Brake Headquarters USA Inc – ‘10-12G’ on 6/6/96 – 10-12B

As of:  Thursday, 6/6/96   ·   Accession #:  1010549-96-117   ·   File #:  0-28640

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Registration of Securities (General Form)   —   Form 10
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12B      Registration of Securities (General Form)             55    255K 

Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 FORM 1O

 General Form For Registration of Securities
 Pursuant to Section 12(b) or 12(g) of
 the Securities Exchange Act of 1934

 BRAKE HEADQUARTERS U.S.A., INC.
(Name of Small Business Issuer in Its Charter)

        Delaware                                  22-3048534
(State or Other Jurisdiction of                   (I.R.S. Employer
  Incorporation or Organization)                   Identification No.)

33-16 Woodside Avenue                                         
Long Island City, New York                               11101      
(Address of Principal Executive Offices)                     (Zip Code)         

(718) 779-4800
 Issuer's Telephone Number

 Securities to be registered pursuant to Section 12(b) of the Act:

     Title of Each Class                      Name of Each Exchange on Which
      to be so Registered                       Each Class is to be Registered

None                                        

Securities to be registered pursuant to Section 12(g)of the Act:

 Common Stock, $.001 par value
(Title of Class)

(Title of Class)

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Item 1.      Description of Business                                            

(a)  General Development of Business.                                           

     Unified  Capital,  Inc. (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.  Quality
First Brake, Inc., a wholly-owned  Delaware  subsidiary of the Company ("Quality
First"), was formed in August 1995 and owns Fifteen, Inc., a wholesale warehouse
for "undercar"  parts. The Company's other  wholly-owned  subsidiaries are Brake
Headquarters  Corp., an inactive New York corporation formed in January 1996 and
Quality First Brake Corp., a currently  inactive Canadian  corporation formed in
1993. All references to business history herein relate to Sanyo Automotive whose
operations pre-date the Company's formation in 1988.                            

(b)  Financial Information about Industry Segments.                             

     The Company  operates solely in one industry segment - the automotive after
market.  All financial  information of the Company is contained in  Consolidated
Financial Statements included elsewhere in this Prospectus.                     

(c)  Narrative Description of 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 registered trademark "Brake  Headquarters,  U.S.A.," as
well as under the name "Sanyo Automotive" and under private labels.             

Industry Overview                                                               

     According to industry data, the automotive aftermarket industry consists of
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                           

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expected to grow by 2.8% during 1995, according to industry data. 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, according to industry data.                              

     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,  increased  performance demanded by consumers.  These
changes caused original equipment  manufacturers  ("OEMs") to make cars lighter,
which,  in turn caused OEMs to shift 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.                                                                   

     Industry data show 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.                  

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     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,
U.S.A.,"  but also  under  the  name  "Sanyo  Automotive"  and  certain  private
manufacturers' labels. The Company distributes its products through 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 100 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.  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                                                  
------------------------------                                                  

     The Company maintains a computer system which 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.                                  

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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 15,000 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 does not maintain supply contracts with any of its suppliers of
parts and equipment although it believes  alternative  sources exist for most of
the products it distributes. The Company depends on close relationships with its
suppliers and its ability to purchase products directly from those manufacturers
at favorable  prices  (including  volume  discounts) and on favorable terms. The
Company's  long-term  association with vendors worldwide has enabled the Company
to obtain inventory at competitive prices and, as a result, to provide customers
with  quality  products at  competitive  prices.  In  addition,  the Company has
certain  products custom  designed and  manufactured  to its  specifications  by
independent manufacturers.                                                      

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                                           

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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 and problems
which may be experienced by 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.  A distinct part number system was created and  publicized
through the catalogs  which  developed a dependency  to form between the Company
and its customers.  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 Company offers many of its products under the name "Brake Headquarters,
U.S.A." for which it has obtained a registered  trademark from the United States
Patent and Trademark Office.                                                    

Employees                                                                       
---------                                                                       

     As of April  30,  1996,  the  Company  had 111  employees,  including  five
executives;  four employees in purchasing;  18 administrative  personnel; six in
sales and customer service; 72 employees in warehousing, shipping and receiving;
and six in Quality First's operations. The Company also retains the services, as
independent  contractors,  of 114 independent sales representatives who are paid
solely on a commission basis.                                                   

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     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.                                  

(d)  Financial  Information  about  Foreign and Domestic  Operations  and Export
Sales.                                                                

                                                        [Enlarge/Download Table]


                                                                                               Year                          
                                                                -------------------------------------------------------------

                                                                     1993                     1994                     1995  
                                                                   --------                 --------                 ------  
                                                                                                                             
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)                  527,874
   Canada.........................................                        -                 (44,599)                   39,000
   Mexico and South America.......................                      (1)                      (1)                      (1)
   Europe.........................................                        -                        -                        -
IDENTIFIABLE ASSETS:                                                                                                         
   United States..................................                8,070,849               11,509,646               15,496,294
   Canada.........................................                        -                  427,497                        -
   South America..................................                        -                        -                        -
   Europe.........................................                        -                        -                        -
<FN>                                                                                                                         

<F1> The Company does not maintain  operations in South America or Mexico and is                                             
     unable to determine operating profit or loss in those geographic regions.                                               

</FN>                                                                                                                        

Item 2. Financial Information.                                                  

