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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

(Mark One)


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

                   For the fiscal year ended DECEMBER 31, 2000
                                             -----------------

                                       OR

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

              For the transition period from ________to __________

                         Commission file number 0-13324
                                               -------

                            QUESTRON TECHNOLOGY, INC.
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             (Exact name of registrant as specified in its charter)

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<S>                                                                          <C>
                        Delaware                                                            23-2257354
---------------------------------------------------------------             --------------------------------------------------
(State or other jurisdiction of incorporation or organization)                    (I.R.S. Employer Identification No.)



       6400 Congress Avenue, Suite 2000, Boca Raton, FL                                           33487
---------------------------------------------------------------             --------------------------------------------------
           (Address of principal executive offices)                                            (Zip Code)

</TABLE>

Registrant's telephone number:  (561) 241-5251
                                --------------

Securities registered under Section 12(b) of the Exchange Act: NONE
                                                               ----

Securities registered under Section 12(g) of the Exchange Act:


                          Common Stock, $.001 Par Value
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                                (Title of class)


                     Series IV Common Stock Purchase Warrant
--------------------------------------------------------------------------------
                                (Title of class)


                         Preferred Share Purchase Right
                       to Purchase 1/1,000th of a share of
    Series A Junior Participating Preferred Stock, par value $0.01 per share
--------------------------------------------------------------------------------
                                (Title of class)

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

                Yes   [X]           No   [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendments to this Form 10-K [ ]

         As of March 20, 2001, the aggregate market value of common stock held
by non-affiliates of the registrant was approximately $18,946,842. In addition,
as of March 20, 2001, the aggregate market value of Series IV Common Stock
Purchase Warrants held by non-affiliates of the registrant was approximately
$1,860,444.

         As of March 20, 2001, there were 9,226,013 shares of the registrant's
common stock and 3,998,000 of the registrant's Series IV Common Stock Purchase
Warrants outstanding.

The following documents are incorporated herein by reference: Certain exhibits
are incorporated herein by reference as set forth in Item 14 (a) 3., Exhibits,
in Part IV.


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         CERTAIN INFORMATION CONTAINED IN THIS ANNUAL REPORT INCLUDES "FORWARD
LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THIS INFORMATION CAN BE IDENTIFIED BY THE USE OF WORDS LIKE
"EXPECTS," "WILL," "SHOULD," "BELIEVES," "INTENDS" OR "ESTIMATES" OR SIMILAR
EXPRESSIONS, AND INCLUDES THE STATEMENTS WITH RESPECT TO EXPECTED 2001 FINANCIAL
AND OPERATING RESULTS. SUCH STATEMENTS REPRESENT THE COMPANY'S JUDGMENT AND
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THE
FORWARD-LOOKING STATEMENTS. SUCH RISKS, UNCERTAINTIES AND OTHER FACTORS INCLUDE,
BUT ARE NOT LIMITED TO, FLUCTUATIONS IN DEMAND FROM THE COMPANY'S CUSTOMERS,
WHETHER DUE TO ECONOMIC CONDITIONS, THE DEMANDS OF THEIR CUSTOMERS OR OTHER
FACTORS, THE CYCLICALITY OF THE MARKET FOR THE COMPANY'S PRODUCTS AND ITS
CUSTOMERS' PRODUCTS, THE CONCENTRATION OF A SIGNIFICANT PART OF THE COMPANY'S
BUSINESS IN A LIMITED NUMBER OF CUSTOMERS, THE ABILITY TO OBTAIN NEW CUSTOMERS,
THE ABILITY TO INTEGRATE ACQUIRED BUSINESSES, CHANGES IN GENERAL ECONOMIC
CONDITIONS, LEVELS OF COMPETITION, THE AVAILABILITY OF CAPITAL, CHANGES IN
INTEREST RATES AND OTHER FACTORS WHICH MAY ADVERSELY AFFECT THE COMPANY'S
OPERATING RESULTS, INCLUDING THE MATTERS ADDRESSED IN THE "RISK FACTORS"
PROVIDED IN ITEM 1. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT UNANTICIPATED EVENTS OR DEVELOPMENTS.

                                     PART I

ITEM 1.  BUSINESS.

GENERAL

         Questron Technology, Inc. (the "Company" or "Questron") provides supply
chain management solutions and inventory logistics management services for small
parts commonly referred to as C inventory items (fasteners and related products)
focused on the needs of original equipment manufacturers ("OEMs") through its
wholly owned subsidiary, Questron Distribution Logistics, Inc. ("QDL"). The
Company is also a master distributor of fasteners through its wholly owned
subsidiary Integrated Material Systems, Inc. ("IMS") and a distributor of
lithium batteries through its wholly owned subsidiary Power Components, Inc.
("PCI"). Effective March 31, 2000, QDL acquired 100% of the stock of R.S.D.
Sales Co. Inc., a privately owned distributor located in Franklin Square, New
York, specializing in providing aerospace-related C inventory items and
value-added services to OEMs located primarily in Europe.

BUSINESS

         QDL provides its customers with supply chain management solutions and
inventory logistics management services, such as bin-stock replenishment and
other just-in-time inventory management programs, and is the outsourced
materials management function for many of its customers, providing complete
supply chain management solutions from procurement to deployment of the products
managed. QDL serves more than 6,000 diversified customers in industries such as
industrial products, military aerospace, commercial aerospace, consumer
products, transportation, furniture, telecommunications, semiconductor
fabrication equipment, contract manufacturing, computers and networking, and
medical electronics.

         Small parts, commonly referred to as C inventory items, are typically
low unit cost, high volume parts that are: (i) complex due to the multiplicity
of items; (ii) consume large amounts of



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administrative resources; and (iii) are labor intensive in preparation for the
production line. C items include, but are not limited to, screws, bolts, nuts,
washers, pins, rings, fittings, springs, spacers, standoffs, plastic components,
cable ties and accessories, drawer slides, connectors and other similar parts.
The Company believes that the supply chain management solutions and inventory
logistics management services industry is in the early stages of consolidation,
and the Company plans to participate in the consolidation of the industry. The
Company believes that its broad selection of C inventory items, high quality
services, professional management team, and strong competitive position will
allow it to be one of the leading consolidators.

         C inventory items constitute a majority of the total number of parts
needed by an OEM to manufacture its products, but represent only a small
fraction of the total materials cost. The cost for an OEM to internally manage
its inventory of C items is relatively high due to: (i) the large number of C
items in inventory; (ii) the inability of an OEM to achieve scale economies that
QDL is able to derive from servicing multiple customers; (iii) the risk of
interruptions for just-in-time ("J-I-T") manufacturing operations; and (iv) the
need to perform quality assurance testing of the fasteners and other C inventory
items. The Company believes that OEMs are increasingly outsourcing their C item
inventory procurement and management needs to specialists like the Company in
order to focus on their key competency, their core manufacturing businesses,
thereby reducing costs. To further reduce costs, many manufacturers are seeking
to consolidate the number of suppliers they use and are selecting companies with
extensive product lines who can also provide inventory-related services. To
capitalize on these trends, the Company offers a broad array of C items, and
provides a variety of related procurement and inventory management services,
including inventory management information systems and reports, J-I-T delivery
programs, quality assurance, advisory engineering services, component kit
production and delivery, and electronic data interchange ("EDI") applications.

         The Company's combined net sales have increased at a compound annual
rate of approximately 16% per year over the five years ended December 31, 2000,
adjusted for acquisitions completed from 1997 through 2000 to reflect true
internal growth. The Company has generated such growth primarily by expanding
its supply chain management solutions and inventory logistics management
services, as well as the breadth of its product offerings and value-added
services, which has allowed the Company to increase its sales to existing
customers and to attract new customers.

INDUSTRY OVERVIEW

         Companies operating in the supply chain management solutions and
inventory logistics management services business can generally be characterized
by the end-users they serve, which are comprised broadly of OEMs, MROs and
construction companies. The traditional C item distribution market is similar to
most industrial distribution markets. C items are purchased from both domestic
and overseas manufacturers and sold to both domestic and overseas customers. The
majority of these C items are sold to OEM and MRO clients on a purchase order
basis. Some smaller distributors specialize along industry lines because of the
uniqueness of customer requirements. Other smaller distributors provide a wide
range of C items used for general assembly. The Company provides a wide range of
C items to meet the specialized needs of its OEM customers.

         Customer demand for supply chain management solutions and inventory
logistics management services including electronic data interchange has required
industry participants to invest in the development and utilization of
sophisticated computer systems in order to remain




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competitive. Automated inventory picking, component kit assembly and quality
control procedures also require investments in personnel and equipment. In
addition, many customers are seeking to reduce their operating costs by
decreasing the number of suppliers with whom they do business, often eliminating
those suppliers offering limited ranges of products and services. QDL believes
that these trends have placed a substantial number of small, owner-operated
fastener distributors at a competitive disadvantage because of their limited
product lines and inventory systems. In addition, many of these smaller
distributors have limited access to the capital resources necessary to provide
working capital needed to provide a full range of services to their customers.

BUSINESS STRATEGY

         The Company believes that it is one of the premier national providers
of supply chain management solutions and inventory logistics management services
for C inventory items focused on the needs of OEMs. QDL seeks to develop and
supply inventory-related services designed to reduce its customers' operating
costs. Quality assurance, J-I-T delivery programs and component kit production
are examples of such services currently provided by QDL to its customers. By
supplying such services, QDL strives to become integrated into its customers'
internal manufacturing processes and be able to anticipate its customers' needs,
which the Company believes results in improved profitability and customer
retention.

         OEMs and other customers choose suppliers based, in significant part,
on the quality of the service supplied. QDL believes that its superior customer
service depends on its well-trained, technically competent workforce and its
belief that its workforce provides an advantage over other distributors of C
inventory items. QDL continually reviews its training and operating practices to
insure the highest standards of quality and customer service are maintained
throughout its operations. As part of its commitment to superior quality and
customer service, the Company is SSQA compliant (SEMATECH Quality Standard) and
ISO 9002 (International Standards Organization) certified or compliant, becoming
certified as required by its customers on a branch location basis.

         One of the primary goals of the Company is to accelerate internal
growth both by expanding the range of products and services provided to existing
customers and by aggressively pursuing new customers. The Company believes that
it will be able to expand sales to existing customers by capitalizing on: (i)
diverse product offerings and marketing expertise; (ii) cross-selling
opportunities across the Company's customer base; and (iii) access to financial
resources that are necessary to support the demands of its customers. The
Company intends to broaden its geographic coverage, which will present
opportunities to capture new business as well as additional business from
existing customers that operate nationwide.

         The Company has centralized appropriate administrative functions and
used its increased purchasing power to improve contractual relationships and
gain volume discounts from its suppliers. The Company has also improved
productivity through enhanced inventory management procedures, standardization
of its quality procedures, and the consolidation of its information systems and
employee benefit plans. All of the acquired businesses operate through an
on-line, real-time computer system, except for its aerospace business facilities
in located Fort Worth, San Antonio and Franklin Square and its industrial
business facility located in Chicago. The Company intends to complete the
integration of these businesses in 2001.




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         The Company pursued an aggressive acquisition program from 1997 through
2000, having completed 12 acquisitions during that period. As described above,
the Company believes that the supply chain management solutions and inventory
logistics management services business for C inventory items is highly
fragmented and in the early stages of consolidation. The Company intends to
acquire other businesses focused on C inventory items in order to enter new
industries and markets, increase sales in certain industries it currently
serves, develop new customer relationships with major OEMs, expand the
geographical reach of the Company, and expand its range of products and
services. Potential acquisition candidates will be evaluated on the strength of
management, profitability, quality of customer base and service, and industry
orientation. The Company believes it will continue to be regarded by acquisition
candidates as an attractive acquirer because of: (i) its ability to create
professionally managed supply chain management solutions and inventory logistics
management services for C inventory items focused on the needs of original
equipment manufacturers; (ii) its ability to acquire businesses with a
combination of cash and publicly traded stock; (iii) the Company's access to
financial resources as a public company to support growth; and (iv) the
potential for increased profitability of the acquired company due to purchasing
economies, centralization of administrative functions, enhanced systems
capabilities and access to increased marketing resources.

         To date, management of the companies acquired has been instrumental in
identifying future acquisition candidates. Several of the principals of such
acquired companies have held leadership roles in industry trade associations,
which has enabled these individuals to develop relationships with the owners of
numerous acquisition candidates across the country. The Company expects that the
visibility of these individuals and the Company within the industry will
increase the awareness and interest of acquisition candidates in the Company and
its acquisition program. The Company has engaged in preliminary discussions with
a number of potential acquisition candidates. Such discussions are in various
stages and none have as yet resulted in any binding agreements, understandings,
arrangements or commitments with respect to any such potential acquisitions. As
consideration for future acquisitions, the Company primarily intends to use
various combinations of cash and its common stock. The consideration for each
future acquisition will vary on a case-by-case basis, with the major factors in
establishing the purchase price being historical operating results, future
prospects of the acquisition candidate and the ability of the candidate to
provide entry to new markets or OEM customers.

PRODUCTS

         The Company stocks over 125,000 different C inventory items, generally
denoted by a unique standard identifier known as a Stock-keeping Unit ("SKU").
The SKUs fall into two general categories: fasteners and other C inventory
items.

         Fasteners sold by QDL include screws, bolts, nuts, washers, rings,
pins, rivets and staples. These items come in a variety of materials, sizes,
plantings, and shapes. The item sold is driven by the end-use requirement or
specification of the fastener, such as strength, resistance to corrosion,
reusability, and many other factors. QDL's sales and purchasing departments have
extensive knowledge of the available products offered by fastener manufacturers
and play an important role in assisting OEMs in selecting the appropriate
fastener for a given application.

         QDL also distributes other C inventory items used by OEMs to
manufacture their products. These items include spacers, standoffs, inserts,
clamps, springs, brackets, connectors, small molded parts, cable ties, plugs,
hoses, fittings and other products. Like fasteners, these





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parts come in many shapes, sizes and materials depending upon the designated
end-use. OEMs are increasingly requesting that the Company provide these parts
because they are often used during the manufacturing or assembly process in
conjunction with the fasteners supplied by QDL.

SERVICES

         In connection with its supply chain management solutions and inventory
logistics management services, the Company provides a wide range of value-added
services including purchasing, quality assurance, inventory management
information systems and reports, J-I-T delivery programs, advisory engineering
services, component kit production and delivery, consolidated billing, and
electronic data interchange applications to OEMs. The OEMs' demand for these
services is driven by the reduction in costs achievable through the outsourcing
of such functions. Such cost reductions are achievable as a result of the
Company's ability to derive economies of scale by providing such services to
many customers, which economies the OEM is unable to achieve on its own. These
value-added services also benefit the Company by further integrating the Company
into its customers' internal manufacturing process.

         Increasingly, manufacturers are outsourcing their inventory management
needs to companies like QDL. These services range from installing a simple
inventory bin card system to developing a complete turnkey inventory management
system with full-time staff. These inventory systems are designed to meet the
specific needs of QDL's customers. They range in sophistication from helping the
OEM set appropriate order quantities and frequencies to delivering the correct C
items to the assembly floor on a J-I-T basis. In some cases, the Company
utilizes computer systems deployed at the OEM's sites to facilitate the
management of the C item inventories. Inventory replenishment services and
product consolidation services decrease the number of invoices and vendors,
lower inventory carrying cost, and allow customers to focus on their key
competency, manufacturing.

         OEMs have reduced their operating costs by reducing the number of
suppliers they use. QDL provides a wide array of C inventory items and will,
upon a customer's request, stock additional parts. As a result, QDL's customers
are able to reduce the number of suppliers, distributors as well as
manufacturers, which they utilize.

         Often OEMs request that QDL package several parts into a package or
"kit." A common use of this service is to supply fastener kits included with
products the retail consumer is required to assemble. The use of kits has also
expanded into the manufacturing environment. Manufacturers frequently desire to
have several related fasteners or components arrive at the assembly line in a
single package; this ensures that all of the parts arrive at the same time and
that no part will be missed in the manufacturing process. This "kit" process
aids the manufacturer by decreasing the number of suppliers needed and improves
productivity by having the fasteners delivered to the assembly line with the
other related parts. Kit services improve the efficiency and effectiveness of
the manufacturing line and decrease the number of stockouts and subsequent
manufacturing line stoppages.

         Quality assurance services provided by QDL involve the testing of
fasteners to ensure they meet the specifications required by the OEM customer
and stated by the manufacturer. Many OEMs require strict quality control with
respect to fasteners. QDL has installed specialized equipment and hired trained
technicians to perform quality control tests on some of its fastener products.
QDL is SSQA compliant (SEMATECH Quality Standard) and ISO 9002




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certified or compliant (International Standards Organization), becoming
certified as required by its customers on a branch location basis.

         In order to meet the exacting requirements of customers, QDL maintains
relationships with vendors that provide plating, galvanizing and coating
services. These services are used to meet the specific requirements of its OEM
and other customers.

COMPETITION

         The Company is engaged in a highly fragmented and competitive industry.
Competition is based primarily on service, quality and geographic proximity. The
Company competes with a large number of fastener distributors on a regional and
local basis, some of which may have greater financial resources than the Company
and some of which are also public companies or divisions of public companies.
The Company may also face competition for acquisitions from these companies,
some of which have acquired fastener distribution businesses during the past
decade. Other smaller fastener distributors may also seek acquisitions from time
to time.

         The Company believes that it will be able to compete effectively
because of its strategically situated locations, geographic diversity,
knowledgeable and trained sales force, integrated computer system, modern
equipment, broad-based product line, long-term customer relationships, combined
purchasing volume, operational economies of scale, and expertise in acquiring
and integrating businesses. The Company believes that it differentiates itself
from its competition in terms of service and quality, and by offering a broad
range of products and services.

SALES AND MARKETING

         QDL utilizes a sales force comprised of both inside and outside sales
people. QDL markets its products and services primarily to OEMs. QDL generally
targets those OEMs that could achieve significant cost savings from the products
and services offered by QDL. These would include OEMs that: (i) maintain
substantial inventories of fasteners and other C inventory items; (ii) utilize
multiple suppliers and wish to reduce that number; (iii) experience a
significant number of stockouts; (iv) desire to improve the quality and
reliability of their products; or (v) desire to improve the efficiency and
effectiveness of the manufacturing process. QDL believes that its commitment to
consistent quality and service has enabled it to develop and maintain long-term
relationships with existing customers, while expanding its market penetration
through the use of its sales and marketing program.


CUSTOMERS

         QDL sells C inventory items to more than 6,000 customers. These
customers include leading industrial products, military aerospace, commercial
aerospace, consumer products, transportation, furniture, telecommunications,
semiconductor fabrication equipment, contract manufacturing, computer and
computer networking, and medical electronics manufacturing companies. QDL's
contracts with its customers for the supply of C items vary in length up to five
years and may be cancelled by either party with proper notice. QDL accepts
returns of C items and issues a credit in exchange for such returns.
Historically, returns have not been of an amount to materially affect the
Company's business. For the year ended December 31, 2000, the




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Company had reported net sales of $161.6 million. The ten largest customers
accounted for approximately 37% of QDL's sales in 2000, with no one customer
contributing more than 9%.

