10-Q dated September 30, 2006
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
| |
|
|
| þ |
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2006
| |
|
|
| o |
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 0-17756
Consulier Engineering, Inc.
(Exact name of small business issuer as specified in its charter)
| |
|
|
| Florida
|
|
59-2556878 |
|
|
|
|
(State or other jurisdiction
of incorporation or organization)
|
|
(I.R.S. Employer
Identification No.) |
2391 Old Dixie Highway, Riviera Beach, FL33404
(Address of principal executive offices)
(561) 842-2492
(Issuer’s telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for 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 þ No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of
the Exchange Act).
Yes þ No o
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, 2006, there were 5,243,105 outstanding
shares of common stock, par value $0.01 per share.
Transitional Small Business Disclosure Format (check one): Yes o No þ
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report on Form 10Q-SB contains “forward-looking statements” within the meanings of the Private
Securities Litigation Reform Act of 1995. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements. Forward-looking
statements include statements preceded by, followed by or that include the words “may,” “could,”
“would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,”
“intend,” or similar expressions. The statements include, among others, statements regarding our
prospects, opportunities, outlook, plans, intentions, anticipated financial and operating results,
our business strategy and means to implement the strategy, and objectives.
Forward-looking statements are only estimates or predictions and are not guarantees of performance.
These statements are based on our management’s beliefs and assumptions, which in turn are based on
currently available information. Important assumptions relating to the forward-looking statements
include, among others, assumptions regarding demand for our products and services, competition from
existing and new competitors, our ability to introduce new products, expected pricing levels, the
timing and cost of planned capital expenditures, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. Forward-looking statements also involve
risks and uncertainties, which could caused actual results to differ materially from those
contained in any forward-looking statement. Among other things, continued unfavorable economic
conditions may impact market growth trends or otherwise impact the demand for our products and
services; competition from existing and new competitors and producers of alternative products will
impact our ability to penetrate or expand our presence in new or growing markets. Uncertainties
relating to our ability to develop and distribute new proprietary products to respond to market
needs in a timely manner may impact our ability to exploit new or growing markets; our ability to
successfully identify and implement productivity improvements and cost reduction initiatives may
impact profitability.
In addition, unless otherwise specifically provided herein, the statements in this Report are made
as of end of the period for which the Report is filed. We expect that subsequent events or
developments will cause our views to change. We undertake no obligation to update any of the
forward-looking statements made herein, whether as a resul5t of new information, future events,
changes in expectations or otherwise. These forward-looking statements should not be relied upon
as representing our views as of any date subsequent to end of the period for which the Report is
filed.
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
3
PART 1.-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS OF CONSULIER ENGINEERING, INC.
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(UNAUDITED)
| |
|
|
|
|
ASSETS |
|
|
|
|
CURRENT ASSETS |
|
|
|
|
Cash and Cash Equivalents |
|
$ |
146,443 |
|
Receivables, Net of Allowance for Doubtful Accounts of $81,167 |
|
|
407,503 |
|
Due from Related Parties |
|
|
26,160 |
|
Income Tax Receivable |
|
|
651,068 |
|
Inventories |
|
|
57,419 |
|
Deferred Implementation Costs |
|
|
1,580,106 |
|
Other Current Assets |
|
|
160,633 |
|
Deferred Income Taxes |
|
|
87,883 |
|
|
|
|
|
Total Current Assets |
|
|
3,117,215 |
|
PROPERTY AND EQUIPMENT, Net |
|
|
2,009,938 |
|
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, Net |
|
|
282,682 |
|
PARTNERSHIP AND LIMITED LIABILITY COMPANIES — INVESTMENTS |
|
|
2,737,162 |
|
NOTE RECEIVABLE — RELATED PARTY |
|
|
200,000 |
|
DEFERRED INCOME TAXES |
|
|
1,577,325 |
|
INTANGIBLE ASSET, Net |
|
|
845,428 |
|
|
|
|
|
|
|
$ |
10,769,750 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
Accounts Payable and Accrued Liabilities |
|
$ |
1,392,608 |
|
Unearned Revenue |
|
|
444,070 |
|
Related Party Payable |
|
|
474,846 |
|
Note Payable-Related Party |
|
|
951,441 |
|
|
|
|
|
Total Current Liabilities |
|
|
3,262,965 |
|
|
|
|
|
NOTES PAYABLE — RELATED PARTY |
|
|
4,830,262 |
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
— |
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
Common Stock of $.01 Par Value: |
|
|
|
|
Authorized 25,000,000 Shares; Issued 5,243,105 Shares |
|
|
52,431 |
|
Additional Paid-in Capital |
|
|
4,096,108 |
|
Retained Earnings (Accumulated Deficit) |
|
|
(1,200,853 |
) |
|
|
|
|
|
|
|
2,947,686 |
|
Less: |
|
|
|
|
Treasury Stock at Cost - 104,936 Shares |
|
|
(264,512 |
) |
Notes Receivable for Common Stock |
|
|
(6,651 |
) |
|
|
|
|
Total Stockholders’
Equity |
|
|
2,676,523 |
|
|
|
|
|
|
|
$ |
10,769,750 |
|
|
|
|
|
The Accompanying Notes are an Integral
Part of These Consolidated Financial Statements
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED |
|
|
NINE MONTHS ENDED |
|
| |
|
SEPTEMBER 30, |
|
|
SEPTEMBER 30, |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software Licensing Fees |
|
$ |
406,712 |
|
|
$ |
455,443 |
|
|
$ |
1,257,922 |
|
|
$ |
807,416 |
|
Other Revenue |
|
|
4,900 |
|
|
|
20,485 |
|
|
|
20,399 |
|
|
|
29,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue |
|
|
411,612 |
|
|
|
475,928 |
|
|
|
1,278,321 |
|
|
|
837,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Costs and Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenue |
|
|
95,071 |
|
|
|
6,998 |
|
|
|
575,628 |
|
|
|
13,407 |
|
Payroll and Related Expense |
|
|
1,018,296 |
|
|
|
1,243,657 |
|
|
|
3,646,077 |
|
|
|
3,505,209 |
|
Selling, General and Administrative |
|
|
679,114 |
|
|
|
642,745 |
|
|
|
2,134,832 |
|
|
|
1,658,340 |
|
Professional Services |
|
|
312,850 |
|
|
|
341,418 |
|
|
|
1,404,630 |
|
|
|
892,314 |
|
