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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE
OCTOBER 7, 1996]
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-17756
Consulier Engineering, Inc.
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(Name of small business issuer in its charter)
Florida 59-2556878
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
169 Tequesta Drive, Suite 31E
Tequesta, FL 33469
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(Address of Principal Executive Offices) (Zip Code)
(561) 745-9149
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(Registrant's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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None None
Securities registered under section 12(g) of the Exchange Act:
Common Stock and Redeemable Warrants
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(Title of Class)
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
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The Issuer's revenues for the fiscal year ended December 31, 1996 totaled
$3,523,793.
As of March 20, 1997, there were 2,499,495 outstanding shares of common stock,
par value $0.01 per share. The aggregate market value of the voting stock of the
registrant held by non-affiliates of the registrant on March 20, 1997 based on
the average bid and asked price of such date was $2,189,097.
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Consulier Engineering, Inc.
1996 Form 10-KSB Annual Report
Table of Contents
<TABLE>
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PART I Page
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<S> <C> <C>
Item 1. Description of Business . . . . . . . . . 3
Item 2. Description of Property . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . 11
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters . . . . . . . . . . 12
Item 6. Management's Discussion and Analysis or Plan
of Operation . . . . . . . . . . . 12
Item 7. Financial Statements. . . . . . . . . . 15
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . 15
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act . . . . . . . . . 16
Item 10. Executive Compensation . . . . . . . . . 17
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . 18
Item 12. Certain Relationships and Related Transactions . . . 20
Item 13. Exhibits and Reports on Form 8-K . . . . . . 21
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Consulier Engineering, Inc. ("Consulier") was incorporated in June 1985 in
Florida. Its principal businesses are the distribution of automobile and truck
parts in the automotive and truck after-market, the development of advanced
engineering products, and investment activities. The automobile and truck parts
distribution business is conducted through a wholly-owned subsidiary, Southeast
Automotive Acquisition Corporation ("Southeast"), which is based in Miami,
Florida. Consulier's Corporate headquarters are located in Tequesta, Florida.
From inception until March 31, 1990, Consulier was engaged in research and
development and manufacturing activities relating to a high performance sports
car, the Consulier GTP. These operations were not profitable. In April 1990,
Consulier sold this business at net book value to Mosler Auto Care Center, Inc.
("MACC"), a corporation wholly owned by Warren B. Mosler ("Mosler"), Consulier's
Chairman and majority stockholder. Consulier retained the right to repurchase
this business at fair value for a five year period. On October 31, 1993, MACC
sold the business for restricted stock and production royalty rights. In
exchange for waiving its repurchase option, Consulier was granted an option to
purchase the restricted stock, and receive all royalty payments (see
"Description of Business Segments" "Discontinued Automobile Manufacturing
Segment").
On April 1, 1990, Consulier purchased a $3,000,000 limited partnership interest
in Adams, Viner & Mosler, Ltd. ("AVM"), a government securities broker/dealer
located in West Palm Beach, Florida. This purchase was financed through a
$3,000,000 loan from Mosler, who was a founder of AVM, and is a general partner
of AVM Associates, the general partner of AVM.
Consulier acquired Southeast Automotive Parts, Inc. of Dade ("Southeast
Automotive") on April 1, 1991 through a merger of Southeast Automotive into
Southeast Automotive Acquisition Corporation ("Southeast"). Prior to this
acquisition, Southeast Automotive was 50% owned by Mosler.
DESCRIPTION OF BUSINESS SEGMENTS
(1) AUTOMOTIVE AND TRUCK PARTS DISTRIBUTION
BACKGROUND
Southeast is located in Miami, Florida. It is engaged in research and
development, manufacturing and distribution to the automotive and truck
wholesale markets.
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PRODUCTS
Southeast's primary products are transmission, engine and torque strut mounts.
The Company sells approximately two hundred different after-market mounts for
domestic and imported vehicles. Twenty new products were developed in 1996, and
an additional twenty to thirty new products are planned for development in 1997.
Development efforts are directed towards developing mount or strut products
which replace two or more original equipment products. For example, the
Southeast 2000 mount replaces nine existing General Motors' mounts used in
eighty-five percent of GM's rear wheel drive vehicles produced from 1954 to
1994.
Other products include over one hundred sixty automotive flywheels and
flexplates, specialty tools and bushings for transmission repair, automotive
springs, speedometer gears, accelerator detente and clutch cables, linkage
parts, thrust washers, electrical connector plugs and sensor switches, specialty
machine shop products and over seventy plastic parts related to transmissions.
Southeast is also developing foreign flywheel applications, and is beginning to
manufacture aluminum parts for transmission and other automotive applications
using three and four axis CNC machining.
Mounts are imported from one primary source and are manufactured to Southeast's
specifications, which meet or exceed original equipment specifications. Due to
shipping schedules, Southeast attempts to maintain a three months supply of
mounts in inventory to fully service customers.
Flywheels are purchased from American sources, and, therefore, quantities held
in inventory are maintained at minimum levels. The specialty tools for
transmission repair are manufactured by Southeast at its Miami facilities. Other
products are purchased from a variety of domestic and foreign sources, or are
manufactured by Southeast.
Southeast Automotive is currently a distributor of CRA-Z Soap Hand Cleaner.
CRA-Z Soap is the next generation in hand cleaners. It is a unique heavy duty
bar with the ability to remove both surface grime and deeply embedded stains
without resorting to petroleum based solvents or skin irritating pumice common
to all other hand cleaners. The Company marketing effort will be to target
mechanics, spray painters, shop personnel, printers, and all other craftsmen.
Southeast's mount supplier increased prices by approximately 10% early in 1995.
This represents the first such price increase in seven years. Other prices have
remained fairly constant during 1996 and management does not anticipate any
other significant price increases in 1997.
SALES AND MARKETING
Automotive parts are distributed primarily to specialty transmission parts
distributors located throughout the United States and in several foreign
countries. Southeast competes with other importer/distributors and original
equipment manufacturers and estimates that it has approximately 40% of the
automatic transmission mount after-market and 3-5% of the general automotive
mount market.
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In the sale of its automotive parts products, Southeast competes with a number
of other automotive after-market suppliers, many of which are larger than
Southeast in terms of sales, financial resources, product development facilities
and channels of distribution. The sale of automotive parts is extremely
competitive, with prices and warranty provisions comparable throughout the
industry. Management believes it can compete profitably in various product
niches. As of March 1, 1997, Southeast had approximately $161,000 in sales
backlog. Southeast completed the development of a new 120 page mount catalog for
distributors in March 1995 which was updated in 1996. Distributors are now able
to provide this catalog to their customers under their own name. Part numbers
have been simplified and to the extent possible made generic.
RESEARCH AND DEVELOPMENT EXPENDITURES
Product development costs for Southeast's transmission mounts are being funded
primarily by the supplier. Approximately $30,000 per year is spent on tooling
for plastic parts. Other research and development expenditures, including design
of specialty tools, are not significant.
EMPLOYEES
Southeast has fifteen employees. Four employees are involved in manufacturing,
two in shipping and receiving, and nine in marketing and administration.
2) INVESTMENTS SEGMENT
INVESTMENT IN ADAMS, VINER & MOSLER, LTD.
In April 1990, the Board of Directors of Consulier approved a resolution
authorizing a $3,000,000 loan from Mosler and the simultaneous reinvestment of
the entire proceeds of the loan in a limited partnership interest in Adams,
Viner & Mosler, Ltd. ("AVM"). The loan and limited partnership investment
transactions were made effective April 1, 1990. The loan was reduced during 1990
and 1991 and fully retired during 1992.
AVM, a broker/dealer in U.S. Government securities formed in October 1983, is an
Illinois limited partnership located in West Palm Beach, Florida. AVM is
registered with the Commodity Futures Trading Commission as a Futures Commission
Merchant (FCM) and conducts its FCM business with other broker/dealers on a
fully disclosed basis. AVM is also registered as a broker/dealer with the
Securities and Exchange Commission, and is a member of the National Association
of Securities Dealers, Inc. The firm is generally engaged in the brokerage of
U.S. Government securities, other fixed income instruments, and arbitrage
transactions and presently employs 60 people in addition to the three general
partners of its general partner. Mosler is one of the founders of AVM and is a
general partner of the general partner of AVM.
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As of December 31, 1996 and 1995, Consulier's limited partnership interest
represents approximately 10% and 13% of AVM's total partnership capital.
Allocation of the partnership's income to its partners varies based on amounts
of appreciation of the partnership's assets and operating profits of the
partnership. Based on earnings distributions provided in the partnership
agreement, Consulier was allocated approximately 7% of AVM's earnings during
1996, and 8% of earnings during 1995.
Under the partnership agreement, Consulier may withdraw all or any portion of
its capital account upon thirty days written notice. AVM's general partner may
also cause withdrawal of Consulier from the partnership, with 30 day written
notice, through payment of the balance of Consulier's capital account.
