SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2005 Commission File No. 1-6663
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COLONIAL COMMERCIAL CORP.
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(Exact Name of Company as Specified in its Charter)
New York 11-2037182
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
120 New South Road, Hicksville, New York 1801
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(Address of Principal Executive Offices) (Zip Code)
Company's Telephone Number, Including Area Code: 516-681-4647
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Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
---
Indicate by check mark whether the Company (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 the Company 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 the Company's Common Stock and
Convertible Preferred Stock as of April 29, 2005.
Common Stock, par value $.05 per share - 4,172,520 shares
Convertible Preferred Stock, par value $.05 per share - 790,360 shares
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 2005 (Unaudited) and December 31, 2004 1
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 2005 and 2004 2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2005 and 2004 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 11
Item 4 - Controls and Procedures 12
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 6 - Exhibits 13
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
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COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, December 31,
2005 2004
------------ --------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 429,539 $ 310,659
Accounts receivable, net of allowance for doubtful accounts
of $311,809 in 2005 and $290,448 in 2004 6,951,628 7,774,588
Inventory 11,837,827 11,002,314
Prepaid expenses and other current assets 557,255 865,732
Deferred tax asset - current portion 574,061 574,061
------------ --------------
Total current assets 20,350,310 20,527,354
Property and equipment 1,665,407 1,656,149
Goodwill 1,628,133 1,628,133
Other intangibles 20,806 27,500
Other assets - noncurrent 169,287 183,183
Deferred tax asset - noncurrent 492,939 492,939
------------ --------------
$24,326,882 $ 24,515,258
============ ==============
Liabilities and Stockholders' Equity
Current liabilities:
Trade payables $ 5,158,049 $ 4,721,790
Accrued liabilities 1,720,698 1,744,006
Income taxes payable 25,470 36,316
Borrowings under credit facility 11,946,120 12,325,209
Notes payable - current portion; includes related party
notes of $0 in 2005 and $30,000 in 2004 115,964 115,265
------------ --------------
Total current liabilities 18,966,301 18,942,586
Notes payable, excluding current portion; includes related party
notes of $862,500 in 2005 and $993,125 in 2004 1,393,016 1,398,774
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Total liabilities 20,359,317 20,341,360
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Commitments and contingencies
Stockholders' equity:
Redeemable convertible preferred stock, $.05 par value, liquidation
preference of $3,951,800 and $3,952,195 and 2,468,860 shares
authorized, 790,360 in 2005 and 790,439 in 2004
shares issued and outstanding 39,518 39,522
Common stock, $.05 par value, 20,000,000 shares
authorized, 4,172,520 in 2005 and 4,158,441 in 2004 shares
issued and outstanding 208,626 207,922
Additional paid-in capital 10,738,736 10,746,836
Accumulated deficit (7,019,315) (6,820,382)
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Total stockholders' equity 3,967,565 4,173,898
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$24,326,882 $ 24,515,258
============ ==============
See accompanying notes to unaudited condensed consolidated financial statements.
1
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
For The Three Months Ended
March 31,
--------------------------------
2005 2004
--------------- ---------------
Sales $ 13,347,318 $ 12,525,359
Cost of sales 9,094,248 8,715,380
--------------- ---------------
Gross profit 4,253,070 3,809,979
Selling, general and administrative expenses, net 4,250,624 4,099,052
--------------- ---------------
Operating income (loss) 2,446 (289,073)
Other income 61,877 56,650
Interest expense, net; includes related party interest of
$17,745 in 2005 and -0- in 2004. (243,560) (179,848)
--------------- ---------------
Loss from operations before
income taxes (benefit) expense (179,237) (412,271)
Income taxes expense (benefit) 19,696 (113,021)
--------------- ---------------
Net loss $ (198,933) $ (299,250)
=============== ===============
Loss per common share:
Basic: $ (0.05) $ (0.11)
Diluted: $ (0.05) $ (0.11)
Weighted average shares outstanding:
Basic 4,165,183 2,726,692
Diluted 4,165,183 2,726,692
See accompanying notes to unaudited condensed consolidated financial statements.
