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Brake Headquarters USA Inc – ‘10QSB’ for 3/31/96

As of: Friday, 5/17/96 · For: 3/31/96 · Accession #: 1010549-96-96 · File #: 33-30422

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/17/96  Brake Headquarters USA Inc        10QSB       3/31/96    2:21K                                    Secs Transfer Corp/FA

Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    12     43K 
 2: EX-27       Financial Data Schedule (Pre-XBRL)                     1      5K

10QSB — Quarterly Report — Small Business
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Consolidated Financial Statements Exhibits and Reports on Form 8-K
1	1st Page - Filing Submission
2	Item 1. Consolidated Financial Statements
11	Item 6. Exhibits and Reports on Form 8-K

10QSB 1st Page of 12 TOC ↑Top Previous Next ↓Bottom Just 1st
 
 U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-Q

[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE                 
SECURITIES EXCHANGE ACT OF 1934                                   

For the quarterly period ended March 31, 1996               

OR

[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE               
SECURITIES EXCHANGE ACT OF 1934                               

  For the transition period from ____________  to ______________

Commission file number 33-30422-A                                               

BRAKE HEADQUARTERS, U.S.A., INC.
 (Exact name of Small Business Issuer as specified in its charter)

Delaware                                     22-3048534     
(State or other jurisdiction                        (I.R.S. Employer            
of incorporation or organization)                  identification No.)          

 33-16 Woodside Avenue
Long Island City, New York
(Address of principal executive offices)

 11101
(Zip Code)

(718) 779-4800
 (Registrant telephone number including area code)

Not Applicable (Former name, former address and formal fiscal year, if changed
since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.                                              

YES ____ NO ____
(Not applicable, as the Registrant is not required to file reports) 

       Class                                Outstanding at May 7, 1996
Common Stock, $0.001 par value                           3,416,197              

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 BRAKE HEADQUARTERS, USA

 FORM 10-Q

QUARTERLY REPORT
 For the Three Months Ended March 31, 1996

 =====================================================================

                                                                    Page to Page

PART I - FINANCIAL INFORMATION                                                  

Item 1.  Consolidated Financial Statements -                                    

Consolidated Balance Sheets -  March 31, 1996                 
         (Unaudited) and December 31, 1995 (Audited)........................   3

Consolidated Statements of Income For The Three               
Three Month Periods ended March 31, 1996 and                  
         March 31, 1995 (Unaudited).........................................   4

Consolidated Statements of Cash Flows For The                 
Three Month Periods ended March 31, 1996 and                  
         March 31, 1995 (Unaudited).........................................   5

         Notes to Consolidated Financial Statements (Unaudited)............. 6-7

Item 2.  Management's Discussion and Analysis of Financial                      
                  Condition and Results of Operations.......................8-10

PART II ....................................................................  11

Item 6.   Exhibits and Reports on Form 8-K..................................  11

Signatures..................................................................  12

2 

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BRAKE HEADQUARTERS U.S.A.,
 INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS

                                                                [Download Table]


                                                 March 31, 1996                    
                                                 (Unaudited)      December 31, 1995
                                                 -----------      -----------------
                                                                                   
ASSETS                                                                             
Current Assets:                                                                    
     Cash                                       $        31,900    $       17,895  
     Accounts receivable, less allowance                                           
       for doubtful accounts                                                       
       of $287,891                                    7,836,231         5,623,117  

     Inventory                                        7,660,440         7,873,131  
     Prepaid expenses and other current assets          359,902           387,767  
     Due from President                                  56,603            51,604  
     Deferred tax asset                                 345,345           345,345  
                                                        -------           -------  
        Total current assets                         16,290,421        14,298,859  

Property and Equipment - net                            914,744           921,120  
Other Assets                                            147,378           276,315  
                                                        -------           -------  
        Total Assets                            $    17,352,543    $   15,496,294  
                                                ===============    ==============  

