<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 September 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)
(561) 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 November 3, 1997, there were 2,444,459 outstanding shares of common stock,
par value $0.01 per share.
1
<PAGE> 2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1997 (Unaudited)
and December 31, 1996 . . . . . . . . . . . . . . 3
Consolidated Statements of Income at
three and nine month periods ended September 30,
1997 and 1996 (Unaudited) . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows at
nine month periods ended September 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 . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities . . . . . . . . . . . . . . 12
Item 3. Defaults upon Senior Securities . . . . . . . . . 12
Item 4. Submission of Matters to Vote of Security
Holders . . . . . . . . . . . . . . . . 12
Item 5. Other information . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 13
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
<PAGE> 3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
- ------------------------------------------------ ------------ ------------
(Unaudited)
<S> <C> <C>
Current :
Cash (Notes 1 and 5) $ 54,912 $ 557,639
Receivables (Note 2) 746,790 676,383
Receivables - related parties (Note 11(a)) 835,680 666,859
Notes receivable - related parties (Note 11(c)) 430,559 430,558
Inventories (Notes 1 and 3) 2,922,760 2,383,976
Other current assets 108,240 4,213
------------ ------------
Total current assets 5,098,941 4,719,628
Property and equipment, net of
accumulated depreciation of $562,135
in 1997 and $550,457 in 1996 1,500,500 237,190
Limited partnership interest (Notes 1 and 5) 2,140,319 2,124,148
Note receivable - related parties (Note 11(b)) 1,741,798 1,741,797
Patents and other assets 102,415 21,480
------------ ------------
$ 10,583,973 $ 8,844,243
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------
LIABILITIES:
Current :
Accounts payable and accruals $ 232,127 $ 188,663
Income taxes (Notes 1 and 8) 48,597 93,939
Notes payable - banks (Note 6(a)) 1,760,000 402,018
Notes payable - related parties (Note 6(c)) 374,926 282,597
------------ ------------
Total current liabilities 2,415,650 967,217
Bonds payable (Note 6(b)) 1,275,000 1,275,000
Deferred income taxes (Notes 1 and 8) 14,765 14,766
------------ ------------
Total liabilities 3,705,415 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 4,345,603 3,887,767
------------ ------------
7,253,046 6,795,210
Less treasury stock at cost - 101,648 shares
in 1997 and 62,538 shares in 1996 (374,488) (207,950)
------------ ------------
Total stockholders' equity 6,878,558 6,587,260
------------ ------------
$ 10,583,973 $ 8,844,243
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 733,170 $ 864,564 $ 2,500,886 $ 2,719,019
Commission income -- -- -- 1,015
----------- ----------- ----------- -----------
733,170 864,564 2,500,886 2,720,034
----------- ----------- ----------- -----------
Operating costs and expenses:
Cost of goods sold 363,818 588,061 1,413,177 1,762,023
Selling, general and
administrative 559,970 366,418 1,376,413 936,096
Research and development expense 42,938 37,927 123,988 128,391
----------- ----------- ----------- -----------
966,726 992,406 2,913,578 2,826,510
----------- ----------- ----------- -----------
Operating (loss) (233,556) (127,842) (412,692) (106,476)
----------- ----------- ----------- -----------
Other income (expense):
Investment income - related party 344,502 752,022 995,150 1,477,381
Interest income - related parties 88,433 72,215 262,546 238,653
Interest expense - other (63,237) (25,004) (157,536) (74,468)
Other income $ 26,360 $ 11,788 46,596 15,788
----------- ----------- ----------- -----------
396,058 811,021 1,146,756 1,657,354
----------- ----------- ----------- -----------
Income before income taxes 162,502 683,179 734,064 1,550,878
Income taxes 70,293 247,866 276,229 583,641
----------- ----------- ----------- -----------
Net income $ 92,209 $ 435,313 $ 457,835 $ 967,237
=========== =========== =========== ===========
Net income per share $ 0.04 $ 0.17 $ 0.18 $ 0.38
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 457,835 $ 967,237
Adjustments to reconcile net income to net
cash used in operations:
Depreciation 63,009 71,976
Amortization 14,227 10,599
Investment income - related party (995,150) (1,477,381)
Investment in the High Risk Opportunities Fund L.P. -- (117,785)
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets (84,901) 34,421
(Increase) in inventories (538,784) (1,154,934)
(Increase) in other assets (89,741) --
Increase in accounts payable and accruals 43,464 118,986
