<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996 Commission File No. 1-6663
---------------------------------------- --------------------------
COLONIAL COMMERCIAL CORP.
-------------------------
(Exact Name of Registrant as Specified in its Charter)
New York 11-2037182
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
3601 Hempstead Turnpike, Levittown New York 11756-1315
------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 516-796-8400
------------
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
- --
Indicate the number of shares outstanding of Registrant's Common Stock and
Convertible Preferred Stock as of September 30, 1996.
Common Stock, par value $.01 per share - 6,821,710 shares
Convertible Preferred Stock, par value $.01 per share - 8,664,675 shares
<PAGE>2
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of
September 30, 1996 (unaudited) and
December 31, 1995 1
Consolidated Statements of Operations
Nine Months Ended September 30, 1996 and
1995 (unaudited) 2
Consolidated Statements of Operations
Three Months Ended September 30, 1996 and
1995 (unaudited) 3
Consolidated Statements of Stockholders'
Equity as of September 30, 1996 (unaudited)
and December 31, 1995 4
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1996 and
1995 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 8
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>3
PART 1.
Item 1. Financial Statements
- -----------------------------
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
Assets 1996 1995
------ ---- ----
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 849,750 1,856,008
Accounts receivable, net of allowance for doubtful
accounts of $306,400 in 1996 and $137,650 in 1995 6,584,256 6,815,401
Inventory 1,928,993 1,301,455
Notes receivable - current portion 120,000 659,500
Prepaid expenses and other assets 57,404 156,360
---------- ----------
Total current assets 9,540,403 10,788,724
Notes receivable, excluding current portion 1,343,750 1,271,750
Investment in Monroc, Inc. 1,772,208 2,032,132
Property and equipment, net 133,618 109,300
Land held for sale 369,495 407,377
---------- ----------
13,159,474 14,609,283
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 2,382,693 2,565,016
Accrued liabilities 1,119,521 930,013
Income taxes payable - 206,356
Borrowings under line of credit 1,834,468 2,209,815
Notes payable - current portion 469,082 494,211
--------- ----------
Total current liabilities 5,805,764 6,405,411
Notes payable, excluding current portion 447,362 916,444
Excess of acquired net assets over cost 978,708 1,066,249
--------- ----------
Total liabilities 7,231,834 8,388,104
--------- ----------
Stockholders' equity:
Convertible preferred stock, $.01 par value liquidation
preference $8,664,675 and $8,719,171 at September 30,
1996 and December 31, 1995, respectively, 12,344,300 shares
authorized, 8,664,675 and 8,719,171 shares issued and
outstanding at September 30, 1996 and December 31, 1995,
respectively 86,647 87,192
Common stock,$.01 par value, 40,000,000 shares
authorized, and 6,821,710 and 6,767,214 shares issued and
outstanding at September 30,1996 and December 31, 1995,
respectively 68,217 67,672
Additional paid-in capital 9,023,669 9,023,669
Unrealized gain on investment security 122,208 382,132
Accumulated deficit (3,373,101) (3,339,486)
---------- ----------
Total stockholders' equity 5,927,640 6,221,179
---------- ----------
Commitments and contingencies
$ 13,159,474 14,609,283
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>4
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
Consolidated Statements of Operations
Nine Months Ended September 30,1996 and 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Revenues:
Sales $ 17,660,124 7,376,708
Interest 87,853 213,441
Other 9,134 60,879
---------- ----------
Total revenues 17,757,111 7,651,028
---------- ----------
Expenses:
Cost of sales 13,219,138 5,510,839
Selling, general and administrative,
net 4,286,932 2,242,923
---------- ----------
Total expenses 17,506,070 7,753,762
---------- ----------
Operating income (loss) 251,041 (102,734)
Interest 194,656 114,922
---------- ----------
Income (loss) before income taxes 56,385 (217,656)
---------- ----------
Income taxes 90,000 29,460
---------- ----------
Net loss (33,615) (247,116)
========== ==========
Net loss per common and preferred
share .00 (.02)
========== ==========
Common and preferred shares outstanding 15,486,385 15,486,385
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>5
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
Consolidated Statements of Operations
Three Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Revenues:
Sales $5,876,926 4,619,499
Interest 18,016 49,163
Other 1,643 29,462
--------- ---------
Total revenues 5,896,585 4,698,124
--------- ---------
Expenses:
Cost of sales 4,454,154 3,461,753
Selling, general and administrative,
net 1,427,641 1,292,146
--------- ---------
Total expenses 5,881,795 4,753,899
--------- ---------
Operating income (loss) 14,790 (55,775)
Interest 70,656 64,005
--------- ---------
Loss before income taxes (55,866) (119,780)
--------- ---------
Income taxes 15,000 11,000
--------- ---------
Net loss (70,866) (130,780)
--------- ---------
Net loss per common and preferred share .00 (.01)
--- ----
Common and preferred shares outstanding 15,486,385 15,486,385
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>6
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
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, 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 income
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
Conversion of
54,496 shares
of preferred stock
to common stock (545) 545 - - - -
Net loss - - - - (33,615) (33,615)
Net unrealized loss
on investment
security - - - (259,924) - (259,924)
------- ------ --------- ------- --------- -------
Balances at
September 30,1996 86,647 68,217 9,023,669 122,208 (3,373,101) 5,927,640
====== ====== ========= ======= ========= =========
See accompanying notes to consolidated statements.
