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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995 Commission File No. 1-6663
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COLONIAL COMMERCIAL CORP.
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(Exact Name of Registrant as Specified in its Charter)
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New York 11-2037182
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(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
3601 Hempstead Turnpike, Levittown, New York 11756-1315
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 516-796-8400
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Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
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None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
Convertible Preferred Stock, Par Value $.01 Per Share
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(Title of Class)
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
Registrant's best knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. (x)
Indicate by check mark whether 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 Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
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Revenues for the fiscal year ended December 31, 1995 were $13,957,286.
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $4,142,872 as of March 15, 1996.
Indicate the number of shares outstanding of Registrant's Common Stock and
Convertible Preferred Stock as of March 15, 1996
Common Stock, par value $.01 per share - 6,774,819 shares.
Convertible Preferred Stock par value $.01 per share - 8,711,566 shares.
Documents Incorporated by Reference
Document Part
Registrant's 1996 Proxy Statement for Annual Meeting
of Shareholders on June 12, 1996 III
Registrant's 1995 Annual Report to Shareholders I, II
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PART I.
Item 1(a) Business Developments
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Colonial Commercial Corp. (the "Company" or "Registrant") is a New York
corporation which was incorporated on October 28, 1964. Unless otherwise
indicated, the term ("Registrant" or "Company" refers to Colonial Commercial
Corp. and its consolidated subsidiaries.
On May 19, 1995, Registrant purchased the capital stock of Atlantic
Hardware and Supply Corporation ("Atlantic"), a distributor of door hardware,
doors and frames, for approximately $3.8 million in cash.
The Company owns 8.5% of Monroc, Inc., ("Monroc") a concrete
products company, headquartered in Utah and holds several parcels of land for
sale in Utah.
In May 1994, Monroc completed the public sale of 600,000 shares of common
stock representing approximately 21% of the post-offering outstanding shares of
common stock. Accordingly, the Company's ownership was reduced from 17% to 13%.
In December, 1995, Colonial's ownership in Monroc decreased to 8.5% from 13%
because a private investment fund purchased 1,650,000 shares of Monroc's common
stock and a warrant for the purchase of an additional 1,500,000 shares for an
aggregate purchase price of $9,075,000. The purchaser owns approximately 37% of
the total shares of Monroc's common stock. Upon exercise of the warrant, and
assuming that no additional Monroc common stock was issued, the investment
fund's percentage ownership would increase to 53%, and Colonial's ownership
percentage would decrease to 6.3%.
Item 1(b) Business Description
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Since 1993, the Registrant has been offering consulting and advisory
services to financial institutions while it was in the process of evaluating
investment opportunities. Since the May 19, 1995 acquisition of Atlantic, the
Registrant's principal business activity is the distribution on builders'
hardware, which is descried in more detail below. The Registrant continues to
seek acquisitions of going concerns and offer consulting services to lenders.
Atlantic - Builders' Hardware
- -----------------------------
Atlantic's primary business is the distribution of door hardware, doors and
frames used in new building construction, buildings being rehabilitated,
interior tenant buildouts, and building maintenance. Products sold by Atlantic
include all types of mechanical and electronic hardware, such as locks, door
knobs, door closers, hinges and other door-related hardware. Atlantic services
the contract hardware market, usually as a material supplier only, on a wide
range of commercial, residential, and institutional construction projects, such
as office buildings, hospitals, schools, hotels and high-rise apartment
buildings.
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Atlantic had approximately 560 customers in 1995. In 1995, no customer
accounted for more than 10% of sales. Atlantic does not believe that the loss of
any one customer would he a material adverse effect on its business.
As of December 31, 1995, Atlantic had $11,480,000 in firm backlog of
orders. Atlantic expects that approximately 95% of the backlog of orders as of
December 31, 1995 will be filled within the current fiscal year. Atlantic's
business is not subject to significant seasonal variations.
Atlantic purchases products from approximately 785 suppliers. In 1995, no
supplier accounted for more than 10% of Atlantic's purchases. Atlantic believes
that the loss of any one supplier would not have a material adverse effect upon
its business.
Atlantic competes primarily with other hardware distributors who are
selected by the architects, owners, and/or construction managers, on a job to
job basis. Atlantic has its estimators evaluate plans received from a
contractor, and prepare and submit a price for the project, which is awarded
through bid or negotiation. If Atlantic receives the job, it supplies the
required hardware by placing orders with manufacturers or from goods on hand, or
both.
Atlantic's competition varies widely from region to region, primarily
because builders' hardware distributors are generally local single market firms.
Within each geographical market, contractors generally limit their hardware
suppliers to a few local firms. Also, in certain markets, Atlantic competes with
firms that supply the complete door package (i.e., door, frame and hardware).
Atlantic has been one of the largest "hardware only" suppliers; however,
Atlantic is in the process of changing its marketing focus from a "hardware
only" supplier to a complete door package supplier.
Management and Employees
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As of December 31, 1995, the Registrant had 67 employees, of whom 2 were
executive officers at its corporate offices in Levittown, New York. Sixty three
(63) of the employees are employed by Atlantic, one of whom is represented by a
labor union. The company believes its employee relations are satisfactory.
Item 2. Properties
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Registrant's principal executive offices are located at 3601 Hempstead
Turnpike, Levittown, New York 11756-1315, in leased premises (approximately
1,306 square feet).
Atlantic maintains office and warehouse space of approximately 28,000
square feet at 601 West 26th Street, New York under a lease expiring in April
2000. Atlantic also maintains leased sales offices in Bensenville, Illinois;
Norcross, Georgia; Wilkes Barre, Pennsylvania and Farmingdale, New York.
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Registrant's executive offices, located in Ft. Lauderdale, Florida, were
closed in June, 1995.
The Registrant's premises are suitable and adequate for their intended use
and are adequately covered by insurance.
Although it is not the customary policy of the Registrant to invest in real
estate, the Company owned a 50% interest in three parcels of raw land in Salt
Lake County, Utah. The parcels, together with three other parcels which have
been sold, were received as a distribution from a restructuring of Monroc in
1986. The Registrant, together with its 50% partner, intends to continue its
efforts to sell the parcels without incurring significant development costs. The
Registrant and its 50% partner have granted a purchase option for consideration
to a developer which expires in December 1996. If the option is exercised, the
sales price is in excess of the Registrant's carrying cost.
Item 3. Legal Proceedings
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In January, 1996, Colonial instituted an action for summary judgment
against a partnership and its general partners regarding non-payment of an
unsecured $1 million note, which was due on December 31, 1995. The makers of the
note instituted an action to declare the note invalid in January 1996,
notwithstanding their previous written acknowledgments that they had no defenses
or offsets to the note. In March 1996, an understanding was reached to
restructure the terms of the note, based upon a cash payment schedule and
collateralization of the note with real property valued in excess of the
outstanding note receivable. In the event the restructuring agreement is not
completed, it is the opinion of the Company and its counsel in this matter, that
judgment will be rendered in favor of the Company for the full principal amount
of the note and for costs, disbursements and reasonable attorneys' fees.
Item 4. Submission of Matters to a Vote of Security Holders
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Not Applicable
Additional Item - Executive Officers of the Registrant
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The names, ages and positions of the Registrant's executive officers are
listed below, along with a brief account of their business experience during the
last five years. Officers are appointed annually by the Board of Directors at
its first meeting following the Annual Meeting of Shareholders and from time to
time at the pleasure of the Board. There are no family relationships among these
officers, nor any arrangement or understanding between any such officers and any
other person pursuant to which any of such officers were selected as executive
officers.
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Name, Age Business Experience
and Position During Past Five Years
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Bernard Korn, 70 From prior to January 1989 to present,
Chairman of the Board, Chairman of the Board and President,
President, Chief Executive Chief Executive Officer of the Company
James W. Stewart, 49 From prior to January 1989, Executive
and Director Vice President and Treasurer of the
Company. From December 31, 1993,
to the present, Secretary of the
Company.
Item 5. Market for the Registrant's Common Stock, Convertible Preferred
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Stock and Related Stockholder Matters
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The information required to be provided is incorporated by reference from
page 3 of the Registrant's 1995 Annual Report to Shareholders.
Item 6. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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The information required to be provided is incorporated by a reference from
pages 4 and 5 of the Registrant's 1995 Annual Report to Shareholders under the
caption, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
Item 7. Financial Statements and Supplementary Data
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The consolidated financial statements of the Registrant, the Independent
Auditors' Report thereon of KPMG Peat Marwick LLP, independent certified public
accountants, as of December 31, 1994 and 1995 and for each of the years in the
three year period ended December 31, 1995, are incorporated herein by reference
from pages 6 through 20 of the Registrant's 1995 Annual Report to Shareholders.
Item 8. Disagreements on Accounting and Financial Disclosures
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None
PART III
Item 9. Directors and Executive Officers of the Registrant
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The information required to be provided is incorporated by reference from
Registrant's 1996 definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A no later than 120 days after the close of its fiscal
year. Information relative to executive officers of the Registrant is included
in Part I of this report on Form 10-KSB under the caption, "Executive Officers
of the Registrant".
