Edgar Filing: COACH INDUSTRIES GROUP INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarter ended March 31, 2004

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to___________

Commission file number: 0-19471

COACH INDUSTRIES GROUP, INC.

(Exact name of registrant as specified in its charter)

Nevada 91-1942841
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

9600 W. Sample Road, Suite 505, Coral Springs, Florida 33065
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (305) 531-1174

Copies of all communications, including all communications sent to the agent for
service, should be sent to:

Joseph I. Emas, Attorney at Law
1224 Washington Avenue
Miami Beach, Florida 33139
Telephone: 305.531.1174

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

TITLE SHARES OUTSTANDING AS OF APRIL 30, 2004
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Common Stock, $0.001 par value 9,785,531

COACH INDUSTRIES GROUP, INC.

Index

PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (unaudited)

Consolidated Condensed balance sheets at March 31, 2004 and December 31, 2003

Consolidated Condensed statements of operations for the Three Months ended March 31, 2004 and 2003

Consolidated Condensed statements of cash flows for the Three Months ended March
31, 2004 and 2003

Notes to consolidated condensed financial statements for the three months ended
March 31, 2004 and 2003

Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations

Item 3. Controls and Procedures

PART II OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K

Signatures

COACH INDUSTRIES GROUP, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

March 31, 2004 December 31, 2003
------------------ -------------------
ASSETS
CURRENT ASSETS:

Cash and cash equivalents......................................$ 4,226 $ 91,565
Accounts receivable, net....................................... 471,892 12,939
Supply inventory............................................... 1,847,417 1,310,483
Due from related party accounts receivable...................... 171,517 31,593
Prepaid expenses and other current assets...................... 81,380 57,680
------------------ -------------------
Total current assets................................... 2,576,432 1,504,260
------------------ -------------------
PROPERTY AND EQUIPMENT, net...................................... 858,601 901,865
GOODWILL......................................................... 2,678,896 2,678,896
------------------ -------------------
$ 6,113,929 $ 5,085,021
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses..........................$ 1,024,701 $ 367,669
Related party accounts payable................................. - 305,739
Deferred rent ................................................. 108,000 115,200
Warranty reserve............................................... 31,189 20,535
Customer deposits.............................................. 37,000 230,273
Accrued wages.................................................. 136,709 32,921
Note payable - related parties................................. 823,494 613,659
Notes payable.................................................. 292,440 -
------------------ -------------------
Total current liabilities.............................. 2,453,533 1,685,996
------------------ -------------------
OTHER LIABILITIES:
Related party payables - convertible 839,632 -
------------------ -------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock $0.001 par value; 50,000,000 shares
authorized; 9,785,531 shares issued and outstanding,
respectively..................................................... 9,785 9,785
Additional paid in capital....................................... 5,675,277 5,675,277
Retained earnings (accumulated deficit) restated effective
January 1, 2003.................................................. (2,144,298) (1,566,037)
Treasury stock, 1.6 million shares at cost....................... (720,000) (720,000)
------------------ -------------------
Total shareholders' equity............................. 2,820,764 3,399,025
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,113,929 $ 5,085,021
================== ===================

The accompanying notes are an integral part of these financial statements.

COACH INDUSTRIES GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended March 31,
-----------------------------
2004 2003
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REVENUES $ 4,183,964 $ -
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COST OF GOODS SOLD 3,284,315 -
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GROSS PROFIT 899,647 -

OPERATING EXPENSES:
General and
Administrative............................ 425,185 80,725
Research and development.................... 747,665 -
Sales and marketing ........................ 187,877 -
Rent........................................ 98,282 -
Interest expense............................ 18,898 3,159
(Gain) loss on reduction of trade
payable.................................. - (238,382)

------------ --------------
Total operating expenses, net of gain in
settlement of trade payable.................... 1,477,907 (154,498)
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(Gain) loss from continuing operations (578,260) 154,498
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Income from discontinued operations (including gain
on disposition of $135,100) ................. - 135,100
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Loss before income taxes....................... (578,260) 289,598
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Income taxes................................... - -
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NET (GAIN) LOSS................................ $ (578,260) $ 289,598
============ ==============
Basic and diluted net
(loss) per share :

Continuing operations.......................... $ (0.07) $ 0.74
Discontinued operations - 0.66
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Total........................................ $ (0.07) $ 1.40
============ ==============
Basic and diluted weighted average common shares
outstanding.................................... 8,185,531 206,212
============ ==============

The accompanying notes are an integral part of these financial statements.

