For
the Quarter Ended June 30, 2005
|
Commission
File No. 1-6663
|
COLONIAL
COMMERCIAL CORP.
|
(Exact
Name of Company as Specified in its
Charter)
|
New
York
|
11-2037182
|
|||
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification Number)
|
|||
275
Wagaraw Road, Hawthorne, New Jersey
|
07506
|
|||
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Company's
Telephone Number, Including Area Code:
|
973-427-8224
|
120
New South Road, Hicksville, New York 11801
|
(Former
Address of Principal Executive
Offices)
|
PART
I.
|
PAGE
NO.
|
|
Item
1 -
|
||
1
|
||
|
||
2
|
||
3
|
||
4
|
||
5
|
||
Item
2 -
|
11
|
|
Item
3 -
|
18
|
|
Item
4 -
|
18
|
|
PART
II.
|
||
|
||
Item
1 -
|
19
|
|
Item
4 -
|
22
|
|
Item
6 -
|
23
|
June
30,
2005
|
December
31,
2004
|
||||||
(Unaudited)
|
|||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
493,998
|
$
|
310,659
|
|||
Accounts
receivable, net of allowance for doubtful accounts of $230,264
in 2005 and
$290,448 in 2004
|
8,764,983
|
7,774,588
|
|||||
Inventory
|
10,897,809
|
11,002,314
|
|||||
Prepaid
expenses and other current assets
|
1,079,014
|
865,732
|
|||||
Deferred
tax asset - current portion
|
574,061
|
574,061
|
|||||
Total
current assets
|
21,809,865
|
20,527,354
|
|||||
Property
and equipment
|
1,606,099
|
1,656,149
|
|||||
Goodwill
|
1,628,133
|
1,628,133
|
|||||
Other
intangibles
|
18,167
|
27,500
|
|||||
Other
assets - noncurrent
|
156,241
|
183,183
|
|||||
Deferred
tax asset - noncurrent
|
492,939
|
492,939
|
|||||
$
|
25,711,444
|
$
|
24,515,258
|
||||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities:
|
|||||||
Trade
payables
|
$
|
5,173,920
|
$
|
4,721,790
|
|||
Accrued
liabilities
|
1,962,673
|
1,744,006
|
|||||
Income
taxes payable
|
92,579
|
36,316
|
|||||
Borrowings
under credit facility
|
12,503,526
|
12,325,209
|
|||||
Notes
payable - current portion; includes related party notes of $0 in
2005 and
$30,000 in 2004
|
122,109
|
115,265
|
|||||
Total
current liabilities
|
19,854,807
|
18,942,586
|
|||||
Notes
payable, excluding current portion; includes related party notes
of
$871,875 in 2005 and $993,125 in 2004
|
1,383,730
|
1,398,774
|
|||||
Total
liabilities
|
21,238,537
|
20,341,360
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders'
equity:
|
|||||||
Redeemable
convertible preferred stock, $.05 par value, liquidation preference
of
$3,857,555 and $3,952,195 and 2,468,860 shares authorized,
771,511 in 2005
and 790,439 in 2004 shares, issued and
outstanding
|
38,576
|
39,522
|
|||||
Common
stock, $.05 par value, 20,000,000 shares authorized, 4,191,369
in 2005 and
4,158,441 in 2004 shares issued and outstanding
|
209,568
|
207,922
|
|||||
Additional
paid-in capital
|
10,723,896
|
10,746,836
|
|||||
Accumulated
deficit
|
(6,499,133
|
)
|
(6,820,382
|
)
|
|||
Total
stockholders' equity
|
4,472,907
|
4,173,898
|
|||||
$
|
25,711,444
|
$
|
24,515,258
|
For
The Three Months Ended June
30,
|
|||||||
2005
|
2004
|
||||||
Sales
|
$
|
17,501,842
|
$
|
16,148,926
|
|||
Cost
of sales
|
12,369,723
|
11,351,064
|
|||||
Gross
profit
|
5,132,119
|
4,797,862
|
|||||
Selling,
general and administrative expenses, net
|
4,368,437
|
4,032,186
|
|||||
Operating
income
|
763,682
|
765,676
|
|||||
Other
income
|
87,557
|
125,560
|
|||||
Interest
expense, net; includes related party interest of $18,646 in 2005
and $0 in
2004.
