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 MARCH 31, 1997 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 MARCH 31, 1997.
COMMON STOCK, PAR VALUE $.01 PER SHARE - 6,985,931 SHARES
CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE - 8,500,454 SHARES
<PAGE>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1997 (UNAUDITED)
AND DECEMBER 31, 1996 1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1997
AND 1996 (UNAUDITED) 2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AS OF MARCH 31, 1997 (UNAUDITED)
AND DECEMBER 31, 1996 3
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 1997
AND 1996 (UNAUDITED) 4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS 7
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 7
SIGNATURES 7
<PAGE>
PART I.
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
- ------ ---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash And Cash Equivalents $ 573,966 1,322,533
Accounts Receivable, Net Of Allowance For
Doubtful Accounts Of $384,750
In 1997 And $317,250 In 1996 8,477,113 8,305,224
Inventory
1,598,568 1,705,747
Notes Receivable - Current Portion 105,000 105,000
Prepaid Expenses And Other Assets 108,919 82,292
------------ -----------
TOTAL CURRENT ASSETS 10,863,566 11,520,796
Notes Receivable, Excluding Current Portion 1,313,750 1,313,750
Investment In Monroc, Inc. 2,315,685 2,410,203
Property And Equipment, Net 121,640 126,972
Land Held For Sale 324,139 324,139
------------ -----------
$ 14,938,780 15,695,860
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable 3,040,107 3,177,550
Accrued Liabilities 942,487 1,094,335
Income Taxes Payable 122,089 137,000
Borrowings Under Line Of Credit 2,480,381 2,273,130
Notes Payable - Current Portion 447,363 469,082
------------ -----------
Total Current Liabilities 7,032,427 7,151,097
Notes Payable, Excluding Current Portion -- 447,363
Excess Of Acquired Net Assets Over Cost, Net 922,242 950,475
------------ -----------
TOTAL LIABILITIES 7,954,669 8,548,935
------------ -----------
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock, $.01 Par Value
Liquidation Preference Of $8,500,454 And
$8,599,696 At March 31, 1997 And December 31,
1996, Respectively, 12,344,300 Shares Authorized,
8,500,454 And 8,599,696 Shares Issued And
Outstanding At March 31, 1997 And December 31,
1996, Respectively 85,005 85,997
Common Stock, $.01 Par Value, 40,000,000 Shares
Authorized, And 6,985,931 Shares Issued And
6,886,689 Outstanding At March 31, 1997 And
December 31, 1996, Respectively 69,859 68,867
Additional Paid-in Capital 9,023,669 9,023,669
Unrealized Gain On Investment Security 665,685 760,203
Accumulated Deficit (2,860,107) (2,791,811)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 6,984,111 7,146,925
------------ -----------
Commitments And Contingencies $ 14,938,780 15,695,860
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
<PAGE>
COLONIAL COMMERCIAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
Sales $ 5,801,662 $ 5,311,665
Cost Of Sales 4,398,835 3,961,890
------------ -----------
Gross Profit 1,402,827 1,349,775
------------ -----------
Selling, General And Administrative, Net 1,394,741 1,367,537
------------ -----------
Operating Income (Loss) 8,086 (17,762)
Interest Income 13,177 30,471
Other Income 1,273 1,359
Interest Expense (70,832) (59,817)
------------ -----------
Loss Before Income Taxes (48,296) (45,749)
------------ -----------
Income Taxes 20,000 15,000
------------ -----------
Net Loss (68,296) (60,749)
Net Loss Per Common And Preferred Share $ (0.0) (0.0)
------------ -----------
Common And Preferred Shares Outstanding $ 15,486,385 $15,486,385
============ ===========
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
COLONIAL COMMERCIAL CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
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, 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
Conversion of 99,242
shares of preferred
stock to common
stock (992) 992 -- -- -- --
Net loss -- -- -- -- (68,296) (68,296)
Net unrealized loss
on investment
security -- -- -- (94,518) -- (94,518)
-------- ------ --------- ------- ---------- ---------
Balances at
March 31, 1997 $ 85,005 69,859 9,023,669 665,685 (2,860,107) 6,984,111
======== ====== ========= ======= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Reconciliation of net loss to net cash used in operating activities:
Net loss $ (68,296) (60,749)
Adjustments to reconcile net loss to cash used in operating activities
Provision for allowance for doubtful accounts 67,500 56,250
Depreciation 17,092 13,709
Amortization of excess of acquired net assets over cost (28,233) (31,075)
Changes in assets and liabilities:
Accounts receivable (239,389) 441,003
Inventory 107,179 (683,222)
Prepaid expenses and other assets (26,627) 45,252
Accounts payable (137,443) (70,768)
Accrued liabilities (151,848) (39,071)
Income taxes payable (14,911) --
----------- ----------
Net cash used in operating activities (474,976) (328,671)
Cash flows from investing activities:
Change in land held for sale -- 20,000
Additions to property and equipment (11,760) (4,469)
----------- ----------
Net cash provided by (used in) investing activities (11,760) 15,531
Cash flows from financing activities:
Payments on notes payable (469,082) (494,211)
Net borrowings (repayments) under line of credit 207,251 (214,066)
----------- ----------
Net cash used in financing activities (261,831) (708,277)
----------- ----------
Decrease in cash and cash equivalents (748,567) (1,021,417)
Cash and cash equivalents - beginning of period 1,322,533 1,856,008
----------- ----------
Cash and cash equivalents - end of period $ 573,966 834,591
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1997 and December 31, 1996
(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 consolidated
financial position, results of operations, and cash flows for the interim
periods to which the report relates. The consolidated results of operations
for the period ended March 31, 1997 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 1996 Annual Report filed on Form 10-KSB.