2
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For The Three Months Ended
2005 2004
---------------- ----------------
Cash flows from operating activities:
Net loss $ (198,933) $ (299,250)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Deferred tax benefit - (129,600)
Stock-based compensation (10,900) 84,900
Provision for doubtful accounts 35,170 66,384
Depreciation 98,737 95,811
Amortization of intangibles 6,694 10,416
Accretion of debt discount 9,375 -
Changes in operating assets and liabilities
Accounts receivable 787,790 (366,902)
Inventory (835,513) (80,299)
Prepaid expenses and other current assets 308,477 (74,278)
Other assets - noncurrent 13,896 -
Trade payables 436,259 500,655
Accrued liabilities (23,308) (75,477)
Income taxes payable (10,846) (48,787)
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Net cash provided by (used in) operating activities 616,898 (316,427)
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Cash flows from investing activities:
Additions to property and equipment (107,995) (188,579)
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Net cash used in investing activities (107,995) (188,579)
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Cash flows from financing activities:
Issuance of common stock and exercise of stock options 3,500 360,000
Retirement of preferred stock - (355,638)
Repayments on notes payable (14,434) (21,602)
Net (repayments) borrowings under credit facility (379,089) 641,378
---------------- ----------------
Net cash (used in) provided by financing activities (390,023) 624,138
---------------- ----------------
Increase in cash and cash equivalents 118,880 119,132
Cash and cash equivalents - beginning of period 310,659 342,756
---------------- ----------------
Cash and cash equivalents - end of period $ 429,539 $ 461,888
================ ================
See accompanying notes to unaudited condensed consolidated financial statements.
3
COLONIAL COMMERCIAL CORP. AND SUBSIDIARIES
Notes To Condensed Consolidated Financial Statements
March 31, 2005
(Unaudited)
1. Summary of Significant Accounting Policies and Practices
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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 presentation 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, 2005
are not necessarily indicative of the operating results that may be achieved for
the full year.
Certain information and footnote disclosures, normally included in
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America, 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 Form 10-K for the year ended December
31, 2004.
We have one continuing industry segment - wholesale distribution of
heating, ventilation, air conditioning equipment and high-end plumbing fixtures.
Inventory is comprised of finished goods.
Stock Options
-------------
The Company uses the intrinsic-value method of accounting for stock-based
awards granted to employees. In accordance with SFAS No. 148, "Accounting for
Stock Based Compensation - Transition and Disclosure," the following table
presents the effect on net loss and net loss per share, had compensation cost
for the Company's stock plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation".
4
The following table illustrates the effect on net income if the
fair-value-based method had been applied to all outstanding and unvested awards
in each period.
For the Three Months Ended
March 31,
2005 2004
--------------- --------------
Net loss, as reported $ (198,933) $ (299,250)
Add: Stock-based compensation
related to option repricing (10,900) 84,900
--------------- --------------
Pro forma net loss $ (209,833) $ (214,350)
=============== ==============
Basic loss per share, as reported (0.05) (0.11)
=============== ==============
Basic loss per share, pro forma (0.05) (0.08)
=============== ==============
Diluted loss per share, as reported (0.05) (0.11)
=============== ==============
Diluted loss per share, pro forma (0.05) (0.08)
=============== ==============
2. Equity Transaction
------------------
During the quarter ended March 31, 2005, the Company issued 14,000 shares
of common stock pursuant to the exercise of outstanding stock options. Bernard
Korn obtained 10,000 shares of common stock, by exercising outstanding stock
options on February 2, 2005. Mr. Korn is the Chief Executive Officer and a
Director of the Company. A non-executive employee of Universal obtained 4,000
shares of common stock, by exercising his outstanding stock options on March 22,
2005.
During the three months ended March 31, 2005, the Company converted a total
of 79 shares of redeemable convertible preferred stock for 79 shares of the
Company's common shares.
3. Supplemental Cash Flow Information
----------------------------------
The following is supplemental information relating to the consolidated
statements of cash flows:
For the Three Months Ended
March 31, 2005 March 31, 2004
--------------- ---------------
Cash paid during the period for:
Interest $ 208,387 $ 154,484
Income taxes $ 44,906 $ 131,212
5
4. Net Loss Per Common Share
-------------------------
Employee stock options totaling 180,000 and 245,500 for the three months
ended March 31, 2005 and 2004, respectively, were not included in the income per
share calculation because their effect would have been anti-dilutive.
Convertible preferred stock, convertible into 790,360 shares of common stock and
871,362 shares of common stock for the three months ended March 31, 2005 and
2004, respectively, were not included in the net loss per share because their
effects would have been anti-dilutive. Convertible notes, convertible into
175,000 shares of common stock and 0 shares of common stock for the three months
ended March 31, 2005 and 2004, respectively, were not included in the income per
share calculation because their effect would have been anti-dilutive.
