<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 March 31, 1998
[ ] 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)
(561) 745-9149
------------------------------------------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
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 of each of the issuer's classes of common
equity, as of the latest practicable date:
AS OF MAY 11, 1998, THERE WERE 4,876,918 OUTSTANDING SHARES OF COMMON STOCK, PAR
VALUE $0.01 PER SHARE.
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 1998 (Unaudited)
and December 31, 1997......................................... 3
Consolidated Statements of Income at
three month periods ended March 31,
1998 and 1997 (Unaudited)..................................... 4
Consolidated Statements of Cash Flows at
three month periods ended March 31, 1998
and 1997 (Unaudited).......................................... 5
Notes to Consolidated Financial
Statements (Unaudited)........................................ 6
Item 2. Management's Discussion and Analysis or
Plan of Operation.................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 13
Item 2. Changes in Securities......................................... 13
Item 3. Defaults upon Senior Securities............................... 13
Item 4. Submission of Matters to a Vote of Security
Holders...................................................... 13
Item 5. Other Information............................................. 13
Item 6. Exhibits and Reports on Form 8-K ............................. 14
SIGNATURES............................................................. 15
2
<PAGE> 3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
ASSETS
<S> <C> <C>
CURRENT:
Cash (Note 1) $ 235,498 $ 7,013
Receivables (Note 2) 477,421 664,154
Receivables - related parties (Note 11(a)) 886,919 861,585
Notes receivable - related parties (Note 11(c)) 430,558 430,558
Inventories (Notes 1 and 3) 2,160,848 2,058,263
Other current assets 108,500 105,700
----------- -----------
TOTAL CURRENT ASSETS 4,299,744 4,127,273
Property and equipment, net (Notes 1, 4 and 6) 1,747,990 1,537,554
Limited partnership interests (Notes 1 and 5) 2,276,995 2,132,798
Notes receivable - related parties (Note 11(b)) 1,741,797 1,741,797
Non-current inventory (Notes 1 and 3) 600,000 600,000
Patents and other assets 194,964 239,366
----------- -----------
$10,861,490 $10,378,788
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT:
Accounts payable and accruals $ 306,133 $ 250,765
Income taxes (Notes 1 and 8) 0 5,231
Notes payable - banks (Note 6(a)) 2,366,560 1,748,775
Note payable - related parties (Note 6(c)) 136,481 352,297
----------- -----------
TOTAL CURRENT LIABILITIES 2,809,174 2,357,068
Bonds payable (Note 6(b)) 1,275,000 1,275,000
Deferred income taxes (Notes 1 and 8) 17,253 14,766
----------- -----------
TOTAL LIABILITIES 4,101,427 3,646,834
----------- -----------
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 2,881,823 2,881,823
Retained earnings 4,320,983 4,292,874
----------- -----------
7,228,426 7,200,317
Less treasury stock at cost - 123,574 shares
in 1998 and 1997 (Note 9(c)) (468,363) (468,363)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 6,760,063 6,731,954
----------- -----------
$10,861,490 $10,378,788
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
--------- --------
<S> <C> <C>
REVENUES:
Net sales $ 636,228 $844,107
--------- --------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 334,282 493,952
Selling, general and
administrative 484,756 383,658
Research and development expense 36,512 29,404
--------- --------
855,550 907,014
--------- --------
Operating loss (219,322) (62,907)
--------- --------
OTHER INCOME (EXPENSE):
Investment income - related party (Note 5) 250,747 299,901
Interest income - related parties 57,892 87,187
Interest expense - other (59,640) (40,493)
Other income 15,540 6,750
--------- --------
264,539 353,345
--------- --------
Income before income taxes 45,217 290,438
Income taxes (Notes 1 and 8) 17,015 107,000
--------- --------
Net income $ 28,202 $183,438
========= ========
Basic and diluted earnings per share $ 0.01 $ 0.07
========= ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Note 10)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 28,202 $ 183,438
Adjustments to reconcile net income to net
cash used in operations:
Depreciation 25,868 24,533
Amortization 6,278 2,099
Investment income - related party (250,747) (299,901)
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other current assets 175,191 (21,986)
(Increase) in inventories (102,585) (123,182)
(Increase) in patents and other assets (136,197) --
Increase in accounts payable and accruals 55,368 166,959
(Decrease) increase in income taxes payable (2,744) 10,387
--------- ---------
NET CASH USED IN OPERATIONS (201,366) (57,653)
--------- ---------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (236,304) (75,900)
Distributions from partnership interest 287,944 311,769
Investment in BioSafe Systems, LLC. (49,092)
Loans to related parties (190,482) (51,647)
--------- ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (187,934) 184,222
--------- ---------
FINANCING ACTIVITIES:
Repayment of bank loans (22,215) (827)
Borrowings 640,000 --
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 617,785 (827)
--------- ---------
INCREASE IN CASH 228,485 125,742
CASH, BEGINNING OF YEAR 7,013 557,639
--------- ---------
CASH, END OF PERIOD $ 235,498 $ 683,381
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have been
included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended December 31, 1997.
