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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 June 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
--------------------------------- -------------------
(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 September 30, 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.
AMENDMENT TO FORM 10-QSB/A
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 June 30, 2003. The financial statements reflect the
presentation of the operations of Southeast Automotive as discontinued
operations according to SFAS Number 144 for all periods presented including
disclosures required by Paragraph 47 of SFAS Number 144. The Company has also
recorded an additional loss of $726,222 from its investment in Systems
Technology, LLC, as described in Note 4, which was due to a change and
clarification of the allocation of losses as reflected in the operating
agreement of the limited liability company, effective April 1, 2003. The total
effect of the restatement was to increase undistributed loss of equity investees
and decrease limited partnership interests by $726,222. Accordingly, the
provision for federal income taxes was adjusted to reflect the changes to the
operating agreements. The Company also adjusted the gain on sale of discontinued
operations and recorded the Company's stock received from the sale of
discontinued operations as treasury stock on the accompanying condensed
consolidated balance sheet as of June 30, 2003.
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
Page
----
PART-I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet at June 30, 2003 (Unaudited) 4
Condensed Consolidated Statements of Income for the three months
and six months ended June 30, 2003 and 2002 (Unaudited) 5
Condensed Consolidated Statements of Cash Flows for the six months
ended June 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 15
Item 3. Controls and Procedures 16
PART-II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 19
CERTIFICATIONS 20
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEET
JUNE 30, 2003
ASSETS
CURRENT:
Cash $ 2,076,321
Receivables, net 50,786
Income tax overpayment 308,800
Receivable - related party 149,579
Inventories 20,512
Deferred income taxes 20,387
Other current assets 6,563
-----------
TOTAL CURRENT ASSETS 2,632,948
Property and equipment, net 1,084,877
Limited partnership interests 4,468,620
Notes receivable - related parties 688,646
Deferred income taxes 53,434
-----------
$ 8,928,525
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT:
Accounts payable and accruals $ 31,844
Bonus payable 50,000
-----------
TOTAL CURRENT LIABILITIES 81,844
Bonds payable 331,690
-----------
TOTAL LIABILITIES 413,534
-----------
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 5,977,077
Treasury stock at cost - 263,055 shares (528,161)
Accumulated other comprehensive loss (33,621)
Notes receivable for common stock (76,540)
-----------
TOTAL STOCKHOLDERS' EQUITY 8,514,991
-----------
$ 8,928,525
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SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
REVENUE:
Net sales $ 27,200 $ 10,152 $ 48,834 $ 21,936
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold -0- 1,071 -0- 3,332
Selling, general and administrative 187,630 89,462 310,330 227,233
----------- ----------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 187,630 90,533 310,330 230,565
----------- ----------- ----------- -----------
OPERATING LOSS (160,430) (80,381) (261,496) (208,629)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 772,154 337,797 1,384,932 652,205
Interest and other income 11,226 12,705 22,094 23,328
Interest expense (13,080) (6,208) (18,332) (12,348)
Undistributed income (loss) of equity investees (1,050,561) 8,854 (1,132,193) 119,276
Other income -0- 599 -0- 34,021
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (LOSS) (280,261) 353,747 256,501 816,482
----------- ----------- ----------- -----------
Income (loss) from continuing operations before (440,691) 273,366 (4,995) 607,853
income taxes
Income tax (provision) benefit 110,360 (100,343) (45,640) (220,530)
----------- ----------- ----------- -----------
Income (loss) from continuing operations (330,331) 173,023 (50,635) 387,323
----------- ----------- ----------- -----------
DISCONTINUED OPERATIONS:
Income from operations of discontinued
subsidiary 16,453 53,111 15,420 141,867
Less income taxes 4,905 19,495 4,905 51,470
----------- ----------- ----------- -----------
11,548 33,616 10,515 90,397
----------- ----------- ----------- -----------
Gain on disposal of subsidiary 342,782 -0- 342,782 -0-
Less income taxes 245,218 -0- 245,218 -0-
----------- ----------- ----------- -----------
97,564 -0- 97,564 -0-
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (221,219) $ 206,639 $ 57,444 $ 477,720
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED
Continuing operations $ (.07) $ .03 $ (.01) $ .08
