CONSULIER ENGINEERING INC, 10KSB40, 1998-04-15

CONSULIER ENGINEERING INC
10KSB40, 1998-04-15
MOTOR VEHICLE SUPPLIES & NEW PARTS

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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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE TRANSITION PERIOD FROM _________ TO __________

COMMISSION FILE NUMBER 0-17756

Consulier Engineering, Inc.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)

Florida 59-2556878
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Indentification No.)

169 Tequesta Drive, Suite 31E
Tequesta, FL 33469
- ----------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)

(561) 745-9149
---------------------------
(Issuer's Telephone Number)

Securities registered under Section 12(b) of the Exchange Act:

Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None

Securities registered under Section 12(g) of the Exchange Act:

COMMON STOCK AND REDEEMABLE WARRANTS
------------------------------------
(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 [ ]

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. [X]

The Issuer's revenues for the fiscal year ended December 31, 1997 totaled
$3,320,963.

As of March 23, 1998, there were 2,438,459 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 23, 1998 based on
the average bid and asked price of such date was $2,517,672.

<PAGE> 2

CONSULIER ENGINEERING, INC.

1997 FORM 10-KSB ANNUAL REPORT

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
PART I
<S> <C> <C>
Item 1. Description of Business................................................................... 3

Item 2. Description of Property................................................................... 9

Item 3. Legal Proceedings......................................................................... 9

Item 4. Submission of Matters to a Vote of
Security Holders.......................................................................... 9

PART II

Item 5. Market for Common Equity and Related
Stockholder Matters....................................................................... 10

Item 6. Management's Discussion and Analysis or Plan
of Operation.............................................................................. 11

Item 7. Financial Statements...................................................................... 14

Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...................................................... 14

PART III

Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act........................................................................ 15

Item 10. Executive Compensation..................................................................... 16

Item 11. Security Ownership of Certain Beneficial Owners
and Management............................................................................. 17

Item 12. Certain Relationships and Related Transactions............................................. 19

Item 13. Exhibits and Reports on Form 8-K........................................................... 20

</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, 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 shareholder. 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. At December 31, 1997, the limited
partnership interest is $2,000,000 and the loan from Mosler was repaid in 1992.

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.

In April 1997 Consulier contracted with Gugel Enterprise, Inc. to purchase six
patents for tool and ladder related products. Several of the patents are for
work platform and tool holding attachments to ladders. A new Florida corporation
named C-6 Products, Inc. ("C-6") was formed to develop, manufacture, sell and
distribute the patented products. C-6 is a wholly-owned subsidiary of Consulier.
These are now being called the Tool Topper(TM) line of products. The balance of
the patents are related to powered hack saws which are powered by 110/220 volt
AC, pneumatic and battery power sources.

Consulier contracted with Gugel Enterprise, Inc. for marketing services
necessary to sell and distribute the Tool Topper(TM) line.

<PAGE> 4

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.

PRODUCTS

Southeast's primary products are transmission, engine, torque strut and
hydraulic mounts. Southeast sells approximately 200 different after-market
mounts for domestic and imported vehicles. 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 85 percent of GM's rear wheel drive vehicles
produced from 1954 to 1994. Efforts have also been directed to foreign
automobiles where 30 new products were developed in 1997 introducing mount
products through year 1996 vehicles.

Other products include over 180 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 100 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 service customers.

Flywheels are purchased from USA/OEM. 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 is currently a distributor of CRA-Z Soap Hand Cleaner, 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. Southeast's initial marketing efforts
targeted mechanics, spray painters, shop personnel, printers and all other
craftsmen. CRA-Z Soap is a high density, long lasting cleaner which is non-toxic
and biodegradable. CRA-Z soap comes in bar form only. It is best used with the
custom CRA-Z Soap dispenser which grinds four bars into granular form providing
approximately 1600 washes. Sales have lagged due to the cost, size and
appearance of the dispenser. One 300 gram bar, the form in which CRA-Z Soap is
manufactured, outlast two gallons of the leading liquid or paste products.
Although CRA-Z Soap is primarily known as a hand cleaner, users have found a
myriad of other applications and general uses. These include clothes washing
applications and pre-scrubbing, household cleaning, auto, bus and marine
washing, etc.

<PAGE> 5

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.

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.

Southeast completed the development of a new 137 page mount catalog for
distributors in 1998. 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.

Sales of CRA-Z Soap have lagged behind expectations. Therefore, a concentrated
marketing effort is being planned for 1998.