Depreciation and Amortization |
|
|
335,623 |
|
|
|
310,259 |
|
|
|
1,006,845 |
|
|
|
765,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Costs and Expenses |
|
|
2,440,954 |
|
|
|
2,545,077 |
|
|
|
8,768,012 |
|
|
|
6,835,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
|
|
(2,029,342 |
) |
|
|
(2,069,149 |
) |
|
|
(7,489,691 |
) |
|
|
(5,998,065 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Loss)/(Expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income — Related Parties |
|
|
406,036 |
|
|
|
309,440 |
|
|
|
1,357,262 |
|
|
|
1,668,185 |
|
Interest Expense |
|
|
(163,171 |
) |
|
|
(11,638 |
) |
|
|
(483,291 |
) |
|
|
(28,780 |
) |
Net Undistributed Income (Loss) of Equity Investees |
|
|
129,233 |
|
|
|
283,312 |
|
|
|
153,497 |
|
|
|
360,315 |
|
Other Income |
|
|
31,698 |
|
|
|
31,883 |
|
|
|
95,094 |
|
|
|
137,659 |
|
Gain (Loss) on Disposal of Equipment |
|
|
15,504 |
|
|
|
(95,746 |
) |
|
|
15,504 |
|
|
|
(95,746 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Income (Loss)/(Expense) |
|
|
419,300 |
|
|
|
517,251 |
|
|
|
1,138,066 |
|
|
|
2,041,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) from Operations Before Minority Interest and Income Taxes |
|
|
(1,610,042 |
) |
|
|
(1,551,898 |
) |
|
|
(6,351,625 |
) |
|
|
(3,956,432 |
) |
Minority Interest in Consolidated Subsidiary Losses |
|
|
2,019,643 |
|
|
|
1,104,768 |
|
|
|
4,044,643 |
|
|
|
3,141,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations Before Income Taxes |
|
|
409,601 |
|
|
|
(447,130 |
) |
|
|
(2,306,982 |
) |
|
|
(814,653 |
) |
(Provision) Benefit for Income Taxes |
|
|
(200,149 |
) |
|
|
176,313 |
|
|
|
(210,993 |
) |
|
|
327,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
209,452 |
|
|
$ |
(270,817 |
) |
|
$ |
(2,517,975 |
) |
|
$ |
(486,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) Per Share — Basic and Diluted: |
|
$ |
0.04 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.48 |
) |
|
$ |
(0.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The Accompanying Notes are an Integral
Part of These Consolidated Financial Statements
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2006
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
Receivable |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Earnings |
|
|
for |
|
|
Total |
|
| |
|
Common Stock |
|
|
Treasury Stock |
|
|
Paid-in |
|
|
(Accumulated |
|
|
Common |
|
|
Stockholders' |
|
| |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit) |
|
|
Stock |
|
|
Equity |
|
Balance, December 31, 2005 |
|
|
5,243,105 |
|
|
$ |
52,431 |
|
|
|
275,007 |
|
|
$ |
(582,686 |
) |
|
$ |
3,216,008 |
|
|
$ |
1,317,122 |
|
|
$ |
(6,651 |
) |
|
$ |
3,996,224 |
|
Sale of Treasury Stock |
|
|
— |
|
|
|
— |
|
|
|
(3,867 |
) |
|
|
6,690 |
|
|
|
11,485 |
|
|
|
— |
|
|
|
— |
|
|
|
18,175 |
|
Issuance of Treasury Stock upon |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Note
Payable-Related
Party |
|
|
— |
|
|
|
— |
|
|
|
(166,204 |
) |
|
|
311,484 |
|
|
|
288,516 |
|
|
|
— |
|
|
|
— |
|
|
|
600,000 |
|
Stock-Based Compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
580,099 |
|
|
|
— |
|
|
|
— |
|
|
|
580,099 |
|
Net (Loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,517,975 |
) |
|
|
— |
|
|
|
(2,517,975 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2006 |
|
|
5,243,105 |
|
|
$ |
52,431 |
|
|
|
104,936 |
|
|
$ |
(264,512 |
) |
|
$ |
4,096,108 |
|
|
$ |
(1,200,853 |
) |
|
$ |
(6,651 |
) |
|
$ |
2,676,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Accompanying Notes are an Integral
Part of These Consolidated Financial Statements
6
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
|
|
|
|
|
|
|
|
| |
|
NINE MONTHS ENDED |
|
| |
|
SEPTEMBER 30, |
|
| |
|
2006 |
|
|
2005 |
|
Cash Flows (Used in) Operating Activities |
|
$ |
(5,785,973 |
) |
|
$ |
(4,871,379 |
) |
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Distributions from Partnership Interest |
|
|
1,357,262 |
|
|
|
1,668,185 |
|
Acquisition of Property and Equipment |
|
|
(175,861 |
) |
|
|
(1,586,385 |
) |
Proceeds from Sale of Asset |
|
|
72,894 |
|
|
|
— |
|
Acquisition of Software Upgrades |
|
|
(233,252 |
) |
|
|
— |
|
Decrease in Due from Related Parties |
|
|
— |
|
|
|
60,172 |
|
|
|
|
|
|
|
|
Net Cash Provided by Investing Activities |
|
|
1,021,043 |
|
|
|
141,972 |
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from Subscription Receivable |
|
|
— |
|
|
|
29,431 |
|
Repayments on Notes Payable-Related Party |
|
|
(450,800 |
) |
|
|
— |
|
Proceeds from Minority Shareholder of ST, LLC |
|
|
3,519,000 |
|
|
|
3,753,693 |
|
Change in Related Party Payables |
|
|
204,490 |
|
|
|
118,290 |
|
Proceeds from Notes Payable-Related Party |
|
|
3,334,066 |
|
|
|
— |
|
Proceeds from (repayments to) Line of Credit |
|
|
(2,000,000 |
) |
|
|
1,097,000 |
|
Proceeds from the Sale of Treasury Stock |
|
|
18,175 |
|
|
|
— |
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities |
|
|
4,624,931 |
|
|
|
4,998,414 |
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash Equivalents |
|
|
(139,999 |
) |
|
|
269,007 |
|
Cash and Cash Equivalents — Beginning of Period |
|
|
286,442 |
|
|
|
117,124 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents — End of Period |
|
$ |
146,443 |
|
|
$ |
386,131 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Transfer of Property and Equipment to Assets Held for Sale |
|
$ |
— |
|
|
$ |
491,764 |
|
|
|
|
|
|
|
|
Conversion of Note Payable-Related Party to Class A Stock of ST, LLC |
|
$ |
525,643 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
Issuance of Treasury Stock upon Conversion of Note Payable-Related Party |
|
$ |
600,000 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
The Accompanying Notes are an Integral
Part of These Consolidated Financial Statements
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Consulier Engineering, Inc. and its subsidiaries (collectively called “Consulier” or the “Company”)
are engaged in two primary business lines: ownership in medical software activities, distribution
of Captain Cra-Z Soap™ and minority ownership of other business entities.
Consulier International, Inc. (a subsidiary) markets and distributes Captain Cra-Z Soap™.
Consulier’s income is also derived from ownership of limited liability companies and limited
partnership interests (Note 5) in BioSafe Systems, LLC (“BioSafe”), and AVM, L.P. (“AVM”), an
Illinois limited partnership. BioSafe develops and markets environmentally safe products,
alternatives to traditionally toxic pesticides. AVM is a broker/dealer in government securities
and other fixed income instruments. Consulier’s Chairman and majority stockholder, Warren B.
Mosler ("Mosler"), is a general partner of the general partner of AVM.