Discontinued operations .02 .01 .02 .02
----------- ----------- ----------- -----------
$ (.05) $ .04 $ .01 $ .10
=========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
---------------------------------
2003 2002
----------- -----------
(Unaudited)
OPERATING ACTIVITIES:
Net income $ 57,444 $ 477,720
Adjustments to reconcile net income to net cash used in
operations:
Gain on sale of discontinued operations, net of taxes (97,564) -0-
Depreciation 12,778 4,280
Amortization 7,770 7,770
Undistributed (income) loss of equity investee 405,971 (119,276)
Investment income - related party (1,384,932) (652,205)
Deferred income taxes 175,921 -0-
Cash from discontinued operations 224,214 194,537
Change in operating assets and liabilities:
Decrease (increase) in receivables and other current assets 104,335 (152,117)
(Increase) in income tax overpayment (554,018) -0-
Decrease (increase) in inventories 10,000 (7,213)
Increase (decrease) in accounts payable and accruals (1,566) 10,101
Decrease in income tax payable (26,312) (710,297)
----------- -----------
NET CASH USED IN OPERATIONS (1,065,959) (946,700)
INVESTING ACTIVITIES:
Distributions from partnerships 1,960,605 967,156
Purchase of fixed assets (13,519) -0-
Contributions to partnership interest (1,585,000) -0-
Net proceeds (payments) from/to related parties 2,517,891 (36,674)
----------- -----------
NET CASH PROVIDED BY INVESTING
ACTIVITIES 2,879,977 930,482
----------- -----------
INCREASE (DECREASE) IN CASH 1,814,018 (16,218)
CASH, BEGINNING OF PERIOD 262,303 150,032
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CASH, END OF PERIOD $ 2,076,321 $ 133,814
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SEE ACCOMPANYING NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF JUNE 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 June 30, 2003 and the results of their
operations for the three and six months ended June 30, 2003 and 2002 and cash
flows for the six months ended June 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
interim 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 BUSINESS SERVICES, INC., ("CBSI") 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.
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF JUNE 30, 2003
NOTE 1. BASIS OF PRESENTATION (CONTINUED)
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).
Amendment to Original 10-QSB
----------------------------
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 June 30, 2003. The financial statements reflect the
presentation of the operations of Southeast Automotive as discontinued
operations according to SFAS Number 144 for all periods presented including
disclosures required by Paragraph 47 of SFAS Number 144.
The Company has recorded an additional loss from its investment in Systems
Technology, LLC, as described in Note 4, which was due to a change and
clarification of the allocation of losses as reflected in the operating
agreement of the limited liability company, effective April 1, 2003.
Accordingly, the provision for federal income taxes was adjusted to reflect the
changes mentioned above. The Company also adjusted the gain on sale of
discontinued operations and recorded the Company's stock received from the sale
of discontinued operations as treasury stock on the accompanying condensed
consolidated balance sheet as of June 30, 2003.
NOTE 2. DISCONTINUED OPERATIONS
On 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% 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
seventy percent 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 20, 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.
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF JUNE 30, 2003
NOTE 2. DISCONTINUED OPERATIONS (CONTINUED)
Since the note was sold and assigned, the Company is no longer considered
to be a primary beneficiary. As such, Southeast is considered to be divested
as of the assigned 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 six months ended June 30, 2003 and 2002:
2003 2002
------------------------------- -------------------------------
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30 June 30 June 30 June 30
------------ ---------- ------------ ----------
Net Sales - Southeast Automotive $ 574,228 $ 1,021,644 $ 691,755 $ 1,468,463
=========== =========== =========== ===========
Income From Discontinued Operations
Before Income Taxes $ 16,453 $ 15,420 $ 53,111 $ 141,867
Income Tax (4,905) (4,905) (19,495) (51,470)
----------- ----------- ----------- -----------
Net Income From Discontinued Operations $ 11,548 $ 10,515 $ 33,616 $ 90,397
=========== =========== =========== ===========
Net Income - Basic and Diluted $ .01 $ .01 $ .01 $ .02
=========== =========== =========== ===========
NOTE 3. INVENTORIES
Inventories, stated at the lower of cost, determined on a first-in, first-out
basis, or market, consist of finished goods related to CRA-Z Soap products.