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Item 10. Executive Compensation.
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Item 11. Security Ownership of Certain Beneficial Owners and
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Management.
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Item 12. Certain Relationships and Related Transactions
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The information required to be provided under Part III, Items 10, 11 and 12
is incorporated by reference from the Registrant's 1995 definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year.
Item 13. Exhibits and Report on Form 8-K
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1. Exhibits
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The exhibits listed on the Index to Exhibits following the
Signature Page herein are filed as part of this Form 10-KSB.
2. Reports on Form 8-K
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Registrant filed no reports on Form 8-K during the fourth
quarter of 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
COLONIAL COMMERCIAL CORP.
(Registrant)
By:/s/ Bernard Korn By:/s/ James W. Stewart
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Bernard Korn, Pres. James W. Stewart
Treasurer, Chief Financial
and Accounting Officer
Dated: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been duly signed below on March 27, 1996 by the following persons on behalf
of the Registrant and in the capacities indicated:
By: /s/ Bernard Korn
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Bernard Korn, President & Director
By: /s/ James W. Stewart
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James W. Stewart, Executive Vice
President, Treasurer and
Secretary/Director
By: /s/ Raphael M. Brackman
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Raphael M. Brackman, Director
By: /s/ Gerald S. Deutsch
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Gerald S. Deutsch, Director
By: /s/ William Koon
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William Koon, Director
By: /s/ Donald K. MacNeill
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Donald K. MacNeill, Director
By: /s/ Ronald Miller
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Ronald Miller, Director
By: /s/ Jack Rose
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Jack Rose, Director
By: /s/ Carl L. Sussman
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Carl L. Sussman, Director
<PAGE> 8
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
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3(a) Certificate of Incor-
poration of Registrant 8-K 1/5/83 1
(b) By-Laws of Registrant 8-K 1/5/83 1
4 Indenture dated as of
January 17, 1983 between
Registrant and IBJ Schroder
Bank and Trust Co., relating
to 6% Notes (approved by the
Bankruptcy Court but not yet
signed) 10-K 4/12/83 4(a)
10(a) Employment Agreement dated
as of November 1, 1989 between
Registrant and Bernard Korn 10-K 3/30/90 10(a)
(i) Amendment No. 1 dated
January 1, 1995 to Employ-
ment Agreement dated
January 1, 1989 10KSB 3/30/95 10(a)(I)
(b) Employment Agreement dated
as of January 1, 1995 between
Registrant and James W. Stewart 10KSB 3/30/95 10(b)
(c) Certain Monroc, Inc. documents
(i) Promissory Note from
Monroc, Inc. (formerly
Monroc Acquisition, Inc.)
to Wel-Com Financial
Services, Inc. 10-K 3/30/88 10(b)(v)
(ii) Subordination Agreement
dated July 27, 1993 with
reference to Promissory
Note filed as Exhibit
10 (c) (i) 10KSB 3/30/95 10(c)(ii)
(iii) Voting Agreement dated
December 28, 1995 between
Registrant and Building and Yes
<PAGE> 9
Construction Partners, L.P.
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
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(d) 1986 Stock Option Plan 10-K 3/30/88 10(c)(ii)
(e) (i) Agreement dated
December 19, 1986
by and between
Breskel Associates
and Registrant 10-K 3/30/87 10(m)xxx(ii)
(ii) Promissory Note dated
December 19, 1986 for
$1,000,000 Breskel
Associates to
Registrant 10-K 3/30/87 10(m)xxx(iii)
(A) Restated and Amended
Promissory Note dated
January 31, 1994 for
$1,000,000 from Breskel
Associates to Registrant 10-KSB 3/29/94 10(f)(ii)(A)
(iii)Letter agreement dated
March 13, 1996 to re-
structure Amended
Promissory Note dated
January 31, 1994 Yes
(f) Certain documents relating to
Atlantic Hardware and Supply
Corporation
(i) Stock Purchase Agreement
dated May 19, 1995 by and
among Thackeray Corporation,
Rennand-Paige Industries,
Inc. and Colonial
Commercial Corp. 8-K 6/5/95 10(g)(i)
(ii) Revolving Credit Agreement
between Atlantic Hardware
and Supply Corporation and
Sterling National Bank &
Trust Company of New York 8-K 6/5/95 10(g)(ii)
<PAGE> 10
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
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(iii) Guarantee of all
liabilities and
security agreement
of Atlantic Hardware
and Supply Corpora-
tion by Colonial
Commercial Corp. to
Sterling National
Bank and Trust of
New York 8-K 6/5/95 10(g)(iii)
(iv) Secured interest
bearing note between
Colonial Commercial
Corp. and National
Westminster Bank 8-K 6/5/95 10(g)(iv)
(v) Employment Agreement
dated May 19, 1995
between Atlantic
Hardware and Supply
Corporation and Paul
Selden 8-K 6/5/95 10(g)(v)
(g) Lease dated February 27,
1992 by and between
Registrant and 3601
Turnpike Associates 10-KSB 3/29/93 10(h)(iii)
11 Statement re computation of
per share earnings (loss)
(not filed since computations
are readily apparent from
financial statements
<PAGE> 11
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
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13 Annual Report of the Registrant
for the fiscal year ended
December 31, 1995. Such
report except for those portions
which are expressly incorporated
by reference herein, is
furnished for the information
of the Commission and is not to
be deemed "filed" as part of this
filing. Financial statement
schedules that are not applicable
are omitted or included in the
financial statement footnotes. Yes
21 Subsidiaries of Registrant Yes
23 Consent of KPMG Peat Marwick LLP Yes
27 Financial Data Schedule Yes
<PAGE> 1
EXHIBIT 10(c)(iii)
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is entered into as of this 28th day
of December, 1995, by and between Colonial Commercial Corporation (the
"Shareholder") and Building and Construction Partners, L.P., a California
Limited Partnership (the "Investor").
RECITALS:
---------
Whereas, the Investor has entered into a Stock Purchase Agreement, dated as
of July 26, 1995 (the "Stock Purchase Agreement"), with Monroc, Inc., a Delaware
Corporation (the "Issuer"), providing for the purchase by the Investor or its
assignee from the Issuer of 1,650,000 shares of the Issuer' s common stock $.01
par value (the "Common Stock") and a five-year warrant to purchase an additional
1,500,000 shares of Common Stock at an exercise price of $6.25 per share (the
"Warrant"); and
WHEREAS, under the Stock Purchase Agreement, Investor will designate a
majority of the members of the Board of Directors of the Issuer; and
WHEREAS, to induce the Investor to make the purchase of the shares of
Common Stock and the Warrant of the Issuer, the Shareholder is willing to agree
to vote the shares of Common Stock of the Issuer owned by the Shareholder in
favor of the individuals designated by the Investor to be members of the Board
of Directors of the Issuer (the "Investor Directors");
NOW, THEREFORE, the parties agree as follows:
1. Voting Agreement. The Shareholder irrevocably agrees to vote on a
-----------------
timely basis all shares of Common Stock held by the Shareholder in favor of the
election of Investor Directors proposed for election pursuant to Section 4.4 of
the Stock Purchase Agreement for a period that ends on the earliest of (a) ten
years from the date of this Agreement, (b) the first date on which the Investor
directly and indirectly owns less than 25% of the outstanding shares of Common
Stock, or (c ) the first date on which the Investor directly or indirectly owns
more than 50% of the outstanding shares of Common Stock.
2. Representations and Warranties of Shareholder. The
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Shareholder hereby represents and warrants to the Investor as follows:
(a) The Shareholder has the requisite power and authority to enter
into this Agreement and to carry out and perform the shareholder's obligations
under the terms of this Agreement.
<PAGE> 2
(b) The Shareholder owns or holds options to acquire, 378,071 shares
of the Common Stock. All of such shares are (or upon exercise of the related
option and payment of the exercise price will be) duly authorized, validly
issued, fully paid and nonassessable.
(c) This Agreement is a valid and binding agreement of the
Shareholder, enforceable in accordance with its terms. The execution, delivery
and performance by the Shareholder of this Agreement and compliance herewith
will not result in any violation of and will not conflict with, or result in a
breach of any of the terms of, or constitute a default under, any provision of
law to which the Shareholder is subject, or any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Shareholder is a party or by which the Shareholder is bound.
(d) No consent, approval, qualification order or authorization of, or
filing with, any governmental or regulatory authority filing with, any
governmental or regulatory authority is required in connection with the
Shareholder's valid execution, delivery or performance of this Agreement.
3. Representations and Warranties of Investor. The Investor hereby
-------------------------------------------
represents and warrants to the Shareholder as follows:
(a)The Investor has the requisite power to enter into this agreement
and to carry out and perform its obligations under this agreement.
