<PAGE> 1
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, 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 (IRS Employer Identification No.)
Incorporation or Organization)
3601 Hempstead Turnpike, Levittown, New York 11756-1315
- -------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrants Telephone Number, Including Area Code: 516-796-8400
------------
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange on Which Registered
- -------------- ------------------------------------
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
-----------------------------------------------------
(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
Registrants 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
---
Revenues for the fiscal year ended December 31, 1996 were $25,194,337.
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $6,618,835 as of March 10, 1997.
Indicate the number of shares outstanding of Registrants Common Stock and
Convertible Preferred Stock as of March 10, 1997
Common Stock, par value $.01 per share -6,985,931 shares.
Convertible Preferred Stock par value $.01 per share -8,500,454 shares.
Documents Incorporated by Reference
Document Part
Registrants 1997 Proxy Statement for Annual Meeting
of Shareholders on June 11, 1997 III
Registrants 1996 Annual Report to Shareholders I, II
<PAGE> 2
PART I.
Item 1(a) Business Developments
- --------------------------------
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 door 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 funds
percentage ownership would increase to 53%, and Colonial's ownership percentage
would decrease to 6.3%.
The Company has signed a non-binding memorandum of intent to purchase all
the outstanding stock of US Computer Group, Inc. and subsidiaries (USCG)in
exchange for 1,800,000 shares of the Company's Common Stock. Headquartered in
Farmingdale, Long Island, NY, USCG has three fully-equipped and staffed offices
in Manhattan, NY; Carlstadt, NJ and Fort Washington, PA. From its operating
divisions, US Computer Maintenance, US Computer Products and US Computer
Solutions, the Company offers maintenance for equipment manufactured by Digital
Equipment Corporation, IBM Midrange, Sun Microsystems, Inc. and leading brand
PCs, the sale of new and used computer equipment, network integration and design
services, disaster recovery and business relocation services. On closing,
Colonial would purchase certain obligations of USCG by issuing 700,000 warrants
to purchase the Company's Common Stock at $1.25 per share and a $500,000 note.
The closing is subject to the execution of a definitive purchase agreement, due
diligence and other conditions. There can be no assurance that the transaction
will be completed.
Item 1(b) Business Description
- -------------------------------
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 of builder's
hardware, which is described in more detail below. The Registrant continues to
seek acquisitions of going concerns.
Atlantic - Builders' Hardware
- -----------------------------
Atlantic's primary business is the distribution of door hardware, doors and
door 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.
<PAGE> 3
Atlantic had approximately 600 customers in 1996. In 1996, no customer
accounted for more than 10% of sales. Atlantic does not believe that the loss of
any one customer would have a material adverse effect on its business.
As of December 31, 1996, Atlantic had $9,630,000 in firm backlog of orders.
Atlantic expects that approximately 95% of the backlog of orders as of December
31, 1996 will be filled within the current fiscal year. Atlantic's business is
not subject to significant seasonal variations.
Atlantic purchases products from approximately 790 suppliers. In 1996, 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 builder's 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
- ------------------------
As of December 31, 1996, the Registrant had 66 employees, of whom 2 were
executive officers at its corporate offices in Levittown, New York. Sixty two
(62) of the employees are employed by Atlantic. The Company believes its
employee relations are satisfactory.
Item 2. Properties
- -------------------
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, New York under a lease expiring
in April 2000. Atlantic also maintains leased sales offices in Bensenville,
Illinois; Norcross, Georgia; Wilkes Barre, Pennsylvania. Atlantic closed its
Farmingdale, New York office in January 1997.
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 two parcels of raw land in Salt Lake
County, Utah at December 31, 1996. 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 remaining parcels without incurring
significant development costs.
<PAGE> 4
Item 3. Legal Proceedings
- --------------------------
In January 1996, the Company demanded payment of its $1,000,000 note
receivable from Breskel Associates. 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. On January 16,1996, the Company instituted an action against Breskel
Associates, Wilbur Breslin and Estate of Robert Frankel for summary judgment to
enforce payment of the note. 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 judgment. On June 27, 1996, the Company's motion for summary judgment
was denied and the Company's action was consolidated with the action instituted
by Breskel and the other plaintiffs (the consolidated action). On September 26,
1996, the Company filed an appeal of the decision denying Summary Judgement and
is also proceeding with the consolidated action.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not Applicable
Additional Item - Executive Officers of the Registrant
- ------------------------------------------------------
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 Stockholders 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.
<TABLE>
<CAPTION>
Name, Age Business Experience
and Position During Past Five Years
- ------------ ----------------------
<C> <C>
Bernard Korn, 71 From prior to January 1992 to present,
Chairman of the Board, Chairman of the Board and President,
President, Chief Executive Chief Executive Officer of the Company
James W. Stewart, 50 From prior to January 1992, Executive
Executive Vice President, Vice President and Treasurer of the
Secretary, Treasurer Company. From December 31, 1993,
and Director to the present, Secretary of the
Company.
