10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009
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o |
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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)
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Florida
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59-2556878 |
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(State or other jurisdiction of
of incorporation or organization)
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(I.R.S. Employer Identification No.) |
2391 Old Dixie Highway
Riviera Beach, FL 33404
(Address of principal executive offices)
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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 has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller Reporting Company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrants classes of common stock, as
of the latest practicable date:
As of August 10, 2009, there were 5,294,748 outstanding shares of common stock, par value $0.01
per share.
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning 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 managements 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 cause 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, and
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 result 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 the end of the period for which the Report
is filed.
2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
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Page |
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5 |
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6 |
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7 |
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8 |
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26 |
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28 |
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28 |
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29 |
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29 |
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29 |
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29 |
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29 |
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29 |
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30 |
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31 |
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Ex 31.1 Section 302 CEO Certification |
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Ex 31.2 Section 302 CFO Certification |
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Ex 32.1 Section 906 CEO Certification |
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Ex 32.2 Section 906 CFO Certification |
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EX-31.1 |
EX-31.2 |
EX-32.1 |
EX-32.2 |
3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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June 30, |
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December 31, |
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2009 |
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2008 |
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ASSETS |
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CURRENT ASSETS |
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Cash and Cash Equivalents |
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$ |
122,941 |
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$ |
270,192 |
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Receivables |
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997,601 |
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1,266,429 |
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Inventories |
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112,696 |
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117,831 |
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Deferred Implementation Costs |
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2,447,332 |
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2,293,464 |
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Other Current Assets |
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213,961 |
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252,385 |
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Deferred Income Taxes |
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277,132 |
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364,615 |
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Total Current Assets |
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4,171,663 |
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4,564,916 |
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PROPERTY AND EQUIPMENT, Net |
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1,209,253 |
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1,316,638 |
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PARTNERSHIP AND LIMITED LIABILITY COMPANIES - INVESTMENTS |
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2,801,140 |
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2,629,017 |
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DEFERRED INCOME TAXES |
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567,528 |
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496,393 |
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INTANGIBLE ASSETS |
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147,193 |
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367,838 |
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OTHER ASSETS |
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50,898 |
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50,898 |
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TOTAL ASSETS |
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$ |
8,947,675 |
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$ |
9,425,700 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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CURRENT LIABILITIES |
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Accounts Payable and Accrued Liabilities |
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$ |
1,438,656 |
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$ |
1,812,163 |
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Unearned Revenue |
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1,085,579 |
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1,102,902 |
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Related Party Payable |
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201,992 |
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Total Current Liabilities |
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2,524,235 |
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3,117,057 |
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NOTES PAYABLE - RELATED PARTY |
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736,766 |
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968,948 |
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Total Liabilities |
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3,261,001 |
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4,086,005 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS EQUITY: |
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Common Stock $.01 Par Value: |
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Authorized 25,000,000 Shares; Issued 5,485,122 Shares |
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Additional Paid-in Capital |
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54,851 |
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54,851 |
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Accumulated Deficit |
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4,117,221 |
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4,117,221 |
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(824,160 |
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(894,360 |
) |
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3,347,912 |
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3,277,712 |
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Less: |
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Treasury Stock, Cost - 190,374 Shares in 2009 and 2008 |
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(589,027 |
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(589,027 |
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Notes Receivable for Common Stock |
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(6,651 |
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(6,651 |
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Total Stockholders Equity |
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2,752,234 |
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2,682,034 |
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Noncontrolling interest |
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2,934,440 |
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2,657,661 |
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Total Equity |
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5,686,674 |
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5,339,695 |
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
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$ |
8,947,675 |
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$ |
9,425,700 |
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See accompanying notes to unaudited consolidated financial statements
4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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THREE MONTHS ENDED |
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SIX MONTHS ENDED |
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JUNE 30, |
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JUNE 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenue: |
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Software Licensing Fees |
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$ |
915,881 |
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$ |
506,175 |
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$ |
2,048,740 |
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$ |
1,391,330 |
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Other Revenue |
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7,601 |
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5,802 |
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9,879 |
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9,519 |
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Total Revenue |
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923,482 |
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511,977 |
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2,058,619 |
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1,400,849 |
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Operating Costs and Expenses: |
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Cost of Revenue |
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89,263 |
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519,998 |
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338,678 |
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757,940 |
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Payroll and Related Expense |
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1,201,523 |
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1,253,690 |
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1,995,762 |
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2,107,470 |
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Selling, General and Administrative |
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737,789 |
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604,020 |
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1,332,914 |
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1,190,119 |
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Professional Services |
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134,176 |