(b) All action on the part of the Investor necessary for the
authorization, execution, delivery and performance by the Investor of this
Agreement and the consummation of the transactions contemplated herein has been
taken. This Agreement is a valid and binding agreement of the Investor,
enforceable in accordance with its terms. The execution, delivery and
performance by the Investor of this Agreement and compliance therewith will not
result in any violation of and will not conflict with, or result in a breach of
any of the terms of, or constitute a default under any provision of law to which
the Investor is subject, or any mortgage, indenture, agreement, instrument,
judgment, decree, order, rule or regulation or other restriction to which the
Investor or any predecessor thereof is a party or by which it is bound.
4. Governing Law. This Agreement shall be governed in all respects by the
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laws of the State of Delaware.
5. Survival. The representations, warranties, covenants and agreements made
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herein shall survive the Closing under the Stock Purchase Agreement.
<PAGE> 3
6. Successors and Assigns. Except as otherwise expressly provided herein, the
-----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, provided, however, that the
---------
provisions hereof shall not be binding on any (a) party that purchases the
shares of Common Stock covered hereby from the Shareholder in an offering
registered under the Securities Act of 1933, as amended (the "Act") or in a
transaction that complies with the provisions of Rule 144 under the Act (without
taking into consideration the provisions of Rule 144(k), or (b) any person who
purchases in the aggregate no more than 100,000 shares of Common Stock of the
Issuer (as adjusted to reflect the effect of any stock dividends, stock split or
other similar change in the capitalization of the Issuer) from the Shareholder
in one or more transactions, whether related or not. For the purpose of the
preceding sentence, a "person" also includes persons who act as a group, as
defined for the purposes of Section 13(d) under the Securities and Exchange Act
of 1934.
7. Entire Agreement; Amendment; Waiver. This Agreement constitutes the full and
------------------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof. Neither this Agreement nor any terms hereof may be amended,
waived, discharged or terminated, except by written instrumentsigned by the
Shareholder and the Investor.
8. Notice, etc. All notices and other communications required or permitted
------------
hereunder shall be in writing and shall be mailed by first-class mail, postage
prepaid, or delivered by hand, facsimile transmission or by messenger, addressed
(a) if to Investor, to Richard C. Blum & Associates, L.P., at 909 Montgomer
Street, Suite 400, San Francisco, CA 94133-4625 and at 15760 Ventura Blvd.,
Suite 1700, Encino, CA 91436, facsimile numbers (415)434-9960 and (818)995-1963,
with a copy to Richard W. Canady, Howard Rice, Nemerovski, Candady, Falk &
Rabkin, A Professional Corporation, Three Embarcadero Center, 7th Floor, San
Francisco, CA 94111, facsimile number: (415)399-3041, or at such other address
as the Investor shall have furnished to the Shareholder in writing, or (b) if to
the Shareholder, to the Shareholder at 3601 Hempstead Turnpike, 121-I,
Levittown, NY 11756-1315, facsimile number (305)928-2815, or at such other
address as the Shareholder shall have furnished to the Investor in writing.
<PAGE> 4
9. Delays or Omissions. No delay or omission to exercise any right, power or
-------------------
remedy accruing to either party hereto upon any breach or default of the
other party hereto under this Agreement shall impair any such right, power or
remedy of the non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring. Any waiver,
permit, consent or approval of any kind or character on the part of either
party of any breach or default under this Agreement, or any waiver on the
part of either party of any provisions or conditions of this Agreement, must
be made in writing and shall be effective only to the extent, specifically
set forth in such writing. Except as otherwise provided herein, all remedies,
either under this Agreement or by law or otherwise afforded, shall be
cumulative and not alternative.
10.Separability. In case any provision of this Agreement shall be invalid,
-------------
illegal or unenforceable, the validity, legality and enforceability of the
remaining provision shall not in any way be affected or impaired thereby.
11.Titles and Subtitles. The titles of the paragraphs and subparagraphs of this
---------------------
Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
12.Counterparts. This Agreement may be executed in any number of counterparts,
-------------
each of which shall be an original but all of which together, shall
constitute one instrument.
BUILDING AND CONSTRUCTION CAPITAL
PARTNERS, L.P.
By Richard C. Blum & Associates,
L.P., a California Limited
Partnership
By Richard C. Blum & Associates, Inc.
By
----------------------------------
Colonial Commercial Corporation
By /s/ James W. Stewart
--------------------
<PAGE> 1
EXHIBIT 10(E)(III)
BRESLIN REALTY
DEVELOPMENT CORP.
Paul Berger 516-741-7584
Executive Vice President
March 13, 1996
VIA FACSIMILE
- -------------
Mr. Bernard Korn
Colonial Commercial
3601 Hempstead Turnpike - Suite 121-I
Levittown, New York 11756
Re: Colonial Commercial
-------------------
Dear Bernie:
This letter is written to memorialize the conversations which you and I had
over the telephone yesterday.
We discussed the need to furnish you and your attorney with more specific
detailed information respecting the 16-acre J-3 zoned neighborhood shopping
center site in Yaphank which was suggested as the collateral for the
indebtedness remaining due from Breskel Associates (Breslin and the Frankel
Estate). You indicated that you were prepared to consent to an extension of time
to answer and to instruct your attorney with respect to such an extension beyond
March 13, 1996 only if the following was done and/or agreed upon in writing, as
the case may be:
1. Wilbur's earlier communication outlined the payment of the sum of $100,000,
comprised of (I) the return of the $38,000 note from Colonial marked "paid"
or "satisfied", and (ii) $62,000 in cash plus interest from January 1, 1996.
In light of the fact that the cash portion of such payment would probably
not be available until sometime during the second week of April, 1996,
Wilbur's earlier communication must be modified. Wilbur is to confirm that
the $62,000 cash payment will be made on or before April 10, 1996 and the
$38,000 note will be deposited with Colonial Commercial's attorney to be
held in escrow subject to consummation of the closing pursuant hereto;
2. Wilbur is to confirm his agreement to furnish such of the title material and
existing environmental studies, copies of material relating to zoning
affecting the parcel, all findings made in connection with the environmental
impact study as it affects the subject parcel and obtain, probably within the
next week, but certainly on or before April 10, an appropriate letter from
the counsel handling the zoning and the Pine Barrens litigation and
negotiations, outlining the impact of the presence or non-presence
<PAGE> 2
of the subject parcel within the CORE Preservation Area of the Pine Barrens.
(I indicated to you that I would contact Herb Balin and ask him to provide an
appropriate explanatory letter which would also explain the operative effect
of a transfer of this site into the CORE Preservation area and the obligation
of the governmental authority having jurisdiction to pay the value of the
property in cash or to substitute for the property other property of
equivalent value to that of the property transferred into the CORE
Preservation area. In making my request to Herb Balin, who is the attorney
likely to prepare the letter for you, I will ask that he accompany his letter
with excerpts from the findings supporting his letter). If you are not
satisfied with the collateral proposed, after review of the material
furnished, Wilbur will try to provide a satisfactory substitute collateral
security;
3. Wilbur is to confirm his agreement to pay the reasonable costs incurred by
Colonial in connection with resolving the existing dispute, including
recording fees and filing fees, reasonable attorneys' fees and disbursements
in enforcing the Note dated January 31, 1994 and in connection with the
agreement, costs of updating environmental reports, surveys, title reports
and, if necessary, the cost of obtaining an appraisal letter from a qualified
appraiser confirming that the value of the subject collateral is at least
equal to the outstanding amount of the Colonial loan. So long as there is
such a letter attesting to a value at least equal to the outstanding amount
of the loan, a formal appraisal shall not be required,
4. Wilbur is to agree to withdraw the lawsuit brought by him alleging fraud in
connection with the inducement of the loan and to discontinue such action
with prejudice on behalf of himself, the partnership and the Estate,
simultaneously with the closing of the modification of the note and
implementation of the collateral transaction; and
5. The balance of the obligation, after application of the $100,000 payment,
will be evidenced by a restated note to be delivered at closing setting forth
the agreed repayment schedule as evidenced by the letter dated February 28,
1996 from Wilbur Breslin addressed to Bernard Korn.
It was my understanding, following our discussion, that if Wilbur was
agreeable to the above-outlined terms and schedule and if the $38,000 note was
undertaken to be delivered at the closing, the pending matter and the time to
answer would be adjourned in order to provide opportunity to furnish the
additional material not heretofore furnished to your attorney, together with the
Herb Balin explanation letter and relevant updated materials (provided such
updated materials are obtainable) and that, at such closing, if the fine-tuning
and due diligence with respect to the collateral had been completed, the
restated note and the collateral given to secure the note would be delivered and
the litigation commenced by you would be adjourned or discontinued without
prejudice so long as the restated note was honored and its terms performed until
the note was paid. Consonant with the philosophy of such a disposition of the
matter, the $62,000 cash
<PAGE> 3
payment, if not made by April 10, 1996, would constitute an Event of Default
under the mortgage and the restated note.