(2) Reclassifications
-----------------
Certain reclassifications have been made to the 1996 consolidated financial
statements in order to conform to the 1997 presentation.
(3) Supplemental Cash Flow Information
----------------------------------
The following is supplemental information relating to the consolidated
statements of cash flows:
THREE MONTHS ENDED
MARCH 31,1997 MARCH 31, 1996
------------- --------------
Cash paid during the period for:
Interest $ 69,938 $ 64,341
Income taxes $ 121,622 $ -0-
(4) Earnings Per Share
------------------
The Financial Accounting Standards Board has issued Statement 128, "Earnings
per Share" (Statement 128). Statement 128 establishes standards for computing
and presenting earnings per share (EPS). The Statement simplifies the
standards for computing EPS and makes them comparable to international EPS
standards. The provisions of Statement 128 are effective for financial
statements issued for periods ending after December 15, 1997, including
interim periods. The Statement does not permit early application and requires
restatement of all prior period EPS data presented. Adoption of Statement 128
will not effect the Company's consolidated financial position or results of
operations, however, the impact on previously reported EPS data is currently
unknown.
(5) 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. The Company instituted an
action against the debtors for summary judgment and the debtors instituted an
action against the Company to declare the note unenforceable and for $3
million in punitive damages. In June 1996, the Company's motion for summary
judgment was denied and its action was consolidated with the debtors action.
In September 1996, the Company filed an appeal of the action denying summary
judgment.
In April 1997, the Appellate Division of the Supreme Court of the State of
New York reversed the lower court decision and ordered that the Company be
granted summary judgment on the $1,000,000 promissory note, together with
interest and costs.
-5-
<PAGE>
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 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 March 31, 1997 as management is of the opinion that the Company will
obtain assets pursuant to the 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
availability of assets, 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 note receivable is classified as a long-term asset
as of March 31, 1997 on the accompanying balance sheet, due to the
uncertainty as to when the matter will be resolved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
results of operations - three months ended
march 31, 1997 and 1996
Registrant reported a net loss of $ 68,296 for the first three months of
1997, which included $117,087 of net income from Atlantic Hardware and Supply
Corporation (Atlantic), as compared to a net loss of $60,749 for the first three
months of 1996, which included $104,988 of net income from Atlantic.
Sales increased $489,997 (9%) to $5,801,662 in the 1997 period. Cost of
sales increased $436,945 to $4,398,835 for the 1997 period, partly attributable
to the increase in sales and to a 1.2% increase in the cost of merchandise over
the 1996 period. Selling and administrative expenses increased $27,204. Interest
expenses increased $11,015 principally due to the financing of higher accounts
receivable and inventory resulting from higher sales, as compared to the 1996
period. The Registrant has provided for income taxes primarily as a result of
state income taxes associated with the income from Atlantic. Atlantic's sales
backlog decreased $330,000 since December 31, 1996 to $9,300,000.
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.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Registrant had $ 573,966 in cash and cash
equivalents compared to $1,322,533 at December 31, 1996.
Cash flows used in operations during the first quarter 1997 were
principally attributable to a reduction in current accounts payable and accrued
expenses and increased accounts receivables from increased sales.
Cash flows used in financing activities during the first quarter of 1997 of
$261,831 was due to payments made on notes offset by a $207,251 increase in
borrowings on the line of credit.
A $1,000,000 note receivable due December 31, 1995 remains unpaid. In April
1997, the Company was awarded a judgment 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 Company's 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.
-6-
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement 128,
"Earnings per Share" (Statement 128). Statement 128 establishes standards for
computing and presenting earnings per share (EPS). The Statement simplifies the
standards for computing EPS and makes them comparable to international EPS
standards. The provisions of Statement 128 are effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. The Statement does not permit early application and requires
restatement of all prior period EPS data presented. Adoption of Statement 128
will not effect the Company's consolidated financial position or results of
operations, however, the impact on previously reported EPS data is currently
unknown.
PART II. OTHER INFORMATION
ITEM 1. 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 judgment which
was granted on April 28,1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits - Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K - During the three months ended March 31, 1997,
the Registrant did not file any reports on Form 8-K.
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
undersigned thereunto duly authorized.
COLONIAL COMMERCIAL CORP.
Dated: May 6, 1997
/s/ Bernard Korn
-------------------------------
Bernard Korn, Chairman of the Board
and President
/s/ James W. Stewart
-------------------------------
James W. Stewart, Executive
Vice Pres. Treasurer and Secretary
-7-
<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> 3-MOS
<PERIOD-START> JAN-01-1997
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 573,966
<SECURITIES> 0
<RECEIVABLES> 8,861,863
<ALLOWANCES> 384,750
<INVENTORY> 1,598,568
<CURRENT-ASSETS> 10,863,566
<PP&E> 263,662
<DEPRECIATION> 142,022
<TOTAL-ASSETS> 14,938,780
<CURRENT-LIABILITIES> 7,032,427
<BONDS> 447,363
0
85,005
<COMMON> 69,859
<OTHER-SE> 6,829,247
<TOTAL-LIABILITY-AND-EQUITY> 14,938,780
<SALES> 5,801,662
<TOTAL-REVENUES> 5,801,662
<CGS> 4,398,835
<TOTAL-COSTS> 4,398,835
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 67,500
<INTEREST-EXPENSE> 70,832
<INCOME-PRETAX> (48,296)
<INCOME-TAX> 20,000
<INCOME-CONTINUING> (68,296)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (68,296)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
