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 March 31, 2002
[ ] 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, 2002, there were 4,951,150 outstanding
shares of common stock, par value $0.01 per share.
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, 2002
(Unaudited) and December 31, 2001.......................... 3
Consolidated Statements of Operations for the
three months ended March 31, 2002
and 2001 (Unaudited)....................................... 4
Consolidated Statements of Cash Flows for the
three months ended March 31, 2002
and 2001 (Unaudited)....................................... 5
Notes to Consolidated Financial
Statements ................................................ 6
Item 2. Management's Discussion
and Analysis or Plan of Operation ...................... 10
PART-II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 14
Item 2. Changes in Securities...................................... 14
Item 3. Defaults Upon Senior Securities............................ 14
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
March 31, December 31,
2002 2001
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(Unaudited)
ASSETS
Current:
Cash $ 208,442 $ 150,032
Receivables, net 594,911 560,848
Due from principal shareholder (Note 2) 790,128 1,232,182
Receivables - related parties 154,806 67,693
Inventories (Note 3) 1,087,627 1,137,168
Deferred income taxes 158,800 158,800
Other current assets 33,210 38,550
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TOTAL CURRENT ASSETS 3,027,924 3,345,273
Property and equipment, net 1,334,682 1,355,466
Limited partnership interests (Note 4) 2,641,801 2,531,379
Notes receivable - related parties 1,420,247 1,420,714
Deferred income taxes 35,025 35,025
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$ 8,459,679 $ 8,687,857
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT :
Accounts payable and accruals $ 204,272 $ 232,330
Income taxes payable 127,459 710,297
Notes payable - related parties 184,781 65,693
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TOTAL CURRENT LIABILITIES 516,512 1,008,320
Bonds payable 312,265 308,380
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TOTAL LIABILITIES 828,777 1,316,700
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STOCKHOLDERS' EQUITY:
Common stock of $.01 par value:
Authorized --- 25,000,000 shares;
Issued --- 5,198,298 shares 51,983 51,983
Additional paid-in capital 3,110,700 3,110,700
Retained earnings 5,051,346 4,780,265
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8,214,029 7,942,948
Less: Treasury stock at cost - 247,148 shares (468,363) (468,363)
Other comprehensive loss (38,224) (26,888)
Notes receivable for common stock (76,540) (76,540)
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TOTAL STOCKHOLDERS' EQUITY 7,630,902 7,371,157
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$ 8,459,679 $ 8,687,857
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
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2002 2001
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(Unaudited)
Revenues:
Net sales $ 788,492 $ 840,894
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OPERATING COSTS AND EXPENSES:
Cost of goods sold 469,290 500,859
Selling, general and administrative 380,162 500,226
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TOTAL OPERATING COSTS AND EXPENSES 849,452 1,001,085
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OPERATING LOSS (60,960) (160,191)
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OTHER INCOME (EXPENSE):
Investment income - related parties (Note 4) 314,408 86,086
Interest income - related parties 10,885 37,833
Interest expense (6,140) (36,482)
Undistributed income of equity investee (Note 4) 110,422 47,957
Other income 54,628 36,080
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TOTAL OTHER INCOME 484,203 171,474
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Income before income taxes 423,243 11,283
Income tax provision 152,162 7,433
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NET INCOME $ 271,081 $ 3,850
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BASIC AND DILUTED EARNINGS PER SHARE (NOTE 5) $ 0.05 $ 0.00
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
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2002 2001
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(Unaudited)
OPERATING ACTIVITIES:
Net income 271,081 3,850
Adjustments to reconcile net income to net
cash (used in) provided by operations:
Depreciation 26,450 27,526
Amortization 3,885 3,885
Provision (recovery) for doubtful accounts -- (8,000)
Undistributed income of equity investee (110,422) (47,957)
Investment income - related party (314,408) (86,086)
Deferred income taxes -- 14,423
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other current assets (39,752) 718,198
Decrease in inventories 49,541 15,988
Decrease in income tax payable (582,838) --
Decrease in accounts payable and accruals (28,058) (542,090)
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NET CASH (USED IN) PROVIDED BY OPERATIONS (724,521) 99,737
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INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (5,666) (12,223)
Distributions from partnership interest 314,101 123,831
Increase (decrease) in related party loans 32,442 (17,149)
Decrease in due from principal shareholder 442,054 --
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NET CASH PROVIDED BY INVESTING ACTIVITIES 782,931 94,459
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FINANCING ACTIVITIES:
Net repayments of bank and other loans -- (47,681)
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NET CASH USED IN FINANCING ACTIVITIES -- (47,681)
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INCREASE IN CASH 58,410 146,515
CASH, BEGINNING OF PERIOD 150,032 418,634
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CASH, END OF PERIOD $ 208,442 $ 565,149
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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 ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. 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, 2001.
