|
ý |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
|
For
the quarterly period ended June 30, 2007
|
|||
OR
|
|||
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
|
For
the transition period from __________ to ___________
|
New
York
|
11-2037182
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
275
Wagaraw Road, Hawthorne, New Jersey
|
07506
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x
|
Class
|
Outstanding
at August 1, 2007
|
|
Common
Stock, $.05 par value per share
|
4,645,680
shares
|
|
Convertible
Preferred Stock, $.05 par value per share
|
467,500
shares
|
COLONIAL
COMMERCIAL CORP. AND
SUBSIDIARIES
|
||||
CONTENTS
|
||||
PART
I.
|
FINANCIAL
INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
Page
|
||
1
|
||||
2
|
||||
3
|
||||
4
|
||||
Item
2.
|
13
|
|||
Item
3.
|
21
|
|||
Item
4.
|
21
|
|||
PART
II.
|
OTHER
INFORMATION
|
|||
Item
1.
|
22
|
|||
Item
4.
|
22
|
|||
Item
6.
|
23
|
June
30,
2007
|
December 31,
2006
|
|||||||
(Unaudited)
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ |
1,104,993
|
$ |
482,251
|
||||
Accounts
receivable, net of allowance for doubtful accounts of $237,744 in
2007
and
|
||||||||
$212,043
in 2006
|
10,467,946
|
9,069,301
|
||||||
Inventory
|
14,322,144
|
12,854,317
|
||||||
Prepaid
expenses and other current assets
|
1,231,169
|
1,057,099
|
||||||
Deferred
tax asset - current portion
|
420,000
|
420,000
|
||||||
Total
current assets
|
27,546,252
|
23,882,968
|
||||||
Property
and equipment
|
1,507,904
|
1,512,666
|
||||||
Goodwill
|
1,628,133
|
1,628,133
|
||||||
Other
intangibles
|
2,500
|
3,500
|
||||||
Other
assets - noncurrent
|
179,268
|
202,177
|
||||||
Deferred
tax asset - noncurrent
|
1,288,500
|
1,288,500
|
||||||
$ |
32,152,557
|
$ |
28,517,944
|
|||||
Liabilities
and Stockholders' Equity
|
||||||||
Current
liabilities:
|
||||||||
Trade
payables
|
$ |
7,715,616
|
$ |
4,719,160
|
||||
Accrued
liabilities
|
1,748,260
|
1,975,175
|
||||||
Income
taxes payable
|
15,127
|
1,630
|
||||||
Borrowings
under credit facility - revolving credit
|
14,439,983
|
13,615,696
|
||||||
Notes
payable - current portion; includes related party notes of $30,000
in 2007
and 2006
|
135,051
|
136,539
|
||||||
Total
current liabilities
|
24,054,037
|
20,448,200
|
||||||
Convertible
notes payable, includes related party notes of $325,000 in 2007 and
2006
|
525,000
|
525,000
|
||||||
Other
notes payable, excluding current portion; includes related party
notes of
$701,875 in 2007 and $703,750 in 2006
|
774,102
|
792,394
|
||||||
Total
liabilities
|
25,353,139
|
21,765,594
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity:
|
||||||||
Redeemable
convertible preferred stock, $.05 par value, 2,500,000 shares
authorized,467,500 shares issued and outstanding in 2007 and
2006, liquidation preference of $2,337,500 in 2007 and
2006
|
23,375
|
23,375
|
||||||
Common
stock, $.05 par value, 20,000,000 shares authorized, 4,645,680 in
2007 and
4,593,680 in 2006 shares issued and outstanding
|
232,284
|
229,684
|
||||||
Additional
paid-in capital
|
10,735,203
|
10,707,791
|
||||||
Accumulated
deficit
|
(4,191,444 | ) | (4,208,500 | ) | ||||
Total
stockholders' equity
|
6,799,418
|
6,752,350
|
||||||
$ |
32,152,557
|
$ |
28,517,944
|
For The Three Months Ended
June
30,
|
For The Six Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