</TABLE>
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<PAGE>7
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Reconciliation of net loss to net cash used in
operating activities:
Net loss (33,615) (247,116)
Adjustments to reconcile net loss to cash
used in operating activities, net of
effects from the purchase of Atlantic Hardware and
Supply Corporation:
Provision for allowance for doubtful accounts 168,750 -
Depreciation 45,409 17,822
Amortization of excess of acquired net assets
over cost (87,541) (37,808)
Changes in assets and liabilities:
Accounts receivable 62,396 (32,077)
Inventory (627,538) 307,593
Prepaid expenses and other assets 98,956 76,288
Accounts payable (182,323) (372,169)
Accrued liabilities (16,848) 113,496
-------- ----------
Net cash used in
operating activities (572,354) (173,971)
-------- --------
Cash flows from investing activities:
Payment for purchase of Atlantic Hardware and Supply
Corporation net of cash acquired - (3,774,249)
Proceeds from sale of investment securities - 1,900,000
Payments received on notes receivable 467,500 99,036
Change in land held for sale 37,882 (9,369)
Additions to property and equipment (69,728) (6,439)
-------- -----------
Net cash provided by (used in)
investing activities 435,654 (1,791,021)
------- ---------
Cash flows from financing activities:
Payments on notes payable (494,211) (519,341)
Net borrowings under line of credit (375,347) 2,004,971
--------- ---------
Net cash provided by (used in)
financing activities (869,558) 1,485,630
--------- ---------
Decrease in cash and cash equivalents (1,006,258) (479,362)
----------- ---------
Cash and cash equivalents - beginning of period 1,856,008 805,262
--------- ---------
Cash and cash equivalents - end of period 849,750 325,900
--------- ---------
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>8
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996 and December 31, 1995
(Unaudited)
(1) The consolidated financial statements of Colonial Commercial Corp. and
subsidiaries (the Company), included herein has been prepared by the
Company and is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of the
financial position, results of operations, and cash flows for the interim
periods to which the report relates. The results of operations for the
period ended September 30, 1996 are not necessarily indicative of the
operating results which may be achieved for the full year.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's l995 Annual Report filed on Form 10-KSB.
(2) Supplemental Cash Flow Information
----------------------------------
The following is supplemental information relating to the consolidated
statements of cash flows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
Cash paid during the period
for:
Interest $ 196,393 $ 114,922
Income taxes $ 176,946 $ 57,415
</TABLE>
(3) Notes Receivable
----------------
Included in notes receivable is a $1,000,000 unsecured note which was not
paid in accordance with the contractual terms of the note agreement, which
required payment to be made on December 31, 1995. In January 1996, the
Company instituted an action against the debtors for a summary judgement to
enforce payment of the note. The debtors instituted an action against the
Company and a director of the Company to declare the note unenforceable
and for $3,000,000 in punitive damages. Both actions were pending as
the Company and the debtors reached a written understanding to restructure
the terms of the note in March 1996. The restructured terms of the note
provided for collateral and scheduled principal payments to begin in April
1996. The written understanding was not consummated and as such the
Company pursued its legal action to obtain summary judgement. In June 1996,
the Company's motion for summary judgement was denied and the action was
consolidated with that of the debtors. On September 26, 1996, the Company
filed an appeal of the decision denying summary judgement and is also
proceeding with the consolidated actions.
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<PAGE>9
The impact of the final resolution of this matter on the Company's results
of operations or liquidity in a particular reporting period is not known.
Management is of the opinion, however, that there are meritorious defenses to
the claim made by the debtors and that the ultimate outcome of this matter will
not have a material adverse effect on the Company's consolidated financial
position. The Company has not recorded an allowance against this note at
September 30, 1996 as management is of the opinion that the result of the
litigation will be favorable and that the expected future cash flows upon the
sale of assets obtained in a judgement will be at least equal to the amount of
the note. The amount the Company will ultimately realize upon the final
resolution of this matter could differ materially in the near term from the
amounts assumed in arriving at the present value of the expected future cash
flows to be obtained as a result of the litigation.
Item 2. Management's Discussion and Analysis of
- ------------------------------------------------
Financial Condition and Results
-------------------------------
Results of Operations - Nine Months Ended
September 30, 1996 and 1995
Registrant reported a net loss of $33,615 for the nine months of 1996,
which included $446,396 of net income from Atlantic Hardware and Supply
Corporation ("Atlantic"), as compared to a net loss of $247,116 for the nine
months of l995, which included $165,604 of net income from Atlantic. Atlantic
was acquired on May 19, 1995.