</TABLE>
Item 5. Market for the Registrant's Common Stock, Convertible Preferred
- -------------------------------------------------------------------------
Stock and Related Stockholder Matters
- -------------------------------------
The information required to be provided is incorporated by reference from
page 3 of the Registrants 1996 Annual Report to Stockholders.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
The information required to be provided is incorporated by a reference from
pages 4 and 5 of the Registrant's 1996 Annual Report to Shareholders under the
caption, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
<PAGE> 5
Item 7. Financial Statements and Supplementary Data
- ----------------------------------------------------
The consolidated financial statements of the Registrant and the Independent
Auditors' Report thereon of KPMG Peat Marwick LLP, independent certified public
accountants, as of December 31, 1995 and 1996 and for each of the years in the
three year period ended December 31, 1996, are incorporated herein by reference
from pages 6 through 20 of the Registrant's 1996 Annual Report to Stockholders.
Item 8. Disagreements on Accounting and Financial Disclosures
- --------------------------------------------------------------
None
PART III
Item 9. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
The information required to be provided is incorporated by reference to
Registrant's 1997 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".
Item 10. Executive Compensation.
- ---------------------------------
Item 11. Security Ownership of Certain Beneficial Owners and
- -------------------------------------------------------------
Management.
- -----------
Item 12. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required to be provided under Part III, Items 10, 11 and 12
is incorporated by reference to the 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.
Item 13. Exhibits and Report on Form 8-K
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Exhibits
- --------
The exhibits listed on the Index to Exhibits following the Signature
Page herein are filed as part of this Form 10-KSB.
Reports on Form 8-K
- -------------------
Registrant filed no reports on Form 8-K during the fourth quarter of
1996.
<PAGE> 6
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
----------------
Bernard Korn, Pres.
By:/s/ James W. Stewart
--------------------
James W. Stewart
Treasurer, Chief Financial
and Accounting Officer
Dated: March 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been duly signed below on March 19, 1997 by the following persons on behalf
of the Registrant and in the capacities indicated:
By: /s/ Bernard Korn
----------------
Bernard Korn, President & Director
By: /s/ James W. Stewart
--------------------
James W. Stewart, Executive Vice
President, Treasurer and
Secretary/Director
By: /s/ Raphael M. Brackman
-----------------------
Raphael M. Brackman, Director
By: /s/ Gerald S. Deutsch
---------------------
Gerald S. Deutsch, Director
By: /s/ William Koon
----------------
William Koon, Director
By: /s/ Donald K. MacNeill
----------------------
Donald K. MacNeill, Director
By: /s/ Ronald Miller
-----------------
Ronald Miller, Director
By: /s/ Jack Rose
-------------
Jack Rose, Director
By: /s/ Carl L. Sussman
-------------------
Carl L. Sussman, Director
<PAGE> 7
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
- -------- --------- ---- ---- -------
<S> <C> <C> <C> <C>
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
Construction Partners, L.P.
(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)
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
- -------- -------- ---- ---- -------
<S> <C> <C> <C> <C>
(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)
(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)
(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)
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Item 1
Incorporated by
Filed Reference From
Exhibits Herewith Form Date Exhibit
- -------- -------- ---- ---- -------
<S> <C> <C> <C> <C>
(g)Lease dated February 27,
1992 by and between
Registrant and 3601
Turnpike Associates
(i) Renewal letter
dated May 6, 1996 Yes 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 the
consolidated financial statements)
13 Annual Report of the Registrant
for the fiscal year ended
December 31, 1996. 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
consolidated financial statement
footnotes. Yes
21 Subsidiaries of Registrant Yes
27 Financial Data Schedule Yes
</TABLE>
<PAGE> 1
3601 TURNPIKE ASSOCIATES
7 Penn Plaza A Suite 618 A New York, New York 10001 9 212-563-6557
FAX 212-563-6657
May 6, 1996
Colonial Commercial Corp.
3601 Hempstead Turnpike
Suite 121-I
Levittown, NY 11756
Gentlemen:
Reference is made to that certain lease dated February 27, 1992 ("the
Lease") between 3601 Turnpike Associates, as Owner and you, as Tenant, covering
space designated as Suite 121-I in the building known as 3601 Hempstead
Turnpike, Levittown, New York.
The parties hereto agree that the Lease is to be extended for a term of
five (5) years to commence on July 1, 1996 and to expire June 30, 2001 with the
same force and effect as if such date ere the date originally set forth in the
Lease as the expiration date hereof.
The parties further agree that during such extended term all of the terms,
covenants and conditions of the Lease shall continue in full force and effect
except that:
1. The annual rent during such extended term shall be increased as shown on
the attached Exhibit "A".
2. Article 37A(b) shall be amended so that the term "Base Taxes" shall mean
a sum equal to the General Tax payable for the calendar year 1996 and the
School Tax for the year July 1, 1995 to June 30, 1996.
3. Tenant agrees to accept the Demised Premises in its present "as is"
condition and owner shall not be required to do any work or furnish any
materials in connection therewith.
4. Pursuant to the terms and conditions of the Lease, Tenant has heretofore
deposited with Owner the sum of $1,469.25, as security thereunder, which
Owner acknowledges receipt thereof.
Provided that prior to the commencement of the term of this Lease, Owner
shall not have used, applied or retained the whole or part of said sum of
$1,469.25, the parties hereto agree that said shall be held by Owner as
security hereunder pursuant to the provisions of Article 34 hereunder.
5. Tenant represents that it has dealt with no broker other than Jeffrey
Management Corp. in connection with the Extension of Lease. Tenant agrees
to indemnify and hold owner harmless (including attorneys' fees) from and
against any and all claims for brokerage commissions made by any other
party claiming to act for or on behalf of Tenant concerning this
transaction.