Net
sales
|
$ |
22,128,569
|
$ |
18,155,812
|
$ |
38,170,801
|
$ |
33,040,025
|
||||||||
Cost
of sales
|
16,025,133
|
12,718,347
|
27,195,863
|
22,917,233
|
||||||||||||
Gross
profit
|
6,103,436
|
5,437,465
|
10,974,938
|
10,122,792
|
||||||||||||
Selling,
general and administrative expenses
|
5,364,444
|
4,793,206
|
10,353,050
|
9,550,068
|
||||||||||||
Operating
income
|
738,992
|
644,259
|
621,888
|
572,724
|
||||||||||||
Other
income
|
78,479
|
63,467
|
143,077
|
129,256
|
||||||||||||
Interest
expense, net; includes related party interest of $25,767 and $25,765
for
the three months ended June 30, 2007 and 2006, respectively, and
$51,734and $51,393 for the six months ended June 30, 2007and 2006,
respectively
|
(361,254 | ) | (336,240 | ) | (695,296 | ) | (635,902 | ) | ||||||||
Income
before income taxes
|
456,217
|
371,486
|
69,669
|
66,078
|
||||||||||||
Income
tax expense
|
49,222
|
33,121
|
52,613
|
52,242
|
||||||||||||
Net
Income
|
$ |
406,995
|
$ |
338,365
|
$ |
17,056
|
$ |
13,836
|
||||||||
Income
per common share:
|
||||||||||||||||
Basic
|
$ |
0.09
|
$ |
0.07
|
$ |
0.00
|
$ |
0.00
|
||||||||
Diluted
|
$ |
0.08
|
$ |
0.06
|
$ |
0.00
|
$ |
0.00
|
||||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic
|
4,645,680
|
4,579,846
|
4,645,393
|
4,578,606
|
||||||||||||
Diluted
|
5,306,768
|
5,127,026
|
5,131,934
|
5,138,556
|
For
The Six Months Ended June 30,
|
||||||||
2007
|
2006
|
|||||||
(Restated)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
17,056
|
$ |
13,836
|
||||
Adjustments
to reconcile net income to net cash provided by (used in) operating
activities:
|
||||||||
Stock-based
compensation
|
17,012
|
-
|
||||||
Provision
for doubtful accounts
|
153,195
|
84,310
|
||||||
Depreciation
|
247,737
|
222,472
|
||||||
Amortization
of intangibles
|
1,000
|
6,834
|
||||||
Accretion
of debt discount
|
18,750
|
18,750
|
||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(1,551,840 | ) | (717,287 | ) | ||||
Inventory
|
(1,467,827 | ) | (1,547,010 | ) | ||||
Prepaid
expenses and other current assets
|
(174,070 | ) |
73,548
|
|||||
Other
assets - noncurrent
|
22,909
|
3,153
|
||||||
Trade
payables
|
2,996,456
|
97,153
|
||||||
Accrued
liabilities
|
(226,915 | ) | (26,782 | ) | ||||
Income
taxes payable
|
13,497
|
(11,801 | ) | |||||
Net
cash provided by (used in) operating activities
|
66,960
|
(1,782,824 | ) | |||||
Cash
flows from investing activities:
|
||||||||
Additions
to property and equipment
|
(242,975 | ) | (195,959 | ) | ||||
Net
cash used in investing activities
|
(242,975 | ) | (195,959 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Issuance
of common stock and exercise of stock options
|
13,000
|
8,000
|
||||||
Repayments
of notes payable: includes related party repayments of $0 in 2007,
and
$30,289 in 2006.
|
(38,530 | ) | (64,922 | ) | ||||
Issuance
of notes payable
|
-
|
13,073
|
||||||
Borrowings
under credit facility - term loan/overadvance
|
-
|
250,000
|
||||||
Borrowings
under credit facility - revolving credit
|
824,287
|
2,129,188
|
||||||
Net
cash provided by financing activities
|
798,757
|
2,335,339
|
||||||
Increase
in cash
|
622,742
|
356,556
|
||||||
Cash
- beginning of period
|
482,251
|
613,456
|
||||||
Cash
- end of period
|
$ |
1,104,993
|
$ |
970,012
|
1.