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  included elsewhere herein. The consolidated
balance  sheet  data as of  December  31,  1994 and 1995,  and the  consolidated
statements of                                                                   

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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
elsewhere in this Registration Statement. 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 three months  ended March 31, 1995 and 1996 are derived  from the  unaudited
consolidated  financial  statements of the Company  appearing  elsewhere in this
Registration Statement. 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 three months ended
March 31, 1996 are not necessarily  indicative of the results to be expected for
the full year.                                                                  

                                                        [Enlarge/Download Table]

                                                     Year Ended December 31,                  3 months ended March 31,  
                           ---------------------------------------------------------------    ------------------------  
                                                                                                                        

STATEMENT OF                                                                                                            
OPERATIONS DATA:        1991         1992           1993           1994            1995         1995            1996    
                        ----         ----           ----           ----            ----         ------          -----   
Net sales            $8,868,974   $13,672,234   $17,717,023    $25,094,473     $30,463,730   $6,793,955      $7,833,881 
Income (loss) from                                                                                                      
 operations             298,793       605,845       370,009     (1,041,037)<F1>    566,874      483,283         366,289 
Interest expense       (307,874)     (261,643)     (314,796)      (520,602)       (774,762)    (140,955)       (266,844)
Net income (loss)        48,409       235,982        41,187     (1,968,909)<F1>   (179,072)     221,537          85,445 
Net income (loss)                                                                                                       
 per common and                                                                                                         
 common                                                                                                                 
 equivalent share(2)       $.02          $.05          $.00     $      .92)          $(.06)        $.08            $.02 

BALANCE SHEET DATA:                                                                                                     
Working capital      $1,336,197    $1,977,053    $1,823,459     $ 3,706,239     $3,288,863   $3,871,117      $7,383,871 
Total assets          6,064,582     8,070,849    10,189,885      11,937,143     15,496,294   13,993,432      17,352,543 
Long-term obligations   545,639        80,113       133,927         216,469        630,494      483,624       4,454,744 
Total stockholders'     941,535     2,174,915     2,176,102       4,124,961      3,855,804    4,346,279       3,991,249 
  equity                                                                                                                

FINANCIAL STATISTICS:                                                                                                   
Gross profit as a                                                                                                       
  percent of sales         27.1          25.1          24.5           26.7            26.4         26.8            26.9 
SG&A as a percent                                                                                                       
   of sales)               23.8          20.6          22.4           20.7<F1>        23.8         19.7            22.2 
Operating income                                                                                                        
 (loss) percent of sales    3.4           4.4           2.1           (4.1)<F1>        1.9          7.1             4.7 

<FN>                                                                                                                    

<F1> 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. See                                        
     "Item 1.  "Description  of  Business - General  Development  of  Business,"                                        
     "Certain  Transactions"  and  Note  4 of  Notes  to the  1995  Consolidated                                        
     Financial Statements.                                                                                              

<F2> Net income (loss) per share is computed on the basis described in Note 1 of                                        
     Notes to  Consolidated  Financial  Statements  included  elsewhere  herein,                                        
     including,  but not limited to, the  adjustment  for dividends on preferred                                        
     stock.                                                                                                             

</FN>                                                                                                                   

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                                                   Year Ended December 31,                      3 months ended March 31,       
                            ----------------------------------------------------------------           ------------------------
                                                                                                                               
OTHER DATA:              1991          1992             1993            1994          1995              1995            1996   
                         ----          ----             ----            ----          ----             -------        -------  
Operating cash flow    $(77,919)    $(667,501)     $(1,762,454)    $(2,076,201)   $(2,704,987)       $(689,368)      $(814,928)
Capital expenditures      7,984        11,958          135,999         210,014        852,431          383,876          14,016 
Depreciation and                                                                                                               
   amortization          48,324        69,164           78,677          92,245        186,675           27,559          20,392 
Number of employees          47            54               62              93            110               91             111 
Weighted average                                                                                                               
   number of shares                                                                                                            
   outstanding        1,500,000     2,448,827        2,618,321       2,188,414      3,058,968        2,657,577       3,666,464 


 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 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 undercar 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, 1995 and 1996.                   

     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                         

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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.           

     Interest  expense for the three months  ended March 31, 1996,  increased by
$125,889, or 89.3% to $266,844,  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.                                                           

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.
A large  retail  chain,  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 SG&A expenses in
1995,  resulting from higher costs  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 has postponed
raising  additional  funds  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 under its Reverse
Merger  Agreement,  as amended,  resulted in the release of the 125,000 escrowed
shares, exercisability of the Class F                                           

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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.                                                                  

     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 is 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.         

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     Interest  expense in 1994 was $520,602,  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 March 31, 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 March 31,
1996.  The  balance  due  under  the  Company's  loan  facilities   amounted  to
approximately  $8,615,000  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  stockholder.  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.                                                             

     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
$814,928 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  $2,213,000  offset by the  corresponding  increase  in  accounts
payable and accrued expenses of $940,000.                                       

     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 $924,653, or 16.8% over the same period
in 1995 to  $4,568,378,  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                    

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$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 five-year period and will not  significantly
affect the cash flows of the Company.                                           

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 at the option of the
Company. 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 loan bears  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                             

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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
$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'  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.                     

ITEM 3. 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                                                             

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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.                                                            

     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.  In July  1995,  the  Company  successfully  bid for an  additional  ten
contiguous acres for future expansion of the Midwest Distribution Center.       