SUPPLIERS

         Over 1,000 suppliers located in the United States and abroad
manufacture the C items sold by QDL. QDL purchases C items directly from
manufacturers or, to a lesser degree, from authorized distributors. QDL's
decision to purchase from a specific source is based on product specifications,
quality, reliability of delivery, production lead times and price. In addition,
the Company purchases products from foreign suppliers when favorable pricing is
available (approximately 11% of purchases for 2000 were from foreign suppliers).

         QDL routinely reviews its supplier base and believes that it is able to
purchase C items in sufficient volumes necessary to achieve improved service and
pricing. QDL believes that it is not materially dependent on any single supplier
and that it currently maintains good relationships with all of its suppliers.
The ten largest suppliers accounted for approximately 19% of QDL's purchases in
2000, with the largest supplier accounting for approximately 3%.

PATENT, TRADEMARK, COPYRIGHT AND PROPRIETARY RIGHTS

         The Company received registrations from the United States Patent and
Trademark Office in 1997 for the marks "Questron Technology, Inc.(R)" and "Quest
Electronic Hardware, Inc.(R)" relating to certain of the Company's services. The
Company does not have any patent or copyright applications pending.

MANAGEMENT INFORMATION SYSTEM

         The Company operates a management information system that is used to
purchase, monitor and allocate inventory throughout its facilities. The Company
believes that its system enables it to manage inventory costs effectively and to
achieve appropriate inventory turnover rates. QDL's system includes computerized
order entry, sales analysis, inventory status, invoicing and payment, bar-code
tracking, and EDI through which the Company offers its customers a paperless
electronic process for order entry, shipment tracking, customer billing,
remittance processing and other routine matters. The Company's information
system operates over a wide-area network. The real-time information system
allows each sales and warehouse center to share information and monitor daily
progress relating to sales activities, credit approval, inventory levels, stock
balancing, vendor returns, order fulfillment, and other measures of performance.
In January 2001, the Company began the implementation of additional supply chain
management software tools, which it believes will create the opportunity to
increase revenues and gross margins, while reducing inventory, costs associated
with carrying inventory, and overall operating costs. The Company expects to
complete the full implementation of such software tools during 2001.

GOVERNMENT REGULATION

         The Fastener Quality Act of 1991, as amended (the "Fastener Act"), was
signed into law on November 16, 1990 and was subsequently amended in March 1996,
August 1998 and June 1999. The Fastener Act is intended to protect the public
safety by deterring the introduction of non-conforming fasteners into commerce
and by improving the traceability of fasteners. Generally, the Fastener Act
covers fasteners including screws, nuts, bolts or studs with internal





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or external threads and load indicating washers with nominal diameters of
greater than approximately one quarter inch, which contain metal or are held out
as meeting a standard or specification that requires through-hardening, and are
manufactured to standards and specifications that require a grade mark.
Fasteners manufactured in accordance with a fastener quality assurance system
are not covered by the Fastener Act.

         Companies that provide supply chain management solutions and inventory
logistics management services that sell fasteners, such as the Company, are
subject to the Fastener Act. The Fastener Act prohibits the manufacturer or
distributor from knowingly misrepresenting or falsifying: fasteners' physical,
mechanical, or performance identification; the record of conformance for
fasteners; or the manufacturer's insignia. The Company currently employs quality
control personnel at its facilities and has not needed to make any significant
investment to comply with the Fastener Act.

         The Company's operations are subject to various federal, state and
local laws and regulations, including those relating to worker safety and
protection of the environment. The Company provides supply chain management
solutions and inventory logistics management services and does not engage in
manufacturing of C items. As a result, environmental laws generally have a
minimal effect on its operations. The Company believes it is in substantial
compliance with applicable regulatory requirements.

INTEGRATED MATERIAL SYSTEMS, INC. & POWER COMPONENTS, INC.

         IMS, a wholly-owned subsidiary of the Company, is a master distributor
of fasteners based in Scottsdale, Arizona. The addition of IMS brought to the
Company expertise in sourcing products on a worldwide basis and additional
materials management skills. IMS sells to distributors nationwide, one of which
contributed approximately 40% of IMS's 2000 sales. IMS purchases fasteners
principally from Taiwan and Japan, as well as domestic sources. In 2000, IMS's
two largest suppliers accounted for approximately 28% and 23%, respectively, of
its total purchases.

         PCI, a wholly-owned subsidiary of the Company, is a distributor of
lithium batteries and battery packs and assemblies based in Fond du Lac,
Wisconsin. PCI sells to distributor and end-user customers nationwide, no one of
which contributed more than 8% of its 2000 sales. PCI purchases product from
international and domestic manufacturers of batteries, with one such supplier
accounting for approximately 65% of its 2000 purchases.

         The combined revenues of IMS and PCI represent less than 10% of the
Company's consolidated revenues in each of the three years ended December 31,
2000.

EMPLOYEES

         At March 20, 2001, the Company had 486 full-time employees. The Company
is not a party to any collective bargaining agreements. The Company believes
that its relationship with its employees is good.



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EXECUTIVE OFFICERS

         The following table sets forth the names, ages and positions of each of
the executive officers of the Company:

<TABLE>
<CAPTION>
NAME                                         AGE    POSITION
----                                         ---    --------
<S>                                           <C>   <C>
Dominic A. Polimeni.....................      54    Chairman and Chief Executive Officer

Robert V. Gubitosi........................    53    President and Chief Financial Officer

Douglas D. Zadow........................      43    Executive Vice President; President, QDL

Phillip W. Schwiebert....................     62    Vice President; Executive Vice President, QDL

Malcolm A. Tallmon.....................       62    Vice President, Aerospace Business Development

James W. Taylor...........................    56    Vice President; President, Integrated Material Services

</TABLE>

         The business experience of each executive officer of the Company is as
follows:

         DOMINIC A. POLIMENI has been Director of the Company since March 1995
and Chairman and Chief Executive Officer of the Company since February 1996.
Previously, Mr. Polimeni was also President of the Company from March 1995 until
May 1999. Since September 1997, he has been a director of Nu Horizons, Inc., a
publicly held company based in Melville, New York, which is a distributor of
electronic components. Mr. Polimeni has been a Managing Director of Gulfstream
Financial Group, Inc., a privately held financial consulting and investment
banking firm since August 1990. Prior to that he held the position of Chief
Financial Officer of Arrow Electronics, Inc. ("Arrow") for four (4) years. He
also held several other positions, including general management positions, with
Arrow over an eight-year period. Mr. Polimeni also practiced as a Certified
Public Accountant for more than 12 years and was a Partner in the New York
office of Arthur Young & Company. Mr. Polimeni is the brother-in-law of Mr.
Gubitosi.

         ROBERT V. GUBITOSI has been a Director of the Company since February
1996, and President and Chief Financial Officer since May 1999. Mr. Gubitosi has
been a Managing Director of Gulfstream Financial Group, Inc., a privately held
financial consulting and investment banking firm since August 1990. Prior to
that he held the position of General Partner and Chief Financial Officer of the
Securities Groups, a New York investment banking firm and primary dealer of U.S.
government securities, with responsibility for the investment banking activities
of the firm. In addition, Mr. Gubitosi has held managerial positions at Goldman
Sachs & Company and Oppenheimer & Company, and specialized in brokerage
accounting and auditing at Haskins & Sells and Touche Ross & Company. Mr.
Gubitosi is the brother-in-law of Mr. Polimeni.

         DOUGLAS D. ZADOW has been a Director of the Company since September
1999, an Executive Vice President of the Company since February 2001
(previously a Vice President of the Company since May 1998), President of QDL
since May 1998 and President of Calfast, now a wholly owned subsidiary of the
Company, since May 1995. Calfast became a part of the Company as of September
1997. From 1987 to 1996, he served as President of All-Spec, Inc., a
manufacturers representative of fastener products. In 1986, Mr. Zadow served as
President of the Southwest Fastener Association.

         PHILLIP D. SCHWIEBERT has been a Vice President of the Company since
May 1998 and Western Region Executive Vice President of QDL since February 2001
(previously Northwest and South Central Regional Vice President of QDL since May
1998). From March 1995 to May 1998, he was President of Quest Electronic
Hardware, Inc., which is now QDL. From 1991 to





                                       10
<PAGE>   11

1995, Mr. Schwiebert served as the Vice President and General Manager of the
Fastener Division of Arrow Electronics, Inc. Prior to that, he held the position
of Vice President of Connector Marketing for Arrow and Vice President of
Marketing for Amphenol, a division of Allied Corporation.

         MALCOLM A. TALLMON has been a Vice President of the Company responsible
for Aerospace Business Development since August 1999 and President of Fortune,
now a wholly owned subsidiary of the Company since its inception in March 1964.
Fortune became a part of the Company as of July 1998.

         JAMES W. TAYLOR has been a Vice President of the Company since May 1998
and President of IMS, now a wholly owned subsidiary of the Company, since its
inception in February 1997. IMS became a part of the Company as of June 1997.
From 1971 to 1996, he served as Executive Vice President of Semblex Corporation,
a manufacturer of fasteners. From 1992 to 1995, Mr. Taylor served as Chairman of
the National Fastener Distributor Association, and from 1994 to 1997, he served
as one of nine industry representatives on the Public Law Task Force, a federal
government committee for fastener regulation.

RISK FACTORS

LIMITED COMBINED OPERATING HISTORY; RECENT ACQUISITIONS.

         The Company has grown significantly in the past four years, primarily
as a result of acquisitions. The Company has acquired 12 companies since March
1997. As a result, the Company's historical results of operations are not
necessarily indicative of future results. Prior to the acquisition of these
companies, they were each private companies with different objectives,
management information systems and accounting and other standards. Consequently,
there is limited information about the performance of the acquired companies
under the Company's management that is available for evaluation.

         The acquisitions have been accounted for using the purchase method of
accounting and the total purchase prices have been allocated to the assets and
liabilities acquired based upon their respective fair values. As a result, the
Company has significant non-cash charges for amortization expense related to
goodwill. In addition, the Company has substantial indebtedness in connection
with the acquisitions for which it will have significant debt service
requirements.

RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY.

         A disciplined acquisition program is part of the Company's business
strategy. The success of this program in the future will depend upon finding
strategic acquisition candidates that would expand and complement the Company's
business at attractive prices. The Company expects to face competition for
acquisitions, which may limit the number of acquisition opportunities and lead
to higher acquisition prices. The Company cannot ensure that it will be able to
identify additional acquisition candidates on terms acceptable to the Company or
in a timely manner, enter into acceptable agreements or close any such
transactions. In addition, the Company may not be able to integrate newly
acquired businesses successfully without unplanned costs, delays or other
difficulties and the Company may not be able to achieve its targeted synergies
and cost savings.




                                       11
<PAGE>   12

         The Company may finance future acquisitions through internally
generated funds, bank borrowings, public offerings or private placements of
equity or debt securities, or a combination of these sources. The Company may
not be able to obtain any required additional financing on terms that are
acceptable to the Company and the Company may be limited in its ability to issue
equity if the Company's common stock does not maintain a sufficient market value
or if potential acquisition candidates are unwilling to accept common stock in
exchange for the sale of their businesses. The Company's inability to obtain the
necessary funds to make such acquisitions may have a material adverse effect on
its ability to affect its acquisition strategy and to continue to grow its
business.

THE MARKET PRICE FOR THE COMPANY'S COMMON STOCK COULD BE AFFECTED BY SHARES THAT
BECOME ELIGIBLE FOR SALE IN THE FUTURE

         Shares of the Company's common stock may be sold in the public market,
subject in some cases to the volume and other limitations of Rule 144 under the
Securities Act of 1933, as amended, including, following their issuance, shares
of common stock underlying warrants, options, and issued in the future in
connection with the acquisitions by the Company. To fulfill its obligations to
certain persons, in May 2000, the Company filed under the Securities Act of
1933, as amended, a registration statement with the Securities and Exchange
Commission, registering for sale by these persons, from time to time,
approximately 2,340,000 shares of its common stock, including shares underlying
options and warrants. The Company is not aware of any obligations of these
persons to sell the shares to be registered for sale under the registration
statement. The sale, or availability for sale, of substantial amounts of common
stock in the public market could adversely affect the prevailing market price of
the common stock.

CHALLENGES OF BUSINESS INTEGRATION -- THE COMPANY MAY NOT BE ABLE TO INTEGRATE
ITS ACQUIRED BUSINESSES SUCCESSFULLY.

         Since March 1997, the Company has acquired 12 businesses. Although all
acquisitions are subject to risks, the high number and aggregate size of the
acquisitions the Company has completed since March 1997 subject the Company to
greater risks than usual. In particular, successful integration of these
companies, or any other companies that the Company may acquire in the future,
into the Company's business presents the Company with significant challenges.
The process of integration could divert management's attention from its daily
operation, require the implementation of enhancements to the Company's
operational and financial systems, require additional management, operational
and financial resources, and place significant demands on the Company's
management and infrastructure. Successful integration will also depend on a
number of other factors, including the Company's ability to maintain the quality
of services it provides to its customers and the recruitment, motivation and
retention of qualified personnel. The Company cannot ensure that it will be able
to succeed with such integration or effectively manage newly acquired businesses
or that such business will perform as expected. In addition, the Company cannot
ensure that the acquired companies will not have additional liabilities or
contingencies that the Company did not anticipate at the time of the
acquisitions.

THE COMPANY FACES THE PRESSURES OF A COMPETITIVE INDUSTRY.

         The Company is engaged in a highly fragmented and competitive industry.
Competition is based primarily on service, quality and geographic proximity. The
Company competes with a large number of other companies, that also provide
supply chain management solutions and inventory logistics management services
for C inventory items focused on the needs of OEMs,





                                       12
<PAGE>   13

on a regional and local basis, some of which have greater financial resources
and technical expertise than the Company. In addition, these competitors may
have greater established customer relationships with certain customers for whose
business the Company competes and may offer lower prices on competing products.
Furthermore, the potential growth of the market in which the Company competes
may attract new participants, as they perceive opportunities. The Company cannot
ensure that it will be able to compete successfully with its existing or future
competitors.

THE COMPANY DEPENDS ON SIGNIFICANT CUSTOMERS.

         For the year ended December 31, 2000, on a pro forma basis, the
Company's ten largest customers accounted for approximately 37% of its sales,
with no one customer contributing more than 9%. These sales arrangements are
terminable upon short notice and none of these customers is obligated to
continue to use the Company's services, or acquire the Company's products, at
all or at existing prices. The dependence on significant customers subjects the
Company to significant financial risk in the operation of its business. The
Company's ability to maintain these customer relationships and build new
customer relationships is dependent, among other things, upon the Company's
ability to maintain high quality standards and competitive prices. The Company
cannot ensure that it will maintain these relationships. The loss of any of
these significant customers or any other significant customer for any reason or
a reduction in business with a significant customer for any reason could result
in a material loss of revenue or otherwise have a material adverse effect on the
Company's business. In addition, from time to time, certain of the Company's
customers may seek to implement competitive bidding and other procedures
designed to reduce prices for C inventory items, which may lower the Company's
gross margins on sales to these customers. The Company will seek to mitigate any
adverse impact to gross margins in the future through its own cost reduction
initiatives and by providing additional services to these customers, however,
the Company can not ensure the timing or the extent to which such mitigating
efforts will offset lower margins, if at all.

CUSTOMER INDUSTRY RISKS AND CYCLICALITY.

         The Company sells a significant number of its products to customers in
industries that experience fluctuations in demand because of changes in economic
conditions, consumer demand and other factors beyond its or their control. As a
result, the Company may not be able to increase or maintain its level of sales
in periods of economic stagnation or downturn in the Company's customers'
industries. The cyclicality of the industries could adversely affect its sales
and therefore potentially have a material adverse effect on the Company's
financial condition, liquidity and results of operations.

THE COMPANY DEPENDS ON ITS INFORMATION SYSTEMS.

         The Company operates a management information system that is used to
purchase, monitor and allocate inventory throughout its facilities. The Company
believes that its information system is an integral part of its business and
certain growth strategies are contingent upon such system. The Company depends
heavily on its management information system to provide real-time information
used in monitoring progress relating to sales activities, credit approval,
inventory levels, stock balancing, vendor returns and order fulfillment. Any
disruption in the operation of the Company's information system could have a
material adverse effect on the Company's financial condition, liquidity and
results of operations.



                                       13
<PAGE>   14

THE COMPANY DEPENDS ON THIRD-PARTY SUPPLIERS AND MANUFACTURERS.

         The Company purchases substantially all of its products, principally
fasteners and other C inventory items, from third-party suppliers and
manufacturers. Although the Company believes there are numerous available
sources of supply for most of its products, the Company is subject to the risk
of price fluctuations, different product performance and quality, and periodic
delays in the delivery of certain specialty fasteners and other products.

THE COMPANY HAS SUBSTANTIAL INDEBTEDNESS.

         The Company's high level of debt could interfere with its ability to
meet its obligations under its Senior Secured Credit Facility and its Senior
Subordinated Notes. At December 31, 2000, the Company had total indebtedness of
approximately $106.1 million, representing 67.7% of its total capitalization. In
addition, subject to restrictions in the Senior Secured Credit Facility,
Questron may incur up to $10.4 million of additional borrowings under the
revolving credit portion of the Senior Secured Credit Facility from time to time
to finance acquisitions, provide for working capital or capital expenditures, or
for other purposes.

         The Company's level of indebtedness could increase its vulnerability to
general economic and industry conditions, limit its ability to fund capital
expenditures, future acquisitions, working capital, and other general corporate
requirements, limit its flexibility in planning for, or reacting to, changes in
its business and the industry in which it operates, and place the Company at a
competitive disadvantage to its competitors that have less debt. The Company
currently expects that it will be able to service its debt out of cash flow from
operations. If the Company is unable to generate sufficient cash flow to meet
its debt service obligations, the Company will have to pursue one or more
alternatives, such as reducing or delaying capital expenditures, refinancing
debt, selling assets or raising equity capital. Each of these alternatives is
dependent upon financial, business and other general economic factors that
affect the Company, many of which are beyond its control. The Company cannot
make any assurances that any of these alternatives could be accomplished on
satisfactory terms or that they would yield sufficient funds to refinance the
Senior Secured Credit Facility or the Senior Subordinated Notes.

THE COMPANY DEPENDS ON KEY MANAGEMENT.

         The Company's success depends largely upon the efforts, abilities and
expertise of its executive officers and other senior managers, including Dominic
A. Polimeni, its Chairman, and Chief Executive Officer, as well as the executive
management of its operating units. In addition, the Company may depend on the
management of any significant business the Company acquires in the future. The
loss of the services of one or more of such individuals could have a material
adverse effect on the Company's financial condition, liquidity and results of
operations.

MANAGEMENT CONTROL.

         Management owns approximately 39.3% of the Company's outstanding shares
of common stock. Accordingly, management has the ability to direct many of the
Company's affairs and actions, including actions requiring stockholder approval.




                                       14
<PAGE>   15


ITEM 2. PROPERTIES.