COACH INDUSTRIES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

March 31,
2004 2003
-------------------- ------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................................... $ (578,260) $ 289,598
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization....................... 46,522 -
Warranty expense.................................... 14,111 -
Charges to warranty reserve......................... (3,457) -
(Gain) loss on settlement of trade payable.......... - (238,382)
Gain on disposal of discontinued operations......... - 135,100
Issuance of common stock for services rendered...... - 75,000
Changes in operating assets and liabilities:
Accounts receivable............................... (458,953) -
Accounts receivable - related parties............. (139,924) -
Inventory......................................... (536,934) -
Prepaid expenses and other........................ (23,701) -
Accounts payable and accrued expenses............. 760,819 408
Customer deposits................................. (193,273) -
Related party payable............................. 209,835 -
Other current liabilities......................... - (6,047)
-------------------- ------------------
Net cash provided by (used in) operating
Activities................................ (903,215) (14,523)
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets............................... (10,457) -
-------------------- ------------------
Net cash used in investing activities....... (10,457) -
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party payables - convertible.... 533,893 -
Borrowings from line of credit........................ 292,440 -
-------------------- ------------------
Net cash provided by (used in) financing
activities................................ 826,333 -
-------------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.... (87,339) (14,523)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......... 91,565 14,790
-------------------- ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 4,226 $ 267
==================== ==================

The accompanying notes are an integral part of these financial statements.

COACH INDUSTRIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2004 and 2003

1. Background

The Company is the currently the holding company for two manufacturers of
limousines, primarily for the livery industry which modify and custom fabricate
stock vehicles that are manufactured by automotive manufacturers, principally
General Motors and Ford Motor Company. During 2003, the Company had two wholly
owned subsidiaries: Commercial Transportation Manufacturing Corporation
("CTMC"), located at the in Bohemia, New York and Springfield Coach Industries
Corporation, Inc. ("SCB"), located in Springfield, Missouri. The Company's
long-term strategy is to develop an array of product offerings, including
Financial Services, to its existing customers and to expand its current customer
base. The Company will actively pursue acquisition candidates that can support
the expansion of other product offerings.

The Company consummated the following transactions in order to implement the
January, 2003 Board of Director's committed plan to restructure the Company and
seek a merger candidate.

During January 2003, the Company partially settled a note payable to a related
party whereby it issued 3,655 shares of common stock in consideration for a
$20,000 reduction in the principal balance (and related accrued interest). The
settlement of this note payable resulted in a gain of $17,076 based upon the
market value of the common stock at the date issued and was classified as gain
on settlement of notes and accounts payable during the three months ended March
31, 2003.

On January 3, 2003 the Company also entered into an asset sale agreement, which
sold the following assets of the Company to Summit Ridge Technologies Group, LLC
(an unaffiliated entity): EarlyBirdDomain.com domain, database for
EarlyBirdDomain.com including all subscribers (active, inactive, and
unsubscribed), and EarlyBirdDomain.com clients and customers lists.

During January 2003, the Company settled a note payable to a related party
whereby it issued 20,155 shares of common stock in consideration for the full
and complete settlement of the outstanding principal balance (and related
accrued interest aggregating $33,795). The settlement of this note payable
resulted in a gain of $109,541 based upon the market value of the common stock
at the date issued and was classified as gain on settlement of notes and
accounts payable in the Statement of Operations during the three months ended
March 31, 2003.

During January 2003, the Company settled a note payable to a trade creditor
whereby it issued 4,820 shares of common stock held in treasury and 3,391 shares
of common stock in consideration for the full and complete settlement of the
outstanding note balance (and related accrued interest). The settlement of this
note payable resulted in a gain of $56,970 based upon the market value of the
common stock at the date issued and was classified as gain on settlement of
notes and accounts payable in the Statement of Operations for the three months
ended March 31, 2003.