     The Company occupies  approximately  10,000 square feet of public warehouse
space at 230 East Burnside, Portland, Oregon on a month-to-month basis.         

Item 4. Security Ownership of Certain Beneficial Owners and Management          

     The following  table sets forth  information as of the date of this filing,
the number of shares of the Company's outstanding Common Stock, $.001 par value,
beneficially  owned (as such term is defined in Rule 13-d3 under the  Securities
Exchange Act of 1934) by each person  known by the Company to be the  beneficial
owner of more than 5% of the outstanding shares, by each director, by each named
executive officer, and by all directors and officers as a group:                

                                                                [Download Table]


Name and Address          Amount and Nature                  Percentage         
of Beneficial Owner     Beneficial Ownership <F1>          of Class <F1><F2>    
-------------------     --------------------------         ----------------     
                                                                                
Joseph Ende <F3>               2,719,333<F4>                     77.8%          

Sandra Ende <F3>                  30,000<F5>                     <F9>           

Marc J. Ruskin <F3>                   0 <F6>                     <F9>           

Scott Osias <F3>                  15,000<F7>                     <F9>           

Officers and Directors         2,764,333<F8>                      79.0%         
as a Group                                                                      
(4 Persons)                                                                     

<FN>                                                                            

<F1> Unless otherwise noted, the Company believes that all persons named in this
     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 date of this  filing  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.       

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<F2> Based on  3,416,197  shares of Common Stock  outstanding  as of the date of
     this filing.                                                               

<F3> The address of this person is c/o the Company,  33-16 Woodside Avenue, Long
     Island City, New York 11101.                                               

<F4> 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.                                       

     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 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 year through  December 31, 2000. See
     Item 7. "Certain Relationships and Related Transactions."                  

<F5> 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.                                                            

<F6> Does not  include  6,000  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.                        

<F7> 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.                        

<F8> Includes  80,000 shares  issuable  upon  exercise of currently  exercisable
     stock  options,  but does not include  235,000 shares of Common Stock which
     may be  purchased  pursuant  to  stock  options  which  are  not  currently
     exercisable.                                                               

<F9> Less than one percent of the issued and outstanding shares.                
</FN>                                                                           

ITEM 5. 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.                                                    

Name           Age  Position                                                    
----           ---  --------                                                    

Joseph Ende    48   Chairman of the Board, President and Chief Executive Officer

Scott Osias    41   Vice President of Sales and Marketing                       

Marc J. Ruskin 43   Chief Financial Officer                                     

Sandra Ende    43   Secretary and Director                                      

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     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.                                                                           

ITEM 6. EXECUTIVE COMPENSATION.                                                 

     The following table sets forth all  compensation  awarded to, earned by, or
paid for all services rendered to the Company,  a small business issuer,  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.                

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Summary Compensation Table
--------------------------

                                                             Long-Term
                                Annual Compensation           Compensation
--------------------------------------------------------------------------------
Name and                                                       Restricted Stock 
Principal               Salary    Bonus      Other Annual           Award(s)    
Position         Year     ($)      ($)      Compensation ($)          ($)       
(a)             (b)     (c)      (d)           (e)                  (f)     
--------------------------------------------------------------------------------

Joseph Ende,     1995  $127,500    -0-(1)        -0-               180,000(2)   
Chief Executive                                                                 
Officer and                                                                     
Director                                                                        
              1994  $130,000    -0-           -0-(3)            120,000(4)
          1993  $108,000  $102,745        -0-                  -0-

(1)  Mr. Ende will receive a bonus of $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,  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,   subject  to   stockholder
     ratification,  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 Item 7. "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 Item 7. "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."                                                         

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Options/SAR Grants in Last Fiscal Year
--------------------------------------

                                                            Potential Realizable
                                                            Value at Assumed
                                                           Annual Rates of Stock
                                 Individual Grants          Price Appreciation
                                                             For Option Term
--------------------------------------------------------------------------------

Percent of                  
Number of     Total                                 
Securities   options/SARs                             
underlying   Granted to  Exercise or                  
options/SARs Employees in  Base Price  Expiration       
Name         Granted (#)  Fiscal Year    ($/Sh)       Date     5% ($)      10%  
(a)              (b)          (c)          (d)         (e)      (f)        (g)  
--------------------------------------------------------------------------------
Joseph Ende    180,000      96.7%        $3.00      12/15/00  $149,400  $329,400
Marc Ruskin      6,000       3.3%        $2.25        9/4/00    $3,729    $8,220

 Aggregated Option/SAR Exercises in Last Fiscal Year
 and FY End Option/SAR Values(1)
 ---------------------------------------------------

                       Number of
                                           Securities           Value of
                                               Underlying        Unexercised in-
                                            Unexercised          the-Money
                                             Options/SARs at     Options/SARs at
         Shares Acquired                     Fiscal Year-End     Fiscal Year-End
Name      on Exercise (#)  Value Realized   (#) Exercisable/    ($) Exercisable/
(a)            (b)              ($)           Unexercisable       Unexercisable 
                             (c)                 (d)                   (e)
--------------------------------------------------------------------------------

Joseph Ende    -0-(1)           -0-          80,000/40,000              -0-     

(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 Item 7. "Certain  Relationships and Related
Transactions."                                                        

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,  with a bonus  at the
discretion of the Board of Directors. Mr. Ende is also entitled to a performance
bonus of $50,000 for each of the six-month  periods  ending June 30 and December
31 during the term of the                                                       

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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.  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 is
receiving a base annual salary of $52,000,  with a bonus to be determined by the
Board of Directors.  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 available 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 3,064 shares have been purchased under such plan as of December 31, 1995.    