         The Company is headquartered at 6400 Congress Avenue, Suite 2000, Boca
Raton, Florida 33487, operating from 36 well-equipped modern facilities, all but
one of which are leased, as follows:

           1)     Boca Raton, Florida (Company headquarters) - occupies 8,226
                  square feet of office space under a lease expiring March 31,
                  2006, which space is approximately 85% utilized;

           2)     Anaheim, California - occupies 3,000 square feet of office
                  space and 17,000 square feet of warehouse space under a lease
                  expiring March 1, 2016, which space is approximately 95%
                  utilized;

           3)     Austin, Texas - occupies 1,200 square feet of office space and
                  7,800 square feet of warehouse space under a lease expiring
                  October 19, 2005, which space is approximately 90% utilized;

           4)     Chicago, Illinois - occupies 5,000 square feet of office space
                  and 45,000 square feet of warehouse space under a lease
                  expiring November 30, 2002, which space is approximately 95%
                  utilized;

           5)     Cincinnati, Ohio - occupies 1,000 square feet of office space
                  and 3,000 square feet of warehouse space under a
                  month-to-month lease, which space is approximately 50%
                  utilized;

           6)     Cleveland, Ohio - occupies 3,500 square feet of office space
                  and 14,500 square feet of warehouse space under a lease
                  expiring June 30, 2004, which space is approximately 95%
                  utilized;

           7)     Colorado Springs, Colorado - occupies 1,900 square feet of
                  office space and 2,893 square feet of warehouse space under a
                  lease, which expired November 30, 1998 (now month-to-month),
                  which space is approximately 90% utilized;

           8)     Columbus, Ohio - occupies 600 square feet of office space and
                  4,400 square feet of warehouse space under a lease, which
                  expires May 31, 2004, which space is approximately
                  95%utilized;

           9)     Dallas, Texas - occupies 1,575 square feet of office space and
                  11,945 square feet of warehouse space under a lease expiring
                  February 28, 2003, which space is approximately 95% utilized;

          10)     Deerfield Beach, Florida - occupies 3,000 square feet of
                  office space and 3,630 square feet of warehouse space under a
                  lease expiring January 31, 2005, which space is approximately
                  80% utilized;

          11)     Duluth, Georgia - occupies 3,083 square feet of office space
                  and 20,917 square feet of warehouse space under a lease
                  expiring November 30, 2005, which space is approximately 60%
                  utilized;



                                       15
<PAGE>   16

         12)      Duluth, Minnesota - occupies 1,240 square feet of office space
                  and 3,368 square feet of warehouse space under a lease
                  expiring December 31, 2004, which space is approximately 70%
                  utilized;

         13)      Fond du Lac, Wisconsin - occupies 491 square feet of office
                  space and 1,962 square feet of warehouse space under a lease
                  expiring May 31, 2002, which space is approximately 95%
                  utilized;

         14)      Fort Worth, Texas - occupies 18,000 square feet of office
                  space and 22,536 square feet of warehouse space under a lease
                  expiring March 31, 2007, which space is approximately 75%
                  utilized;

         15)      Franklin Square, New York - occupies 3,800 square feet of
                  office space under a lease expiring December 31, 2004, which
                  space is approximately 95% utilized;

         16)      Grand Rapids, Michigan - occupies 2,500 square feet of office
                  space and 70,625 square feet of warehouse space under a lease
                  expiring August 31, 2006, which space is approximately 70%
                  utilized;

         17)      Greenville, Mississippi - occupies 1,560 square feet of office
                  space and 9,900 square feet of warehouse space under a lease
                  expiring August 31, 2003, which space is approximately 80%
                  utilized;

         18)      High Point, North Carolina - occupies 3,000 square feet of
                  office space and 37,000 square feet of warehouse space under a
                  lease expiring March 31, 2004, which space is approximately
                  90% utilized;

         19)      Huntsville, Alabama - occupies 920 square feet of office space
                  and 11,580 square feet of warehouse space under a lease
                  expiring June 30, 2004, which space is approximately 40%
                  utilized;

         20)      Juarez, Mexico - occupies 1,000 square feet of warehouse space
                  that is customer provided, which space is approximately 95%
                  utilized;

         21)      Melbourne, Florida - occupies 600 square feet of office space
                  and 900 square feet of warehouse space under a lease expiring
                  January 31, 2003, which space is approximately 95% utilized;

         22)      Milpitas, California - occupies 6,000 square feet of office
                  space and 13,500 square feet of warehouse space under a lease
                  expiring April 30, 2005, which space is approximately 90%
                  utilized;

         23)      Milwaukee, Wisconsin - occupies 1,600 square feet of office
                  space and 10,092 square feet of warehouse space under a lease
                  expiring October 31, 2004, which space is approximately 90%
                  utilized;

         24)      Minneapolis, Minnesota - occupies 1,760 square feet of office
                  space and 6,000 square feet of warehouse space under a lease
                  expiring June 30, 2005, which space is approximately 95%
                  utilized;



                                       16
<PAGE>   17

         25)      Nogales, Mexico - occupies 500 square feet of office space and
                  7,500 square feet of warehouse space under a lease expiring
                  May 31, 2003, which space is approximately 90% utilized;

         26)      Orlando, Florida - occupies 5,100 square feet of office space
                  and 5,540 square feet of warehouse space in a facility owned
                  by the Company, which space is approximately 90% utilized;

         27)      Phoenix, Arizona - occupies 1,000 square feet of office space
                  and 11,000 square feet of warehouse space under a lease
                  expiring October 31, 2003, which space is approximately 90%
                  utilized;

         28)      San Antonio, Texas - occupies 900 square feet of office space
                  and 7,492 square feet of warehouse space under a lease
                  expiring February 4, 2005, which space is approximately 60%
                  utilized;

         29)      San Diego, California - occupies 4,700 square feet of office
                  space and 17,228 square feet of warehouse space under a lease
                  expiring February 29, 2004, which space is approximately 90%
                  utilized;

         30)      Scottsdale, Arizona - occupies 2,130 square feet of office
                  space and 5,183 square feet of warehouse space under a lease
                  expiring August 31, 2003, which space is approximately 95%
                  utilized;

         31)      Tucson, Arizona - occupies 1,500 square feet of office space
                  and 10,000 square feet of warehouse space under a lease
                  expiring January 31, 2002, which space is approximately 75%
                  utilized;

         32)      Tyler, Texas - occupies 3,000 square feet of office space and
                  37,000 square feet of warehouse space under a lease expiring
                  November 30, 2004, which space is 80% utilized;

         33)      Winchester, Massachusetts - occupies 4,000 square feet of
                  office space and 16,000 square feet of warehouse space under a
                  lease expiring March 31, 2003, which space is approximately
                  85% utilized.

         Total rent expense for the Company amounted to $2,021,617 in 2000. The
aggregate minimum rental commitment under all non-cancelable operating leases
for the year ending December 31, 2001 is $2,726,041.




                                       17
<PAGE>   18


ITEM 3.  LEGAL PROCEEDINGS.

         In the opinion of management, there are no material pending or
threatened legal proceedings to which the Company or any of its subsidiaries is
a party or of which any of their property is subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         On August 16, 2000, at the Annual Meeting of Stockholders, the
stockholders of the Company elected the following Directors and approved the
following proposal put forth by management and the board of directors:

<TABLE>
<CAPTION>
Election of Directors:                                              For                            Withheld
------------------------------------------------             -------------------              -------------------
<S>                                                              <C>                               <C>
Dominic A. Polimeni                                              5,515,400                         682,062
Robert V. Gubitosi                                               5,515,387                         682,075
Douglas D. Zadow                                                 5,515,400                         682,062
Milton M. Adler                                                  5,515,321                         682,141
Frederick W. London                                              5,515,400                         682,062
William J. McSherry, Jr.                                         5,515,400                         682,062

</TABLE>

<TABLE>
<CAPTION>
                                                                Affirmative           Negative
Proposal                                                           Votes                Votes            Abstained
---------------------------------------------------------    -------------------    --------------     ---------------
<S>                                                              <C>                    <C>                  <C>
To ratify the appointment of Ernst & Young LLP as the
independent accountants for the Company (requires
affirmative votes of 50% of the votes cast)                      6,183,819              12,706               911


</TABLE>


                                       18
<PAGE>   19


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's common stock is included for quotation on the NASDAQ
National Market System under the symbol "QUST".

         The following table sets forth the reported high and low bid quotations
of the common stock for the periods indicated. Such quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.

                                               Common Stock
                                        -------------------------
                                        HIGH                  LOW
                                        ----                  ---
               1999:
               First Quarter           $ 5.25               $ 3.56
               Second Quarter          $ 5.63               $ 3.25
               Third Quarter           $ 4.38               $ 3.31
               Fourth Quarter          $ 8.13               $ 2.75

               2000:
               First Quarter           $12.63               $ 6.44
               Second Quarter          $ 9.69               $ 4.50
               Third Quarter           $ 7.03               $ 4.00
               Fourth Quarter          $ 4.72               $ 2.63

         On March 20, 2001, there were approximately 1,000 holders of record of
the Company's common stock (including entities which hold stock in street name
on behalf of other beneficial owners).

         The Company has not paid any cash dividends on its common stock to
date. The Company anticipates that for the foreseeable future it will follow a
policy of retaining earnings, if any, in order to finance the expansion and
development of its business. Payment of common stock dividends is within the
discretion of the Company's board of directors and will depend upon the
earnings, capital requirements, and the operating and financial condition of the
Company, among other factors, including restrictions under the Company's loan
and security agreement with its lenders, which presently prohibits the payment
of any dividends. The Company does not anticipate the declaration or payment of
any dividends in the foreseeable future. There can be no assurance that cash
dividends of any kind will ever be paid.

         In connection with the Company's acquisitions of Action Threaded
Products, Inc., Capital Fasteners, Inc. and Metro Form Corporation d.b.a.
Olympic Fasteners and Electronic Hardware, the Company had issued $5,000,000 in
notes to the former shareholders of the acquired businesses. Such notes bore
interest at 8.5% per annum and required principal payments of $1,250,000 on June
30, 2000, $1,250,000 on June 30, 2001 and $2,500,000 on June 30, 2002. On March
7, 2000, the Company reached agreements with the all of the note holders whereby
the $5,000,000 in notes and the approximately $291,100 in accrued interest on
such notes were exchanged for 450,000 shares of the Company's common stock in a
private transaction exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended.


                                       19
<PAGE>   20

         In connection with the acquisition of RSD Sales Company, Inc. ("RSD")
effective as of March 31, 2000, the Company issued 394,619 shares of the
Company's common stock in a private transaction exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, to the former owner of
RSD in full consideration for the acquisition.

ITEM 6.  SELECTED FINANCIAL DATA.

         The following table sets forth certain selected consolidated financial
data and should be read in conjunction with Management's Discussion and Analysis
of Financial Condition and Results of Operations, and the Company's consolidated
financial statements and related notes appearing elsewhere in this annual
report.

SELECTED FINANCIAL DATA (In thousands except per share data):

<TABLE>
<CAPTION>
                                   2000          1999          1998          1997          1996
                                 --------      --------      --------      --------      --------
<S>                              <C>           <C>           <C>           <C>           <C>
FOR THE YEAR:
Sales                            $161,565      $108,958      $ 56,968      $ 25,710      $ 11,036
Gross Profit                       64,044        43,335        22,649        10,223         4,628
Operating income                   21,164        12,947         8,279         3,302           915
Income before
  extraordinary Items(a)(b)         5,018         2,372         3,286         1,637           549
Net income                          5,478           921         3,286         1,637           549
PER COMMON SHARE:
 Income before
  extraordinary items(a)(b)      $    .60      $    .38      $    .60      $    .56      $    .36
 Net Income                      $    .66      $    .15      $    .60      $    .56      $    .36
PER DILUTED COMMON SHARE:
 Income before
  extraordinary items(a)(b)      $    .52      $    .38      $    .60      $    .47      $    .36
 Net Income                      $    .57      $    .15      $    .60      $    .47      $    .36

AT YEAR-END:
Accounts receivable              $ 25,560      $ 16,828      $ 11,280      $  4,741      $  1,229
Inventories                        60,726        38,302        20,973         8,416         3,169
Total assets                      179,031       137,998        77,725        35,194        12,032
Long-term debt                    100,748        87,809        39,286         9,894         1,785
Stockholders' equity               50,638        34,450        27,464        19,275         8,720


</TABLE>

(a) In 1999, the Company incurred an extraordinary charge, in connection with
the early extinguishment of debt, in the amount of $1,451,516 (net of applicable
income taxes of $1,187,604).
(b) In 2000, the Company realized an extraordinary gain, in connection with the
early extinguishment of debt, in the amount of $459,844 (net of applicable
income taxes of $326,214).


                                       20
<PAGE>   21


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

RESULTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED WITH 1999.

         The results of operations through December 31, 2000 include the
operating results of the Company's inventory logistics management business,
Questron Distribution Logistics, Inc. ("QDL"), its master distribution of
fasteners business, Integrated Material Systems, Inc. ("IMS") and its lithium
battery distribution business, Power Components, Inc. ("PCI"). QDL's operating
results for 2000 include those of:

         o        Fas-Tronics, Inc. ("Fas-Tronics"), Fortune Industries, Inc.
                  ("Fortune") and AFCOM, which were acquired in 1998;

         o        Action Threaded Products, Inc. ("Action"), Capital Fasteners,
                  Inc. ("Capital"), Olympic Fasteners & Electronic Hardware
                  ("Olympic") and B&G Supply Company, Inc. ("B&G"), which were
                  acquired in 1999; and

         o        R.S.D. Sales Co. Inc. ("RSD"), which was acquired in 2000.

In 1999, the businesses of Fas-Tronics and Fortune began to operate as Questron
Aerospace Logistics ("QAL"), a division of QDL dedicated to providing inventory
logistics management services to aerospace manufacturers.

         The Company's revenues for the year ended December 31, 2000 amounted to
$161,564,981, compared with $108,958,426 for the year ended December 31, 1999.
The significant growth in the Company's revenues in 2000 is primarily
attributable to the internal growth of QDL, as well as the effect of the
full-year results of Action, Capital, Olympic and B&G acquired during 1999.
Revenues, excluding revenues attributable to the 2000 and 1999 acquisitions,
increased to $115,823,090 for 2000 from $80,972,025 for 1999. This increase
represents an internal growth rate of 43.0% from 1999 to 2000.

         The Company's operating income was $21,164,146 for the year ended
December 31, 2000, compared with operating income of $12,947,323 for the prior
year. This increase is primarily due to the operating income attributable to the
acquired businesses, as well as internal growth. Operating income as a
percentage of sales increased to 13.1% for the year ended December 31, 2000 from
11.9% for the year ended December 31, 1999. This increase is due to the decrease
in operating expenses as a percentage of sales, which is primarily due to the
elimination of redundant expenses of the acquired businesses and the continued
maturation of inventory logistics management programs signed during 1999.

         Interest expense for the year ended December 31, 2000 amounted to
$12,585,738, compared with $8,496,097 for 1999. The increase in interest expense
principally reflects the cost of increased borrowings associated with the
acquisitions of Action, Capital and Olympic as of April 1, 1999, as well as
borrowings associated with QDL's working capital needs.

         The provision for income taxes for the year ended December 31, 2000
reflects an effective income tax rate of 41.5%, compared with 49.2% for 1999.
The decrease in the effective tax rate in 2000 is primarily due to the reduced
effect of non-deductible goodwill associated with the acquired businesses as it
relates to pre-tax income of the Company.




                                       21
<PAGE>   22

         Income before extraordinary items for the year ended December 31, 2000
was $5,018,369, compared with $2,372,066 for 1999. This increase reflects the
growth in operating income attributable to the continuing internal growth of
QDL, as well as the effect of the full-year results of the acquired businesses
and the reduction of operating expenses as a percentage of sales, offset in part
by the increased interest expense associated with the financing of four
acquisitions and the working capital requirements of QDL. While certain
redundant expenses associated with the acquired businesses have been eliminated,
the Company should realize the full benefit of the integration of the acquired
businesses with the completion of the integration of QAL and Action, scheduled
for the second quarter of 2001.

         During the first quarter of 2000, the Company entered into settlement
agreements with the former shareholders of Action, Capital and Olympic repaying
$5,000,000 of acquisition indebtedness, plus accrued interest, with 450,000
shares of the Company's common stock, valued at $4,500,000. As a result, the
Company recognized an extraordinary gain of $459,844, net of applicable income
taxes, for the difference between the balance owed and the value of the stock
exchanged. After the extraordinary gain, the net income for the year ended
December 31, 2000 amounted to $5,478,213.

         During the second quarter of 1999, the Company refinanced its then
existing debt and, as a result, incurred an extraordinary charge to earnings of
$1,451,516, net of applicable income taxes, for the unamortized balance of loan
costs associated with the previous financing. After the extraordinary charge,
the net income for the year ended December 31, 1999 amounted to $920,550.

FOR THE YEAR ENDED DECEMBER 31, 1999 COMPARED WITH 1998.

         The results of operations through December 31, 1999 include the
operating results of the Company's inventory logistics management business, QDL,
its master distribution of fasteners business, IMS, and its lithium battery
distribution business, PCI. QDL's operating results for 1999 include those of:

         o        Fas-Tronics, Fortune and AFCOM, which were acquired in 1998;
                  and
         o        Action, Capital, Olympic and B&G, which were acquired in 1999.


In 1999, the operations of Fas-Tronics and Fortune began to operate as Questron
Aerospace Logistics ("QAL"), a division of QDL dedicated to providing inventory
logistics management services to aerospace manufacturers.

         The Company's revenues for the year ended December 31, 1999 amounted to
$108,958,426, compared with $56,968,007 for the year ended December 31, 1998.
The significant growth in the Company's revenues in 1999 is primarily
attributable to the full-year results of Fas-Tronics, Fortune and AFCOM and the
acquisitions of Action, Capital, Olympic and B&G during the year, as well as the
internal growth of the other QDL branches. Revenues, excluding revenues
attributable to the 1999 and 1998 acquisitions, increased to $54,290,070 for
1999 from $45,481,650 for 1998. This increase represents an internal growth rate
of 19.4% from 1998 to 1999.

         The Company's operating income was $12,947,323 for the year ended
December 31, 1999, compared with operating income of $8,279,478 for the prior
year. The increase in operating income for the year ended December 31, 1999 is
primarily due to the operating income attributable to the acquired businesses,
as well as internal growth. Operating income as a percentage of sales declined
to 11.9% for the year ended December 31, 1999 from 14.5% for the





                                       22
<PAGE>   23

year ended December 31, 1998, as a result of an increase in operating expenses
as a percentage of sales. This increase is primarily due to redundant expenses
of the acquired businesses and the investment by QDL in personnel and facilities
to support recently signed inventory logistics management agreements.

         Interest expense for the year ended December 31, 1999 amounted to
$8,496,097, compared with $2,709,979 for 1998. The increase in interest expense
principally reflects the cost of increased borrowings associated with the
acquisitions of Fortune and Fas-Tronics as of July 1, 1998 and Action, Capital
and Olympic as of April 1, 1999, as well as borrowings associated with QDL's
working capital needs.

         The provision for income taxes for the year ended December 31, 1999
reflects an effective income tax rate of 49.2%, compared with 41% for 1998. The
increase in the effective tax rate in 1999 is primarily due to the effect of
non-deductible goodwill associated with the acquired businesses.