ST, LLC, a majority owned limited liability company, is a majority member (75%) of Patient Care
Technology Systems, LLC (“PCTS”) which develops and licenses data based integrated emergency room
information systems marketed as Amelior ED™. Mosler’s ownership in ST, LLC was approximately 23%
and Consulier’s ownership was approximately 58% as of September 30, 2006. On July 15, 2005 and
November 10, 2005, PCTS acquired certain assets of nuMedica, Inc. (“nuMedica”), which designs,
customizes, markets, sells and distributes paper templates used for diagnostic purposes in
emergency medical departments.
Basis of Consolidation
The accompanying condensed interim consolidated financial statements include Consulier and its
wholly-owned subsidiary, Consulier International, Inc., and ST, LLC, and its majority owned
subsidiary, PCTS. All significant intercompany accounts and transactions have been eliminated in
consolidation. The Company uses the equity method of accounting for investments where its
ownership is between 20% and 50%.
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Consulier Engineering, Inc. and subsidiaries as of
September 30, 2006, and the results of their operations and cash flows for the three and nine
months ended September 30, 2006 and 2005. The results of operations and cash flows for the period
are not necessarily indicative of the results of operations or cash flows that can be expected for
the year ending December 31, 2006. For further information, refer to the consolidated financial
statements and footnotes thereto included in Consulier’s annual report on Form 10-KSB for the year
ended December 31, 2005.
Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Estimates are used when accounting for allowances for doubtful accounts, software and
service revenue, revenue reserves, inventory reserves, depreciation and amortization, taxes,
contingencies and impairment allowances. Such estimates are reviewed on an on-going basis. Actual
results could differ from these estimates and those differences may be material.
9
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations
Financial instruments, which potentially expose the Company to concentrations of credit risk, as
defined by Statement of Financial Accounting Standards No. 105, Disclosure of Information about
Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of
Credit Risk, consist primarily of accounts receivable. PCTS’s accounts receivable are concentrated
in the healthcare industry. PCTS’s customers typically have been well-established hospitals or
medical facilities. However, some hospitals and medical facilities have experienced significant
operating losses as a result of limits on a third-party reimbursement from insurance companies and
governmental entities and extended payment of receivables from these entities is not uncommon.
To date, PCTS has relied on a limited number of customers for a substantial portion of its total
revenues. The Company expects that a significant portion of its future revenues will continue to be
generated by a limited number of customers. The failure to obtain new customers or expand sales
through remarketing partners, the loss of existing customers or reduction in revenues from existing
customers could materially and adversely affect the Company’s operating results.
PCTS currently buys all of its hardware and some major software components for its emergency room
information systems from third-party vendors. Although there are a limited number of vendors
capable of supplying these components, management believes that other suppliers could provide
similar components on comparable terms. A change in suppliers, however, could cause a delay in
system implementations and a possible loss of revenues, which could adversely affect operating
results.
Capitalized Software Development Costs
Software development costs are accounted for in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 86, Accounting for the Costs of Software to be Sold, Leased or Otherwise
Marketed. Costs associated with the planning and designing phase of software development, including
coding and testing activities necessary to establish technological feasibility, are classified as
product research and development and are expensed as incurred. Once technological feasibility has
been determined, a portion of the costs incurred in development, including coding, testing, and
product quality assurance, are capitalized and subsequently reported at the lower of unamortized
cost or net realizable value.
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Capitalized Software Development Costs (Continued)
Amortization is provided on a product-by-product basis over the estimated economic life of the
software, not to exceed three years, using the straight-line method. Amortization commences when a
product is available for general release to customers. Unamortized capitalized costs determined to
be in excess of the net realizable value of a product are expensed at the date of such
determination. Amortization expense on capitalized software development costs totaled $260,577 for
the nine months ended September 30, 2006. Accumulated amortization totaled $880,497 at September
30, 2006.
During 2006 and 2005, the Company required third party expertise for the development of a new data
based integrated emergency room information system to enhance the functionality, reliability and
flexibility of the Company’s existing products. For the nine months ended September 30, 2006 and
2005, research and development costs totaled $1,004,087 and $559,191, respectively. These expenses
are included with professional fees in the accompanying condensed consolidated statement of
operations.
Intangible Assets
Intangible assets consist of customer lists acquired in connection with the acquisition of certain
assets from Healthcare Information Technology, Inc. in 2004 and nuMedica in 2005, which are being
amortized over three to five years using the straight-line method, and non-compete agreements,
which are being amortized over one year using the straight-line method.The Company periodically
reviews its intangible assets for impairment and assesses whether significant events or changes in
business circumstances indicate that the carrying value of the assets may not be recoverable.
Partnership and Limited Liability Companies Investments
The Company’s investments in AVM and Biosafe are less than 50% ownership and are accounted for
using the equity method. ST, LLC was consolidated under the provisions of Financial Accounting
Standards Board (“FASB”) Interpretation No. 46(R) Consolidation of Variable Interest Entities (“FIN
46R”) from December 31, 2004 through March 31, 2005. Effective April 1, 2005, the Company owned in
excess of 50% of ST, LLC (Note 2), thereby requiring consolidation. The Company owns less than 10%
in AVM; however, the Company has the ability to significantly influence this investee under the
terms of the partnership agreement. Income or loss is allocated to Consulier based on the
partnership and LLC agreements. The Company reviews its partnership and limited liability
companies investments for other than temporary declines in value on a monthly basis by analyzing
the underlying investee’s actual revenue, earnings capacity and estimated future undiscounted cash
flows.
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Partnership and Limited Liability Companies Investments (Continued)
Due to the Company’s membership interest in ST, LLC and ST, LLC’s operating agreement with PCTS;
the Company was exposed to the majority of risk related to the activities of ST, LLC and PCTS.
Therefore, in accordance with FIN 46(R), the Company considered ST, LLC as a variable interest
entity that required consolidation with the Company’s financial statements as of December 31, 2004.
However, effective April 1, 2005, the operating agreement was amended to reallocate membership
interests in this LLC based upon historical contributions. The Company receives allocated losses to
the extent of its contributions from inception. Consequently, the losses allocated to Consulier can
be greater than or less than the Company’s ownership percentage.
As a result of consolidating ST, LLC, a minority interest was created representing the other
members. As of September 30, 2006, there were no amounts related to the minority interest
available to offset future losses.
Effective April 1, 2006, ST, LLC’s partnership operating agreement was amended to create a Class A
membership interest. The Class A members are entitled to a cumulative annual priority return of 10%
on their investment, and cash available for distribution after payment of that return is
distributable to all of the members in accordance with their percentage membership interests. In
accordance with this amendment to the operating agreement, allocations of losses are based upon
historical annual contributions. As of September 30, 2006, the Class A member had invested
$4,044,643, which included the conversion of notes payable to a related party totaling $525,643
during the nine months ended September 30, 2006. Unpaid cumulative priority returns on the Class A
membership interest totaled approximately $150,000 at September 30, 2006.