5. Financing Arrangements
----------------------
At March 31, 2005, amounts outstanding under the credit facility were
$11,946,120, of which $1,312,977 represents a term loan payable in equal monthly
installments of approximately $83,333. At March 31, 2005, the amount of the
unused available credit was $849,627. The interest rate on the $1,312,977 term
loan was 6.25% (prime plus .5%) as of March 31, 2005. The interest rate on the
remaining credit facility, as of March 31, 2005 was 5.50% (prime minus .25%).
6. Related Party Transactions
--------------------------
Oscar Folger, who was legal counsel for the Company through April 20, 2005,
is the husband of Rita Folger who is a beneficial owner of the Company.
Professional fees paid to Oscar Folger for the three months ended March 31, 2005
were $5,150.
7. New Accounting Pronouncements
-----------------------------
In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment",
which establishes standards for transactions in which an entity exchanges its
equity instruments for goods or services. This standard requires an entity to
measure the cost of employee services received in exchange for an award of
equity instruments based on the grant date fair value of the award. This
eliminates the exception to account for such awards using the intrinsic method
previously allowable under APB Opinion No. 25. SFAS No. 123 (R) will be
effective for the first period after December 31, 2005. The Company is in the
process of evaluating the impact to its financial statements and believes the
adoption will not have a material effect on our income statement.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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The Company
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Colonial Commercial Corp. ("Colonial") is a New York corporation, which was
incorporated on October 28, 1964. Unless otherwise indicated, the term "Company"
refers to Colonial Commercial Corp. and its consolidated Subsidiaries. The
Company's operations are conducted through its wholly owned Subsidiaries,
Universal Supply Group, Inc., ("Universal"), The RAL Supply Group, Inc. ("RAL")
and American/Universal Supply, Inc. ("American").
Forward-Looking Statements
--------------------------
This report on Form 10-Q contains forward-looking statements relating to
such matters as anticipated financial performance and business prospects. When
used in this report, the words, "anticipates," "expects," "believes," "may,"
"intends," and similar expressions are intended to be among the statements that
identify forward-looking statements. From time to time, the Company may also
publish forward-looking statements. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking statements.
Forward-looking statements involve risks and uncertainties, including, but not
limited to, the consummation of certain events referred to in this report,
technological changes, competitive factors, maintaining customer and vendor
relationships, inventory obsolescence and availability, and other risks detailed
in the Company's periodic filings with the Securities and Exchange Commission,
which could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements.
Critical Accounting Policies
----------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires that we make
estimates and judgments that affect the amounts reported of assets, liabilities,
revenues, and expenses and the related disclosure of contingent assets and
liabilities. We base our estimates on historical experience and on various
other assumptions we believe to be applicable and reasonable under the current
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
In addition, we are periodically faced with uncertainties, the outcomes of
which are not within our control and will not be known for prolonged periods of
time.
We believe the following to be critical accounting policies that affect the
most significant estimates and judgments used in the preparation of our
consolidated financial statements:
7
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Accounts Receivable
-------------------
Accounts receivable consist of trade receivables recorded at original
invoice amount, less an estimated allowance for uncollectible accounts. Trade
credit is generally extended on a short-term basis; thus trade receivables
generally do not bear interest. However, a service charge may be applied to
receivables that are past due. These charges, when collected, are included as
other income. Trade receivables are periodically evaluated for collectibility
based on past credit history with customers and their current financial
condition. Changes in the estimated collectibility of trade receivables are
recorded in the results of operations for the period in which the estimate is
revised. Trade receivables that are deemed uncollectible are offset against the
allowance for uncollectible accounts. The Company generally does not require
collateral for trade receivables.
Inventory
---------
Inventory is stated at the lower of cost or market and consists solely of
finished goods. Cost is determined using the first-in, first-out method.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is calculated on
the straight line method over the estimated useful lives of the assets as
follows:
Computer hardware and software 3-5 years
Furniture and fixtures 5 years
Automobiles 3-5 years
Leasehold improvements are amortized over the shorter of the lease term or
the estimated useful life of the asset.
Goodwill and Other Intangible Assets
------------------------------------
Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Other
Intangible Assets," requires that goodwill having indefinite lives not be
amortized, but instead be tested for impairment at least annually. Intangible
assets determined to have finite lives are amortized over their remaining useful
lives.
