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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17756
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CONSULIER ENGINEERING, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2556878
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2391 OLD DIXIE HIGHWAY, RIVIERA BEACH, FL 33404
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(Address of principal executive offices)
(561) 842-2492
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(Issuer's telephone number)
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(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
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 November 15, 2003, there were 4,935,243 outstanding shares of common
stock, par value $0.01 per share.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
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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 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 ST, LLC, 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.
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
Page
----
PART-I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at September 30, 2003 (Unaudited) 4
Condensed Consolidated Statements of Income for the three months
and nine months ended September 30, 2003 and 2002 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2003 and 2002 (Unaudited) 6
Notes to the Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 14
Item 3. Controls and Procedures 17
PART-II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
CERTIFICATIONS
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
(UNAUDITED)
ASSETS
CURRENT:
Cash $ 1,583,886
Receivables, net 106,063
Income tax overpayment 631,686
Receivable - related party 317,399
Deferred income taxes 20,387
-----------
TOTAL CURRENT ASSETS 2,659,421
Property and equipment, net 1,078,487
Limited partnership interests 4,004,509
Notes receivable - related parties 652,648
Deferred income taxes 53,434
-----------
$ 8,448,499
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT:
Accounts payable and accruals $ 45,936
Bonus payable 50,000
-----------
TOTAL CURRENT LIABILITIES 95,936
Bonds payable 335,575
-----------
TOTAL LIABILITIES 431,511
-----------
STOCKHOLDERS' EQUITY
Common stock $.01 par value:
Authorized - 25,000,000 shares; issued
- 5,198,298 shares 51,983
Additional paid-in capital 3,124,253
Retained earnings 5,456,194
Treasury stock at cost - 263,055 shares (528,161)
Accumulated other comprehensive loss (10,741)
Notes receivable for common stock (76,540)
-----------
TOTAL STOCKHOLDERS' EQUITY 8,016,988
-----------
$ 8,448,499
===========
See accompanying notes to the unaudited condensed
consolidated financial statements.
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
REVENUE:
Net sales $ 100,281 $ 11,700 $ 149,114 $ 33,636
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 22,759 653 22,759 3,985
Selling, general and administrative 208,215 13,891 518,540 241,124
----------- ----------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 230,974 14,544 541,299 245,109
----------- ----------- ----------- -----------
OPERATING LOSS (130,693) (2,844) (392,185) (211,473)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 1,196,500 671,517 2,581,432 1,323,722
Interest and other income 45,937 2,587 68,026 25,915
Interest expense (9,254) (5,368) (27,586) (17,716)
Undistributed income (loss) of equity investees (1,728,992) 216,212 (2,861,185) 335,488
Other income -0- 9,686 -0- 43,707
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (LOSS) (495,809) 894,634 (239,313) 1,711,116
----------- ----------- ----------- -----------
Income (loss) from continuing operations before
Income taxes (626,502) 891,790 (631,498) 1,499,643
Income tax (provision) benefit 105,619 (343,790) 59,980 (564,320)
----------- ----------- ----------- -----------
Income (loss) from continuing operations (520,883) 548,000 (571,518) 935,323
----------- ----------- ----------- -----------
DISCONTINUED OPERATIONS:
Income from operations of discontinued
Subsidiary -0- 34,269 15,420 176,136
Less income taxes -0- 14,810 4,905 66,280
----------- ----------- ----------- -----------
-0- 19,459 10,515 109,856
----------- ----------- ----------- -----------
Gain on disposal of subsidiary -0- -0- 342,782 -0-
Less income taxes -0- -0- 245,218 -0-
----------- ----------- ----------- -----------
-0- -0- 97,564 -0-
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (520,883) $ 567,459 $ (463,439) $ 1,045,179
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Continuing operations $ (.11) $ .11 $ (.12) $ .19
Discontinued operations .00 .00 .02 .02
----------- ----------- ----------- -----------
$ (.11) $ .11 $ (.10) $ .21
=========== =========== =========== ===========
See accompanying notes to the unaudited condensed
consolidated financial statements.