The consolidated financial statements include Consulier Engineering, Inc. (the
"Company") and its wholly-owned subsidiaries, Southeast Automotive Acquisition
Corporation, Consulier Business Services, Inc., and C-6 Products 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:
March 31, December 31,
1998 1997
---------- ----------
Raw materials $ 29,652 $ 26,161
CRA-Z Soap 1,007,803 1,010,561
Finished goods 1,167,393 1,065,541
Obsolescence reserve (44,000) (44,000)
---------- ----------
$2,160,848 $2,058,263
========== ==========
Non-Current Inventory $ 600,000 $ 600,000
========== ==========
The non-current portion of inventory consists of $600,000 of CRA-Z soap which
the company believes will take longer than one year to sell.
6
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CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3. LIMITED PARTNERSHIP INTEREST
The limited partnership interest consists of Consulier's investment in Adams,
Viner & Mosler, Ltd. ("AVM")and The High Risk Opportunities Fund L.P. ("HRO").
Investment income from HRO was $8,743 for the quarter ended March 31, 1998.
These investment's are accounted for under the equity method. Following is a
summary of the operations of AVM (in thousands):
Three Months Ended
March 31,
---------------------------------
1998 1997
------- -------
Revenue $ 9,057 $ 9,130
Costs and expenses 4,466 4,348
------- -------
Net income $ 4,591 $ 4,782
======= =======
Consulier's share of
earnings $ 115 $ 295
======= =======
Consulier owned approximately 9% and 10% of AVM's capital as of March 31,1998
and 1997, respectively. Based on capital and earnings distributions provided in
the partnership agreement, Consulier was allocated approximately 2.5% and 6% of
AVM's earnings at March 31, 1998 and 1997, respectively.
7
<PAGE> 8
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
1998 1997
---------- ----------
<S> <C> <C>
Numerator:
Net income, numerator for basic and diluted
Earnings per share $ 28,202 $ 183,438
Denominator:
Denominator for basic Earnings
per share, weighted - average shares 2,438,459 2,499,495
Effect of dilutive securities:
Stock options 36,141 23,630
Warrants 7,868 --
---------- ----------
Dilutive potential common shares 44,009 23,630
Denominator for diluted Earnings
per share, adjusted weight -
average shares 2,482,468 2,523,125
========== ==========
Basic earnings per share .01 .07
Diluted earnings per share .01 .07
</TABLE>
Options to purchase 12,500 shares of common stock at prices ranging from $4.38
to $5.00 per share were not included in the computation of diluted earnings per
share because the options exercise price was greater than the average market
price of the common shares and, therefore, the effect would be antidilutive.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Consulier Engineering, Inc. ("Consulier") experienced a decrease in net income
for the first quarter of 1998. Net income decreased $155,236 or 85% to $28,202
from $183,438 in 1997. Revenues decreased 25% in the first quarter of 1998
compared to 1997.
Net sales of the Company's Southeast Automotive parts distribution segment
represent 99% of Consulier's net sales. Sales for this segment decreased 25% or
$212,346 to $629,961 in 1998 compared to $842,307 in the first quarter of 1997.
Selling, General and Administrative expenses were $286,155 in 1998 compared to
$293,840 in 1997, a decrease of $7,685. Other Income/Expense increased $12,501
in the first quarter due to an increase in interest expense. The automotive
parts distribution segment experienced a loss before taxes of $49,494 in 1998
compared to income before taxes of $24,298 in 1997.
In April 1997 Consulier contracted to purchase six patents for tool and ladder
related products. A wholly owned subsidiary was formed, C-6 Products, Inc., to
develop, manufacture, sell and distribute the products. The ladder Tool
Topper(TM) line of products is currently being developed. The products segment
had $124,213 of expenses in the first quarter of 1998 with no comparable
expenses in 1997. The major expenditures were for research and development
$51,174, marketing $56,563 and travel $9,585. The injection molds for the Tool
Topper(TM) are currently being produced with production expected to begin in
late 1998.
Investment income from Consulier's AVM limited partnership interest and HRO was
$250,747 in 1998, a 16% decrease from 1997 income of $299,901. The first quarter
annualized return on investments was 47% compared to 56% in the first quarter
last year.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, Consulier's cash totaled $235,498 as compared to $7,013 at
December 31, 1997. During the quarter Consulier's cash increased $228,485. The
Company has relied
9
<PAGE> 10
on cash flows from its limited partnership investment in AVM supplemented, as
necessary, by bank borrowings and loans from Mr. Mosler to finance working
capital and capital expenditures.
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 that the AVM limited partnership interest has 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 redeem the
partnership interest, there can be no assurance that AVM will not do so in the
future. Consulier believes that it may require additional financing to complete
agreements which are currently in place. The timing and amount of Consulier's
additional financing needs will depend, among other things, upon the timing of
Tool Topper(TM) construction of injection molds.
FUTURE OUTLOOK
Based on AVM's current operations and operating results, Consulier expects
continued returns in 1998 on its limited partnership investment. However, there
is no guarantee that the returns of the past can be maintained.