In March 2003, the Company increased the shares available to be issued by
62,500. The Company issued common stock to employees, consultants and Board
Members for services rendered to the Company. During March 2003, the Company
issued 62,500 shares to consultants for administrative, corporate accounting and
public relations services in lieu of cash compensation totaling $75,000 which
was reflected in the statement of operations for the three months ended March
31, 2003.

As of March 31, 2003, the Company has disposed of all of its operating
assets/businesses and ceased all operating activities. The financial statements
disclosed in the Company's filings with the Securities and Exchange Commission
reflect the businesses sold as discontinued operations.

On August 26, 2003, the Company effected a 1-for-4 stock split of each
outstanding share of common stock, which is reflected on a retroactive basis.

On September 1, 2003, CTMC, a New York corporation specializing the
manufacturing and selling of limousines, was merged into Coach Industries Group,
Inc. The Company issued 3.0 million shares of common stock valued at $1.35
million as of August 26, 2003.

Effective December 31, 2003, the Company, through its wholly owned subsidiary,
Springfield Coach Industries Corporation, Inc., a Missouri corporation,
consummated the purchase of substantially all of the assets of Springfield Coach
Builders, Inc. The Company issued 2.0 million shares of common stock valued at
$2.7 million as of November 3, 2003.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying financial statements include the accounts of Coach, and its
wholly owned subsidiaries CTMC and SCB. All significant inter-company balances
and transactions have been eliminated.

As of March 31, 2003, the Company had disposed of all of its operating
assets/businesses and ceased all operating activities. The accompanying
financial statements reflect the businesses sold as discontinued operations. On
September 1, 2003, the Company became the holding company for a manufacturer of
limousines, primarily for the livery industry by modifying and custom
fabricating stock vehicles that are manufactured by automotive manufacturers.
The accompanying financial statements reflect the new business of the Company.

Interim Financial Statements

The interim financial statements presented herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. The interim financial statements should be read in
conjunction with the Company's annual financial statements, notes and accounting
policies included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2003 as filed with the SEC. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) which are
necessary to provide a fair presentation of financial position as of March 31,
2004 and the related operating results and cash flows for the interim period
presented have been made. The results of operations, for the period presented
are not necessarily indicative of the results to be expected for the year.

Research and Development Costs

Generally accepted accounting principles state that costs that provide no
discernible future benefits, or allocating costs on the basis of association
with revenues or among several accounting periods that serve no useful
purpose, should be charged to expense in the period occurred. SFAS No. 2
"Accounting for Research and Development Costs" requires that certain costs be
charged to current operations including, but not limited to: salaries and
benefits; contract labor; consulting and professional fees; depreciation;
repairs and maintenance on operational assets used in the production of
prototypes; testing and modifying product and service capabilities and design;
and, other similar costs. The Company has expensed all research and
development costs for the three months ended March 31, 2004 with no
corresponding expense for the period ended March 31, 2003.

3. RELATED PARTY TRANSACTIONS

The Company is a party to a non-cancelable operating lease pertaining to the
office and plant facilities. The lease term, as amended, expires in December
2007 with payments commencing in July 2003. The lease is to a related party.

Rental expense under all operating leases totaled approximately $98,282 and $0
for the three months ended March 31, 2004 and 2003, respectively, that includes
amortization of approximately $7,200 and $0 for the three months ended March 31,
2004, respectively of deferred rental expense.

As of March 31, 2004 and December 31, 2003 the Company had receivable balances
for approximately $171,517 and $31,593 due from related parties, respectively.

At March 31, 2004 and December 31, 2003, the Company had a note payable to a
related party outstanding for $823,494 and $613,659. This balance relates
directly to chassis purchases that are outstanding on the related party floor
plan with an unaffiliated third party. Interest on the note payable is due when
paid by the related party. The unaffiliated line of credit does not charge
interest to the line of credit for 90 days, thus no interest is incurred by the
Company unless the chassis is outstanding longer than 90 days.

The Company has related party payables at December 31, 2003 to a related party
of $305,739. This balance, as well as additional cash funding during the period
were reclassified to convertible debt as of March 31, 2004.