         Income before an extraordinary charge for the year ended December 31,
1999 was $2,372,066, compared with $3,286,004 for the prior year. The decrease
in income before the extraordinary charge in 1999 as compared with 1998 reflects
the increased interest expense associated with the financing of four
acquisitions, increased selling, general and administrative expenses, as well as
the redundant expenses associated with the acquired businesses, partially offset
by the growth in operating income attributable to the acquired businesses.

         During the second quarter of 1999, the Company refinanced its existing
debt and, as a result, incurred an extraordinary charge to earnings of
$1,451,516, net of applicable income taxes, for the unamortized balance of loan
costs associated with the previous financing. After the extraordinary charge,
the net income for the year ended December 31, 1999 amounted to $920,550.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 2000, the Company had $357,618 in cash and cash
equivalents, compared with $111,102 as of December 31, 1999. As of December 31,
2000, the Company had working capital of $62,196,968, compared with working
capital of $41,885,433 as of December 31, 1999.

         For the year ended December 31, 2000, the net cash used in the
Company's operating activities amounted to $15,759,102, principally reflecting
increases in inventories, receivables and other assets, offset in part by
current year earnings, an increase in income taxes payable and an increase in
accounts payable.

         For the year ended December 31, 2000, the net cash used in the
Company's investing activities amounted to $3,278,274, including $1,393,417 net
cash consideration paid in connection with the deferred purchase price of IMS,
Action and Olympic. The Company also had capital expenditures of $1,884,857 for
the purchase of fixed assets, principally for the expansion of QAL's facilities
in Fort Worth, TX, the expansion into new branches to service new ILM programs
and the further expansion of the Company's computer systems in order to complete
the integration of QAL and Action. Other than the $2.5 million expenditure
associated with the implementation of additional supply chain management
software tools, the Company




                                       23
<PAGE>   24

does not have significant commitments for capital expenditures as of December
31, 2000 and no significant commitments are anticipated for the next twelve
months.

         In connection with the acquisitions of Action, Capital and Olympic in
1999, the Company entered into a $75,000,000 senior secured credit facility with
Ableco Finance L.L.C. and Congress Financial Corporation (Florida). Also in
connection with the above acquisitions, the Company completed a $20,000,000
senior subordinated debt private placement. The senior subordinated notes were
placed with affiliates of Albion Alliance LLC and Alliance Capital Management
LP, The Equitable Life Assurance Society of the United States and IBJ Whitehall
Financial Group.

         In 2000, the Company amended its senior secured credit facility adding
a $4,000,000 term loan, Note C and also completed an additional private
placement for $17,500,000 of Senior Subordinated Debt. The net proceeds of both
financings were used to pay down a portion of the Company's revolving credit
facility.

         The senior secured credit facility, as amended, consists of a
$52,500,000 four and one-quarter year term loan, a $4,000,000 two year term loan
and a $22,500,000 revolving credit facility. The term loans are divided into
three notes: Note A for $25,000,000, Note B for $27,500,000 and Note C for
$4,000,000. The loan agreement includes a provision for the calculation of a
borrowing base, which determines the amount of borrowings available under the
revolving credit facility. At December 31, 2000, $12,085,082 was borrowed and
outstanding under the revolving credit facility. Of the remaining amount of the
$22,500,000 revolving credit facility, $10,414,918 was available at December 31,
2000 for future working capital needs. Interest on the revolving credit facility
is payable monthly at the prime rate plus 1.5%, with a minimum rate of interest
of 9.25% per annum. The Company can elect a LIBOR Rate Election for amounts
borrowed and outstanding under the revolving facility. During all times that a
LIBOR Rate Election is in effect, the interest due on the principal amount of
the LIBOR revolving credit portion outstanding is at an interest rate of LIBOR
plus 2.75%. Interest on Note A is payable monthly at the prime rate plus 2.0%
with a minimum rate of interest of 9.75% per annum. Interest on Note B is
payable monthly at the prime rate plus 2.5% with a minimum rate of interest of
10.25% per annum. Interest on Note C is payable monthly at the prime rate plus
2.5% with a minimum rate of interest of 12% per annum.

         For the year ended December 31, 2000, the net cash provided by the
Company's financing activities amounted to $19,283,892, which principally
consists proceeds from $17,500,000 of senior subordinated debt and $4,000,000 of
senior term debt to provide additional working capital for the continued
expansion of the Company's business, reduced by expenses associated with the
financings of $1,985,854.

         Interest on the $20,000,000 senior subordinated debt is payable
quarterly in arrears at an annual fixed rate of 12.5% in cash and 2.00% in kind
or cash, at the Company's option. Principal on the senior subordinated debt is
payable in full on June 30, 2005. In connection with the financing, the Company
issued 680,000 shares of the Company's common stock to the senior subordinated
lenders. These shares were valued at $1,190,000 and were treated as original
issue discount.

         Interest on the $17,500,000 senior subordinated debt is payable
quarterly in arrears at an annual fixed rate of 12.5% in cash and 2.00% in kind
or cash, at the Company's option. Principal on the senior subordinated debt is
payable in full on June 30, 2005. In connection with





                                       24
<PAGE>   25

the financing, the Company issued 750,000 shares of the Company's common stock
to the senior subordinated lenders. These shares were valued at $1,312,500 and
were treated as original issue discount.

         In order to secure the obligations of the Company and its subsidiaries
under the revolving credit facility and the related term loan facility under the
loan and security agreement with the lender, the Company entered into a stock
pledge agreement with the lender whereby the Company pledged to the lender the
shares of capital stock of each of its subsidiaries at the date of such
agreement and any shares of its subsidiaries in which the Company may thereafter
acquire an interest. In addition, the Company and its subsidiaries granted to
the lender a security interest in substantially all of their assets.

         On March 7, 2000, the Company reached agreements with the former
shareholders of Action, Capital and Olympic whereby notes payable aggregating
$5,000,000 were settled in exchange for 450,000 shares of the Company's common
stock.

         The Company intends to continue to identify and evaluate potential
merger and acquisition candidates engaged in businesses complementary to its
business. While certain of such additional potential acquisition opportunities
are at various stages of consideration and evaluation, none is at any definitive
stage at this time. Management believes that its working capital, funds
available under its credit agreement, and funds generated from operations will
be sufficient to meet its obligations through 2001, exclusive of cash
requirements associated with any business acquisitions.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
is effective for the Company beginning January 1, 2001. The adoption of the new
Statement will not have an impact on the earnings or the financial position of
the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company has significant amounts outstanding under various credit
agreements, a substantial portion of which bears interest at variable rates. As
a result, the Company's interest expense is sensitive to changes in the general
level of interest rates. The Company may, from time to time, enter into interest
rate swap arrangements to manage its interest cost and mitigate its exposure to
fluctuating interest rates. There were no such swap arrangements outstanding at
December 31, 2000 or during the year then ended.


                                       25
<PAGE>   26


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Questron Technology, Inc.

         We have audited the accompanying consolidated balance sheets of
Questron Technology, Inc. and subsidiaries as of December 31, 2000 and 1999 and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000. Our audits also included the financial statement schedules listed in the
Index at Item 14(a)(2). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 audits provide a reasonable basis
for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Questron Technology, Inc. and subsidiaries at December 31, 2000 and 1999 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.




                                       ERNST & YOUNG LLP

New York, New York
March 20, 2001



                                       26
<PAGE>   27


                            QUESTRON TECHNOLOGY, INC.
                           CONSOLIDATED BALANCE SHEET
                          AT DECEMBER 31, 2000 AND 1999

<TABLE>
<CAPTION>
                                                                                               2000                1999
                                                                                         -------------       -------------
<S>                                                                                      <C>                 <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                                             $     357,618       $     111,102
   Accounts receivable, less allowances for
      doubtful accounts of $281,194 in 2000 and $283,666 in 1999                            25,560,014          16,827,678
   Other receivables                                                                           346,624             253,057
   Inventories                                                                              60,725,835          38,301,589
   Other current assets                                                                      1,355,948             515,705
                                                                                         -------------       -------------
      Total current assets                                                                  88,346,039          56,009,131

Property and equipment - net                                                                 4,562,046           2,898,919
Cost in excess of net assets of businesses acquired,
   less accumulated amortization of $4,521,606 in 2000 and $2,699,305 in 1999               76,138,460          70,235,243
Deferred income taxes                                                                        4,342,475           4,846,780
Other assets                                                                                 5,642,006           4,007,768
                                                                                         -------------       -------------
      Total assets                                                                       $ 179,031,026       $ 137,997,841
                                                                                         =============       =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                                      $  16,671,027       $   9,668,171
   Accrued expenses                                                                          2,313,454           1,958,596
   Income taxes payable                                                                      1,780,148             750,333
   Current portion of long-term debt                                                         5,384,442           1,746,598
                                                                                         -------------       -------------
      Total current liabilities                                                             26,149,071          14,123,698
Deferred income taxes                                                                        1,158,369             993,048
Long-term debt                                                                             100,748,425          87,808,934
                                                                                         -------------       -------------
      Total liabilities                                                                    128,055,865         102,925,680
                                                                                         -------------       -------------

Commitments and contingencies:
   Common stock subject to put agreement                                                       337,182             622,170
Stockholders' equity:
   Preferred stock, $.01 par value; authorized 10,000,000 shares                                    --                  --
   Common stock, $.001 par value; authorized 20,000,000
     shares; issued 9,226,013 shares in 2000 and 7,164,522 in 1999                               9,226               7,165
   Additional paid-in capital                                                               56,031,038          45,678,802
   Accumulated deficit                                                                      (5,402,285)        (10,880,498)
                                                                                         -------------       -------------
                                                                                            50,637,979          34,805,469
   Less: treasury stock at cost, 11,849 shares in 1999                                              --            (355,478)
                                                                                         -------------       -------------
      Total stockholders' equity                                                            50,637,979          34,449,991
                                                                                         -------------       -------------
      Total liabilities and stockholders' equity                                         $ 179,031,026       $ 137,997,841
                                                                                         =============       =============

</TABLE>

                 See Notes to Consolidated Financial Statements.


                                       27
<PAGE>   28


                            QUESTRON TECHNOLOGY, INC.
                        CONSOLIDATED STATEMENT OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


<TABLE>
<CAPTION>
                                                                    2000               1999                1998
                                                              -------------      -------------       -------------
<S>                                                           <C>                <C>                 <C>
Sales                                                         $ 161,564,981      $ 108,958,426       $  56,968,007
Cost of good sold                                                97,521,098         65,623,111          34,319,326
                                                              -------------      -------------       -------------

Gross profit                                                     64,043,883         43,335,315          22,648,681

Selling, general and administrative expenses                     40,316,041         28,279,252          13,385,018
Depreciation and amortization                                     2,563,696          2,108,740             984,185
                                                              -------------      -------------       -------------

Total operating expenses                                         42,879,737         30,387,992          14,369,203
                                                              -------------      -------------       -------------

Operating income                                                 21,164,146         12,947,323           8,279,478
Interest expense                                                 12,585,738          8,496,097           2,709,979
                                                              -------------      -------------       -------------

Income before income taxes and extraordinary items                8,578,408          4,451,226           5,569,499
Provision for income taxes                                        3,560,039          2,079,160           2,283,495
                                                              -------------      -------------       -------------

Income before extraordinary items                                 5,018,369          2,372,066           3,286,004
Extraordinary gain (charge) in connection with the early
   extinguishment of debt (less applicable income
   taxes of $326,214 in 2000 and $1,187,604 in 1999)                459,844         (1,451,516                  --
                                                              -------------      -------------       -------------

Net income                                                    $   5,478,213      $     920,550       $   3,286,004
                                                              =============      =============       =============

Net income                                                    $   5,478,213      $     920,550       $   3,286,004
Deduct: Preferred Stock dividend                                         --                 --             165,310
              Imputed non-cash Preferred Stock dividend                  --                 --           1,075,988
                                                              -------------      -------------       -------------

Net income used in per common share calculation               $   5,478,213      $     920,550       $   2,044,706
                                                              =============      =============       =============

PER COMMON SHARE:
 Income before extraordinary items                            $         .60      $         .38       $         .60
 Extraordinary gain (charge)                                            .06               (.23)                 --
                                                              -------------      -------------       -------------
 Net income                                                   $         .66      $         .15       $         .60
                                                              =============      =============       =============

PER DILUTED COMMON SHARE:
 Income before extraordinary items                            $         .52      $         .38       $         .60
 Extraordinary gain (charge)                                            .05               (.23)                 --
                                                              -------------      -------------       -------------
 Net income                                                   $         .57      $         .15       $         .60
                                                              =============      =============       =============

Average number of common shares outstanding                       8,360,552          6,162,168           3,435,162
                                                              =============      =============       =============

Average number of diluted common shares outstanding               9,574,754          6,296,302           4,718,566
                                                              =============      =============       =============

</TABLE>


                 See Notes to Consolidated Financial Statements.


                                       28
<PAGE>   29


                            QUESTRON TECHNOLOGY, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                            Preferred Stock                     Common Stock
                                   -------------------------------    -------------------------------
                                      Shares             Amounts         Shares            Amounts
                                   ------------       ------------    ------------       ------------
<S>                                   <C>             <C>                <C>             <C>
Balance - December 31, 1997           1,150,000       $     11,500       2,122,439       $      2,122
Issuance of securities:
Issuance of common stock upon
     Acquisitions                            --                 --         990,043                990
Series B Preferred Stock
  Dividend                                   --                 --              --                 --
Payment of Series B
  Preferred Stock dividend
  in common stock                            --                 --          35,583                 36

Imputed non-cash Series B
  Preferred Stock dividend                   --                 --              --                 --
Conversion of Series B
  Preferred Stock                    (1,150,000)           (11,500)      1,653,125              1,653
Put agreement exercised
  by former shareholders
  of Calfast                                 --                 --          (6,015)                (6)
Put agreement declined
  by former shareholders
  of Calfast                                 --                 --              --                 --
Net income for the year                      --                 --              --                 --
                                   ------------       ------------    ------------       ------------
Balance - December 31, 1998                  --                 --       4,795,175              4,795
Issuance of securities:
Issuance of common stock upon
  acquisitions                               --                 --       2,382,579              2,383
Put agreement exercised
  by former shareholders
  of Calfast                                 --                 --         (13,232)               (13)
Put agreement declined
  by former shareholders
  of Calfast                                 --                 --              --                 --
B & G shares subject to put
  agreement                                  --                 --              --                 --
Net income for the year                      --                 --              --                 --
                                   ------------       ------------    ------------       ------------

Balance - December 31, 1999                  --                 --       7,164,522              7,165
Issuances of securities:
Issuance of common stock upon
  acquisitions                               --                 --         676,267                676
Issuance of common stock in
  exchange for debt                          --                 --         450,000                450
Issuance of common stock in
  connection with Senior
  Subordinated Debt financing                --                 --         750,000                750
Issuance of common stock upon
  exercise of options and
  warrants                                   --                 --         233,108                233
Put agreement exercised
  by former shareholders
  of acquired businesses                     --                 --         (36,035)               (36)
Put agreement declined
  by former shareholders
  of acquired businesses                     --                 --              --                 --
Retirement of treasury stock                 --                 --         (11,849)               (12)
Net income for the year                      --                 --              --                 --
                                   ------------       ------------    ------------       ------------
Balance - December 31, 2000                  --                 --       9,226,013       $      9,226
                                   ============       ============    ============       ============


</TABLE>


<TABLE>
<CAPTION>
                                    Additional
                                      Paid in          Accumulated          Treasury
                                     Capital            Deficit              Stock
                                   ------------       ------------       ------------
<S>                                <C>                <C>                <C>
Balance - December 31, 1997        $ 33,462,524       $(13,845,790)      $   (355,478)
Issuance of securities:
Issuance of common stock upon
     Acquisitions                     4,676,550                 --                 --
Series B Preferred Stock
  Dividend                                   --           (165,274)                --
Payment of Series B
  Preferred Stock dividend
  in common stock                       165,274                 --                 --

Imputed non-cash Series B
  Preferred Stock dividend            1,075,988         (1,075,988)                --
Conversion of Series B
  Preferred Stock                        (9,847)                --                 --
Put agreement exercised
  by former shareholders
  of Calfast                                 --                 --                 --
Put agreement declined
  by former shareholders
  of Calfast                            245,509                 --                 --
Net income for the year                      --          3,286,004                 --
                                   ------------       ------------       ------------
Balance - December 31, 1998          39,615,998        (11,801,048)          (355,478)
Issuance of securities:
Issuance of common stock upon
  acquisitions                        6,428,314                 --                 --
Put agreement exercised
  by former shareholders
  of Calfast                                 --                 --                 --
Put agreement declined
  by former shareholders
  of Calfast                              7,549                 --                 --
B & G shares subject to put
  agreement                            (373,059)                --                 --
Net income for the year                      --            920,550                 --
                                   ------------       ------------       ------------
Balance - December 31, 1999          45,678,802        (10,880,498)          (355,478)
Issuances of securities:
Issuance of common stock upon
  acquisitions                        4,570,610                 --                 --
Issuance of common stock in
  exchange for debt                   4,499,550                 --                 --
Issuance of common stock in
  connection with Senior
  Subordinated Debt financing         1,311,750                 --                 --
Issuance of common stock upon
  exercise of options and
  warrants                              520,185                 --                 --
Put agreement exercised
  by former shareholders
  of acquired businesses               (239,686)                --                 --
Put agreement declined
  by former shareholders
  of acquired businesses                 45,293                 --                 --
Retirement of treasury stock           (355,466)                --            355,478
Net income for the year                      --          5,478,213                 --
                                   ------------       ------------       ------------
Balance - December 31, 2000        $ 56,031,038       $ (5,402,285)                --
                                   ============       ============       ============

</TABLE>


                 See Notes to Consolidated Financial Statements.