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. 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, the Company has been advancing its cash distributions
from AVM to its principal shareholder. These distributions are included in due
from principal shareholder of $790,128 and $1,232,182, respectively, at March
31, 2002 and December 31, 2001 on the consolidated balance sheets.
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,
2002 2001
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Raw materials $ 15,817 $ 5,719
CRA-Z Soap 22,147 24,123
Finished goods 1,179,663 1,237,326
Obsolescence Reserve (130,000) (130,000)
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$ 1,087,627 $ 1,137,168
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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.
and BioSafe Systems, LLC.
AVM, L.P
Consulier owns approximately 10% of AVM's capital as of March 31, 2002 and
December 31, 2001. 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,
2002 and 2001. 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 (in thousands):
Three Months Ended
March 31,
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2002 2001
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Revenue $13,500 $ 6,458
Costs and expenses 6,903 5,442
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Net income $ 6,597 $ 1,016
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Consulier's share of earnings $ 314 $ 86
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BIOSAFE SYSTEMS, LLC
The Company owns a 40% interest in BioSafe Systems, LLC. Bio Safe Systems, LLC's
total assets (unaudited) at March 31, 2002 and December 31, 2001 were
approximately $1,083,000 and $965,000 respectively. The investment is recorded
at $577,586 and $467,164 at March 31, 2002 and December 31, 2001, respectively,
further, equity in income for the three-month periods ended March 31, 2002 and
2001 was $110,422 and $47,957, respectively.
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. EARNINGS PER SHARE
Three Months Ended March 31,
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2002 2001
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NUMERATOR:
Net income,
numerator for basic and diluted
earnings per share $ 271,081 $ 3,850
DENOMINATOR:
Denominator for basic earnings
per share, weighted - average shares 4,951,150 4,951,150
EFFECT OF DILUTIVE SECURITIES:
Stock options -- 17,904
Warrants 11,124 7,742
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Dilutive potential common shares 11,124 25,646
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DENOMINATOR FOR DILUTED EARNINGS
per share, adjusted
weighted - average shares 4,962,274 4,976,796
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BASIC EARNINGS PER SHARE $ 0.05 $ 0.00
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Diluted earnings per share $ 0.05 $ 0.00
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Options to purchase 10,000 and 35,000 shares of common stock at prices ranging
from $1.50 $2.50 per share were not included for the three month period ended
March 31, 2001 in the computation of diluted earnings per share because the
options exercise price was greater than the average market price of the common
shares and, therefore, the effect would be antidilutive.
At March 31, 2002, no stock options were outstanding.
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. - SUBSEQUENT EVENT
On April 16, 2002, the Company entered into an agreement granting a line of
credit of up to $900,000, at an interest rate of 4% per annum, payable on
demand, to Asset Assistance Group, LLC ("AAG"). As of May 15, 2002, the
outstanding amount drawn on the line of credit was approximately $278,000. The
line of credit expires one year from April 16, 2002. Further, in consideration
for the line of credit, the Company was granted an option to acquire 95% of AAG.
That option expires one year from April 16, 2002, and has an exercise price of
$950.
9
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, 2002 TO THE THREE MONTHS ENDED MARCH 31, 2001:
During the quarter ended March 31, 2002, sales and cost of goods sold decreased
$52,402 and $31,569, respectively, from the comparable amounts recorded during
the quarter ended March 31, 2001. Gross profit for the three months ended March
31, 2002 decreased $20,833 compared to the three months ended March 31, 2001.
Net Income for the first quarter of 2002 was $271,081, or $0.05 per share,
compared to $3,850, or $0.00 per share, in the first quarter of 2001. The
increase in net income is related primarily to an increase of $228,322 in
investment income from related parties, and of $62,465 in undistributed income
of equity investee.
Interest expense declined $30,342 due to the reduction in notes payable banks
and the partial redemption of bonds payable in the second quarter of 2001.
Other income consisting of investment income and interest income/expense
increased $312,729, from $484,203 in the first quarter of 2002 compared to
$171,474 in 2001, primarily attributable to the $228,322 increase in earnings
from AVM, and the $62,465 increase in undistributed income of BioSafe. Income
before income taxes increased $411,960 from income of $11,283 in the first
quarter of 2001 to income of $423,243 in the first quarter of 2002.
