<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
Commission file number 0-17756
---------------------------------------------------------
CONSULIER ENGINEERING, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2556878
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
169 Tequesta Drive - Suite 31E
Tequesta, FL 33469
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(407) 745-9149
- --------------------------------------------------------------------------------
(Issuer's telephone number, Including area code)
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if
changed since last report
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding for each of the issuer's classes of
common equity as of the last practical date:
AS OF AUGUST 5, 1997, THERE WERE 2,484,645 OUTSTANDING SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARE.
1
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
- ------------------------------ ----
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1997 (Unaudited)
and December 31, 1996 . . . . . . . . . . . . . . 3
Consolidated Statements of Income at
three and six month periods ended June 30,
1997 and 1996 (Unaudited) . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows at
six month periods ended June 30, 1997
and 1996 (Unaudited) . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . 8
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . . . . . 11
Item 3. Defaults upon Senior Securities . . . . . . . . . 11
Item 4. Submission of Matters to Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . 11
Item 5. Other information . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 13
- ---------
2
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CONSULIER ENGINEERING, INC. AND SUBSIDIARITES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
ASSETS 1997 1996
- ------------------------------- -------------- --------------
(UNAUDITED)
CURRENT:
Cash (Notes 1 and 5) $170,063 $557,639
Receivables (Note 2) 717,633 676,383
Receivables - related parties (Note 11(a)) 775,957 666,859
Notes receivable - related parties (Note 11(c)) 430,559 430,558
Inventories (Notes 1 and 3) 2,660,050 2,383,976
Other current assets 104,653 4,213
----------- ----------
TOTAL CURRENT ASSETS 4,858,915 4,719,628
Property and equipment, net of
accumulated depreciation of $599,200
in 1997 and $550,457 in 1996 1,386,679 237,190
Limited partnership interest (Notes 1 and 5) 2,136,295 2,124,148
Note receivable - related parties (Note 11(b)) 1,741,798 1,741,797
Patents and other assets 107,836 21,480
----------- ----------
$10,231,523 $8,844,243
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
LIABILITIES:
CURRENT:
Accounts payable and accruals $295,846 $188,663
Income taxes (Notes 1 and 8) 45,262 93,939
Notes payable - banks (Note 6(a)) 1,400,345 402,018
Notes payable - related parties (Note 6(c)) 282,597 282,597
----------- ----------
TOTAL CURRENT LIABILITIES 2,024,050 967,217
Bonds payable (Note 6(b)) 1,275,000 1,275,000
Deferred income taxes (Notes 1 and 8) 14,766 14,766
----------- ----------
TOTAL LIABILITIES 3,313,816 2,256,983
----------- ----------
STOCKHOLDERS' EQUITY: (NOTES 1 AND 9)
Common stock of $.01 par value:
Authorized -- 5,000,000 shares;
Issued -- 2,562,033 shares 25,620 25,620
Additional paid-in capital (Note 9(c)) 2,881,823 2,881,823
Retained earnings 4,253,393 3,887,767
----------- ----------
7,160,836 6,795,210
Less treasury stock at cost - 71,238 shares
in 1997 and 62,538 shares in 1996 (243,129) (207,950)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,917,707 6,587,260
----------- ----------
$10,231,523 $8,844,243
=========== ==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 923,609 $1,056,911 $1,767,716 $1,854,455
Commission income -- 915 -- 1,015
---------- ---------- ---------- ----------
923,609 1,057,826 1,767,716 1,855,470
---------- ---------- ---------- ----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 555,407 651,284 1,049,359 1,173,962
Selling, general and
administrative 432,785 304,010 816,443 569,678
Research and development expense 51,646 45,116 81,050 90,464
---------- ---------- ---------- ----------
1,039,838 1,000,410 1,946,852 1,834,104
---------- ---------- ---------- ----------
Operating (loss) income (116,229) 57,416 (179,136) 21,366
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Investment income - related party 350,747 347,562 650,648 725,359
Interest income - related parties 86,926 85,866 174,113 166,438