                                       29
<PAGE>   30


                            QUESTRON TECHNOLOGY, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                           2000               1999               1998
                                                                     ------------       ------------       ------------
<S>                                                                  <C>                <C>                <C>
Cash flows from operating activities:
  Net income                                                         $  5,478,213       $    920,550       $  3,286,004
  Adjustments to reconcile net income to net cash used in
     operating activities:
     Amortization of cost in excess of net assets
        of businesses acquired                                          1,822,301          1,533,328            616,411
     Depreciation of property and equipment                               741,398            575,412            367,774
     Amortization of original issue discount                              222,693                 --                 --
     Non-cash interest expense                                            506,159                 --                 --
     Deferred income taxes                                                669,625            515,883            182,087
     Recognition of current year income tax benefit of net
        operating loss carryforward                                            --                 --            344,450

  Change in operating assets and liabilities:
     Increase in accounts receivable                                   (8,298,890)        (1,486,583)        (3,109,261)
     (Increase) decrease in other receivables                             (93,567)          (182,645)             7,321
     Increase in inventories                                          (22,301,229)        (9,823,501)        (7,331,154)
     Increase in other current assets                                    (840,243           (226,676)          (187,217)
     (Increase) decrease in other assets                               (1,910,861)           164,524           (373,145)
     Increase in accounts payable                                       6,924,101          1,524,112          1,809,897
     Increase (decrease) in accrued expenses                              291,383            (84,165)          (194,254)
     Increase (decrease) in income taxes payable                        1,029,815         (1,738,684)         1,514,024
                                                                     ------------       ------------       ------------
     Net cash used in operating activities                            (15,759,102)        (8,642,860)        (3,067,063)
                                                                     ------------       ------------       ------------

Cash flows from investing activities:
     Net cash consideration paid for acquired businesses               (1,393,417)       (30,441,923)       (24,072,714)
     Acquisition of property and equipment                             (1,884,857)          (629,539)          (325,830)
                                                                     ------------       ------------       ------------
     Net cash used in investing activities                             (3,278,274)       (31,071,462)       (24,398,544)
                                                                     ------------       ------------       ------------

Cash flows from financing activities:
     Net borrowings under revolving facility                              147,254          6,644,029          3,869,519
     Proceeds from long-term debt                                      21,500,000         72,500,000         35,000,000
     Repayment of long-term debt                                         (300,984        (35,019,686)        (9,583,334)
     Fees and expenses associated with long-term debt financing        (1,985,854)        (4,112,982)        (2,193,973)
     Payments on capital leases                                          (129,834           (139,750)           (79,085)
     Payments on exercise of put options                                 (239,694            (83,037)           (37,744)
     Proceeds from exercise of options and warrants                       520,185                 --                 --
     Payments on notes issued for acquired business                      (227,181)          (192,435)          (155,571)
                                                                     ------------       ------------       ------------
     Net cash provided by financing activities                         19,283,892         39,596,139         26,819,812
                                                                     ------------       ------------       ------------
Increase (decrease) in cash and cash equivalents                          246,516           (118,183)          (645,795)
Cash and cash equivalents at beginning of period                          111,102            229,285            875,080
                                                                     ------------       ------------       ------------
Cash and cash equivalents at end of period                           $    357,618       $    111,102       $    229,285
                                                                     ============       ============       ============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
     Interest                                                        $ 10,747,545       $  7,380,139       $  2,166,687
                                                                     ============       ============       ============
     Income taxes                                                    $    812,500       $  1,764,688       $    298,367
                                                                     ============       ============       ============

</TABLE>


                 See Notes to Consolidated Financial Statements.


                                       30
<PAGE>   31


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

         Questron Technology, Inc. ("Questron" or the "Company") provides supply
chain management solutions and inventory logistics management services for small
parts commonly referred to as C inventory items (fasteners and related products)
focused on the needs of original equipment manufacturers ("OEMs") throughout the
United States through its subsidiary, Questron Distribution Logistics, Inc.
("QDL"). The Company is also a master distributor of fasteners through its
subsidiary Integrated Material Systems, Inc. ("IMS"), and a distributor of
lithium batteries through its subsidiary Power Components, Inc. ("PCI"). QDL
includes the operations of Fas-Tronics, Inc. ("Fas-Tronics"), Fortune
Industries, Inc. ("Fortune"), AFCOM, Action Threaded Products, Inc. ("Action"),
Capital Fasteners, Inc. ("Capital"), Olympic Fasteners & Electronic Hardware
("Olympic"), B&G Supply Co., Inc. ("B&G") and R.S.D. Sales Co. Inc. ("RSD"). In
1999, the operations of Fas-Tronics and Fortune began to operate as Questron
Aerospace Logistics ("QAL"), a division of QDL dedicated to providing inventory
logistics management programs to aerospace manufacturers. These two businesses
were merged in April 2000 into a single facility in Fort Worth, TX and operate
under the QAL name.

         All of the Company's operations comprise one business segment.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION - In 2000, the Company acquired RSD. In 1999, the
Company acquired Action, Capital, B&G, and the business and operating assets of
Metro Form Corporation, d.b.a. Olympic. In 1998, the Company acquired Fortune,
Fas-Tronics, and the business and operating assets of AFCOM, Inc. All
acquisitions were recorded under the purchase method of accounting. Accordingly,
the consolidated financial statements include the operations of the acquired
businesses from their respective dates of acquisition. Certain amounts in prior
years have been reclassified to conform to the current year presentation.

         CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly owned. All
significant intercompany transactions and amounts are eliminated.

         CASH AND CASH EQUIVALENTS - The Company considers certain highly liquid
investments with original maturities of three months or less when acquired to be
cash equivalents. The Company maintains its cash and cash equivalents in
accounts that, at times, may exceed federally insured limits. The Company has
not experienced any losses in such accounts and believes it is not exposed to
any significant credit risk.


                                       31
<PAGE>   32


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


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

         CONCENTRATION OF CREDIT RISK - The Company extends credit to its
customers which results in accounts receivable arising from its normal business
activities. The Company does not require collateral from its customers, but
routinely assesses the financial strength of its customers. Such estimate of the
financial strength of customers may be subject to change in the near term. Based
upon factors surrounding the credit risk of its customers, the Company believes
that its receivable credit risk exposure is limited. During each of years ended
December 31, 2000, 1999 and 1998, the top ten customers accounted for
approximately 37%, 39% and 50% of the Company's revenues, respectively. During
the years ended December 31, 2000 and 1998, sales to one customer of the Company
represented approximately 8.3% and 13.4% of revenue, respectively. For the year
ended December 31, 1999, no single customer represented more than 5.0% of
revenue.

         REVENUE RECOGNITION - The Company recognizes revenue when products are
shipped.

         SHIPPING AND HANDLING - The Company classifies all shipping and
handling costs on products shipped to customers within cost of sales.

         INVENTORIES - Inventories, which consist solely of finished products,
are stated at the lower of cost or market. Cost is determined on the first-in,
first-out (FIFO) method.

         PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Expenditures for normal repairs and maintenance are charged to earnings as
incurred. When assets are retired or otherwise disposed, their costs and related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are included in operations. Depreciation is recorded using the
straight-line method over the shorter of the estimated lives of the related
asset or the remaining lease term. Estimated useful lives are as follows:

                  Building                            30 years
                  Furniture and fixtures               7 years
                  Computer equipment                   5 years
                  Office equipment                     5 years
                  Automobiles                          5 years
                  Leasehold improvements               5 years




                                       32
<PAGE>   33


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         COST IN EXCESS OF NET ASSETS OF BUSINESSES ACQUIRED - The cost in
excess of net assets of businesses acquired is being amortized on a
straight-line basis over 40 years. The Company reviews the recoverability of
intangible and other long-lived assets whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. A loss
is recognized for the difference between the carrying amount and the recoverable
amount, which would be determined using discounted cash flows. No such losses
were recognized during the three years ended December 31, 2000.

         STOCK OPTIONS AND SIMILAR EQUITY INSTRUMENTS - The Company accounts for
stock options and similar equity instruments (collectively "Options") issued to
employees and directors in accordance with Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," rather than the fair
value based method of accounting prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." The
exercise price for Options issued to employees and directors equals or exceeds
the fair market value of the Company's common stock at the date of grant and,
accordingly, no compensation expense is recorded. Equity instruments issued to
acquire goods and services from non-employees are accounted for based on the
fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more readily determinable.

         NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting
Standards Board issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which is effective for the Company beginning January 1,
2001. The adoption of the new Statement will not have an impact on the earnings
or the financial position of the Company.

2. EARNINGS PER SHARE

         Earnings per share is based on the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the
potential dilution that would occur if securities or other contracts to issue
common stock were exercised or converted into common stock using, when
appropriate, the treasury stock method.



                                       33
<PAGE>   34



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         The following table sets forth the computation of earnings per share
and diluted earnings per share for the years ended December 31, 2000, 1999 and
1998:

<TABLE>
<CAPTION>
                                                            2000            1999            1998
                                                        ----------      ----------      ----------
<S>                                                     <C>             <C>             <C>
Numerator:
     Income before extraordinary items                  $5,018,369      $2,372,066      $3,286,004

     Less: preferred stock dividends                            --              --       1,241,298
                                                        ----------      ----------      ----------

     Numerator for income before extraordinary
        items per common share                           5,018,369       2,372,066       2,044,706
           Effect of dilutive securities -
              Preferred stock dividends                         --              --       1,241,298
                                                        ----------      ----------      ----------
     Numerator for income before extraordinary
        items per diluted common share                  $5,018,369      $2,372,066      $3,286,004
                                                        ==========      ==========      ==========
Denominator:
     Denominator for income before extraordinary
         items per common share
     Weighted-average shares                             8,360,552       6,162,168       3,435,162
                                                        ----------      ----------      ----------
     Effect of dilutive securities:
        Options                                            676,285          17,970          79,693
        Warrants                                           537,917             668         374,884
        Stock earned, not issued                                --         115,496              --
        Convertible preferred stock                             --              --         828,827
                                                        ----------      ----------      ----------

     Dilutive potential common shares                    1,214,202         134,134       1,283,404
                                                        ----------      ----------      ----------
     Denominator for income before extraordinary
         items per diluted common share                  9,574,754       6,296,302       4,718,566
                                                        ==========      ==========      ==========

     Income before extraordinary items per
        common share                                    $      .60      $      .38      $      .60
                                                        ==========      ==========      ==========

     Income before extraordinary items per diluted
        common share                                    $      .52      $      .38      $      .60
                                                        ==========      ==========      ==========

</TABLE>


         Income before extraordinary items per common share and income before
extraordinary items per diluted common share for the year ended December 31,
1998 reflect deductions for preferred stock dividends, including imputed,
non-cash dividends associated with the issuance of the preferred stock. The
preferred stock converted into common stock on July 2, 1998, causing the
acceleration of the amortization of the imputed dividend as a one-time, non-cash
dividend. As a result of this conversion, the common stock into which the
preferred stock converted (1,653,125 shares of common stock) is included for two
quarters in the weighted average number of common shares outstanding for the
year ended December 31, 1998. The effect of this one-time, non-cash dividend is
anti-dilutive, accordingly, the presentation of net income per diluted common
share is presented on the face of the income statement as the same amount as net
income per common share.


                                       34
<PAGE>   35



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

3. ACQUISITIONS

         Effective July 1, 1998, the Company acquired 100% of the issued and
outstanding capital stock of Fas-Tronics, a privately owned distributor of
fasteners and related products. The purchase price for Fas-Tronics consisted of
(i) $7,422,803 in cash; (ii) 421,941 shares of the Company's common stock,
valued at $1,930,380; and (iii) additional amounts payable in cash and shares of
the Company's common stock if Fas-Tronics attained certain earnings targets for
the twelve months ending June 30, 1999. In addition, the Company granted to the
former shareholders of Fas-Tronics and one key employee options to purchase an
aggregate of 50,000 shares of the Company's common stock at $4.58 per share,
market price at time of grant, exercisable for five years.

         Effective July 1, 1998, the Company acquired 100% of the issued and
outstanding capital stock of Fortune, a privately owned distributor of fasteners
and related products. The purchase price for Fortune consisted of (i) $9,830,660
in cash; (ii) 518,102 shares of the Company's common stock, valued at
$2,370,317; and (iii) additional amounts payable in cash and shares of the
Company's common stock if Fortune attained certain earnings targets for the year
ended December 31, 1998.

         Effective December 1, 1998, the Company acquired the business and
operating assets of AFCOM, a privately owned distributor of fasteners and
related products. The purchase price for AFCOM consisted of $5,766,718 in cash
and 50,000 shares of the Company's common stock valued at $257,344.

         Effective April 1, 1999, the Company acquired 100% of the issued and
outstanding capital stock of Action Threaded Products, Inc., an Illinois
corporation ("Action"), a privately owned distributor of fasteners and related
products. The purchase price for Action consisted of (i) $8,437,280 in cash;
(ii) the assumption of $2,062,720 in debt net of cash on hand; (iii) 470,588
shares of the Company's common stock valued at $1,800,000; (iv) a note payable
to the sellers of Action in the amount of $1,500,000; and (v) up to $1,800,000
if Action attains certain earnings targets for the twelve months ending March
31, 2000.

         Effective April 1, 1999, the Company acquired 100% of the issued and
outstanding capital stock of Capital Fasteners, Inc., a North Carolina
corporation ("Capital"), a privately owned distributor of fasteners and related
products. The purchase price for Capital consisted of (i) $7,037,197 in cash;
(ii) the assumption of $1,220,078 in debt net of cash on hand; (iii) 169,935
shares of the Company's common stock valued at $650,000; (iv) a note payable to
the sellers of Capital in the amount of $2,000,000; and (v) up to $1,500,000 if
Capital attains certain earnings targets for the twelve months ending March 31,
2000.



                                       35
<PAGE>   36

                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         Effective April 1, 1999, the Company acquired the business and
operating assets of Metro Form Corporation, an Ohio corporation d/b/a Olympic
Fasteners ("Olympic"). The purchase price for Olympic consisted of (i)
$5,550,113 in cash; (ii) the assumption of $960,481 in debt net of cash on hand;
(iii) 261,438 shares of the Company's common stock valued at $1,000,000; (iv) a
note payable to the sellers of Olympic in the amount of $1,500,000; and (v) up
to $1,000,000 if Olympic attains certain earnings targets for the twelve months
ending March 31, 2000.

         Effective October 1, 1999, the Company acquired the business and
operating assets of B&G Supply Company, Inc. ("B&G"). The purchase price for B&G
consisted of (i) 86,451 shares of the Company's common stock valued at $580,000;
(ii) the assumption of $388,386 in debt; (iii) additional initial consideration
of up to a maximum of $420,000 payable in cash or stock if B&G attains certain
earnings targets for the twelve month periods ended June 30, 2001 and June 30,
2002; and (iv) additional amounts payable in cash or stock if B&G attains
certain earnings targets for each calendar year from 2000 through 2004.

         Effective March 31, 2000, the Company acquired 100% of the issued and
outstanding stock of R.S.D. Sales Co. Inc., a New York corporation ("RSD"), a
privately owned company. The purchase price for RSD consisted of 394,619 shares
of the Company's common stock valued at $3,300,000.

         In connection with certain of the above acquisitions, the Company may
be required to make additional purchase price payments that are contingent upon
the achievement of specified operating goals. Such payments may be in the form
of cash and/or shares of common stock of the Company and will be recorded at
fair market value at the time of payment. The amounts of such additional
consideration, if any, will be recorded when paid as cost in excess of net
assets of businesses acquired and amortized over the remaining life of the
asset. During the years ended December 31, 2000 and 1999, the Company paid
$1,977,179 and $6,902,148, respectively, as additional consideration. Of the
2000 and 1999 amounts, $87,776 and $1,493,691, respectively, represented the
fair value of shares issued in settlement of these obligations. The balance of
these amounts was paid in either cash or notes.

         During 1999, the Company issued 297,680 additional shares of common
stock to the former owners of Fas-Tronics and Fortune pursuant to amendments to
the original purchase agreements. Such amendments required the issuance of
additional shares if the market price of the Company's common stock fell below
certain levels. The value of the additional shares has been reflected as a
reduction to the value of the initial common stock consideration through a
reduction of additional paid-in capital.




                                       36
<PAGE>   37





                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         The following unaudited pro forma information presents the combined
operating results of the Company, Fas-Tronics, Fortune, AFCOM, Action, Capital,
Olympic and B&G, treating the acquired companies as if they were subsidiaries of
the Company for the full years ended December 31, 1999 and 1998. The pro forma
effects of the acquisition of RSD are not material. This unaudited pro forma
information does not purport to be indicative of what would have occurred had
the acquisitions been completed as of January 1, 1998 or results which may occur
in the future:


<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                     ------------------------------
                                                         1999              1998
                                                     ------------      ------------
<S>                                                  <C>               <C>
Sales                                                $120,320,000      $113,231,000
                                                     ------------      ------------

Operating income                                       14,084,000        15,436,000
                                                     ------------      ------------

Net income                                           $  2,203,000      $  3,207,000
                                                     ============      ============

        Pro forma net income per diluted common
           Share                                     $        .32      $        .46
                                                     ============      ============


        Average number of diluted
           common shares outstanding                    6,963,838         6,905,648
                                                     ============      ============
</TABLE>

4. LONG-TERM DEBT

         At December 31, the Company's long-term debt consisted of the
following:

                                                2000              1999
                                           ------------      ------------
Term loans(a)                              $ 56,500,000      $ 52,500,000
Revolving facility(b)                        12,085,802        11,938,548
Senior subordinated debt(c)                  36,025,519        19,109,167
Notes payable to sellers(d)                     905,624         5,231,930
Other(e)                                        615,922           775,887
                                           ------------      ------------
                                            106,132,867        89,555,532
Less installments due within one year         5,384,442         1,746,598
                                           ------------      ------------
                                           $100,748,425      $ 87,808,934
                                           ============      ============

(a)  In 1999, the Company entered into a $75,000,000 Senior Secured Credit
     Facility that consists of a $52,500,000 four and one-quarter year term loan
     and a $22,500,000 revolving credit facility. The term loan is divided into
     Note A for $25,000,000 and Note B for $27,500,000. The proceeds were used
     in conjunction with the acquisitions of Action, Capital and Olympic and to
     retire amounts outstanding under the Company's previous credit facility. In
     2000, the Company amended the Senior Secured Credit Facility to add a
     $4,000,000 term loan, Note C, the proceeds of which were used to pay down a
     portion of the Company's revolving credit facility.



                                       37
<PAGE>   38



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

     Interest on Note A is payable monthly at a rate of prime plus 2%, with a
     minimum interest rate of 9.75% (11.5% at December 31, 2000). Note A is due
     in quarterly installments beginning July 1, 2001, through April 1, 2003.
     Interest on Note B is payable monthly at a rate of prime plus 2.5%, with a
     minimum interest rate of 10.25% (12% at December 31, 2000). Note B is due
     in full on September 30, 2003. Interest on Note C is payable monthly at a
     rate of prime plus 2.5%, with a minimum interest rate of 12% (12% at
     December 31, 2000). Note C is due in full on September 30, 2003.

(b)  Amounts available for borrowing under the revolving credit facility are
     determined pursuant to a borrowing base calculation. Interest on
     outstanding amounts under the revolving credit facility is payable monthly
     and, at the option of the Company, accrues at either prime plus 1.5%, with
     a minimum rate of 9.25% (11% at December 31, 2000) or at LIBOR plus 2.75%
     (9.3% at December 31, 2000). The maturity of the revolving credit facility
     is September 30, 2003.

(c)  Simultaneously with the execution of the Senior Secured Credit Facility,
     the Company completed a private placement of $20,000,000 Senior
     Subordinated Debt. Interest on the $20,000,000 Senior Subordinated Debt is
     payable quarterly in arrears at a fixed rate of 14.5% (12.5% in cash and 2%
     payable in kind or cash, at the Company's option). Principal is payable in
     full on June 30, 2005. In connection with the private placement, the
     company issued 680,000 shares of the Company's common stock to the senior
     subordinated lenders. The carrying amount of the Senior Subordinated Debt
     was reduced by $1,190,000, the fair value of the shares. Such shares are
     treated as original issue discount and amortized over the term of the debt
     as an adjustment to interest expense.

     In 2000, the Company completed an additional private placement for
     $17,500,000 of Senior Subordinated Debt, the net proceeds of which were
     used to pay down a portion of the Company's revolving credit facility.
     Interest on the $17,500,000 Senior Subordinated Debt is payable quarterly
     in arrears at a fixed rate of 14.5% (12.5% in cash and 2% payable in kind
     or cash, at the Company's option). Principal is payable in full on June 30,
     2005. In connection with this private placement, the Company issued 750,000
     shares of the Company's common stock to the senior subordinated lenders.
     The carrying amount of the Senior Subordinated Debt was reduced by
     $1,312,500, the fair value of the shares. Such shares are treated as
     original issue discount and amortized over the term of the debt as an
     adjustment to interest expense.