The effective tax rate decreased to approximately 36 % in the first quarter of
2002 compared to 66% in 2001 due to an increase of approximately $14,000 in
deferred income tax expense in the first quarter of 2001.
Consulier's consolidated income for the quarter ended March 31, 2002 was
$271,081, or $0.05 basic and diluted earnings per share compared to income of
$3,850, or $0.00 basic and diluted earnings per share, for first quarter 2001.
AUTOMOTIVE PARTS DISTRIBUTION - Net sales of Consulier's Southeast automotive
parts distribution represented 99% and 94% of Consulier's net sales in the first
quarters of 2002 and 2001 respectively. This segment's sales decreased by less
than 2%, or $10,980, in the 2002 quarter to $776,708, compared to $787,688 in
the 2001 quarter.
The automotive parts distribution segment had income before income taxes of
$95,989 in the first quarter of 2002 compared to $47,758 in the first quarter of
2001. The increase is primarily attributable to a decrease of approximately
$29,000 in payroll and related expenses as a result of decreasing the number of
employees from 20 to 12 during 2001.
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
HOUSEHOLD AND TOOL PRODUCTS - C-6 incurred a net loss of $6,276 in the first
quarter of 2002, consisting primarily of freight charges, compared to a net loss
of $9,000 in the first quarter of 2001.
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $314,408 in the first quarter of 2002, a 265% increase from the
comparable 2001 quarter's income of $86,086. This represents annualized returns
of 61% and 17%, respectively, on Consulier's average investment during each
year.
INVESTMENT IN BIOSAFE - Equity in income of BioSafe was $110,422 in the first
quarter of 2002, a 130% increase over the comparable 2001 quarter's income of
$47,957. This represents the Company's 40% interest in BioSafe's net income of
approximately $276,000 in the first quarter of 2002, compared to $120,000 in the
first quarter of 2001.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, Consulier's cash totaled $208,442 as compared to $150,032 at
December 31, 2001, an increase of $58,410. Net cash used in operations increased
to $724,521 in the first three months of 2002 compared to $99,737 of net cash
provided in the first three months of 2001. Net cash provided by investing
activities increased from $94,459 in the first three months of 2001 to $782,931
in the first three months of 2002, resulting primarily from a decrease of
$442,054 in due from principal shareholder, and a $190,270 increase in
distributions from partnership interest.
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 2002, a significant portion of the Company's excess
cash funds continued to be 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 expires one
year from April 16, 2002 and approximately $278,000 is outstanding at May 15,
2002. Sources for funding the line of credit are expected to be investment
income from AVM and repayments of outstanding amounts/advances by the principal
shareholder.
11
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 2002 on Consulier's limited
partnership investment. However, there is no guarantee that the annualized
return of 61% in the first quarter of 2002 will be maintained.
Sales in the automotive parts distribution segment are expected to increase in
2002 due to the reorganization of the sales department and training of
salespeople, strengthening of existing product lines, and increased marketing
and promotion. Southeast is scheduled to attend numerous trade shows in key
locations around the world to promote and sell its products.
In December 2000, Consulier entered into a multi-year strategic alliance and
distribution agreement with Norpak Manufacturing Inc. (Norpak) of Toronto,
Canada and its related company Veridien Corp. (Veridien) of St. Petersburg,
Florida. Veridien has a full line of top quality cleaning products that they
manufacture and distribute to national and regional retailers and distributors.
Norpak also with a full line of cleaning products and retail as well as
distribution sources, has been contracted to be the main distributor for the
soap in Canada. Norpak is responsible for the sales, marketing, retailing and
distribution of the soap in Canada. These agreements include pricing schedules
for products at distributorship levels.
Veridien and Norpak are working with Consulier to launch the product to national
and regional retailers and major distributors.
In addition to the above, Consulier maintains a sales and marketing department
developing new retail and distribution outlets nationally and internationally.
There are several trade shows scheduled for marketing the soap throughout 2002
and the internet web site continues to be a good lead generator with
applications for distribution being received through the site from countries all
over the world.
12
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.
13
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 2002, 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 2002, 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 2002, 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 2002, 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
(a) 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, 2002.
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
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)
Date: May 15, 2002 By: /s/ Alan R Simon
-------------------------------------
Alan R. Simon, Esq.
Secretary/Treasurer
15