Interest expense - other (53,806) (24,731) (94,299) (49,464)
Other income $ 13,486 -- 20,236 4,000
---------- ---------- ---------- ----------
397,353 408,697 750,698 846,333
---------- ---------- ---------- ----------
Income before income taxes 281,124 466,113 571,562 867,699
Income taxes (Notes 1 and 8) 98,936 200,775 205,936 335,775
---------- ---------- ---------- ----------
Net income $ 182,188 $ 265,338 $ 365,626 $ 531,924
========== ========== ========== ==========
Net income per share $ 0.07 $ 0.11 $ 0.15 $ 0.21
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $365,626 $531,924
Adjustments to reconcile net income to net
cash used in operations:
Depreciation 48,744 37,027
Amortization 8,804 7,123
Investment income - related party (650,648) (725,359)
Investment in the High Risk Opportunities Fund L.P. -- (100,000)
Changes in operating assets and liabilities:
(Increase) in receivables and other current assets (148,573) (310,735)
(Increase) in inventories (276,074) (543,936)
(Increase) in other assets (95,162) --
Increase in accounts payable and accruals 107,183 86,848
(Decrease) increase in income taxes payable (48,677) 335,775
--------- --------
NET USED IN OPERATIONS (688,777) (681,333)
--------- --------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (1,198,231) (3,212)
Distributions from partnership interest 645,382 602,467
Loans to related parties (109,098) (49,988)
--------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES (661,947) 549,267
--------- --------
FINANCING ACTIVITIES:
Repayment of bank and other loans (1,673) (2,133)
Borrowings 1,000,000 275,000
Purchase of stock for the treasury and stock options
(Note 9(c)) (35,179) (36,944)
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 963,148 235,923
--------- --------
INCREASE (DECREASE) IN CASH (387,576) 103,857
CASH, BEGINNING OF PERIOD 557,639 321,920
--------- --------
CASH, END OF PERIOD $170,063 $425,777
========= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have been
included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1996.
The consolidated financial statements include Consulier Engineering, Inc. (the
"Company") and its wholly-owned subsidiaries, Southeast Automotive Acquisition
Corporation, C-6 Products, Inc. and Consulier Business Services, Inc. All
intercompany balances and transactions have been eliminated.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out
basis, or market. Major classes of inventory are summarized as follows:
June 30, December 31,
1997 1996
---------- ------------
Raw materials $ 47,545 $ 63,235
Work-in-process -- --
Finished goods 2,656,505 2,364,741
Obsolescence reserve (44,000) (44,000)
---------- -----------
$2,660,050 $ 2,383,976
========== ===========
6
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. LIMITED PARTNERSHIP INTEREST
The limited partnership interest consists of Consulier's investment in Adams,
Viner & Mosler, Ltd. ("AVM") and The High Risk Opportunities Fund L.P. ("HRO").
Investment income from HRO was $6,906 for the quarter ended June 30, 1997 and
$12,147 year to date. These investment's are accounted for under the equity
method. Following is a summary of the operations of AVM (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
------------------ -----------------
Revenues $10,122 $ 9,146 $19,251 $17,706
Costs and expenses 4,495 4,673 8,842 8,357
------- ------- ------- -------
Net income $ 5,627 $ 4,473 $10,409 $ 9,349
======= ======= ======= =======
Company's share of
net income $ 344 $ 337 $ 639 $ 713
======= ======= ======= =======
Consulier owned approximately 10% and 13% of AVM's capital as of June 30, 1997
and 1996, respectively. Based on capital and earnings distributions provided in
the partnership agreement, Consulier was allocated approximately 6% and 8% of
AVM's earnings at June 30, 1997 and 1996, respectively.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
RESULTS OF OPERATIONS
Consulier Engineering, Inc. ("CEI") experienced a decrease in net income for the
second quarter of 1997 and also year to date. For the second quarter, net income
decreased $83,150 or 31% to $182,188 from $265,338 in the second quarter of
1996. Year to date, net income decreased $166,298 or 31% to $365,626 from
$531,924 in 1996. Revenues decreased $134,217 in the second quarter of 1997
compared to 1996. Revenues year to date decreased $87,754. Engineering
consulting revenues declined along with a slowdown in sales of the company's
Southeast automotive parts wholesale subsidiary.
