U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17756
CONSULIER ENGINEERING, INC.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-2556878
-------------------------------- -------------------
(State or other incorporation or (I.R.S. Employer
jurisdiction of organization) Identification No.)
2391 Old Dixie Highway, Riviera Beach, Fl 33404
--------------------------------------------------------------------------------
Address of principal executive offices)
(561) 842-2492
--------------------------------------------------------------------------------
(Issuer's telephone number)
--------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
As of September 30, 2001, there were 4,951,150 outstanding
shares of common stock, par value $0.01 per share.
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
Page
----
PART-I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2001
(Unaudited) and December 31, 2000.............................. 3
Consolidated Statements of Income for the
three and nine month periods ended September 30,
2001 and 2000 (Unaudited)...................................... 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 2001
and 2000 (Unaudited)........................................... 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion
and Analysis or Plan of Operation.............................. 9
PART-II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 13
Item 2. Changes in Securities.......................................... 13
Item 3. Defaults upon Senior Securities................................ 13
Item 4. Submission of Matters
to a Vote of Security Holders................................ 14
Item 5. Other Information.............................................. 14
Item 6. Exhibits and Reports on Form 8-K............................... 14
SIGNATURES.............................................................. 15
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2001 2000
------------- -----------
(Unaudited)
ASSETS
Current:
Cash $ 133,712 $ 418,634
Due from principal shareholder 856,140 --
Receivables, net 622,353 1,213,967
Receivables - related parties 497,125 460,923
Inventories (Note 2) 1,341,223 1,167,793
Other current assets 8,194 15,226
----------- -----------
TOTAL CURRENT ASSETS $ 3,458,747 $ 3,276,543
----------- -----------
Property and equipment, net $ 1,381,653 $ 1,438,185
Limited partnership interests 2,626,239 2,507,443
Notes receivable - related parties 990,155 990,155
Deferred income taxes 169,000 403,648
----------- -----------
TOTAL ASSETS $ 8,625,794 $ 8,615,974
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current:
Accounts payable and accruals $ 402,843 $ 1,002,537
Income taxes payable 626,000 --
Notes payable - banks -- 1,047,681
----------- -----------
TOTAL CURRENT LIABILITIES $ 1,028,843 $ 2,050,218
Bonds payable 304,495 792,840
----------- -----------
TOTAL LIABILITIES $ 1,333,338 $ 2,843,058
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock of $.01 par value:
Authorized --- 25,000,000 shares;
Issued --- 5,198,298 shares $ 51,983 $ 51,983
Additional paid-in capital 3,110,700 3,110,700
Retained earnings 4,710,071 3,190,636
----------- -----------
$ 7,872,754 $ 6,353,319
Less: Treasury stock at cost - 247,148 shares (468,363) (468,363)
Other comprehensive loss (35,395) (35,500)
Notes receivable for common stock (76,540) (76,540)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 7,292,456 $ 5,772,916
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 8,625,794 $ 8,615,974
----------- -----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(Unaudited)
REVENUES:
Net sales $ 737,597 $ 708,672 $ 2,500,942 $ 2,390,532
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold $ 453,137 $ 409,147 $ 1,510,152 $ 1,368,081
Selling, general and administrative 429,259 412,812 1,437,536 1,396,006
Provision for inventory losses -- -- -- 266,255
Loss on impaired assets -- -- -- 472,727
----------- ----------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES $ 882,396 $ 821,959 $ 2,947,688 $ 3,503,069
----------- ----------- ----------- -----------
Operating loss $ (144,799) $ (113,287) $ (446,746) $(1,112,537)
OTHER INCOME (EXPENSE):
Investment income - related parties $ 520,626 $ 196,777 $ 854,294 $ 908,985
Interest income - related parties 23,935 71,642 94,220 197,800
Interest expense (6,433) (78,794) (75,485) (240,612)
Casualty loss -- -- -- (537,826)
Insurance recovery -- -- 1,750,000 --
Undistributed income of equity investee 134,307 -- 117,249 --
Other income 36,122 1,760 86,128 91,111
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) $ 708,557 $ 191,385 $ 2,826,406 $ 419,458
