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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSBA
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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)
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 May 15, 2003, there were 4,980,243 outstanding shares of common stock,
par value $0.01 per share.
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Pursuant to this Form 10-QSB/A, the registrant amends "Part I Financial
Information, Item 1, Financial Statements" in its quarterly Form 10-QSB for the
quarterly period ended March 31, 2003, to reclassify a "Notes Receivable -
Related Parties" as non-current and to reduce the income tax provision. The
classification of the note receivable was corrected to reflect the term of the
note. The income tax provision was corrected since the original filing did not
accurately reflect the current income tax expense. On Page 7, Note 1. Basis of
Presentation, the Form 10-QSB/A more fully disclosed the terms of the
disposition of 70% of the common stock of a wholly owned subsidiary.
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
Page
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PART-I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2003
(Unaudited) and December 31, 2002 4
Consolidated Statements of Income for the
three months ended March 31, 2003
and 2002 (Unaudited) 5
Consolidated Statements of Cash Flows for the
three months ended March 31, 2003
and 2002 (Unaudited) 6
Notes to Consolidated Financial
Statements 7
Item 2. Management's Discussion
and Analysis or Plan of Operation 11
Item 3. Controls and Procedures 14
PART-II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters
to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
CERTIFICATIONS 17
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2003 2002
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(unaudited)
ASSETS
Current:
Cash $ 262,313 $ 262,303
Receivables, net 478,588 471,203
Due from principal shareholder (Note 2) 93,986 529,174
Inventories (Note 3) 1,325,330 1,336,162
Deferred income taxes 202,606 202,606
Other current assets 12,713 12,785
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Total current assets 2,375,536 2,814,233
Property and equipment, net 1,274,408 1,286,505
Limited partnership interests (Note 4) 4,702,943 4,009,575
Notes receivable - related parties 1,420,680 1,420,714
Deferred income taxes 111,136 47,136
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$9,884,703 $9,578,163
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current:
Accounts payable and accruals $ 336,383 $ 429,785
Bonus Payable 50,000 50,000
Income taxes payable 146,358 26,312
Notes payable - related parties 183,935 186,587
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Total current liabilities 716,676 692,684
Bonds payable 327,805 323,920
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Total liabilities 1,044,481 1,016,604
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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 3,124,253 3,124,253
Retained earnings 6,198,298 5,919,635
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9,374,534 9,095,871
Less: Treasury stock at cost - 218,055 shares (417,911) (417,911)
Other comprehensive loss (39,861) (39,861)
Notes receivable for common stock (76,540) (76,540)
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Total stockholder's equity 8,840,222 8,561,559
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$9,884,703 $9,578,163
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
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2003 2002
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(Unaudited)
Revenues:
Net sales $ 490,149 $ 788,492
Operating cost and expenses:
Cost of goods sold 247,243 469,290
Selling, general and administrative 372,963 380,162
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Total operating costs and expenses 620,206 849,452
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Operating loss (130,057) (60,960)
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Other income (expense):
Investment income - related parties (Note 4) 612,778 314,408
Interest income - related parties 16,772 10,885
Interest expense (5,252) (6,140)
Undistributed income (loss) of equity investees (Note 4) (79,552) 110,422
Other income 19,974 54,628
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Total other income 564,720 484,203
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Income before income taxes 434,663 423,243
Income tax provision 156,000 152,162
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Net income $ 278,663 $ 271,081
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Basic and diluted earnings per share (Note 5) $ 0.06 $ 0.05
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
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2003 2002
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(Unaudited)
OPERATING ACTIVITIES:
Net income $ 278,663 $ 271,081
Adjustments to reconcile net income to net
cash (used in) provided by operations:
Depreciation 26,577 26,450
Amortization 3,885 3,885
Undistributed (income) loss of equity investee 79,552 (110,422)
Investment income - related party (612,778) (314,408)
Deferred income taxes (65,000) --
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other current assets 75,141 (39,752)
Decrease in inventories 10,832 49,541
Increase (decrease) in income tax payable 120,046 (582,838)
Decrease in accounts payable and accruals (93,402) (28,058)
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NET CASH USED IN OPERATIONS (175,484) (725,522)
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (12,400) (5,666)
Distributions from partnership interest 530,323 314,101
Increase (decrease) in related party loans, net (2,617) 32,442
Decrease in due from principal shareholder 435,188 442,054
Purchase of investment (775,000) --
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NET CASH PROVIDED BY INVESTING ACTIVITIES 175,494 782,931
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INCREASE IN CASH 10 58,410
CASH, BEGINNING OF PERIOD 262,303 150,032
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CASH, END OF PERIOD $ 262,313 $ 208,442
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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 ended March 31, 2003 are not necessarily
indicative of the results that may 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.