I think the foregoing outline of our conversation includes all of the items
discussed. If the foregoing accurately reflects your understanding of the
conversation we had, please indicate your agreement by countersigning the copy
of this letter and furnishing me with a countersigned copy. Wilbur has reviewed
this letter and has evidenced his agreement with the terms set forth, provided
that you similarly agree to the terms as outlined If the terms are agreeable to
both, we can implement the arrangement, the understanding being that the entire
arrangement is conditioned on the due diligence investigation confirming that
good title to the property reposes in Breskel Associates, that the property is
substantially as described in the metes and bounds description and the survey
heretofore furnished that the appraisal letter confirms that the value is at
least equal to the amount of indebtedness and that Herb Balin's letter provides
the explanation of the status of the property in the context of the Pine
Barren's legislation and its provisions respecting the CORE preservation area in
a manner reasonably acceptable to Colonial. If you are not satisfied with the
collateral proposed, after review of the material furnished, Wilbur will try to
provide a satisfactory collateral security.
If there is reasonable objection by you and/or your attorney to the
adequacy or appropriateness of what is revealed by the due diligence
investigation, the parties would be restored to the status quo ante, the $38,000
note will be returned, the $62,000 payment will not be made, the note and
mortgage will not be delivered and all agreements respecting the restraints on
the conduct of the existing litigation would be withdrawn. The time for delivery
of any documents in the litigation pending will be due ten (10) days following
your declaration that the collateral being offered is not satisfactory. Colonial
will advise Wilbur, in writing, if it determines that the collateral is not
satisfactory and the delivery of such notice will trigger the time period within
which any pending responsive litigation documents would be required to be
served.
I am hopeful that necessary third party responses will accommodate the
schedule outlined, knowing that we have a title company to deal with,
environmental engineers to deal with and, of course, attorneys to deal with. I
have kept the schedule at the tight level that you requested and we will make
every effort to get the items that we are trying to have furnished to you within
those scheduled time frames. I look forward to being able to dispose of this
matter with minimal further damage to those concerned, financial and/or
psychological.
Very truly yours,
/s/ Paul Berger
Paul Berger
Acknowledged and Agreed to by: Acknowledged and Agreed to by:
/s/ Wilbur F. Breslin
- --------------------- --------------------------
Wilbur F. Breslin Bernard Korn
<PAGE> 1
INSIDE FRONT COVER
Contents Page
- -------- ----
Chairman's Letter 1
About the Company 2
Market Price of the Company's Stock 3
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 4
Independent Auditors' Report 6
Consolidated Financial Statements 7
<PAGE> 2
To Our Shareholders:
The year 1995 was a year of progress for Colonial Commercial Corp. Colonial
reported net income of $875,000 in 1995, compared to net income of $293,000 in
1994.
On May 19, 1995, Colonial purchased the capital stock of Atlantic Hardware and
Supply Corporation. Atlantic's primary business is the distribution of door
hardware and doors and frames used in new building construction, buildings being
rehabilitated, interior tenant buildouts, and building maintenance. Atlantic
serves the contract hardware market on a wide range of commercial, residential,
and institutional construction projects, such as office buildings, hospitals,
schools, hotels and high-rise apartment buildings. A 50-year old Company,
Atlantic is headquartered in New York City and has operating branches in New
Jersey, Pennsylvania, Georgia, Illinois and Long Island, New York.
Since acquisition, Atlantic contributed revenues of $13,653,000 and $554,000 of
net income to Colonial's consolidated income. Because of record backlogs, we
anticipate increased earnings in 1996 from Atlantic. We will endeavor to grow
Atlantic intelligently, internally and by acquisition.
Sales proceeds from land held for sale located in Utah was $800,000 in 1995,
compared to $2,282,000 in 1994 and gain on land sales was $745,000 in 1995
compared to $930,000 in 1994. Colonial remains with a 50% joint venture interest
in three parcels of land in Salt Lake County, Utah, of which one parcel has been
optioned to a developer. It is anticipated that the option will be exercised by
December 1996 resulting in a gain of about $300,000. The remaining parcels are
carried on Colonial's books at less than their realizable value.
Colonial's investment in Monroc, Inc., a concrete products company with
facilities in Utah, Idaho and Wyoming in which Colonial has had an equity
interest since 1977, has had recent appreciation. Monroc's 1995 profit was in
excess of $2,00,000 before noncash ESOP entries. A private fund invested in
excess of $9,000,000 in the common stock of Monroc on December 28, 1995 for 37%
of total shareholders' equity, bringing Monroc's total shareholders' equity to
almost $20 million at the end of 1995. Further appreciation of our investment is
anticipated in the future due to these events.
Colonial has received a cash return from Monroc through 1995 of $16 million
since Colonial's original investment of $4 million in 1977. Colonial's cash
return should increase from remaining land sales, payment of Monroc's debt to
Colonial and the future sale of our 378,000 share holdings of the common stock
of Monroc.
Colonial's equity base and debt-to-equity ratio continue to augur well for
future growth. We continue to seek acquisitions of companies that generate a
recurring stream of income, as well as other strategic investments. If we can
complete acquisitions, such as Atlantic, at favorable costs, and repeat our
success in Monroc by taking minority interests in smaller entities, we may be
able to obtain an above average return on investment, which may enhance Colonial
share prices.
Because of Atlantic's backlog and anticipated Utah land sales, Colonial should
be profitable again in 1996. We will try to increase profits by sensible
investments or acquisitions. We feel our cash position, borrowing capacity,
equity base and tax loss carryforwards will be of help in obtaining our
objectives.
Sincerely,
/s/ Bernard Korn
April 9, 1996 Bernard Korn
Chairman
<PAGE> 2
About the Company
Colonial Commercial Corp. ("Colonial" or the "Company") was founded in 1965
and was involved in various facets of the financial services industry until
1992. Colonial was engaged in the collection and realization of consumer
accounts receivable portfolios and other assets purchased for its own account,
and intermittently provided consumer accounts receivable services for other
companies. In early 1993, Colonial began evaluating private companies outside of
the financial services industry for the purpose of acquisition or merger.
In May 1995, Colonial purchased 100% of the capital stock of Atlantic
Hardware and Supply Corporation ("Atlantic") for approximately $3.8 million in
cash. Atlantic distributes door hardware, doors and frames used in new building
construction, buildings being rehabilitated, interior tenant buildouts and
building maintenance. Atlantic serves the contract hardware market on a wide
range of the commercial, residential and institutional construction projects,
such as office buildings, hospitals, schools, hotels and high-rise apartment
buildings. A 50-year old company, Atlantic is headquartered in New York City and
has operating branches in New Jersey, Pennsylvania, Georgia, Illinois and Long
Island, New York.
Colonial presently owns 8.5% of Monroc, Inc., a concrete product company
with operations in Utah, Idaho and Wyoming. The shareholders' equity of Monroc,
Inc. has grown recently as a result of earnings and issuance of its common
stock. Monroc, Inc.'s common stock is traded on the NASDAQ National Market.
Colonial considers its holdings in Monroc, Inc. to be available for sale, and
will consider a sale, if funds are required for new acquisition opportunities.
Colonial has holdings in several parcels of land held for sale located in
Salt Lake County, Utah.
Colonial continues to seek strategic acquisitions and investments in order
to maximize shareholders' equity.
<PAGE> 3
Market Price of Company's Common Stock, Convertible Preferred Stock and Related
Security Holder Matters
(a) Price Range of Common Stock and Preferred Stock
The Company's Common Stock and Convertible Preferred Stock are traded in the
over-the-counter market on the NASDAQ automated quotation system. The following
table sets forth the quarterly high and low bid prices during 1995 and 1994 as
reported by the National Association of Securities Dealers, Inc. monthly
statistical reports. The quotations set forth below represent inter-dealer
quotations which exclude retail markups, markdowns and commissions and do not
necessarily reflect actual transactions.
<TABLE>
<CAPTION>
Convertible Preferred
Common Stock Stock
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1995
First Quarter 11/32 1/4 11/32 1/4
Second Quarter 7/16 1/4 7/16 1/4
Third Quarter 3/8 1/4 11/32 9/32
Fourth Quarter 11/32 5/16 11/32 5/16
1994
First Quarter 13/16 5/16 3/4 5/16
Second Quarter 7/8 9/32 13/16 5/16
Third Quarter 13/32 9/32 13/32 11/32
Fourth Quarter 7/16 11/32 7/16 5/16
</TABLE>
(b) Approximate Number of Common and Convertible Preferred Stockholders
<TABLE>
<CAPTION>
Approximate Number of Record Holders
Title of Class (as of March 15, 1996)
- -------------- ----------------------
<S> <C>
Common Stock
par value $.01 per share 1,239
Convertible Preferred Stock
par value $.01 per share 7,973
</TABLE>
(c) Dividends
The Company does not contemplate Common Stock dividend payments in the near
future.
<PAGE> 4
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations 1995-1994
The Company reported net income of $875,259 for the year 1995, compared to net
income of $293,115 for the year 1994. The 1995 income consisted of net income of
$553,550 from Atlantic, since its acquisition date of May 19, 1995, plus net
income of $321,709 from parent company operations. Proceeds from the sale of
land was $800,000 and the gain on sale was $744,936 for the year 1995, compared
to proceeds of $2,282,185 and a gain of $930,145 for the year 1994. The Company
expects additional cash flow and revenues from land sales in 1996.