----------- ----------- ----------- -----------
Income (loss) before income taxes $ 563,758 $ 78,098 $ 2,379,660 ($ 693,079)
Income tax provision (benefit) 233,225 29,232 860,225 (259,959)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 330,533 $ 48,866 $ 1,519,435 ($ 433,120)
----------- ----------- ----------- -----------
Basic and diluted earnings
(loss) per share (Note 4) $ 0.07 $ 0.01 $ 0.31 ($ 0.09)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
---------------------------------
September 30, September 30,
2001 2000
-------------- -------------
Unaudited
OPERATING ACTIVITIES:
Net income (loss) $ 1,519,435 $ (433,120)
Adjustments to reconcile net income (loss)
to net cash used in operations:
Depreciation 80,203 87,061
Amortization 11,655 56,065
Provision for doubtful accounts 13,651 --
Undistributed income of equity investee (117,249) --
Investment income - related party (854,294) (908,985)
Casualty loss -- 537,826
Provision for inventory losses -- 266,255
Impairment loss -- 472,727
Deferred income taxes 234,648 (259,959)
Changes in operating assets and liabilities:
Decrease (increase) in receivables 576,521 (230,136)
Decrease (increase) in inventories (173,430) (148,347)
Decrease (increase) in other current assets 7,032 --
(Decrease) increase in accounts payable and accruals (615,078) (99,148)
Increase in income taxes payable 626,000 --
----------- -----------
$ 1,309,094 ($ 659,761)
NET CASH PROVIDED BY (USED) IN OPERATIONS
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (23,672) (63,422)
Distributions from partnership interest 854,294 871,285
Increase in related party loans, net (20,817) --
Increase in due from principal shareholder (856,140) --
----------- -----------
($ 46,335) $ 807,863
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
FINANCING ACTIVITIES:
Net repayments of bank and other loans (1,047,681) (89,894)
Payments on bonds payable (500,000) --
Repayments, borrowings of related parties -- (3,879)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES $(1,547,681) $ (93,773)
----------- -----------
(284,922) 54,329
(DECREASE) INCREASE IN CASH
CASH, BEGINNING OF PERIOD $ 418,634 $ 80,097
----------- -----------
CASH, END OF PERIOD $ 133,712 $ 134,426
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
accruals considered necessary for a fair presentation, have been included.
Operating results for the three months and nine months ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 2000.
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported financial
statements in order to conform to the financial statement presentation of the
current period.
The consolidated financial statements include CONSULIER ENGINEERING, INC. (the
"Company" or "Consulier") and its wholly-owned subsidiaries, SOUTHEAST
AUTOMOTIVE ACQUISITION CORPORATION ("Southeast"), CONSULIER BUSINESS SERVICES,
INC., ("CBSI") and C-6 PRODUCTS, INC ("C-6"). All intercompany balances and
transactions have been eliminated.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out
basis, or market. Major classes of inventory are summarized as follows:
September 30, 2001 December 31, 2000
------------------ -----------------
Finished goods $ 1,445,833 $ 1,231,585
Raw materials 19,301 3,869
Soap 6,089 62,339
Obsolescence reserve (130,000) (130,000)
----------- -----------
TOTAL $ 1,341,223 $ 1,167,793
=========== ===========
6
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LIMITED PARTNERSHIP INTERESTS
The limited partnership interests consist of Consulier's investment in AVM, L.P.
("AVM") and a 40% interest in BioSafe Systems, LLC ("BioSafe"). BioSafe's total
assets (unaudited) at September 30, 2001 and December 31, 2000, were
approximately $1,122,200 and $783,000, respectively. The BioSafe investment is
recorded at $544,552 at September 30, 2001 and $427,303 at December 31, 2000.
Equity in income for the first nine months of 2001 was $117,249. These
investments are accounted for under the equity method.
Following is a summary of the operations of AVM (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2001 2000 2001 2000
------- ------- ------- -------
Revenue $13,500 $ 6,970 $29,020 $23,581
Costs and expenses 6,903 4,472 18,256 12,469
------- ------- ------- -------
Net income $ 6,597 $ 2,498 $10,764 $11,112
------- ------- ------- -------
Consulier's share of earnings $ 521 $ 197 $ 854 $ 909
======= ======= ======= =======
Consulier owned approximately 10% of AVM's capital as of September 30, 2001 and
2000. Based on capital and earnings distributions provided in the partnership
agreement, Consulier was allocated approximately 8% of AVM's earnings at
September 30, 2001 and 2000, respectively.