The Company has related party payables - convertible at March 31, 2004 and
December 31, 2003 to a related party of $839,632 and zero, respectively. These
balances outstanding were for funding operating shortfalls as well as expenses
associated with Coach. In an effort to conserve cash resources the outstanding
balances were transferred to convertible debt as of March 31, 2004. The Company
intends to convert these balances outstanding into shares of common stock during
the second quarter of 2004.

On January 3, 2003 the Company entered into an asset sale agreement, which sold
the certain assets of the Company to Solutions.com, LLC, an entity controlled by
its former director. The net book value of the net assets sold approximated
$8,000 as of the date of sale. Pursuant to the asset sale agreement the Company
agreed to transfer such assets in settlement of a portion of the then
outstanding principal balance of $179,359 together with all accrued but unpaid
interest. The settlement of this note payable resulted in a gain of $135,100
based upon the market value of the common stock at the date issued and was
classified as gain on disposal of discontinued operations in the Statement of
Operations for the three months ended March 31, 2003.

Concurrent with this transaction, the Company's previous president also agreed
to accept the issuance of 42,589 shares held in treasury and 47,411 shares of
common stock to settle wages payable resulted in a gain of $54,795 based upon
the market value of the common stock at the date issued and was classified as
gain on settlement of notes and accounts payable in the Statement of Operations
for the three months ended March 31, 2003.In addition, rental payments owed by
the Company for its use of web hosting and office space were canceled.

4. Notes Payable and Line of Credit

The Company has established a floor plan line of credit with a local dealership
in New York. The dealership funds the purchase of chassis inventory, interest
free for 90 days. The balance outstanding at March 31, 2004 was $292,440.
Currently all chassis outstanding on the line of credit are under 90 days, thus
no interest has accrued for these chassis.

The $10,000 note payable-related party represents unsecured loans incurred for
working capital purposes and bears interest at 11.5%. The original maturity date
of the note was September 30, 2001 and was due on demand. During January 2003,
the Company partially settled this note whereby it issued 3,655 shares of common
stock in consideration for a $20,000 reduction in the principal balance (and
related accrued interest). The settlement of this note payable resulted in a
gain of $17,076 based upon the market value of the common stock at the date
issued and was classified as a gain on settlement of notes and accounts payable
in the Statement of Operations for the three months ended March 31, 2003.

The $40,000 note payable represents loans incurred for unpaid wages and cash
advances to the Company. During January 2003, the Company partially settled this
note whereby it issued 45,323 shares of common stock in consideration for a
$173,564 reduction in the principal balance (and related accrued interest) and
the transfer of certain Company assets with a carrying value of $8,000. The
settlement of this note payable resulted in a gain of $135,100 based upon the
market value of the common stock at the date issued and was classified as gain
on disposal of discontinued operations for the three months ended March 31,
2003.

5. Subsequent Event

As of August 26, 2003, the Company reserved 1.6 million shares, valued at $0.45
cents per share, for the purpose of using as agreed consideration for a
potential transaction. The shares shall vest on the effective date of the
aforementioned potential transaction. The shares are issued and classified as
treasury stock as of March 31, 2004 and December 31, 2003. On May 7, 2004, the
Company signed a letter of intent to acquire all the common stock of Go
Commercial Leasing Corporation. The deal is valued at $720,000.

Forward-Looking Statements
--------------------------

The following discussion contains, in addition to historical information,
forward-looking statements regarding Coach Industries, Group, Inc. (the
"Company" or "CIGI"), that involve risks and uncertainties. The Company's actual
results could differ materially. For this purpose, any statements contained in
this Report that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "believe," "anticipate," "intend,"
"could," "estimate," or "continue" or the negative or other variations thereof
or comparable terminology are intended to identify forward-looking statements.
Factors that could cause or contribute to such difference include, but not
limited to, history of operating losses and accumulated deficit; possible need
for additional financing; competition; dependence on management; risks related
to proprietary rights; government regulation; and other factors discussed in
this report and the Company's other filings with the Securities and Exchange
Commission.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Summary Overview and Overall Business Strategy
----------------------------------------------

Coach Industries Group, Inc. Overview and Business Strategy

The Company is the currently the holding company for two manufacturers of
limousines, primarily for the livery industry which modify and custom fabricate
stock vehicles that are manufactured by automotive manufacturers, principally
General Motors and Ford Motor Company. During 2003, the Company had two wholly
owned subsidiaries: Commercial Transportation Manufacturing Corporation
("CTMC"), located at the in Bohemia, New York and Springfield Coach Industries
Corporation, Inc. ("SCB"), located in Springfield, Missouri. In August 2003
Company changed the name of the Company to Coach Industries Group, Inc.