Total revenues increased to $13,957,286 in the year 1995 from $297,561 in the
1994 year, principally attributable to Atlantic's sales of $13,653,247.
Atlantic's sales backlog increased $1,980,000 to $11,480,000 since the May 19,
1995 acquisition date. Atlantic anticipates that approximately 95% of its
year-end backlog will be shipped during the 1996 year.
Total cost of sales increased $10,039,756 entirely due to the acquisition of
Atlantic. General and administrative expense increased $2,707,613 and interest
expense increased $177,729 principally due to the acquisition of Atlantic. The
parent company continues to seek the acquisition of, or merger with, privately
held companies, which businesses generate a recurring stream of income, and
continues to offer consulting and advisory services to other financial
institutions. Reported earnings in the near term will be affected by the timing
and the size of any new acquisitions, the timing of additional land sales and
the operating results of Atlantic.
The Company has provided for income taxes primarily as a result of State income
taxes associated with income from Atlantic
Results of Operations 1994-1993
The Company reported net income of $293,000 for the year 1994 compared to a loss
of $448,000 in 1993. Proceeds from the sales of land held for sale were
$2,282,000 in 1994 compared to $971,000 in 1993 and the gain on sale was $930,00
in 1994 compared to $179,000 in 1993.
Total revenues decreased approximately $431,000 principally because of decreased
portfolio servicing income and consulting fees. Total expenses decreased
approximately $488,000 principally due to continued reduction of personnel and
administrative expenses in accordance with the company's decision to contract is
operations starting early in 1993.
<PAGE> 5
Impact of Changing Prices
The Company was not materially affected by changing prices in 1995.
Capital Resources
As of December 31, 1995, the Company had $1,856,000 in cash and cash equivalents
compared to $3,405,000 in cash and cash equivalents at December 31, 1994. $1.8
million of Company cash was used to repay indebtedness incurred in the $3.8
million purchase of Atlantic.
The Company believes that its cash and cash equivalents are adequate for its
present operations and that credit is available should it be required. The
Company's resources consist primarily of cash, investment in Atlantic and
Monroc, notes receivable and land held for sale. The Company believes the
carrying value of its land held for sale is less than its market value.
Recent Accounting Pronouncements
In October of 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation", which must be
adopted by the Company in 1996. The Company has elected not to implement the
fair value based accounting method for employee stock options, but has elected
to disclose, commencing in 1996,the pro forma net income and earnings per share
as if such method had been used to account for stock-based compensation cost as
described in Statement No. 123.
FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", must be adopted by the Company in
1996. Statement No. 121 requires, among other things, that long-lived assets
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Management believes that the implementation of Statement No. 121
will not have a material impact on the Company's financial position or results
of operations.
<PAGE> 6
Independent Auditors' Report
----------------------------
The Board of Directors and Stockholders
Colonial Commercial Corp.:
We have audited the accompanying consolidated balance
sheets of Colonial Commercial Corp. and subsidiaries as
of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the
three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to
express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our 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 financial position of Colonial Commercial
Corp. and subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows
for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
/S/ KPMG PEAT MARWICK LLP
MARWICK LLP
March 26, 1996
<PAGE> 7
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,856,008 805,262
Certificates of deposit, at cost - 2,600,000
Accounts receivable, net of allowance for doubtful
accounts of $137,650 6,815,401 -
Inventory 1,301,455 -
Notes receivable - current portion 659,500 129,036
Prepaid expenses and other assets 156,360 122,376
---------- ----------
Total current assets 10,788,724 3,656,674
Notes receivable, excluding current portion 1,271,750 1,553,750
Investment in Monroc, Inc. 2,032,132 1,650,000
Property and equipment, net 109,300 6,519
Land held for sale 407,377 472,329
---------- ----------
$ 14,609,283 7,339,272
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 2,565,016 -
Accrued liabilities 930,013 445,488
Income taxes payable 206,356 -
Borrowings under line of credit 2,209,815 -
Notes payable - current portion 494,211 519,341
---------- ----------
Total current liabilities 6,405,411 964,829
Notes payable, excluding current portion 916,444 1,410,655
Excess of acquired net assets over cost 1,066,249 -
---------- ----------
Total liabilities 8,388,104 2,375,484
---------- ----------
Stockholders' equity:
Convertible preferred stock, $.01 par value, liquidation
preference of $8,719,171 and $8,834,842 at December 31,
1995 and 1994, respectively, 12,344,300 shares authorized,
8,719,171 and 8,834,842 shares issued and outstanding
at December 31, 1995 and 1994, respectively 87,192 88,348
Common stock, $.01 par value, 40,000,000 shares authorized,
6,767,214 and 6,651,543 shares issued and outstanding at
December 31, 1995 and 1994, respectively 67,672 66,516
Additional paid-in capital 9,023,669 9,023,669
Unrealized gain on investment security 382,132 -
Accumulated deficit (3,339,486) (4,214,745)
---------- ----------
Total stockholders' equity 6,221,179 4,963,788
---------- ----------
Commitments and contingencies
$ 14,609,283 7,339,272
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales $ 13,653,247 - -
Interest 271,866 284,646 327,660
Other 32,173 12,915 400,808
---------- ---------- ----------
Total revenues 13,957,286 297,561 728,468
---------- ---------- ----------
Expenses:
Cost of sales 10,039,756 - -
Selling, general and administrative, net 3,505,205 916,167 1,351,097
---------- ---------- ----------
Total expenses 13,544,961 916,167 1,351,097
---------- ---------- ----------
Operating income (loss) 412,325 (618,606) (622,629)
Other:
Gain on land sales 744,936 930,145 178,864
Interest (177,729) - (4,256)
Writedown of investment in CRF Funding - (18,424) -
---------- ---------- ----------
Income (loss) before income taxes 979,532 293,115 (448,021)
Income taxes 104,273 - -
---------- ---------- ----------
Net income (loss) $ 875,259 293,115 (448,021)
========== ========== ==========
Net income (loss) per common and preferred share $ .06 .02 (.03)
========== ========== ==========
Common and preferred shares outstanding 15,486,385 15,486,385 15,486,385
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
Net un-
Con- realized Total
vertible Additional gain on Accu- stock-
preferred Common paid-in investment mulated holders'
stock stock capital security deficit equity
----- ----- ------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 $ 91,150 63,714 9,023,669 - (4,059,839) 5,118,694
Conversion of 70,825 shares of
preferred stock to common
stock (708) 708 - - - -
Net loss - - - - (448,021) (448,021)
------- ------- ------- ------- ---------- ---------
Balances at December 31, 1993 90,442 64,422 9,023,669 - (4,507,860) 4,670,673
Conversion of 209,332 shares of
preferred stock to common
stock (2,094) 2,094 - - - -
Net income - - - - 293,115 293,115
------- ------- --------- ------- ---------- ---------
Balances at December 31, 1994 88,348 66,516 9,023,669 - (4,214,745) 4,963,788
Conversion of 115,671 shares of
preferred stock to common
stock (1,156) 1,156 - - - -
Net income - - - - 875,259 875,259
Net unrealized gain on investment
security - - - 382,132 - 382,132
------ ------ --------- ------- ---------- ---------
Balances at December 31, 1995 $ 87,192 67,672 9,023,669 382,132 (3,339,486) 6,221,179
====== ====== ========= ======= ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net income (loss) to net
cash provided by (used in) operating activities:
Net income (loss) $ 875,259 293,115 (448,021)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities,
net of effects from the purchase of Atlantic
Hardware & Supply Corporation:
Deferred tax benefit (206,356) - -
Loss (gain) on disposal of fixed assets (11,201) - 6,890
Gain on sale of land (744,936) (930,145) (178,864)
Provision for allowance for doubtful accounts 137,650 - -
Recovery of credit losses - - (53,214)
Write-off of investment in CRF Funding - 18,424 -
Depreciation 34,099 2,693 24,545
Amortization of excess of acquired net assets over
cost (63,035) - -
Amortization of imputed interest - - (66,775)
Changes in assets and liabilities:
Accounts receivable (1,292,750) - -
Inventory 474,394 - -
Prepaid expenses and other assets 16,399 56,282 196,683
Accounts payable 588,590 55,536 (29,171)
Accrued liabilities 57,610 - -
Income taxes payable 206,356 - -
Other 9,888 - -
---------- ---------- ---------
Net cash provided by (used in)
operating activities 81,967 (504,095) (547,927)
---------- ---------- ---------
Cash flows from investing activities:
Payment for purchase of Atlantic Hardware and
Supply Corporation, net of cash acquired (3,788,395) - -
Proceeds from (purchase of) investment securities 2,600,000 (1,220,442) (351,156)
Proceeds from sale of land 422,500 2,282,185 971,021
Payments received on notes receivable 129,036 109,036 72,913
Deed of trust received on land sale - 146,481 (146,481)
Additions to property and equipment (34,836) - -
---------- ---------- ---------
Net cash provided by (used in)
investing activities (671,695) 1,317,260 546,297
---------- ---------- ---------
Cash flows from financing activities:
Payments on notes payable (519,341) (548,592) (574,419)
Borrowing from short-term bank loan 1,800,000 - -
Repayment of short-term bank loan (1,800,000) - -
Net borrowing under line of credit 2,159,815 - -
---------- ---------- ---------
Net cash provided by (used in)
financing activities 1,640,474 (548,592) (574,419)
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents 1,050,746 264,573 (576,049)
Cash and cash equivalents - beginning of period 805,262 540,689 1,116,738
---------- ---------- ---------
Cash and cash equivalents - end of period $ 1,856,008 805,262 540,689
========== ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 11
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies and Practices
--------------------------------------------------------
(a) Description of Business
-----------------------
Colonial Commercial Corp. and subsidiaries (the Company) had been
engaged in consumer financing activities, equipment leasing and
collections through 1993 and currently holds certain assets for
investment purposes. As a result of an acquisition (note 2) the
Company is principally a distributor of door hardware, doors and
door frames used in new building construction, buildings being
rehabilitated, interior tenant buildouts and building
maintenance. The Company services the contract hardware market,
usually as a material supplier only, on a wide range of
commercial, residential and institutional construction projects.