Stock-Based Compensation
On January 1, 2006, the Company adopted the fair value recognition provisions of Financial
Accounting Standards Board (“FASB”) Statement No. 123(R), Share-Based Payment, (SFAS 123(R)’).
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and
measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB25”),
and related Interpretations, as permitted by FASB Statement No. 123, “Accounting for Stock-Based
Compensation (“SFAS 123”). In accordance with APB 25, no compensation cost was required to be
recognized for options granted that had an exercise price equal to the market value of the
underlying common stock on the date of grant.
12
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation (Continued)
The Company adopted SFAS 123(R) using the modified-prospective-transition method. Under this
method, compensation cost recognized for the nine months ended September 30, 2006 includes: a)
compensation cost for all share-based payments granted prior to, but not yet vested as of December
31, 2005, based on the grant-date fair value estimated in accordance with the original provisions
of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to December
31, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS
123(R). In addition, deferred stock compensation related to non-vested options is required to be
eliminated against additional paid-in capital upon adoption of SFAS 123(R). The results for the
prior periods have not been restated.
All previously granted stock options had fully vested at December 31, 2005 and during the nine
months ended September 30, 2006, the Company did not grant any new stock options, however, the
Company modified the previously existing stock options outstanding at December 31, 2005.
Accordingly, the Company’s results of operations for the nine months ended September 30, 2006
include compensation expense related to the modification of previously existing stock options under
the provisions of SFAS 123R (Note 11).
During the three and nine months ended September 30, 2006 and 2005, there were no stock options
granted. Accordingly, no proforma effect on net income (loss) and earning (loss) per share is
necessary.
Revenue Recognition
The Company derives revenue from the following sources: (1) licensing and sale of data based
integrated emergency room information systems and passive tracking technologies, which include new
software licenses, software license updates and product support revenues and (2) services, which
include consulting, advance product services and education revenues.
New software license revenues represent all fees earned from granting customers licenses to use the
Company’s database and tracking technology as well as applications software, and exclude revenue
derived from software license updates, which are included in software license updates and product
support. While the basis for software license revenue recognition is substantially governed by the
provisions of Statement of Position No. 97-2, Software Revenue Recognition (“SOP No. 97-2”), issued
by the American Institute of Certified Public Accountants, the Company exercises judgment and uses
estimates in connection with the determination of the amount of software and services revenues to
be recognized in each accounting period.
13
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
For software license arrangements that do not require significant modification or customization of
the underlying software, the Company recognizes new software license revenue when: (1) the Company
enters into a legally binding arrangement with a customer for the license of software; (2) the
Company delivers the products; (3) customer payment is deemed fixed or determinable and free of
contingencies or significant uncertainties; and (4) collection is probable. Substantially all new
software license revenue is recognized in this manner. The vast majority of software license
arrangements include software license updates and product support, which are recognized ratably
over the term of the arrangement, typically one year. Software license updates provide customers
with rights to unspecified software product upgrades, maintenance releases and patches released
during the term of the support period. Product support includes internet access to technical
content, as well as internet and telephone access to technical support personnel. Software license
updates and product support are generally priced as a percentage of the new software license fees.
Many of the Company’s software arrangements include consulting implementation services sold
separately under consulting engagement contracts. Consulting revenue from these arrangements are
generally accounted for separately from new software license revenue because the arrangements
qualify as service transactions as defined in SOP No. 97-2. The more significant factors
considered in determining whether the revenue should be accounted for separately include the nature
of services (i.e. consideration of whether the services are essential to the functionality of the
licensed product), degree of risk, availability of services from other vendors, timing of payments
and impact of milestones or acceptance criteria on the realizability of the software license fee.
Revenue for consulting services is generally recognized as the services are performed. If there is
a significant uncertainty about the project completion or receipt of payment for the consulting
services, revenue is deferred until the uncertainty is sufficiently resolved. Contracts with fixed
or “not to exceed” fees are recognized on a proportional performance basis.
If an arrangement does not qualify for separate accounting of the software license and consulting
transactions, then new software license revenue is generally recognized together with the
consulting services based on contract accounting using either the percentage-of-completion or
completed-contract method. Contract accounting is applied to any arrangements: (1) that include
milestones or customer specific acceptance criteria that may affect collection of the software
license fees; (2) where services include significant modification or customization of the software;
(3) where significant consulting services are provided for in the software license contract without
additional charge or are substantially discounted; or (4) where the software license payment is
tied to the performance of consulting services.
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued)
Advanced product services revenue is recognized over the term of the service contract, which is
generally one year. Education revenue is recognized as the classes or other education offerings
are delivered.
For arrangements with multiple elements, the Company allocates revenue to each element of a
transaction based upon its fair value as determined by “vendor specific objective evidence.”
Vendor specific objective evidence of fair value for all elements of an arrangement is based upon
normal pricing and discounting practices for those products and services when sold separately and
for software license updates and product support services, and is additionally measured by the
renewal rate offered to the customer.
The Company defers revenue for any undelivered elements, and recognizes revenue when the product is
delivered or over the period in which the service is performed, in accordance with the revenue
recognition policy for such element. If the Company cannot objectively determine the fair value of
any undelivered element included in bundled software and service arrangements, the Company defers
revenue until all elements are delivered and services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements. When the fair value of a
delivered element has not been established, the residual method is used to record revenue if the
fair value of all undelivered elements is determinable. Under the residual method, the fair value
of the undelivered elements is deferred and the remaining portion of the arrangement fee is
allocated to the delivered elements and is recognized as revenue.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Newly Issued Accounting Pronouncements
In November 2005, the FASB issued Staff Position NO. FAS 123(R)-3, “Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP 123R-3”). The Company has
elected to adopt the alternative transition method provided in FSP 123R-3 for calculating the tax
effects of stock-based compensation under SFAS 123R. The alternative transition method includes
simplified methods to establish the beginning balance of the additional paid-in-capital pool (“APIC
pool”) related to the tax effects of stock-based compensation, and for determining the impact on
the APIC pool and consolidated statements of cash flows of the tax effects of stock-based
compensation awards that are outstanding upon adoption of SFAS 123R.
15
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. ACCOUNTING FOR VARIABLE INTEREST ENTITY (VIE)
In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities
(“VIE”), an Interpretation of Accounting Research Bulletin No. 51 (FIN 46R). In December 2003, the
FASB modified FIN 46R to make certain technical corrections and address certain implementation
issues that had arisen. FIN 46R provides a new framework for identifying VIEs and determining when
a company should include the assets, liabilities, noncontrolling interests and results of
activities of a VIE in its financial statements and deferred the effective date for us until
December 31, 2004.
In general, a VIE is an entity used to conduct activities or hold assets that either (1) has an
insufficient amount of equity to carry out its principal activities without additional subordinated
financial support, (2) has a group of equity owners that are unable to make significant decisions
about its activities, or (3) has a group of equity owners that do not have the obligation to absorb
losses or the right to receive returns generated by its operations.