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
---------------------------------
2003 2002
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ (463,439) $ 1,045,179
Adjustments to reconcile net income to net cash used in
operations:
Gain on disposal of subsidiary (97,564) -0-
Depreciation 19,178 11,610
Amortization 11,655 11,655
Provision for doubtful accounts 48,101 -0-
Undistributed (income) loss of equity investee 2,861,185 (335,488)
Investment income - related party (2,581,432) (1,323,722)
Deferred income taxes 175,921 -0-
Cash provided from discontinued operations 224,214 87,975
Change in operating assets and liabilities:
Decrease (increase) in receivables and other current assets 7,522 (75,805)
(Increase) in income tax overpayment (876,907) -0-
Decrease (increase) in inventories 30,512 (19,851)
Increase (decrease) in accounts payable and accruals 12,514 (19,377)
(Decrease) in income tax payable (26,312) (505,364)
----------- -----------
NET CASH USED IN OPERATIONS (654,852) (1,123,188)
INVESTING ACTIVITIES:
Distributions from partnerships 2,430,885 1,129,603
Contributions to partnership interest (2,827,000) -0-
Purchase of fixed assets (13,519) -0-
Net proceeds (payments) from/to related parties 2,386,069 543,750
----------- -----------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 1,976,435 1,673,353
----------- -----------
INCREASE IN CASH 1,321,583 550,165
CASH, BEGINNING OF PERIOD 262,303 150,032
----------- -----------
CASH, END OF PERIOD $ 1,583,886 $ 700,197
=========== ===========
See accompanying notes to the unaudited condensed
consolidated financial statements.
6
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 1. BASIS OF PRESENTATION
Interim Financial Data
The accompanying unaudited condensed interim consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America 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 accounting principles generally
accepted in the United States of America for complete financial statements.
However, management believes the accompanying unaudited condensed interim
consolidated financial statements contain all adjustments, consisting of only
normal recurring adjustments, necessary to present fairly the consolidated
financial position of the Company as of September 30, 2003 and the results of
their operations for the three and nine months ended September 30, 2003 and 2002
and cash flows for the nine months ended September 30, 2003 and 2002. The
results of operations and cash flows for the periods are not necessarily
indicative of the results of operations or cash flows that can be expected for
the year ending December 31, 2003. 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, 2002.
Reclassifications
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported condensed
consolidated financial statements in order to conform to the financial statement
presentation of the current period.
Basis of Consolidation
The condensed consolidated financial statements include CONSULIER ENGINEERING,
INC. (the "Company" or "Consulier"), and its wholly-owned subsidiaries,
CONSULIER INTERNATIONAL, INC., ("CII") and C-6 PRODUCTS, INC., ("C-6"), as well
as SOUTHEAST AUTOMOTIVE ACQUISITION CORP. ("Southeast") (Note 2). All
intercompany balances and transactions between the Company and its wholly-owned
subsidiaries have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The income tax provision differs from the expected Federal statutory rates due
primarily to the reversal of deferred tax assets related to the divestiture of
Southeast (Note 2).
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 2. DISCONTINUED OPERATIONS
As of December 31, 2002, the Company sold 70% of the common stock of its
wholly-owned subsidiary, Southeast, to executive officers of Southeast, in
exchange for 45,000 shares of the Company's common stock, and a promissory note
(the "Note") of approximately $1,600,000 payable to the Company by Southeast for
its pre-existing debt to the Company, collateralized by Southeast's assets, the
common stock in Southeast and the purchasers' personal guarantees, limited to
the cash in Southeast at December 31, 2002 of approximately $228,000. The note
bears interest at 6% and is payable in monthly installments of principal and
interest of approximately $9,600 beginning February 20, 2003.
On June 29, 2003, the Company transferred its remaining 30% ownership of the
common stock of Southeast to the former executive officers of Southeast in
consideration of their agreement to change the method of calculating the
purchase price of the 70% of common stock of Southeast and their agreement to
amend the note to reflect an original principal balance of $1,764,581 with a
term of 40 years from June 2003, with a balloon payment of $206,916 due on May
20, 2043; the remaining terms of the note were unchanged. On June 30, 2003, the
Company sold and assigned the note to the majority stockholder of Consulier,
together with its security interest for the consideration of $1,762,575, the
then current unpaid principal balance and accrued interest due on the note.