The Company acquired SCB effective December 31, 2003 and at that time determined
that the production of the various vehicles needed to be segregated as to
eliminate any the duplication of production processes at both facilities. The
CTMC facility began working on prototypes for four models, which were a General
Motors Hummer, Cadillac Escalade, Chrysler PT Cruiser and the Sprinter Bus. At
the same time, the SCB facility began modifying their production process to
improve and combine the engineering features of the prior SCB models and the
CTMC models to present to the marketplace three new models; the Lincoln
Navigator, the Ford Excursion and the Lincoln Town Car Reality Series.

The Company's long-term strategy is to develop an array of product offerings,
including Financial Services, to its existing customers and to expand its
current customer base. The Company will actively pursue acquisition candidates
that can support the expansion of the product offerings.

The business strategy of the Company is to further diversify product lines and
develop innovative design, engineering and manufacturing expertise in order to
be the best value manufacturer of custom vehicle products in the marketplace.
The Company sells its custom limousine chassis to limousine companies
principally in New York, Florida and throughout the United States. The Company
markets its limousines through tradeshows, print and direct marketing to
limousine operators. The Company is focusing on certain custom niches within its
geographical markets and believes that opportunities for growth remain strong
for modified limousine chassis.

The Company has an innovative team focused on building lasting relationships
with its customers. This is accomplished by striving to deliver vehicles and
services that management believes will inspire customer enthusiasm. The Company
believes that it can best carry out its long-term business plan and obtain
optimal financial flexibility by using a combination of borrowings under the
Company's credit facilities, as well as internally or externally generated
equity capital, as sources of expansion capital.

THREETHREE MONTHS ENDED MARCH 31, 2004
COMPARED TO THREETHREE MONTHS ENDED MARCH 31, 2003

Gross Revenues and Costs of Operations

Gross revenues. Gross revenues increased from zero for the three month period
ended March 31, 2003 to $4.2 million for the three month period ended March 31,
2004, an increase of $4.2 million, primarily as a result of the Company
disposing of all of its operating assets/businesses and discontinuing all
operating activities during first quarter of 2003. The Company acquired CTMC
effective September 1, 2003 and SCB effective December 31, 2003. Gross revenues
for the period reflect revenues for both CTMC and SCB for the three months ended
March 31, 2004.

Costs of goods sold. Costs of goods sold increased from zero for the three
months ended March 31, 2003 to $3.3 million for the three months ended March 31,
2004, an increase of $3.3 million, primarily as a result of the Company
disposing of all of its operating assets/businesses and discontinuing all
operating activities during the first quarter of 2003. The Company acquired CTMC
effective September 1, 2003 and SCB effective December 31, 2003. The costs of
goods sold for the three months ended March 31, 2004 reflect costs for both
operations.

OPERATING EXPENSES. Operating expenses increased from $83,884 for the three
months ended March 31, 2003 to $1.5 million for the three months ended March 31,
2004, an increase of $1.4 million.

In addition, the Company recognized a gain on reduction of trade payable for the
three months ended March 31, 2003 of $238,392, with no corresponding gain for
the same period in 2004.

General and administrative expenses increased from $80,725 for the three months
ended March 31, 2003 to $425,188 for the three months ended March 31, 2004, an
increase of $344,463, primarily due to the acquisition of CTMC and SCB during
2003 and the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities and expenditures related to the Company's
business plan of restructuring the Company and securing a merger candidate
during the first quarter of 2003.