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191,065 |
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273,213 |
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578,275 |
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Depreciation and Amortization |
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164,255 |
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287,092 |
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332,792 |
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566,944 |
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Total Operating Costs and Expenses |
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2,327,006 |
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2,855,865 |
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4,273,359 |
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5,200,748 |
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Operating Loss |
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(1,403,524 |
) |
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(2,343,888 |
) |
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(2,214,740 |
) |
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(3,799,899 |
) |
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Other Income (Expense): |
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Investment Income Related Parties |
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183,962 |
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732,343 |
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646,473 |
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1,898,392 |
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Interest Expense |
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(18,474 |
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(56,344 |
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(38,322 |
) |
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(139,908 |
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Net Undistributed Income of Equity Investees |
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286,663 |
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166,602 |
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312,945 |
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122,789 |
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Other Income |
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48,272 |
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53,517 |
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85,410 |
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116,385 |
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Total Other Income (Expense) |
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500,423 |
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896,118 |
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1,006,506 |
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1,997,658 |
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Loss Before Income Taxes |
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(903,101 |
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(1,447,770 |
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(1,208,234 |
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(1,802,241 |
) |
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Benefit from (provision for) Income Taxes |
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(81,434 |
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110,002 |
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9,563 |
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138,165 |
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Net Loss |
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(984,535 |
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(1,337,768 |
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(1,198,671 |
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(1,664,076 |
) |
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Less: Net (loss) attributable to noncontrolling interest |
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(1,208,032 |
) |
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(1,087,957 |
) |
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(1,268,871 |
) |
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(1,401,941 |
) |
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Net Income (Loss) attributed to Consulier Engineering,
Inc. |
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$ |
223,497 |
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$ |
(249,811 |
) |
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$ |
70,200 |
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$ |
(262,135 |
) |
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Earnings (Loss) Per Share Basic and Diluted |
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$ |
0.04 |
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$ |
(0.05 |
) |
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$ |
0.01 |
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$ |
(0.05 |
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See accompanying notes to unaudited consolidated financial statements
5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
THREE MONTHS ENDED JUNE 30, 2009
(UNAUDITED)
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Notes |
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Retained |
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Receivable |
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Additional |
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Earnings |
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for |
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Total |
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Common Stock |
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Treasury Stock |
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Paid-in |
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(Accumulated |
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Common |
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Stockholders |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit) |
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Stock |
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Equity |
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Balance, December 31, 2008 |
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|
5,485,122 |
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$ |
54,851 |
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|
190,374 |
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|
$ |
(589,027 |
) |
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$ |
4,117,221 |
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|
$ |
(894,360 |
) |
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$ |
(6,651 |
) |
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$ |
2,682,034 |
|
Net Income attributed to
Consulier Engineering, Inc. |
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70,200 |
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70,200 |
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Balance June 30, 2009 |
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5,485,122 |
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$ |
54,851 |
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|
190,374 |
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$ |
(589,027 |
) |
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$ |
4,117,221 |
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$ |
(824,160 |
) |
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$ |
(6,651 |
) |
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$ |
2,752,234 |
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See accompanying notes to unaudited consolidated financial statements
6
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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SIX MONTHS ENDED |
|
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|
JUNE 30, |
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|
|
2009 |
|
|
2008 |
|
Cash Flow (Used in) Operating Activities |
|
$ |
(2,487,675 |
) |
|
$ |
(2,592,779 |
) |
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|
|
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Software Upgrades |
|
|
|
|
|
|
(40,771 |
) |
Distributions from Partnership Interest |
|
|
1,228,598 |
|
|
|
2,158,705 |
|
Net Acquisition of Property and Equipment |
|
|
|
|
|
|
(34,972 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Investing Activities |
|
|
1,228,598 |
|
|
|
2,082,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Noncontrolling Interest in ST, LLC |
|
|
1,546,000 |
|
|
|
375,000 |
|
Increase (Decrease) in Related Party Payables |
|
|
(201,992 |
) |
|
|
336,895 |
|
Proceeds from Subscription Receivable |
|
|
|
|
|
|
22,496 |
|
Purchase of Treasury Stock |
|
|
|
|
|
|
(161,136 |
) |
Repayment of Notes Payable Related Party |
|
|
(232,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Financing
Activities |
|
|
1,111,826 |
|
|
|
573,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in Cash and Cash Equivalents |
|
|
(147,251 |
) |
|
|
63,438 |
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - Beginning of Period |
|
|
270,192 |
|
|
|
333,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents - End of Period |
|
$ |
122,941 |
|
|
$ |
396,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash Paid for Interest |
|
$ |
63,440 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Cash Paid for Income Taxes |
|
$ |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Note Payable-Related Party to Class A Stock |
|
$ |
|
|
|
$ |
3,405,062 |
|
|
|
|
|
|
|
|
Conversion of Related Party Payable to Note Payable |
|
$ |
|
|
|
$ |
915,541 |
|
|
|
|
|
|
|
|
See accompanying notes to unaudited consolidated financial statements
7
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
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 three 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 wholly-owned subsidiary) markets and distributes Captain Cra-Z
Soap. Consuliers income is also derived from ownership of interests (Note 3) in BioSafe Systems,
LLC (BioSafe), a California limited liability company, 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. Consuliers Chairman and majority stockholder, Warren B. Mosler (Mosler), is
a general partner of the general partner of AVM.
ST, LLC, a majority-owned (51%) limited liability company, is a majority member (75%) of Patient
Care Technology Systems, LLC (PCTS), a California limited liability company which develops and
licenses data-based integrated emergency room information systems marketed as Amelior ED. PCTS is
also a provider of passive tracking technologies for emergency departments and operating rooms. Its
software technologies track the status and location of patients and assets through wireless badges
worn by people or attached to equipment in the emergency department and ancillary areas. PCTS also
designs, customizes, markets, sells and distributes paper templates used for diagnostic purposes in
emergency medical departments. Moslers ownership in ST, LLC was approximately 24% as the Class A
member and Consuliers ownership was approximately 51% as of June 30, 2009.
Basis of Consolidation
The accompanying condensed consolidated financial statements include Consulier and its wholly-owned
subsidiary, Consulier International, Inc., and ST, LLC, with 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% (Note 3).
8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interim Financial Data
The accompanying unaudited condensed 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-Q and Regulation S-X. 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 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 June 30,
2009, and the results of their operations for the three and six months ended June 30, 2009 and
2008, and cash flows for the six months ended June 30, 2009 and 2008. 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, 2009. For further information, refer
to the consolidated financial statements and footnotes thereto included in Consuliers annual
report on Form 10-K for the year ended December 31, 2008.
