written consent of Lessor. If Lessor
in good faith believes itself insecure or performance impaired, it may declare a
default hereunder or, instead of declaring a default, Lessor may demand, and
Lessee hereby agrees to give, additional Equipment or other collateral as
security for the obligations hereunder.

15. LEASE IRREVOCABILITY.

This Lease is irrevocable for the full terms thereof as set forth in any
Schedule and for the aggregate rentals therein reserved and the rent shall not
abate by reason of termination of Lessee's right of possession and/or the taking
of possession by the Lessor or for any other reason. Any payment not made when
due shall, at the option of Lessor, bear late charges thereon calculated at the
rate of 1 1/2% per month, but in no event greater than the highest rate
permitted by relevant law.

<PAGE>

16. PURCHASE OPTION.

If any Schedule has a purchase option price set forth therein with respect to
the items of Equipment listed on such Schedule, then at the expiration of the
original lease term in such Schedule with respect to such items of Equipment, if
Lessee has paid in full all rentals owing under such Schedule, and be not then
in default under this Lease (including all obligations under any Schedule),
Lessee shall have the option to purchase ALL, BUT NOT LESS THAN ALL, THE ITEMS
OF EQUIPMENT IN THE APPLICABLE SCHEDULE upon giving written notice not less than
30 DAYS prior to expiration of the original term thereof. The purchase price
shall be as set forth in the applicable Schedule and shall be payable upon
expiration of the original Lease term. If any Schedule does not contain a
purchase option price, then Lessee shall not have an option to purchase any
Equipment on such Schedule.

Any purchase option price stated as "fair market value" ("FMV") for any item of
Equipment on a Schedule shall be determined on the basis of, and shall be equal
in amount to, the value which would obtain in an arm's length transaction
between an informed and willing buyer-user (other than a Lessee currently in
possession and a used Equipment dealer) and an informed and willing seller under
no compulsion to sell and, in such determination, costs of removal of the items
of Equipment from their location of current use shall not be a deduction from
such value.

17. RENEWAL.

Any renewal privilege shown on any Schedule with respect to any item of
Equipment shall be exercised by Lessee giving Lessor a notice in writing and
paying Lessor the amount of the renewal rental plus applicable taxes, at least
45 DAYS prior to the commencement of the renewal term of the Lease with respect
to such item of Equipment. Upon such notification and payment, this Lease shall
be renewed for the stated renewal period at the stated renewal rental with the
other provisions and conditions of the lease continuing unchanged.

If Lessee is a corporation, this Lease is executed by authority of its Board of
Directors. If Lessee is a partnership or joint venture, this Lease is executed
by authority of all its partners or co-venturers.

Dated: July 11, 1996

<TABLE>
<S> <C>
LESSOR: LESSEE:

Corporate Capital Services, Inc. Brake Headquarters U.S.A., Inc.
- ------------------------------------------- ---------------------------------------------
Name of individual, corporation or partnership Name of individual, corporation or partnership

By_ Sandy Steinhouser___ Title_Vice President__ By__Marc J. Ruskin____________ Title____CFO______
If corporation, give official title. If owner or partner, state which. If corporation, have signed by President, Vice
President or Treasurer, and give official
title. If owner or partner, state which.

- -----------------------------------------------------------------------------------------------------------------------------------
If Lessee is a partnership, enter:

- -----------------------------------------------------------------------------------------------------------------------------------
Partners' names Home addresses

- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We hereby consent to the use in this Registration Statement of Brake
Headquarters U.S.A., Inc. on Form S-1 of our report dated April 8, 1996,
appearing in the Annual Report on Form 10-K of Brake Headquarters U.S.A., Inc.
for the year ended December 31, 1995 and to the reference to us under the
heading "Experts" contained in such Registration Statement.

DELOITTE & TOUCHE LLP

Stamford, Connecticut
November 6, 1996
<PAGE>

<PAGE>
EXHIBIT 23.3

INDEPENDENT AUDITOR'S CONSENT

To the Board of Directors
Brake Headquarters U.S.A., Inc.

We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of our report dated February 8, 1995 on the
consolidated financial statements of Brake Headquarters U.S.A., Inc. as of
December 31, 1994 and for the year then ended, which appear in such Prospectus.
We also consent to the reference to our firm under the caption "Experts" in the
Prospectus.

GOLDSTEIN GOLUB KESSLER & COMPANY,
P.C.

New York, New York
November 6, 1996
<PAGE>

<PAGE>
EXHIBIT 23.4

INDEPENDENT AUDITOR'S CONSENT

To the Board of Directors
Brake Headquarters U.S.A., Inc.

We hereby consent to the use in the Prospectus constituting part of the
Registration Statement on Form S-1 of our report dated February 25, 1994 on the
consolidated statements of operations, shareholders' equity and cash flows of
Brake Headquarters, U.S.A., Inc. (formerly Sanyo Industries, Inc.) and
Subsidiaries for the year ended December 31, 1993 which appear in such
Prospectus. We also consent to the reference to our firm under the captions
"Experts" and "Selected Financial Data" in such Prospectus.

BOREK, STOCKEL & MARDEN

Port Chester, New York
November 6, 1996
<PAGE>