RESEARCH AND DEVELOPMENT. Research and development expenses for the three months
ended March 31, 2004 were $747,665 compared to zero for the comparable period in
2003. The Company acquired SCB effective December 31, 2003 and at that time
determined that the production of the various vehicles needed to be segregated
as to eliminate any the duplication of production processes at both facilities.
The CTMC facility began working on prototypes for four models, which were a
General Motors Hummer, Cadillac Escalade, Chrysler PT Cruiser and the Sprinter
Bus. At the same time, the SCB facility began modifying their production process
to improve and combine the engineering features of the prior SCB models and the
CTMC models to present to the marketplace three new models; the Lincoln
Navigator, the Ford Excursion and the Lincoln Town Car Reality Series. The
associated salaries, materials and costs associated with this process were
included in this category.

Sales and marketing expenses for the three months ended March 31, 2004 were
$187,877 compared to zero for the corresponding period in 2003. Both CTMC and
SCB attend an annual trade show for limousine manufactures and operators. The
sales and marketing expenses attributed to the trade show were approximately
$100,000 and the remaining expenses were attributed to commissions paid on
limousine sales.

Rent expense for the three months ended March 31, 2004 was $92,282 compared to
zero for the same three months ended March 31, 2003. Rent expense is
specifically attributed to the plant facilities in Springfield, Missouri and
Bohemia, New York.

Interest expense for the three months ended March 31, 2004 was $18,898 compared
to $3,159 for the same period in 2003. Interest expense is directly attributed
to the floor plan facilities and floor plan facilities due a related party. The
interest represents interest paid on these facilities for limousine chassis.

INCOME FROM DISCONTINUED OPERATIONS. Income from discontinued operations
decreased from $135,100 for the three months ended March 31, 2003 to zero for
the three months ended March 31, 2004, a decrease of $135,100, primarily due to
the Company completing its plan of disposal in 2002 and early 2003.

NET INCOME (LOSS). Net loss increased from net income of $289,598 for the three
months ended March 31, 2003 to a net loss of $578,262 for the three months ended
March 31, 2004, primarily due to the operations of CTMC and SCB for the period.
Both CTMC and SCB were in full operation for the three months ended March 31,
2004. The Company had disposed of all its assets and reduced its overhead during
2002 and first quarter 2003.

LIQUIDITY AND CAPITAL RESOURCES. The Company has historically satisfied its cash
requirements primarily through private placements of restricted stock, the
issuance of debt securities, issuance of common stock to satisfy balances
currently outstanding and cash funding from related parties, as required.

The Company anticipates that its cash requirements will continue to increase as
it continues to expend substantial resources to build its infrastructure,
develop its business plan and establish its sales and marketing network
operations, customer support and administrative organizations. The Company
currently anticipates that its available cash resources and cash generated from
operations will be sufficient to meet its presently anticipated working capital
and capital expenditure requirements for the next twelve months. If the Company
is unable to maintain profitability, or seeks further expansion, additional
funding will become necessary. No assurances can be given that either equity or
debt financing will be available.

As of August 26, 2003, the Company reserved 1.6 million shares, valued at .45
cents per share, for the purpose of using as agreed consideration for a
potential transaction. The shares shall vest on the effective date of the
aforementioned potential transaction.

Related party payable - convertible increased from zero at December 31, 2003 to
$839,632 at March 31, 2004. The increase relates to the reclassification of the
$305,739 outstanding at December 31, 2003 from related party payable to
convertible debt. The additional increase in the balance relates to cash funding
needs at CTMC and SCB as well as expenses funded by the related party for
operating expenses at the parent level. These balances are anticipated to be
converted in the second quarter of 2004.

Current Assets
--------------

CASH AND CASH EQUIVALENTS. Cash and cash equivalents decreased from $91,565 at
December 31, 2003 to $4,226 at March 31, 2004, a decrease of $87,339, primarily
as a result of the Company acquiring CTMC effective September 1, 2003.

TOTAL CURRENT ASSETS. Total current assets increased from $1.5 million at
December 31, 2003 to $2.6 million at March 31, 2004, an increase of $1.1
million, primarily as a result of the Company acquisition of CTMC and SCB. The
Company has increased operations during the three months ended March 31, 2004,
thus increasing accounts receivable, net to $471,892, accounts receivable -
related parties to $171,517 and supply inventory to $1.8 million compared to
December 31, 2003 of $12,939, $31,593 and $1.3 million, respectively. Revenues
for the three months ended March 31, 2004 were $4.2 million compared to $471,762
for the year ended December 31, 2003, thus increasing the receivable and
inventory balances.