                                       38
<PAGE>   39


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

(d)  In connection with certain of the Company's acquisitions, the Company
     issued notes to the former shareholders of the acquired businesses. Such
     notes bear interest at interest rates ranging from 8.5% to 10% and are
     payable in monthly installments through March 1, 2002.

     On March 7, 2000, the Company reached an agreement with the former
     shareholders of Action, Capital and Olympic whereby notes payable
     aggregating $5,000,000 plus accrued interest were settled in exchange for
     450,000 shares of the Company's common stock.

(e)  Other long-term indebtedness includes amounts related to capital leases and
     notes payable assumed in certain acquisitions.

         The Senior Secured Credit Facility is secured by substantially all of
the assets of the Company and its subsidiaries. In addition, the Company has
pledged the shares of capital stock of each of its subsidiaries at the date of
the agreements and any shares of companies that the Company may acquire in the
future.

         The aggregate annual maturities of long-term debt for periods
subsequent to December 31, 2000 are: $5,384,442 in 2001; $13,563,178 in 2002;
and $51,159,728 in 2003. The outstanding balance on the senior subordinated debt
matures and is payable on June 30, 2005.

5. PROPERTY AND EQUIPMENT

         Property and equipment at December 31 consisted of the following:

                                                  2000            1999
                                              ----------      ----------

          Land                                $   24,000      $   24,000
          Building                               341,625         341,625
          Furniture and fixtures               1,410,154         935,043
          Computer equipment                   2,403,874       1,417,285
          Office equipment                     1,258,873         870,078
          Autos and trucks                       432,182         337,276
          Leasehold improvements                 842,235         383,111
                                              ----------      ----------
             Subtotal                          6,712,943       4,308,418
          Less: accumulated depreciation       2,150,897       1,409,499
                                              ----------      ----------

             Total                            $4,562,046      $2,898,919
                                              ==========      ==========

         Depreciation expense related to property and equipment for the years
ended December 31, 2000, 1999 and 1998 was $741,398, $575,412 and $367,774,
respectively.


                                       39
<PAGE>   40


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


6. STOCKHOLDERS' EQUITY

         On March 10, 1997, the Company completed an offering of 1,150,000 Units
(the "Offering") at a price of $6.00 per unit. Each Unit consisted of one share
of the Company's Series B Convertible Preferred Stock and one redeemable Series
IV Common Stock Purchase Warrant of the Company. Each share of the Series B
Convertible Preferred Stock was converted into 1.4375 shares of the Company's
common stock on July 2, 1998. Such conversion ratio represented a 20% discount
to the price of the Company's common stock on the day immediately preceding the
effective date of the Offering. The discount $1,653,125 has been amortized as an
imputed non-cash dividend to retained earnings over the period from March 1997
through the date of conversion, July 2, 1998.

         In addition to the 1,150,000 Series IV Warrants issued in connection
with the Offering, the Company issued 2,750,000 Series IV Warrants to former
shareholders of acquired businesses and 100,000 Series IV Warrants to the
related underwriter. Each of the 4,000,000 Series IV Common Stock Purchase
Warrants is exercisable until March 4, 2002 and entitles the holder to purchase
one share of the Company's common stock at $5.75 per share. During the year
ended December 31, 2000, 2,000 Series IV Warrants were exercised.

         In connection with the acquisition of Calfast, the Company granted to
the former shareholders of Calfast the option to sell 125,896 shares back to the
Company on a monthly basis as follows: for each of the seven months during the
period October 1997 through April 1998, an aggregate of 8,879 shares per month
valued at $6.275 per share, or $55,715 per month, and for each of the 53 months
during the period May 1998 through September 2002, an aggregate of 1,203 shares
per month valued at $6.275 per share, or $7,549 per month. During 2000 and 1999,
the former shareholders of Calfast exercised their options on 7,218 shares and
13,232 shares, respectively.

         In connection with the acquisition of B&G, the Company granted to the
former shareholders of B&G the option to sell 41,451 shares back to the Company
on a monthly basis as follows: for each of the eleven months during the period
July 2000 through May 2001, an aggregate of 3,600 shares per month valued at
$9.00 per share, or $32,400 per month, and for the month of June 2001, an
aggregate of 1,851 shares valued at $9.00 per share, or $16,659. During 2000,
the former shareholders of B&G exercised their options on 21,600 shares.


                                       40
<PAGE>   41




                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         In 1998, the Company paid a dividend of one preferred share purchase
right on each outstanding share of the Company's common stock. The rights are
exercisable if a person or group acquires 15% or more of the outstanding shares
of the Company's common stock or announces or commences a tender offer for 15%
or more of such shares. When a person or group acquires such 15%, each
exercisable right will entitle its holder (other than such person or group) to
purchase, at the right's then-current exercise price (presently $30), a number
of the Company's shares of common stock having a market value of twice such
price. In addition, if the Company is acquired in a merger or other business
combination transaction after a person has acquired 15% or more of the Company's
outstanding common stock, each right will entitle its holder to purchase, at the
right's then-current exercise price, a number of the acquiring company's shares
of common stock having a market value of twice such price. Prior to the
acquisition by a person or group of beneficial ownership of 15% or more of the
Company's common stock, the rights are redeemable for $.01 per right at the
option of the board of directors. The rights do not have voting rights and will
expire on November 16, 2008, unless otherwise extended by the Company's board of
directors.

7. STOCK OPTIONS

1996 STOCK OPTION PLAN

         Under the terms of the 1996 Stock Option Plan, as amended (the "1996
Plan"), both incentive and nonqualified stock options may be granted to
officers, employees and directors of the Company and its subsidiaries. The 1996
Plan provides for options to purchase an aggregate number of shares of the
Company's common stock that may be granted equal to the greater of 1,000,000
shares of common stock or 14% of the total number of shares of common stock
outstanding on December 31 of the immediately preceding calendar year. As of
January 1, 2001, an aggregate of 1,291,642 shares of the Company's common stock
were authorized for grant under the 1996 Plan. In the case of incentive stock
options, which may be granted only to officers, employees and directors of the
Company and its subsidiaries, such options are to be granted at prices greater
than or equal to fair market value of the shares at date of grant. Options
currently outstanding under the 1996 Plan have terms of ten years and become
exercisable in either three equal nine-month installments, three equal annual
installments or three years from date of grant.


                                       41
<PAGE>   42



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         The transactions under the 1996 Plan during the years ended
December 31, 2000, 1999 and 1998 are summarized as follows:


<TABLE>
<CAPTION>
                                                   2000                          1999                           1998
                                        ---------------------------    --------------------------    --------------------------
                                                          Average                       Average                      Average
                                                         Exercise                      Exercise                      Exercise
                                            Shares        Price           Shares         Price          Shares         Price
                                        -----------     -----------    -----------    -----------    -----------    -----------
<S>                                         <C>         <C>                <C>        <C>                <C>        <C>
Options outstanding at beginning
   of year                                  473,251     $      4.24        123,250    $      6.32        159,450    $      6.51
Granted                                      37,000            7.13        355,551           3.56         10,300           4.80
Exercised                                    (3,700)           6.63             --                                           --
Cancelled                                   (20,100)           3.91         (5,550)          6.63        (46,500)          6.63
                                        -----------     -----------    -----------    -----------    -----------    -----------
Options outstanding at end of year          486,451     $      4.46        473,251    $      4.24        123,250    $      6.32
                                        ===========     ===========    ===========    ===========    ===========    ===========

Prices per share of options                              $     3.56 -                 $      3.56 -                 $      4.75 -
outstanding                                              $    10.75                   $      6.63                   $      6.63
                                                         ===========                  ===========                   ===========

Options exercisable at end of year          245,191     $      5.02        111,033    $      6.40         65,500    $      6.53
                                        ===========     ===========    ===========    ===========    ===========    ===========
Options available for future grant
   at end of year                           805,191                        528,123                       376,750
                                        ===========                    ===========                   ===========
Weighted average remaining
   life of options outstanding            8.51 Yrs.                      9.38 Yrs.                     8.77 Yrs.
                                        ===========                    ===========                   ===========

</TABLE>

PERFORMANCE OPTIONS

         In connection with certain business acquisitions, the Company agreed to
issue to the former shareholders of such companies acquired, performance options
to purchase shares of common stock upon the Company's attainment of certain
pre-tax income targets. During the years ended December 31, 1998 and 1997,
options to purchase 798,333 and 166,667 shares of common stock, respectively, at
exercise prices of $4.50 and $7.75, respectively, were granted pursuant to these
arrangements.

OTHER OPTIONS

         In connection with the early termination of a consulting agreement with
one of the former shareholders of an acquired company, options to purchase a
total of 1,160,500 shares of common stock at an average exercise price of $5.43
were cancelled. In connection with a revised employment agreement, dated March
29, 1999, of the chief executive officer of the Company, options to purchase
1,100,000 shares of common stock at an exercise price of $4.50 were granted. In
connection with the acquisition of IMS, the Company granted to the former
shareholders of IMS options to purchase 100,000 shares of common stock at an
exercise price of $6.00 per share. Such options vest and become exercisable in
five equal annual installments commencing on June 1, 1998. In connection with
the acquisition of Fas-Tronics, the Company granted to the former shareholders
and one key employee of Fas-Tronics options to purchase an aggregate of 50,000
shares of common stock at an exercise price of $4.50 per share. In connection
with the acquisition of the business of AFCOM, the Company granted to one of the
former shareholders of AFCOM options to purchase 20,000 shares of common stock
at an exercise price of $4.89.


                                       42
<PAGE>   43



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1994 DIRECTOR NON-QUALIFIED STOCK OPTION PLAN

Under the terms of the 1994 Director Non-qualified Stock Option Plan, as amended
(the "1994 Plan"), options to purchase up to an aggregate of 150,000 shares of
the Company's common stock may be granted to non-employee directors of the
Company. Under the 1994 Plan, options are to be granted to each eligible
director at the rate of 5,000 per year at an exercise price equal to the fair
market value of the underlying stock on the date of grant, are immediately
exercisable, and have a term of ten years. Transactions under the 1994 Plan
during the years ended December 31, 2000, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                                   2000                           1999                           1998
                                        -------------------------      -------------------------      -------------------------
                                                        Average                        Average                        Average
                                                       Exercise                       Exercise                       Exercise
                                          Shares         Price            Shares        Price            Shares        Price
                                        -----------   -----------      -----------   -----------      -----------   -----------
<S>                                          <C>      <C>                   <C>      <C>                   <C>      <C>
Options outstanding at beginning
   of year                                   72,000   $      6.84           62,000   $      7.15           29,000   $      8.77
Granted                                      15,000          8.75           10,000          4.91           33,000          5.72
Exercised                                        --            --               --            --               --            --
Cancelled                                        --            --               --            --               --            --
                                        -----------   -----------      -----------   -----------      -----------   -----------
Options outstanding at end of year           87,000   $      7.17           72,000   $      6.84           62,000   $      7.15
                                        ===========   ===========      ===========   ===========      ===========   ===========

Options exercisable at end of year           87,000   $      7.17           72,000   $      6.84           62,000   $      7.15
                                        ===========   ===========      ===========   ===========      ===========   ===========
Options available for future grant
   at end of year                            63,000                         78,000                        88,000
                                        ===========                    ===========                    ===========
Weighted average remaining
   life of options outstanding            7.21 Yrs.                      8.05 Yrs.                      8.88 Yrs.
                                        ===========                    ===========                    ===========

</TABLE>

         At December 31, 2000, 81,000 options were outstanding with exercise
prices ranging from $3.88 to $8.75 per share, or a weighted average exercise
price of $6.34 per share, and a weighted average remaining life of 7.61 years.
An additional 6,000 options were outstanding with exercise prices ranging from
$11.25 to $24.08 per share, or a weighted average exercise price of $18.36 per
share, and a weighted average remaining life of 4.34 years.



                                       43
<PAGE>   44



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

OTHER

If the Company had accounted for the issuance of all options pursuant to the
fair value based method of SFAS No. 123, the Company would have recorded
additional compensation expense of $421,391, $5,104,380 and $999.160 for the
years ended December 31, 2000, 1999 and 1998, respectively, and the Company's
income before extraordinary charge and net income per share before extraordinary
charge would have been as follows:

<TABLE>
<CAPTION>
                                                               2000               1999                1998
                                                         -------------      -------------       -------------
<S>                                                      <C>                <C>                 <C>
INCOME BEFORE EXTRAORDINARY ITEM
PER COMMON SHARE:
Income before extraordinary item used in
    per common share calculation as reported             $   5,018,369      $   2,372,066       $   2,044,706
                                                         =============      =============       =============
Pro forma income (loss) before
    extraordinary item used in per common
    share calculation                                    $   4,771,855      $    (639,518)      $   1,456,954
                                                         =============      =============       =============

Income before extraordinary item per
    common share, as reported                            $         .60      $         .38       $         .60
                                                         =============      =============       =============
Pro forma income (loss) before
    extraordinary item per share                         $         .57      $        (.10)      $         .42
                                                         =============      =============       =============

INCOME BEFORE EXTRAORDINARY ITEM PER DILUTED COMMON
SHARE:
Income before extraordinary item as
    reported                                             $   5,018,369      $   2,372,066       $   3,286,004
                                                         =============      =============       =============
Pro forma income (loss) before
    extraordinary item                                   $   4,771,855      $    (639,518)      $   2,698,252
                                                         =============      =============       =============
Income before extraordinary item per
    diluted common share, as reported                    $         .52      $         .38       $         .60
                                                         =============      =============       =============
Pro forma income (loss) before
    extraordinary item per diluted common
    share                                                $         .50      $        (.10)      $         .57
                                                         =============      =============       =============

</TABLE>

         The fair value of options at date of grant was estimated using the fair
value based method with the following weighted average assumptions for the years
ended December 31, 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                                    December 31, 2000      December 31, 1999   December 31, 1998
                                    -----------------      -----------------   -----------------
<S>                                     <C>                      <C>                   <C>
Expected life (years)                     5                         5                   5
Interest rate                      5.80%  -  6.52%                6.26%                4.64%
Annual rate of dividends                  --                       --                   --
Volatility factor                       .650                     .606                  .627

</TABLE>

         The weighted average fair value of options at date of grant using the
fair value based method during 2000, 1999 and 1998 is estimated at $4.40, $2.50
and $4.15, respectively.



                                       44
<PAGE>   45

                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

8. RETIREMENT PLAN

         The Company has a defined contribution plan for eligible employees,
which qualifies under Section 401(k) of the Internal Revenue Code. The Company's
contributions to the plan, which is based on a specified percentage of employee
contributions, amounted to $308,779, $274,510 and $76,123 in 2000, 1999 and
1998, respectively.

         In 1997, the Board of Directors of the Company approved the adoption of
a noncontributory employee stock ownership plan that enables all eligible
employees to acquire shares of the Company's common stock. Contributions, which
are determined by the Board of Directors, are in the form of common stock or
cash that is used to purchase the Company's common stock for the benefit of
participating employees. The Company accrued $100,000, $75,000 and $75,000 for
the years ended December 31, 2000, 1999 and 1998, respectively, to fund the
purchase of the Company's common stock pursuant to the plan.

9. LEASE COMMITMENTS

         The Company leases certain office and warehouse space under
non-cancelable operating leases expiring at various dates through 2016. Rent
expense for all non-cancelable operating leases amounted to $2,021,617,
$2,001,854 and $639,601 for the years ended December 31, 2000, 1999 and 1998,
respectively. Aggregate minimum rental commitments under all non-cancelable
operating leases approximate $12,745,933 as of December 31, 2000. Such
commitments on annual basis are as follows:

                    Years ending December 31,
                         2001                              $  2,726,041
                         2002                                 2,598,990
                         2003                                 2,237,783
                         2004                                 1,712,817
                         2005                                 1,125,863
                         Thereafter                           2,344,439
                                                           -------------
                               Total                       $ 12,745,933
                                                           =============

10. INCOME TAXES

         The provision for income taxes for the years ended December 31, 2000,
1999 and 1998 consisted of the following:

                                  2000            1999            1998
                              ----------      ----------      ----------
         Current
                 Federal      $2,555,944      $1,380,319      $1,450,861
                 State           334,470         182,958         306,097
                              ----------      ----------      ----------
                               2,890,414       1,563,277       1,756,958
                              ----------      ----------      ----------
         Deferred
                 Federal         553,729         463,911         498,464
                 State           115,896          51,972          28,073
                              ----------      ----------      ----------
                                 669,625         515,883         526,537
                              ----------      ----------      ----------
                              $3,560,039      $2,079,160      $2,283,495
                              ==========      ==========      ==========



                                       45
<PAGE>   46

                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


         Income taxes are determined using the liability method, whereby
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse. The Company has reflected a deferred tax asset
resulting from the availability of net operating loss carryforwards. At December
31, 2000 and 1999, the balance of the deferred tax asset relating to the net
operating loss carryforwards was $2,624,318 and $2,968,764, respectively, after
having been reduced by $344,446 each year for the amount of the benefit related
to the 2000 and 1999 utilization of net operating loss carryforwards.

         The significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>
                                                       2000            1999
                                                   ----------      ----------
<S>                                                <C>             <C>
         Deferred tax assets:
         Benefit of net operating loss carry-
             forwards                              $2,624,318      $2,968,764
         Inventory reserves                         1,130,680       1,777,932
         Uniform cost capitalization                  475,000              --
         Allowance for doubtful accounts              112,477         100,084
                                                   ----------      ----------

            Total deferred tax assets               4,342,475       4,846,780
                                                   ----------      ----------

         Deferred tax liabilities:
         Differences in basis of acquired
             assets                                 1,158,369         935,627
         Other                                             --          57,421
                                                   ----------      ----------

            Total deferred tax liabilities          1,158,369         993,048
                                                   ----------      ----------

            Net deferred tax assets                $3,184,106      $3,853,732
                                                   ==========      ==========


</TABLE>




                                       46
<PAGE>   47


                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         A reconciliation of the federal statutory rate to the Company's
effective tax rate is as follows:

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                         --------------------------------
                                                           2000         1999         1998
                                                         ------       ------       ------
<S>                                                        <C>          <C>          <C>
         Federal statutory rate                            34.0%        34.0%        34.0%

         State income taxes, net of federal benefit         6.0%         5.1%         6.0%

         Effect of permanent differences between
            financial statement treatment and tax
            treatment of certain items, primarily
            amortization of goodwill                        1.5%        10.1%         1.0%
                                                         ------       ------       ------

         Effective tax rate                                41.5%        49.2%        41.0%
                                                         ======       ======       ======
</TABLE>

         As of December 31, 2000, the Company had unused net operating loss
carryforwards of $7,718,582, expiring in various years through 2010. Although
the Company's use of these net operating loss carryforwards is limited to
approximately $1 million per year as a result of a change of control as defined
under Section 382 of the Internal Revenue Code, the expiration of such
carryforwards will not inhibit the utilization or realization thereof. The
amount of the net operating loss carryforwards and their expiration dates are as
follows:

                                                                Net
                                                           Operating Loss
             Expiring in Years Ending December 31,         Carryforwards
                                                           --------------
               2004                                         $    315,817
               2005                                              579,718
               2006                                              782,129
               2007                                            2,945,421
               2008                                            2,336,094
               2009                                              591,906
               2010                                              167,497
                                                            ------------

                    Total                                   $  7,718,582
                                                            ============



                                       47
<PAGE>   48



                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


11. FAIR VALUE OF FINANCIAL INSTRUMENTS

         For certain financial instruments, including cash and cash equivalents,
trade receivables and payables, and short-term debt, the carrying amount
approximated fair value because of the near term maturities of such obligations.
The fair value of long-term debt was determined based on current rates at which
the Company could borrow funds with similar remaining maturities. Fair value of
the financial instruments disclosed below is not necessarily representative of
the amount that could be realized or settled, nor does the fair value amount
consider the tax consequences of realization or settlement.