Except as herein above modified, all of the terms, covenants, and
conditions of the Lease are hereby ratified in all respects thereto.
Very truly yours,
3601 TURNPIKE ASSOCIATES
BY Owner
The above is hereby agreed
and accepted:
COLONIAL COMMERCIAL CORP.
<PAGE> 2
<TABLE>
<CAPTION>
EXHIBIT 'A'
PERIOD MONTHLY ANNUAL
BEGINNING ENDING RENT RENT
<C> <C> <C> <C>
7/1/1996 6/30/1997 $ 1,605.49 $ 19,265.88
7/1/1997 6/30/1998 $ 1,653.65 $ 19,843.80
7/1/1998 6/30/1999 $ 1,703.26 $ 20,439.12
7/1/1999 6/30/2000 $ 1,754.36 $ 21,052.32
7/1/2000 6/30/2001 $ 1,806.99 $ 21,683.88
</TABLE>
<PAGE> 1
COLONIAL COMMERCIAL CORP.
ANNUAL REPORT
1996
<PAGE> 2
INSIDE FRONT COVER
Contents Page
- -------- ----
Chairman's Letter 1
About the Company 2
Market Price of the Company's Stock 3
Managements Discussion and Analysis
of Financial Condition and Results
of Operations 4
Independent Auditors' Report 6
Consolidated Financial Statements 7
<PAGE> 3
To Our Stockholders:
The year 1996 was a year of continued progress for Colonial Commercial
Corp. Colonial reported net income of $547,675 in 1996, compared to net income
of $875,259 in 1995. While gain on land sales declined, reported net income from
Colonial's principal subsidiary, Atlantic Hardware and Supply Corporation
("Atlantic") increased to $964,439 from $616,585 as a result of the inclusion of
Atlantic's results for a full year in 1996.
Atlantic was acquired by Colonial in May 1995. It is a 51 year old company
headquartered in New York City with operating branches in New Jersey,
Pennsylvania, Georgia and Illinois. Atlantic's primary business is the
distribution of door hardware and doors and door frames used in new building
construction, buildings being rehabilitated, interior tenant buildouts, and
building maintenance. Atlantic is neither a wholesaler nor a retailer, it serves
architects, engineers and general contractors in 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.
Atlantic had internal growth in 1996 recording sales of approximately
$25,100,000 compared to approximately $20,100,000 in all of 1995. Because
Colonial purchased Atlantic in May 1995, it reported only $13,653,000 of the
1995 sales. Atlantic contemplates future growth by intelligent acquisitions and
internal expansion in the near term.
Sales proceeds from land held for sale located in Utah was $336,088 in 1996,
compared to $800,000 in 1995 and gain on land sales was $258,651 in 1996
compared to $744,936 in 1995. Colonial retains a 50% joint venture interest in
two parcels of land in Salt Lake County, Utah. The Utah land is carried on
Colonial's books at less than its estimated realizable value.
Since 1977, Colonial has had an investment position in Monroc, Inc., a
concrete products company with facilities in Utah, Idaho and Wyoming. Since
Colonial's original investment in Monroc of $4 million in 1977, Colonial has
received a cash return of approximately $17 million. This cash return should
increase from sales of the remaining two parcels of land, payment of Monroc's
remaining debt to Colonial and the future sale of Colonial's 378,000 common
shares of Monroc, Inc. Due to the increase in Monroc's NASDAQ market price in
1996, Colonial's carrying value of its Monroc's shares increased approximately
19%. Because of a management change and one time reorganization charges in 1996,
Monroc reported a net loss of $1,368,000; however, because of record
construction activities in Monroc's market area, future operating profitability
is anticipated. Additionally, Monroc anticipates gains on sale of certain of its
real estate.
As indicated in the accompanying financial statements, Colonial is in litigation
regarding an unpaid $1,000,000 note receivable. We feel strongly we will be
successful in the litigation but the timing of collection cannot be predicted
presently. Colonials operations and liquidity have not been affected adversely
by its inability to collect this note.
Colonial has signed a non-binding memorandum of intent to purchase all the
outstanding stock of US Computer Group, Inc. and subsidiaries (USCG) for
1,800,000 shares of Colonial Common Stock. Headquartered in Farmingdale, Long
Island, NY, USCG has three fully-equipped and staffed offices in Manhattan, NY;
Carlstadt, NJ and Fort Washington, PA. From its operating divisions, US Computer
Maintenance, US Computer Products and US Computer Solutions, the Company offers
maintenance for Digital, IBM Midrange, Sun and leading brand PCs, the sale of
new and used computer equipment, network integration and design services,
disaster recovery and business relocation services. On closing, Colonial would
purchase certain obligations of USCG by issuing 700,000 warrants to purchase
Colonial Common Stock at $1.25 per share and a $500,000 note. The closing is
subject to the execution of a definitive purchase agreement, due diligence and
other conditions. There can be no assurance that the transaction will be
completed.
<PAGE> 4
Whether the USCG acquisition is completed or not, Colonial intends to continue
to seek acquisitions of companies generating a recurring stream of income and
make other strategic investments.
We appreciate the continued confidence of our stockholders and employees.