LIABILITIES AND SHAREHOLDERS' EQUITY                                               

Current Liabilities:                                                               
     Accounts payable, accrued expenses and                                        
       other current liabilities                $     3,738,627    $    2,869,762  
     Notes and acceptances payable                    5,080,823         8,075,196  
     Current portion of long-term debt                   87,100            65,038  
                                                         ------            ------  
        Total current liabilities                     8,906,550        11,009,996  

Long-term Debt                                        4,454,744           630,494  
                                                      ---------           -------  
        Total liabilities                            13,361,294        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                                              
       3,416,197 shares.                                  3,416             3,416  
     Additional paid-in capital                      13,064,259        13,014,260  
     Accumulated deficit                             (9,076,427)       (9,161,872) 
                                                     ----------        ----------  
        Total shareholders' equity                    3,991,249         3,855,804  
                                                      ---------         ---------  
        Total Liabilities and Shareholders'                                        
          Equity                                $    17,352,543    $   15,496,294  
                                                ===============    ==============  


See Notes to consolidated Financial Statements

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BRAKE HEADQUARTERS
U.S.A., INC. AND
SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF INCOME

 (Unaudited)

                                                                [Download Table]


                                                  Three Months Ended         
                                           March 31, 1996      March 31, 1995
                                           --------------      --------------
                                                                             
Sales                                      $    8,446,375      $   7,084,216 
   Less returns and allowances                   (612,494)          (290,261)
                                                 --------           -------- 
Net sales                                       7,833,881          6,793,955 
Cost of goods sold                              5,728,683          4,975,223 
                                                ---------          --------- 

Gross profit                                    2,105,198          1,818,732 
                                                ---------          --------- 

Operating expenses:                                                          
    Selling, general and administrative         1,738,909          1,335,449 
                                                ---------          --------- 

Income from operations                            366,289            483,283 
                                                  -------            ------- 

Other income (expense):                                                      
    Interest expense                             (266,844)          (140,955)
    Gain on foreign currency transactions               -             10,367 
                                                 --------             ------ 

Income before provision for income taxes           99,445            352,695 

Provision for income taxes                         14,000            131,158 
                                                   ------            ------- 

Net income                                 $       85,445      $     221,537 
                                           ==============      ============= 

Net income per common and common                                             
   equivalent share                        $         0.02      $        0.08 
                                           ==============      ============= 

Weighted average number of common and                                        
   common equivalent shares outstanding         3,666,464          2,657,577 
                                                =========          ========= 

See Notes to Consolidated Financial Statements

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BRAKE HEADQUARTERS U.S.A., INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 (Unaudited)

                                                        [Enlarge/Download Table]


                                                                    Three Months Ended       
                                                             March 31, 1996    March 31, 1995
                                                             --------------    --------------
                                                                                             
Cash flows from operating activities:                                                        
    Cash received from customers                            $    5,620,767     $   5,211,902 
    Cash paid to suppliers and employees                        (4,568,378)       (5,493,031)
    Interest paid                                                 (233,573)         (140,955)
    Taxes paid                                                      (3,888)         (267,284)
                                                                    ------          -------- 
             Net cash used in operating activities                (814,928)         (689,368)
                                                                  --------          -------- 
Cash flows used in investing activity-capital expenditures         (14,016)         (383,876)
                                                                   -------          -------- 

Cash flows from financing activities:                                                        
    Net borrowings (repayments) under notes and                                              
      acceptances payable                                       (2,959,241)          764,867 
    Proceeds from issuance of long-term debt                     3,824,250           333,884 
    Principal payments on long-term debt                           (22,060)           (2,629)
                                                                   -------            ------ 
             Net cash provided by financing activities             842,949         1,096,122 
                                                                   -------         --------- 