In January 1996 Consulier invested $100,000 in The High Risk Opportunities Fund
L.P., a limited partnership formed to invest in an unrestricted range of
financial instruments.
(3) CORPORATE SEGMENT
GENERAL
Consulier's Corporate segment includes Corporate management and finance
activities as well as a developing engineering products business and a small
leasing business. It formerly included a high performance engine repair and
overhaul business which was discontinued in March 1994.
CORPORATE EMPLOYEES
As of December 31, 1996, the Corporate segment of Consulier's business has five
employees engaged in marketing, engineering, management and finance activities,
and three engineers with specialized areas of expertise retained for different
engineering projects on a consulting basis.
(3)A ENGINEERING PRODUCTS
BACKGROUND
Most of Consulier's patents and engineering technology were developed by a
former employee, James Shaffer, who left the Company in September 1992. In May
1994, Consulier hired George E. Mount as President and Chief Executive Officer
to develop a program to bring to market products based on this and other
technology. After directing Consulier's development programs for a year and a
half, Mr. Mount resigned his position at Consulier in February 1996 to pursue
other opportunities. At that time Charles E. Spaeth was appointed acting
President and CEO, a position he continues to hold.
Consulier's main business focus has been and will continue to be development and
sale of its own patented ideas and concepts, mostly in the area of applications
of devices with epicyclic or nutating motion. Additionally, Consulier will
continue, for special projects which offer synergism with our mainline
interests, providing consulting engineering support.
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STAGE OF DEVELOPMENT
As of December 31, 1996, the engineering product segment of Consulier has been
engaged in research and development of a variety of automotive and industrial
products. Eleven U.S. Patent Letters and/or Notice of Allowance of Patent had
been and are currently being supported. As many as twenty other products and
concepts were considered in the last several years, some requiring market
analysis and/or preliminary patent investigation activities. In 1996, an
analysis was made of the active patents to determine if funding should be
allocated to continue their development or even merit continued payment of
support fees. It was decided that no new development activity of any of these
patents would be undertaken at this time. Several patents will not receive
continued maintenance payments due to our evaluation including the original
"winch apparatus" patent.
Development activity previously underway on the following three patents will
continue at some level in 1997.
1) Lug-Remov-R(TM) - a torque multiplying device configured to remove
automotive wheel lugs.
2) Hyperoll(TM) ballscrew - a unique modular ball screw without the need
for a ball return tube with potential for low cost, low radial profile,
high speed applications with low load requirements.
3) TigerTail(TM) winch - a unique winch utilizing the torque multiplying
device for its mechanical advantage.
Management hopes that these and other Consulier patents can be developed into
product lines which will deliver significant returns to Consulier and its
investors.
Research and development costs related to new products are expensed as incurred.
However, patent costs are capitalized and amortized over five years. No new
patents were issued to Consulier in 1996. Only maintenance and patent search
fees were expensed.
Consulier incurred direct research and development costs, including product
development and patent amortization, totaling $163,383 in 1996 and $317,061 in
1995.
PRODUCTS
Products under development have a wide variety of consumer uses and industrial
applications. They generally involve motion transfer and torque multiplication,
and incorporate new mechanical wave technologies. Consulier's mechanical wave
concepts involve a modification of traditional gearing mechanisms which
substantially improve efficiency, speed, durability and are inexpensive to
produce.
Consulier has developed a torque multiplying device, configured as a low cost,
compact tool for use in loosening automotive lug nuts. Dubbed the
Lug-Remov-R(TM), this consumer oriented tool is designed to fit a variety of
lug nut and wheel sizes, and is small enough to hold in one hand.
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During tests the device has loosened a lug nut tightened to 150 foot-pounds
(which most individuals could not remove with a standard lug wrench). This tool
multiplies one's strength by an a 8-to-1 torque ratio. In 1993, a licensing
agreement was signed with Florida Pneumatic Manufacturing Corporation of
Jupiter, Florida. This agreement was suspended in April, 1995.
In 1996 Consulier refined its Lug-Remov-R(TM) design in an effort to reduce
product cost and complexity and improve its appearance. The new Lug-Remov-R(TM)
design is more streamlined, has reduced part count and was designed for
manufacture with gearing made of powder metallurgy technology. Manufacturing
cost estimates for the new design show that the Lug-Remov-R(TM) could be made in
quantity for $25.00 per unit or less. Other than to manufacture a reaction arm
for the prototype Lug-Remov-R(TM), updating the prototype to look similar to the
new design configuration, no other development work was conducted on the
Lug-Remov-R(TM).
The design of the TigerTail(TM) winch closely parallels the torque multiplying
device in that it employs the same mechanical epicyclic gear technology. The
winch is small enough to fit in a standard sized tool box, and is designed to
lift in excess of 500 pounds with a 4-to-1 safety factor. In 1993 a licensing
agreement was also signed with Florida Pneumatic. This agreement was also
suspended in 1995. In 1996 the winch was completely redesigned in a departure
from the concept shown in the "winch apparatus" patent. The new winch design is
simpler, has fewer parts and was made with consideration to manufacture with
low-cost powder metallurgy processes. Preliminary testing indicates that
mechanical advantage exceeds 10-to-1 as expected but has uncovered some
durability issues which must be resolved in continued development planned for
1997.
Consulier's Hyperoll(TM) ballscrew utilizes a unique ball circulating system
with no return tubes or jogs in the nut raceways. The balls move inside a
planar, closed circular course directly on the thread surfaces and can,
therefore, be manufactured and applied as modules. Hyperoll(TM), therefore, has
potential for a high-speed, efficient and durable product manufactured at a
low cost. The ballscrew should have many industrial applications, particularly
in the area of high speed linear control. In 1996 activity in this area
included analytic work and design verification of a computer based software
program for design analysis and design of Hyperoll(TM) ballscrews. Design
verification included manufacture and analysis of a brass ballscrew prototype
of a size for possible use in a current automotive ABS braking system.
Note: The Hyperoll(TM) ballscrew computer based analytical design and analysis
program is considered a trade secret of Consulier Engineering, Inc., so no
discussion of it is included.
In March 1995, Consulier received a Notice of Allowance of Patent from the U.S.
patent office for the "Consulier Actuator Motor". This potential product is a
variable speed, variable torque, electric actuator with electronic control which
can be used in many applications. The motor can be locked in less than one
degree increments with reduced current draw and without the oscillation (spring
effect) inherent in existing stepper motors. This design potentially eliminated
the need for gear reducers, brakes, clutches and anti back-drive units.
Applications for this product included electric motor power steering, industrial
controls and positioning equipment. Work to develop an improved controller and
evaluate a prototype of the motor was conducted in late 1995 and early 1996.
Speed was improved but efficiency and torque capability continued to
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be major development issues which would have required major development funding
to overcome. A cursory market analysis hints that market potential may be there
for some applications, however, no firm applications were identified for the
motor. Work in this product area has been abandoned.
ENGINEERING PRODUCTS SALES AND MARKETING ACTIVITIES
Sales and marketing activities of the engineering products are currently
performed by one employee. This year tool companies were approached, nationwide,
in an attempt to develop a cooperative business arrangement for the
Lug-Remov-R(TM). While some interest was developed with several companies
including the Danaher Tool Group, this effort was generally unsuccessful. Based
on a $25.00 manufacturing cost, price projections show Lug-Remov-R(TM) retail
price would be in the $69.95 to $79.95 range. Unfortunately, this puts it in a
losing competition with low cost 12 volt impact wrenches and other competitive
alternative devices now available. The niche market for the Lug-Remov-R(TM) is
fragile at best, primarily including "do-it-yourselfer's" operating off-the-road
vehicles, recreational vehicles and ranch and farm equipment. Widespread
cellular telephone networking to contact roadside services like AAA and recently
introduced competitive products have made sale or licensing of patent rights
unlikely. Likewise, proceeding with additional development of the
Lug-Remov-R(TM) itself does not seem prudent at this time. In 1997 we will
undertake limited engineering definition and market analysis of the potential
for a low-cost, general purpose torque multiplying wrench kit which may have
market potential to merit its development.
Marketing activity for the Hyperoll(TM) ballscrew, will continue in 1997. The
thrust of this effort will be to find a ballscrew company willing to collaborate
with Consulier in additional required development and product rating tests.
Their assistance is also necessary to develop a list of potential applications
for the Hyperoll(TM) ballscrew. Several companies have indicated interest and
business arrangements are being pursued.
Preliminary marketing activities are also underway on the TigerTail(TM) winch.
However, these activities have been limited since development is still underway.
Several companies have shown some interest, however, testing of the prototype
winch must be successfully completed and plans for transition to manufacturing
completed before discussions can proceed.
Consulier's general approach has been to establish licensing agreements with
various companies to generate royalty revenues or to sell the product's
intellectual rights outright. In today's environment, that approach is proving
nonproductive. To increase the value of intellectual rights, most concepts or
ideas must be carried all the way to production with sales contracts secured
before the intellectual rights have a marketable value.