Sincerely,
/s/ Bernard Korn
April 9, 1997 Bernard Korn
Chairman
<PAGE> 5
About the Company
Colonial Commercial Corp. ("Colonial" or the "Company") was founded in 1964
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 door 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 51-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 owns presently 8.5% of Monroc, Inc., a concrete products company
with operations in Utah, Idaho and Wyoming. The shareholders' equity of Monroc,
Inc. has grown over the last several years as a result of net 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 stockholder's equity.
<PAGE> 6
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 1996 and
1995 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>
1996
First Quarter 15/32 1/4 3/8 1/4
Second Quarter 15/32 11/32 15/32 11/32
Third Quarter 15/32 11/32 15/32 5/16
Fourth Quarter 3/4 3/8 21/32 13/32
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
</TABLE>
(b) Approximate Number of Common and Convertible Preferred Stockholders
<TABLE>
<CAPTION>
Approximate Number of Record Holders
Title of Class (as of March 10, 1997)
- -------------- ----------------------
<S> <C>
Common Stock 1,217
par value $.01 per share
Convertible Preferred Stock 7,883
par value $.01 per share
</TABLE>
(c) Dividends
The Company does not contemplate Common Stock dividend payments in the near
future.
<PAGE> 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations 1996-1995
The Company reported net income of $547,675 for the year 1996 compared to net
income of $875,259 for the year 1995. The 1996 income consisted of net income of
$964,439 from Atlantic for the full 12 months in 1996, compared to $616,585 from
the date of its acquisition on May 19, 1995 to December 31, 1995, less a net
loss of $416,764 from parent company operations compared to a net income of
$258,674 in the 1995 period principally due to the reduction in the gain from
the sale of land to $258,651 in the 1996 period from $744,936 in the year 1995.
Proceeds from the sale of land was $336,088 in 1996 as compared to $800,000 in
1995. Parent company operations include investing activities, supervision of
operating subsidiaries and management of various liquidating assets.
Total revenues increased to $25,194,337 in the year 1996 from $13,957,286
reported in the 1995 year principally attributable to Atlantic's full year sales
of $25,059,492. Atlantic's full year sales for 1995 were $20,106,956. Atlantic's
sales backlog was $9,630,000 at December 31, 1996 as compared to $11,480,000 at
December 31, 1995. It is anticipated that approximately 95% of the backlog will
be shipped during the 1997 year.
Total cost of sales increased $8,528,513; selling, general and
administrative expenses increased $2,381,676 and interest expense increased
$86,061 all principally due to including Atlantic's operations for a full 12
month period compared to the shorter period in 1995. As a percentage of sales
selling, general and administrative expenses decreased approximately 2%. This 2%
decrease is due to a full year of Atlantic's sales offsetting the parent company
expenses. The expenses of Atlantic on a percentage of sales basis remained
consistent.
The parent company 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 Company has provided for income taxes primarily for State income taxes
associated with income from Atlantic and Federal alternative minimum tax applied
to consolidated earnings.
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
$616,585 from Atlantic, since its acquisition date of May 19, 1995, plus net
income of $258,674 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.
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.
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.
Impact of Changing Prices
The Company was not materially affected by changing prices in 1996.
Capital Resources
As of December 31, 1996, the Company had $1,322,533 in cash and cash equivalents
compared to $1,856,008 in cash and cash equivalents at December 31, 1995.
<PAGE> 8
Cash flows used in operations during the 1996 year were principally attributable
to an increase in accounts receivable resulting from Atlantic's approximate $5
million annualized increase in sales volume during the 1996 year.
Cash flows provided by investing activities of $761,986 during 1996 was due to
proceeds received from the sale of land and payment on a note receivable offset
slightly by capital expenditures.
Cash flows used in financing activities of $430,895 during 1996 was due to
payments made on notes offset by a $63,315 net increase in line of credit
borrowings.
A $1,000,000 note receivable due December 31, 1995 remains unpaid. The
Company is engaged in litigation in connection with this note. The Company
anticipates eventual 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.
Although the final resolution of this matter on the Companys results of
operations or liquidity in a particular reporting period is not known,
management is of the opinion that the ultimate outcome of this matter will not
have a material adverse effect on the Company's consolidated financial position.
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 $2,500,000 line of credit is currently expiring in May of 1997. The
Company has begun negotiating an extension of the line for an additional two
years. 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.