Research and Development expenditures increased 14% in the second quarter to
$51,646 from $45,116 in 1996. Year to date R&D expenditures are $81,050 in 1997
compared to $90,464 in 1996. One of the primary reasons R&D increased in the
second quarter was the formation of C-6 Products, Inc., a wholly owned
subsidiary of CEI, in May 1997. C-6 Products was formed to engineer, develop and
produce the Tool Topper(TM) and hand-held powered hacksaw.
Consolidated selling, general and administrative expenses increased 42% in the
second quarter from $304,010 to $432,785 and increased 43% from $569,678 to
$816,443 in the first six months of 1997 compared to 1996. The primary reason
these expenses increased was the expense associated with introducing a new
product, CRA-Z Soap Hand Cleaner, in the national market. Additional warehouse
rental space for increased inventory was added along with additional staff.
Also, printing of promotional materials and advertising in national publications
increased significantly. Also, C-6 Products had marketing and consulting
expenditures of $32,618 in the quarter.
On April 25, 1997, The company's subsidiary, Southeast Automotive closed on the
purchase of a 47,000 square foot industrial warehouse in Medley, Florida, for
$1,100,000. The building is currently being remodeled and will house Southeast's
tool manufacturing operations, the automotive distribution business and offices
for its financial and administrative personnel. Southeast will also lease
approximately 10,000 square feet to an unrelated corporation. It is anticipated
that at the end of August the move to the new facilities will begin to take
place.
8
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Investment income from Consulier's AVM limited partnership interest and HRO
interest was $650,648 in the first six months of 1997, a 10% decrease from 1996
income of $725,359. On October 1, 1996 Consulier reduced its partnership
interest in AVM by $292,403. The annualized return on investments was 61%
compared to 62% in the six months of last year.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1997, Consulier's cash and cash equivalents
decreased $387,576. Cash used in operating activities remained basically the
same for the first six months of 1997 compared to 1996. Cash used for investing
activities reflects the acquisition of the building in Medley, Florida. Cash
provided by financing activities primarily reflects the proceeds of the Chase
Manhattan credit line loan.
The ability of Consulier to continue to generate cash flow in excess of its
normal operating repuirements depends almost entirely on the performance of its
limited partnership investment in AVM. Consulier believes that it may require
additional financing to complete agreements which are currently in place. The
timing and amount of Consulier's additional financing needs will depend, among
other things, upon the timing of Tool Topper(TM) design work, review of drawings
for plastic molding feasibility,proper draft angles, ease of manufacture,
develop prototype models for design verification and marketing purposes and send
drawings to several major plastics molding companies for product price estimates
and estimated tooling costs and timing.
FUTURE OUTLOOK
On May 9, 1997, C-6 Products, Inc. (C-6), a wholly owned subsidiary of Consulier
Engineering, Inc. which was formed on May 16, 1997, entered into a patent sale
and royalty agreement, and, a marketing and consulting agreement with Gugel
Enterprise, Inc., (Gugel).
Under the terms of the agreements C-6 agreed to purchase from Gugel the rights,
title and interest in patents, accessories and other products related to the
patents. In exchange, Gugel, for a period of two years, commencing on May 1,
1997, shall receive, on a monthly basis, $16,309. Under certain conditions,
Gugel may renew the agreement, for a period of twelve months. However, if those
conditions are not met, the renewal will be for twelve months with a clause
allowing for a thirty day notice of intent to terminate by either party added.
In addition to the monthly payment, Gugel received a one time set-up fee of
$21,289.
9
<PAGE> 10
C-6 will manufacture or supply goods, equipment and/or services for those
patents which C-6 agreed to purchase and Gugel will act as exclusive sales
representative to certain types of customers in accordance with specific terms
and conditions, as set forth in the agreement.
The six patents are for tools and related products. Several are related to work
platform and tool holding attachments to ladders tentatively being called our
Tool Topper(TM) line of products. The balance of the patents are related to
powered hack saws powered by 110/220 volt AC, pneumatic and battery power
sources. A new Florida based corporation was established to develop,
manufacture, sell and distribute the patented products. This corporation is
called C-6 Products, Inc., and is a wholly owned subsidiary of Consulier
Engineering, Inc. Consulier has also taken the additional step of contracting an
exclusive sales agreement with Gugel Enterprise, Inc. for marketing services
necessary to service large retailers and wholesalers.
On June 6, 1997, Southeast Automotive Acquisition Corporation (Southeast),
entered into an agreement with Masters Marketing and Development, Inc.