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(3)B CONSULTING ACTIVITIES
BACKGROUND
On a limited basis, Consulier has continued to provide engineering and
engineering management consulting services. To date these activities have not
been profitable and Consulier is not actively pursuing consulting work unless it
is tied in with technology areas of mutual interest or business arrangements in
which Consulier will have long range involvement.
(3)C CONSULIER BUSINESS SERVICES, INC.
Consulier Business Services, Inc. is a wholly owned subsidiary involved in the
leasing of four vehicles and various machinery and equipment previously used in
the engine repair and overhaul business (see (3)d below). Assets and revenues
are not material, and the business is operated by Corporate staff.
(3)D DISCONTINUED AUTOMOBILE MANUFACTURING SEGMENT
Although Consulier was founded as an automobile manufacturer, management
recognized that the development of an effective automotive sales and marketing
program required a much longer period of time than originally anticipated. In
view of projected capital requirements, management considered it imprudent to
continue to commit a majority of Consulier's resources to the long-range
operating needs of its automobile manufacturing business segment. Accordingly,
in March 1990, the Board of Directors approved a sale of the automobile business
to MACC, with Consulier retaining a five year option to repurchase the business.
The sale price of $750,000 resulted in no gain or loss to Consulier.
On October 31, 1993 MACC sold the automobile business to U.S. Electricar, Inc.
("Electricar") of Santa Rosa, California in exchange for 1,000,000 shares of
Electricar restricted common stock, and production royalties payable over a
fifteen year period. MACC retained the right to produce special order GTP cars
and WSC (World Sports Car) class race cars.
At the time of the sale, Consulier held an option to repurchase the car business
at net book value. In exchange for waiving this purchase option, MACC granted
Consulier the right to purchase the 1,000,000 shares of Electricar restricted
stock at a price of $.50 per share. Consulier will also receive all royalty
payments arising out of the sale which are based upon production of composite
vehicles by Electricar. U.S. Electricar is currently under reorganization. No
royalty payments have been received to date.
ITEM 2. DESCRIPTION OF PROPERTY
Consulier occupies approximately 2,250 square feet in a building owned by AVM
Properties Ltd. ("Properties"), a Mosler affiliate, located at 169 Tequesta
Drive, Tequesta, Florida. The space is leased month-to-month with a monthly
rental of $1,987 which includes sales tax of $112.50.
Southeast leases five warehouse units, 22,000 square feet, of a building in
Miami, month-to-month, at a cost of $6,200 per month. One unit of approximately
3,200 square feet houses Southeast's tool manufacturing operations. The
remaining units of approximately 18,800
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square feet consists of warehouse space for Southeast's automotive distribution
business and offices for its financial and administrative personnel. Southeast
currently has under contract to purchase a 47,000 square foot industrial
warehouse in Medley, Florida for $1,300,000, with an expected closing in May
1997.
Consulier's facilities are believed to be suitable for present requirements and
anticipated future uses.
ITEM 3. LEGAL PROCEEDINGS
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Consulier did not submit any matters to its shareholders for a vote during the
fourth quarter of the year ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET PRICE AND DIVIDENDS
Consulier's common stock trades on The NASDAQ SmallCap Market(SM) tier of The
NASDAQ Stock Market(SM) under the symbol CSLR. The following table sets forth,
for the periods indicated, the high and low bid prices for Consulier's common
stock as reported by NASDAQ.
<TABLE>
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High Low
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YEAR ENDED DECEMBER 31, 1995:
First quarter $2.9375 $2.1250
Second quarter 2.7500 2.3750
Third quarter 2.8750 2.7500
Fourth quarter 3.6250 2.6250
YEAR ENDED DECEMBER 31, 1996:
First quarter $3.2500 $2.8125
Second quarter 3.8750 2.7500
Third quarter 3.1250 2.7500
Fourth quarter 4.7500 3.2500
</TABLE>
As of March 20, 1997, there were approximately 750 record holders of Consulier's
common stock. To date, Consulier has not paid dividends on its common stock.
Because of the financial requirements of the company, the Board of Directors has
no current intention to commence paying dividends. Future dividend policy will
depend upon Consulier's profitability, capital requirements and other factors.
NASDAQ LISTING
Consulier's common stock is listed on the National Association of Securities
Dealers Automated Quotation system ("NASDAQ") and has been traded on NASDAQ
since Consulier's initial public offering in May 1989.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Automotive Parts Distribution - Net sales of the Company's Southeast automotive
parts distribution segment represent 99% of Consulier's net sales in 1996 and
98% of net sales in 1995. This segment's sales increased 35% to a record
$3,488,000 after increasing 42% to $2,588,000 in
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1995 (the previous record). The 1996-95 increases in sales are attributable to
the upgrading of product lines through the addition of mounts for newer
vehicles, the broadening of the company's line of flywheels and plastic parts,
changes in price structure for mounts, and the general improvement in economic
conditions. Although the customer base has remained fairly constant, Southeast
also benefited from competitor restructuring which reduced competition in the
flywheel after-market.
The automotive parts distribution segment experienced income before taxes of
$395,371 in 1996 and $395,200 in 1995 (both records). Gross profit on sales was
38.3% in 1996 and 37.5% in 1995. The 1996 improvement in income before taxes was
due to the 35% increase in sales and the improved gross profit percentage offset
by increased Selling, General and Administrative expense. Selling, General and
Administrative expenses increased by $226,000 or 36% in 1996. The primary reason
these costs increased was the expense associated with introducing a new product,
CRA-Z Soap Hand Cleaner, in the national market. Additional warehouse rental
space was added along with additional staff. Also, printing of promotional
materials and advertising in national publications increased significantly.
Management expects continued improvement in this segment in 1997.
CRA-Z Soap Hand Cleaner is the next generation in hand cleaners. It is a unique
heavy duty bar with the ability to remove both surface grime and deeply embedded
stains without resorting to petroleum based solvents or skin irritating pumice
common to all other hand cleaners. The Company marketing effort will target
mechanics, spray painters, shop personnel, printers, and all other craftsmen.
CORPORATE RESEARCH AND DEVELOPMENT - During 1996 Consulier direct expenditures
on research and development totaled $163,383. This represents a decrease of 48%
from 1995 direct expenditures of $317,061. During 1996 an analysis was made of
the active patents to determine if development should continue. It was decided
to continue development of three patents. The Lug-Remov-R(TM), Hyperoll(TM)
ballscrew, and the TigerTail(TM) winch.
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $1,831,143 in 1996, a 5% decrease from 1995 income of $1,927,218.
This represents annualized returns of 83% and 84%, respectively, on Consulier's
average investment during each year. On October 1, 1996 Consulier reduced its
partnership interest in AVM by $292,403. The funds were used to reduce a loan
used for CRA-Z Soap inventory.
CONSOLIDATED OPERATING RESULTS - Consulier's consolidated net income for the
year ended December 31, 1996 was $1,210,841, or $.48 per share compared to
$942,403, or $.35 per share for 1995. The increase in net income for 1996 and
1995 is attributable primarily to investment and interest income, net of related
interest expense, and to the continued record operating performance of the
Automotive Parts Distribution segment and decreased spending on research and
development. Investment and interest income results from Consulier's limited
partnership interest in AVM, The High Risk Opportunities Fund L.P., and interest
income on promissory notes (see item 12). During the years ended December 31,
1996 and 1995, investment and other income totaled $2,078,360 and $2,118,207,
respectively, offset by operating losses of $136,977 in
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1996 and $589,804 in 1995. These operating losses are due to continued spending
on research and development and Corporate overhead.
OUTLOOK FOR 1997
Based on AVM's current operations and operating results over the past five
years, management expects continued returns in 1997 on Consulier's limited
partnership investment. However, there is no guarantee that the returns of 83%
and 84% in 1996 and 1995 respectively can be maintained. Sales in the automotive
parts distribution segment should continue to improve in 1997 due to the
introduction of new products and the strengthening of existing product lines.
Southeast Automotive, currently a distributor of CRA-Z Soap , has entered into
an agreement with the developer of the soap, Masters Marketing & Development,
Inc. of Sarasota, Florida wherein Southeast will receive a royalty of 3.5% of
all sales made by Masters. Also in 1997 an infomercial is planned to be
produced. The auto parts distribution segment is anticipating increased sales of
CRA-Z Soap in the last half of 1997. Research and development expenditures are
expected to continue at current levels. No other significant fluctuations in
costs or expenses are anticipated in 1997.
Consulier will continue in its efforts to expose its engineering products and
technology to manufacturers as well as distributors.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, Consulier's cash and cash equivalents increased 235,719. Net
cash used in operations increased $934,813 from $1,283,454 in 1995 to $2,218,267
in 1996. This was primarily due to an increase in inventories of $1,733,850
during 1996 as compared to an inventory increase of $80,583 in 1995. Southeast
Automotive purchased approximately $1.6 million of CRA-Z Soap for inventory in
1996. In return, Southeast Automotive will receive a royalty of 3.5% of the
gross sales of CRA-Z Soap from Masters Marketing & Development, Inc. Southeast
expects to sell the increased inventory of CRA-Z Soap during the normal course
of business.