9
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF JUNE 30, 2003
NOTE 4. 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 10% of AVM's capital as of June 30, 2003. Based on
capital and earnings distributions provided in the partnership agreement,
Consulier was allocated approximately 8% of AVM's earnings during the
three-month and six-month periods ended June 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 Six Months Ended
June 30, June 30,
(in thousands) (in thousands)
---------------------- ----------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------- --------- --------- ---------
Revenue $ 19,562 $ 9,842 $ 36,997 $ 21,206
Costs and expenses 10,408 5,890 20,777 13,828
---------- --------- --------- ---------
Net income $ 9,154 $ 3,952 $ 16,220 $ 7,378
========== ========= ========= =========
Consulier's share of earnings $ 772 $ 338 $ 1,385 $ 652
========== ========= ========= =========
BIOSAFE SYSTEMS, LLC
The Company owns a 40% interest in BioSafe Systems, LLC. Bio Safe Systems, LLC's
total assets (unaudited) at June 30, 2003 were approximately $1,556,561.
Following is a summary of the results of operations of BioSafe Systems, LLC and
the income (losses) allocated to the Company:
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) (in thousands)
---------------------- ----------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------- --------- --------- ---------
Revenue $ 1,075 $ 906 $ 2,443 $ 2,060
Costs and expenses 1,183 884 2,342 1,762
---------- --------- --------- ---------
Net income (loss) $ (108) $ 22 $ 101 $ 298
========== ========= ========= =========
Consulier's share of earnings (loss) $ 43) $ 9 $ 40 $ 119
========= ========= ========= =========
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AS OF JUNE 30, 2003
NOTE 4. 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 six
months ended June 30, 2003, the Company made additional contributions of
$1,585,000 to increase its investment in ST, LLC. As of June 30, 2003, the
Company's interest in ST, LLC totaled 29%. 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 June 30, 2003) investment in
PCTS. The original agreement provides that the losses from ST, LLC are allocated
to ST, LLC principal shareholders. 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 29%.
The Company's principal shareholder owns approximately 46% of ST, LLC, and
together with the Company's 29%, the ownership aggregates 75%. 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 Six Months Ended
June 30, June 30,
(in thousands) (in thousands)
---------------------- ----------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------- --------- --------- ---------
Revenue $ 92 NA $ 183 NA
Costs and expenses 1,102 NA 2,033 NA
---------- --------- --------- ---------
Net loss $ (1,010) NA $ (1,850) NA
========== ========= ========= =========
Consulier's share of loss $ (1,010) NA $ (1,175) NA
========== ========= ========= =========
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
NOTE 5. EARNINGS PER SHARE
Basic and diluted earnings per share for the three and six months ended June 30,
2003 and 2002 were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
BASIC EARNINGS PER SHARE COMPUTATION:
NUMERATOR:
Income (loss) from continuing operations $ (330,331) $ 173,023 $ (50,635) $ 387,323
Discontinued operations,
net of income taxes 109,112 33,616 108,079 90,397
----------- ----------- ----------- -----------
Net Income (Loss) $ (221,219) $ 206,639 $ 57,444 $ 477,720
=========== =========== =========== ===========
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 $ (330,331) $ 173,023 $ (50,635) $ 387,323
Discontinued operations, net of income taxes 109,112 33,616 108,079 90,397
----------- ----------- ----------- -----------
Net Income (Loss) $ (221,219) $ 206,639 $ 57,444 $ 477,720
=========== =========== =========== ===========
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 16,528 11,124 16,048 11,124
----------- ----------- ----------- -----------
Total shares 4,951,771 4,962,274 4,951,291 4,962,274
=========== =========== =========== ===========
12
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
NOTE 6. 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 six months ended June 30, 2003 and 2002.