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 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                                                               

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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 258,000 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  165,000
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.

# of Options     # of Options   # of Options                                    
Granted             Vested       Exercised     Exercise Price   Expiration Date 
--------------------------------------------------------------------------------

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    

     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 in two installments in December 1996.          

     Mark 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.         

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1995 Employee Stock Option Plan                                                 
-------------------------------                                                 

     In July 1995,  the Company's  Board of Directors  adopted the 1995 Employee
Stock  Option Plan (the "1995  Plan").  The 1995 Plan  provides for the grant of
ISOs, NQSOs and SARs to purchase an aggregate of 300,000 shares of Common Stock.
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.                                                                        

# of Options     # of Options    # of Options                                   
Granted             Vested        Exercised     Exercise Price  Expiration Date 
--------------------------------------------------------------------------------

180,000               -0-            -0-            $3.00             7/30/00   

     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 Item 7.  "Certain
Relationships and Related Transactions."                                        

 Repricing of Options/SARs
 -------------------------

                                  Market       Exercise              Length of
                  Number of     Price of     Price of               Original
                   Securities    Stock at      Stock at              Option Term
                   Underlying    Time of       Time of               Remaining
                  Options/SARs Repricing or  Repricing or   New     at Date of
                   Repriced or   Amendment     Amendment  Exercise  Repricing or
Name         Date  Amended (#)     ($)            ($)     Price ($)   Amendment 
(a)           (b)      (c)         (d)            (e)       (f)          (g)    
--------------------------------------------------------------------------------

Joseph Ende 12/16/94  120,000       $2.50       $20.00      $2.50       5 years 

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                                                  

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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.                                                

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                         

     In  connection  with the 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,  subject to  stockholder  ratification,  of an
option to purchase  180,000 shares of Common Stock under the 1995 Plan. See Item
6. "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.                                            

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     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,  since the Company had revenues of
at least  $25,000,000  for fiscal 1994 and the Company  had  cumulative  pre-tax
operating  income for the years ended  December  31,  1992,  1993 and 1994 of at
least $2,125,000.                                                               

     As of December 31, 1995, Joseph Ende had personally  guaranteed  payment of
up to an aggregate of $9,000,000 of the Company's  indebtedness under its credit
facilities.  In  February  1996,  the  bank  limited  Mr.  Ende's  guarantee  to
$1,000,000.  See Item 6. "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 131,330 shares,  respectively,
from  the  Brennan  Trusts  as  described  under  Item 9.  "Market  Price of and
Dividends on the Registrant's Common Equity and Related Stockholder Matters."   

     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,
all of which shares are held by Joseph Ende. See Item 4. "Security  Ownership of
Certain Beneficial Owners and Management."                                      

     See "Item 3.  Properties" for a description of a lease between Mr. Ende and
the Company.                                                          

ITEM 8. LEGAL PROCEEDINGS.                                                      

     On December  28,  1995,  the Company  filed a complaint  against 18,  Inc.,
Twenty,  Inc.,  Twenty-One,  Inc.,  Thirty,  Inc., Forty, Inc., Dori Avishay and
Israel Goldman in the Supreme Court of the State of New York,  County of Queens,
claiming that the defendants owe the Company  $985,943.91,  including  interest,
for goods sold and delivered and account stated,  and demanding punitive damages
in the amount of $1,000,000. The defendants have answered the complaint,  denied
the allegations and counterclaimed  against the Company, as well as Joseph Ende,
the Company's President for fraud in the amount of $5 million of damages and $20
million of punitive  damages.  The Company  believes the counterclaim is without
merit and intends to vigorously defend this lawsuit.                            

     The Teamsters  Union  representing  employees at the Company's  Long Island
City,  New York warehouse has made a claim for  approximately  $64,000 in unpaid
health  benefits,  interest and audit  expenses.  The Company is disputing  this
claim.                                                                          

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ITEM 9. MARKET PRICE OF AND  DIVIDENDS  ON THE  REGISTRANT'S  COMMON  EQUITY AND
RELATED STOCKHOLDER MATTERS.                                          

(a)  Market Information                                                         

     The Common Stock is traded in the over-the-counter  market under the symbol
BHQU.  Until  August 8, 1995,  the Common  Stock  traded  under the symbol SNYO.
Quotations  of the  prices  of stock  trades  are  available  on the  Electronic
Bulletin Board  maintained by the National  Association  of Securities  Dealers,
Inc. The Company has applied to have the Common  Stock listed on NASDAQ,  and is
awaiting determination.                                                         

     The  following  table sets forth the high and low bid and asked  quotations
for the  Common  Stock for each  quarter  of the last two  fiscal  years and the
subsequent  interim period, as reported by the National  Quotation Bureau,  Inc.
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. All prices have been adjusted to reflect the Company's 1993
one-for- two reverse split and its 1995 one-for-ten reverse split.              