During the second quarter of 1997, Southeast Automotive plans to purchase an
industrial warehouse in Medley, Florida for $1.3 million. The company plans to
use its credit line with The Chase Manhattan Bank of New York to fund this
purchase. Management believes that a positive cash flow will continue through at
least December 31, 1997, assuming continued interest income on the promissory
notes from Mosler and positive cash flow generated by Consulier's investment in
AVM. Continued positive cash flow may be used to continue reducing indebtedness,
or to invest in other business opportunities. During January 1996 Consulier
invested $100,000 in The High Risk Opportunities Fund L.P., a limited
partnership formed to invest in an unrestricted range of financial instruments.
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 investment in AVM. Consulier cannot, with any degree of
assurance, predict whether there will be a continuation of the net return
experienced in the period the AVM limited partnership interest has
14
<PAGE> 15
been owned. However, Consulier does not expect that the rate of return will
decline to the point where Consulier has negative cash flow. Furthermore,
although AVM has given Consulier no indication of any intention on its part to
request withdrawal of the partnership interest, there can be no assurance that
AVM will not make such a request sometime in the future.
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 have inventories of
approximately $2.4 million as of December 31, 1996. 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 may continue at present levels, but such expenditures
should not be significantly affected by inflation. Interest rates on bond
indebtedness are fixed and, therefore, are not impacted by inflationary rate
increases, while rates on notes receivable are floating and should move with
inflation.
ITEM 7. FINANCIAL STATEMENTS
See index to Financial Statements in this report on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE> 16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS
<TABLE>
<CAPTION>
Positions and Offices Held
and Principal Occupation or
Director Other Employment during the
Name Age Since Past Five Years
- ---- --- -------- ----------------------------
<S> <C> <C> <C>
Warren B. 47 1985 Chairman of the Board, 1985 to present. President and
Mosler Chief Executive Officer, June 1985 to May 1994.
Principal in Adams, Viner &
Mosler, Ltd., a broker/dealer
engaged in arbitrage and
government securities trading,
1983 to present.
Alan R. 46 1985 1982 to present, private practice of law, Boca Raton,
Simon, Esq. Florida.
Charles E. 72 1992 Project Engineer, Pratt & Whitney Aircraft, 1949 to
Spaeth 1990. Last position - responsible for directing product
design support functions in
areas of structural analytical
methods, life prediction
methods, mission definition and
component design verification.
Burck E. 66 1992 1991 to present, President, BG Consulting Group, Inc.
Grosse July 1987 to 1991, Senior Vice President, Lear Group,
Inc., general contracting firm. 1948 to 1987, General
Motors Corporation. Last position - General Director,
Technical Service; responsible for coordination of all
technical service functions for GM car and truck
divisions.
William R. 50 1992 1971 to present, First Federal of the Palm Beaches,
Locke currently Consumer Loan Officer and Coordinator of
Indirect Dealer Lending.
Richard N. 36 1995 1984 to 1989, floor trader at the Chicago Board of
Hornstrom Trade; 1989 to present, Vice
President of Lutrell Capital
Management, a commodity trading
advisor/ commodity pool
operator located in Tampa,
Florida.
</TABLE>
No family relationships exist among the directors and officers of Consulier.
Messrs. Mosler and Simon have been directors since the inception of the company.
16
<PAGE> 17
EXECUTIVE OFFICERS
The principal occupation of each executive officer of Consulier is set forth
below. All of the executive officers are elected annually, or until their
successors have been duly elected.
Warren B. Mosler, 47, is the Chairman of the Board of Directors. Mosler has
served as Chairman since the inception of Consulier and as Chief Executive
Officer from inception to March 1989 and from August 1989 to May 1994. From 1983
to the present, Mosler has been a principal in Adams, Viner & Mosler, Ltd., a
broker/dealer engaged in arbitrage and government securities trading in West
Palm Beach, Florida.
Charles E. Spaeth, 72, is the Acting President and Chief Executive Officer. He
was elected to these offices in February 1996. Mr. Spaeth is also on the Board
of Directors. Prior to joining Consulier, Mr. Spaeth was a Project Engineer with
Pratt & Whitney Aircraft from 1949 to 1990.
Ralph D. Butler, 50, is Secretary, Treasurer and Chief Financial Officer. He was
elected to these offices in May 1996. Prior to joining Consulier, Mr. Butler was
Chief Financial Officer of Harold Grant, Inc., a multi-state high end clothing
retailer. From 1990 to 1995, Mr. Butler was with Governors Bank Corporation, a
Bank Holding Company, where he was Senior Vice President, Cashier and Chief
Financial Officer.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid to Consulier's
Chief Executive Officer and each of Consulier's other executive officers with
respect to the three years ended December 31, 1996:
<TABLE>
<CAPTION>
Annual Compensation Long Term
Name and Principal Position Year Salary Compensation
- --------------------------- ------------------------- ------------
<S> <C> <C> <C>
Warren B. Mosler 1996 $ 75,000 -
Chairman of the Board 1995 $ 75,000 -
of Directors 1994 $ 75,000 -
Charles E. Spaeth 1996 (1) -
Acting President and 1995 (1) -
Chief Executive 1994 (1) -
Ralph D. Butler 1996 (1) -
Secretary, Treasurer 1995 (1) -
and Chief Financial Officer 1994 (1) -
</TABLE>
(1) Total annual salary and bonus was less than $100,000.
17
<PAGE> 18
Certain columns have been omitted from the above table because there is no
compensation required to be reported in such columns.
OPTION GRANTS TABLE
There were no stock options granted to named executive officers during 1996
requiring disclosure.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised,
in-the-money stock options held by the Named Executive Officers as of the end of
the 1996 fiscal year. No stock options were exercised by any of the Named
Executive Officers during 1996. All options presented are exercisable.
<TABLE>
<CAPTION>
Number of Value of Unercised
Unexercised Options In-the-Money Options
Name at 1996 Year-End at 1996 Year-End
- -------------------- --------------------- -------------------
<S> <C> <C>
Warren B. Mosler 3,510 $ 4,826
Charles E. Spaeth 5,000 $ 6,875
</TABLE>
LONG-TERM INCENTIVE AND PENSION PLANS
Consulier does not have any long-term incentive or pension plans.
COMPENSATION OF DIRECTORS
Directors are compensated $100 for attendance at each Board of Directors'
meeting.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Amount and Percent of
Title Nature of Class at
of Name and Address Beneficial December 31,
Class of Beneficial Owner Ownership 1996
- ------- ----------------------- -------------- ------------
<S> <C> <C> <C>
Common Warren B. Mosler 1,984,690 (1) 79.3%
Stock 483 S. Beach Road
Hobe Sound, FL 33455
</TABLE>
(1) Includes stock options to acquire 3,510 shares of Consulier Common Stock.
18
<PAGE> 19
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following officers and directors of Consulier beneficially own the indicated
number of shares of Common Stock of Consulier as of December 31, 1996:
<TABLE>
<CAPTION>
Amount and Percent of
Title Nature of Class at
of Name and Address Beneficial December 31,
Class of Beneficial Owner Ownership 1996
- -------- --------------------- ----------- ----------
<S> <C> <C> <C>
Common Warren B. Mosler 1,984,690(1) 79.3%
Stock 483 S. Beach Road
Hobe Sound, FL 33455
Common Alan R. Simon 90,000(2) 3.6%
Stock 7777 Glades Rd., 204
Boca Raton, FL 33434
Common Richard N. Hornstrom 15,950 .6%
Stock 15607 Cochester Rd.
Tampa, Florida 33647
Common Burck E. Grosse 12,500 (3) .5%
Stock 11 Huntly
Palm Beach Gardens,
FL 33418
Common Charles Spaeth 5,000 (3) .2%
Stock 13 Paddock Circle
Tequesta, FL 33469
Common William R. Locke 5,000 (3) .2%
Stock P.O. Box 3405
Tequesta, FL 33469
Common All directors and 2,023,140 80.1%
Stock executive officers
as a group, excluding
duplications (6 people)
</TABLE>
(1) Includes stock options to acquire 3,510 Consulier shares at $2.50 per
share.
(2) Consists of stock options to acquire Consulier's shares from Mosler at
$2.50 per share.
(3) Consists of stock options granted under Consulier's Tandem Stock Option
Plan. Exercise prices for the options range from $.10 to $5.00 per
share.
19
<PAGE> 20
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AVM PROPERTIES LIMITED PARTNERSHIP LOANS AND LEASE OF OFFICE SPACE
In January 1996, Consulier advanced $107,343 to AVM Properties, Ltd. Interest
accrued on this short-term advance at the rate of 7.0%. This advance was reduced
to $7,343 in February 1996 and was subsequently paid. This advance was
collateralized by unencumbered real estate owned by AVM Properties, Ltd.
