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, 1998 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
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(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, 1998.
Common Stock, par value $.05 per share - 1,433,589 shares
Convertible Preferred Stock, par value $.05 per share - 1,663,688 shares
<PAGE>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets as of
March 31,1998 (unaudited) and
December 31, 1997 1
Consolidated Statements of Operations
Three Months ended March 31, 1998 and
1997 (unaudited) 2
Consolidated Statements of Cash Flows for
the Three Months ended March 31, 1998 and
1997 (unaudited) 3
Notes to Consolidated Financial Statements
(unaudited) 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote of Security Holders 6
Item 6 - Exhibits and Reports on Form 8-K 7
SIGNATURES 7
<PAGE>
PART 1.
Item 1. Financial Statements
- -----------------------------
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Assets 1998 1997
------ ---- ----
(Unaudited)
<S> <C> <C>
Cash $ 529,639 1,240,986
Accounts receivable, net of allowance for doubtful
accounts of $463,282 in 1998 and $416,688 in 1997 7,012,609 7,904,353
Inventory 1,139,318 823,267
Notes receivable - current portion 278,035 278,035
Prepaid expenses and other assets 89,831 114,245
Investment in Monroc, Inc. 3,424,405 3,321,790
Land held for sale 174,226 174,226
Deferred taxes 306,000 306,000
------------ ------------
Total current assets 12,954,063 14,162,902
Notes receivable, excluding current portion 652,854 652,854
Property and equipment, net 352,037 344,701
------------ ------------
$ 13,958,954 15,160,457
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable 1,200,699 1,748,551
Accrued liabilities 923,613 1,075,218
Income taxes payable 118,472 112,606
Borrowings under line of credit 1,941,334 1,990,108
Notes payable - current portion -- 447,363
------------ ------------
Total current liabilities 4,184,118 5,373,846
Excess of acquired net assets over cost 809,310 837,543
------------ ------------
Total liabilities 4,993,428 6,211,389
------------ ------------
Stockholders' equity:
Convertible preferred stock, $.05 par value, liquidation
preference of $8,318,440 and $8,337,710
at March 31,1998 and December 31,1997, respectively
2,468,860 shares authorized, 1,663,688 and
1,667,542 shares issued, at March 31, 1998 and
December 31, 1997, respectively, 1,654,527 and
1,667,542 shares outstanding at March 31, 1998 and
December 31, 1997, respectively 83,184 83,377
Common stock, $.05 par value, 20,000,000 shares
authorized, 1,433,589 and 1,429,735 shares issued
at March 31, 1998 and December 31, 1997, respectively,
1,426,520 and 1,429,735 shares outstanding
at March 31, 1998 and December 31, 1997,
respectively 71,680 71,487
Additional paid-in capital 9,023,669 9,023,669
Accumulated other comprehensive income 1,992,605 1,889,990
Accumulated deficit (2,167,009) (2,119,455)
Treasury stock, 7,069 and 9,161 common and preferred
shares, respectively, at cost (38,603) --
------------ ------------
Total stockholders' equity 8,965,526 8,949,068
------------ ------------
Commitments and contingencies
$ 13,958,954 15,160,457
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-1-
COLONIAL COMMERCIAL CORP.
Consolidated Statements of Operations
Three Months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Sales $ 5,082,652 5,801,662
Cost of sales 3,647,261 4,398,835
--------- ----------
Gross profit 1,435,391 1,402,827
--------- ----------
Selling, general and
administrative expenses, net 1,414,979 1,394,741
--------- ---------
Operating income 20,412 8,086
Interest income 24,656 13,177
Other income 4,322 1,273
Interest expense (57,944) (70,832)
------- -------
Loss before income taxes (8,554) (48,296)
Income taxes 39,000 20,000
------ ------
Net loss $ (47,554) (68,296)
====== =======
Net earnings per common share:
Basic (.03) (.05)
===== =====
Diluted (.03) (.05)
==== =====
Weighted average shares outstanding:
Basic 1,431,767 1,397,186
Diluted 1,431,767 1,397,186
See accompanying notes to consolidated financial statements.