As the note was sold and assigned from the Company, the Company is no longer
considered to be the primary beneficiary. As such, Southeast is considered to be
divested as of the assignment date, June 30, 2003, and as a result the Company
recorded the operations and disposal of Southeast as discontinued operations.
Following is summarized unaudited financial information for the discontinued
operations during the three and nine months ended September 30, 2003 and 2002:
2003 2002
--------------------------- -----------------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30 September 30 September 30 September 30
------------ ----------- ------------ -----------
Net Sales - Southeast Automotive $ -0- $ 1,021,644 $ 698,999 $ 2,167,462
===== =========== =========== ===========
Income From Discontinued Operations
Before Income Taxes $ -0- $ 15,420 $ 34,269 $ 176,136
Income Tax Provision (-0-) (4,905) (14,810) (66,280)
----- ----------- ----------- -----------
Net Income From Discontinued Operations $ -0- $ 10,515 $ 19,459 $ 109,856
===== =========== =========== ===========
Net Income Per Share - Basic and Diluted $ .00 $ .00 $ .00 $ .02
===== =========== =========== ===========
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 3. PARTNERSHIP AND LLC INTERESTS
The Company's interests consist of Consulier's investments in AVM, L.P., BioSafe
Systems, LLC and Systems Technologies, LLC, which are accounted for using the
equity method.
AVM, L.P.
Consulier owns approximately 8.5% of AVM's capital as of September 30, 2003.
Based on capital and earnings distributions provided in the partnership
agreement, Consulier was allocated approximately 8.5% of AVM's earnings during
the three-month and nine-month periods ended September 30, 2003 and 2002. Under
the partnership agreement, Consulier may withdraw all or any portion of its
capital account upon 30 days written notice. AVM's general partner may also
expel Consulier from the partnership through payment of the balance of
Consulier's capital account. Following is a summary of the results of operations
of AVM and the income allocated to the Company:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) (in thousands)
---------------------- ----------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
------- ------- ------- -------
Revenue $29,680 $21,096 $66,677 $47,375
Costs and expenses 15,590 12,970 36,367 31,871
------- ------- ------- -------
Net income $14,090 $ 8,126 $30,310 $15,504
======= ======= ======= =======
Consulier's share of earnings $ 1,197 $ 672 $ 2,581 $ 1,324
======= ======= ======= =======
BIOSAFE SYSTEMS, LLC
The Company owns a 40% interest in BioSafe Systems, LLC. Bio Safe Systems, LLC's
total assets (unaudited) at September 30, 2003 were approximately $1,948,147.
Following is a summary of the results of operations of BioSafe Systems, LLC and
the income allocated to the Company:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) (in thousands)
-------------------- --------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
------- ------ ------ ------
Revenue $2,064 $1,643 $4,508 $3,703
Costs and expenses 1,568 1,109 3,916 2,870
------ ------ ------ ------
Net income $ 496 $ 534 $ 592 $ 833
====== ====== ====== ======
Consulier's share of earnings $ 198 $ 216 $ 240 $ 335
====== ====== ====== ======
9
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 3. PARTNERSHIP AND LLC INTERESTS (CONTINUED)
SYSTEMS TECHNOLOGIES, LLC
During August 2002 the Company purchased a 14.25% interest in Systems
Technologies, LLC, a Nevada limited liability company (ST, LLC). During the nine
months ended September 30, 2003, the Company made additional contributions of
$2,827,000 to increase its investment in ST, LLC. As of September 30, 2003, the
Company's interest in ST, LLC totaled 41%. ST, LLC is a member of Patient Care
Technology Systems, LLC, a California limited liability company (PCTS). ST,
LLC's primary asset is its approximate 75% (at September 30, 2003) investment in
PCTS. The original agreement provides that the losses from ST, LLC are allocated
to ST, LLC's principal members. Effective April 1, 2003, the agreement was
amended and stipulates that the Company receives allocated losses to the extent
that the Company has made capital contributions during the current year or since
inception. Consequently, the loss allocated to the Company is greater than 41%.