8
Results of Operations For theThree Months Ended March 31, 2005 and 2004
-----------------------------------------------------------------------
The Company reported a net loss of $198,933 for the quarter ended March 31,
2005, compared to a net loss of $299,250 in the first quarter of 2004.
Sales for the quarter ended March 31, 2005 increased by $821,959, or 6.6%,
compared to the same period in 2004. The increase in sales is primarily a
result of a general increase in market activity in the RAL and
American/Universal trading areas and an increase in general industry pricing.
Gross profit for the quarter ended March 31, 2005 increased by $443,091, or
11.6%, compared to the same period in 2004. Gross profit expressed as a
percentage of sales increased to 31.9% in 2005 compared to 30.4% for the
comparable period in 2004. This increase is primarily a result of price
discounts achieved by purchasing in larger volumes and the result of the sales
of higher margin products. Our gross margins may not be comparable to others in
our or similar industries that include incoming freight, purchasing and
receiving costs, inspection costs, internal transfer costs, and other costs of a
distribution network in their cost of sales line item. The Company excludes
theses costs from cost of sales and includes them in selling, general and
administrative expenses.
Selling, general, and administrative expenses and cost of operations for
the quarter ended March 31, 2005 increased by $151,572, or 3.7%, over the same
period in 2004. This increase relates to general cost increases.
Operating income for the quarter ended March 31, 2005 increased by $291,519
compared to the same period for 2004. The operating income for the period
ending March 31, 2005 was $2,446 compared to a loss of $289,073 for the same
period in 2004. This improvement relates to improved profitability of RAL and
the new locations opened in 2004.
Interest expense net for the quarter ended March 31, 2005 increased by
$63,712, or 35.4%, compared to the same period in 2004. This increase is
primarily due to the increase in prime rate which was 5.75% at March 31, 2005
compared to 4.0% at March 31, 2004 and increased borrowings to support the
Company's growth.
Income tax expense increased by $132,717 for the quarter ended March 31,
2005 compared to the same period for 2004. This increase is primarily a result
of the Company recording a net federal tax benefit of $0 in 2005 and $129,600 in
2004. The income tax benefit realized in 2004, was from a decrease in its
valuation allowance on deferred tax assets in recognition of its then
anticipated utilization of net operating loss carryforwards.
9
The following table summarizes information derived from the Company's
consolidated statements of income expressed as a percentage of sales for the
quarter ended March 31, 2005 and 2004.
For the Three Months
Ended March 31,
2005 2004
----------- -----------
Sales 100.0% 100.0%
Cost of sales 68.1 69.6
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Gross profit 31.9 30.4
Selling, general and administrative expenses 31.9 32.7
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Operating income 0.0 (2.3)
Other income 0.4 0.4
Interest expense (1.8) (1.4)
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Income before taxes (1.4) (3.3)
Income tax (expense) benefit (0.1) 0.9
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Net loss (1.5) (2.4)
=========== ===========
Liquidity and Capital Resources
-------------------------------
Credit Facility
The Company has a $15,000,000 secured loan facility pursuant to a credit
and security agreement ("Agreement") with Wells Fargo Business Credit, Inc.
("Wells") consisting of a revolving line of credit which expires on August 1,
2009, and a term loan with a balance of $1,312,977 as of March 31, 2005, payable
in equal monthly installments of $83,333. Availability under the revolving
credit line is determined by a percentage of eligible assets as defined in the
Agreement, and was $12,795,747 as of March 31, 2005. The balance outstanding
under the revolving line of credit including the term loan was $11,946,120 as of
March 31, 2005. The revolving credit line bears interest at .25% below prime,
and the term loan bears interest at .50% above prime. Substantially all of the
assets of the Company, as well as a pledge of the stock of Colonial Commercial
Corp.'s operating subsidiaries, collateralize the loans. The facility contains
covenants relating to the financial condition of the Company, its business
operations, and restricts the payment of dividends, subordinated debt, purchase
of securities and capital expenditures. The Company is in compliance with all
of its financial loan covenants. All loans are due on demand by the bank, and
accordingly, have been classified as current liabilities.
As of March 31, 2005, the Company had $429,539 in cash and cash equivalents
compared with $310,659 at December 31, 2004.
10
Cash flows provided by operations were $616,898 during the three months
ended March 31, 2005. Accounts receivable decreased due to improved aging of
receivables. Accounts payable and inventory increased due to increased
inventory in preparation for the increased demand of sales of air conditioning
products for the second quarter of 2005.