-2-
COLONIAL COMMERCIAL CORP.
Consolidated Statements of Cash Flows
Three Months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Reconciliation of net loss to net cash
used in operating activities:
Net loss $ (47,554) (68,296)
Adjustments to reconcile net loss to cash
used in operating activities:
Provision for allowance for doubtful accounts 70,000 67,500
Depreciation 24,591 17,092
Amortization of excess of acquired net assets
over cost (28,233) (28,233)
Changes in assets and liabilities:
Accounts receivable 821,744 (239,389)
Inventory (316,051) 107,179
Prepaid expenses and other assets 24,414 (26,627)
Accounts payable (547,852) (137,443)
Accrued liabilities (151,605) (151,848)
Income taxes payable 5,866 (14,911)
--------- --------
Net cash used in operating activities (144,680) (474,976)
--------- ---------
Cash flows from investing activities:
Additions to property and equipment (31,927) (11,760)
--------- ---------
Net cash used in investing activities (31,927) (11,760)
--------- ---------
Cash flows from financing activities:
Payments on notes payable (447,363) (469,082)
Net borrowings (repayments) under line of credit (48,774) 207,251
Payments for purchase of treasury stock (38,603) -
--------- ---------
Net cash used in financing activities (534,740) (261,831)
--------- ---------
Decrease in cash (711,347) (748,567)
Cash - beginning of period 1,240,986 1,322,533
--------- ----------
Cash - end of period $ 529,639 573,966
=========== ==========
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998 and December 31, 1997
(Unaudited)
(1) The consolidated financial statements of Colonial Commercial Corp. and
subsidiaries (the Company), included herein have been prepared by the
Company and are unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair statement of the
financial position, results of operations, and cash flows for the interim
periods to which the report relates. The results of operations for the
period ended March 31, 1998 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 l997 Annual Report filed on Form 10-KSB.
(2) Supplemental Cash Flow Information
----------------------------------
The following is supplemental information relating to the consolidated
statements of cash flows:
Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash paid during the period for:
Interest $ 60,645 $ 69,938
Income taxes $ 64,208 $ 121,622
(3) Comprehensive Income
--------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This
Statement requires that all items recognized under accounting standards as
components of comprehensive income be reported in an annual financial
statement that is displayed with the same prominence as other annual
financial statements. For example, other comprehensive income may include
foreign currency translation adjustments, minimum pension liability
adjustments, and unrealized gains and losses on marketable securities
classified as available-for-sale. The Company's only item of other
comprehensive income is the net change in unrealized gain on
available-for-sale securities. The accumulated other comprehensive income
of $1,992,605 and $1,889,990 at March 31, 1998 and December 31, 1997 on the
accompanying consolidated balance sheets is the unrealized gain on the
Company's investment security. Annual financial statements for prior
periods will be classified, as required.
-4-
The Company's total comprehensive income was as follows:
Three Months Ended March 31
1998 1997
Net loss $ (47,554) (68,296)
Other comprehensive income (loss) 102,615 (94,518)
------- ---------
Total comprehensive income (loss) $ 55,061 (162,814)
========= =========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
Results of Operations - Three Months Ended
March 31, 1998 and 1997
Registrant reported a net loss of $47,554 for the first quarter of 1998,
which includes $157,797 of net income from Atlantic Hardware and Supply
Corporation ("Atlantic"), as compared to a net loss of $68,296 for the first
quarter of l997, which included $117,087 of net income from Atlantic.
Sales decreased $719,010 (12%) to $5,082,652 in the 1998 period due to the
timing of contracts. However, sales backlog has increased $1,382,000 since
December 31, 1997 to $10,253,000. Gross margins improved primarily as a result
of changes in product mix. Selling, general and administrative expenses, net
increased $20,238. Interest expense decreased $12,888. The Registrant has
provided for income taxes primarily as a result of state income taxes associated
with the income from Atlantic.
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, the sale of Monroc
stock and the operating results of Atlantic.
Liquidity and Capital Resources
As of March 31, l998, the Registrant had $529,639 in cash compared to
$1,240,986 at December 31, 1997.