Revenue Recognition
PCTS 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
license and software license updates and product support revenues, and (2) services, which include
consulting, advanced product services and education revenues. The following generally describes the
revenue accounting followed by PCTS.
New software license revenues represent all fees earned from granting customers licenses to use
PCTSs database and tracking technology as well as applications software, and exclude revenue
derived from software license updates, which is 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 (SOP) No. 97-2, Software Revenue Recognition, issued by the
American Institute of Certified Public Accountants, PCTS 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.
9
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
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, PCTS recognizes new software license revenue when: (1) PCTS enters into a
legally binding arrangement with a customer for the license of software; (2) PCTS delivers the
products; (3) a customer payment is deemed fixed or determinable and free of contingencies or
significant uncertainties; and (4) collection is probable. Substantially all new software license
revenues are 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 net new software license fees.
Many of PCTSs software arrangements include consulting implementation services sold separately
under consulting engagement contracts. Consulting revenue from these arrangements is 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
(e.g., 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.
10
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
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, PCTS 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 the normal
pricing and discounting practices for those products and services when sold separately, and for
software license updates and product support services, is additionally measured by the renewal rate
offered to the customer.
PCTS 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 PCTS cannot objectively determine the fair value of any
undelivered element included in bundle 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.
Sales of the Companys soap products are recorded upon shipment of goods to customers.
Shipping and handling costs billed to customers are included in sales and recorded when goods are
shipped to customers. Shipping costs of the Company are classified as a selling expense.
Income Taxes
The Company accounts for income taxes under the liability method. Under this method, deferred tax
liabilities and assets are determined based on the difference between the consolidated financial
statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
As part of the process of preparing our consolidated financial statements, the Company is required
to estimate its income taxes in each of the jurisdictions in which it operates. This process
involves estimating current tax exposure together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes.
11
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes (Continued)
These differences result in deferred tax assets and liabilities, which are included within the
Companys consolidated balance sheet. The Company then assesses the likelihood that the deferred
tax assets will be recovered from future taxable income and to the extent it believes that recovery
is not likely, it establishes a valuation allowance. To the extent the Company establishes a
valuation allowance or changes this allowance in a period, it includes an expense or a benefit
within the tax provision in the Companys consolidated statement of operations.
In June 2006, the Financial Accounting Standards Board published FASB Interpretation No. 48 (FIN
No. 48). Accounting for Uncertainty in Income Taxes, to address the non-comparability in
reporting tax assets and liabilities resulting from a lack of specific guidance in FASB Statement
of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes, on the
uncertainty in income taxes recognized in an enterprises financial statements. Specifically, FIN
No. 48 prescribes (a) a consistent recognition threshold and (b) a measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return, and provides related guidance on derecognition, classification, interest and
penalties, accounting interim periods, disclosure and transition. FIN 48 requires companies to
determine whether it is more likely than not that a tax position will be sustained upon
examination by the appropriate taxing authorities before any part of the benefit can be recorded in
the financial statements. For those tax positions where it is not more likely than not that a tax
benefit will be sustained, no tax benefit is recognized. Where applicable, associated interest and
penalties are also recorded in the accompanying consolidated financial statements as selling,
general and administrative expenses. .
The Company adopted the provisions of FIN 48 on January 1, 2007. Based on our evaluation, we have
concluded that there are no significant uncertain tax positions requiring recognition in our
financial statements. Our evaluation was performed for the tax years ended December 31, 2008,
2007, 2006, and 2005, the tax years which remain subject to examination by major tax jurisdictions
as of June 30, 2009.
Recently Adopted Accounting Pronouncements
In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value in accordance with generally
accepted accounting principles, and expands disclosures about fair value measurements. For all of
our financial assets and liabilities that are recognized and disclosed at fair value on a recurring
basis, we adopted the provisions of SFAS 157 effective January 1, 2008.
12
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Adopted Accounting Pronouncements (Continued)
The implementation of SFAS No. 157 did not have a material effect on the Companys consolidated
financial statements. For all assets and liabilities that are non-financial that are recognized or
disclosed at fair value in the financial statements on a non-recurring basis we adopted the
provisions of SFAS 157 effective January 1, 2009. This partial deferral was a result of Staff
Position 157-2 Effective Date of FASB Statement No. 157 (FSP 157-2) issued on February 12, 2008,
which delayed the adoption of SFAS 157 for non-financial assets and liabilities that are recognized
or disclosed at fair value on a non-recurring basis. The adoption of this standard did not have a
significant impact on the Companys financial position or results of operations.
On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities (SFAS No. 159). Under SFAS No. 159, the Company may elect to report
financial instruments and certain other items at fair value on a contract-by-contract basis with
changes in value reported in earnings. This election is irrevocable. SFAS No. 159 provides an
opportunity to mitigate volatility in reported earnings that is caused by measuring hedged assets
and liabilities that were previously required to use a different accounting method than the related
hedging contracts when the complex provisions of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, (SFAS 133) applicable to hedge accounting are not met. The
Company adopted SFAS No. 159 on January 1, 2008. The Company chose not to elect the fair value
option for its financial assets and liabilities existing at January 1, 2009, and did not elect the
fair value option on financial assets and liabilities transacted in the six months ended June 30,
2009. Therefore, the adoption of SFAS No. 159 had no impact on the Companys interim condensed
consolidated financial statements.
In March 2008, the FASB issued SFAS 161 Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133 (SFAS 161), which is effective for fiscal
years and interim periods beginning after November 15, 2008, with earlier adoption encouraged.