Cash flows used in investing activities of $107,995 during the three months
ended March 31, 2005 were due to purchases of equipment.
The cash flows used in financing activities of $390,023 consisted of
$379,089 net repayments under the Company's credit facility, and $14,434 of
repayments on notes payable. Cash flows provided from financing activities
consisted of $3,500 received from the exercise of stock options.
The Company believes that the credit facility is sufficient to finance its
current operating needs. However, the business of the Company would be
materially and adversely affected if the bank demands payment of the loan and
the Company is unable to refinance the loan.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
Market risk represents the risk of changes in value of a financial
instrument, derivative or non-derivative, caused by fluctuations in interest
rates, foreign exchange rates and equity prices. The Company has no financial
instruments that give it exposure to foreign exchange rates or equity prices.
The Company's pre-tax earnings and cash flows are exposed to changes in
interest rates. All borrowings under its credit facility bear interest based on
the prime rate less .25%, except for the $2.0 million term loan, which bears
interest at a rate of prime plus .5%, and a $750,000 note to Goldman Associates
of NY, Inc. which bears interest at prime. A hypothetical 10% adverse change in
such rates would reduce the pre-tax earnings and cash flows for the quarter
ended March 31, 2005 by approximately $71,000 over a one-year period, assuming
the borrowing level remains consistent with the outstanding borrowings as of
March 31, 2005. The fair value of the borrowings under the credit facility is
not affected by changes in market interest rates.
The Company's remaining interest-bearing obligations are at fixed rates of
interest and as such, do not expose the pre-tax earnings and cash flows to
changes in market interest rates. The change in fair value of the Company's
fixed rate obligations resulting from a hypothetical 10% adverse change in
interest rates would not be material.
11
ITEM 4. CONTROLS AND PROCEDURES
--------------------------------
(a) Evaluation of Disclosure Controls and Procedures
------------------------------------------------
An evaluation has been carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and the operation of our
"disclosure controls and procedures" (as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934) as of March 31, 2005 ("Evaluation
Date"). Based on such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of the Evaluation Date, the disclosure
controls and procedures are reasonably designed and effective to ensure that (i)
information required to be disclosed by us in the reports we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
(ii) such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls
----------------------------
Subsequent to that evaluation, there have been no significant changes in
our internal controls or other factors that could significantly affect these
controls after such evaluation.
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
Universal Supply Group, Inc. is a New York corporation ("Universal"). In June
1999, Universal acquired substantially all of the assets of Universal
Engineering Co., Inc. and Universal Supply Group, Inc., a New Jersey
corporation, including its name. The name of Universal Supply Group, Inc. (the
selling corporation) was subsequently changed to Hilco, Inc. In 1998, Hilco,
Inc. acquired the assets of Amber Supply Co., Inc., previously known as Amber
Oil Burner Supply Co., Inc., Universal Engineering Co., Inc., Amber Supply Co.,
Inc., Amber Oil Burner Supply Co., Inc. and Hilco, Inc. are referred to as the
"Predecessors." The majority shareholders of the predecessors are John A.
Hildebrandt and Paul Hildebrandt. Paul Hildebrandt was a director of the
Company from September 29, 2004 to January 28, 2005.
12
Universal has been joined as a defendant with Predecessors and many other
companies in numerous product liability lawsuits brought in the Superior Court
of New Jersey (Middlesex County) that allege injury due to asbestos. These
actions have been managed by the Predecessor's historic product liability
insurance carriers, and all claims, including all defense and settlement costs,
to date have been covered and paid by those carriers. Counsel representing the
Company in these matters has advised that they are not aware of any material
pending or threatened litigation, claims or assessments, except for one matter
of which any verdict or settlement will be covered by insurance. John A.
Hildebrandt, Paul Hildebrandt and the Predecessors have also indemnified
Universal against all asbestos claims. The asbestos claims that have been filed
to date stem primarily from products sold by the Predecessors prior to 1999 that
were manufactured and/or packaged by a third party, which allegedly contained
asbestos. The Company does not believe that it will be materially adversely
affected by these lawsuits.
ITEMS 2,3,4 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
-----------------------------------------------------------
ITEM 6. EXHIBITS
-----------------
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.
13
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.
Dated: May 13, 2005 COLONIAL COMMERCIAL CORP.
/s/ Bernard Korn
----------------
Bernard Korn,
Chairman of the Board and President
/s/ William Salek
-----------------
William Salek
Chief Financial Officer