(Decrease) increase in income taxes payable (45,342) 142,641
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (1,175,383) (1,404,240)
----------- -----------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (1,326,321) (47,876)
Distributions from partnership interest 884,025 1,167,725
Loans to related parties (168,821) (152,794)
----------- -----------
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (611,117) 967,055
----------- -----------
FINANCING ACTIVITIES:
Repayment of bank and other loans (2,018) (3,199)
Borrowings 1,452,329 575,000
Purchase of stock for the treasury and stock options (166,538) (36,944)
----------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,283,773 534,857
----------- -----------
(DECREASE) INCREASE IN CASH (502,727) 97,672
CASH, BEGINNING OF PERIOD 557,639 321,920
----------- -----------
CASH, END OF PERIOD $ 54,912 $ 419,592
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
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:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1997
------------ -----------
<S> <C> <C>
Raw materials $ 71,154 $ 63,235
CRA-Z Soap 1,898,788 1,606,006
Finished goods 996,818 758,735
Obsolescence reserve (44,000) (44,000)
----------- -----------
$ 2,922,760 $ 2,383,976
</TABLE>
6
<PAGE> 7
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 $4,024 for the quarter ended September 30, 1997
and $16,171 year to date. These investment's are accounted for under the equity
method. Following is a summary of the operations of AVM (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
Revenues $10,305 $14,987 $29,556 $32,694
Costs and expenses 4,561 5,126 13,403 13,483
------- ------- ------- -------
Net income $ 5,744 $ 9,861 $16,153 $19,211
======= ======= ======= =======
Company's share of
net income $ 340 $ 747 $ 978 $ 1,460
======= ======= ======= =======
</TABLE>
Consulier owned approximately 9% and 12% 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 September 30, 1997 and 1996, respectively.
7
<PAGE> 8
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
third quarter of 1997 and also year to date. For the third quarter, net income
decreased $343,104 or 79% to $92,209 from $435,313 in the third quarter of 1996.
Year to date, net income decreased $509,402 or 53% to $457,835 from $967,237 in
1996. Revenues decreased $131,394 in the third quarter of 1997 compared to 1996.
Revenues year to date decreased $218,133. Engineering consulting revenues
declined along with a slowdown in sales of the company's Southeast automotive
parts wholesale subsidiary.
Research and Development expenditures increased 12% in the third quarter to
$42,938 from $37,927 in 1996. Year to date R&D expenditures are $123,988 in 1997
compared to $128,391 in 1996. One of the primary reasons R&D increased in the
third 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 TopperTM and hand-held powered hacksaw.
Consolidated selling, general and administrative expenses increased 53% in the
third quarter from $366,418 to $559,970 and increased 47% from $936,096 to
$1,376,413 in the first nine 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 $98,234 in the quarter and $116,366 year to date.
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 in January 1998.
The move was completed in the third quarter and all leased space turned over to
the landlords.
8
<PAGE> 9
Investment income from Consulier's AVM limited partnership interest and HRO
interest was $995,150 in the first nine months of 1997, a 33% decrease from 1996
income of $1,477,381. On October 1, 1996 Consulier reduced its partnership
interest in AVM by $292,403 which reduced the income distribution in 1997. The
annualized return on investments was 63% year to date compared to 85% in the
nine months of last year.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1997, Consulier's cash and cash equivalents
decreased $502,727. Working capital decreased $1,069,120 in 1997 primarily due
to the acquisition of the building for Southeast Auto. Cash provided by
operating activities decreased primarily due to lower income from operations.
Cash used for investing activities reflects the acquisition of the building in
Medley, Florida along with related improvements. 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 TopperTM design work, review of drawings
for plastic molding feasibility, ease of manufacture, development of 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
9
<PAGE> 10
either party added. In addition to the monthly payment, Gugel received a one
time set-up fee of $21,289. 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 TopperTM 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.