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. EARNINGS (LOSS) PER SHARE
Three Months Ended Nine Months Ended
September 30, September 30
------------------------------ ------------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
Numerator:
Net income (loss),
Numerator for basic and diluted
earnings (loss) per share $ 330,533 $ 48,866 $ 1,519,435 ($ 433,120)
Denominator:
Denominator for basic earnings (loss)
per share, weighted - average shares 4,951,150 4,951,150 4,951,150 4,924,109
Effect of dilutive securities:
Stock options -- -- -- --
Warrants 12,342 10,691
----------- ----------- ----------- -----------
Dilutive potential common shares 12,342 0 10,691 0
Denominator for diluted earnings
(loss) per share, adjusted
weighted - average shares 4,963,492 4,951,150 4,961,841 4,924,109
----------- ----------- ----------- -----------
Basic earnings (loss) per share 0.07 0.01 0.31 (0.09)
----------- ----------- ----------- -----------
Diluted earnings (loss) per share 0.07 0.01 0.31 (0.09)
=========== =========== =========== ===========
During the month of April 2001, all remaining stock options expired unexercised.
Options to purchase 61,232 shares of the Company's common stock were exercised
in the second quarter of 2000. In lieu of cash, the option holders issued notes
payable to the Company, totaling $76,540, for a term of up to five years with
interest at 8% for the exercise of the options. The Company is holding the stock
certificates as collateral.
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. - INVENTORY AND IMPAIRED ASSET LOSSES
During June 2000, management determined that the remaining inventory of C-6's
product line (Tool Topper, Laddertop, and Workstation), should be written down
by $266,255. Additionally, the tooling for the product had suffered an
impairment loss of $472,727. Both losses are recorded in the accompanying
Consolidated Statement of Operations for the nine months ended September 30,
2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THE FOLLOWING COMPARES THE RESULTS OF OPERATIONS FOR THE FIRST NINE MONTHS ENDED
SEPTEMBER 30, 2001 TO THE FIRST NINE MONTHS ENDED SEPTEMBER 30, 2000:
During the nine months ended September 30, 2001, sales and cost of goods sold
increased $110,410 and $142,071, respectively, from the comparable amounts
recorded during the nine months ended September 30, 2000. Gross profit for the
nine months ended September 30, 2001, decreased $31,661 compared to the nine
months ended September 30, 2000.
During the nine months ended September 30, 2001, selling, general and
administrative expenses increased $41,530 over the comparable nine months ended
September 30, 2000. The operating loss for the nine months ended September 30,
2001 and 2000 was $446,746 and $1,112,537 respectively. Other income and expense
increased $2,406,948 in the first nine months of 2001 primarily due to an
insurance recovery of $1,750,000 related to damage caused by Hurricane Irene in
1999.
THE FOLLOWING COMPARES THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2001 TO THE THREE MONTHS ENDED SEPTEMBER 30, 2000:
During the quarter ended September 30, 2001, sales and cost of goods sold
increased $28,925 and $43,990, respectively, from the comparable amounts
recorded during the quarter ended September 30, 2000. Gross profit for the three
months ended September 30, 2001 decreased $15,065, compared to the three months
ended September 30, 2000. Net income for the third quarter of 2001 was $330,533,
or $0.07 per share, compared to $48,866, or $0.01 per share, in the third
quarter of 2000. The increase in net income is related primarily to an increase
of $323,849 in investment income from related parties.
9
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, Consulier's cash totaled $133,712 as compared to $418,634
at December 31, 2000. During the nine months, Consulier's cash decreased
$284,922. Net cash provided by operations increased to $1,309,094 in the first
nine months of 2001 compared to cash used in operations of $659,761 in the first
nine months of 2000. The change from cash used in operations to cash provided by
operations is due primarily to receipt of a recovery from insurance claim of
$1,750,000 and collections on accounts receivable. Net cash provided by
investing activities decreased from $807,863 in the first nine months of 2000 to
cash used of $46,335 in the first three quarters of 2001, resulting primarily
from an increase of $856,140 in due from principal stockholder.
The ability of Consulier to continue to generate cash flow in excess of its
normal operating requirements depends almost entirely on the performance of its
limited partnership investment in AVM. Consulier cannot, with any degree of
assurance, predict whether there will be a continuation of the net return
experienced in the period that the AVM limited partnership interest has been
owned. However, Consulier does not expect that the rate of return will decline
to the point where Consulier has negative cash flow. Furthermore, although AVM
has given Consulier no indication of any intention on its part to redeem the
partnership interest, there can be no assurance that AVM will not do so in the
future.