In June 1994 Consulier leased approximately 1,300 square feet of office space
located in Tequesta, Florida from AVM Properties, Ltd. on a month-to-month
basis. An additional 950 square feet were added to the lease in January 1995,
also on a month-to-month basis. This property is leased at competitive market
rates.
SALE OF AUTOMOBILE OPERATIONS
In consideration of the sale of Consulier's automobile manufacturing business in
1990, MACC executed a promissory note for $750,000, which note was personally
guaranteed by Mosler. This note had an interest rate of 12%, and provided for
the monthly payment of interest only ($7,500) for a period of one year. Monthly
principal and interest payments of $16,338 were required over the following five
year period. In January 1993 the rate on this note was reduced to prime plus 1%.
In October 1993, MACC sold the automobile business to U.S. Electricar, Inc. in
return for restricted common stock and future royalties. Consulier waived its
option to reacquire the business in consideration for the future royalties and
an option to purchase the stock. Also, principal payments on the MACC note were
suspended in November 1993 and the interest rate was further reduced to the one
month U.S. Dollar London Interbank Offering Rate ("LIBOR"). The note is payable
on May 11, 2001. It has an unpaid balance of $430,559 at December 31, 1996, and
is guaranteed by Mosler.
SALE AND LEASEBACK OF REAL ESTATE
In December 1989, the Board of Directors adopted a resolution approving sale and
partial leaseback of real estate to Mosler, subject to existing bond
indebtedness collateralized by the property. This real estate is located in
Riviera Beach, Florida. In consideration for the property, Mosler signed a
promissory note of $2,500,000. The note initially bore an annual rate of 12%,
with interest payable monthly. The interest rate was reduced to prime plus 1% in
January 1993. The note matures in December 2001.
Simultaneously with the execution of the sale, Consulier entered into a lease
with Mosler for approximately 25,000 square feet of space at an annual gross
rental of $4.00 per square foot. This lease was subsequently reduced to 6,000
square feet when Consulier sold its automobile operations. The lease was
terminated in 1994 when Consulier moved its principal executive offices to
Tequesta, Florida.
20
<PAGE> 21
INTEREST RATE ADJUSTMENTS
In January 1993, the Affiliated Transaction Committee of the Board of Directors
reviewed the promissory notes receivable from MACC and Mosler described above.
At this review, the interest rates for the notes were adjusted to prime plus one
percent. In October 1993, the Committee further reduced the rate on the MACC
note to the one month LIBOR.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See index to Exhibits in this report on page E-1.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
21
<PAGE> 22
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.
CONSULIER ENGINEERING, INC.
Dated: April 11, 1997 By: /s/ Charles E. Spaeth
-------------------------
Charles E. Spaeth
Acting President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Name Title Date
- ---- ----- ----
<S> <C> <C>
/s/ Warren B. Mosler
- ------------------------------
Warren B. Mosler Chairman of the Board April 11, 1997
of Directors
/s/ Charles E. Spaeth
- ------------------------------
Charles E. Spaeth Acting President, April 11, 1997
Chief Executive Officer
/s/ Ralph D. Butler
- ------------------------------
Ralph D. Butler Secretary, Treasurer, April 11, 1997
Chief Financial Officer
/s/ Alan R. Simon
- ------------------------------
Alan R. Simon Director April 11, 1997
/s/ Charles E. Spaeth
- ------------------------------
Charles E. Spaeth Director April 11, 1997
/s/ Burck E. Grosse
- ------------------------------
Burck E. Grosse Director April 11, 1997
/s/ William R. Locke
- ------------------------------
William R. Locke Director April 11, 1997
/s/ Richard N. Hornstrom
- ------------------------------
Richard N. Hornstrom Director April 11, 1997
</TABLE>
22
<PAGE> 23
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
FORM 10-KSB ITEM 7 FINANCIAL STATEMENTS
Financial Statements:
<TABLE>
<S> <C>
Report of Independent Certified Public
Accountants . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at December 31,
1996 and 1995 . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the
years ended December 31, 1996 and 1995. . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1996 and 1995. . . . . . . F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1996 and 1995 . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . F-7
</TABLE>
F-1
<PAGE> 24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors
Consulier Engineering, Inc.
Tequesta, Florida
We have audited the accompanying consolidated balance sheets of Consulier
Engineering, Inc. and subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Consulier
Engineering, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
West Palm Beach, Florida BDO Seidman, LLP
April 7, 1997
F-2
<PAGE> 25
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
ASSETS 1996 1995
- --------------------------------------------------- ------------ -------------
<S> <C> <C>
CURRENT:
Cash (Note 1 and 5) $ 557,639 $ 321,920
Receivables (Note 2) 676,383 600,881
Receivables - related parties (Note 11(a)) 666,859 462,361
Notes receivable - related parties (Note 11(c)) 430,558 430,558
Inventories (Note 1 and 3) 2,383,976 650,126
Income taxes (Notes 1 and 8) -- 55,603
Other current assets 4,213 19,900
---------------------------------
TOTAL CURRENT ASSETS 4,719,628 2,541,349
Property and equipment, net (Notes 1, 4 and 6) 237,190 271,084
Limited partnership interest (Notes 1 and 5) 2,124,148 2,292,403
Notes receivable - related parties (Note 11(b)) 1,741,797 1,741,797
Patents and other assets 21,480 35,689
---------------------------------
$8,844,243 $6,882,322
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------
LIABILITIES:
CURRENT :
Accounts payable and accruals $ 188,663 $ 172,338
Income taxes (Notes 1 and 8) 93,939 --
Notes payable - banks (Note 6(a)) 402,018 6,855
Note payable - related parties (Note 6(c)) 282,597 --
---------- ----------
TOTAL CURRENT LIABILITIES 967,217 179,193
Bonds payable (Note 6(b)) 1,275,000 1,275,000
Deferred income taxes (Notes 1 and 8) 14,766 14,766
---------- ----------
TOTAL LIABILITIES 2,256,983 1,468,959
---------- ----------
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 3,887,767 2,676,926
---------- ----------
6,795,210 5,584,369
Less treasury stock at cost - 62,538 shares
in 1996 and 50,316 shares in 1995 (Note 9(e)) (207,950) (171,006)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 6,587,260 5,413,363
---------- ----------
$8,844,243 $6,882,322
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 26
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Net sales $ 3,523,793 $ 2,649,184
Commission income -- 52,075
----------- -----------
3,523,793 2,701,259
----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 2,240,822 1,807,638
Selling, general and
administrative 1,256,565 1,166,364
Research and development expense 163,383 317,061
----------- -----------
3,660,770 3,291,063
----------- -----------
Operating loss (136,977) (589,804)
----------- -----------
OTHER INCOME (EXPENSE):
Investment income - related party 1,855,290 1,927,218
Interest income - related parties 331,649 337,466
Interest expense - other (113,305) (149,277)
Other income 4,726 2,800
----------- -----------
2,078,360 2,118,207
----------- -----------
Income before income taxes 1,941,383 1,528,403
Income taxes (Notes 1 and 8) 730,542 586,000
----------- -----------
Net income $ 1,210,841 $ 942,403
=========== ===========
Net income per share $ 0.48 $ 0.35
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 27
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK (NOTE 1)
--------------------------------------------
TREASURY STOCK ADDITIONAL RETAINED TOTAL
-------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
---------- ------- ------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 2,562,046 $25,620 (42,460) $(149,402) $ 2,899,127 $1,734,523 $ 4,509,868
Net income for the year -- -- -- -- -- 942,403 942,403
Purchase of shares for
Treasury (Note 9(c)) -- -- (7,856) (21,604) -- -- (21,604)
Purchase of employee
options -- -- -- -- (17,262) -- (17,262)
Retirement of fractional shares
due to one-for-ten reverse
stock split (13) -- -- -- (42) -- (42)
---------- ------- ------- --------- ----------- ---------- -----------
Balance, December 31, 1995 2,562,033 25,620 (50,316) (171,006) 2,881,823 2,676,926 5,413,363
Net income for the year -- -- -- -- -- 1,210,841 1,210,841
Purchase of shares for
the Treasury (Note 9(c)) -- -- (12,222) (36,944) -- -- (36,944)
---------- ------- ------- --------- ----------- ---------- -----------
Balance, December 31, 1996 2,562,033 $25,620 (62,538) $(207,950) $ 2,881,823 $3,887,767 $ 6,587,260
========== ======= ======= ========= =========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE> 28
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 1,210,841 $ 942,403
Adjustments to reconcile net income to net
cash used in operations:
Depreciation 98,059 131,357
Provision for uncollectible accounts (5,999) 5,999
Amortization 14,132 23,874
Investment income - related party (1,855,291) (1,927,218)
Investment in the High Risk Opportunities Fund L.P. (100,000) --
Changes in operating assets and liabilities:
(Increase) in receivables and other current assets (12,105) (204,757)
(Increase) in inventories (1,733,850) (80,583)
Increase in accounts payable and accruals 16,325 41,845
Increase (decrease) in income taxes payable 149,621 (216,374)
----------- -----------
NET CASH USED IN OPERATIONS (2,218,267) (1,283,454)
----------- -----------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (64,165) (200,043)
Capital distribution 292,403 --
Patent development -- (23,320)
Distributions from partnership interest 1,789,431 2,018,248
Loans to related parties (204,499) (174,763)
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,813,170 1,620,122
----------- -----------
FINANCING ACTIVITIES:
Repayment of bank and other loans (4,837) (41,986)
Early redemption of bonds due in 2004 (Note 6(b)) -- (1,000,000)
Borrowings 682,597 --
Purchase of stock for the treasury and stock options (Note 9(d)) (36,944) (38,866)
Retirement of fractional shares due to reverse stock split (Note 9(c)) -- (42)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 640,816 (1,080,894)
----------- -----------
INCREASE (DECREASE) IN CASH 235,719 (744,226)
CASH, BEGINNING OF PERIOD 321,920 1,066,146
----------- -----------
CASH, END OF PERIOD $ 557,639 $ 321,920
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 29
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consulier Engineering, Inc. ("Consulier") and its subsidiaries are engaged in
three primary businesses: the distribution of automobile and truck parts in the
automotive/truck after-market, investment activities, and the development of
advanced engineering products.