This statement is intended to improve transparency in financial reporting by requiring enhanced
disclosures of an entitys derivative instruments and hedging activities and their effects on the
entitys financial position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, as well as related hedged items, bifurcated
derivatives, and non-derivative instruments that are designated and qualify as hedging instruments.
This statement was adopted effective January 1, 2009. SFAS 161 had no material impact on the
Companys consolidated financial statements.
13
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Adopted Accounting Pronouncements (Continued)
In December 2007, the FASB issued SFAS 141R, Business Combinations (SFAS 141R), which is
effective prospectively for all business combinations with acquisition dates on or after the
beginning of the first fiscal year beginning after December 15, 2008, with the exception of the
accounting for valuation allowances on deferred taxes and acquired tax contingencies. SFAS 141R
replaces SFAS 141 Business Combinations (SFAS 141), but it retains the underlying concepts of
SFAS 141 in that all business combinations are required to be accounted for at fair value under the
acquisition method of accounting. However, SFAS 141R changed the method of applying the
acquisition method in a number of significant ways. Acquisition costs will generally be expensed
as incurred; noncontrolling interests will be valued at fair value at the acquisition date;
in-process research and development will be recorded at fair value at the acquisition date as an
indefinite-lived intangible asset; restructuring cost associated with a business combination will
generally be expensed subsequent to the acquisition date; and changes in deferred tax asset
valuation allowances and income tax uncertainties after the acquisition date generally will affect
income tax expense. This statement was adopted effective January 1, 2009. SFAS 141R did not have
a material impact on the Companys consolidated financial statements.
In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible
Assets. This FSP amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,
Goodwill and Other Intangible Assets (SFAS 142). The objective of this FSP is to improve the
consistency between the useful life of a recognized intangible asset under SFAS 142 and the period
of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other
principles of GAAP.
This FSP applies to all intangible assets, whether acquired in a business combination or otherwise.
The Company adopted this standard on January 1, 2009, and it did not have a significant impact on
the determination or reporting of the Companys consolidated financial results.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles (SFAS 162). This statement identifies the sources of accounting principles and the
framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in accordance with GAAP. With the issuance of this
statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not
its auditor, and reside in the accounting literature established by the FASB as opposed to the
American Institute of Certified Public Accountants
14
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Adopted Accounting Pronouncements (Continued)
(AICPA) Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. The Company adopted this standard effective January 1,
2009, and it did not have a significant impact on the determination or reporting of the Companys
consolidated financial results.
In December 2007, the FASB issued SFAS 160 Non-controlling Interests in Consolidated Financial
Statements (SFAS160), which amends Accounting Research Bulletin (ARB) 51, Consolidated
Financial Statements (ARB 51). This statement was adopted effective January 1, 2009. FAS160
provides guidance for the accounting, reporting and disclosure of noncontrolling interests and
requires, among other things, that non-controlling interests be recorded as equity in the
consolidated financial statements. The adoption of this standard resulted in the reclassification
of $2,688,758 of Minority Interests (now referred to as non-controlling interests) to a separate
component of Stockholders Equity on the Consolidated Balance Sheet. Additionally, net income
attributable to non-controlling interests is now shown separately from parent net income in the
Consolidated Statement of Income. Prior periods have been restated to reflect the presentation and
disclosure requirements of SFAS 160.
EITF 08-6, which was effective January 1, 2009, clarifies the accounting for certain transactions
and impairment considerations involving equity method investments and is applied on a prospective
basis to future transactions.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133 (SFAS161). SFAS 161 requires entities that use
derivative instruments to provide qualitative disclosures about their objectives and strategies for
using such instruments, as well as any details of credit-risk-related contingent features contained
within derivatives. SFAS 161 also requires entities to disclose additional information about the
amounts and location of derivatives located within the financial statements, how the provisions of
SFAS 133 have been applied, and the impact that hedges have on an entitys financial position,
financial performance, and cash flows. The Company does not currently hold derivative instruments
and was not impacted by the adoption of SFAS 161.
15
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Adopted Accounting Pronouncements (Continued)
In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly (FSP 157-4), and FSP FASB 107-1 and Accounting Principles Board (APB) 28-1, Interim
Disclosures about Fair Value of Financial Instruments (FSP 107-1). These two staff positions
relate to fair value measurements and related disclosures. The FASB also issued a third FSP
relating to the accounting for impaired debt securities titled FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments (FSP 115-2). These standards are
effective for interim and annual periods ending after June 15, 2009. The company has determined
that FSP 157-4 and FSP 115-2 do not currently apply to its activities and had adopted the
disclosure requirements of FSP 107-1.
In May 2009, the FASB issued Statement No. 165, Subsequent Events (SFAS 165), which establishes
general standards of accounting for, and requires disclosure of, events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. The
Company adopted the provisions of SFAS 165 for the quarter ended June 30, 2009. The adoption of
these provisions did not have a material effect on the Companys consolidated financial statements.
The Company evaluated subsequent events through August 14, 2009, the date this quarterly report
was filed with the Securities and Exchange Commission.
Recently Issued Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, as
amendment to SFAS No. 140 (SFAS166). SFAS 166 eliminates the concept of a qualifying
special-purpose entity, changes the requirements for derecognizing financial assets, and requires
additional disclosures in order to enhance information reported to users of financial statements by
providing greater transparency about transfers of financial assets, including securitization
transactions, and an entitys continuing involvement in and exposure to the risks related to
transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15,
2009. The Company will adopt SFAS 166 in fiscal 2010 and is evaluating the impact it will have on
the consolidated results of the Company.
16
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements (Continued)
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS 167).