FIN 46R requires a VIE to be consolidated if a party with an ownership, contractual or other
financial interest in the VIE is obligated to absorb a majority of the risk of loss from the VIEs
activities, is entitled to receive a majority of the VIEs residual returns (if no party absorbs a
majority of the VIEs losses), or both. A variable interest holder that consolidates the VIE is
called the primary beneficiary. Upon consolidation, the primary beneficiary generally must
initially record all of the VIEs assets, liabilities and noncontrolling interests at fair value and
subsequently account for the VIE as if it were consolidated based on majority voting interest.
The Company began consolidating the balance sheet and operations of ST, LLC in accordance with FIN
46R as of December 31, 2004. This entity qualified as a VIE under FIN 46R during that period, and
we were the primary beneficiary. Previously the Company carried the investment under the equity
method.
On April 1, 2005 (the date of the amendment to the operating agreement), the Company’s ownership in
ST, LLC increased to 58%, thereby requiring consolidation.
Consulier can require Consulier’s principal stockholder to purchase its interest in ST, LLC for
cash equal to Consulier’s capital account as of the closing date. Consulier has contributed to ST,
LLC approximately $14.5 million since inception and has no remaining net investment at September
30, 2006.
16
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. DEFERRED IMPLEMENTION COSTS
Deferred implementation costs as of September 30, 2006, totaled $1,580,106 and represented
equipment purchased for customers, payroll and payroll related expenses for customer contracts
which have not met certain milestones, customer acceptance or “go-live” dates. Implementation
costs are deferred and recognized ratably over the initial licensing term or upon reaching certain
milestones, acceptance criteria or “go-live” dates depending on the applicable revenue stream.
Deferred implementation costs are stated at the lower of cost or market.
NOTE 4. CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally
insured limits. The Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash equivalents. The company places its cash
with high credit quality financial institutions. Cash held by these financial institutions in
excess of FDIC limits amounted to approximately $26,000 at September 30, 2006.
The Company grants credit to customers, substantially all of whom are businesses located in the
United States and Canada. The Company typically does not require collateral from customers. The
Company monitors exposure to credit losses and maintains allowances for anticipated losses
considered necessary in the circumstances.
Approximately 17% of the Company’s software licensing fees were derived from one customer for the
nine months ended September 30, 2006. Approximately 48% of the Company’s software licensing fees
were derived from 3 customers for the nine months ended September 30, 2005. Customer A, B and C
represented approximately 25%, 13% and 10%, respectively of total software licensing fees.
NOTE 5. INVESTMENTS — PARTNERSHIP AND LIMITED LIABILITY COMPANY
The Company’s limited partnership and limited company interests consist of Consulier’s investments
in AVM, L.P. and BioSafe Systems, LLC, respectively.
AVM, L.P.
Consulier owned an approximate 7.5% limited partnership interest in AVM as of September 30, 2006
and 2005. Based on capital and earnings distributions provided in the partnership agreement,
Consulier was allocated approximately 5.4% and 5.7% of AVM’s earnings during the nine months ended
September 30, 2006 and 2005, respectively. 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.
17
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. INVESTMENTS — PARTNERSHIP AND LIMITED LIABILITY COMPANY (CONTINUED)
The Company’s income from its interest in AVM was $406,000 in the third quarter of 2006, compared
to income of approximately $309,000 for the quarter ended September 30, 2005. This represents the
Company’s 5.4% interest in AVM’s net income of approximately $7,500,000 in the third quarter of
2006, compared to income of approximately $5,459,000 in the third quarter of 2005.
The following is a summary of the results of operations (unaudited) 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) |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Revenues |
|
$ |
16,512 |
|
|
$ |
11,806 |
|
|
$ |
53,354 |
|
|
$ |
51,539 |
|
Cost and Expenses |
|
|
9,012 |
|
|
|
6,347 |
|
|
|
28,128 |
|
|
|
22,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
7,500 |
|
|
$ |
5,459 |
|
|
$ |
25,226 |
|
|
$ |
29,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulier’s Share of Earnings |
|
$ |
406 |
|
|
$ |
309 |
|
|
$ |
1,357 |
|
|
$ |
1,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of the Company’s interest in AVM at September 30, 2006 was $1,852,133.
BIOSAFE SYSTEMS, LLC
Consulier owns a 40% interest in BioSafe. The following is a summary of the results of operations
of BioSafe and the income allocated to Consulier:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
(In Thousands) |
|
|
(In Thousands) |
|
| |
|
(Unaudited) |
|
|
(Unaudited) |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Revenues |
|
$ |
2,129 |
|
|
$ |
2,453 |
|
|
$ |
5,445 |
|
|
$ |
5,400 |
|
Cost and Expenses |
|
|
1,806 |
|
|
|
1,745 |
|
|
|
5,057 |
|
|
|
4,499 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
323 |
|
|
$ |
708 |
|
|
$ |
388 |
|
|
$ |
901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulier’s Share of Earnings |
|
$ |
129 |
|
|
$ |
283 |
|
|
$ |
154 |
|
|
$ |
360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment in BioSafe at September 30, 2006 was approximately $885,029.
18
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing net income (loss) available to stockholders by
the weighted —average number of common shares outstanding during each period. Diluted earnings per
share is computed using the weighted average number of common and dilutive common share equivalents
outstanding during the period. Dilutive common share equivalents consist of shares issuable upon
the exercise of stock awards (calculated using the treasury stock method) during the period they
were outstanding.
Basic and diluted earnings per share for the three and nine months ended September 30, 2006 and
2005 were calculated as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
September 30 |
|
|
September 30, |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
BASIC AND DILUTED
EARNINGS PER SHARE
COMPUTATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMERATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
209,452 |
|
|
$ |
(270,817 |
) |
|
$ |
(2,517,975 |
) |
|
$ |
(486,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
DENOMINATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
weighted average shares
outstanding |
|
|
5,243,105 |
|
|
|
5,243,105 |
|
|
|
5,243,105 |
|
|
|
5,243,105 |
|
Effect of dilutive
employee stock awards |
|
|
64,500 |
(a) |
|
|
— |
(a) |
|
|
— |
(a) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
weighted average shares
outstanding |
|
|
5,307,605 |
|
|
|
5,243,105 |
|
|
|
5,243,105 |
|
|
|
5,243,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Effect of dilutive employee stock awards were not included in computing diluted earnings
per share because their effects were antidilutive.