|
Summary
of Significant Accounting Policies and
Practices
|
2.
|
Stock
Options
|
Options
Outstanding and Exercisable
|
||||||||||||||||||
Range
of
Exercise
Prices
|
Shares
|
Weighted
Average
Remaining
Contractual
Life
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
||||||||||||||
$ |
.25
|
22,000
|
1.98
|
$ |
.25
|
|||||||||||||
$ |
1.85
|
30,000
|
9.44
|
$ |
1.85
|
|||||||||||||
52,000
|
$ |
1.17
|
$ |
27,500
|
||||||||||||||
Options
Outstanding and Non-exercisable
|
||||||||||||||||||
$ |
1.85
|
45,000
|
9.44
|
$ |
1.85
|
$ |
0
|
3.
|
Equity
Transactions
|
4.
|
Supplemental
Cash Flow Information
|
For
the Six Months Ended
|
||||||||
June
30, 2007
|
June
30, 2006
|
|||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ |
681,012
|
$ |
598,810
|
||||
Income
taxes
|
$ |
20.410
|
$ |
65,179
|
5.
|
Net
Income Per Common Share
|
For the Quarter Ended
June
30,
|
For the Six Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
Net
Income (numerator for basic income per share)
|
$ |
406,995
|
$ |
338,365
|
$ |
17,056
|
$ |
13,836
|
||||||||
Interest
expense on convertible notes (net of tax)
|
$ |
12,879
|
- | (1) | - | (1) | - | (1) | ||||||||
Adjusted
Net Income (numerator for diluted income per share)
|
$ |
419,874
|
$ |
338,365
|
$ |
17,056
|
$ |
13,836
|
||||||||
Weighted
average common shares
|
||||||||||||||||
(denominator
for basic income per share)
|
4,645,680
|
4,579,846
|
4,645,393
|
4,578,606
|
||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Convertible
preferred stock
|
467,500
|
474,267
|
467,500
|
477,018
|
||||||||||||
Convertible
notes
|
175,000
|
- | (1) | - | (1) | - | (1) | |||||||||
Stock
options
|
18,588
|
72,913
|
19,041
|
82,932
|
||||||||||||
Weighted
average common and potential common shares
|
||||||||||||||||
outstanding
(denominator for diluted income per share)
|
5,306,768
|
5,127,026
|
5,131,934
|
5,138,556
|
||||||||||||
Basic
net income per share
|
$ |
0.09
|
$ |
0.07
|
$ |
0.00
|
$ |
0.00
|
||||||||
Diluted
net income per share
|
$ |
0.08
|
$ |
0.07
|
$ |
0.00
|
$ |
0.00
|
6.
|
Financing
Arrangements
|
7.
|
Litigation
|
8.
|
New
Accounting Pronouncements
|
9.
|
Income
Tax Expense
|
10.
|
Related
Party Transactions
|
11.
