Table of ContentsCOLONIAL COMMERCIAL CORP. AND SUBSIDIARIESNotes to Consolidated Financial Statements, Continued3. Property and EquipmentProperty and equipment consists of the following at December 31:2006 2005Computer hardware and software $ 1,040,441 $ 884,011Furniture and fixtures 91,558 85,180Leasehold improvements 1,4<strong>10</strong>,425 1,361,620Showroom fixtures and displays 79,606 0Automobiles 550,829 560,4843,172,859 2,891,295Less accumulated depreciation and amortization 1,660,193 1,221,811$ 1,512,666 $ 1,669,4844. Other Intangible AssetsThe Company has certain identifiable intangible assets that are subject to amortization. Intangible assets are included in“Other intangibles” in the consolidated balance sheets. The components of intangible assets are as follows:GrossCarryingAmountDecember 31, 2006 December 31, 2005AccumulatedAmortizationNetCarryingAmountGrossCarryingAmountAccumulatedAmortizationNetCarryingAmountEstimatedUsefulLife(Years)Covenants Not to Compete $ 241,667 $ (238,167) $ 3,500 $ 241,667 $ (230,333) $ 11,334 5Amortization expense amounted to $7,834, $16,166 and $26,667 for the years ended December 31, 2006, 2005 and 2004, respectively.Estimated Amortization Expense:For the Years Ended December 31,2007 $ 2,0002008 1,500$ 3,500F−11Source: COLONIAL COMMERCIAL , <strong>10</strong>−K, March 23, 2007
Table of ContentsCOLONIAL COMMERCIAL CORP. AND SUBSIDIARIESNotes to Consolidated Financial Statements, Continued5. Financing ArrangementsThe Company has a total secured loan facility of $15,000,000 pursuant to a credit and security agreement (“Agreement”)with Wells Fargo Business Credit, <strong>Inc</strong>. (“Wells”) consisting of a revolving line of credit including a $2,000,000 two−year term loan.Final payment of the term loan was made in July of 2006. The revolving credit line bears interest at .25% below prime, and the termloan bore interest at .50% above prime. On May 11, 2006 the Company received a $500,000 overadvance, payable in equalinstallments of $12,500 each business day commencing July 11, 2006. The overadvance was paid in full on September 5, 2006.Effective June 23, 2006, the Agreement was amended to extend the maturity date from August 1, 2009 to August 1, 20<strong>10</strong>. The facilityconsists of a $15,000,000 revolving line of credit which expires on August 1, 20<strong>10</strong>. The Company has standby letters of credit whichexpire on July 31, 2007 and September 1, 2007, that reduce the credit facility by $300,000 and $<strong>10</strong>0,000, respectively, and additionalreserves determined by the bank that reduce the credit facility by $<strong>10</strong>0,000. Availability under the revolving credit line is determinedby a percentage of available assets as defined in the Agreement, less letters of credit and reserves, and was $142,216 as of December31, 2006. The balance outstanding under the revolving line of credit was $13,615,696 as of December 31, 2006. The interest rate onthe revolving credit facility, as of December 31, 2006 was 8.0%.Substantially 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, <strong>Inc</strong>. unless a waiver is obtained.F−12Source: COLONIAL COMMERCIAL , <strong>10</strong>−K, March 23, 2007
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