19
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SEGMENT INFORMATION
Operating segments are components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company has four reportable segments:
distribution of household and tool products, ownership of limited liability entities, medical
software activities, and corporate. The household and tool products manufacturing segment is
engaged in sales of the Captain Cra-Z soap product line and tool and ladder related products. The
investments segment maintains investment interest in an investment limited partnership and a
limited liability company. The corporate segment is engaged in management of the business and
finance activities. Segment information as of and for the three and nine months ended September
30, 2006 and 2005 are as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, 2006 |
|
| |
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Derived From |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Ownership of |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Limited |
|
|
|
|
|
|
Medical |
|
|
|
|
| |
|
Distribution |
|
|
Liability |
|
|
Corporate |
|
|
Software |
|
|
|
|
| |
|
Activities |
|
|
Companies |
|
|
Activities |
|
|
Activities |
|
|
Total |
|
Revenue (b) |
|
|
|
|
|
$ |
4,900 |
|
|
$ |
— |
|
|
$ |
$406,712 |
|
|
$ |
411,612 |
|
Operating (Loss) |
|
|
(9,228 |
) |
|
|
— |
|
|
|
(253,944 |
) |
|
|
(1,766,173 |
) |
|
|
(2,029,345 |
) |
Other Income (Loss) |
|
|
— |
|
|
|
535,269 |
|
|
|
2,095 |
|
|
|
(118,064 |
) |
|
|
419,300 |
|
Minority Interest Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,019,643 |
|
|
|
2,019,643 |
|
Income Tax Benefit
(Provision) |
|
|
15,340 |
|
|
|
(678,046 |
) |
|
|
462,557 |
|
|
|
— |
|
|
|
(200,149 |
) |
Net Income (Loss) (a) |
|
|
6,112 |
|
|
|
(142,777 |
) |
|
|
348,963 |
|
|
|
(2,849 |
) |
|
|
209,449 |
|
Total Assets |
|
$ |
65,999 |
|
|
$ |
2,737,162 |
|
|
$ |
3,639,210 |
|
|
$ |
4,327,379 |
|
|
$ |
10,769,750 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended September 30, 2005 |
|
| |
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Derived From |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Ownership of |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Limited |
|
|
|
|
|
|
Medical |
|
|
|
|
| |
|
Distribution |
|
|
Liability |
|
|
Corporate |
|
|
Software |
|
|
|
|
| |
|
Activities |
|
|
Companies |
|
|
Activities |
|
|
Activities |
|
|
Total |
|
Revenue (b) |
|
$ |
20,485 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
455,443 |
|
|
$ |
475,928 |
|
Operating (Loss) |
|
|
4,429 |
|
|
|
— |
|
|
|
(109,910 |
) |
|
|
(1,963,668 |
) |
|
|
(2,069,149 |
) |
Other Income (Loss) |
|
|
— |
|
|
|
592,752 |
|
|
|
20,245 |
|
|
|
(95,746 |
) |
|
|
517,251 |
|
Minority Interest Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,104,768 |
|
|
|
1,104,768 |
|
Income Tax Benefit
(Provision) |
|
|
4,665 |
|
|
|
(243,037 |
) |
|
|
37,194 |
|
|
|
377,491 |
|
|
|
176,313 |
|
Net Income (Loss) (a) |
|
|
9,094 |
|
|
|
349,715 |
|
|
|
(52,471 |
) |
|
|
(577,155 |
) |
|
|
(270,817 |
) |
Total Assets |
|
$ |
86,916 |
|
|
$ |
2,832,480 |
|
|
$ |
3,405,596 |
|
|
$ |
4,142,478 |
|
|
$ |
10,467,470 |
|
| |
(a) |
|
All interest expense incurred by the Company was allocated to the Corporate Activities
Segment. |
| |
| |
(b) |
|
There was no intersegment revenue during the period. |
20
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. SEGMENT INFORMATION (CONTINUED)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, 2006 |
|
| |
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Derived From |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Ownership of |
|
|
|
|
|
|
Medical |
|
|
|
|
| |
|
Distribution |
|
|
Limited Liability |
|
|
Corporate |
|
|
Software |
|
|
|
|
| |
|
Activities |
|
|
Companies |
|
|
Activities |
|
|
Activities |
|
|
Total |
|
Revenue (b) |
|
|
|
|
|
$ |
20,399 |
|
|
$ |
— |
|
|
$ |
$1,257,922 |
|
|
$ |
$1,278,321 |
|
Operating (Loss) |
|
|
(33,644 |
) |
|
|
— |
|
|
|
(1,014,319 |
) |
|
|
(6,441,728 |
) |
|
|
(7,489,691 |
) |
Other Income (Loss) |
|
|
— |
|
|
|
1,510,759 |
|
|
|
(175 |
) |
|
|
(372,518 |
) |
|
|
1,138,066 |
|
Minority Interest Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,044,643 |
|
|
|
4,044,643 |
|
Income Tax Benefit
(Provision) |
|
|
15,340 |
|
|
|
(688,890 |
) |
|
|
462,557 |
|
|
|
— |
|
|
|
(210,993 |
) |
Net Income (Loss) (a) |
|
|
(18,304 |
) |
|
|
821,869 |
|
|
|
(551,937 |
) |
|
|
(2,769,603 |
) |
|
|
(2,517,975 |
) |
Total Assets |
|
$ |
65,999 |
|
|
$ |
2,737,162 |
|
|
$ |
3,639,210 |
|
|
$ |
4,327,379 |
|
|
$ |
10,769,750 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, 2005 |
|
| |
|
|
|
|
|
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Derived From |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Ownership of |
|
|
|
|
|
|
Medical |
|
|
|
|
| |
|
Distribution |
|
|
Limited Liability |
|
|
Corporate |
|
|
Software |
|
|
|
|
| |
|
Activities |
|
|
Companies |
|
|
Activities |
|
|
Activities |
|
|
Total |
|
Revenue (b) |
|
$ |
29,680 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
807,416 |
|
|
$ |
837,096 |
|
Operating (Loss) |
|
|
(11,550 |
) |
|
|
— |
|
|
|
(408,262 |
) |
|
|
(5,578,253 |
) |
|
|
(5,998,065 |
) |
Other Income (Loss) |
|
|
— |
|
|
|
2,028,500 |
|
|
|
108,879 |
|
|
|
(95,746 |
) |
|
|
2,041,633 |
|
Minority Interest Loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,141,779 |
|
|
|
3,141,779 |
|
Income Tax Benefit
(Provision) |
|
|
4,665 |
|
|
|
(816,607 |
) |
|
|
120,505 |
|
|
|
1,019,390 |
|
|
|
327,953 |
|
Net Income (Loss) (a) |
|
|
(6,885 |
) |
|
|
1,211,893 |
|
|
|
(178,878 |
) |
|
|
(1,512,830 |
) |
|
|
(486,700 |
) |
Total Assets |
|
$ |
86,916 |
|
|
$ |
2,832,480 |
|
|
$ |
3,405,596 |
|
|
$ |
4,142,478 |
|
|
$ |
10,467,470 |
|
| |
(a) |
|
All interest expense incurred by the Company was allocated to the Corporate Activities
Segment. |
| |
| |
(b) |
|
There was no intersegment revenue during the period. |
21
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. INCOME TAXES
Provisions (benefit) for federal and state income tax in the interim condensed consolidated
statements of operations consist of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months |
|
|
For the Nine Months |
|
| |
|
Ended September 30, |
|
|
Ended September 30, |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
— |
|
|
|
— |
|
|
|
10,844 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
10,844 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
200,149 |
|
|
|
(168,343 |
) |
|
|
200,149 |
|
|
|
(299,100 |
) |
State |
|
|
— |
|
|
|
(7,970 |
) |
|
|
— |
|
|
|
(28,853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,149 |
|
|
|
(176,313 |
) |
|
|
200,149 |
|
|
|
(327,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax
(benefit) provision |
|
$ |
200,149 |
|
|
$ |
(176,313 |
) |
|
$ |
210,993 |
|
|
$ |
(327,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Applicable income taxes (benefit) for financial reporting purposes differ from the amount
computed by applying the statutory federal income tax rate as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
For the Three Months |
|
|
For the Nine Months |
|
| |
|
Ended September 30, |
|
|
Ended September 30, |
|
| |
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Tax provision (benefit) at |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
statutory rate |
|
|
139,264 |
|
|
|
(152,024 |
) |
|
|
(784,374 |
) |
|
|
(276,982 |
) |
State income tax expense
(benefit) net of federal
tax effect |
|
|
— |
|
|
|
(24,592 |
) |
|
|
10,844 |
|
|
|
(44,806 |
) |
Suspended losses in ST, LLC |
|
|
— |
|
|
|
— |
|
|
|
941,665 |
|
|
|
— |
|
Other |
|
|
60,885 |
|
|
|
303 |
|
|
|
42,858 |
|
|
|
(6,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) |
|
$ |
200,149 |
|
|
$ |
(176,313 |
) |
|
$ |
210,993 |
|
|
$ |
(327,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2006, the Company had Federal and state tax loss carry-forwards totaling
approximately $1,497,000 and $4,572,000, respectively, available to reduce future years’ income
through 2023.