The amendments include: (1) the elimination of the exemption for qualifying special purpose
entities, (2) a new approach for determining who should consolidate a variable-interest entity, and
(3) changes to when it is necessary to reassess who should consolidate a variable-interest entity.
SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and
for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in
fiscal 2010 and is evaluating the impact it will have on the consolidated results of the Company.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles (SFAS 168). SFAS 168 replaces FASB Statement
No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes the FASB
Accounting Standards Codification (the Codification) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in the preparation of
financial statements in conformity with generally accepted accounting principles (GAAP). SFAS 168
is effective for interim and annual periods ending after September 15, 2009. The Company will
begin to use the new Codification when referring to GAAP in its quarterly report of Form 10Q for
the quarter ending September 30, 2009. This will not have an impact on the consolidated results of
the Company.
NOTE 2. DEFERRED IMPLEMENTATION COSTS
Deferred implementation costs as of June 30, 2009, totaled $2,447,332 and $2,293,464 as of December
31, 2008, and represented equipment purchased for customers, payroll and payroll related expenses
for customer contracts which have not met certain milestones and 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.
17
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE
3. INVESTMENTS PARTNERSHIP AND LIMITED LIABILITY COMPANY
The Companys limited partnership and limited liability company interests consist of its
investments in AVM and BioSafe, respectively.
AVM, L.P.
Consulier owned an approximately 6.3% limited partnership interest in AVM as of June 30, 2009 and
2008, respectively. Based on capital and earnings distributions provided in the partnership
agreement, Consulier was allocated approximately 3.68% and 4.86% of AVMs earnings during the six
months ended June 30, 2009 and 2008, respectively. Under the partnership agreement, Consulier may
withdraw from AVM upon 90 days written notice.
The following is a summary of the results of operations (unaudited) 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) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
13,505 |
|
|
$ |
28,945 |
|
|
$ |
35,912 |
|
|
$ |
62,153 |
|
Cost & Expenses |
|
$ |
8,309 |
|
|
$ |
13,082 |
|
|
$ |
18,335 |
|
|
$ |
25,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
5,196 |
|
|
$ |
15,863 |
|
|
$ |
17,577 |
|
|
$ |
36,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consuliers Share
of Earnings |
|
$ |
184 |
|
|
$ |
732 |
|
|
$ |
646 |
|
|
$ |
1,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying value of the Companys investment in AVM at June 30, 2009, and December 31, 2008,
was $1,552,893 and $1,582,260, respectively.
18
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
BIOSAFE SYSTEMS, LLC
Consulier owned a 40% interest in BioSafe Systems as of June 30, 2009 and 2008. The following is a
summary of the results of operations of BioSafe and the income allocated to Consulier:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
(In Thousands) |
|
|
(In Thousands) |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
$ |
2,477 |
|
|
$ |
2,042 |
|
|
$ |
3,896 |
|
|
$ |
3,828 |
|
Cost & Expenses |
|
$ |
1,762 |
|
|
$ |
1,625 |
|
|
$ |
3,111 |
|
|
$ |
3,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
715 |
|
|
$ |
417 |
|
|
$ |
785 |
|
|
$ |
307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consuliers Share
of Earnings |
|
$ |
287 |
|
|
$ |
167 |
|
|
$ |
313 |
|
|
$ |
123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The carrying value of Consuliers investment in BioSafe at June 30, 2009 was $1,248,247 and
$1,046,757 at December 31, 2008.
NOTE 4. EARNINGS PER SHARE
Basic earnings per share are 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 are computed using the weighted average number of common and dilutive potential common shares
outstanding during the period. Dilutive potential common shares consist of shares issuable upon the
exercise of stock awards (calculated using the treasury stock method) warrants, convertible debt
and convertible preferred stock during the period they were outstanding.
19
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 4. EARNINGS PER SHARE (CONTINUED)
Basic and diluted earnings per share for the three and six months ended June 30, 2009 were
calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
BASIC & DILUTED |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPUTATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMERATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) attributed to
Consulier Engineering, Inc. |
|
$ |
223,497 |
|
|
$ |
(249,811 |
) |
|
$ |
70,200 |
|
|
$ |
(262,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DENOMINATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares-
Weighted Average Number
of common shares
outstanding |
|
|
5,294,748 |
|
|
|
5,300,018 |
|
|
|
5,294,748 |
|
|
|
5,310,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings(Loss) per share |
|
$ |
0.04 |
|
|
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009 and 2008, the Company did not have any dilutive outstanding common stock
instruments to be included in its diluted earnings per share computation.
20
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
|
|
|
NOTE 5. |
|
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 interests in a limited partnership and a limited liability
company (which are together called Limited Liability Companies in the following tables). The
corporate segment is engaged in management of the business and finance activities.