<TABLE>
<CAPTION>
                                          2000                                           1999
                            --------------------------------                ---------------------------------
                            Carrying                                        Carrying
                             Amount               Fair Value                 Amount                Fair Value
                            --------              ----------                --------               ----------
<S>                       <C>                     <C>                      <C>                    <C>
Long-term debt            100,748,425             99,412,576               87,808,934             86,889,201


</TABLE>

12.  RELATED PARTY TRANSACTIONS

         The Company had a management advisory and consulting agreement with
Gulfstream Financial Group, Inc. ("Gulfstream"), of which the chairman and chief
executive officer of the Company is a 50% owner. Under the terms of such
agreement, Gulfstream acted as an advisor and consultant to the Company
principally concerning the expansion of the Company's business through the
identification of potential acquisition candidates. This agreement was
terminated effective March 1, 1999. Fees paid to Gulfstream in connection with
the agreement amounted to $68,000 and $305,000 for the years ended December 31,
1999 and 1998, respectively. Gulfstream presently owns 2.8% of the Company's
outstanding common stock.

         The Company leases five of its facilities from entities owned by former
stockholders of acquired businesses who are now employees of the Company. Rent
expense of approximately $536,813 associated with these facilities has been
charged to selling, general & administrative expenses for the year ended
December 31, 2000. Management believes that the terms of such leases are no less
favorable than those which otherwise are available in the market for those
facilities.





                                       48
<PAGE>   49

                            QUESTRON TECHNOLOGY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998



13.  QUARTERLY FINANCIAL DATA (UNAUDITED)

      A summary of the Company's quarterly results of operations follows (in
thousands except per share data):

<TABLE>
<CAPTION>
                                                First          Second          Third           Fourth
                                              Quarter         Quarter         Quarter         Quarter
<S>                                         <C>             <C>              <C>             <C>
2000
Sales                                       $   36,479      $   41,226       $   41,919      $   41,941
Gross profit                                    14,719          15,809           16,889          16,627
Income before extraordinary item                 1,264           1,510            1,570             674
Net income                                       1,724           1,510            1,570             674
Per common share:
    Income before extraordinary gain        $      .16      $      .18       $      .19      $      .08
    Net income                              $      .22      $      .18       $      .19      $      .08
Per diluted common share:
    Income before extraordinary gain        $      .12      $      .16       $      .18      $      .08
    Net income                              $      .16      $      .16       $      .18      $      .08

1999
Sales                                       $   19,304      $   29,974       $   29,324      $   30,356
Gross profit                                     7,488          11,508           11,351          12,988
Income before extraordinary item                   703             869              349             452
Net income                                         703            (583)             349             452
Per common share:
    Income before extraordinary charge      $      .14      $      .15       $      .05      $      .06
    Net income                              $      .14      $     (.10)      $      .05      $      .06
Per diluted common share:
    Income before extraordinary charge      $      .14      $      .15       $      .05      $      .06
    Net income                              $      .14      $     (.10)      $      .05      $      .06


</TABLE>

                                       49
<PAGE>   50



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

              Not applicable.


















                                       50
<PAGE>   51


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         See "Executive Officers" in Item 1 above. In addition, the information
set forth under the heading "Election of Directors" in the Company's Definitive
Proxy Statement to be filed on or before April 30, 2001 in connection with the
Annual Meeting of Stockholders hereby is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

         The information set forth under the heading "Executive Compensation and
Other Information" in the Company's Definitive Proxy Statement to be filed on or
before April 30, 2001 in connection with the Annual Meeting of Stockholders
hereby is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information set forth under the heading "Security Ownership of
Management and Principal Stockholders" in the Company's Definitive Proxy
Statement to be filed on or before April 30, 2001 in connection with the Annual
Meeting of Stockholders hereby is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information set forth under the heading "Related Party
Transactions" in the Company's Definitive Proxy Statement to be filed on or
before April 30, 2001 in connection with the Annual Meeting of Stockholders
hereby is incorporated herein by reference.



                                       51
<PAGE>   52

                                     PART IV

ITEM 14  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a) Financial Statements, Financial Statement Schedules, and Exhibits.

                  1.       The financial statements listed in the accompanying
                           index to financial statements are filed as part of
                           this annual report.

                  2.       The financial statement schedule is filed as part of
                           this annual report.

                  3.       See Index to Exhibits on page 61.

         (b) Report on Form 8-K.

                  There were no reports on Form 8-K filed during the last
quarter of 2000 through the date hereof.




                                       52
<PAGE>   53




                           QUESTRON TECHNOLOGY, INC.
                                     INDEX
                            TO FINANCIAL STATEMENTS

                                 (ITEM 14 (A))


<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
<S>                                                                                         <C>

         Report of Independent Auditors covering consolidated financial
            statements at December 31, 2000 and 1999 and for each of the three
            years in the period ended December 31, 2000                                          26

         Consolidated Balance Sheet as of December 31, 2000 and 1999                             27

         For the years ended December 31, 2000, 1999 and 1998:

                  Consolidated Statement of Operations                                           28
                  Consolidated Statement of Changes in Stockholders' Equity                      29
                  Consolidated Statement of Cash Flows                                           30

         Notes to Consolidated Financial Statements at December 31, 2000, 1999 and
            1998 and for the years then ended                                                    31
</TABLE>

         The following financial statement schedules for the three years ended
December 31, 2000 are included in Item 14 (d):

               Schedule I - Condensed financial information of registrant
               Schedule II - Valuation and qualifying accounts

         All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.


                                       53
<PAGE>   54


                                   SIGNATURES

         In accordance with Section 13 or 15 (d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                         QUESTRON TECHNOLOGY, INC.

                                         By:  /s/ DOMINIC A. POLIMENI
                                             ----------------------------
                                                  Dominic A. Polimeni,
                                                  Chairman and Chief Executive
                                                  Officer

                                         Date:    March 30, 2001

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
indicated on March 30, 2001:

(1) Principal Executive Officer:      (3) A Majority of the Board of Directors:


         /s/ DOMINIC A. POLIMENI             /s/ MILTON M. ADLER
         ---------------------------         ----------------------------------
         Dominic A. Polimeni,                Milton M. Adler, Director
           Chief Executive Officer

                                             /s/ ROBERT V. GUBITOSI
                                             ----------------------------------
                                             Robert V. Gubitosi, Director


(2) Principal Financial and Accounting       /s/ FREDERICK W. LONDON
    Officer:                                 -----------------------------------
                                             Frederick W. London, Director

         /s/ ROBERT V. GUBITOSI              /s/ WILLIAM J. MCSHERRY, JR.
         ---------------------------         ----------------------------------
         Robert V. Gubitosi,                 William J. McSherry, Jr., Director
            Chief Financial Officer
                                             /s/ DOMINIC A. POLIMENI
                                             ----------------------------------
                                             Dominic A. Polimeni, Director

                                             /s/ DOUGLAS D. ZADOW
                                             ----------------------------------
                                             Douglas D. Zadow, Director

                                       54
<PAGE>   55


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            QUESTRON TECHNOLOGY, INC.
                                (Parent Company)

                             CONDENSED BALANCE SHEET
                          AT DECEMBER 31, 2000 AND 1999


<TABLE>
<CAPTION>
                                                                       2000             1999
                                                                  -----------      -----------
<S>                                                               <C>              <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents                                      $        --      $   867,444
   Other current assets                                               526,489          300,074
                                                                  -----------      -----------
   Total current assets                                               526,489        1,167,518

Property and equipment--net                                         3,552,032          522,509
Deferred income taxes                                               4,342,475        3,431,438
Other assets (principally investment in and amounts due from
   wholly owned subsidiaries)                                      46,907,058       32,766,054
                                                                  -----------      -----------
Total assets                                                      $55,328,054      $37,887,519
                                                                  ===========      ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued expenses                          $ 3,194,524      $ 1,822,310
                                                                  -----------      -----------
   Total current liabilities                                        3,194,524        1,822,310

Deferred income taxes                                               1,158,369          993,048

Common stock subject to put agreement                                 337,182          622,170

Stockholders' equity:
   Common stock                                                         9,226            7,165
   Other stockholders' equity                                      50,628,753       34,443,826
                                                                  -----------      -----------
   Total stockholders' equity                                      50,637,979       34,449,991
                                                                  -----------      -----------
Total liabilities and stockholders' equity                        $55,328,054      $37,887,519
                                                                  ===========      ===========


</TABLE>

                  See Notes to Condensed Financial Statements.


                                       55
<PAGE>   56


     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

                            QUESTRON TECHNOLOGY, INC.
                                (Parent Company)

                          CONDENSED STATEMENT OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                  2000              1999              1998
                                              -----------       -----------       -----------
<S>                                           <C>               <C>               <C>
Costs and expenses:
   General and administrative                 $ 5,404,916       $ 3,054,827       $ 1,746,473
   Depreciation and amortization                  341,135           413,413           676,806
   Interest expense                                    --         3,042,110         2,647,836
                                              -----------       -----------       -----------
   Total costs and expenses                     5,746,051         6,510,350         5,071,115
                                              -----------       -----------       -----------

Loss before income taxes, equity in net
   income of subsidiaries and
   extraordinary charge                        (5,746,051)       (6,510,350)       (5,071,115)
Income tax benefit                              2,384,611         3,203,000         2,079,157
                                              -----------       -----------       -----------

Loss before equity in net income of
   subsidiaries and extraordinary charge
                                               (3,361,440)       (3,307,350)       (2,991,958)
Equity in net income of subsidiaries
                                                8,839,653         5,363,166         6,277,962
                                              -----------       -----------       -----------

Income before extraordinary charge
                                                5,478,213         2,055,816         3,286,004
Extraordinary charge (less applicable
   income taxes of $928,854 in 1999)
                                                       --        (1,135,266)               --
                                              -----------       -----------       -----------
Net income                                    $ 5,478,213       $   920,550       $ 3,286,004
                                              ===========       ===========       ===========

</TABLE>

                  See Notes to Condensed Financial Statements.



                                       56
<PAGE>   57


     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

                            QUESTRON TECHNOLOGY, INC.
                                (Parent Company)

                        CONDENSED STATEMENT OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>
<CAPTION>
                                                2000               1999               1998
                                           ------------       ------------       ------------
<S>                                        <C>                <C>                <C>
Net cash from operating activities         $  2,752,301       $  1,249,713       $  2,816,657

Investing activities
   Net cash consideration paid for
      acquired businesses                                               --        (24,072,714)
   Other                                     (1,884,857)          (159,482)          (576,746)
                                           ------------       ------------       ------------
Net cash used in investing activities
                                             (1,884,857)          (159,482)       (24,649,460)

Financing activities
   Proceeds from long-term debt                      --                 --         40,294,519
   Repayments of long-term debt                      --                 --        (11,128,334)
   Fees and expenses associated with
     long-term financing                             --                 --         (2,193,973)
   Other                                             --           (222,787)          (116,829)
                                           ------------       ------------       ------------
Net cash (used in) provided by
   financing activities                              --           (222,787)        26,855,383
                                           ------------       ------------       ------------

Increase (decrease) in cash                $   (867,444)      $    867,444       $   (610,734)
                                           ============       ============       ============

</TABLE>


                  See Notes to Condensed Financial Statements.


                                       57
<PAGE>   58


     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (continued)

                            QUESTRON TECHNOLOGY, INC.
                                (Parent Company)

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1. BASIS OF PRESENTATION

     In the parent company financial statements, the company's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since date of acquisition. The Company's share of net income of its
consolidated income statement is included using the equity method.
Parent-company-only financial statements should be read in conjunction with the
Company's consolidated financial statements.

2. LONG-TERM DEBT

     During 1999, the Company refinanced its previous indebtedness through
borrowings made by its wholly owned subsidiaries Questron Finance Company and
Questron Operating Company. In connection with the refinancing and
extinguishment of debt at the parent company level, the Company wrote off the
remaining balance of deferred financing costs associated with the extinguished
debt. This resulted in an extraordinary charge of $1,135,266 (net of taxes of
$928,854).

     The subsidiaries' loan agreements include, among other matters,
restrictions on the amounts of retained earnings available for distribution to
the Company and additional borrowings, and require that the Company maintain
certain consolidated financial ratios.



                                       58
<PAGE>   59


                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                            QUESTRON TECHNOLOGY, INC.
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2000

<TABLE>
<CAPTION>
                      Balance at
                       beginning    Charged to    Charged to                  Balance at
                       of year        income       other(1)    Write-offs    end of year
                      ----------    ----------    ----------   ----------    ------------
<S>                    <C>           <C>           <C>          <C>           <C>
Allowance for
doubtful accounts
       2000            $283,666      $108,315      $      0     $110,787      $281,194
                       ========      ========      ========     ========      ========
       1999            $186,256      $ 63,000      $ 33,455     $      0      $283,666
                       ========      ========      ========     ========      ========
       1998            $ 93,561      $ 52,729      $ 60,000     $ 20,034      $186,256
                       ========      ========      ========     ========      ========
</TABLE>


(1)  Represents the allowance for doubtful accounts of the businesses
     acquired by the Company during each of the respective years.






                                       59
<PAGE>   60


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   EXHIBITS TO
                                    FORM 10-K


(Mark One)

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

                   For the fiscal year ended DECEMBER 31, 2000
                                             -----------------

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (No Fee Required)

        For the transition period from _______________ to ______________

                         Commission file number 0-13324
                                                -------

                            QUESTRON TECHNOLOGY, INC.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

<TABLE>
<S>                                                                          <C>
                           Delaware                                                            23-2257354
---------------------------------------------------------------             --------------------------------------------------
(State or other jurisdiction of incorporation or organization)                   (I.R.S. Employer Identification Number)

       6400 Congress Avenue, Suite 2000, Boca Raton, FL                                           33487
---------------------------------------------------------------             --------------------------------------------------
           (Address of principal executive offices)                                            (Zip Code)

</TABLE>

                   Issuer's telephone number: (561) 241-5251
                                              --------------



                                       60
<PAGE>   61


INDEX TO EXHIBITS

The following exhibits are filed as part of this Annual Report on Form 10-K:

*3.0     Certificate of Incorporation, incorporated by reference to Exhibit 3(i)
         to the Company's Form 10-KSB filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1987 (File No.
         0-13324).

*3.1     Certificate of Amendment, dated March 20, 1985, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 4.1
         to Amendment No. 1 of the Company's Registration Statement on Form S-3
         filed with the Securities and Exchange Commission on March 9, 1995
         (File No. 33-44331).

*3.2     Certificate of Amendment, dated June 9, 1989, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 4.1
         to Amendment No. 1 of the Company's Registration Statement on Form S-3
         filed with the Securities and Exchange Commission on March 9, 1995
         (File No. 33-44331).

*3.3     Certificate of Correction, dated May 17, 1991, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 4.1
         to Amendment No. 1 of the Company's Registration Statement on Form S-3
         filed with the Securities and Exchange Commission on March 9, 1995
         (File No. 33-44331).

*3.4     Certificate of Amendment, dated December 20, 1993, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 3(i)
         to the Company's Form 10-KSB filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1993 (File No.
         0-13324).

*3.5     Certificate of Correction, dated December 22, 1993, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 3.3
         to the Company's Form 10-KSB filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1993 (File No.
         0-13324).

*3.6     Certificate of Correction, dated July 19, 1994, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 4.1
         to Amendment No. 1 to the Company's Registration Statement on Form S-3
         filed with the Securities and Exchange Commission on March 9, 1995
         (File No. 33-44331).

*3.7     Certificate of Amendment, dated April 2, 1996, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 3.5
         to the Company's Form 10-KSB filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1995 (File No.
         0-13324).

*3.8     Certificate of Amendment, filed December 31, 1996, to Certificate of
         Incorporation of the Company, incorporated by reference to Exhibit 3.10
         to Amendment No. 1 to the Company's Form SB-2 filed with the Securities
         and Exchange Commission on February 25, 1997 (File No. 333-18243).


                                       61
<PAGE>   62



*3.9     By-Laws of the Company, incorporated by reference to Exhibit 3b(ii) to
         the Company's Form 10-KSB filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1987 (File No.
         0-13324).

*3.10    Amendment to By-Laws of the Company, incorporated by reference to
         Exhibit 3.4 of the Company's Form 10-KSB filed with the Securities and
         Exchange Commission for the fiscal year ended December 31, 1992 (File
         No. 0-13324).

*4.0     Specimen Common Stock Certificate, incorporated by reference to Exhibit
         4.0 to Amendment No. 1 to the Company's Form SB-2 filed with the
         Securities and Exchange Commission on February 25, 1997 (File No.
         333-18243).

*4.1     Form of Series IV Warrant Agreement, incorporated by reference to
         Exhibit 4.3 to Amendment No. 1 to the Company's Form SB-2 filed with
         the Securities and Exchange Commission on February 25, 1997 (File No.
         333-18243).

*4.2     Form of Series III Warrant Agreement, dated as of November 7, 1994,
         incorporated by reference to Exhibit 10.22 to the Company's Form 10-KSB
         filed with the Securities and Exchange Commission for the fiscal year
         ended December 31, 1994 (File No. 0-13324).

*4.3     Form of Underwriters' Purchase Option, incorporated by reference to
         Exhibit 4.5 to Amendment No. 1 to the Company's Form SB-2 filed with
         the Securities and Exchange Commission on February 25, 1997 (File No.
         333-18243).

*4.4     Stock Purchase Warrant Certificate for Purchase of Common Stock of
         Questron Technology, Inc., incorporated by reference to Exhibit 4.6 to
         Amendment No. 1 to the Company's Form SB-2 filed with the Securities
         and Exchange Commission on February 25, 1997 (File No. 333-18243).

*4.5     Amended Certificate of Designation Establishing Series of Preferred
         Stock of Questron Technology, Inc., incorporated by reference to
         Exhibit 4.7 to the Company's Quarterly Report on Form 10-QSB for the
         three month period ended June 30, 1998 filed with the Securities and
         Exchange Commission on May 15, 1998 (File No. 0-13324).

*4.6     Registration Rights Agreement, dated as of September 24, 1998, by and
         between the Company and the persons listed on Schedule A thereto,
         incorporated by reference to the Company's Current Report on Form 8-K,
         filed with the Securities and Exchange Commission on October 8, 1998
         (File No. 0-13324).

*4.7     Certificate of Designation of Series A Junior Participating Preferred
         Stock of Questron Technology, Inc., incorporated by reference to the
         Company's Quarterly Report on Form 10-QSB for the three month period
         ended September 30, 1998, filed with the Securities and Exchange
         Commission on November 16, 1998 (File No. 0-13324).