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, CONSULIER BUSINESS
SERVICES, INC., ("CBSI") and C-6 PRODUCTS, INC ("C-6"), as well as SOUTH EAST
AUTOMOTIVE ACQUISITION CORP. ("South East"). All intercompany balances and
transactions between the Company and its wholly-owned subsidiaries have been
eliminated. The Company sold seventy percent 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
of approximately $1,700,000 payable to the Company by Southeast for its
pre-existing debt to the Company, secured 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 through January 20, 2033.
The effective date of the sale was subsequent to the close of business on
December 31, 2002 and the closing was held on February 5, 2003.
Although the Company will retain a minority interest in Southeast, due to the
significant portion of the sales proceeds being in the form of a note receivable
collateralized by substantially all assets of Southeast, the Company will
continue to account for Southeast as a consolidated subsidiary.
NOTE 2. DUE FROM PRINCIPAL SHAREHOLDER
Prior to 2001, capital and income distributions from the Company's investment in
AVM (see Note 4) were distributed directly from AVM to the Company on a monthly
basis. Beginning in 2001 and ending in July 2002, the Company had been advancing
its cash distributions from AVM to its principal shareholder. These
distributions are included in due from principal shareholder of $93,986 and
$529,174, respectively, at March 31, 2003 and December 31, 2002 on the
consolidated balance sheets.
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NOTE 3. INVENTORIES
Inventories, stated at the lower of cost, determined on a first-in, first-out
basis, or market, are summarized as follows:
March 31, December 31,
2003 2002
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Raw materials $ 819 $ 819
CRA-Z Soap 29,693 29,693
Finished goods 1,434,818 1,445,650
Obsolescence Reserve (140,000) (140,000
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$1,325,330 $1,336,162
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8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PARTNERSHIP INTERESTS AND CONCENTRATION OF CREDIT RISK
The limited partnership interests consist of Consulier's investment in AVM,
L.P., BioSafe Systems, LLC. and Systems Technologies, LLC.
AVM, L.P
Consulier owns approximately 10% of AVM's capital as of March 31, 2003 and
December 31, 2002. Based on capital and earnings distributions provided in the
partnership agreement, Consulier was allocated approximately 5% and 8%,
respectively, of AVM's earnings during the three-month periods ended March 31,
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. ERROR! NOT A VALID LINK.
BIOSAFE SYSTEMS, LLC
The Company owns a 40% interest in BioSafe Systems, LLC. Bio Safe Systems, LLC's
total assets (unaudited) at March 31, 2003 and December 31, 2002 were
approximately $1,861,000 and $1,725,000 respectively. The investment is recorded
at $874,124 and $788,371 at March 31, 2003 and December 31, 2002, respectively,
further, equity in income for the three-month periods ended March 31, 2003 and
2002 was $85,753 and $47,957, respectively.
SYSTEMS TECHNOLOGIES, LLC
During 2002 the Company purchased a 14.25% interest in Systems Technologies,
LLC, a Nevada limited liability company (ST, LLC), as of March 31, 2003 the
Company's interest in ST, LLC totaled 22%. 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 60% (at March 31, 2003) investment in
PCTS. As of March 31, 2003 PCTS's summarized financial information was as
follows: total assets of approximately $509,000, total liabilities of
approximately $231,000, and net operating loss of $832,000. The Company's
investment in ST, LLC is recorded at $1,968,365 which is the initial investment
of $2,200,000 net of equity in the loss of ST, LLC of $231,635 including
$165,305 during the three months ended March 31, 2003. The Company's principal
shareholder owns approximately 71% of ST, LLC, therefore the Company is
accounting for its investment using the equity method. 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.
Interest in South East consists of a note receivable and 30% of South East stock
(see note 1).
SOUTH EAST AUTOMOTIVE ACQUISITION CORP.
As of March 31, 2003, South East's summarized financial information is: total
assets of $1,853,671, total liabilities of $2,013,526, and a net operating loss
of $27,646, for the first quarter of 2003.
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. EARNINGS PER SHARE
Three Months Ended March 31,
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2003 2002
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Numerator:
Net income, numerator for basic and diluted
earnings per share $ 278,663 $ 271,081
Denominator:
Denominator for basic earnings
per share, weighted - average shares 4,980,243 4,951,150
Effect of dilutive securities:
Stock options -- --
Warrants 17,325 11,124
Dilutive potential common shares 17,235 11,124
Denominator for diluted earnings
per share, adjusted
weighted - average shares 4,997,478 4,962,274
Basic earnings per share $ 0.06 $ 0.05
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Diluted earnings per share $ 0.06 $ 0.05
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At March 31, 2003, no stock options were outstanding.