The parts distribution business is conducted through a wholly-owned subsidiary,
Southeast Automotive Acquisition Corporation ("Southeast").
Consulier's investment income is derived from a limited partnership interest
(see Notes 5 and 12(b)) in Adams, Viner & Mosler, Ltd. ("AVM"), an Illinois
limited partnership. AVM is a broker/dealer, in government securities and other
fixed income instruments. Consulier's Chairman and majority stockholder, Warren
B. Mosler ("Mosler"), is a general partner of the general partner of AVM.
Consulier conducts research and development activities relating to a variety of
automotive and industrial products. As of December 31, 1996, patents and/or
notice of patent allowances have been obtained for twelve products; patent
applications have been filed with respect to three other products.
BASIS OF PRESENTATION
The consolidated financial statements include Consulier and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out
basis, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line and declining balance methods over estimated
useful lives or related lease terms, as appropriate. Depreciation for income tax
purposes is computed using declining balance methods over statutory lives.
F-7
<PAGE> 30
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIMITED PARTNERSHIP INVESTMENT
The Company's investment in AVM is recorded using the equity method. Income or
loss is allocated to Consulier based on the AVM partnership agreement.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are for product development These costs are
expensed in the period incurred with the exception of the legal cost of
obtaining patents which are amortized over 60 months.
INCOME TAXES
Deferred income taxes are provided for temporary differences arising from
differences between financial statement and income tax bases of assets and
liabilities.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PER SHARE DATA
Net income per share is based on the weighted average number of common and
common equivalent shares outstanding during each year as follows: 1996 -
2,518,710; 1995 - 2,664,431. In both 1996 and 1995, shares issuable upon
exercise of dilutive common stock equivalents (outstanding stock options) are
included in the computation using the treasury stock method.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed of ", on January 1, 1996. SFAS No.
121 provides guidance on how and when impairment losses are recognized on
long-lived assets. Adoption of SFAS No. 121 did not have a material impact on
the Company's operations. The Company applies Accounting Principles Board (APB)
Opinion 25, "Accounting for Stock Issued to Employees", and related
interpretations in accounting for its fixed-price, stock option plans.
Accordingly, no compensation cost is recognized as a result of options awarded
under the plan. In October 1995, the Financial Accounting Standards board
("FASB") issued SFAS No.123, "Accounting for Stock-Based Compensation". SFAS No.
123 allows companies to continue to account for their stock option plans in
accordance with APB Opinion 25 but
F-8
<PAGE> 31
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
encourages the adoption of a new accounting method which requires the
recognition of compensation expenses based on the estimated fair value of
employee stock options. Companies electing not to follow the new fair value
based method are required to provide expanded footnote disclosures, including
pro forma net income and earnings per share, determined as if the company had
applied the new method. SFAS No. 123 is required to be adopted prospectively
beginning January 1, 1996. Managment is accounting for its stock option plans in
accordance with APB Opinion 25 and providing supplemental disclosures as
required by SFAS No.123 beginning in 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Consulier's financial instruments approximate estimated fair value as of
December 31, 1996.
NOTE 2 - RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Capital and income
distribution due from AVM $ 112,781 $ 71,069
Trade accounts 541,677 509,268
Employee advances 36,925 35,544
--------- ---------
691,383 615,881
Less allowance for doubtful
trade accounts 15,000 15,000
--------- ---------
$ 676,383 $ 600,881
========= =========
</TABLE>
F-9
<PAGE> 32
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Raw materials $ 63,235 $ 46,947
Work-in-process - 32,773
Finished goods 2,364,741 594,406
Obsolescence Reserve (44,000) (24,000)
---------- ---------
$2,383,976 $ 650,126
========== =========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Machinery and equipment $ 401,423 $ 544,625
Furniture and fixtures 107,010 107,406
Vehicles 237,970 257,850
Leasehold improvements 41,244 52,443
--------- ---------
787,647 962,324
Less accumulated depreciation
and amortization 550,457 691,240
--------- ---------
$ 237,190 $ 271,084
========= =========
</TABLE>
F-10
<PAGE> 33
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - LIMITED PARTNERSHIP INTEREST AND CONCENTRATION OF CREDIT RISK
5(a) The limited partnership interest consists of Consulier's investment in AVM
and The High Risk Opportunities Fund L.P.
Following is a summary of financial position and results of operations of AVM as
of and for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash $ 8,569,279 $ 6,767,735
Due from brokers 790,944 4,281,850
Securities owned 48,043,581 57,574,921
Customer receivables 34,570 --
Ownership interest in advisory account -- 2,000,000
Investment in affiliate & other assets 7,681,249 3,425,787
----------- -----------
Total assets $65,119,623 $74,050,293
=========== ===========
Due to brokers $ 7,457,369 $11,353,505
Securities sold under
agreements to repurchase 26,014,866 36,669,325
Securities sold but
not yet purchased -- --
Customer payables 7,448,998 5,411,530
Other liabilities 2,086,044 819,851
Anticipated partners'
withdrawals 1,683,616 2,123,066
----------- -----------
Total liabilities $44,690,893 $56,377,277
=========== ===========
Partners' capital $20,428,730 $17,673,016
=========== ===========
Revenue $43,799,624 $36,768,083
=========== ===========
Net income $25,285,907 $24,448,352
=========== ===========
Consulier's share of
earnings $ 1,831,143 $ 1,927,218
=========== ===========
</TABLE>
Consulier owned approximately 10% and 13% of AVM's capital as of December 31,
1996 and 1995, respectively. Based on capital and earnings distributions
provided in the partnership agreement, Consulier was allocated approximately 7%
and 8% of AVM's earnings during 1996 and 1995, respectively.
Under the partnership agreement, Consulier may withdraw all or any portion of
its capital account upon thirty days written notice. AVM's general partner may
also cause withdrawal of Consulier
F-11
<PAGE> 34
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
from the partnership through payment of the balance of Consulier's capital
account. On October 1, 1996, Consulier reduced its investment in AVM by
$292,403.
5(b) As of December 31, 1996 and 1995, there were no concentrations of credit
risk other than the investment in AVM. Furthermore, as of December 31, 1996
substantially all of Consulier's cash was held by AVM in a special reserve
account for the benefit of customers at a major national bank. In January 1996
Consulier invested $100,000 in The High Risk Opportunities Fund L.P., a limited
partnership formed to invest in an unrestricted range of financial instruments.
NOTE 6 - NOTES AND BONDS PAYABLE
(A) CURRENT NOTES PAYABLE - BANKS
Current notes payable to banks consist of a 7.50% note payable and a $400,000
credit line loan which was obtained in 1996 at 10.25% from Enterprise National
Bank, an institution related by common ownership. Additionally, a 9.50% note
payable was retired in 1995..
(B) BONDS PAYABLE
Bonds payable are due in 2004 with interest of 8% per annum, payable quarterly.
As part of an agreement with the holders of $175,000 of these bonds, the
interest rate was reduced to 6% in the second quarter of 1993. In exchange for
this interest rate reduction warrants to purchase the Company's common stock at
a price of $3.4375 were extended for five years to December 31, 1999 (see note
9(b)).
No principal payments are due until maturity. The bonds are redeemable by
Consulier at face value after June 30, 1994. They are collateralized by land and
building owned by Mosler (see Note 11(c)(1)), and machinery and equipment,
personal property, and leasehold improvements owned by the Company. A total of
$1,000,000 of bond principal was retired during 1995.
(C) NOTE PAYABLE - RELATED PARTY
During 1996 Warren B. Mosler advanced a total of $575,000 to Southeast
Automotive as a non-interest bearing note. As of December 31, 1996 $282,597
remains unpaid.