<PAGE> 9
COLONIAL COMMERCIAL CORP.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 10
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, 1996 and 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1996. 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, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/S/ KPMG PEAT MARWICK LLP
March 7 , 1997
<PAGE> 11
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,322,533 1,856,008
Accounts receivable, net of allowance for doubtful
accounts of $317,250 in 1996 and $137,650 in 1995 8,305,224 6,815,401
Inventory 1,705,747 1,301,455
Notes receivable - current portion 105,000 659,500
Prepaid expenses and other assets 82,292 156,360
----------- -----------
Total current assets 11,520,796 10,788,724
Notes receivable, excluding current portion (note 3) 1,313,750 1,271,750
Investment in Monroc, Inc. 2,410,203 2,032,132
Property and equipment, net 126,972 109,300
Land held for sale 324,139 407,377
----------- -----------
$ 15,695,860 14,609,283
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 3,177,550 2,565,016
Accrued liabilities 1,094,335 930,013
Income taxes payable 137,000 206,356
Borrowings under line of credit 2,273,130 2,209,815
Notes payable - current portion 469,082 494,211
----------- -----------
Total current liabilities 7,151,097 6,405,411
Notes payable, excluding current portion 447,363 916,444
Excess of acquired net assets over cost 950,475 1,066,249
----------- -----------
Total liabilities 8,548,935 8,388,104
----------- -----------
Stockholders' equity:
Convertible preferred stock, $.01 par value,
liquidation preference of $8,599,696 and
$8,719,171 at December 31, 1996 and 1995,
respectively, 12,344,300 shares authorized,
8,599,696 and 8,719,171 shares issued and outstanding
at December 31, 1996 and 1995, respectively 85,997 87,192
Common stock, $.01 par value, 40,000,000 shares authorized,
6,886,689 and 6,767,214 shares issued and outstanding at
December 31, 1996 and 1995, respectively 68,867 67,672
Additional paid-in capital 9,023,669 9,023,669
Unrealized gain on investment security 760,203 382,132
Accumulated deficit (2,791,811) (3,339,486)
----------- -----------
Total stockholders' equity 7,146,925 6,221,179
----------- -----------
Commitments and contingencies (notes 3 and 16)
$ 15,695,860 14,609,283
See accompanying notes to consolidated financial statements. ============ ==========
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales $25,059,492 13,653,247 -
Interest 121,781 271,866 284,646
Other 13,064 32,173 12,915
---------- ---------- ----------
Total revenues 25,194,337 13,957,286 297,561
---------- ---------- ----------
Expenses:
Cost of sales 18,568,269 10,039,756 -
Selling, general and administrative, net 5,886,881 3,505,205 916,167
---------- ---------- ----------
Total expenses 24,455,150 13,544,961 916,167
---------- ---------- ----------
Operating income (loss) 739,187 412,325 (618,606)
Other income (expense):
Gain on land sales 258,651 744,936 930,145
Interest (263,790) (177,729) -
Writedown of investment in CRF Funding - - (18,424)
---------- ---------- ----------
Income before income taxes 734,048 979,532 293,115
Income taxes 186,373 104,273 -
---------- ---------- ----------
Net income $ 547,675 875,259 293,115
========== ========== ==========
Net income per common and preferred share $ .04 .06 .02
========== ========== ==========
Common and preferred shares outstanding 15,486,385 15,486,385 15,486,385
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 13
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
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, 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
Conversion of 119,475 shares of
preferred stock to common
stock (1,195) 1,195 - - - -
Net income - - - - 547,675 547,675
Net unrealized gain on investment
security - - - 378,071 - 378,071
------- ------- --------- ------- ---------- ---------
Balances at December 31, 1996 $ 85,997 68,867 9,023,669 760,203 (2,791,811) 7,146,925
======= ======= ========= ======= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 14
<TABLE>
<CAPTION>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Reconciliation of net income to net
cash provided by (used in) operating
activities:
Net income $ 547,675 875,259 293,115
Adjustments to reconcile net income to
cash provided by (used in) operating activities,
net of effects from the purchase of Atlantic
Hardware & Supply Corporation:
Deferred tax benefit - (206,356) -
Gain on disposal of fixed assets - (11,201) -
Gain on sale of land (258,651) (744,936) (930,145)
Provision for allowance for doubtful accounts 232,600 137,650 -
Write-off of investment in CRF Funding - - 18,424
Depreciation 68,930 34,099 2,693
Amortization of excess of acquired net assets
over cost (115,774) (63,035) -
Changes in assets and liabilities:
Accounts receivable (1,722,423) (1,292,750) -
Inventory (404,292) 474,394 -
Prepaid expenses and other assets 74,068 16,399 56,282
Accounts payable 612,534 588,590 55,536
Accrued liabilities 164,322 57,610 -
Income taxes payable (69,356) 206,356 -
Other 5,801 9,888 -
---------- ---------- --------
Net cash provided by (used in)
operating activities (864,566) 81,967 (504,095)
---------- ---------- --------
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)
Proceeds from sale of land 336,088 422,500 2,282,185
Payments received on notes receivable 512,500 129,036 109,036
Deed of trust received on land sale - - 146,481
Additions to property and equipment (86,602) (34,836) -
---------- ---------- ---------
Net cash provided by (used in)
investing activities 761,986 (671,695) 1,317,260
---------- ---------- ---------
Cash flows from financing activities:
Payments on notes payable (494,210) (519,341) (548,592)
Borrowing from short-term bank loan - 1,800,000 -
Repayment of short-term bank loan - (1,800,000) -
Net borrowing under line of credit 63,315 2,159,815 -
---------- ---------- ---------
Net cash provided by (used in)
financing activities (430,895) 1,640,474 (548,592)
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents (533,475) 1,050,746 264,573
Cash and cash equivalents - beginning of period 1,856,008 805,262 540,689
---------- ---------- ---------
Cash and cash equivalents - end of period $ 1,322,533 1,856,008 805,262
========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 15
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(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 hold certain assets for investment purposes.
As a result of an acquisition in 1995(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 at December 31, 1995 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. There were no cash equivalents at December 31,
1996.
(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.
(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.
(Continued)
<PAGE> 16
2
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
(h) Land Held For Sale
------------------
The land held for sale is stated at cost. Impairment, if any, is recognized
if the estimated fair value less costs to sell are lower than the
carrying value.
(i) Stock Option Plan
-----------------
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if and to the extent that the current market price of
the underlying stock exceeded the exercise price. On January 1, 1996,
the Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (Statement 123), which permits
entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, Statement
123 also allows entities to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in Statement 123
had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of Statement 123.