The Company's principal shareholder owns approximately 44% of ST, LLC, and
together with the Company's 41%, the ownership aggregates 85%. The Company can
require the Company's principal shareholder to purchase its interest in ST, LLC
for cash equal to the Company's capital account balance in ST, LLC at any time
with 60 days written notice. Management has evaluated ST, LLC's projections and
related assumptions regarding their operations. In this regard, management
periodically compares actual results to these projections. Should actual results
be significantly less than the projection, a write down might be necessary.
Following is a summary of the results of operations of ST, LLC and the losses
allocated to the Company:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) (in thousands)
--------------------- -----------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
------- ----- ------- -----
Revenue $ 94 $ N/A $ 277 $ N/A
Costs and expenses 2,021 N/A 3,378 N/A
------- ----- ------- -----
Net loss $(1,927) N/A $(3,101) N/A
======= ===== ======= =====
Consulier's share of loss $(1,927) N/A $(3,101) N/A
======= ===== ======= =====
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 4. EARNINGS PER SHARE
Basic and diluted earnings per share for the three and nine months ended
September 30, 2003 and 2002 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------ ----------- ----------- -----------
BASIC EARNINGS PER SHARE COMPUTATION:
NUMERATOR:
Income (loss) from continuing operations $ (520,883) $ 548,000 $ (571,518) $ 935,323
Discontinued operations,
net of income taxes -0- 19,459 108,079 109,856
------------ ----------- ----------- -----------
Net Income (Loss) $ (520,883) $ 567,459 $ (463,439) $ 1,045,179
============ =========== =========== ===========
DENOMINATOR:
Average number of common shares outstanding 4,935,243 4,951,150 4,935,243 4,951,150
============ =========== =========== ===========
DILUTED EARNINGS PER SHARE COMPUTATION:
NUMERATOR:
Income (Loss) from continuing operations $ (520,883) $ 548,000 $ (571,518) $ 935,323
Discontinued operations, net of income taxes -0- 19,459 108,079 109,856
------------ ----------- ----------- -----------
Net Income (Loss) $ (520,883) $ 567,459 $ (463,439) $ 1,045,179
============ =========== =========== ===========
DENOMINATOR:
Average number of common shares outstanding 4,935,243 4,951,150 4,935,243 4,951,150
Incremental shares for assumed exercise
of securities 18,584 11,124 16,999 11,124
------------ ----------- ----------- -----------
Total shares 4,953,827 4,962,274 4,952,242 4,962,274
============ =========== =========== ===========
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 5. SEGMENT INFORMATION
The Company's continuing operations are currently comprised of three segments;
manufacturing, investing and corporate activities. These operating units are
managed from the Company's Riviera Beach facility. As discussed in Note 2,
Discontinued Operations, the Company sold its automotive part distribution as of
June 30, 2003.
Detailed below are the results of operations by segment and the discontinued
operations for the three and nine months ended September 30, 2003 and 2002.
Three Months Ended September 30, 2003
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
------------- ------------ ----------- ------------ -----------
Revenue $ 100,281 $ -0- $ -0- $ -0- $ 100,281
Operating Income (Loss) 30,331 (161,024) (130,693)
Other Income (Loss) -- (486,555) (9,254) (495,809)
Income (Loss) From
Continuing Operations 24,869 (305,939) (239,813) (520,883)
Income (Loss) From
Discontinued Operations -0- -0-
Assets $ 1,184,550 $ 6,241,043 $ 1,022,906 $ 8,448,499
Three Months Ended September 30, 2002
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
------------- ------------ ----------- ------------ -----------
Revenue $ 11,700 $ -0- $ -0- $ -0- $ 11,700
Operating Income (Loss) (30,188) 27,344 (2,844)
Other Income (Loss) 900,002 (5,368) 894,634
Income (Loss) From
Continuing Operations (18,550) 553,046 13,504 548,000
Income (Loss) From
Discontinued Operations 19,459 19,459
Assets $ 1,213,964 $ 8,252,505 $ 177,603 $ 9,644,072
12
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF SEPTEMBER 30, 2003
NOTE 5. SEGMENT INFORMATION (CONTINUED)
Nine Months Ended September 30, 2003
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
------------- ------------ ----------- ------------ -----------
Revenue $ 149,114 $ -0- $ -0- $ -0- $ 149,114
Operating Income (Loss) (25,960) (366,225) (392,185)
Other Income (Loss) (239,313) (239,313)
Income (Loss) From
Continuing Operations (25,960) (125,893) (419,665) (571,518)
Income (Loss) From
Discontinued Operations 108,079 108,079
Assets $ 1,184,550 $ 6,241,043 $ 1,022,906 $ 8,448,499
Nine Months Ended September 30, 2002
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
------------- ------------ ----------- ------------ -----------
Revenue $ 33,636 $ -0- $ -0- $ -0- $ 33,636
Operating Income (Loss) (67,772) (143,701) (211,473)
Other Income (Loss) 1,711,116 1,711,116
Income (Loss) From
Continuing Operations (67,772) 1,146,796 (143,701) 935,323
Income (Loss) From
Discontinued Operations 109,856 109,856
Assets $ 1,213,964 $ 8,252,505 $ 177,603 $ 9,644,072
13
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
THE FOLLOWING COMPARES THE RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2003 TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002:
During the quarter ended September 30, 2003, sales increased $88,581 from the
comparable amounts recorded during the quarter ended September 30, 2002.
