Form 10-K - CCOM Group Inc.

Table of ContentsSubstantially all of the assets of the Company, as well as a pledge of the stock of Colonial Commercial Corp.'s operatingsubsidiaries, collateralize the loans. The facility contains covenants relating to the financial condition of the Company, its businessoperations, and restricts the payment of dividends, subordinated debt, purchase of securities, and capital expenditures. The Companymust maintain a tangible net worth of approximately $3.8 million for the fiscal year ending December 31, 2006. In addition, theCompany is required to maintain certain levels of net income and cash flows, as defined in the agreement. All loans are due ondemand by the bank, and accordingly, have been classified as current liabilities. In the event that Mr. Pagano no longer performs theduties of the President of Universal or the Vice President of RAL or American for any reason other than death or disability, theCompany will be considered in default of its credit agreement with Wells Fargo Business Credit, Inc. unless a waiver is obtained.The Company believes that the credit facility is sufficient to finance its current operating needs. However, the business of theCompany would be materially and adversely affected if the bank demands payment of the loan and the Company is unable torefinance the loan.As of December 31, 2006, the Company had $482,251 in cash compared with $613,456 at December 31, 2005.Net cash used in operating activities was $1,409,274 for the year ended December 31, 2006. The net cash used in operatingactivities for the 2006 period is primarily a result of net income of $753,422 and non−cash charges of $768,545, offset by cash used inoperating assets and liabilities of $2,931,241. The increase in accounts receivable of $701,615 was a direct correlation to the increasein sales compared to the prior year. Accounts payable decreased by $1,272,786 as a reflection of the reduced purchase requirementsfor the warmer months of November and December and $400,000 additional cash that became available as a result of the finalpayment of the term loan in July of 2006.Cash flows used in investing activities were $450,129 during the year ended December 31, 2006 due to $300,504 inpurchases of equipment and $149,625 in the purchase of Speed Queen assets from Goldman Associates of NY, Inc.Cash flows provided by financing activities of $1,728,198 consisted of $2,432,688 in borrowings under the creditfacility−revolving credit, $500,000 in borrowings under the credit facility−overadvance, $8,000 received from the exercise of stockoptions and $13,073 from the issuance of notes payable. Cash flows used in financing activities consisted of $562,977 for repaymentsunder the credit facility−term loan, $500,000 repayments under the credit facility−overadvance and $162,586 for repayments on notespayable.Equity TransactionsDuring the year ended December 31, 2006, the Company issued 32,000 shares of common stock pursuant to the exercise of stockoptions. On April 3, 2006, Ronald H. Miller obtained 12,000 shares of common stock, by exercising 12,000 outstanding stock options.Mr. Miller is a Director of the Company. On April 17, 2006, Jack Rose obtained 12,000 shares of common stock, by exercising12,000 outstanding stock options. Mr. Rose was a Director of the Company at the time of the transaction. On May 16, 2006, anon−executive employee of the Company obtained 4,000 shares of common stock by exercising 4,000 outstanding stock options. OnMay 31, 2006, a non−executive employee of the Company obtained 4,000 shares of common stock by exercising 4,000 outstandingstock options.18Source: COLONIAL COMMERCIAL , 10−K, March 23, 2007