Three Months Ended June 30, 2003
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
----------- ----------- ---------- ---------- -----------
Revenue $ 27,200 $ -0- $ -0- $ -0- $ 27,200
Operating Income (Loss) (19,044) (141,386) -0- (160,430)
Other Income (Loss) (267,181) (13,080) -0- (280,261)
Income (Loss) From
Continuing Operations (14,275) (200,272) (115,784) -0- (330,331)
Income (Loss) From
Discontinued Operations -0- -0- -0- 109,112 109,112
Assets $ 1,111,952 $ 7,314,065 $ 502,508 -0- $ 8,928,525
Six Months Ended June 30, 2003
Manufacturing Investing Corporate Discontinued
Activities Activities Activities Operations Total
----------- ----------- ---------- ---------- -----------
Revenue $ 48,834 $ -0- $ -0- $ -0- $ 48,834
Operating Income (Loss) (23,149) (238,347) -0- (261,496)
Other Income (Loss) 274,833 (18,332) -0- 256,501
Income (Loss) From
Continuing Operations (23,149) 265,297 (292,783) -0- (50,635)
Income (Loss) From
Discontinued Operations 108,079 108,079
Assets $ 1,111,952 $ 7,314,065 $ 502,508 -0- $ 8,928,525
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 SIX MONTHS
ENDED JUNE 30, 2003 TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2002:
During the quarter ended June 30, 2003, sales increased $17,048 from the
comparable amounts recorded during the quarter ended June 30, 2002. Net loss
from continuing operations for the three months ended June 30, 2003 was
$330,331, or ($0.07) per share, compared to net income of $173,023, or $0.03 per
share, for the three months ended June 30, 2002 from continuing operations.
Investment income from AVM Limited, Inc. increased by approximately $434,000 for
the three months ended June 30, 2003 as compared with the three months ended
June 30, 2002. However, the undistributed loss from equity investees increased
by more than $1,060,000 for the same period. 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 2003.
HOUSEHOLD AND TOOL PRODUCTS - C-6 incurred a net loss of $5,277 in the second
quarter of 2003, compared to a net loss of $6,188 in the second quarter of 2002.
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $772,154 in the second quarter of 2003, a 129% increase from the
comparable 2002 quarter's income of $337,797. This represents annualized returns
of 132% and 61%, respectively, on Consulier's average investment during each
quarter.
INVESTMENT IN BIOSAFE - Equity in the loss of BioSafe was $43,374 in the second
quarter of 2003, compared to 2002 quarter's income of $9,000. This represents
the Company's 40% interest in BioSafe's net loss of approximately $108,000 in
the second quarter of 2003, compared to income of $22,000 in the second quarter
of 2002.
INVESTMENT IN ST, LLC - Equity in the loss of ST, LLC was $1,009,267, in the
second quarter of 2003. The company did not own an interest in ST, LLC in the
second quarter of 2002.
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2003, Consulier's cash totaled $2,076,321 as compared to $262,303 at
December 31, 2002. Net cash used by operations was $564,025 for the second three
months of 2003 compared to $724,522 of net cash used in the second three months
of 2002. Net cash used by investing activities was primarily additional
investment in ST, LLC of $1,585,000 offset by the distribution of $1,384,932
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.
15
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 investments. However, there is no guarantee that the annualized
return of 132% in the second 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.
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.
16
CONSULIER ENGINEERING, INC. AND SUBSIDIARIESPART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of June 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 second 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 second 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 second 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
Effective June 11, 2003, the accounting firm of BDO Seidman, LLP, of
West Palm Beach, Florida was dismissed as the Company's auditor.
Effective June 11, 2003, Goldstein Lewin & Co. of Boca Raton, Florida
was appointed and retained by the Company as its auditor.
(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
17
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 15, 2003 By: /s/ Alan R Simon
-------------------------------------
ALAN R. SIMON, ESQ.
Secretary and Treasurer (Principal
Financial and Accounting Officer)
Date: November 15, 2003 By: /s/ Warren B. Mosler
-------------------------------------
Chairman of the Board, President
& Chief Executive Officer (Principal
Executive Officer)
19