Consulier's automotive parts wholesale distribution business experienced a
decrease in sales in the first quarter but management is now seeing an
improvement in sales due to the introduction of new product lines. This
business, Southeast Automotive, intends to expand its business through the
development of a wider customer base. At the end of 1997 Southeast had
approximately $1,600,000 of hand cleaner CRA-Z Soap in inventory. A portion,
$600,000 of this inventory is classified as non-current because Consulier
believes it will take longer than one year to sell.
In 1997, Consulier entered into a contract for the purchase of six patents for
tools and related products. Several are related to work platform and tool
holding attachments to ladders tentatively being called our Tool Topper(TM) line
10
<PAGE> 11
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 Florida corporation
was established to develop, manufacture, sell and distribute the patented
products. This corporation, C-6 Products, Inc. ("C-6"), is a wholly owned
subsidiary of Consulier. During 1998, C-6 is continuing development of the Tool
Topper(TM) Workstation product. This patented product is designed so it can be
easily and quickly attached to any stepladder, converting it into a work
platform. C-6 has completed design and rapid prototyping of the Tool Topper(TM)
Workstation. An agreement has been reached with a large production plastic
injection molding company to manufacture our Tool Topper(TM) Workstation for us.
Production tooling orders were placed for all required tools. Initiation of
production is scheduled for August 1998. Packaging and handling requirements and
other production issues will be addressed this summer. Marketing is underway
utilizing the prototype Tool Topper(TM) Workstations and sales brochures.
However, marketing cannot be finalized until actual production parts are
available. This is primarily because of the need for the product and its marking
and packaging to pass quality assurance requirements of the retailers.
In October 1997, Consulier purchased a minority equity interest in BioSafe
Systems, LLC., a New Jersey limited liability corporation ("BioSafe"). Biosafe
develops and markets environmentally safe products, alternatives to
traditionally toxic pesticides.
Recent public concern over environmental practices and the effect of toxic
chemicals on the environment are producing increasing pressure on agricultural
concerns to limit their use. BioSafe uses peroxigen chemistry as a pesticide,
algaecide and fungicide. Peroxigen chemistry uses the power of free radical
oxidation to kill all forms of micro-organisms that may be pathogenic to plants,
without causing harm to the plant. Peroxigens immediately biodegrade upon
reacting with either micro-organisms or organic material such as soil, into
components of oxygen and water leaving behind no toxic residues.
BioSafe's initial product, ZeroTol(TM), utilizes a formulation using peroxigens
as the principal active ingredients. No other company currently has or has
requested a US EPA registration for the use of peroxigens for these purposes.
11
<PAGE> 12
BioSafe's federal EPA registration for its ZeroTol(TM) product was received in
1998 permitting its use on ornamental plants and turf applications.
Additionally, the U.S. Patent Office granted a patent for ZeroTol(TM).
Consulier has an agreement to purchase up to a 40% equity interest in BioSafe.
During 1998 management has continued to increase its investment in BioSafe.
BioSafe sales have improved in 1998 as new distributors and product users have
been added and advertising in trade magazines initiated.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information contained in this report, certain matters
discussed in Management's Discussion and Analysis or Plan of Operation are
forward looking statements which involve risks and uncertainties including, but
not limited to statements regarding Consulier's planned capital expenditure
requirements, cash and working capital requirements, Consulier's expectations
regarding the adequacy of current financing arrangements, product demand and
market growth, other statements regarding future plans and strategies,
anticipated events or trends, and similar expressions concerning matters that
are not historical facts. It should be noted that Consulier's actual results
could differ materially from those contained in such forward looking statements
mentioned above due to adverse changes in any number of factors that affect
Consulier's business including, without limitation, risks associated with
investing in and the marketing of Consulier's Tool Topper(TM) and CRA-Z Soap
products, manufacturing and supply risks, risks concerning the protection of
Consulier's patents, reliance upon distributors, regulatory risks, risks of
expansion, product liability and other risks described herein.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 1998, 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 first quarter of 1998, 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 first quarter of 1998, 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 TO A VOTE OF SECURITY HOLDERS
During the first quarter of 1998, the Company did not submit any matters to a
vote of security holders.
ITEM 5. OTHER INFORMATION
The Company has no other information to report which might otherwise be reported
under Form 8-K.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT DESCRIPTION
------- -----------
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 March 31, 1998.
14
<PAGE> 15
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant, 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: May 12, 1998 Ralph D. Butler
Secretary/Treasurer
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 235
<SECURITIES> 0
<RECEIVABLES> 1,839
<ALLOWANCES> 44
<INVENTORY> 2,761
<CURRENT-ASSETS> 4,300
<PP&E> 2,352
<DEPRECIATION> 604
<TOTAL-ASSETS> 10,861
<CURRENT-LIABILITIES> 2,809
<BONDS> 1,275
0
0
<COMMON> 26
<OTHER-SE> 6,734
<TOTAL-LIABILITY-AND-EQUITY> 10,861
<SALES> 636
<TOTAL-REVENUES> 636
<CGS> 334
<TOTAL-COSTS> 334
<OTHER-EXPENSES> 521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60
<INCOME-PRETAX> 45
<INCOME-TAX> 17
<INCOME-CONTINUING> 28
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