|
(250,029
|
)
|
(193,137
|
)
|
|||
Income
from operations before income tax expense
|
601,210
|
698,099
|
|||||
Income
tax expense
|
81,028
|
34,594
|
|||||
Net
income
|
$
|
520,182
|
$
|
663,505
|
|||
Income
per common share:
|
|||||||
Basic
|
$
|
0.12
|
$
|
0.22
|
|||
Diluted
|
$
|
0.10
|
$
|
0.16
|
|||
Weighted
average shares outstanding:
|
|||||||
Basic
|
4,185,505
|
3,011,554
|
|||||
Diluted
|
5,287,577
|
4,081,840
|
For
The Six Months Ended June
30,
|
|||||||
2005
|
2004
|
||||||
Sales
|
$
|
30,849,161
|
$
|
28,674,285
|
|||
Cost
of sales
|
21,463,971
|
20,066,444
|
|||||
Gross
profit
|
9,385,190
|
8,607,841
|
|||||
Selling,
general and administrative expenses, net
|
8,619,062
|
8,131,238
|
|||||
Operating
income
|
766,128
|
476,603
|
|||||
Other
income
|
149,435
|
182,277
|
|||||
Interest
expense, net; includes related party interest of $36,391 in 2005
and $0 in
2004.
|
(493,590
|
)
|
(373,052
|
)
|
|||
Income
from operations before income tax expense (benefit)
|
421,973
|
285,828
|
|||||
Income
tax expense (benefit)
|
100,724
|
(78,427
|
)
|
||||
Net
income
|
$
|
321,249
|
$
|
364,255
|
|||
Income
per common share:
|
|||||||
Basic
|
$
|
0.08
|
$
|
0.13
|
|||
Diluted
|
$
|
0.06
|
$
|
0.09
|
|||
Weighted
average shares outstanding:
|
|||||||
Basic
|
4,175,422
|
2,869,123
|
|||||
Diluted
|
5,287,377
|
4,078,661
|
For
The Six Months Ended June
30,
|
|||||||
2005
|
2004
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
321,249
|
$
|
364,255
|
|||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
|||||||
Deferred
tax benefit
|
-
|
(129,600
|
)
|
||||
Stock-based
compensation
|
(25,740
|
)
|
50,940
|
||||
Provision
for doubtful accounts
|
30,587
|
150,765
|
|||||
Depreciation
|
191,090
|
176,788
|
|||||
Amortization
of intangibles
|
9,333
|
20,833
|
|||||
Accretion
of debt discount
|
18,750
|
-
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(1,020,982
|
)
|
(1,755,496
|
)
|
|||
Inventory
|
104,505
|
(488,980
|
)
|
||||
Prepaid
expenses and other current assets
|
(213,282
|
)
|
(274,894
|
)
|
|||
Other
assets - noncurrent
|
26,942
|
-
|
|||||
Trade
payables
|
452,130
|
1,031,147
|
|||||
Accrued
liabilities
|
218,667
|
333,579
|
|||||
Income
taxes payable
|
56,263
|
(29,893
|
)
|
||||
Net
cash provided by (used in) operating activities
|
169,512
|
(550,556
|
)
|
||||
Cash
flows from investing activities:
|
|||||||
Additions
to equipment
|
(141,040
|
)
|
(211,106
|
)
|
|||
Net
cash used in investing activities
|
(141,040
|
)
|
(211,106
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Issuance
of common stock
|
3,500
|
360,000
|
|||||
Retirement
of preferred stock
|
-
|
(355,638
|
)
|
||||
Repayments
of notes payable
|
(26,950
|
)
|
(35,232
|
)
|
|||
Issuance
of notes payable
|
-
|
22,871
|
|||||
Net
borrowings under credit facility
|
178,317
|
1,387,332
|
|||||
Net
cash provided by financing activities
|
154,867
|
1,379,333
|
|||||
Increase
in cash and cash equivalents
|
183,339
|
617,671
|
|||||
Cash
and cash equivalents - beginning of period
|
310,659
|
342,756
|
|||||
Cash
and cash equivalents - end of period
|
$
|
493,998
|
$
|
960,427
|
1.
|
Summary
of Significant Accounting Policies and
Practices
|
For
the Quarter Ended June 30,
|
For
the Six Months Ended June 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income, as reported
|
$
|
520,182
|
$
|
663,505
|
$
|
321,249
|
$
|
364,255
|
|||||
Add:
Stock-based compensation
|
|||||||||||||
related
to option repricing
|
(14,840
|
)
|
(33,960
|
)
|
(25,740
|
)
|
50,940
|
||||||
Pro
forma net income
|
$
|
505,342
|
$
|
629,545
|
$
|
295,509
|
$
|
415,195
|
|||||
Basic
income per share, as reported
|
0.12
|
0.22
|
0.08
|
0.13
|
|||||||||
Basic
income per share, pro forma
|
0.12
|
0.21
|
0.07
|
0.14
|
|||||||||
Diluted
income per share, as reported
|
0.10
|
0.16
|
0.06
|
0.09
|
|||||||||
Diluted
income per share, pro forma
|
0.10
|
0.15
|
0.06
|
0.10
|
2.
|
Equity
Transactions
|
3.