        Bid Prices        Asked Prices
       High     Low      High      Low
       ----     ---      ----      ---
1994                                                                    
----                                                                    
First Quarter              $20.00    $10.00   $55.00     $40.00                 
Second Quarter             $30.00    $20.00   $45.00     $25.00                 
Third Quarter              $20.00    $ 1.25   $35.00     $ 5.00                 
Fourth Quarter             $ 3.75    $ 7.50   $ 7.50     $ 2.50                 

1995                                                                    
----                                                                    
First Quarter              $ 8.13    $ 1.56   $10.60     $ 2.50                 
Second Quarter             $ 7.50    $ 2.50   $ 8.13     $ 3.43                 
Third Quarter              $ 3.50    $ 2.50   $ 4.00     $ 3.75                 
Fourth Quarter             $ 5.25    $ 2.75   $ 6.00     $ 3.38                 

1996                                                                    
----                                                                    
First Quarter              $ 3.50    $ 2.75   $ 4.00     $ 3.38                 
Second Quarter             $ 3.50    $ 3.38   $ 4.00     $ 4.00                 
(Through April 30, 1996)                                                        

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     As of April 24, 1996,  the closing bid and asked prices of the Common Stock
were $3.50 and $4.00 per share, respectively.                                   

     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 at the time of the Reverse Merger,  the beneficiaries of
certain  trusts,  which had  beneficial  ownership of  approximately  23% of the
Company's  Common Stock through the  potential  exercise of Class A, Class B and
Class C Warrants, were the three sons of Robert E. Brennan, the former President
of First Jersey  Securities,  Inc. (the "Brennan Trusts") and that Mr. Brennan's
beneficial  ownership  of  the  Common  Stock  on  a  fully  diluted  basis  was
approximately  38% of the Common  Stock.  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 the above  table.
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.               

     At such  time,  Management  of the  Company  believed  that  the  continued
beneficial  ownership of the Common Stock by the Brennan  Trusts had resulted in
the  Company's  failure to obtain a listing  of the  Common  Stock on NASDAQ and
other  adverse  effects on the Company and its  operations.  Management  further
believed  that it was in the best  interests of the Company to  repurchase  such
shares from the Brennan Trusts.  The Company's lender would not lend the Company
the funds  necessary to purchase shares of Common Stock from the Brennan Trusts,
but agreed to loan the money to Mr. Ende  personally to purchase the shares.  In
January 1995,  Joseph Ende  purchased  386,000  shares of Common Stock using the
proceeds  of such bank  loan,  and  William  Orzolek  and Robert W.  Green,  two
non-affiliated persons, purchased 75,000 and 131,330 shares, respectively,  from
the Brennan Trusts.                                                             

(b)  Stockholders of Record                                                     
-----------------------                                               

     As of May 22,  1996,  there were 518 holders of record of the Common  Stock
and 1 holder of record of the 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.                                                                   

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(c)  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 Series A Preferred  Stock issued in connection  with
the Reverse  Merger.  On April 30, 1995, all of the then  outstanding  shares of
Series A 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 Series B Preferred Stock issued to the Company's President.  See
Item 2. "Financial Information Management's Discussion and Analysis of Financial
Condition  and Results of  Operations"  and Item 7. "Certain  Relationships  and
Related Transactions."                                                          

     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.                         

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.                               

(a) 1. Between  February 7, 1996 and May 10, 1996,  an aggregate of 3,064 shares
of Common  Stock  were  purchased  by and  issued to  employees  of the  Company
pursuant to the Company's Employee Stock Bonus Plan.                            

     2. On March 28, 1996,  1,000 shares of Series B Preferred Stock were issued
to Joseph Ende in consideration for services rendered.                          

     3. On January  5, 1996,  an  aggregate  of 538 shares of Common  Stock were
issued to two employees of the Company in consideration for services rendered.  

     4. On November 8, 1995,  an  aggregate of 2,366 shares of Common Stock were
purchased by and issued to 18 employees of the Company pursuant to the Company's
Employee Stock Bonus Plan.                                                      

     5. On September 5, 1995,  the Company  granted to Marc J. Ruskin options to
purchase  6,000 shares of Common  Stock at an exercise  price of $2.25 per share
for services rendered.                                                          

     6. On July 31,  1995,  the  Company  granted  to Joseph  Ende,  subject  to
stockholder ratification,  options to purchase 180,000 shares of Common Stock at
an exercise price of $.30 per share.                                            

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     7. On May 19, 1995,  1,000,000 shares of Common Stock were issued 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.                         

     8. On May 19,  1995,  41,666  shares of Common  Stock were issued to Joseph
Ende upon the exercise of all of the Company's Class F Warrants for an aggregate
consideration of $16,667.                                                       

     9. On December  16, 1994,  the Company  regranted to Joseph Ende options to
purchase 120,000 shares of Common Stock at an exercise price of $2.50 per share.

     10. On December 7, 1994, the Company  granted to Gregory Farrell options to
purchase  3,000 shares of Common Stock at an exercise  price of $2.50 per share,
which options have been terminated.                                             

     11. On November 21,  1994,  the Company  granted to Scott Osias  options to
purchase 9,000 shares of Common Stock at an exercise price of $2.50 per share.  

     12. On October  25,  1994,  41,666  shares of Common  Stock were  issued to
Joseph Ende upon the  exercise of all of the  Company's  Class D Warrants for an
aggregate consideration of $16,667.                                             

     13. On October 25,  1994,  1,100 shares of Common Stock were issued to Ilan
Pacholder in consideration for services rendered.                               