Liabilities
-----------

ACCRUED WAGES. Accrued wages increased from $32,921 at December 31, 2003 to
$136,709 at March 31, 2004, an increase of $103,788, primarily as a result of
the Company disposing of all of its operating assets/businesses and
discontinuing all operating activities as of and settling all outstanding
employment agreement obligations, offset by accrued wages relating to the
operations of CTMC.

ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES. Accounts payable increased from
$367,670 at December 31, 2003 to $1.0 million at March 31, 2004, an increase of
$657,030, primarily relating to the operations of CTMC and SCB. Both of these
companies are fully operational for the three months ended March 31, 2004.

CUSTOMER DEPOSITS. Customer deposits decreased from $230,273 at December 31,
2003 to $37,000 at March 31, 2004. The customer deposits reflected the full
costs of those cars that were not delivered until January 2004, primarily at
CTMC.

RELATED PARTY PAYABLE. Related party payable increased from $305,739 at December
31, 2003 to zero at March 31, 2004, an decrease of $305,739. The decrease
related to the reclassification of this balance to related party payable -
convertible.

NOTES PAYABLE-RELATED PARTIES. Notes payable-related parties increased from
$613,659 at December 31, 2003 to $823,494 at March 31, 2004, an increase of
$209,835, primarily relating to the acquisition of SCB. The notes payable -
related parties is funding the purchase of chassis for the business.

LINE OF CREDIT. The line of credit increased from zero at December 31, 2003 to
$292,440 at March 31, 2004, an increase of $292,440, primarily related to a line
of credit established by CTMC with a local dealership for the purchase of
chassis for production.

TOTAL CURRENT LIABILITIES. Total current liabilities increased from $1.7 million
at December 31, 2003 to $2.5 million at March 31, 2004, an increase of $0.8
million. The increase is primarily attributed to operations of both CTMC and
SCB.

RELATED PARTY PAYABLE - convertible. Related party payable - convertible
increased from zero at December 31, 2003 to $839,632 at March 31, 2004. The
increase relates to the reclassification of the $305,739 outstanding at December
31, 2003 from related party payable to convertible debt. The additional increase
in the balance relates to cash funding needs at CTMC and SCB as well as expenses
funded by the related party for operating expenses at the parent level. These
balances are anticipated to be converted in the second quarter of 2004.

ACCOUNTING POLICIES SUBJECT TO ESTIMATION AND JUDGMENT

Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. When preparing our financial statements, we make estimates and
judgments that affect the reported amounts on our balance sheets and income
statements, and our related disclosure about contingent assets and liabilities.
We continually evaluate our estimates, including those related to revenue,
allowance for doubtful accounts, reserves for income taxes, and litigation. We
base our estimates on historical experience and on various other assumptions,
which we believe to be reasonable in order to form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily ascertained from other sources. Actual results may deviate from these
estimates if alternative assumptions or condition are used.

ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried
out an evaluation of the effectiveness of the design and operation of its
disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. This
evaluation was done under the supervision and with the participation of the
Company's Principal Executive Officer and Principal Financial Officer. Based
upon that evaluation, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in gathering, analyzing and disclosing information needed to satisfy
the Company's disclosure obligations under the Exchange Act.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities None

Item 3. Defaults upon Senior Securities
None

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

A. Exhibits:

31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act.

31.2 Certification of Principal Financial and Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1 Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act.

32.2 Certification of Principal Financial and Accounting Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act.

B. Reports on Form 8-K

No other reports on Form 8-K were filed during the quarter ended March 31, 2004,
for which this report is filed.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Coach Industries Group, Inc.

May 14, 2004 /s/ Francis O'Donnell
----------------------------------
Francis O'Donnell,
Chief Executive Officer
(PRINCIPAL EXECUTIVE OFFICER)

May 14, 2004 /s/ Francis O'Donnell
-----------------------------------
Francis O'Donnell,
Chief Accounting Officer
(PRINCIPAL ACCOUNTING OFFICER)