(j) 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.
(k) Income Per Common and Preferred Share
-------------------------------------
Net income per common and preferred share is based upon net income and the
number of common and preferred shares outstanding for the period. For
purposes of this calculation, the convertible preferred stock is
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 per common and preferred share by less
than 3%.
(l) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
-----------------------------------------------------------------------
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (Statement 121) on
January 1, 1996. This Statement requires that long-lived
(Continued)
<PAGE> 17
3
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the
carrying amount of fair value less costs to sell. Adoption of this Statement
did not have a material impact on the Companys financial position, results of
operations, or liquidity.
(m) 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.
(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 Atlantics
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 on a straight-line basis
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 income from the date of acquisition.
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>
(Continued)
<PAGE> 18
4
COLONIAL COMMERCIAL CORP.
Notes to Consolidated Financial Statements, Continued
(3) Notes Receivable
----------------
Notes receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Note receivable (a) $ 1,000,000 1,000,000
Subordinated note (b) 418,750 553,750
Note receivable arising from land sale,
secured, due October 31, 1996,
interest at 8% - 377,500
--------- ----------
Total notes receivable 1,418,750 1,931,250
Less current portion 105,000 659,500
--------- ----------
Total notes receivable,
less current portion $ 1,313,750 1,271,750
========= =========
</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 and,
accordingly, the Company made a demand for payment. 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. In January 1996,
the Company instituted an action against the debtors for a summary judgment
to enforce payment of the note. Both actions were pending as the Company and
the debtors negotiated to restructure the terms of the note in March 1996.
The restructured terms of the note were to provide for collateral and
scheduled principal payments to begin in April 1996. The parties were unable
to agree to the terms of a restructured note and as such the Company pursued
its legal action to obtain summary judgment. In June 1996, the Company's
motion for summary judgment was denied and the action was consolidated with
that of the debtors (the consolidated action). On September 26, 1996, the
Company filed an appeal of the decision denying summary judgment and
proceeded with the consolidated action.
The impact of the final resolution of this matter on the Company's results
of operations or liquidity in a particular reporting period cannot be
estimated. 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 December 31, 1996 as management is of the opinion that
the result of the litigation will be favorable and that the Company will be
paid pursuant to the note or will obtain assets in a judgment, and the
expected future cash flows from the sale of such assets will be at least
equal to the amount of the note. However, any amount the Company will
ultimately realize upon the final resolution of this matter could differ
materially in the near term from the amount recorded on the accompanying
consolidated balance sheet due to the outcome of the Company's appeal of the
decision denying summary judgment, the outcome of the consolidated action,
and availability of assets if awarded in a judgment against the debtor, as
well as the cash flows obtained upon the sale of such assets. The final
outcome of this matter could have a material effect on results of operations
for a particular quarter or year in which the matter is ultimately resolved.
The maximum loss on this matter could include both the loss of the note
receivable, plus punitive damages. The note receivable is classified as a
long-term asset as of December 31, 1996 on the accompanying balance sheet,
due to the uncertainty as to when the matter will be resolved.
(b) The Company has a subordinated note due from Monroc (note 4) bearing
interest at the prime rate, which was 8.25% and 8.5% at December 31, 1996
and 1995, respectively. Under the terms of the subordination agreement,
Monroc made principal payments of $135,000 and $120,000 during 1996 and
1995, respectively, and is to make future payments of $120,000 per year
provided that it is in compliance with the terms of its line of credit
agreement.
(Continued)
<PAGE> 19
5
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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, 1996 and 1995. The
Company's interest in Monroc constituted 8.5% of the total outstanding
shares at December 31, 1996 and 1995. The fair value of the investment
security was $2,410,203 and $2,032,132 at December 31, 1996 and 1995,
respectively , which is comprised of a cost basis of $1,650,000 and a
gross unrealized holding gain of $760,203 and $382,132 at December 31,
1996 and 1995, respectively, which is 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>
<S> <C> <C>
Computer hardware $ 142,465 74,928
Office and warehouse equipment 20,465 5,747
Furniture and fixtures 37,109 32,762
Automobiles 51,863 51,863
------- ------
251,902 165,300
Less accumulated depreciation 124,930 56,000
------- -------
$ 126,972 109,300
======= =======
</TABLE>
(6) Financing Arrangements
----------------------
At December 31, 1996 and 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 $2,273,130 and $2,209,815 at December 31, 1996
and 1995, respectively. Borrowings under the line of credit bear
interest at prime plus 2%, which was 10.25% and 10.5% at December 31,
1996 and 1995, respectively. 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, 1996 and 1995 were $2,374,624 and 2,209,815. For
the year ended December 31, 1996, average borrowings under the line were
$2,023,249 and the weighted average interest rate was 10.3%. 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%.
(Continued)
<PAGE> 20
6
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Notes Payable
-------------
Notes payable of $916,445 and $1,410,655 at December 31, 1996 and 1995,
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
income. Included in accrued liabilities at December 31, 1996 and 1995 is
approximately $545,355 and $486,628, respectively, of unclaimed payments
on the notes payable.
The aggregate annual maturities of the notes payable, at December 31, 1996,
are as follows:
1997 $ 469,082
1998 447,363
---------
$ 916,445
===========
(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 the
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, 1996 there were 10,327,196 shares of common stock reserved
for conversion of preferred stock and for the exercise of stock options
(note 9).