Segment information as of and for the three and six months ended June 30, 2009 and 2008 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
Income (loss) Derived |
|
|
|
|
|
Medical |
|
|
|
|
Distribution |
|
from Ownership of |
|
Corporate |
|
Software |
|
|
|
|
Activities |
|
Investments |
|
Activities |
|
Activites |
|
Total |
Revenue (b) |
|
$ |
7,601 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
915,881 |
|
|
$ |
923,482 |
|
Operating Income
(loss) |
|
|
(28,836 |
) |
|
|
|
|
|
|
(149,097 |
) |
|
|
(1,225,591 |
) |
|
|
(1,403,524 |
) |
Other Income
(loss)(a) |
|
|
|
|
|
|
470,625 |
|
|
|
29,798 |
|
|
|
|
|
|
|
500,423 |
|
Noncontrolling
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,208,032 |
|
|
|
1,208,032 |
|
Income Tax Benefit
(Expense) |
|
|
12,643 |
|
|
|
(190,779 |
) |
|
|
52,966 |
|
|
|
43,736 |
|
|
|
(81,434 |
) |
Net Income (loss)(a) |
|
|
(16,193 |
) |
|
|
279,846 |
|
|
|
(66,333 |
) |
|
|
26,171 |
|
|
|
223,497 |
|
Total Assets |
|
$ |
38,997 |
|
|
$ |
2,801,140 |
|
|
$ |
2,315,440 |
|
|
$ |
3,792,098 |
|
|
$ |
8,947,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, 2008 |
|
|
|
|
|
|
|
|
Income (loss) Derived |
|
|
|
|
|
Medical |
|
|
|
|
Distribution |
|
from Ownership of |
|
Corporate |
|
Software |
|
|
|
|
Activities |
|
Investments |
|
Activities |
|
Activites |
|
Total |
Revenue (b) |
|
$ |
5,802 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
506,175 |
|
|
$ |
511,977 |
|
Operating Income
(loss) |
|
|
(7,058 |
) |
|
|
|
|
|
|
(103,612 |
) |
|
|
(2,233,218 |
) |
|
|
(2,343,888 |
) |
Other Income
(loss)(a) |
|
|
|
|
|
|
898,945 |
|
|
|
53,931 |
|
|
|
(56,758 |
) |
|
|
896,118 |
|
Noncontrolling
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,087,957 |
|
|
|
1,087,957 |
|
Income Tax Benefit
(Expense) |
|
|
2,717 |
|
|
|
(346,094 |
) |
|
|
19,127 |
|
|
|
434,252 |
|
|
|
110,002 |
|
Net Income (loss)(a) |
|
|
(4,341 |
) |
|
|
552,851 |
|
|
|
30,554 |
|
|
|
(767,767 |
) |
|
|
(249,811 |
) |
Total Assets |
|
$ |
47,091 |
|
|
$ |
2,769,803 |
|
|
$ |
2,480,776 |
|
|
$ |
3,696,163 |
|
|
$ |
8,993,833 |
|
|
|
|
(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 CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 5. SEGMENT INFORMATION (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
|
Income (loss) Derived |
|
|
|
|
|
Medical |
|
|
|
|
Distribution |
|
from Ownership of |
|
Corporate |
|
Software |
|
|
|
|
Activities |
|
Investments |
|
Activities |
|
Activites |
|
Total |
Revenue (b) |
|
$ |
9,879 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,048,740 |
|
|
$ |
2,058,619 |
|
Operating Income (loss) |
|
|
(55,261 |
) |
|
|
|
|
|
|
(297,571 |
) |
|
|
(1,861,908 |
) |
|
|
(2,214,740 |
) |
Other Income (loss)(a) |
|
|
|
|
|
|
959,418 |
|
|
|
47,088 |
|
|
|
|
|
|
|
1,006,506 |
|
Noncontrolling Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,268,871 |
|
|
|
1,268,871 |
|
Income Tax Benefit
(Expense) |
|
|
21,588 |
|
|
|
(356,452 |
) |
|
|
97,569 |
|
|
|
246,858 |
|
|
|
9,563 |
|
Net Income (loss)(a) |
|
|
(33,673 |
) |
|
|
602,966 |
|
|
|
(152,914 |
) |
|
|
(346,179 |
) |
|
|
70,200 |
|
Total Assets |
|
$ |
38,997 |
|
|
$ |
2,801,140 |
|
|
$ |
2,315,440 |
|
|
$ |
3,792,098 |
|
|
$ |
8,947,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2008 |
|
|
|
|
|
|
|
|
Income (loss) Derived |
|
|
|
|
|
Medical |
|
|
|
|
Distribution |
|
from Ownership of |
|
Corporate |
|
Software |
|
|
|
|
Activities |
|
Investments |
|
Activities |
|
Activites |
|
Total |
Revenue (b) |
|
$ |
9,519 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,391,330 |
|
|
$ |
1,400,849 |
|
Operating Income
(loss) |
|
|
(6,749 |
) |
|
|
|
|
|
|
(298,181 |
) |
|
|
(3,494,969 |
) |
|
|
(3,799,899 |
) |
Other Income
(loss)(a) |
|
|
|
|
|
|
2,021,181 |
|
|
|
78,783 |
|
|
|
(102,306 |
) |
|
|
1,997,658 |
|
Noncontrolling
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,401,941 |
|
|
|
1,401,941 |
|
Income Tax Benefit
(Expense) |
|
|
2,598 |
|
|
|
(778,551 |
) |
|
|
84,468 |
|
|
|
829,254 |
|
|
|
138,165 |
|
Net Income (loss)(a) |
|
|
(4,151 |
) |
|
|
1,243,026 |
|
|
|
(134,930 |
) |
|
|
(1,366,080 |
) |
|
|
(262,135 |
) |
Total Assets |
|
$ |
47,091 |
|
|
$ |
2,769,803 |
|
|
$ |
2,480,776 |
|
|
$ |
3,696,163 |
|
|
$ |
8,993,833 |
|
22
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
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 Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(12,955 |
) |
|
$ |
|
|
|
$ |
(25,911 |
) |
|
$ |
|
|
State |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(12,955 |
) |
|
$ |
|
|
|
$ |
(25,911 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
82,488 |
|
|
$ |
(99,973 |
) |
|
$ |
17,747 |
|
|
$ |
(124,869 |
) |
State |
|
$ |
11,901 |
|
|
$ |
(10,029 |
) |
|
$ |
(1,399 |
) |
|
$ |
(13,296 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
94,389 |
|
|
$ |
(110,002 |
) |
|
$ |
16,348 |
|
|
$ |
(138,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Income Tax (Benefit) Expense |
|
$ |
81,434 |
|
|
$ |
(110,002 |
) |
|
$ |
(9,563 |
) |
|
$ |
(138,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Applicable income taxes (benefit) expense for financial reporting purposes differs from the
amount computed by applying the statutory federal income tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Three Months |
|
|
For Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Federal tax expense (benefit) at
statutory rate |
|
$ |
93,423 |
|
|
$ |
(492,242 |
) |
|
$ |
(10,322 |
) |
|
$ |
(612,762 |
) |
State income tax expense (benefit) net of
federal tax effect |
|
$ |
7,855 |
|
|
$ |
(52,554 |
) |
|
$ |
(923 |
) |
|
$ |
(65,421 |
) |
Losses allocated to minority shareholder
of St. LLC |
|
$ |
(20,685 |
) |
|
$ |
424,478 |
|
|
$ |
|
|
|
$ |
527,550 |
|
Adjustment of net operating loss
carryovers |
|
$ |
|
|
|
$ |
1,742 |
|
|
$ |
|
|
|
$ |
3,894 |
|
Other |
|
$ |
841 |
|
|
$ |
8,574 |
|
|
$ |
1,682 |
|
|
$ |
8,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax (Benefit) Expense |
|
$ |
81,434 |
|
|
$ |
(110,002 |
) |
|
$ |
(9,563 |
) |
|
$ |
(138,165 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2009, the Company had Federal and State tax loss carry-forwards totaling
approximately $0 and $4,928,000, respectively, available to reduce future years income through
2023.