Net increase in cash                                                14,005            22,878 
Cash at beginning of period                                         17,895            11,991 
                                                                    ------            ------ 
Cash at end of period                                       $       31,900     $      34,869 
                                                            ==============     ============= 
Reconciliation of net loss to net cash used in                                               
   operating activities:                                                                     
    Net income                                              $       85,445     $     221,537 
    Adjustments to reconcile net loss to                                                     
      net cash used in operating activities:                                                 
      (Gain) on foreign currency transactions                            -           (10,367)
       Depreciation and amortization                                20,392            27,559 
       Changes in assets and liabilities:                                                    
            Accounts receivable                                 (2,213,114)       (1,582,053)
            Inventory                                              212,691          (117,217)
            Prepaid expenses and other current assets               27,865           (10,525)
            Other assets                                           128,937            32,772 
           Due from President                                       (4,999)                  
           Accounts payable and accrued expenses                   940,452           748,976 
                                                                   -------           ------- 
               Net cash used in operating activities        $     (802,331)    $    (689,368)
                                                            ==============     ============= 

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 Consolidated Financial Statements

5 

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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 three
months ended March 31, 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.  Contingently  returnable shares are not considered oustanding for
earnings per share unless all conditions for release have been attained.        

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 totalling $10,000,000.  The
Company's  second  line of credit will be reviewed  for  renewal.  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. No guarantees exist on the new two year agreement.         

In January 1996,  the Company  obtained  another  $100,000 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. As of April 30, 1996,
the Company has borrowed $67,300.                                               

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Note 3                                                                          
Stockholders' Equity                                                            
--------------------                                                            

Common Stock - In March 1996,  the Company  decreased  its shares of  authorized
common stock to 6,000,000 shares.                                               

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 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.                                                    

In March 1996, the President purchased 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.                                                                 

Note 4                                                                          
Contingencies and Commitments                                                   
-----------------------------                                                   

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
vigorously defend this lawsuit.                                                 

The Company intends to enter into an agreement to purchase a new computer system
for approximately $475,000 which will be financed over a five year period.      

 7

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

     The following should be read in conjunction with the Company's consolidated
financial statements and the related notes included elsewhere herein.           

Results of Operations                                                           
---------------------                                                           

Three Months  Ended March 31, 1996  Compared to the Three Months Ended March 31,
1995                                                                            

     Gross  sales  for the  three  months  ended  March 31,  1996  increased  by
$1,362,159,  or 19.2%, to $8,446,375 compared to $7,084,216 for the three months
ended March 31, 1995.  The increase was due primarily to the increased  sales to
existing customers and the Company's  introduction of new under-car part product
lines.  The Company  expanded  its  customer  base during the three months ended
March 31, 1996 to include sales to new  customers who were not customers  during
the comparable  period in 1995. In addition,  another large retail chain,  which
became a customer in late 1993, accounted for approximately 26% of the Company's
revenues for the three months ended March 31, 1996.                             

     Gross  profit  for the three  months  ended  March 31,  1996  increased  by
$286,466,  or 15.8%, to $2,105,198,  compared to $1,818,732 for the three months
ended March 31, 1995.  Gross profit  margin as a percentage of net sales for the
three  months  ended March 31, 1996  increased to 26.9% from 26.8% for the three
months ended March 31, 1995.  There were no significant  changes in gross profit
percentage between the periods ended March 31, 1996 and 1995.                   

     Operating  expenses for the three months ended March 31, 1996  increased by
$403,460,  or 30.2% to $1,738,909  compared to  $1,335,449  for the three months
ended March 31, 1995. These increases were a result of higher costs,  associated
with  higher   increased  sales  volume,   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.  In
April 1995, the Company purchased its Midwest  Distribution Center in Fairfield,
Illinois,  which it  previously  rented.  In June 1995,  the  Company  completed
construction  to double the size of this  facility.  In August 1995, the Company
acquired an additional five contiguous acres of property for future expansion of
the Midwest Distribution Center.                                                

     Income from operations decreased by $116,994, or 24.2%, to $366,289 for the
three  months  ended March 31,  1996,  compared to $483,283 for the three months
ended March 31, 1995 as a result of increased operating expenditures.           

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

     Interest  expense for the three months  ended March 31, 1996,  increased by
$125,889, or 89.3% to $266,842,  compared to $140,955 for the three months ended
March 31,  1995.  The  increase  was a result of  additional  borrowings  by the
Company in support of the growth in sales and assets.                           

