ý
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES
EXCHANGE ACT OF 1934
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For
the quarterly period ended March
31, 2006
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OR
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o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period from ________________ to
________________
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New
York
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11-2037182
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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275
Wagaraw Road, Hawthorne, New Jersey
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07506
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(Address
of principal executive offices)
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(Zip
Code)
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Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer x
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Class
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Outstanding
at May 1, 2006
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Common
Stock, $.05 par value per share
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4,577,614
shares
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|
Convertible
Preferred Stock, $.05 par value per share
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475,566
shares
|
PART
I. FINANCIAL
INFORMATION
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||||
Item
1.
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||||
1
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||||
2
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||||
3
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||||
4
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||||
Item
2.
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9
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|||
Item
3.
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13
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|||
Item
4.
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14
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PART
II. OTHER
INFORMATION
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||||
Item
1.
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14
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|||
Item
6.
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16
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March
31,
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December
31,
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||||||
2006
|
2005
|
||||||
(Unaudited)
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|||||||
Assets
|
|||||||
Current
assets:
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|||||||
Cash
|
$
|
563,156
|
$
|
613,456
|
|||
Accounts
receivable, net of allowance for doubtful accounts of $169,268
in 2006 and
$185,971 in 2005
|
7,707,152
|
8,489,717
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|||||
Inventory
|
14,314,466
|
12,214,261
|
|||||
Prepaid
expenses and other current assets
|
980,841
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1,066,658
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|||||
Deferred
tax asset - current portion
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637,500
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637,500
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|||||
Total
current assets
|
24,203,115
|
23,021,592
|
|||||
Property
and equipment
|
1,653,514
|
1,669,484
|
|||||
Goodwill
|
1,628,133
|
1,628,133
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|||||
Other
intangibles
|
7,917
|
11,334
|
|||||
Other
assets - noncurrent
|
122,713
|
135,832
|
|||||
Deferred
tax asset - noncurrent
|
1,071,000
|
1,071,000
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|||||
$
|
28,686,392
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$
|
27,537,375
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||||
Liabilities
and Stockholders' Equity
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|||||||
Current
liabilities:
|
|||||||
Trade
payables
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$
|
6,802,202
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$
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5,991,946
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|||
Accrued
liabilities
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1,911,084
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2,047,159
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|||||
Income
taxes payable
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19,029
|
12,772
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|||||
Borrowings
under credit facility - revolving credit
|
12,336,234
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11,183,008
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|||||
Borrowings
under credit facility - term loan
|
312,977
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562,977
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|||||
Notes
payable - current portion; includes related party notes of $30,000
in 2006
and $60,389 in 2005
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134,677
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165,112
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|||||
Total
current liabilities
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21,516,203
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19,962,974
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|||||
Notes
payable, excluding current portion; includes related party notes
of
$1,010,000 in 2006 and $1,000,625 in 2005
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1,407,671
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1,400,834
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|||||
Total
liabilities
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22,923,874
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21,363,808
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|||||
Commitments
and contingencies
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|||||||
Stockholders'
equity:
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|||||||
Redeemable
convertible preferred stock, $.05 par value, 2,500,000 shares authorized,
475,566 in 2006 and 484,721 in 2005 shares issued and outstanding,
liquidation preference of $2,377,830 in 2006 and $2,423,605 in
2005
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23,778
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24,236
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|||||
Common
stock, $.05 par value, 20,000,000 shares authorized, 4,553,614
in 2006 and
4,544,459 in 2005 shares issued and outstanding
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227,681
|
227,223
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|||||
Additional
paid-in capital
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10,638,899
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10,626,859
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|||||
Accumulated
deficit
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(5,127,840
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)
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(4,704,751
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)
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Total
stockholders' equity
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5,762,518
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6,173,567
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|||||
$
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28,686,392
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$
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27,537,375
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For
The Three Months Ended
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|||||||
March
31,
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|||||||
2006
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2005
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||||||
Sales
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$
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14,884,214
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$
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13,347,318
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Cost
of sales
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10,297,447
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9,094,248
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|||||
Gross
profit
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4,586,767
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4,253,070
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|||||
Selling,
general and administrative expenses, net
|
4,756,862
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4,250,624
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|||||
Operating
(loss) income
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(170,095
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)
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2,446
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||||