NOTE 7 - LEASES
Consulier leases office and operating facilities under various month-to-month
leases. Rent expense charged to operations was $90,242 in 1996 and $57,888 in
1995. Of this expense, $23,850 was paid to related parties in 1996 and $23,961
in 1995.
NOTE 8 - INCOME TAXES
Provisions for federal and state income taxes in the consolidated statements of
income consist of the following:
F-12
<PAGE> 35
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
Current:
Federal $ 623,766 $ 500,000
State 106,776 86,000
--------- ---------
Total income taxes $ 730,542 $ 586,000
========= =========
</TABLE>
Applicable income taxes for financial reporting purposes differ from the amount
computed by applying the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
Tax at statutory rate $ 660,070 $ 519,657
State income tax net of
federal tax benefits 70,472 55,485
Other - 10,858
--------- ---------
Income taxes $ 730,542 $ 586,000
========= =========
</TABLE>
F-13
<PAGE> 36
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCKHOLDERS' EQUITY
(A) STOCK OPTION AND RESTRICTED STOCK PLANS
Consulier has established a Tandem Stock Option Plan (Tandem Plan) covering
current employees and former employees who currently work for Mosler Auto Care
Center, Inc. ("MACC") (see note 11(c)(2)). Under the Tandem Plan, qualified and
non-qualified options may be granted.
The Tandem Plan provides that an aggregate of 100,000 shares of Consulier's
common stock may be optioned to officers, directors and other key employees of
Consulier and MACC. The options are exercisable after two years of continuous
employment or service and have a maximum life of ten years from the date of
grant. The Tandem Plan terminates March 31, 2000.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB25"), and related Interpretations
in accounting for its employee stock options because, the alternative fair value
accounting provided for under FASB Statement No. 123, Accounting for Stock-Based
Compensation ("FAS 123"), requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
The following summary sets forth activity under the plan for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------- --------------------------------
Weighted Average Weighted Average
Options Exercise Price Options (1) Exercise Price
------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
Outstanding at
Beginning of
Year 331,256 $11.00 331,256 $11.00
Forfeited 227,000 $14.66 - -
Outstanding and
Exercisable at year end 104,256 $2.97 331,256 $11.00
</TABLE>
(1) Shown net of effect of 10:1 reverse stock split
The following table summarizes information about fixed stock options outstanding
at December 31, 1996.
<TABLE>
<CAPTION>
Weighted
Range Average Weighted Options Weighted
of Exercise Options Remaining Average Exercisable at Average
Price Outstanding Contractual Life Exercise Price 12/31/1996 Exercise Price
----- ----------- ---------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$.10 5,000 3.3 $0.10 5,000 $0.10
$2.50 41,756 3.3 $2.50 41,756 $2.50
$3.00 40,000 3.0 $3.00 40,000 $3.00
$4.38 5,000 3.3 $4.38 5,000 $4.38
$5.00 12,500 3.3 $5.00 12,500 $5.00
</TABLE>
F-14
<PAGE> 37
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(B) COMMON STOCK WARRANTS
In connection with the issuance of the bonds payable (see Note 6(b)), Consulier
issued warrants to purchase 455,000 shares of its common stock at a purchase
price of $3.4375 per share. A total of 400,000 of these warrants expired
December 31, 1994. The remaining 55,000 warrants were extended to December 31,
1999 in exchange for a reduction in interest rate from 8% to 6%. During 1995 an
additional 20,000 warrants were retired in conjunction with the early retirement
of bonds. A total of 35,000 warrants remain outstanding. No warrants have been
exercised to date.
(C) TREASURY STOCK
During 1996 Consulier acquired 12,222 shares of Common Stock as Treasury stock
at a cost of $36,944. During 1995 an additional 7,856 shares were purchased at a
cost of $21,604.
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the years ended December 31, 1996 and 1995 totaled $113,305
and $153,630, respectively. Income taxes paid during 1996 and 1995 totaled
approximately $581,000 and $803,000 respectively.
NOTE 11 - RELATED PARTY TRANSACTIONS
(A) CASH ADVANCES
During 1996, Mosler and Consulier continued to share certain costs and expenses
incurred in the normal course of business. Mosler owed Consulier $666,859 and
$462,351 at year ends 1996 and 1995 resulting from these transactions. Interest
is paid on the outstanding balance at the rate of 9.25%.
In January 1996, Consulier advanced $107,343 to AVM Properties, Ltd. Interest
accrued on this short-term advance at the rate of 7.0%. This advance was reduced
to $7,343 in February 1996 and was subsequently repaid. This advance was
collateralized by unencumbered real estate owned by AVM Properties, Ltd.
(B) OTHER
For other related party transactions see Notes 5, 6(a), and 7.
F-15
<PAGE> 38
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(C) NOTES RECEIVABLE - RELATED PARTIES
Notes receivable - related parties consist of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Mosler (see Note 11(c)(1)) $ 2,500,000 $ 2,500,000
Mosler Auto Care Center,
Inc. (see Note 11(c)(2)) 430,558 430,558
----------- -----------
2,930,558 2,930,558
Less excess of face
amount of note over
carrying cost of
real estate 758,202 758,202
----------- -----------
Notes receivable $ 2,172,356 $ 2,172,356
=========== ===========
</TABLE>
Interest income relating to the above notes totaled $255,896 in 1996 and
$271,469 in 1995.
(C)(1) SALE AND LEASEBACK OF REAL ESTATE
In 1989, Consulier sold and partially leased-back real estate to Mosler. The
property was transferred, subject to a pledge on bond indebtedness, in exchange
for Mosler's promissory note for $2,500,000. The note originally paid interest
at 12%. This rate was reduced to prime plus 1% (9.5% at December 31, 1994). On
February 1, 1996 the prime rate was lowered by .25% which changed the interest
rate to 9.25%. Principal on the note is payable at maturity in December 2001.
Simultaneously with the execution of the deed, Consulier entered into a lease
with Mosler for approximately 6,000 square feet of the property. This lease was
terminated in 1994 when the Company's principal offices were moved to Tequesta,
Florida.
The transaction resulted in a sales price of $758,202 in excess of the carrying
cost of the building and has been accounted for as a sale leaseback with a
related party. Accordingly, the excess has been offset against the note
receivable from Mosler. The excess will be recorded as a capital contribution to
the extent of any reduction in the principal balance of the note receivable.
(C)(2) SALE OF AUTOMOBILE OPERATIONS
In 1990, Consulier sold its automobile manufacturing business to Mosler Auto
Care Center, Inc. ("MACC"), a company wholly- owned by Mosler. As consideration
for the purchase, MACC executed a promissory note for $750,000, which note was
personally guaranteed by Mosler. This promissory note accrued interest at an
annual rate of 12% until November 1993 when the rate was reduced to the one
month U.S. Dollar London Interbank Offering Rate (one month U.S. Dollar Libor -
5.50000 at January 2, 1997). The note provided for monthly payment of interest
only for the first year. Monthly principal and interest payments of $16,338 were
to be paid over the following five year period.
On October 31, 1993 MACC sold the automobile business to U.S. Electricar, Inc.
("Electricar") of Santa Rosa, California in exchange for 1,000,000 shares of
Electricar restricted common stock,
F-16
<PAGE> 39
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and production royalties payable over a fifteen year period. At the time of the
sale, Consulier held an option to repurchase the automobile business at net book
value. In exchange for waiving this option, MACC granted Consulier an option to
purchase the 1,000,000 shares of Electricar restricted stock at a price of $.50
per share. Consulier will also receive any production royalty payments arising
out of the sale.
Principal payments on the MACC note were suspended in October 1993 when MACC
sold the automobile business to Electricar. The note is payable on May 11, 2001,
and has an outstanding balance of $430,559.
NOTE 12 - BUSINESS SEGMENT INFORMATION
Information related to Consulier's operations in its different industry segments
is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES AND INVESTMENT INCOME:
Automotive parts
distribution $ 3,487,964 $ 2,639,175
Investments 1,855,290 1,927,218
Corporate 35,829 61,544
----------- -----------
$ 5,379,083 $ 4,627,937
=========== ===========
OPERATING PROFITS (LOSSES):
Automotive parts
distribution $ 395,371 $ 395,200
Investments 1,855,290 1,927,218
Corporate (532,348) (985,003)
----------- -----------
1,718,313 1,337,415
Interest, net 218,344 188,188
Other 4,726 2,800
----------- -----------
Income before income taxes $ 1,941,383 $ 1,528,403
=========== ===========
IDENTIFIABLE ASSETS:
Automotive parts
distribution $ 3,202,996 $ 1,526,937
Investments 2,124,147 2,370,329
Corporate 3,517,100 2,985,056
----------- -----------
$ 8,844,243 $ 6,882,322
=========== ===========
</TABLE>
F-17
<PAGE> 40
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - ROYALTY AGREEMENT
In April 1996, the Company agreed to purchase and begin distribution of CRA-Z
Soap, a hand cleaner designed for use by tradesmen. The Company agreed to pay
$.50 per bar of soap royalty to the manufacturer upon sale of the product.