For the nine months of 1997 CRA-Z Soap sales have amounted to $47,436. The
Company currently has approximately $1,900,000 of CRA-Z Soap in inventory. The
Company purchased this large amount of inventory due to the advantageous price
that was offered. If smaller quantities had been ordered from the manufacturer
the unit price per bar would have been much higher.
The Company was very optimistic when it contracted to purchase this large amount
of inventory that CRA-Z Soap would be an instant success. That has not happened
even though everyone in the Company has worked very hard over the last year and
a half to make CRA-Z Soap a known product.
Recently, two full time sales representatives have been hired to promote CRA-Z
Soap. Plans are to increase the number of sales rep's to ten in the coming year.
The plan is to sell CRA-Z Soap to major distributors that have existing product
lines and customers. Also, large international corporation's with multi-location
manufacturing plants.
CRA-Z Soap is not only skin friendly, it's also earth friendly. There are no
caustic chemicals or environmentally damaging petrochemicals. The product is
totally water soluble and biodegradable.
On October 30, 1997, Consulier Engineering, entered into a purchase agreement
with Biosafe Systems, LLC to purchase up to forty (40%) percent interest in
Biosafe.
10
<PAGE> 11
Bio Safe Systems, a New Jersey based Limited Liability Corporation, is
a start-up company that currently develops and markets environmentally safe
products that are alternatives to traditionally toxic pesticides. These products
include the Zero Tol brand of products that utilize a formulation using
peroxigens as the principal active ingredients. Peroxigen chemistry uses the
power of free radical oxidation to kill all forms of microorganisms that may be
pathogenic to plants, without causing harm to the plant. Peroxigens immediately
bio-degrade upon reacting with either microorganisms or organic material such as
soil, into components of oxygen and water; leaving behind no toxic residues.
Consulier paid Bio Safe $70,000 upon execution of the agreement and will pay
$16,363.64 monthly for eleven months, a total of $250,000, for a forty percent
ownership interest. Bio Safe will use the funds for working capital, advertising
and promotion, federal and state product registration, and field trial expenses.
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 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 third 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 third 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 third 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.
12
<PAGE> 13
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)
(B) CURRENT REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three month period
ended September 30, 1997.
13
<PAGE> 14
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: November 12, 1997 Ralph D. Butler
Secretary/Treasurer
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 11
CONSULIER ENGINEERING, INC.
COMPUTATION OF EARNINGS PER SHARE
PRIMARY AND FULLY DILUTED
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net income $ 92,209 $ 435,313 $ 457,835 $ 967,237
========== ========== ========== ==========
Shares used in
computation:
Weighted average
number of
common shares
outstanding 2,478,243 2,499,495 2,490,949 2,501,190
Common stock
equivalents
from assumed
issuances using
the treasury
stock method -
Stock options and
warrants 31,257 13,191 33,841 13,191
---------- ---------- ---------- ----------
Primary and fully
diluted earnings
per share 2,509,500 2,512,686 2,524,790 2,514,381
========== ========== ========== ==========
Primary and fully
diluted earnings
per share $ .04 $ .17 $ .18 $ .38
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 55
<SECURITIES> 0
<RECEIVABLES> 2,013
<ALLOWANCES> 44
<INVENTORY> 2,923
<CURRENT-ASSETS> 5,099
<PP&E> 2,063
<DEPRECIATION> 562
<TOTAL-ASSETS> 10,584
<CURRENT-LIABILITIES> 2,416
<BONDS> 1,275
0
0
<COMMON> 26
<OTHER-SE> 6,853
<TOTAL-LIABILITY-AND-EQUITY> 10,584
<SALES> 2,501
<TOTAL-REVENUES> 2,501
<CGS> 1,413
<TOTAL-COSTS> 1,413
<OTHER-EXPENSES> 1,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157
<INCOME-PRETAX> 734
<INCOME-TAX> 276
<INCOME-CONTINUING> 458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 458
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