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

        Number of Warrants
Name                                   Exercised            Number of Shares    
--------------------------------------------------------------------------------

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         

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

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        Number of Warrants
Name                                   Exercised            Number of Shares    
--------------------------------------------------------------------------------

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         

     16. On March 30,  1994,  5,000  shares of Common  Stock were issued 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.                                              

     17. On January 1, 1994,  700 shares of Common  Stock were  issued to Morton
Haft in consideration for services rendered.                                    

     18. On May 23, 1993, 100 shares of Common Stock were issued to each of five
employees  of  the  Company  in  consideration  for  services  rendered,  for an
aggregate of 500 shares issued.                                                 

(b) There were no  underwriters  with respect to any of the above  transactions.
The  persons  or the class of persons  to whom the  securities  were sold are as
indicated under each numbered item.                                             

(c) The Company  received  aggregate  consideration  for the above securities as
indicated under each numbered item.                                             

(d) The exemption for the issuance of the 1,000,000  shares of Common Stock upon
conversion of shares of Preferred  Stock is claimed under Section 3(a)(9) of the
Securities  Act;  the  exemption  for the grant and exercise of all warrants and
options  listed above is claimed under Section 4(2) of the  Securities  Act; and
the exemption for the issuance of the shares in subsections a(1), a(2),  (a)(3),
(a)(4),  (a)(12),  (a)(16) and (a)(17),  respectively,  is claimed under Section
4(2) of the Securities Act.                                                     

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.               

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  and,  accordingly,  the holders of the Common Stock voting for the
election of directors are able to elect less than the majority of all directors.
There  are  no  preemptive,   subscription,   conversion  or  redemption  rights
pertaining to                                                                   

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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 the Series B Preferred  Stock.  All of the
3,416,197  shares of Common Stock  outstanding  as of April 26,  1996,  are duly
authorized, validly issued, fully paid and non-assessable.                      

ITEM 12. 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.                           

     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 the Delaware General  Corporation Law
(the "DGCL").                                                                   

     The DGCL 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 DGCL; or                         

     (iv) for any  transaction  from  which the  director  derived  an  improper
personal benefit.                                                     

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

     The Company's  financial  statements are included in a separate  section of
this registration statement following Item 15.                                  

ITEM 14.  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                                

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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. ("GG&K"). Prior to its appointment,  the
Company did not consult with GG&K  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 GG&K
as the Company's  certified public  accountants.  GG&K'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 GG&K.  

     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.                                           

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.                                     

      Index to Consolidated Financial Statements and Exhibits         Page No.
      -------------------------------------------------------         --------

Independent Auditors' Reports.........................................F-1 to F-3

Balance Sheets as of                                                            
 December 31, 1995 and 1994..................................................F-4

Statements of Operations for the                                                
 years ended December 31, 1995, 1994 and 1993................................F-5

Statements of Shareholders' Equity                                              
 for the years ended December 31, 1995, 1994 and 1993........................F-6

Statements of Cash Flows for the                                                
 years ended December 31, 1995, 1994 and 1993................................F-7

Notes to Financial Statements........................................F-8 to F-15

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Balance Sheets as of March 31, 1996 (Unaudited)                                 
 and December 31, 1995 (Audited)............................................F-16

Statements of Income for the three months ended                                 
 March 31, 1996 and March 31, 1995 (Unaudited)..............................F-17

Statements of Cash Flows for the three months ended                             
 March 31, 1996 and March 31, 1995 (Unaudited)..............................F-18

Notes to Financial Statements (Unaudited)...........................F-19 to F-20

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Exhibit No. Exhibit                                                             

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)                                      

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        Grid Promissory Note in the amount of $2,600,000 made by Sanyo      
      Automotive Parts, Ltd. to Bank Leumi Trust Company of New York
dated April 6, 1994.(2)                                 

10.5        Employment Agreement between the Company and Scott Osias            
dated November 24, 1994.(4)                             

10.6        Grid Promissory Note in the amount of $3,300,000 made by Sanyo      
      Automotive Parts, Ltd. to Bank Leumi Trust Company of New York
dated December 8, 1994.(4)                              

10.7        Amendment dated April 17, 1995 to Agreement and Plan of             
Reorganization by and among Unified Capital, Inc.       
          (now know as Sanyo Industries, Inc.), Sanyo Automotive Parts, Ltd.
and Joseph Ende dated July 9, 1992.(4)                  

10.8        Loan Agreement between Sanyo Automotive Parts, Ltd., The Fairfield  
National Bank and Illinois Development Authority dated  
January 13, 1995.(4)                                    

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10.9        Employment Agreement between the Company and Joseph Ende dated      
July 31, 1995.(5)                                       

10.10       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)                                   

10.11       Mortgage between Sanyo Automotive Parts, Ltd. and Fairfield National
Bank dated December 8, 1995.(5)                         

10.12       Promissory Note in the principal amount of $390,000 made by Sanyo   
Automotive Parts, Ltd. to Fairfield National Bank dated 
December 8, 1995.(5)                                    

10.13       Second Mortgage between Sanyo Automotive Parts, Ltd. and the        
Illinois Development Finance Authority ("IDFA") dated   
December 7, 1995.(5)                                    

10.14       Loan Agreement between Sanyo Automotive Parts, Ltd. and IDFA dated  
December 11, 1995.(5)                                   

10.15       Promissory Note in the principal amount of $240,000 made by Sanyo   
  Automotive Parts, Ltd. to IDFA dated December 11, 1995.(5)