(9) Stock Options
-------------
In June 1996, the Company adopted the 1996 stock option plan (the 1996
Plan) pursuant to which the Company's Board of Directors may grant up to
1,000,000 options to key employees and other persons who render service
to the Company until December 31, 2005. Under the 1996 Plan, the options
can be either incentive or nonqualified. 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 may not
be 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 may
not be less than 85% of the fair market value of the Company's common
stock on the date of grant. No options were granted in 1996 under the
1996 Plan.
In May 1995, nonqualified options to purchase 50,000 shares of common stock
were granted to a key employee at $0.38 per share which equaled the fair
market value of the shares at the date of grant under the 1986 stock
option plan (1986 Plan). The 1986 Plan, which expired on December 31,
1995, had similar provisions to that of the 1996 Plan.
(Continued)
<PAGE> 21
7
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The per share weighted average fair value of the stock options granted
during 1995 was $0.35 on the date of grant using the Black Scholes
option-pricing model with the following weighted average assumptions:
expected dividend yield 0%, expected volatility of 100%, risk-free
interest rate of 6.4% and an expected life of 10 years.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options in the consolidated financial statements On a pro forma basis,
had the Company determined compensation cost based upon the fair value
at the grant date for its stock options under Statement 123, the
Company's net income would have been reduced by approximately $17,500
with no impact to earnings per share.
Changes in options outstanding are as follows:
<TABLE>
<CAPTION>
Shares Subject Weighted Average
to Option Exercise Price
------------ --------------
<S> <C> <C>
Balance at December 31, 1993 677,500 $ .28
Granted - -
--------
Balance at December 31, 1994 677,500 .28
Granted 50,000 .38
--------
Balance at December 31, 1995 727,500 .29
Granted - -
--------
Balance at December 31, 1996 727,500 $ .29
</TABLE>
At December 31, 1996, 1995 and 1994, all shares subject to option were
exercisable. At December 31, 1996, the range of exercise prices and
weighted average remaining contractual life of outstanding options was
$.25-$.38 per share and six years, respectively.
(10) Income Taxes
------------
The provision (benefit) for income taxes attributable to income is comprised
of:
<TABLE>
<CAPTION>
1996 1995
---- ----
State and State and
Federal Local Total Federal Local Total
------- ------ ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Current $ 4,569 181,804 186,373 43,989 266,640 310,269
Deferred $ - - - (26,713) (179,643) (206,356)
----- ------- ------- -------- --------- ---------
$ 4,569 181,804 186,373 17,276 86,997 104,273
===== ======= ======= ====== ====== =======
</TABLE>
Income tax expense for 1996 and 1995 differed from amounts computed by
applying the U.S. Federal income tax rate of 34% to pre-tax income due
to state and local taxes, net of Federal income tax benefit and a net
reduction in the valuation allowance of deferred tax assets of
$1,183,811 and $858,475 for 1996 and 1995, respectively. Income tax
expense for 1994 differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to pretax income due to a reduction in
the valuation allowance of $99,659.
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 at the date of acquisition. 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.
(Continued)
<PAGE> 22
8
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The components of deferred income tax benefit attributable to income from
continuing operations are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax expense (exclusive of the effect
of the other components listed below) 115,489 (212,698)
Adjustment to deferred tax assets for expired
net operating loss carryforwards 1,063,322 234,418
Recording of deferred tax liability in
connection with acquisition - 206,356
Decrease in the valuation allowance for
deferred tax assets (1,178,811) (434,432)
--------- --------
$ - (206,356)
========= ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1996 and 1995 are
presented below.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 12,917,942 14,264,144
Accounts receivable due to allowance
for doubtful accounts 146,249 65,315
Inventory due to valuation reserve 85,283 -
Alternative minimum tax credit carryforward 45,163 43,989
----------- ----------
Total gross deferred tax assets 13,194,637 14,373,448
Less valuation allowance (13,194,637) (14,378,448)
---------- -----------
Net deferred tax assets $ - -
========== ===========
</TABLE>
At December 31, 1996, 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 1997 through 2015. Approximately $1,933,000 of the net operating
loss carryforwards will expire if not utilized during 1997. During 1996,
the Company utilized approximately $832,000 of its net operating loss
carryforwards and $3,127,418 expired. 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.
(Continued)
<PAGE> 23
9
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(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.
It was not possible to estimate the fair value of the $1,000,000 note
receivable due to the litigation surrounding the collectibility of the
note (notes 3 (a) and 16 (a)). The remaining notes approximate fair
value as the interest rates are comparable to rates currently offered by
local lending institutions for loans of similar terms to companies with
comparable credit risk.
The notes payable carrying amounts of $916,445 and $1,410,655 in the
accompanying consolidated balance sheets, have an estimated fair value
of approximately $874,950 and $1,163,000 at December 31, 1996 and 1995,
respectively. The fair values of the notes payable were 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>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash paid during the years for:
Interest $ 260,628 154,575 -
======= ======= =====
Income taxes $ 250,878 108,741 -
======= ======= =====
</TABLE>
Non-cash transactions:
In 1995, the Company issued a note receivable for $377,500 in connection
with the sale of land.