The Company's customers are located in the United States,
primarily in New York, New Jersey, Georgia, Illinois and
Pennsylvania.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the financial
statements of the Company and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Cash Equivalents
----------------
Cash equivalents of $700,000 and $300,000 at December 31, 1995 and
1994, respectively, consist of certificates of deposit with an
initial term of less than three months. For purposes of the
statements of cash flows, the Company considers all highly liquid
investment instruments with an original maturity of three months
or less to be cash equivalents.
(d) Inventory
---------
Inventory is stated at the lower of cost or market and consists
solely of finished goods. Cost is determined using the first-in,
first-out method.
(e) Notes Receivable
----------------
Notes receivable are recorded at cost, less the related allowance
for impaired notes receivable, if any.
<PAGE> 12
(f) Investment in Monroc. Inc.
--------------------------
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", (Statement 115) at January 1,
1994. The impact of adopting the provisions of Statement 115 was
immaterial in 1994. Under Statement 115, the Company classifies
its investment in Monroc, Inc., (Monroc) (note_4), as an
available-for-sale security. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized.
Dividend income is recognized when earned.
(g) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is
calculated on the straight-line method over the estimated useful
lives of the assets. The useful lives of the assets are
estimated to range between three and five years for all asset
categories, with the exception of leasehold improvements.
Leasehold improvements are amortized over the shorter of the
lease term or estimated useful life of the asset.
(h) Land Held For Sale
------------------
The land held for sale is stated at cost. Impairment, if any, is
recognized if the estimated proceeds from future land sales are
less than carrying value.
(i) Income Taxes
------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
<PAGE> 13
(j) Income (Loss) Per Common and Preferred Share
--------------------------------------------
Net income (loss) per common and preferred share is based upon net
income (loss) and the number of common and preferred shares outstanding
for the period. For purposes of this calculation, the convertible
preferred stock has been considered to be outstanding common stock, due
to the nature and conversion feature of the preferred stock. The stock
options (note 9) have not been included in the calculation because they
are either antidilutive or dilute income (loss) per common and preferred
share by less than 3%.
(k) Use of Estimates
----------------
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(l) Reclassifications
-----------------
Certain reclassifications have been made to the 1994 and 1993
consolidated financial statements in order to conform to the 1995
presentation.
(2) Business Acquisition
--------------------
On May 19, 1995, the Company purchased the capital stock of Atlantic
Hardware and Supply Corporation (Atlantic) for $3,827,895, financed with
a $1,800,000 short-term loan and a $2,000,000 borrowing on Atlantic's
line of credit (note 6). The acquisition was accounted for as a purchase
and, accordingly, the cost of the acquisition was allocated to the net
assets acquired, based upon their estimated fair values. The Company
elected to treat the acquisition as a purchase of assets for tax
purposes, which resulted in the Company recording a net deferred tax
liability of $206,356 as of the acquisition date (note 10). The
resultant excess of the fair value of net assets acquired over the cost,
amounting to $1,129,284, is being amortized over a ten-year period. In
connection with the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
<S> <C>
Fair value of assets acquired $ 7,616,874
Cash paid for the capital stock 3,827,895
---------
Fair value of liabilities assumed $ 3,788,979
=========
</TABLE>
The results of operations of Atlantic have been included in the
accompanying consolidated statements of operations from the date of
acquisition.
<PAGE> 14
The following unaudited pro forma summary incorporates the historical
results of operations of the purchased business adjusted for interest on
acquisition financing and amortization of the excess of net assets
acquired over the cost, as if the acquisition had taken place on January
1, 1994. The pro forma results of operations are not necessarily
indicative of the actual results that would have occurred had the
purchase been made at the beginning of the period, or results that may
occur in the future.
<TABLE>
<CAPTION>
Years ended December 31,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Total revenues $ 20,533,163 19,063,780
========== ==========
Net income $ 814,294 988,396
========== ==========
Net income per share .05 .06
========== ==========
Common and preferred shares
outstanding 15,486,385 15,486,385
========== ==========
</TABLE>
(3) Notes Receivable
----------------
Notes receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Note receivable (a) $ 1,000,000 1,000,000
Subordinated note (b) 553,750 673,750
Note receivable arising from land sale,
secured, due October 31, 1996,
interest at 8% 377,500 -
Other, net - 9,036
---------- ---------
Total notes receivable 1,931,250 1,682,786
Less current portion (659,500) (129,036)
---------- ----------
Total notes receivable,
less current portion $ 1,271,750 1,553,750
========== ==========
</TABLE>
(a) This note was not paid in accordance with the contractual terms
of the note agreement, which required payment to be made on December 31,
1995. On March 21, 1996, a written understanding was reached between the
parties to restructure the terms of this note to provide for $100,000 of
principal payments during April 1996 and $50,000 in semi-annual payments
until the principal is repaid in full. Interest on the restructured note
would be due in semi-annual installments at 8%. It is anticipated that
the restructured note will be collateralized by property with an
assessed fair market value at least equal to the amount of the
outstanding note receivable. Based upon the present value of the
expected future cash flows under the proposed terms of the restructured
note, discounted at the note's effective interest rate, the Company did
not record an allowance for this note at December 31, 1995. The
restructured note agreement is expected to close in April 1996.
<PAGE> 15
(b) The Company has a subordinated note due from Monroc (note 4) bearing
interest at the prime rate, which was 8.5% at December 31, 1995 and
1994. Under the terms of the subordination agreement, Monroc made
principal payments of $120,000 and $45,000 during 1995 and 1994,
respectively, and is t make future payments of $120,000 per year
provided that it is in compliance with the terms of its line of credit
agreement.
(4) Investment in Monroc, Inc.
--------------------------
The Company owns 378,071 shares of Monroc common stock which was
classified as an available-for-sale security at December 31, 1995
and 1994. The Company's interest in Monroc constituted 8% and 13% of the
total outstanding shares at December 31, 1995 and 1994, respectively.
The fair value of t investment security was $2,032,132 at December 31,
1995, which is comprised of a cost basis of $1,650,000 and a gross
unrealized holding gain of $382,132 recorded as a separate component of
stockholders' equity.
During 1995, the Company entered into a voting
rights agreement with a 37% investor in Monroc. The agreement requires
the Company to vote its shares in Monroc in favor of the directors
proposed for election by the investor for a period of ten years, or
until the investor owns less than 25% of the
outstanding common shares of Monroc.
During 1995, the Company entered into a consulting agreement with
Monroc. Under the terms of the agreement, the Company is to receive
$15,000 per year for a period of four years, or until the Company owns
less than 189,035 shares.
(5) Property and Equipment
----------------------
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Computer hardware and software $ 74,928 -
Office and warehouse equipment 57,610 -
Furniture and fixtures 32,762 28,420
------- ------
165,300 28,420
Less accumulated depreciation
and amortization 56,000 21,901
------- ------
$ 109,300 6,519
======= =====
</TABLE>
(Continued)
<PAGE> 16
(6) Financing Arrangements
----------------------
At December 31, 1995, the Company had available a line of credit
with a financial institution for $2,500,000. Amounts outstanding under
the line of credit were $2,209,815 at December 31, 1995. Borrowings
under the line of credit bear interest at prime plus 2%, which was 10.5%
at December 31, 1995. The line of credit agreement expires on May 18,
1997.
The credit facility allows the Company to borrow against eligible
accounts receivable on a formula basis. Borrowings under the line of
credit are secured by accounts receivable and inventory. Monthly
interest and principal payments are based upon monthly accounts
receivable collections, as defined.