23
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE 6. INCOME TAXES (CONTINUED)
The approximate tax effects of temporary differences that give rise to deferred tax assets
(liabilities) as of June 30, 2009, are as follows:
|
|
|
|
|
|
|
June 30th |
|
|
|
2009 |
|
Depreciation and Amortization |
|
$ |
368,163 |
|
Tax loss carry forward |
|
|
199,365 |
|
Accrued Interest |
|
|
277,132 |
|
|
|
|
|
Total Net Deferred Tax Asset |
|
$ |
844,660 |
|
|
|
|
|
Deferred tax assets and liabilities are reflected on the balance sheet as of June 30, 2009, as
follows:
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
Net Short-Term Deferred Tax Asset |
|
$ |
277,132 |
|
Net Long-Term Deferred Tax Asset |
|
|
567,528 |
|
|
|
|
|
Net Deferred Tax Assets |
|
$ |
844,660 |
|
|
|
|
|
NOTE 7: COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in lawsuits and claims in the ordinary course of
business. Currently, neither the Company nor any of its subsidiaries are involved in any lawsuits
or claims.
NOTE 8. RELATED PARTY TRANSACTIONS
NOTE PAYABLE RELATED PARTY
ST, LLC had unsecured promissory notes to the majority stockholder totaling $736,766 and $968,948
as of June 30, 2009 and December 31, 2008, respectively, the proceeds of which have been used to
meet operating 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 any time 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.
24
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2009
NOTE PAYABLE RELATED PARTY (CONTINUED)
Accrued interest on these notes totaled $27,736 and $53,407 and is included in related party note
payable on the accompanying consolidated balance sheets as of June 30, 2009 and December 31, 2008,
respectively.
OTHER RELATED PARTY TRANSACTIONS
PCTSs president is also the majority owner of a company that provides materials related to the
Companys passive tracking technologies. The Company paid this vendor approximately $32,000 for the
three months ended June 30, 2009, for these materials. Amounts due this related party vendor
totaled $0 of June 30, 2009. This amount is included in accounts payable and accrued expenses on
the accompanying condensed consolidated balance sheets.
ACCOUNTS RECEIVABLE RELATED PARTY
Included in accounts receivable on the condensed consolidated balance sheets at June 30, 2009, is
$119,170 due from AVM, L.P., and $111,456 from BioSafe, LLC.
25
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
RESULTS OF OPERATIONS
Gross revenue, which is predominantly software licensing fees, increased approximately 80% in the
quarter ended June 30, 2009, compared to the quarter ended June 30, 2008, due to the completion of
implementation projects at certain hospitals.
The operating loss for the six months ended June 30, 2009, was approximately $2,215,000 compared to
an operating loss for the six months ended June 30, 2008, of $3,800,000. This reduction in
operating loss of approximately $1,585,000 was largely due to an increase in revenue from software
licensing fees, and reduction in professional services and amortization in the medical software
segment due to the completion in 2008 of major software revisions.
During the six months ended June 30, 2009, other income decreased by approximately $396,000,
primarily driven by the Companys interest in AVM, Ltd., whose income was approximately 66% less
than the same period of 2008. The income from the Companys interest in AVM Ltd., was income of
$646,473 in the six months ended June 30, 2009 compared to income of $1,898,392 during the
comparable period in 2008.
LIQUIDITY AND CAPITAL RESOURCES
The Companys cash position decreased $147,251 in the six months ended June 30, 2009, compared to
an increase of $63,438 during the comparable period in 2008. Net cash flow used in operations for
the six months ended June 30, 2009, was approximately $2.5 million, compared with cash used in
operations of approximately $2.6 million for the six months ended June 30, 2008. The primary
reason for the approximate $100,000 difference is a decrease in operating costs and the recognition
of deferred revenues associated with completed implementation contracts.
Net cash used by financing activities was approximately $1,112,000 for the six months ended June
30, 2009, compared to cash provided by financing activities of approximately $573,000 for the six
months ended June 30, 2008. Net cash provided by financing activities was primarily affected from
an investment from the majority shareholder in the amount of approximately $1,546,000 in 2009.