10.16       Absolute, Unconditional and Continuing Guaranty of Payment made by  
Brake Headquarters U.S.A., Inc. in favor of IDFA dated  
December 11, 1995.(5)                                   

10.17       Loan Agreement between Sanyo Automotive Parts, Ltd. and the Chase   
Manhattan Bank, N.A. dated February 22, 1996.(5)        

10.18       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)                                   

10.19       Security Agreement between Sanyo Automotive, Ltd. and the Chase     
Manhattan Bank, N.A. dated February 22, 1996.(5)        

10.20       Corporate Guaranty made by Brake Headquarters U.S.A., Inc. in favor 
     of the Chase Manhattan Bank, N.A. dated February 22, 1996.(5)

10.21       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)                             

21.1        Subsidiaries of the Company.(5)                                     

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(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.                                 

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SIGNATURES

     Pursuant to the  requirements of Section 12 of the Securities  Exchange Act
of 1934, as amended, the registrant has duly caused this registration  statement
to be signed on its behalf by the undersigned, thereunto duly authorized.       

                           BRAKE HEADQUARTERS U.S.A., INC.

Dated:  June 4, 1996                  By:  /s/ Joseph Ende                      
                                --------------------------
                 Joseph Ende
                                           President and Chief Executive Officer
                                   (Principal Executive Officer)

                        /s/ Marc J. Ruskin
                                --------------------------
                    Marc J. Ruskin
                             Chief Financial Officer
                                  (Principal FinancialOfficer)

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INDEPENDENT AUDITORS' REPORT                                                    

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

We  have  audited  the   accompanying   consolidated   balance  sheet  of  Brake
Headquarters  U.S.A.,  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 U.S.A., 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 6 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 of 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                                                           
April 8, 1996                                                                   

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INDEPENDENT AUDITORS' REPORT                                                    

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

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity,  and cash flows of Brake  Headquarters  U.S.A.,  Inc. and
subsidiaries for the year ended December 31, 1994. These consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.                                                  

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.          

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

GOLDSTEIN GOLUB KESSLER & COMPANY, P.C.                                         
New York, New York                                                              

February  8, 1995                                                               

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INDEPENDENT AUDITORS' REPORT                                                    

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

We  have  audited  the  accompanying   consolidated  statements  of  operations,
shareholders'  equity,  and cash flows of Brake  Headquarters  U.S.A.,  Inc. and
subsidiaries for the year ended December 31, 1993. These consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.                                                  

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.          

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
Brake Headquarters U.S.A., Inc. and subsidiaries for the year ended December 31,
1993 in conformity with generally accepted accounting principles.               

BOREK, STOCKEL & MARDEN                                                         
Port Chester, New York                                                          

May 30, 1996                                                                    

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

 CONSOLIDATED BALANCE SHEETS

December 31,                                                                    
ASSETS                                                                          
                                                          1995        1994
                                                          ----        ----
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
                                                     ---------------------------
       Total current liabilities                      11,009,996     7,595,713

Note Payable - Shareholder                                     -         37,063 
Long-term Debt                                            630,494       179,406 
                                                     ---------------------------
       Total liabilities                              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
                                                     ===========================

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

 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                        [Enlarge/Download Table]


Year ended December 31,                                1995             1994              1993    
-----------------------                                ----             ----              ----    
                                                                                                  
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 
                                                      =========        =========        ========= 


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

 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                                        [Enlarge/Download Table]


                                                                                                             Cumulative             
                                                                                                              Foreign       Total   
                                                                                  Additional                  Currency      Share-  
                                   Preferred Stock             Common Stock        Paid-In     Accumulated   Translation   -holders'
                                   Shares    Amount        Shares        Amount    Capital       Deficit     Adjustment     Equity  
                                   ------    ------        ------        ------    -------       -------     ----------     ------  
                                                                                                                                    
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 

Escess 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 
====================================================================================================================================

                                      F-6                                                                                           

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

                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                         

                                                        [Enlarge/Download Table]


Year ended December 31,                                                      1995           1994            1993    
                                                                             ----           ----            ----    
                                                                                                                    
Cash flows from operating activities:                                                                               
    Cash received from customers                                      $   28,526,134   $  24,081,395   $ 16,477,707 
    Cash paid to suppliers and employees                                 (29,740,631)    (25,662,239)   (17,600,199)
    Interest paid                                                           (757,394)       (495,357)      (302,378)
    Taxes paid                                                              (733,096)              -       (337,584)
                                                                            --------                       -------- 
                      Net cash used in operating activities               (2,704,987)     (2,076,201)    (1,762,454)
                                                                          ----------      ----------     ---------- 
Cash flows used in investing activity-capitalexpenditures                   (852,431)       (210,014)      (135,999)
                                                                            --------        --------       -------- 
Cash flows from financing activities:                                                                               
    Proceeds from common stock issuance                                        7,932       1,489,750              - 
    Net borrowings under notes and acceptances payable                     3,020,376         637,416      1,899,791 
    Proceeds from issuance of long-term debt                                 630,000         182,757         86,466 
    Principal payments on long-term debt                                     (21,032)        (32,150)             - 
    Principal payments on obligations under capital leases                         -         (16,676)       (50,468)
    Loans to President                                                       (72,000)              -        (17,936)
                                                                             -------                        ------- 
                      Net cash provided by financing activities            3,565,276       2,261,097      1,917,853 
                                                                           ---------       ---------      --------- 
Effect of exchange rate changes on cash                                       (1,954)          1,954              - 
                                                                              ------           -----                

