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| CSLR > SEC Filings for CSLR > Form 10-K on 15-Apr-2009 | All Recent SEC Filings |
15-Apr-2009
Annual Report
FORWARD LOOKING STATEMENTS
This Report on Form 10-K 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 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 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 Subsidiaries' products and
services and competition from existing and new competitors and producers of
alternative products will impact our Subsidiaries' ability to penetrate or
expand our presence in new or growing markets.
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 could 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.
The following discussion is intended to help the reader understand the results
of operations and financial condition of the Company. The discussion is provided
as a supplement to, and should be read in conjunction with, our consolidated
financial statements and the accompanying notes.
CRITICAL ACCOUNTING POLICIES
Management believes the following critical accounting policies affect the
significant judgments and estimates used in the preparation of the consolidated
financial statements:
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.
Financial Reporting Release No. 60, as released by the U.S. Securities and
Exchange Commission, encourages all companies to include a discussion of
critical accounting policies or methods used in the preparation of consolidated
financial statements. Note 1 to the Company's consolidated financial statements
includes a summary of the significant accounting policies and methods used in
the preparation of Consulier's consolidated financial statements.
PARTNERSHIP AND LIMITED LIABILITY COMPANY INTERESTS
The Company's partnership and limited liability company interests are accounted
for using the equity method. Income or loss is allocated to Consulier based on
each entity's partnership or operating agreement.
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 includes new software license and software license updates
and product support revenues, and (2) services, which include consulting,
advanced 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 ("SOP") No. 97-2, Software
Revenue Recognition, issued by the American Institute of Certified Public
Accountants, the Company exercises judgment and use estimates in connection with
the determination of the amount of software and services revenues to be
recognized in each accounting period.
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 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 the Company's 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.
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 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.
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.
Sales of the Company's 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.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of consolidated 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 consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Estimates are used when
accounting for allowances for doubtful accounts, revenue reserves, inventory
reserves, depreciation and amortization, taxes, contingencies and impairment
allowances, if any. Such estimates are reviewed on an on-going basis and actual
results could differ from these estimates. Those differences may be material.
RESULTS OF OPERATIONS
CONSOLIDATED OPERATING RESULTS FROM CONTINUING OPERATIONS. During the twelve
months ended December 31, 2008, revenues increased from $2,177,865 to $2,911,975
over the prior twelve months as a result of an increase in revenue from PCTS.
Total operating costs and expenses decreased by $744,934, primarily as a result
of the reduced expenses of PCTS.
Installations of the PCTS core product line of electronic tracking and
documentation solutions now total 26. Including its non-core solutions, PCTS
supports a total customer base of 66, representing over 1,800,000 million annual
patient encounters.
The Company had net other income, consisting primarily of investment income and
net undistributed income of equity investees less interest expense totaling
$3,528,000 in 2008, compared to net other income of $2,823,655 during 2007. The
primary reason for the increase in net other income was the increase in the
Company's income from AVM.
AVM. Income from Consulier's interest in AVM was $3,425,442 in 2008, a 31%
increase from 2007 income of $2,621,375. These represent an annualized return of
220% and 141%, respectively, on Consulier's average investment during each of
the years ended December 31, 2008 and 2007.
BIOSAFE. The Company had net undistributed income from BioSafe of $120,228 in
2008, a decrease from the net undistributed income of $369,250 from its BioSafe
investment in 2007. This amount represents the Company's 40% interest in
BioSafe's net income of approximately $303,000 in 2008, compared to $923,235 in
2007. The Company received distributions from BioSafe of $167,590 during 2008
compared to $134,000 in 2007.
BioSafe's sales volume had increased by 2.3% over the previous year. Gross
profit percentage decreased during the same period by 3.5%. New products have
continued to be well received in the aquatic and home and garden market
segments, which closed the year at a 28% increase from 2007 sales.
OUTLOOK FOR 2009
Based on AVM's operations over the past five years, management expects continued
annualized returns in 2009 similar to prior years on its interest in AVM;
however, there is no guarantee that the expected annualized return will continue
in fiscal 2009 or any other period.