Operating loss from continuing operations for the third quarter of 2003 was
$130,693, or $.03 per share, compared to a loss of $2,844, or $.00 per share,
for the third quarter of 2002 from continuing operations.
During the nine months ended September 30, 2003, sales increased $115,478 from
the comparable amounts recorded during the quarter ended September 30, 2002.
Operating loss from continuing operations for the nine months ended September
30, 2003 was $392,185, or $.08 per share, compared to a loss of $211,473, or
$.04 per share, for the nine months ended September 30, 2002 from continuing
operations.
Increase in operating expenses was due to the an increase in sales and marketing
effort of bringing the new soap formula to market.
Investment income from AVM Limited, Inc. increased by approximately $525,000.
However, the allocated loss from equity investees increased by more than
$1,945,000. That coupled with the increase in selling general administrative
expenses resulted in the loss from continuing operations.
AUTOMOTIVE PARTS DISTRIBUTION - Because of the assignment of the note on the
disposition of the Southeast Automotive Parts Distribution subsidiary, all
financial information is disclosed as discontinued operations. A $97,564 gain on
the disposal of subsidiary (net of income tax) was recorded in the second
quarter of 2003.
HOUSEHOLD AND TOOL PRODUCTS - C-6 incurred a net loss of $10,021 in the three
months ended September 30, 2003 consisting mostly of storage costs, compared to
a net loss of $12,000 in the three months of 2002.
C-6 had net income of $2,700 for the nine months ended September 30, 2003
compared to a net loss of $18,575 for the nine months ended September 30, 2002.
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $1,196,500 in the third quarter of 2003, a 78% increase from the
comparable 2002 quarter's income of $671,517. This represents annualized returns
of 258% and 33%, respectively, on Consulier's average investment during each
quarter.
Investment income from Consulier's AVM limited partnership interest was
$2,581,432 for the nine months ended September 30, 2003, a 95% increase from the
comparable 2002 income of $1,323,722 for the nine months ended September 30,
2002. This represents annualized returns of 186% and 95%, respectively, on
Consulier's average investment during each nine months.
INVESTMENT IN BIOSAFE - Equity in the income of BioSafe was $198,270 in the
third quarter of 2003, compared to 2002 quarter's income of $216,212. This
represents the Company's 40% interest in BioSafe's net income of approximately
$496,000 in the third quarter of 2003, compared to income of $534,000 in the
third quarter of 2002.
Equity in the income of BioSafe was $240,649 for the nine months ended September
30, 2003, compared to the nine months ended September 30, 2002 income of
$335,634.
INVESTMENT IN ST, LLC - Equity in the loss of ST, LLC was $1,927,262 in the
third quarter of 2003. The company did not own an interest in ST, LLC in the
third quarter of 2002.
15
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2003, Consulier's cash totaled $1,583,886 as compared to
$262,303 at December 31, 2002. Net cash provided by operations was $411,107 for
the three months ended September 30, 2003 compared to $176,488 of net cash used
in the three months ended September 30, 2002. Net cash used by investing
activities was primarily due to additional investment in ST, LLC of $1,242,000
offset by the distribution of $1,196,500 from AVM during the three months ended
September 30, 2003.