Net increase (decrease) in cash                                                5,904         (23,164)        19,400 
Cash at  beginning of year                                                    11,991          35,155         15,755 
                                                                              ------          ------         ------ 
Cash at end of year                                                   $       17,895   $      11,991   $     35,155 
                                                                      ==============   =============   ============ 
Reconciliation of net loss to net cash used in operating activities:                                                
    Net income (loss)                                                 $     (179,072)  $  (1,968,909)  $     41,187 
    Adjustments to reconcile net loss to net cash used in                                                           
      operating activities:                                                                                         
        (Gain) loss on foreign currency transactions                          (2,816)         12,270        (22,042)
       Depreciation and amortization                                         186,675          92,245         78,677 
       Provision for doubtful accounts                                       617,891         (60,906)        26,113 
       Deferred income tax benefit                                          (154,000)        (49,000)       (23,059)
       Non-cash compensatory charges                                               -       2,314,000              - 
       Common stock issued for services                                            -          36,000              - 
       Changes in assets and liabilities:                                                                           
            Accounts receivable                                           (1,937,596)       (596,741)    (1,265,428)
            Inventory                                                     (1,593,795)       (707,601)      (472,786)
            Prepaid expenses and other current assets                         28,438        (207,553)      (133,838)
           Other assets                                                      (51,766)        (30,852)      (151,273)
           Accounts payable and accrued expenses                             764,220      (1,235,690)       338,273 
           Income taxes payable                                             (383,166)        326,536       (178,278)
                                                                            --------         -------       -------- 
                      Net cash used in operating activities           $   (2,704,987)  $  (2,076,201)  $ (1,762,454)
                                                                      ==============   =============   ============ 

Supplemental schedule of non-cash financing activities:                         

     Common stock was issued in 1995 and 1994 in connection with the exercise of
     Class F and D warrants,  respectively,  by an  increase in the amount,  due
from President of $16,667.                                            

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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.  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.                           

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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.               

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.                 

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.                                                                      

 F-9

The outstanding balances are as follows:                                        

                                    1995                    1994
                                    ----                    ----

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

Note 3.  LONG-TERM DEBT                                                         

Long-term debt consists of the following:                                       
                                                1995          1994
                                                ----          ----

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

(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.

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Aggregate maturities of long-term debt are as follows:                          

Year ending December 31,                                                        

1996                      $   65,038                          
1997                          69,712                          
1998                          70,556                          
1999                          54,493                          
2000                          59,000                          
Thereafter                   376,733                          
----------
$  695,532

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.                             

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.    

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

Exercise                              
Price                 Number of   
Per                  Warrants   
Class              Warrant                Exercised              Amount   
                -------                ---------              ------
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
                                       ==========           ==========

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 1/2 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.                                                             

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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  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:           

                         Options          Option Price
                         -------          ------------
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    
 =======

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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.               

Note 5.  INCOME TAXES                                                           

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

                               1995               1994              1993
                               ----               ----              ----
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
                                =========        =========        ==========

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:                 

                                         1995         1994          1993
                                         ----         ----          ----
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%
                                        =====         ====          ====

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.                                                   

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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:                 

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

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.  

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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

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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.                                               

F-19

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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.      

F-20

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-12G’ Filing		Date		First		Last			Other Filings
		1/1/05		45
		3/31/01		16		55
		12/31/00		16		55
		9/4/00		21
		7/30/00		18		22
		11/1/99		21
		9/5/99		21
		7/31/99		22		48
		7/1/99		14
		1/1/99		21
		9/5/98		21
		7/31/98		22		48			4
		1/1/98		21
		9/5/97		21
		7/31/97		22		48
		1/1/97		21
		12/31/96		46		54			10-K,  NT 10-K
		6/30/96		13		45			10-Q
Filed on:		6/6/96
		6/4/96		36
		5/30/96		39
		5/22/96		26
		5/10/96		27
		4/30/96		6		54
		4/26/96		30
		4/24/96		26
		4/8/96		37
		3/31/96		8		54			10QSB,  NT 10-Q
		3/28/96		27
		2/22/96		34
		2/7/96		27
		1/5/96		27
		1/1/96		13		45
		12/31/95		7		54
		12/28/95		24		31
		12/11/95		34		45
		12/8/95		34		45
		12/7/95		34
		11/17/95		34
		11/8/95		27
		9/5/95		27
		8/8/95		2		25
		7/31/95		18		34
		5/19/95		28
		4/30/95		24		47
		4/17/95		33
		3/31/95		8		53
		2/8/95		38
		1/13/95		13		33
		12/31/94		7		50
		12/16/94		28
		12/8/94		33
		12/7/94		28
		11/24/94		20		33
		11/21/94		28
		10/25/94		28
		6/8/94		30
		4/6/94		33
		3/30/94		28		47
		1/1/94		29
		12/31/93		11		50
		11/9/93		33
		5/23/93		29
		1/8/93		26
		1/5/93		26
		1/1/93		48
		12/31/92		23		46
		12/21/92		26
		9/21/92		35
		8/19/92		35
		7/21/92		35
		7/9/92		17		47
		7/1/92		14		33
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