As of December 31, 1996 and 1995, the Company recorded an unrealized
holding gain relating to available-for-sale marketable equity securities
of $378,071 and $382,132 , respectively, as a separate component of
stockholder's equity.
(13) Employee Benefit Plans
----------------------
The Company has a profit-sharing plan and a 401(k) plan, which cover
substantially all employees of Atlantic. Participants in the 401(k) plan
may contribute a percentage of compensation, but not in excess of the
maximum allowed under the Internal Revenue Code. The 401(k) plan does
not provide for matching contributions, however, the Board of Directors
can authorize discretionary contributions to both the profit sharing and
401(k) plans. In 1996 and 1995, the Board of Directors authorized
$75,000 and $33,827, respectively of such discretionary contributions to
the plans. Prior to 1995 the Company did not have these employee benefit
plans.
(Continued)
<PAGE> 24
10
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(14) Industry Segments
-----------------
Summarized financial information for each of the Company's two business
segments for 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Door
hardware, Investing
doors activities and
1996 and door frames corporate Total
---- ---------------- ------------ -----
<S> <C> <C> <C>
Revenues $25,051,282 143,055 25,194,337
Operating income (loss) 1,507,194 (768,007) 739,187
Identifiable assets 10,218,917 5,476,943 (a) 15,695,860
Depreciation expense 63,298 5,632 68,930
Capital expenditures 84,104 2,498 86,602
====== ===== ======
1995
----
Revenues $13,653,247 304,039 13,957,286
Operating income (loss) 928,575 (516,250) 412,325
Identifiable assets 8,477,432 5,876,851 (a) 14,354,283
Depreciation expense 31,406 2,693 34,099
Capital expenditures 31,499 3,338 34,837
====== ===== ======
</TABLE>
(a) Principally related to the Company's investing activities.
(15) Business and Credit Concentrations
----------------------------------
During 1996, four customers accounted for approximately 23% of the Company's
annual sales and during 1995, seven customers accounted for
approximately 30% of the Company's annual sales. At December 31, 1996,
seven customers had accounts receivable balances, which in the aggregate
represented 30% of the total net receivable and at December 31, 1995,
six customers represented 27% of the total net receivables. 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.
(16) Commitments and Contingencies
-----------------------------
a) Legal Proceedings
-----------------
The Company was named in an action seeking $3,000,000 in punitive damages in
connection with a $1,000,000 note receivable (note 3(a)). The impact of
the final resolution of this matter on the Company's results of
operations or liquidity in a particular reporting period cannot be
estimated. In the opinion of management, the ultimate disposition of
this matter will not have a material adverse effect on the Company's
consolidated financial position.
(Continued)
<PAGE> 25
11
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(b) 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. For this
and adjoining properties, the Environmental Protection Agency (EPA) has
concluded that remedial action should be taken and has been proposed by
the 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 Company has been participating in a study group with the EPA, the former
owner, Murray City, and other current land owners to develop a plan that
would result in the remediation of the property. An agreement in
principle has been reached among all parties and upon execution of a
formal understanding, the EPA will begin the process of preparing a
consent agreement in 1997. Cleanup will take several years to accomplish
and involves a combination of off-site disposal, development of the
area, including new road construction and on-site treatment. Development
of the land for commercial purposes will be possible at the end of the
process. The remediation plan calls for the dedication of less than one
acre of the Company's property for the extension of a roadway in Murray
City. If the consent agreement is approved, any cost to the Company is
not expected to be material. However, until approval of a consent
agreement, it is difficult to estimate the financial impact to the
Company, if any.
(c) 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, 1996 under such contracts
is approximately $1,555,200.
(d) 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 $291,600,
$208,000 and $18,000 for the years ended December 31, 1996, 1995 and
1994, respectively. At December 31, 1996, future minimum lease payments
in the aggregate and for each of the five succeeding years are as
follows:
1997 265,942
1998 272,534
1999 205,104
2000 77,690
2001 10,842
-------
$ 832,112
=======
<PAGE> 26
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
Retired Corporate Executive
Gerald S. Deutsch
Certified Public Accountant and Attorney
William Koon
President - Lords Enterprises, grain merchants
Bernard Korn
Chairman of the Board/President
Donald K. MacNeill
Retired Corporate Executive
Ronald Miller
Miller and Hearn, 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 11,1997,10:30 AM Levittown, New York 11756-1315
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
FED. I.D. 11-2037182
NAME OF SUBSIDIARY I.D. NUMBER
<S> <C>
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
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
</TABLE>
<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.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,322,533
<SECURITIES> 0
<RECEIVABLES> 8,622,474
<ALLOWANCES> 317,250
<INVENTORY> 1,705,747
<CURRENT-ASSETS> 11,520,796
<PP&E> 251,902
<DEPRECIATION> 124,930
<TOTAL-ASSETS> 15,695,860
<CURRENT-LIABILITIES> 7,151,097
<BONDS> 447,363
0
85,997
<COMMON> 68,867
<OTHER-SE> 6,992,061
<TOTAL-LIABILITY-AND-EQUITY> 15,695,860
<SALES> 25,059,492
<TOTAL-REVENUES> 25,194,337
<CGS> 18,568,269
<TOTAL-COSTS> 18,568,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 232,600
<INTEREST-EXPENSE> 263,790
<INCOME-PRETAX> 734,048
<INCOME-TAX> 186,373
<INCOME-CONTINUING> 547,675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 547,675
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