22
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9: COMMITMENTS AND CONTINGENCIES
As of September 30, 2006, there was a personal injury claim concerning a fall from a lifeguard
stand manufactured by the Company (prior to 2000 in a previous line of business). 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.
On August 1, 2006, a shareholder derivative lawsuit was filed by a number of shareholders of
Patient Care Technology Systems, Inc., formerly ER Quick, Inc., which owns a 25% interest in the
Company’s subsidiary, Patient Care Technology Systems, LLC (“PCTS”.) The suit, filed in the
Superior Court of the State of California, County of San Diego, against PCTS and other defendants,
alleges that PCTS misappropriated unspecified assets from Patient Care Technology Systems, Inc.
On or about August 2, 2006 PCTS, was made a defendant to a lawsuit filed by Hill-Rom Services, Inc.
et al in the United States District Court, Middle District of North Carolina, as a successor in
interest to Healthcare Information Technology, Inc., and as a customer of a vendor concerning their
vendors’ disputed patent ownership and unauthorized use of such patents. The plaintiffs also
requested a determination that they did not violate their license agreement with PCTS’s vendor.
PCTS has advised the Company that it believes both suits are without merit and that it will defend
them vigorously.
As of September 30, 2006, the Company has a $2,000,000 line of credit available from a bank. At
September 30, 2006, there were no amounts outstanding under this line of credit.
NOTE 10. RELATED PARTY TRANSACTIONS
DUE FROM RELATED PARTIES
Amounts due from related parties totaled $226,160 and represent advances to certain members of
management. These amounts are unsecured, non-interest bearing and due on demand. The Company has
no intention of demanding $200,000 due from two employees within one year from September 30, 2006.
Accordingly, the Company has classified $200,000 as a non-current asset on the condensed interim
consolidated balance sheet as of September 30, 2006.
23
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. RELATED PARTY TRANSACTIONS (CONTINUED)
NOTE PAYABLE — RELATED PARTY
ST, LLC has unsecured promissory notes to the majority stockholder totaling $4,830,262, the
proceeds of which have been used to meet operating funding requirements. These promissory notes
accrue interest at 10% per annum, compounding monthly. Interest only is payable annually on the
anniversary date of each of the promissory notes. The promissory notes and any accrued interest
are due on demand anytime after 10 years from the applicable date of the note. Accordingly, the
total unpaid principal balance is included in long-term liabilities on the accompanying
consolidated balance sheet. The Company may not prepay the principal balance without prior consent
of the majority stockholder.
On January 5, 2006, the Company issued an unsecured promissory note to Consulier’s majority
stockholder for $2,001,441 to repay the line of credit. The promissory note accrues interest at
6.5% per annum and is due upon demand. As of September 30, 2006, the remaining unpaid principal
balance due the majority stockholder totaled $951,441, which has been included in short-term
liabilities on the accompanying consolidated balance sheet. During the quarter ended September 30,
2006, the majority stockholder converted $600,000 of this promissory note in exchange for 166,204
shares of the Company’s common stock held in treasury (Note 12).
NOTE 11: STOCK-BASED EMPLOYEE COMPENSATION
SFAS No. 123(R) established standard for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services. It also addressed transactions in which an
entity incurs liabilities in exchange for goods or services that are based on the fair value of the
entity’s equity instruments or that may be settled by the issuance of those equity instruments.
Previously, the Company accounted for its stock-based employee compensation plan under the
intrinsic value method in accordance with APB 25 and related Interpretations. The Company has
adopted the provisions of SFAF No. 123(R) as amended by FASB Statement No. 148, “Accounting for
Stock-Based Compensation Transition and Disclosure” (“FAS 148”). The Company calculated its SFAS
123(R) compensation expense using the Black-Scholes model with the following assumptions for the
modifications of previously issued options; risk free rate of 4.77%, per share strike price of
$4.65, dividend yield of 0%, average per share values of $3.50, historical volatility of 128%, and
an expected life of one year.
24
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: STOCK-BASED EMPLOYEE COMPENSATION (CONTINUED)
Options outstanding as of December 31, 2005 were to expire on February 28, 2006; however, on
February 27, 2006 the Company extended the expiration date through February 28, 2007. Accordingly,
the Company recorded additional compensation of $580,099 for the nine months ended September 30,
2006. The additional compensation represented the difference between the fair value of the
modified award and the fair value of the original vested share option assumed to be repurchased
prior to the modification. As of September 30, 2006, the holders of these options were fully
vested. Accordingly, the Company recorded the total compensation cost to payroll and related
expenses in the accompanying condensed interim consolidated statement of operations.
NOTE 12: TREASURY STOCK
On July 17, 2006, the Company’s majority shareholder acquired 166,204 shares of the Company’s
common stock held in treasury stock by exchanging $600,000 of the Company’s indebtedness to the
shareholder as part of the Company’s plan to comply with NASDAQ Marketplace Rule 4310(c)(z)(b)(i)
by increasing the Company’s shareholders’ equity to more than $2,500,000.
25
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,
2006, with comparable periods in the prior year.
During the quarter ended September 30, 2006, sales decreased approximately $64,000 from sales for
the quarter ended September 30, 2005 due to the loss of a hospital account in PCTS, LLC. During
the nine months ended September 30, 2006, sales increased approximately $441,000 from the
comparable 2005 period due to the increase in Hospital accounts in PCTS, LLC during the nine months
ended.