(Masters), whereby Southeast would purchase, over the course of not less than
eleven months nor more than thirty three months, CRA-Z Soap in the amount of
$1,986,970, which price to be adjusted to reflect any increase in manufacturing
costs incurred by Masters.
The term of the agreement commenced in August 1997 with the first shipment of
CRA-Z Soap from Masters to Southeast.
This agreement, dated June 6, 1997, which supercedes all other agreements
between Southeast and Masters, increases the royalty that Southeast is to
receive for all sales of CRA-Z Soap other than to Southeast from 3.5% to 5% and
relieves Southeast from paying a previously agreed upon royalty for CRA-Z Soap
previously recorded in inventory.
Consulier has an option to purchase one million shares of restricted U.S.
Electricar ("Electricar") common stock at a price of $.50 per share. CEI is also
entitled to receive production royalties on sales of vehicles using the
composite monocoque construction technology. No royalties have been received to
date. Management is not certain that royalties will be paid since Electricar may
not have sufficient cash to meet its obligations.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of June 30, 1997, there were no legal proceedings pending against the Company
or its subsidiaries nor did the Company have any knowledge of any proceedings
which were being contemplated.
ITEM 2. CHANGES IN SECURITIES
During the second quarter of the fiscal year ending December 31, 1997 there were
no changes in the instruments defining the rights of the holders of any class of
registered securities, nor were the rights evidenced by any class of registered
securities limited or qualified by the issuance or modification of any other
class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the second quarter of the fiscal year ending December 31, 1997 there have
been no material defaults in the payment of principal, interest, or any other
material default with respect to any indebtedness, nor has there been any
arrearage in the payment of dividends of any class of stock.
ITEM 4. SUBMISSION OF MATTERS FOR A VOTE OF SECURITY
HOLDERS
During the second quarter of the fiscal year ending December 31, 1997, the
Company did not submit any matters to a vote of security holders.
ITEM 5. OTHER INFORMATION
The registrant has no other information to report which might otherwise be
reported under Form 8-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT DESCRIPTION
------- -----------
11 Statement regarding computation of
earnings per share
27 Financial Data Schedule (for SEC use only)
11
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(b) CURRENT REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three month period
ended June 30, 1997.
12
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SIGNATURE
In accordance with the requirements of the Exchange Act, Consulier Engineering,
Inc. has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CONSULIER ENGINEERING, INC.
---------------------------
(Registrant)
/s/ RALPH D. BUTLER
---------------------------
Date: August 12, 1997 Ralph D. Butler
Secretary/Treasurer
Chief Financial Officer
13
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EXHIBIT 11
CONSULIER ENGINEERING, INC.
COMPUTATION OF EARNINGS PER SHARE
PRIMARY AND FULLY DILUTED
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Net income $ 182,188 $ 265,338 $ 365,626 $ 531,924
========== ========== ========== ==========
Shares used in
computation:
Weighted average
number of
common shares
outstanding 2,496,834 2,502,046 2,496,834 2,502,046
Common stock
equivalents
from assumed
issuances using
the treasury
stock method -
Stock options and
warrants 29,717 19,069 31,399 18,063
--------- --------- --------- ---------
Primary and fully
diluted earnings
per share 2,526,551 2,521,077 2,528,233 2,520,109
========= ========= ========= =========
Primary and fully
diluted earnings
per share $ .07 $ .11 $ .15 $ .21
========= ========= ========= =========
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 170
<SECURITIES> 0
<RECEIVABLES> 1,924
<ALLOWANCES> 44
<INVENTORY> 2,660
<CURRENT-ASSETS> 4,859
<PP&E> 1,986
<DEPRECIATION> 599
<TOTAL-ASSETS> 10,232
<CURRENT-LIABILITIES> 2,024
<BONDS> 1,275
0
0
<COMMON> 26
<OTHER-SE> 6,892
<TOTAL-LIABILITY-AND-EQUITY> 10,232
<SALES> 1,768
<TOTAL-REVENUES> 1,768
<CGS> 1,049
<TOTAL-COSTS> 1,049
<OTHER-EXPENSES> 897
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 572
<INCOME-TAX> 206
<INCOME-CONTINUING> 366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 366
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