Total revenues increased to $17,757,111 in the l996 period compared to
revenues of $7,651,028 in the 1995 period, principally attributable to
Atlantic's sales of $17,660,124. Atlantic's sales backlog has increased $540,000
to $12,790,000 since December 31, 1995.
Total cost of sales increased $7,708,299, selling, general and
administrative expense increased $2,044,009 and interest expense increased
$79,734 principally due to the Atlantic operations for a full nine month period
compared to the four and one half months of the 1995 period.
The Registrant continues to seek the acquisition of or merger with
privately held companies which businesses generate a recurring stream of income.
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 Registrant has provided for income taxes primarily as a result of state
income taxes associated with the income from Atlantic.
-7-
<PAGE>10
Results of Operations - Three Months Ended
September 30, 1996 and 1995
Registrant reported a net loss of $70,866 for the third quarter of l996,
which included $75,360 of net income from Atlantic, as compared to net loss of
$l30,780 for the third quarter of l995, which included $31,203 of net income
from Atlantic.
Total revenues increased to $5,896,585 in the l996 period compared to
revenues of $4,698,124 in the l995 period, principally attributable to an
increase of Atlantic's sales of $1,257,427. Atlantic's sales backlog increased
$1,270,000 during the quarter ended September 30, 1996.
Total cost of sales increased $992,401 principally due to increased sales
volume of $l,257,427. Selling, general and administrative expenses increased
$135,495 and interest expense increased $6,651 principally due to the growth in
Atlantic operations.
Liquidity and Capital Resources
As of September 30, l996, the Registrant had $849,750 in cash and cash
equivalents compared to $1,856,008 at December 31, 1995.
A $1,000,000 note receivable due December 31, 1995 remains unpaid. The
Company is pursuing legal action in connection with this note as described in
Note 3 to the consolidated financial statements. The Company anticipates payment
of the note as a result of the litigation, however, cannot estimate when such
payment will be made. The delay in payment of the note has not negatively
impacted the Company's present operations or liquidity and is not anticipated to
adversely affect future operations or liquidity. Although the final resolution
of this matter on the Company's results of operations or liquidity in a
particular reporting period is not known, management is of the opinion, however,
that there are meritorious defenses to the claim made by the debtors and that
the ultimate outcome of this matter will not have a material adverse effect on
the Company's consolidated financial position.
The Registrant 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 capital resources consist primarily of cash and cash equivalents,
notes receivable, land held for sale and its investment in Atlantic and Monroc,
Inc. The Company believes the carrying value of its land held for sale is less
than their market value.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
On January 16, 1996, the Company instituted an action against Breskel
Associates, Wilbur Breslin and the Estate of Robert Frankel for summary
judgement to enforce payment of a $l,000,000 note. On January 11, 1996, Breskel
Associates, Wilbur Breslin and the Estate of Robert Frankel instituted an action
against the Company and Bernard Korn, who is a director and chief executive
officer of the Company, to declare the note unenforceable and for $3,000,000 in
punitive damages. Both actions were brought in the Supreme Court of the State of
New York, County of Nassau. In March 1996, a written understanding to
restructure the terms of the note was reached, which provided for collateral and
scheduled principal payments beginning in April 1996. The restructuring of the
note was not consummated and the Company pursued its legal action to obtain
summary judgement. On June 27, 1996,
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<PAGE>11
the Company's motion for summary judgement was denied and the Company's action
was consolidated with the action instituted by Breskel and the other plaintiffs.
On September 26, 1996, the Company filed an appeal of the decision denying
Summary Judgement and is also proceeding with the consolidated actions.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits - Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K - During the nine months ended September 30,
l996, the Registrant did not file any reports on Form 8-K.
-9-
<PAGE>12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
under-signed thereunto duly authorized.
Dated: November 12, l996 COLONIAL COMMERCIAL CORP.
/S/ BERNARD KORN
--------------------------
Bernard Korn, Chairman
of the Board and President
/S/ JAMES W. STEWART
-------------------------
James W. Stewart
Executive Vice President,
Treasurer and Secretary
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000021828
<NAME> COLONIAL COMMERCIAL CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 849,750
<SECURITIES> 0
<RECEIVABLES> 6,890,656
<ALLOWANCES> (306,400)
<INVENTORY> 1,928,993
<CURRENT-ASSETS> 9,540,403
<PP&E> 235,027
<DEPRECIATION> (101,409)
<TOTAL-ASSETS> 13,159,474
<CURRENT-LIABILITIES> 5,804,764
<BONDS> 447,362
0
86,647
<COMMON> 68,217
<OTHER-SE> 5,772,776
<TOTAL-LIABILITY-AND-EQUITY> 13,159,474
<SALES> 17,660,124
<TOTAL-REVENUES> 17,757,111
<CGS> 13,219,138
<TOTAL-COSTS> 13,219,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 168,750
<INTEREST-EXPENSE> 194,656
<INCOME-PRETAX> 56,385
<INCOME-TAX> 90,000
<INCOME-CONTINUING> (33,615)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,615)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