Loss from operations for the nine months ended September 30, 2006 was approximately $7,489,000, or
$1.43 per share, compared to a loss of approximately $5,998,000, or $1.14 per share, for the nine
months ended September 30, 2005, primarily due to losses from PCTS, LLC (majority owned by ST, LLC)
which resulted from The Company’s marketing efforts.
During the quarter ended September 30, 2006, other income (loss)/(expense) decreased approximately
$98,000 from the quarter ended September 30, 2005, primarily a result of additional interest
expense.
During the nine months ended September 30, 2006, other income (loss)/(expense) decreased
approximately $904,000 from the nine months ended September 30, 2005, primarily a result of
additional interest expense and reduced income from AVM, LTD. and BioSafe Systems, LLC.
Equity in the income of BioSafe was approximately $129,000 in the third quarter of 2006, compared
to income of approximately $284,000 for the quarter ended September 30, 2005. This represents the
Company’s 40% interest in BioSafe’s net income of approximately $323,000 in the third quarter of
2006, compared to income of approximately $708,000 in the third quarter of 2005.
The Company’s income from its interest in Investment in AVM was $406,000 in the third quarter of
2006, compared to income of approximately $309,000 for the quarter ended September 30, 2005. This
represents the Company’s 5.4% interest in AVM’s net income of approximately $7,500,000 in the third
quarter of 2006, compared to income of approximately $5,460,000 in the third quarter of 2005.
26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION (CONTINUED)
Management continues to monitor these activities as they relate to budgeted amounts. See
“Liquidity and Capital Resources” and “Outlook” sections below. The Company maintains an open
option to sell its interest in ST, LLC to the primary stockholder of the Company for its total
investment as noted in the accompanying financial statements.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2006, Consulier’s cash totaled approximately $146,000 compared to approximately
$286,000 at December 31, 2005. Net cash used in operations was approximately $5,786,000 for the
nine months ended September 30, 2006, compared to approximately $4,871,000 of net cash used in the
nine months ended September 30, 2005. Net cash provided by investing activities totaling
approximately $1,021,000 was primarily due to the distribution of approximately $1,357,000 from AVM
during the nine months ended September 30, 2006, offset by the acquisition of property, equipment
and software totaling approximately $409,000. Net cash provided from financing activities came
from the proceeds from Consulier’s minority shareholder in ST, LLC of $3,519,000 and the excess net
proceed from loans.
Consulier can require Consulier’s principal stockholder to purchase its interest in ST, LLC for
cash equal to Consulier’s capital account as of the closing date. Consulier has contributed to ST,
LLC approximately $14,500,000 since inception and has no remaining net investment at September 30,
2006.
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 interest in AVM
as well as obtaining additional financing proceeds. Consulier cannot, with any degree of
assurance, predict whether there will be a continuation of the net return experienced in the period
from AVM limited partnership, nor the continued ability to obtain additional funding. 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.
At September 30, 2006, the Company has a $2,000,000 line of credit available from a bank. It is
anticipated that the cash requirements for ST, LLC will decrease in the future as ST, LLC’s sales
increase.
27
OUTLOOK
Based on AVM’s operations over the past five years, management expects continued annualized returns
in 2006 on its interest in AVM; however, there is no guarantee that the annualized return in the
third quarter of 2006 will be maintained throughout fiscal 2006.
Consulier International, Inc. has been developing new retail and distribution outlets locally,
nationally and internationally. There are several trade shows scheduled for marketing the Captain
Cra-Z Hand and All Purpose Cleaner throughout 2006 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 and new marketing materials are being developed.
Strong performances in most of BioSafe’s market segments and a decrease in the horticultural
segment, combined to account for the sales decrease of approximately $324,000 experienced in the
3rd quarter of 2006. Agriculture segments had an increase in sales of 250% over the first three
quarters of 2006, while our achievement of the projected growth in Aquatics’ product sales produced
a 20% sales increase. BioSafe has increased inventory levels to respond to the customer demand.
In the third quarter, PCTS acquired new customers for its computer and paper-based ED information
systems. In August, the company successfully installed its first enterprise-wide asset tracking
system in conjunction with a business partner. This installation represents the company’s first
installation in a non-acute care hospital setting reflecting the increasing breadth in market
demand for the company’s technologies. The company signed two additional co-marketing agreements
with providers of complementary technologies further broadening the scope of the company’s sales
and marketing reach. PCTS remains focused on active implementation projects across its solution
portfolio through the remainder of 2006.
ITEM 3. CONTROLS AND PROCEDURES
Our management has conducted an evaluation of the effectiveness of our disclosure controls and
procedures as defined in Rule 13a-15(e) 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 the reports filed in 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 periods covered by this Report.
28
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 2006, there was a personal injury claim concerning a fall from a lifeguard
stand manufactured by the Company (prior to 2000 in a previous line of business). 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.
On August 1, 2006, a shareholder derivative lawsuit was filed by a number of shareholders of
Patient Care Technology Systems, Inc., formerly ER Quick, Inc., which owns a 25% interest in the
Company’s subsidiary, Patient Care Technology Systems, LLC (“PCTS”.) The suit filed in the Superior
Court of the State of California, County of San Diego, against PCTS and other defendants, alleges
that PCTS misappropriated unspecified assets from Patient Care Technology Systems, Inc.
On or about August 2, 2006 PCTS, was made a defendant to a lawsuit filed by Hill-Rom Services, Inc.
et al in the United States District Court, Middle District of North Carolina, as a successor in
interest to Healthcare Information Technology, Inc., and as a customer of a vendor concerning their
vendors’ disputed patent ownership and unauthorized use of such patents. The plaintiffs also
requested a determination that they did not violate their license agreement with PCTS’s vendor.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On July 17, 2006, the Company’s majority shareholder purchased 166,204 shares of common stock in
exchange for $600,000 of the Company’s indebtedness to the shareholder. The transaction was exempt
from registration pursuant to Section 4(2) of The Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
29
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION (CONTINUED)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| |
(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 |
| |
| |
(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. |
30
SIGNATURES
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 10, 2006 |
By: |
/s/Alan R Simon
|
|
| |
|
Alan R. Simon, Esq. |
|
| |
|
Secretary and Treasurer
(Principal Financial and Accounting Officer) |
|
| |
| |
|
|
| Date: November 10, 2006 |
By: |
/s/Warren B. Mosler
|
|
| |
|
Warren B. Mosler |
|
| |
|
Chairman of the Board,
President & Chief Executive Officer
(Principal Executive Officer) |
|
| |
31
EXHIBIT INDEX
| |
|
|
| Exhibit |
|
|
| No. |
|
Description |
31.1
|
|
Certification of Chief Executive Officer Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002 |
31.2
|
|
Certification of Chief Financial Officer Pursuant to Section 302 of
Sarbanes-Oxley Act of 2002 |
32.1
|
|
Certification of Chief Executive Officer Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002 |
32.2
|
|
Certification of Chief Financial Officer Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002 |
32