Further, in exchange for this purchase and for agreeing to negotiate a financing
agreeement for manufacturing costs the manufacturer agreed to pay Southeast
Automotive 3.5% of all net sales. As sales through December 31, 1996 have been
minimal, no amounts have been recorded by the company under this agreement.
F-18
<PAGE> 41
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
FORM 10-KSB ITEM 13(A) EXHIBITS
The following exhibits are incorporated by reference to prior filings by
Consulier in an effective registration statement under the Securities Act or in
reports filed pursuant to the Exchange Act, except as referenced to pages filed
herein.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
1(a) Underwriting Agreement (1)
1(b) Warrant Exercise Fee Agreement (1)
1(c) Financial Advisory Agreement (1)
3(a) Articles of Incorporation of Consulier (1)
3(b) Amendments to Articles of Incorporation of Consulier (2) (3)
3(c) By-Laws of Consulier (1)
4(a) Form of Warrant Agreement (1)
4(b) Form of Underwriters Warrant (1)
4(c) Form of common stock certificate (1)
4(d) Form of specimen warrant (1)
4(e) Form of preferred stock certificate (2)
10(a) Escrow Agreement
10(b) Lease Agreement
10(c) Agreement of Plan of Merger between Southeast Automotive Parts,
Inc. of Dade, Inc. into Southeast Automotive Acquisition
Corporation (6)
10(d) Articles of Merger, Southeast Automotive Parts of Dade, Inc. into
Southeast Automotive Acquisition Corporation (6)
10(e) Promissory Note of Consulier for $3,000,000 dated April 1, 1990
(5) 10(f) Security Agreement between Consulier and Mosler dated
April 16, 1990 (5) 10(g) Purchase and Sale Agreement between
Consulier and Mosler Auto Care Center, Inc., regarding sale of
automobile business (7)
10(h) Promissory Note of Mosler Auto Care Center, Inc., dated March 31,
1990, regarding sale of automobile business (2)
10(i) Research and Development Funding Agreement between Mosler Auto
Care Center, Inc., and Consulier dated April 1, 1990 (3)
10(j) Agreement of Merger between Consulier and WBM Engines, Inc.,
effective December 31, 1989 (2)
10(k) Purchase and Sale Agreement between Consulier and Warren B. Mosler
regarding sale of real estate (2)
10(m) Promissory Note of Warren B. Mosler for $2,500,000 dated December
31, 1989 regarding sale of real estate (2)
10(n) Mortgage Indenture regarding Bonds and Class B Warrants dated June
30, 1989 (8)
10(o) Agreement between Mosler Auto Care Center, Inc., and Consulier
dated October 31, 1993, relinquishing Consulier's option to
repurchase the automobile business in exchange for option to
purchase U.S. Electricar, Inc. restricted stock at $.50 per share,
and for the right to future royalty payments (9)
10(p) Royalty Agreement, Covenant Not to Compete and Security Agreement
between Mosler Auto Care Center, Inc., and U.S. Electricar, Inc.,
dated October 31, 1993 (9)
</TABLE>
E-1
<PAGE> 42
<TABLE>
<S> <C>
10(q) Employment Agreement dated May 16, 1994, between George E. Mount
and Consulier wherein George E. Mount is hired as President and
CEO for a term of two years (10)
10(r) Purchase and Royalty Agreement between Masters Marketing and
Development, Inc., and Southeast Automotive Acquisition
Corporation, dated April 11, 1996, concerning CRA-Z Soap hand
cleaner.
11 Statement regarding computation of earnings per share (see page
E-3)
20 Notice of corporate action regarding election of new directors (4)
21 List of subsidiaries of Consulier (see page E-4)
27 Financial Data Schedule (for SEC use only).
99(a) Limited Partnership Agreement of Adams, Viner & Mosler, Ltd. (5)
</TABLE>
- -------------------------------------------------------------
1 - Incorporated by reference to Registrant's Registration Statement on Form
S-18, effective May 25, 1989
2 - Incorporated by reference to Registrant's Current Report on Form 8-K filed
December 31, 1989 and March 31, 1990
3 - Incorporated by reference to Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1992
4 - Incorporated by reference to Registrant's Current Report on Form 8-K filed
April 16, 1990
5 - Incorporated by reference to Registrant's Current Report on Form 8-K filed
March 1, 1991
6 - Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1989
7 - Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1991
8 - Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1993.
9 - Incorporated by reference to Registrant's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1994.
E-2
<PAGE> 1
EXHIBIT 10(r)
CONSULIER ENGINEERING, INC.
Purchase and Royalty Agreement between Masters Marketing and Development, Inc.,
and Southeast Automotive Acquisition Corporation, dated April 11, 1996,
concerning CRA-Z Soap hand cleaner.
AGREEMENT
This Agreement is made and entered into on this 11th day of April, 1996
by and between MASTERS MARKETING AND DEVELOPMENT, INC. ("Masters") and SOUTHEAST
AUTOMOTIVE ACQUISITION CORPORATION ("Southeast").
WHEREAS, Masters manufactures and sells a bar type hand cleaner known
as Cra-Z Soap ("Product"), and
WHEREAS, Masters desires to raise additional capital for the company
through the sale of said product, and
WHEREAS, Southeast has agreed to purchase $600,000.00 worth of the
product pursuant to the terms contained herein and further to negotiate a
financing agreement regarding manufacturing costs of masters in accordance with
the terms contained herein, and
WHEREAS, in exchange for said purchase of product by Southeast and the
agreement to negotiate a financing agreement regarding manufacturing costs,
masters is willing to give Southeast a total of 3.5% of all net sales of Master,
payable monthly commencing six months from the date of this agreement and
monthly thereafter. Said percentage shall by payable in either cash or in an
equivalent amount of product.
NOW, THEREFORE, in consideration of TEN AND NO/100 DOLLARS ($10.00), in
the receipt and sufficiency of which is hereby acknowledged, the mutual premises
and covenants contained herein, the parties agree as follows:
1. Masters agrees to sell to Southeast and Mosler 400,000 Three hundred
gram bars of the product as a purchase price of $1.50 per bar for a
total of $600,000.00.
2. Masters will deliver 200,000 bars of said product to Southeast and
Mosler within five (5) days from the date of this Agreement. The
remaining 200,000 bars will be delivered by Masters to Southeast and
Mosler within sixty (60) days from the date of this Agreement.
3. Upon delivery of the initial 200,000 bars of the product, Southeast
and Mosler will pay to Masters the sum of $400,000.00. The balance of
the purchase price shall be due and payable at rate of $.50 per bar as
the product is sold by Southeast and Mosler.
4. This Agreement shall insure to the benefit of and be binding upon
the parties, their successors and assigns.
5. Masters agrees to provide Southeast with a monthly report of all
Masters' sales. masters agrees to allow Southeast access to Masters'
books in order to verify sales reports upon reasonable notice.
6. The parties hereto agree and acknowledge that this Agreement
contains the understanding between the parties and that neither is
relying upon any additional agreement, either oral or written, in
entering into this agreement.
E-3
<PAGE> 2
MASTERS MARKETING AND DEVELOPMENT, INC.
By: /s/ Richard Herman
------------------
Richard Herman
President
SOUTHEAST AUTOMOTIVE ACQUISITION CORPORATION
By: /s/ Bernardo Davila
-------------------
Bernardo Davila
President
E-4
<PAGE> 1
EXHIBIT 11
CONSULIER ENGINEERING, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Primary and Fully Diluted:
Net income $1,210,841 $ 942,403
========== ==========
Shares used in computation:
Weighted average number of
common shares outstanding 2,500,764 2,517,056
Common stock equivalents
from assumed issuances
using treasury stock
method -
Stock options and
warrants 17,946 147,375
---------- ----------
Total 2,518,710 2,664,431
========== ==========
Net income per share:
Net income per share $ .48 $ .35
========== ==========
</TABLE>
E-5
<PAGE> 1
EXHIBIT 21
CONSULIER ENGINEERING, INC.
LIST OF SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation Names
- -------------------- ------------- ---------------
<S> <C> <C>
Southeast Automotive Florida Southeast
Acquisition Southeast Tools
Corporation
Consulier Business Florida None
Services, Inc.
</TABLE>
E-6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 558
<SECURITIES> 0
<RECEIVABLES> 1,774
<ALLOWANCES> 44
<INVENTORY> 2,384
<CURRENT-ASSETS> 4,720
<PP&E> 787
<DEPRECIATION> 550
<TOTAL-ASSETS> 8,844
<CURRENT-LIABILITIES> 967
<BONDS> 1,275
0
0
<COMMON> 26
<OTHER-SE> 6,562
<TOTAL-LIABILITY-AND-EQUITY> 8,844
<SALES> 3,524
<TOTAL-REVENUES> 3,524
<CGS> 2,241
<TOTAL-COSTS> 2,241
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</TABLE>