Other
income
|
65,789
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61,877
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|||||
Interest
expense, net; includes related party interest of $25,629 in 2006
and
$21,820 in
2005
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(299,662
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)
|
(243,560
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)
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Loss
before income taxes
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(403,968
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)
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(179,237
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)
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Income
tax expense
|
19,121
|
19,696
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|||||
Net
loss
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$
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(423,089
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)
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$
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(198,933
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)
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Loss
per common share:
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|||||||
Basic
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$
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(0.09
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)
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$
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(0.05
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)
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Diluted
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$
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(0.09
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)
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$
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(0.05
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)
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Weighted
average shares outstanding:
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|||||||
Basic
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4,549,411
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4,165,183
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Diluted
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4,549,411
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4,165,183
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For
The Three Months Ended
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|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities:
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|||||||
Net
loss
|
$
|
(423,089
|
)
|
$
|
(198,933
|
)
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Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
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Stock-based
compensation
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-
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(10,900
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)
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Provision
for doubtful accounts
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59,844
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35,170
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|||||
Depreciation
|
106,690
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98,737
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|||||
Amortization
of intangibles
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3,417
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6,694
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|||||
Accretion
of debt discount
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9,375
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9,375
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Changes
in operating assets and liabilities
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|||||||
Accounts
receivable
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722,721
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787,790
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|||||
Inventory
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(2,100,205
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)
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(835,513
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)
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Prepaid
expenses and other current assets
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97,857
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308,477
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Other
assets - noncurrent
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13,119
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13,896
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Trade
payables
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810,256
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436,259
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|||||
Accrued
liabilities
|
(136,075
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)
|
(23,308
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)
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Income
taxes payable
|
6,257
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(10,846
|
)
|
||||
Net
cash (used in) provided by operating activities
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(829,833
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)
|
616,898
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Cash
flows from investing activities:
|
|||||||
Additions
to property and equipment
|
(90,720
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)
|
(107,995
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)
|
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Net
cash used in investing activities
|
(90,720
|
)
|
(107,995
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Issuance
of common stock and exercise of stock options
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-
|
3,500
|
|||||
Repayments
of notes payable: includes related party repayments of $30,389 in 2006,
and $0.00 in 2005.
|
(46,046
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)
|
(14,434
|
)
|
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Issuance
of notes payable
|
13,073
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-
|
|||||
Repayments
under credit facility - term loan
|
(250,000
|
)
|
(353,690
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)
|
|||
Borrowings
(repayments) under credit facility - revolving credit
|
1,153,226
|
(25,399
|
)
|
||||
Net
cash provided by (used in) financing activities
|
870,253
|
(390,023
|
)
|
||||
(Decrease)
increase in cash
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(50,300
|
)
|
118,880
|
||||
Cash
- beginning of period
|
613,456
|
310,659
|
|||||
Cash
- end of period
|
$
|
563,156
|
$
|
429,539
|
1.
|
Summary
of Significant Accounting Policies and
Practices
|
Range
of
Exercise
Prices
|
Shares
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
|||||||
$
.25
|
106,000
|
5.37
|
$
|
.25
|
For
the Quarter Ended
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||||
March
31,
2005
|
||||
Net
loss, as reported
|
$
|
(198,933
|
)
|
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Add:
Stock-based
compensation
|
||||
related
to option repricing
|
(10,900
|
)
|
||
Pro
forma net loss
|
$
|
(209,833
|
)
|
|
Basic
loss per share, as reported
|
(0.05
|
)
|
||
Basic
loss per share, pro forma
|
(0.05
|
)
|
||
Diluted
loss per share, as reported
|
(0.05
|
)
|
||
Diluted
loss per share, pro forma
|
(0.05
|
)
|
2. |
Equity
Transactions
|
3. |
Supplemental
Cash Flow Information
|
For
the Three Months Ended
|
|||||||
March
31, 2006
|
March
31, 2005
|
||||||
Cash
paid during the period for:
|
|||||||
Interest
|
$
|
283,714
|
$
|
208,387
|
|||
Income
taxes
|
$
|
57,364
|
$
|
44,906
|
4. |
Net
Loss Per Common Share
|
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
March 31,
|
|||||||
2006
|
2005
|
||||||
Sales
|
100.0
|
%
|
100.0
|
%
|
|||
Cost
of sales
|
69.2
|
%
|
68.1
|
%
|
|||
Gross
profit
|
30.8
|
%
|
31.9
|
%
|
|||
Selling,
general and administrative expenses
|
31.9
|
%
|
31.9
|
%
|
|||
Operating
loss
|
(1.1
|
)%
|
0.0
|
%
|
|||
Other
income
|
0.4
|
%
|
0.4
|
%
|
|||
Interest
expense
|
(2.0
|
)%
|
(1.8
|
)%
|
|||
Loss
before taxes
|
(2.7
|
)%
|
(1.4
|
)%
|
|||
Income
taxes
|
(0.1
|
)%
|
(0.1
|
)%
|
|||
Net
loss
|
(2.8
|
)%
|
(1.5
|
)%
|
(a) |
Evaluation
of Disclosure Controls and
Procedures
|
(b) |
Changes
in Internal Controls
|
31.1 |
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2 |
Certification
of Chief Financial Office Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32.1 |
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
32.2 |
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
Dated:
May 15, 2006
|
COLONIAL
COMMERCIAL CORP.
|
|
/s/
William Pagano
|
||
William
Pagano,
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||
Chief
Executive Officer
|
||
/s/
William Salek
|
||
William
Salek,
|
||
Chief
Financial Officer
|