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
FUTURE OUTLOOK
Based on AVM's current operations and operating results over the past five
years, management expects continued positive annualized returns in 2001 on its
limited partnership investment. However, there is no guarantee that the returns
of the past can be maintained.
Consulier's automotive parts wholesale distribution business experienced a
slight increase in sales in the nine months ended September 30, 2001. Due to the
reorganization of the sales departments and training of salespeople,
strengthening of existing product lines, and increased marketing and promotion,
Southeast expects increased sales of its auto parts, Southeast tools, and
plastic component parts for the remainder of 2001.
Consulier received its initial shipment of the newly packaged Captain CRA-Z Hand
and All Purpose Soap in October 2000. This consisted of 50 tons of soap made
with the new formula developed by Consulier. The soap was tested with success in
November and December before becoming available for sale on a larger scale in
January 2001. Consulier's supplier is currently processing a new order of
Captain CRA-Z Soap with a cost of approximately $150,000. This inventory is
needed to facilitate the anticipated sales volume increase from our strategic
alliances with Veridien Corp. ("Veridien") of St. Petersburg, Florida and Norpak
Manufacturing Inc. ("Norpak") of Toronto, Canada.
Veridien and Norpak are working with Consulier to launch the Captain CRA-Z Soap
product to National and Regional retailers and major distributors.
On October 31, 1997, Consulier purchased a 40% equity interest in BioSafe
Systems, LLC. a Connecticut limited liability company ("BioSafe"). BioSafe
develops and markets environmentally safe products, alternatives to
traditionally toxic pesticides.
BioSafe has developed a well-established national distribution network, serving
the greenhouse and nursery marketplace. In addition, BioSafe has established
distribution in Central and South America. Product registrations have been
secured in Costa Rica, Colombia and Ecuador.
BioSafe is expected to continue to grow at a slow and steady pace. In the first
nine months of 2001, BioSafe had a net income of $293,122 of which Consulier
recorded $117,249 as undistributed income of equity investee.
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained in this report, certain matters
discussed in Management's Discussion and Analysis are forward looking statements
which involve risks and uncertainties including, but not limited to statements
regarding Consulier's planned capital expenditure requirements, cash and working
capital requirements. Consulier's expectations regarding the adequacy of current
financing arrangements, product demand and market growth, other statements
regarding future plans and strategies, anticipated events or trends, and similar
expressions concerning matters that are not historical facts. It should be noted
that Consulier's actual results could differ materially from those contained in
such forward looking statements mentioned above due to adverse changes in any
number of factors that affect Consulier's business including, without
limitation, risks associated with investing in BioSafe and AVM and the marketing
of Consulier's Captain CRA-Z Soap products, manufacturing and supply risks,
reliance upon distributors, regulatory risks, risks of expansion, product
liability and other risks described herein.
12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 2001, there were no legal proceedings pending against the
Company or its subsidiaries nor did the Company have any knowledge of any
proceedings, which were being contemplated.
On or about May 30, 2001, the Company received $1,750,000 from American States
Insurance Company in settlement of all of the Company's claims relating to
litigation concerning the Company's insurance claim for property damage caused
by rainfall associated with Hurricane Irene occurring in October 1999.
ITEM 2. CHANGES IN SECURITIES
During the third quarter of 2001 there were no changes in the instruments
defining the rights of the holders of any class of registered securities, nor
were the rights evidenced by any class of registered securities limited or
qualified by the issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the third quarter of 2001, there have been no material defaults in the
payment of principal, interest, or any other material default with respect to
any indebtedness, nor has there been any arrearage in the payment of dividends
of any class of stock.
13
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the third quarter of 2001, the Company did not submit any matters to a
vote of security holders.
ITEM 5. OTHER INFORMATION
The Company has no other information to report, which might otherwise be
reported under Form 8-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Required by Item 601 of Regulation S-k
None
(b) Current Reports On Form 8-K
The Company did not file any reports on Form 8-K during the three month period
ended September 30, 2001.
14
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CONSULIER ENGINEERING, INC.
(Registrant)
By: /s/ Alan Simon
-------------------------------------
ALAN SIMON, ESQ.
Secretary/Treasurer
Date: November 16, 2001
15