|
Supplemental
Cash Flow Information
|
For
the Six Months Ended
|
|||||||
June
30, 2005
|
June
30, 2004
|
||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
446,212
|
$
|
306,733
|
|||
Income
taxes
|
$
|
156,206
|
$
|
131,212
|
4. |
Net
Income Per Common Share
|
For
the Quarter Ended June 30,
|
For
the Six Months Ended June 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
income (numerator)
|
$
|
520,182
|
$
|
663,505
|
$
|
321,249
|
$
|
364,255
|
|||||
Weighted
average common shares
|
|||||||||||||
(denominator
for basic income per share)
|
4,185,505
|
3,011,554
|
4,175,422
|
2,869,123
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Convertible
preferred stock
|
777,375
|
865,826
|
783,903
|
1,014,639
|
|||||||||
Convertible
notes
|
175,000
|
-
|
175,000
|
-
|
|||||||||
Stock
options
|
149,697
|
204,460
|
153,052
|
194,899
|
|||||||||
Weighted
average common and potential
|
|||||||||||||
Common
shares outstanding
|
|||||||||||||
(denominator
for diluted income per share)
|
5,287,577
|
4,081,840
|
5,287,377
|
4,078,661
|
|||||||||
Basic
net income per share
|
$
|
0.12
|
$
|
0.22
|
$
|
0.08
|
$
|
0.13
|
|||||
Diluted
net income per share
|
$
|
0.10
|
$
|
0.16
|
$
|
0.06
|
$
|
0.09
|
5.
|
Financing
Arrangements
|
6.
|
Litigation
|
7.
|
New
Accounting Pronouncements
|
8.
|
Subsequent
Events
|
Computer
hardware and software
|
3-5
years
|
Furniture
and fixtures
|
5
years
|
Automobiles
|
3-5
years
|
For
the Quarter Ended June 30,
|
For
the Six Months Ended June 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Cost
of sales
|
70.7
|
70.3
|
69.6
|
70.0
|
|||||||||
Gross
profit
|
29.3
|
29.7
|
30.4
|
30.0
|
|||||||||
Selling,
general and administrative expenses
|
25.0
|
25.0
|
27.9
|
28.3
|
|||||||||
Operating
income
|
4.3
|
4.7
|
2.5
|
1.7
|
|||||||||
Other
income
|
0.5
|
0.8
|
0.5
|
0.6
|
|||||||||
Interest
expense
|
(1.4
|
)
|
(1.2
|
)
|
(1.6
|
)
|
(1.3
|
)
|
|||||
Income
before taxes
|
3.4
|
4.3
|
1.4
|
1.0
|
|||||||||
Income
tax (expense) benefit
|
(0.4
|
)
|
(0.2
|
)
|
(0.4
|
)
|
0.3
|
||||||
Net
income
|
3.0
|
%
|
4.1
|
%
|
1.0
|
%
|
1.3
|
%
|
(a)
|
Evaluation
of Disclosure Controls and
Procedures
|
(b)
|
Changes
in Internal Controls
|
(a)
|
An
Annual Meeting of Shareholders was held on June 15,
2005.
|
PROPOSAL
|
FOR
|
AGAINST
|
ABSTAINED
|
|||||||
For
the preferred shareholders to elect William Koon, Ronald Miller and
Jack
Rose as Preferred Stock Directors:
|
||||||||||
William
Koon
|
585,153
|
-
|
4,218
|
|||||||
Ronald
Miller
|
584,751
|
-
|
4,620
|
|||||||
Jack
Rose
|
584,614
|
-
|
4,757
|
|||||||
For
the common shareholders to elect E. Bruce Fredrikson, Melissa Goldman,
Michael Goldman, Bernard Korn, William Pagano and Carl L. Sussman
as
Common Stock Directors:
|
||||||||||
E.
Bruce Fredrikson
|
3,714,307
|
-
|
93,047
|
|||||||
Melissa
Goldman
|
3,699,147
|
-
|
108,207
|
|||||||
Michael
Goldman
|
3,699,247
|
-
|
108,107
|
|||||||
Bernard
Korn
|
3,699,127
|
-
|
108,227
|
|||||||
William
Pagano
|
3,699,247
|
-
|
107,107
|
|||||||
Carl
L. Sussman
|
3,524,207
|
-
|
283,147
|
|||||||
To
ratify the selection of Weiser, LLP as independent public accountants
of
the Company for the fiscal year ending December 31, 2005:
|
3,792,152
|
15,443
|
3,893
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
Certification
of Chief Financial Office Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-
Oxley
Act of 2002.
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
Dated: August 12, 2005 | COLONIAL COMMERCIAL CORP | ||
/s/ Bernard Korn | |||
Bernard Korn, | |||
Chairman of the Board and President | |||
/s/ William Salek | |||
William Salek | |||
Chief Financial Officer |