10
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 MONTHS ENDED
MARCH 31, 2003 TO THE THREE MONTHS ENDED MARCH 31, 2002:
During the quarter ended March 31, 2003, sales increased $33,000 from the
comparable amounts recorded during the quarter ended March 31, 2002, without
regard to Southeast Automotive Parts, as discussed below. Net Income for the
quarter of 2003 was $278,663, or $0.06 per share, compared to $271,081, or $0.05
per share, in the first quarter of 2002. Although net income was approximately
the same, increase in cost of sales and selling, general and administrative
expenses were offset by an increase in other income.
Other income consisting of investment income and interest income/expense
increased $80,517, primarily attributable to a $298,370 increase in earnings
from AVM, offset by the $24,669 decrease in undistributed income from BioSafe,
and an undistributed loss from ST, LLC of $165,305.
AUTOMOTIVE PARTS DISTRIBUTION - Net sales of South East's automotive parts
distribution represented 91% and 99% of Consulier's net sales in the first
quarters of 2003 and 2002 respectively. Southeast's net sales decreased
approximately $329,352 from $776,708 in the first quarter of 2003 compared to
the first quarter 2002 primarily due to general economic conditions. The
automotive parts distribution segment had loss of $27,646 in the first quarter
of 2003, and net income before income taxes of $95,989 in the first quarter of
2002.
HOUSEHOLD AND TOOL PRODUCTS - C-6 incurred a net income of $12,922 in the first
quarter of 2003, compared to a net loss of $6,276 in the first quarter of 2002.
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $612,778 in the first quarter of 2003, a 95% increase from the
comparable 2002 quarter's income of $314,408. This represents annualized returns
of 132% and 61%, respectively, on Consulier's average investment during each
quarter.
INVESTMENT IN BIOSAFE - Equity in income of BioSafe was $83,753 in the first
quarter of 2003, a 24% decrease from the comparable 2002 quarter's income of
$110,422. This represents the Company's 40% interest in BioSafe's net income of
approximately $214,000 in the first quarter of 2003, compared to $276,000 in the
first quarter of 2002.
INVESTMENT IN ST, LLC - Equity in the loss of ST, LLC was $165,305, in the first
quarter of 2003. The company did not own an interest in ST, LLC in the first
quarter of 2002.
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2003, Consulier's cash totaled $262,313 as compared to $262,303 at
December 31, 2002. Net cash used by operations was $175,484 for the first three
months of 2003 compared to $724,522 of net cash used in the first three months
of 2002. Net cash provided by investing activities was primarily additional
investment in ST, LLC of $775,000, offset by the net increase of $216,222 in
distributions from AVM.
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.
During the first quarter of 2003, none of the Company's excess cash funds was
advanced to the Company's principal shareholder, under demand receivables.
On April 16, 2002, the Company entered into agreement granting a line of credit
of up to $900,000 to Asset Assistance Group, LLC. The line of credit expired on
April 16, 2003.
12
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
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 investment. However, there is no guarantee that the annualized
return of 132% in the first 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 second 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.
In addition to the above, Consulier is expanding its sales and marketing
department to develop new retail and distribution outlets nationally and
internationally. Specifics of the new marketing plan have not been finalized.
13
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 Systems Technologies, 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.
ITEM 3. CONTROLS AND PROCEDURES
a. Within the 90 days prior to the date of this report, the Company
evaluated the effectiveness of it's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
Company's Chief Executive Officer and Principal Accounting and
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material
information relating to the Company required to be included in its
periodic SEC filings.
b. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of the evaluation referenced above.
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 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.
ITEM 2. CHANGES IN SECURITIES
During the first 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 first 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 first 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
The Company did not file any reports on Form 8-K during the three
month period ended March 31, 2003 except to report the Company's sale
of 70% of its stock in South East.
(c) CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
200218 U.S.C. (SECTION 1350)
The Company has attached Exhibits 99.1 and 99.2 to this filing to
comply with the requirements of the Sarbanes-Oxley Act of 2002.
15
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 20, 2003 By: /s/ Alan R Simon
-------------------------------------
ALAN R. SIMON, ESQ.
Secretary and
Treasurer (Principal
Financial and Accounting Officer)
Date: November 20, 2003 By: /s/ Warren B. Mosler
-------------------------------------
WARREN B. MOSLER
Chairman of the Board, President
& Chief Executive Officer (Principal
Executive Officer)
16