Net cash used by operations was $654,852 for the nine months ended September 30,
2003 compared to $1,123,188 used in the nine months ended September 30, 2002.
Net cash provided by investing activities for the nine months ended September
30, 2003 was primarily the distribution of $2,430,885 from AVM, and the sale of
the discontinued operations in the amount of $1,762,575, offset by additional
investment in ST, LLC of $2,827,000.
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.
The Company has a $2,000,000 line of credit from a bank available, which has not
been used. It is anticipated that the cash requirements for ST, LLC will reduce
in the future as the sales increase within that limited liability company.
FUTURE OUTLOOK
Based on AVM's recent operations and operating results over the past five years,
management expects continued annualized returns in 2003 on Consulier's limited
partnership investments. However, there is no guarantee that the annualized
return of 258% in the third quarter of 2003 will be maintained.
The Company has developed a new formula for its Captain Cra-z Hand and All
Purpose Soap and is expecting its first delivery of soap based on this formula
from its new domestic manufacturer in the fourth quarter of 2003. Design changes
to packaging to better serve the industrial as well as retail markets will be
implemented and launched with the new formula.
16
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
The Company has formed a new wholly owned subsidiary, Consulier International,
Inc. to market its Captain Cra-z Hand and All Purpose Soap, as well as its
future products and to develop new retail and distribution outlets nationally
and internationally. Specifics of Consulier International Inc.'s marketing plan
have not been finalized. Clark T. Feezell, formerly Regional Manager for
Ferguson Enterprise, Inc., a division of Wosleley, PLC (NYSE:WOS) will head
Consulier International, Inc. which will start operations during the fourth
quarter of 2003.
The Company intends to substantially increase its investment in ST, LLC over the
next three to five years. While the exact amount of the Company's future
investment has not been quantified at this time, it is expected that the
investment will be between $5 million and $7 million. The exact amount will be
based upon market acceptance of PCTS's Amelior products and the need for
investment funds.
ITEM 3. CONTROLS AND PROCEDURES
Our management have conducted an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15e and 15d-15(e)
promulgated under the Securities and Exchange Act of 1934, as amended) as of the
end of the fiscal quarter covered by this report. Based upon that evaluation,
our management has concluded that our disclosure controls and procedures are
effective for timely gathering, analyzing and disclosing the information we are
required to disclose in our reports filed under the Securities Exchange Act of
1934, as amended. There have been no significant changes made in our internal
controls or in other factors that could significantly affect our internal
controls during the fiscal quarter covered by this report.
17
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 2003, 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, except a personal injury claim
concerning a fall from a lifeguard stand manufactured by the Company. Although
the outcome of any litigation cannot be guaranteed with certainty and the
Company maintains insurance coverage for this type of claim, there is a good
likelihood that the Company will succeed in its defense of this claim.
ITEM 2. CHANGES IN SECURITIES
During the third quarter of 2003, 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 2003, 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the third quarter of 2003, 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-B
None
(b) CURRENT REPORTS ON FORM 8-K None
(c) 31.1 - Certification of Chief Executive Officer Pursuant to Section
302 of Sarbanes-Oxley Act of 2002
(d) 31.2 - Certification of Chief Financial Officer Pursuant to
Section 302 of Sarbanes-Oxley Act of 2002
18
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
(e) 32.1 - Certification of Chief Executive Officer Pursuant to Section
906 of Sarbanes-Oxley Act of 2002
(f) 32.2 - Certification of Chief Financial Officer Pursuant to Section
906 of Sarbanes-Oxley Act of 2002
The Company has attached Exhibits 31.1, 31.2, 32.1 and 32.2 to this
filing to comply with the requirements of the Sarbanes-Oxley Act of
2002.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONSULIER ENGINEERING, INC.
(Registrant)
Date: November 19, 2003 By: /s/ Alan R Simon
-------------------------------------
ALAN R. SIMON, ESQ.
Secretary and Treasurer (Principal
Financial and Accounting Officer)
Date: November 19, 2003 By: /s/ Warren B. Mosler
-------------------------------------
WARREN B. MOSLER
Chairman of the Board, President
& Chief Executive Officer (Principal
Executive Officer)
20