Consulier International, Inc. has been researching additional products to add to
its portfolio and plans to continue its research and new product development
during 2009 and to continue to develop new marketing materials and new retail
and distribution outlets locally, nationally and internationally for its Captain
Cra-Z Hand and All Purpose Cleaner throughout 2009. Consulier's web site has
become a source of on-line internet retail sales and continues to be a good lead
generator, with applications for distribution being received through the site
from countries all over the world.
In the fourth quarter, Patient Care Technology Systems (PCTS) successfully
implemented its automatic tracking system in the perioperative suite at
Carondelet St. Joseph's Hospital in Tucson and announced its ongoing use in the
emergency department at sister facility Carondelet St. Mary's Hospital.
Additional implementations of automatic tracking and emergency department
clinical documentation continue to progress for Q1 & Q2 2009 deployments. In
January, PCTS will complete its implementation to support invasive
cardio-vascular patient flow at Providence St. Vincent Medical Center (PSVMC) in
Portland. In Q4, PCTS signed an agreement with PSVMC to install full automatic
tracking capabilities in its radiology department. PCTS also signed a contract
to pilot its software in its first non-U.S. based installation - at a leading
UK-based health care facility. PCTS signed a co-marketing agreement with leading
metro-New York networking company, Computer Design and Integration. PCTS CEO,
Tony Marsico presented at an international conference on RFID/RTLS technologies
and PCTS staff and customers presented at regional events. PCTS and two of its
leading customers were highlighted in a Wall Street Journal article profiling
the growth of the automatic tracking category. PCTS hired a new Vice President
of Sales and Business Development, Jaime Ojeda, formerly of The 3M Company's
Track and Trace division. PCTS more than doubled the size of its principal
offices located in Charlotte, North Carolina by relocating locally.
PCTS currently supports 26 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 66 implementations representing over 1.8 million annual patient encounters.
The financial position of BioSafe remains strong. The majority of market
segments had decreased sales in 2008 compared with 2007, with the exceptions of
the sanitation and aquatics markets. These two markets showed significant growth
with increased sales over 125% each and associated costs rising only 43% and
24%, respectively. With continued efforts to find new applications in municipal
water and waste water and increasing their coverage, BioSafe expects continued
growth in these markets.
The year ended with net income decreasing over 63% from the prior year, but
still positive. This decrease was due to expenses increasing more than 41% over
the percentage increase in sales. BioSafe Systems feels that the repressed
economy played a major factor in this outcome. However, the company expects to
see a slight increase in sales and a return to historical net profit for 2009.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2008, Consulier had cash of $270,192, compared to $333,024, at
December 31, 2007, a decrease of $62,832. Net cash used by operations was
$4,792,154 in 2008, compared to net cash used in operations of $6,182,763 in
2007. The decrease in cash used in operations was a direct result of an increase
in the number of hospitals utilizing the Company's software, coupled with
management's focus on reducing operating cash flow.
Cash flow during 2008 provided by financing activities was $980,370, compared to
the 2007 cash flow provided by financing activities of $4,517,587. In 2008
related parties payable was reduced by $579,990.
Net cash provided by investing activities was $3,748,952 in 2008, compared to
net cash provided by investing activities of $1,756,772 in 2007. This was
primarily caused by an increase in partnership distributions from AVM and
BioSafe.
The ability of Consulier to continue to generate cash flow in excess of its
operating requirements depends, in the short term, almost entirely on the
performance of its interest in AVM, which Consulier cannot predict with
assurance. However, Consulier does not expect that its cash flow from AVM will
decline to the point where Consulier has negative cash flow.
Consulier is planning to continue to invest in ST, LLC and estimates an
additional investment of $5 million to $7 million during the next 3 years, at
which time the goal is for ST, LLC to be at the break-even point for its
operations. The Company anticipates that the cash which it will use to invest in
ST, LLC, will be available from the Company's interests 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.
IMPACT OF INFLATION AND CHANGING PRICES
Management does not consider the impact of inflation on Consulier's operations
to be material. The operating segments of its businesses had inventories of
$120,859 as of December 31, 2008. Considering the dollar value of inventory and
the gross profit margins generated by sales, moderate rates of inflation should
have little, if any, effect on the business. Product development expenditures
will be significantly reduced, but such expenditures should not be significantly
affected by inflation.
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