*10.1    The Company's 1994 Director Non-Qualified Stock Option Plan,
         incorporated by reference to Exhibit 10.28 of the Company's Report on
         Form 10-KSB filed with the Securities and Exchange Commission for the
         fiscal year ended December 31 1993 (File No. 0-13324).

*10.2    Employment Agreement, dated March 29, 1999 between Questron Technology,
         Inc. and Dominic A. Polimeni incorporated by reference to Exhibit 10.2
         of the Company's Report on Form 10-KSB filed with the Securities and
         Exchange Commission for the fiscal year ended December 31 1998 (File
         No. 0-13324).



                                       62
<PAGE>   63

*10.3    Employment Agreement, dated November 29, 1994, between Quest Electronic
         Hardware, Inc. and Phillip D. Schwiebert, incorporated by reference to
         Exhibit 10.25 to the Company's Form 10-KSB filed with the Securities
         and Exchange Commission for the fiscal year ended December 31, 1994
         (File No. 0-13324).

*10.4    Employment Agreement dated October 1, 1999 between Questron Technology,
         Inc. and Robert v. Gubitosi, incorporated by reference to Exhibit 10.4
         to the Company's Form 10-K filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1999 (File No.
         0-13324).

*10.5    Non-Statutory Stock Option Agreement between Questron Technology and
         Malcolm Tallmon dated Mach 6, 2000, incorporated by reference to
         Exhibit 10.5 to the Company's Form 10-K filed with the Securities and
         Exchange Commission for the fiscal year ended December 31, 1999 (File
         No. 0-13324).

*10.6.   Termination of Management Advisory and Consulting Agreement, dated as
         of March 1, 1999, between Gulfstream Financial Group, Inc. and the
         Company.

*10.7.   Purchase of Assets Agreement, dated as of November 29, 1994, between
         Quest Electronic Hardware, Inc. and Arrow Electronics, Inc.,
         incorporated by reference to Exhibit 10.29 to the Company's Form 10-KSB
         filed with the Securities and Exchange Commission for the fiscal year
         ended December 31, 1994 (File No. 0-13324).

*10.8.   1996 Stock Option Plan, incorporated by reference to Exhibit 10.19 to
         Amendment No. 1 to the Company's Form SB-2 filed with the Securities
         and Exchange Commission on February 25, 1997 (File No. 333-18243).

*10.9.   Exchange Agreement, dated November 8, 1996 by and among the Company,
         Gulfstream Financial Group, Inc. and Phillip D. Schwiebert,
         incorporated by reference to Exhibit 10.21 to Amendment No. 1 to the
         Company's Form SB-2 filed with the Securities and Exchange Commission
         on February 25, 1997 (File No. 333-18243).

*10.10.  Stock Purchase Agreement dated as of December 16, 1996 relating to Webb
         Distribution, Inc., incorporated by reference to Exhibit 2.0 to
         Amendment No. 1 to the Company's Form SB-2 filed with the Securities
         and Exchange Commission on February 25, 1997 (File No. 333-18243).

*10.11.  Form of Underwriting Agreement, incorporated by reference to Exhibit
         2.0 to Amendment No. 1 to the Company's Form SB-2 filed with the
         Securities and Exchange Commission on February 25, 1997 (File No.
         333-18243).

*10.12.  Stock Option Grant Agreement between the Company and Phillip D.
         Schwiebert made as of November 8, 1996, incorporated by reference to
         Exhibit 10.20 to the Company's Form 10-KSB filed with the Securities
         and Exchange Commission for the fiscal year ended December 31, 1996
         (File No. 0-13324).

*10.13.  Stock Purchase Agreement between Questron Technology, Inc. and the
         shareholders of California Fasteners, Inc. dated August 29, 1997,
         incorporated by reference to Exhibit 2.0 to the Company's Form 8-K,
         filed October 7, 1997 (File No. 0-13324).



                                       63
<PAGE>   64

*10.14.  Serial Put Agreement between Questron Technology, Inc. and Douglas D.
         Zadow and Terry Bastian dated September 22, 1997, incorporated by
         reference to Exhibit 2.1 to the Company's Form 8-K, filed October 7,
         1997 (File No. 0-13324).

*10.15.  Stock Purchase Agreement, dated as of June 12, 1998, by and between the
         Company, Fortune Industries, Inc. and the Stockholders of the Company
         listed on Schedule 1.1 thereto (the "Fortune Stock Purchase
         Agreement"), incorporated by reference to Exhibit 10.1 to the Company's
         Quarterly Report on Form 10-QSB for the three-month period ended June
         30, 1998 filed with the Securities and Exchange Commission on August
         14, 1998 (File. No. 0-13324).

*10.16.  Stock Purchase Agreement, dated as of June 12, 1998, by and between the
         Company, Gregory Fitzgerald, Valerie Fitzgerald and Fas-Tronics, Inc.
         (the "Fas-Tronics Stock Purchase Agreement"), incorporated by reference
         to Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for
         the three-month period ended June 30, 1998 filed with the Securities
         and Exchange Commission on August 14, 1998 (File. No. 0-13324).

*10.17.  Letter Agreement, dated July 29, 1998, by and between the Company,
         Fortune Industries, Inc. and the Stockholders listed on Schedule 1.1 to
         the Fortune Stock Purchase Agreement, incorporated by reference to
         Exhibit 10.3 to the Company's Quarterly Report on Form 10-QSB for the
         three-month period ended June 30, 1998 filed with the Securities and
         Exchange Commission on August 14, 1998 (File. No. 0-13324).

*10.18.  Letter Agreement, dated July 29, 1998 by and between the Company,
         Gregory Fitzgerald, Valerie Fitzgerald and Fas-Tronics, Inc.,
         incorporated by reference to Exhibit 10.4 to the Company's Quarterly
         Report on Form 10-QSB filed with the Securities and Exchange Commission
         on August 14, 1998 (File No. 0-13324).

*10.19.  Second Amendment to the Fas-Tronics Stock Purchase Agreement,
         incorporated by reference to the Company's Current Report on Form 8-K
         filed with the Securities and Exchange Commission on October 8, 1998
         (File No. 0-13324).

*10.20.  Settlement Agreement dated as of March 1, 2000, is entered into by and
         among Questron Technology, Inc., a Delaware corporation, Gregory
         Fitzgerald and Valerie Fitzgerald, incorporated by reference to Exhibit
         10.20 to the Company's Form 10-K filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1999 (File No.
         0-13324).

*10.21.  Second Amendment to the Fortune Stock Purchase Agreement, incorporated
         by reference to the Company's Current Report on Form 8-K filed with the
         Securities and Exchange Commission on October 8, 1998 (File No.
         0-13324).

*10.22.  Rights Agreement, dated as of October 23, 1998, between the Company and
         American Stock Transfer & Trust Company, as Rights Agent, incorporated
         by reference to the Company's Registration Statement on Form 8-A filed
         with the Securities and Exchange Commission on November 6, 1998 (File
         No. 0-13324).

*10.23.  Loan and Security Agreement, dated as of September 24, 1998, by and
         among the Company, Questron Distribution Logistics, Inc., Integrated
         Material Systems, Inc., Power Components, Inc., California Fasteners,
         Inc., Comp Ware, Inc., Fas-Tronics, Inc., Fortune Industries, Inc.,
         each of the signatures which is a signatory thereto, Congress Financial
         Corporation (Florida), as administrative agent, and Madeleine L.L.C.,
         as collateral agent,





                                       64
<PAGE>   65

         incorporated by reference to Exhibit 10.17 to the Company's Quarterly
         Report on Form 10-QSB for the three-month period ended September 30,
         1998, filed with the Securities and Exchange Commission on November 16,
         1998 (File No. 0-13324).

*10.24.  Amendment Number One to the Loan and Security Agreement, dated November
         2, 1998, by and among the Company, Questron Distribution Logistics,
         Inc., Integrated Material Systems, Inc., Power Components, Inc.,
         California Fasteners, Inc., Comp Ware, Inc., Fas-Tronics, Inc., Fortune
         Industries, Inc., each of the signatures which is a signatory thereto,
         Congress Financial Corporation (Florida), as administrative agent and
         Madeleine L.L.C., as collateral agent, incorporated by reference to
         Exhibit 10.18 to the Company's Quarterly Report on Form 10-QSB for the
         three-month period ended September 30, 1998, filed with the Securities
         and Exchange Commission on November 16, 1998 (File No. 0-13324).

*10.25.  Asset Purchase Agreement, dated as of January 29, 1999, by and between
         the Company, Questron Distribution Logistics, Inc. and AFCOM, Inc., and
         each of the persons listed on Schedule 1.1 thereto and signatory
         thereto, incorporated by reference to Exhibit 10.19 to the Company's
         Quarterly Report on Form 10-Q for the three month period ended March
         31, 1999 (File No. 0-13324).

*10.26.  Asset Purchase Agreement, dated as of March 11, 1999, by and between
         Questron Technology, Inc., Questron Distribution Logistics, Inc., and
         Metro Form Corporation, d.b.a. Olympic Fasteners & Electronic Hardware,
         and each of the persons listed on Schedule 1.1 thereto and signatory
         thereto (the "Olympic Purchase Agreement"), incorporated by reference
         to Exhibit 10.20 to the Company's Quarterly Report on Form 10-Q for the
         three-month period ended March 31, 1999 (File No. 0-13324).

*10.27.  Amendment to the Olympic Purchase Agreement, dated June 28, 1999,
         incorporated by reference to Exhibit 2.2 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

*10.28.  Settlement Agreement in Connection with the Acquisition of Olympic
         dated as of March 7, 2000, by and among Questron Finance Corp., a
         Delaware corporation (ii) Questron Technology, Inc., a Delaware
         corporation and Sheldon Enterprises, Inc (James Mraz as notified
         party), incorporated by reference to Exhibit 10.28 to the Company's
         Form 10-K filed with the Securities and Exchange Commission for the
         fiscal year ended December 31, 1999 (File No. 0-13324).

*10.29.  Settlement Agreement in Connection with the Acquisition of Olympic
         dated as of March 7, 2000, by and among Questron Finance Corp., a
         Delaware corporation (ii) Questron Technology, Inc., a Delaware
         corporation and Sheldon Enterprises, Inc (Rudolph M. Petric as notified
         party), incorporated by reference to Exhibit 10.29 to the Company's
         Form 10-K filed with the Securities and Exchange Commission for the
         fiscal year ended December 31, 1999 (File No. 0-13324).

*10.30.  Stock Purchase Agreement, dated as of April 26, 1999, between Questron
         Distribution Logistics, Inc., Questron Technology, Inc., James R.
         Gilchrist and Capital Fasteners, Inc. (the "Capital Purchase
         Agreement"), incorporated by reference to Exhibit 2.3 to the Company's
         Current Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).



                                       65
<PAGE>   66

*10.31.  Amendment to the Capital Purchase Agreement, dated June 25, 1999,
         incorporated by reference to Exhibit 2.4 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

*10.32.  Settlement Agreement in Connection with Capital Acquisition dated as of
         March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology, Inc., a Delaware corporation and
         James R. Gilchrist, Trustee of James R. Gilchrist Revocable Trust Under
         Agreement Dated June 25, 1999, incorporated by reference to Exhibit
         10.32 to the Company's Form 10-K filed with the Securities and Exchange
         Commission for the fiscal year ended December 31, 1999 (File No.
         0-13324).

*10.33.  Settlement Agreement in Connection with Capital Acquisition dated as of
         March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology, Inc., a Delaware corporation and
         James R. Gilchrist, incorporated by reference to Exhibit 10.33 to the
         Company's Form 10-K filed with the Securities and Exchange Commission
         for the fiscal year ended December 31, 1999 (File No. 0-13324).

*10.34.  Letter Agreement, dated as of June 29, 1999, amending the Capital
         Purchase Agreement, incorporated by reference to Exhibit 2.5 to the
         Company's Current Report on Form 8-K, dated June 30, 1999 (File No.
         0-13324).

*10.35.  Stock Purchase Agreement, dated as of May 7, 1999, by and between
         Questron Technology, Inc, Questron Distribution Logistics, a Delaware
         corporation, Action Threaded Products, Inc. and the persons signatory
         thereto (the "Action Purchase Agreement"), incorporated by reference to
         Exhibit 2.6 to the Company's Current Report on Form 8-K, dated June 30,
         1999 (File No. 0-13324).

*10.36.  Letter Agreement, dated as of June 29, 1999, amending the Action
         Purchase Agreement, incorporated by reference to Exhibit 2.7 to the
         Company's Current Report on Form 8-K, dated June 30, 1999 (File No.
         0-13324).

*10.37.  Settlement Agreement in Connection with the Action Acquisition dated as
         of March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology, Inc., a Delaware corporation and
         Gerald H. Ablan, incorporated by reference to Exhibit 10.37 to the
         Company's Form 10-K filed with the Securities and Exchange Commission
         for the fiscal year ended December 31, 1999 (File No. 0-13324).

*10.38.  Settlement Agreement in Connection with the Action Acquisition dated as
         of March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology, Inc., a Delaware corporation and
         Robert A. Lehman, incorporated by reference to Exhibit 10.38 to the
         Company's Form 10-K filed with the Securities and Exchange Commission
         for the fiscal year ended December 31, 1999 (File No. 0-13324).

*10.39.  Settlement Agreement in Connection with the Action Acquisition dated as
         of March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology, Inc., a Delaware corporation and
         William P. Hackett, incorporated by reference to Exhibit 10.39 to the
         Company's Form 10-K filed with the Securities and Exchange Commission
         for the fiscal year ended December 31, 1999 (File No. 0-13324).

*10.40.  Settlement Agreement in Connection with the Action Acquisition dated as
         of March 7, 2000, by and among Questron Finance Corp., a Delaware
         corporation, Questron Technology,


                                       66
<PAGE>   67

         Inc., a Delaware corporation and Charles W. Gozder, incorporated by
         reference to Exhibit 10.40 to the Company's Form 10-K filed with the
         Securities and Exchange Commission for the fiscal year ended December
         31, 1999 (File No. 0-13324).


*10.41.  Securities Purchase Agreement (identical agreement executed separately
         with each of four purchasers), dated as of June 29, 1999, by and
         between Questron Technology, Inc., Questron Operating Company, Inc.,
         and, separately, each of Albion Alliance Mezzanine Fund, L.P., Alliance
         Investment Opportunities Fund, L.L.C., The Equitable Life Assurance
         Society of the United States and IBJ Whitehall Bank & Trust Company,
         incorporated by reference to Exhibit 10.1 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

*10.42.  Note Agreement, dated as of June 29, 1999, among Questron Operating
         Company, Inc. and Albion Alliance Mezzanine Fund, L.P., Alliance
         Investment Opportunities Fund, L.L.C., The Equitable Life Assurance
         Society of the United States and IBJ Whitehall Bank & Trust Company,
         incorporated by reference to Exhibit 10.1 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

*10.43.  Investors Rights Agreement, dated as of June 29, 1999, among Questron
         Technology, Inc. and Albion Alliance Mezzanine Fund, L.P., Alliance
         Investment Opportunities Fund, L.L.C., The Equitable Life Assurance
         Society of the United States and IBJ Whitehall Bank & Trust Company,
         incorporated by reference to Exhibit 10.1 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

*10.44.  Unconditional Guaranty, dated as of June 29, 1999, by Questron
         Technology, Inc., Questron Finance Corp., Questron Distribution
         Logistics, Inc., Integrated Material Systems, Inc., Power Components,
         Inc., Fortune Industries, Inc., Fas-Tronics, Inc., California
         Fasteners, Inc., Comp Ware, Inc., Action Threaded Products, Inc.,
         Action Threaded Products of Georgia, Inc., Action Threaded Products of
         Minnesota, Inc. and Capital Fasteners, Inc., in favor of each of Albion
         Alliance Mezzanine Fund, L.P., Alliance Investment Opportunities Fund,
         L.L.C., The Equitable Life Assurance Society of the United States and
         IBJ Whitehall Bank & Trust Company, incorporated by reference to
         Exhibit 10.1 to the Company's Current Report on Form 8-K, dated June
         30, 1999 (File No. 0-13324).

*10.45.  Amended and Restated Loan and Security Agreement, dated as of June 29,
         1999, by and between Questron Technology, Inc. and its subsidiaries and
         Congress Financial Corporation (Florida) and Ableco Finance LLC,
         incorporated by reference to Exhibit 10.1 to the Company's Current
         Report on Form 8-K, dated June 30, 1999 (File No. 0-13324).

+10.46.  Amendment Number Four, dated as of October 19, 2000, to Amended and
         Restated Loan and Security Agreement, dated as of June 29, 1999, by and
         among Questron Technology, Inc., certain of its direct and indirect
         Subsidiaries identified therein, each of the Lenders signatory thereto,
         Congress Financial Corporation and Ableco Finance LLC.

+10.47.  Securities Purchase Agreement, dated as of November 9, 2000, by and
         between Questron Technology, Inc., Questron Operating Company, Inc.,
         and Albion Alliance Mezzanine Fund II, L.P., IBJ Whitehall Bank & Trust
         Company and Exeter Capital Partners IV, L.P.

+10.48.  Note Agreement, dated as of November 9, 2000, among Questron Operating
         Company, Inc. and Albion Alliance Mezzanine Fund II, L.P., IBJ
         Whitehall Bank & Trust Company and Exeter Capital Partners IV, L.P.



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+10.49.  Investors Rights Agreement, dated as of November 9, 2000, among
         Questron Technology, Inc. and Albion Alliance Mezzanine Fund II, L.P.,
         IBJ Whitehall Bank & Trust Company and Exeter Capital Partners IV, L.P.

+10.50.  Unconditional Guaranty, dated as of November 9, 2000, by Questron
         Technology, Inc., Questron Finance Corp., Questron Distribution
         Logistics, Inc., Integrated Material Systems, Inc., Power Components,
         Inc., Fortune Industries, Inc., Fas-Tronics, Inc., California
         Fasteners, Inc., Comp Ware, Inc., Action Threaded Products, Inc.,
         Action Threaded Products of Georgia, Inc., Action Threaded Products of
         Minnesota, Inc., Capital Fasteners, Inc., B&G Supply Company, Inc. and
         R.S.D. Sales Co. Inc., in favor of each of Albion Alliance Mezzanine
         Fund II, L.P., IBJ Whitehall Bank & Trust Company and Exeter Capital
         Partners IV, L.P.

+10.51.  Omnibus Amendment, dated as of November 9, 2000, to Note Agreement,
         dated as of June 29, 1999, by and among Questron Operating Company,
         Inc. and Albion Alliance Mezzanine Fund, L.P., Alliance Investment
         Opportunities Fund, LLC, The Equitable Life Assurance Society of the
         United States and IBJ Whitehall Bank & Trust Company.

+10.52.  Amendment Number Five, dated as of November 9, 2000, to Amended and
         Restated Loan and Security Agreement, dated as of June 29, 1999, by and
         among Questron Technology, Inc., certain of its direct and indirect
         Subsidiaries identified therein, each of the Lenders signatory thereto,
         Congress Financial Corporation and Ableco Finance LLC.

+21.1.   Subsidiaries of the Company, as amended.

+23.1.   Consent of Ernst & Young L.L.P., dated March 30, 2001.



* previously filed
+ filed herewith






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