Cash flows used in operations during the first quarter 1998 improved in
comparison to the first quarter 1997 principally due to a reduction in accounts
payable and accrued liabilities and an increase in inventory, partially offset
by a reduction in accounts receivable, as a result of lower sales in the
quarter.
Cash flows used in financing activities during the first quarter of 1998 of
$534,740 were due to payments made on notes of $447,363, repayments on the line
of credit of $48,774 and payments of $38,603 to acquire treasury stock.
-5-
<PAGE>
The Company believes that its cash is adequate for its present operations
and that additional credit is available should it be required. The Company's
resources consist primarily of cash, investment in Atlantic and Monroc, notes
receivable and land held for sale. The Company believes the carrying value of
its land held for sale is less than its market value.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
- --------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
(a) Special Meeting of Shareholders on January 13, 1998
(c) On January 13, 1998, the stockholders approved a proposal to amend the
Company's Certificate of Incorporation to effect a five-to-one reverse stock
split by changing the number of authorized shares of common stock, par value
$.01 from 40,000,000 shares to 8,000,000 shares, par value $.05 and the number
of authorized shares of convertible preferred stock, par value $.01, from
12,344,300 shares to 2,468,860 shares, par value $.05. The Company made the
reverse stock split effective on January 30, 1998. In addition, stockholders
approved a proposal to amend the Company's Certificate of Incorporation
immediately following the amendment effecting the reverse stock split to
increase the amount of authorized common stock to 20,000,000 with a par value of
$.05 per share.
PROPOSAL FOR AGAINST ABSTAINED
-------- --- ------- ---------
To amend the Company's Certificate
of Incorporation to effect a one-
for-five reverse stock split by
changing the number of authorized
shares to Common Stock, par value
$.01 from 40,000,000 shares to
8,000,000 shares par value $.05 and
the number of Convertible Preferred
Stock, par value $.01 from
12,344,300 shares to 2,468,860
shares, par value $.05 8,762,272 315,233 185,048
To amend the Company's Certificate
of Incorporation immediately
following the amendment effecting
the reverse stock split to increase
the amount of authorized Common
Stock to 20,000,000 shares, with a
par value of $.05 per share. 9,058,832 435,183 200,971
To approve an increase in the number
of shares of Common Stock for which
options can be issued pursuant to
the 1996 Stock Option Plan by
1,000,000 shares from 200,000 shares
to 1,200,000 shares on a post-
reverse stock split basis. 6,758,517 598,275 210,941
-6-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27.1 Financial Data Schedule March 31, 1998
Exhibit 27.2 Restated Financial Data Schedule
March 31, 1997
(b) Reports on Form 8-K - During the three months ended March 31,
l998, 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
under-signed thereunto duly authorized.
Dated: May 7, 1998 COLONIAL COMMERCIAL CORP.
/s/ Bernard Korn
----------------
Bernard Korn, Chairman
of the Board and President
/s/ James W. Stewart
--------------------
James W. Stewart
Executive Vice President,
Treasurer and Secretary
-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-01-1998
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 529,639
<SECURITIES> 0
<RECEIVABLES> 7,475,891
<ALLOWANCES> 463,282
<INVENTORY> 1,139,318
<CURRENT-ASSETS> 12,954,063
<PP&E> 563,175
<DEPRECIATION> 211,138
<TOTAL-ASSETS> 13,958,954
<CURRENT-LIABILITIES> 4,184,118
<BONDS> 0
0
83,184
<COMMON> 71,680
<OTHER-SE> 8,810,662
<TOTAL-LIABILITY-AND-EQUITY> 13,958,954
<SALES> 5,082,652
<TOTAL-REVENUES> 5,082,652
<CGS> 3,647,261
<TOTAL-COSTS> 3,647,261
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70,000
<INTEREST-EXPENSE> 57,944
<INCOME-PRETAX> (8,554)
<INCOME-TAX> 39,000
<INCOME-CONTINUING> (47,554)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (47,554)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 FORM 10-QSB AS RESTATED IN ACCORDANCE WITH FASB 128, WHICH WAS ADOPTED
DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<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> (.05)
<EPS-DILUTED> (.05)
</TABLE>