During the period ending June 30, 2009, approximately $434,000 was used to reduce related party
debt.
Net cash provided by investing activities relates primarily to the distribution from AVM and
BioSafe of approximately $1,229,000 for the six months ended June 30, 2009. This compares to net
cash provided by investing activities for the six months ended June 30, 2008, of approximately
$2,083,000. The distribution from AVM for the quarter ended June 30, 2009, was approximately
$184,000.
26
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.
Consulier cannot, with any degree of assurance, predict whether there will be a continuation of
the net return from our interest in partnerships for the six months ended June 30, 2009, nor
whether we will continue to be able to obtain additional funding when necessary. However,
Consulier does not expect that the rate of return will decline to the point that Consulier has
negative cash flow.
Consulier is planning to continue to invest in ST, LLC. The Company anticipates that the cash
which it will use to invest in ST, LLC will be available from the Companys interest in AVM and
BioSafe.
The Company does not trade derivative instruments. However, AVM enters into various transactions
involving derivatives and other off-balance sheet financial instruments. These derivatives and
off-balance sheet instruments are subject to varying degrees of market and credit risk.
OUTLOOK
Based on AVMs operations over the past five years, management expects continued return in 2009 on
its interest in AVM; however, there is no guarantee that the return in the second quarter of 2009
will be maintained throughout fiscal 2009.
Consulier International, Inc., continues to develop new retail and distribution outlets locally,
nationally and internationally. As a result, sales of that companys primary product, Captain
Cra-Z Hand and All Purpose Cleaner, have increased for the six months ended June 30, 2009, by 4%
over the comparable 2008 period.
In the second quarter, Patient Care Technology Systems (PCTS) signed a contract with Wake Forest
University Baptist Medical Center in Winston-Salem, NC for what will be the worlds largest
real-time location system (RTLS) implementation in a health care facility. PCTS will track assets
in an over 4.1 million square foot campus. PCTS also signed an asset tracking contract with the
13-hospital system, Aurora Health Care in Milwaukee, WI for an over 1.65 million square foot
deployment at Aurora St. Lukes Medical Center. PCTS successfully completed an implementation of
its emergency department automatic patient tracking system at Hoag Memorial Hospital Presbyterian
in Newport Beach, CA. During the quarter, PCTS exhibited and spoke at eight conferences, including
the internationally recognized HIMSS annual conference where three customers delivered
presentations on the return on investment benefits their departments have achieved using PCTS
workflow visibility solutions.
PCTS currently supports 29 completed installations of its core product line of electronic tracking
and documentation solutions with over 12 implementations in progress. Including its non-core
solutions, PCTS supports a total customer base of 69 implementations representing over 1.8 million
annual patient encounters.
The Companys income from its interest in BioSafe was $312,945 for the six months ended June 30,
2009, compared to income of $122,789 for the six months ended June 30, 2008.
27
Total revenue for the six months ended June 30, 2009, increased by 2% compared with the six
months ended June 30, 2008. The Company expects continued sales growth and continued success with
cost containment.
The company net income increased by 189% for the quarter ended June 30, 2009 over the same period
in the prior quarter due to the reduction in sales and administrative expenses. The Company is
confident that its profitability will continue with maintaining the current sales volume and the
cost containment success.
|
|
|
ITEM 3. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK |
The Company is a smaller reporting company, as defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, and is accordingly not required to provide the information
required by this Item.
|
|
|
ITEM 4. |
|
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, or the Evaluation Date, we carried out
an evaluation under the supervision and with the participation of our management, including our
Chief Executive Office and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended, or the Exchange Act). Because of its inherent limitations, our
internal control over financial reporting may not prevent material errors or fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. The continued effectiveness of our
internal control over financial reporting is subject to risks, including that the controls may
become inadequate because of changes in conditions or that the degree of compliance with our
policies or procedures may deteriorate. Based on the evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that, as of June 30, 2009, the disclosure controls were
effective in ensuring that the information required to be disclosed by us in reports filed under
the Exchange Act is recorded, processed, summarized and reported.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2009,
that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
28
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
|
|
|
ITEM 1. |
|
LEGAL PROCEEDINGS |
None.
The Company is a smaller reporting company, as defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, and is accordingly not required to provide the information
required by this Item.
|
|
|
ITEM 2. |
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS |
In April 2007, the Company adopted a plan to repurchase up to 50,000 shares of its common stock on
the open market at a price not to exceed $3.75 per share plus brokerage fees. In January 2008, the
Company adopted a second plan to repurchase up to an additional 50,000 shares of its common stock
on the open market at a price not to exceed $3.50 plus brokerage fees. Since April, 2007 through
June 30, 2009, the Company repurchased 91,437 shares of its common stock. There were no
repurchases of stock during the quarter ended June 30, 2009.
|
|
|
ITEM 3. |
|
DEFAULTS UPON SENIOR SECURITIES |
None.
|
|
|
ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None.
|
|
|
ITEM 5. |
|
OTHER INFORMATION |
None.
29
|
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 |
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: August 18, 2009 |
By: |
/s/ Alan R Simon
|
|
|
|
Alan R. Simon, Esq. |
|
|
|
Secretary and Treasurer (Principal
Financial and Accounting Officer) |
|
|
|
|
|
Date: August 18, 2009 |
By: |
/s/ Warren B. Mosler
|
|
|
|
Warren B. Mosler |
|
|
|
Chairman of the Board, President
& Chief Executive Officer (Principal
Executive Officer) |
|
|
31