The maximum month-end amount outstanding under the line of credit
during the year ended December 31, 1995 was $2,209,815. From the date of
the acquisition of Atlantic through the end of December 31, 1995,
average borrowings were $1,789,352 and the weighted average interest
rate was 10.8%.
(7) Notes Payable
-------------
Notes payable of $1,410,655 and $1,929,996 at December 31, 1995 and
1994, respectively, are due to creditors, pursuant to a 1983
reorganization plan. In accordance with the plan the notes were
established to include interest, at 6% per annum through maturity, and
therefore interest expense is not reflected in the accompanying
consolidated statements of operations. Included in accrued liabilities
at December 31, 1995 and 1994 is approximately $486,628 and $380,029,
respectively, of unclaimed payments on the notes payable.
The aggregate annual maturities of the notes payable, at December
31, 1995, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 494,211
1997 469,082
1998 447,362
---------
$ 1,410,655
===========
</TABLE>
<PAGE> 17
(8) Capital Stock
-------------
Each share of the Company's preferred stock is convertible into one
share of the Company's common stock. Preferred stockholders will be
entitled to a dividend, based upon a formula, when and if, any dividends
are declared on the Company's common stock. The preferred stock is
redeemable, by th Company, at $1.50 per share.
The voting rights of the common stockholders and preferred
stockholders are based upon the number of shares of convertible
preferred stock outstanding. If more than 6,250,000 shares of preferred
stock are outstanding five of the nine directors are elected by the
common stockholders and the remainder by the preferred stockholders, if
more than 3,000,000 but less than 6,250,000 preferred shares are
outstanding, six of the nine directors are elected by common
stockholders. A majority of the directors elected by preferred
stockholders and a majority of the directors elected by the common
stockholders are required to approve certain transactions, including,
but not limited to, incurring certain indebtedness, merger,
consolidation or liquidation of the Company, and the redemption of
common stock. Preferred and common stockholders vote together on all
other matters.
At December 31, 1995 there were 9,446,671 shares of common stock
reserved for conversion of preferred stock and for the exercise of stock
options (note 9).
(9) Stock Options
-------------
In 1986, the Board of Directors approved the adoption of the 1986
stock option plan for the granting of up to 1,000,000 options to
employees and other persons who render service to the Company. Under the
1986 stock option plan, the options could have been either incentive or
nonqualified and could have been granted at any time before December 31,
1995. The rate at which the options are exercisable is to be determined
by the Board of Directors at the time of grant. The exercise price of
the incentive stock options was not less than the fair market value of
the Company's common stock on the date of grant. The exercise price of
the nonqualified stock options was not less than 85% of the fair market
value of the Company's common stock on the date of grant.
Stock option activity is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year 677,500 677,500 422,500
Granted 50,000 - 255,000
------- ------- -------
Outstanding at end of year (prices ranging
from $.38-.25 per share) 727,500 677,500 677,500
======= ======= =======
Exercisable at end of year 727,500 677,500 677,500
======= ======= =======
Available for grant at end of year - 322,500 322,500
======= ======= =======
</TABLE>
<PAGE> 18
The Company will adopt the disclosure provisions of Statement of
Financial Accounting Standards No.123, "Accounting for Stock-Based
Compensation," on January 1, 1996, and intends to continue to account
for stock-based compensation in accordance with APB Opinion No. 11.
(10) Income Taxes
------------
The provision (benefit) for income taxes for 1995 attributable to
income is comprised of:
<TABLE>
<CAPTION>
Federal State Total
------- ----- -----
<S> <C> <C> <C>
Current $ 43,989 266,640 310,629
Deferred (26,713) (179,643) (206,356)
------- -------- --------
$ 17,276 86,997 104,273
====== ====== =======
</TABLE>
In connection with the acquisition of Atlantic, the Company elected,
pursuant to Internal Revenue Code Section 338(h)(10), to treat the
acquisition as a purchase of assets. Accordingly, the Company recorded a
net deferred tax liability of $206,356. The deferred tax liability is
net of a benefit recorded for the tax effect of the expected utilization
of the Company's operating loss carryforwards in the amount of $393,039,
as a result of the acquisition. The net deferred tax liability of
$206,356 reversed during 1995 and was currently due at December 31,
1995.
Income tax expense for 1995 differed from the amounts computed by
applying the U.S. federal income tax rate of 34% to pretax income due to
state and local income taxes, net of federal income tax benefit and a
net reduction in the valuation allowance for deferred tax assets. The
valuation allowance for 1995 was reduced by net operating loss
carryforwards that expired of $234,418 and the utilization of net
operating loss carryforwards of $733,361, of which $393,039 was utilized
to offset deferred tax liabilities arising from the acquisition of
Atlantic. These reductions in the valuation allowance were offset by
increases for the deferred tax assets associated with the allowance for
doubtful accounts and alternative minimum tax credit carryforwards
aggregating $109,304.
Income tax expense, for 1994 and 1993, differed from the amounts c
omputed by applying the U.S. federal income tax rate of 34% to pretax
income (loss) due to changes in the valuation allowance for deferred tax
assets. The valuation allowance for 1994 was reduced by $99,659 due to
pretax income. The valuation allowance for 1993 was increased by
$152,327 due to the pretax loss.
<PAGE> 19
The components of deferred income tax benefit attributable to income
from continuing operations for the year ended December 31, 1995
are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax expense (exclusive of the effect
of the other components listed below) $ 624,057
Adjustment to deferred tax assets for expired
net operating loss carryforwards 234,418
Recording of deferred tax liability in
connection with acquisition 206,356
Decrease in the valuation allowance for
deferred tax assets (858,475)
_________
$(206,356)
=========
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets at December 31,
1995 and 1994 are presented below.
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 12,971,237 13,939,016
Accounts receivable due to allowance
for doubtful accounts 65,315 -
Alternative minimum tax credit carryforward 43,989 -
------------ ----------
Total gross deferred tax assets 13,080,541 13,939,016
Less valuation allowance (13,080,541) (13,939,016)
Net deferred tax assets $ - -
============ ==========
</TABLE>
At December 31, 1995, the Company has net operating loss carryforwards for
federal income tax purposes of approximately $38,000,000. Varying amounts of
the net operating loss carryforwards will expire each year from 1996 through
2008. Approximately $4,000,000 of the net operating loss carryforwards will
expire if not utilized during 1996. During 1995, the Company utilized
approximately $2,156,000 of its net operating loss carryforwards. The net
operating loss carryforwards have been substantially reduced as a result of
certain annual limitations and they may be further limited to utilization
against the future earnings of the subsidiary which sustained the loss. If
certain substantial changes in ownership occur, there would be a further
annual limitation on the amount of tax carryforwards which can be utilized in
the future.
<PAGE> 20
(11) Fair Value of Financial Instruments
-----------------------------------
Financial Accounting Standards Board Statement No.107, "Disclosure about
Fair Value of Financial Instruments", defines the fair value of a
financial instrument as the amount at which the instrument could be
exchanged in a current transaction between willing parties. The carrying
value of all financial instruments classified as current assets or
liabilities is deemed to approximate fair value, with the exception of
the notes receivable and notes payable, because of the short maturity of
these instruments.
The carrying value of the notes receivable approximates fair value based
upon several factors. The $1,000,000 note receivable approximates fair
value based upon the anticipated restructuring of the note. The
remaining notes approximate fair value as the interest rates approximate
rates currently offered by local lending institutions for loans of
similar terms to companies with comparable credit risk.
The notes payable carrying amount of $1,410,655 at December 31, 1995, in
the accompanying balance sheets, have an estimated fair value of
approximately $1,163,000. The fair value of the notes payable was
estimated by discounting the future cash flows of the instrument at a
rate currently offered to the Company for similar debt instruments of
comparable maturities by the Company's bankers.
(12) Supplemental Cash Flow Information
----------------------------------
The following is supplemental information relating to the
consolidated statements of cash flows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash paid during the years for:
Interest $ 154,575 - 4,256
======= ===== =====
Income taxes $ 108,741 - -
======= ===== =====
</TABLE>
Non-cash transaction: the Company issued a note receivable for
$377,500 in connection with the sale of land.
<PAGE> 21
(13) Employee Benefit Plans
----------------------
The Company has a profit-sharing plan and 401(k) plan which cover
substantially all employees of Atlantic. Contributions to these plans
are determined by the Board of Directors. In 1995, the Company
recognized $33,827 of expense associated with these plans. Prior to 1995
the Company did not have an employee benefit plan.
(14) Industry Segments
-----------------
Summarized financial information by the Company's two business
segments for 1995 is as follows:
<TABLE>
<CAPTION>
Door
hardware, Investing
doors activities and
and frames corporate Total
---------- -------------- -----
<S> <C> <C> <C>
Revenues $ 13,653,247 304,039 13,957,286
Operating income (loss) 865,540 (453,215) 412,325
Identifiable assets 8,477,432 5,876,851(a) 14,354,283
Depreciation and amortization expense 31,406 2,693 34,099
Capital expenditures 31,499 3,338 34,837
(a) Principally related to the CompanyOs investing activities.