     Net income as a  percentage  of net sales for the three  months ended March
31, 1996 was 1.1% as compared to 3.3% for the three months ended March 31, 1995.

         As a result of the  foregoing,  the  Company's net income for the three
months ended March 31, 1996  decreased  by $136,092 to $85,445 or $.02  earnings
per share,  as compared to  $221,537,  or $.08  earnings per share for the three
months ended March 31,1995.                                                     

Liquidity and Capital Resources                                                 
-------------------------------                                                 

     The Company has  continued to use funds  generated  from  operations,  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 March 31,
1996. The balance due under the Company's loan facilities amounted to $8,615,183
at March 31, 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 prime (which was 8.25% at March 31,
1996) to .75% above prime.  Both lines are secured by a pledge of  substantially
all of the  Company's  assets  and  one  line  is  partially  guaranteed  by the
President/majority  shareholder.  The agreements contain covenants which require
the  maintenance of certain amounts of net worth and certain  financial  ratios.
The Company has  maintained  compliance  with its loan  covenants and maintained
good relations with its primary lender for a period of 17 years.                

     In January 1996, the Company  obtained another $100,000 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. To date, $67,300 has
been funded.                                                                    

     Cash used in  operations  during the three  months ended March 31, 1996 was
$802,331 as compared with  $689,368  used in operations  during the three months
ended March 31,  1995.  This  change was due mainly to the  increase in accounts
receivable  of  $2,213,114  offset by the  corresponding  increase  in  accounts
payable and accrued expenses of $940,952.                                       

 9

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

     Cash received from  customers  during the three months ended March 31, 1996
amounted to $5,620,767, an increase of $408,865, or 7.8% over the same period in
1995. At the same time,  cash paid to suppliers  and employees  during the three
months ended March 31, 1996  decreased by $912,056 or 16.6% over the same period
in 1995 to  $4,580,975,  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 three months ended March 31, 1996,  the Company made a concerted
effort to control the growth of  inventory  while  ensuring  sufficient  product
availability.  As a  result,  inventory  decreased  by  $212,691,  or  2.7%,  to
$7,660,440 from  $7,873,131.  Accounts  receivable  increased by $2,213,114,  or
39.4%,  from  January  1, 1996 to March  31,  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  anticipates signing a contract for a new computer system which
management believes will improve the efficiency of operations.  The cost of this
expenditure  will be financed  over a 5 year  period and will not  significantly
affect the cash flows of the Company.                                           

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PART II                                                                         

Other Information                                                               

ITEM 6                                                                          

Exhibits and Reports on Form 8-K                                                

[a]  None.                                                            

     [b]  No reports on Form 8-K were filed  during the quarter  ended March 31,
1996.                                                       

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SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.                                          

                         BRAKE HEADQUARTERS, USA

                 /s/ Joseph Ende
                                      Joseph Ende, Chief Executive Officer

DATE:  May 15, 1996                                                             

                 /s/ Marc Ruskin
                                         Marc J. Ruskin, Chief Financial Officer

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10QSB’ Filing	Date	First	Last	Other Filings

	3/31/01	7
	12/31/00	7
	12/31/96	6		10-K, NT 10-K
Filed on:	5/17/96
	5/15/96	12		NT 10-Q
	5/7/96	1
	4/30/96	6
For Period End:	3/31/96	1	11	NT 10-Q
	1/1/96	10
	12/31/95	2	6
	3/31/95	2	9
				List all Filings

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Filing Submission 0001010549-96-000096 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Brake Headquarters USA Inc – ‘10QSB’ for 3/31/96

As of: Friday, 5/17/96 · For: 3/31/96 · Accession #: 1010549-96-96 · File #: 33-30422

Quarterly Report — Small Business — Form 10-QSBFiling Table of Contents

10QSB — Quarterly Report — Small BusinessDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Quarterly Report — Small Business — Form 10-QSB
Filing Table of Contents

10QSB — Quarterly Report — Small Business
Document Table of Contents