|
Restatement
|
For The Three Months Ended
|
For the Six Months Ended
|
|||||||||||||||
June
30,
|
June
30
|
|||||||||||||||
Restated
|
As
Previously
Reported
|
Restated
|
As
Previously
Reported
|
|||||||||||||
2006
|
2006
|
2006
|
2006
|
|||||||||||||
Cost
of Sales
|
$ |
12,718,347
|
$ |
12,714,879
|
$ |
22,917,233
|
$ |
23,012,325
|
||||||||
Gross
Profit
|
5,437,465
|
5,440,933
|
10,122,792
|
10,027,700
|
||||||||||||
Operating
income
|
644,259
|
647,727
|
572,724
|
477,632
|
||||||||||||
Income
(loss) before income taxes
|
371,486
|
374,954
|
66,078
|
(29,014 | ) | |||||||||||
Net
income (loss)
|
$ |
338,365
|
$ |
341,833
|
$ |
13,836
|
$ | (81,256 | ) | |||||||
Income
(loss) per common share:
|
||||||||||||||||
Basic:
|
$ |
0.07
|
$ |
0.07
|
$ |
0.00
|
$ | (0.02 | ) | |||||||
Diluted:
|
$ |
0.06
|
$ |
0.06
|
$ |
0.00
|
$ | (0.02 | ) | |||||||
Weighted
average shares outstanding:
|
||||||||||||||||
Basic:
|
4,579,846
|
4,579,846
|
4,578,606
|
4,578,606
|
||||||||||||
Diluted:
|
5,127,026
|
5,302,026
|
5,138,556
|
4,578,606
|
For The Six Months Ended
|
||||||||
Restated
|
As
Previously
Reported
|
|||||||
2006
|
2006
|
|||||||
Net
income (loss)
|
$ |
13,836
|
$ | (81,256 | ) | |||
Inventory
|
(1,547,010 | ) | (1,451,918 | ) |
Computer
hardware and software
|
3-5
years
|
Furniture
and fixtures
|
5
years
|
Automobiles
|
3-5
years
|
Showroom
fixtures and displays
|
3
years
|
For
the Quarter
Ended
June 30,
|
For
the Six Months
Ended
June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of sales
|
72.4
|
70.1
|
71.2
|
69.4
|
||||||||||||
Gross
profit
|
27.6
|
29.9
|
28.8
|
30.6
|
||||||||||||
Selling,
general and administrative expenses
|
24.3
|
26.3
|
27.2
|
28.9
|
||||||||||||
Operating
income
|
3.3
|
3.6
|
1.6
|
1.7
|
||||||||||||
Other
income
|
0.4
|
0.4
|
0.4
|
0.4
|
||||||||||||
Interest
expense, net
|
(1.6 | ) | (1.9 | ) | (1.8 | ) | (1.9 | ) | ||||||||
Income
before taxes
|
2.1
|
2.1
|
0.2
|
0.2
|
||||||||||||
Income
taxes
|
(0.3 | ) | (0.2 | ) | (0.2 | ) | (0.2 | ) | ||||||||
Net
income
|
1.8 | % | 1.9 | % | 0.0 | % | 0.0 | % |
|
a.
|
Evaluation
of Disclosure Controls and
Procedures
|
|
b.
|
Changes
in Internal Controls
|
|
a.
|
An
Annual Meeting of Shareholders was held on June 12,
2006.
|
|
b.
|
On
June 12 2006, the common and preferred shareholders elected E. Bruce
Fredrikson, Melissa Goldman-Williams, Michael Goldman, Stuart H.
Lubow,
Ronald H. Miller and William Pagano as Directors. The common
and preferred shareholders voted in favor of a resolution appointing
Eisner LLP as the independent registered public accounting firm for
the
Company for the fiscal year ending December 31,
2007.
|
PROPOSAL
|
FOR
|
AGAINST
|
ABSTAINED
|
|||||||||
For
the common and preferred shareholders to elect E. Bruce
Fredrikson, Melissa Goldman-Williams, Michael Goldman, Stuart H.
Lubow,
Ronald H. Miller and William Pagano as Directors:
|
||||||||||||
E.
Bruce Fredrikson
|
4,632,820
|
-
|
18,484
|
|||||||||
Melissa
Goldman-Williams
|
4,575,737
|
-
|
75,567
|
|||||||||
Michael
Goldman
|
4,576,883
|
-
|
74,421
|
|||||||||
Stuart
H. Lubow
|
4,633,258
|
-
|
18,046
|
|||||||||
Ronald
H. Miller
|
4,632,313
|
18,991
|
||||||||||
William
Pagano
|
4,576,664
|
-
|
74,640
|
|||||||||
To
ratify the selection of Eisner LLP as independent public accountants
of
the Company for the fiscal year ending December 31, 2007:
|
4,584,417
|
8,987
|
57,900
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
||
Certification
of Chief Financial Officer 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
14, 2007
|
COLONIAL
COMMERCIAL CORP.
|
/s/
William Pagano
|
|
William
Pagano,
|
|
Chief
Executive Officer
|
|
/s/
William Salek
|
|
William
Salek,
|
|
Chief
Financial Officer
|