</TABLE>
(15) Business and Credit Concentrations
----------------------------------
Seven customers account for approximately 30% of the Company's annual
sales. At December 31, 1995, six customers had accounts receivable
balances, which in the aggregate represented approximately 27% of the
total net accounts receivable. The Company estimates an allowance for
doubtful accounts based on the creditworthiness of its customers as well
as general economic conditions. Consequently, an adverse change in those
factors could affect the Company's estimate of its bad debts. The
Company as a policy does not require collateral from its customers.
<PAGE> 22
(16) Commitments and Contingencies
-----------------------------
(a) Leases
------
The Company is obligated under operating leases for warehouse, office facilities
and certain office equipment. Minimum annual rental payments, including real
estate taxes, amounted to approximately $208,000, $18,000 and $21,000 for
the years ended 1995, 1994 and 1993, respectively. At December 31, 1995,
future minimum lease payments in the aggregate and for each of the five
succeeding years are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 241,282
1997 223,216
1998 212,734
1999 180,990
2000 56,330
--------
$ 914,552
</TABLE>
(b) Employment Contracts
--------------------
The Company has employment contracts with two officers and various employees
with remaining terms ranging from one to four years at amounts approximating
their current levels of compensation. The Company's remaining aggregate
commitment at December 31, 1995 under such contracts is approximately
$1,523,000.
(c) Environmental Matters
---------------------
The Company owns a 50% interest in a 10-acre property located in Murray, Utah,
which contains lead slag deposited by the former owner. This and adjoining
properties have been proposed by the Environmental Protection Agency (EPA)
for listing on the National Properties List for cleanup of the lead slag.
Although the Company has not been a generator of the slag material, under
the Comprehensive Environmental Response Compensation and Liability Act, the
current owner of a property may be liable for response costs. Although the
EPA typically pursues the generator responsible for delivering the material,
a possible claim exists against the property owner. In such case, the
Company would pursue a claim against former owners for its respective share
of the cost of cleanup. The Company has not been designated a Potentially
Responsible Party by the EPA with respect to cleanup of any waste at this
site. The outcome of this matter is uncertain and it is not possible at this
time to estimate the possible financial impact on the Company, if any.
(d) Other
-----
The Company is involved in other legal actions arising in the ordinary course
of business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
<PAGE> 23
OFFICERS
Bernard Korn, Chairman of the Board/President
James W. Stewart, Executive Vice President/Treasurer/Secretary
SUBSIDIARY
Atlantic Hardware and Supply Corporation
Paul Selden, President
DIRECTORS
Raphael M. Brackman
Consumer Credit Consultant
Gerald S. Deutsch
Certified Public Accountant and Attorney
William Koon
President - Lord's Enterprises, grain merchants
Bernard Korn
Chairman of the Board/President
Donald K. MacNeill
Consumer Credit Consultant
Ronald Miller
Henkener and Miller, attorneys
Jack Rose
Investor
James W. Stewart
Executive Vice President/Treasurer/Secretary
Carl L. Sussman
Investor
COUNSEL STOCK LISTINGS - NASDAQ
Oscar D. Folger, Esq. Convertible Preferred Stock
New York, New York Symbol = CCOM-P
AUDITORS Common Stock
KPMG Peat Marwick LLP Symbol = CCOM
Jericho, New York
REGISTRAR AND TRANSFER AGENT 10-KSB AVAILABLE
American Stock Transfer Co. The Annual Report on Form 10-KSB
New York, New York as filed with the Securities and
Exchange Commission, is available
TRUSTEE OF 6% NOTES to stockholders without charge
IBJ Schroder Bank & Trust Co. upon written request to:
New York, New York
Secy.,Colonial Commercial Corp.
ANNUAL STOCKHOLDERS' MEETING 3601 Hempstead Turnpike
Wednesday, June 12, 1996, 10:30 AM Levittown, New York 11756-1315
<PAGE> 1
EXHIBIT
21 - SUBSIDIARIES OF REGISTRANT
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
FED. I.D. 11-2037182
PAGE 1 OF 2
NAME OF SUBSIDIARY I.D. NUMBER
Atlantic Hardware and Supply Corporation 13-2687036
Southern Mortgage Associates, Inc. 58-1283424
Wel-Com Financial Services, Inc. 31-0484520
Homeowners Equities, Inc. 11-2164702
Devon Capital Corporation 11-2511952
Devon Home Center Stores of Alabama, Inc. 63-0899560
Devon Home Center Stores of Alaska, Inc. 93-0888948
Devon Home Center Stores of Arizona, Inc. 86-0435657
Devon Home Center Stores of Arkansas, Inc. 72-0575478
Devon Home Center Stores of California, Inc. 95-3562992
Devon Home Center Stores of Colorado, Inc. 11-2659058
Devon Home Center Stores of Connecticut, Inc. 06-1212345
Devon Home Center Stores of Delaware, Inc. 51-0272647
Devon Home Center Stores of Florida, Inc. 59-2133173
Devon Home Center Stores of Georgia, Inc. 58-1562213
Devon Home Center Stores of Hawaii, Inc. 59-2602021
Devon Home Center Stores of Idaho, Inc. 82-0391365
Devon Home Center Stores of Illinois, Inc. 11-2659057
Devon Home Center Stores of Kansas, Inc. 48-0977143
Devon Home Center Stores of Kentucky, Inc. 62-1185807
Devon Home Center Stores of Louisiana, Inc. 72-0946179
Devon Home Center Stores of Maryland, Inc. 52-1426814
Devon Home Center Stores of Massachusetts, Inc. 04-2898705
Devon Home Center Stores of Mississippi, Inc. 64-0662622
Devon Home Center Stores of Missouri, Inc. 43-1340332
Devon Home Center Stores of Montana, Inc. 93-0953467
Devon Home Center Stores of Nebraska, Inc. 47-0645693
Devon Home Center Stores of Nevada, Inc. 88-0175788
Devon Home Center Stores of New Jersey, Inc. 11-1263496
Devon Home Center Stores of New Mexico, Inc. 74-2274898
Devon Home Center Stores of New York, Inc. 14-1680633
Devon Home Center Stores of North Carolina, Inc. 62-1165477
Devon Home Center Stores of North Dakota, Inc. 45-0385825
Devon Home Center Stores of Ohio, Inc. 11-2659059
Devon Home Center Stores of Oklahoma, Inc. 73-1153207
Devon Home Center Stores of Pennsylvania, Inc. 52-1502376
Devon Home Center Stores of Rhode Island, Inc. 05-0422283
Devon Home Center Stores of South Carolina, Inc. 57-0734213
Devon Home Center Stores of South Dakota, Inc. 46-0381832
Devon Home Center Stores of Tennessee, Inc. 62-1164261
Devon Home Center Stores of Texas, Inc. 74-2205286
Devon Home Center Stores of Utah, Inc. 87-0410622
Devon Home Center Stores of Virginia, Inc. 62-1209840
<PAGE> 2
PAGE 2 OF 2
Devon Home Center Stores of Washington, Inc. 91-1219687
Devon Home Center Stores of Wyoming, Inc. 83-0277441
Financial Resources, Inc. 54-1159936
Henry Appliance Corporation 54-1107964
Henry's Warehouse, Inc. 54-1116717
Capital Recovery & Subrogation, Inc. 65-0155541
Devon Equipment Leasing, Inc. 65-0202321
<PAGE> 1
Accountants' Consent
--------------------
The Board of Directors
Colonial Commercial Corp.
and Subsidiaries:
We consent to incorporation by reference in the registration statement (No.
2-62100) on Form S-8 of Colonial Commercial Corp. of our report dated March 26,
1996, relating to the consolidated balance sheets of Colonial Commercial Corp.
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1995, which report is
incorporated by reference in the December 31, 1995 annual report on Form 10-KSB
of Colonial Commercial Corp.
/S/ KPMG PEAT MARWICK LLP
Jericho, New York
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-KSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000021828
<NAME> COLONIAL COMMERCIAL CORP.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,856,008
<SECURITIES> 0
<RECEIVABLES> 6,953,051
<ALLOWANCES> 137,650
<INVENTORY> 1,301,455
<CURRENT-ASSETS> 10,788,724
<PP&E> 165,300
<DEPRECIATION> 56,000
<TOTAL-ASSETS> 14,609,283
<CURRENT-LIABILITIES> 6,405,411
<BONDS> 916,444
0
87,192
<COMMON> 67,672
<OTHER-SE> 6,066,315
<TOTAL-LIABILITY-AND-EQUITY> 14,609,283
<SALES> 13,653,247
<TOTAL-REVENUES> 13,957,286
<CGS> 10,039,756
<TOTAL-COSTS> 10,039,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 137,650
<INTEREST-EXPENSE> 177,729
<INCOME-PRETAX> 979,532
<INCOME-TAX> 104,273
<INCOME-CONTINUING> 875,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 875,259
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