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 14 employees. Three 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, Consulier borrowed $3,000,000 from Chairman Warren Mosler and
invested the entire proceeds of the loan in a limited partnership interest in
AVM. 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

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general partner. Mosler is one of the founders of AVM and is a general partner
of the general partner of AVM.

As of December 31, 1997 and 1996, Consulier's limited partnership interest
represented approximately 9% and 10% 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 6% of AVM's earnings during
1997, and 8% of earnings during 1996.

Under the partnership agreement, Consulier may withdraw all or any portion of
its capital upon 30 days written notice. AVM's general partner may also expel
Consulier from the partnership, on 30 days written notice, through return of the
balance of Consulier's capital.

In January 1996 Consulier invested $100,000 in The High Risk Opportunities Fund
L.P., (the HRO Fund") a limited partnership formed to invest in an unrestricted
range of financial instruments. As of December 31,1997, Consulier's equity in
the HRO Fund was $135,715.

BIOSAFE SYSTEMS, LLC

On October 31, 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. Consulier is entitled to representation on
Biosafe's Board of Managers.

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 microorganisms that may be pathogenic to plants,
without causing harm to the plant. Peroxigens immediately biodegrade upon
reacting with either microorganisms 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.
BioSafe's first federal EPA registration for its ZeroTol(TM) product is expected
in 1998 permitting its use on ornamental plants and turf applications. BioSafe
will concentrate the majority of its initial marketing effort towards commercial
greenhouses, nurseries and the turf and turf management industries.

Planned applications and uses for ZeroTol(TM) include general use, turf
applications, water treatment, foliar plant spray, drench applications and
disinfectant applications.

(3) CORPORATE SEGMENT

GENERAL

Consulier's Corporate segment includes management and finance activities as well
as a consulting, engineering, new product development and business management.
Wholly owned subsidiaries include Southeast, C-6 and a small leasing company
named Consulier Business

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Services, Inc. Formerly included was a high performance engine repair and
overhaul business which was discontinued in March 1994.

CORPORATE EMPLOYEES

As of December 31, 1997, the Corporate segment of Consulier's business had eight
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

In February 1996, Charles E. Spaeth was appointed acting President and CEO. Mr.
Spaeth, also on Consulier's Board of Directors, filled that role until the
appointment of Michael G. Maguire to that position in April 1997. Ralph D.
Butler has continued to serve as Secretary, Treasurer and Chief Financial
Officer, positions he has held since May 1996.

Most of Consulier's patents and engineering technology were developed by a
former employee, James Shaffer, who left the Company in September 1992.

Consulier's main business focus has been and will continue to be the purchase or
establishment of businesses as subsidiaries and the engineering, development and
manufacturing of its own concepts and inventions. Additionally, Consulier will
continue to provide consulting services in these areas to inventors and
businesses requiring outsourcing services.

STAGE OF DEVELOPMENT

As of December 31, 1997, the Engineering Products Segment of Consulier has been
engaged in research and development of a variety of automotive and industrial
products. As many as 20 other products and concepts were considered in the last
several years, some requiring market analysis and/or preliminary patent
investigation activities.

Limited development activity on three patents continued through the first half
of 1997.

In December 1997, Consulier returned the "Shaffer Patents" receiving a release
from liability. Consulier has retained the patent prototypes or models,
proprietary designs, computer programs and trade secrets relative to the patents
as corporate assets.

Consulier incurred direct research and development costs, including product
development and patent amortization, totaling $168,781 in 1997 and $163,383 in
1996.

PRODUCTS

All products currently under development are in support of Consulier's
subsidiaries. The major effort in 1997 was the design, development and product
launch of the Tool Topper(TM) Workstation for C-6. Also for C-6, conceptual
design work necessary to improve the powered, hand held hacksaw patents was
completed and conceptual work for other Tool Topper(TM) related product lines
and accessories began and is underway.

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Conceptual design activity for an improved CRA-Z soap dispenser is also underway
for Southeast. The goal is to produce a lower cost, more compact and attractive
dispenser which will handle only one or two bars.

(3)(B) CONSULTING ACTIVITIES

BACKGROUND

On a limited basis, Consulier has continued to provide engineering and
management consulting services. To date these activities have not been
profitable. Consulier had not been actively pursuing consulting work unless it
was tied in support of our subsidiaries or technology areas with synergy to
Consulier's business interests. However, in 1998 Consulier will be looking for
strategies to improve it's productivity. With that improved productivity,
Consulier seeks to assist inventors and small businesses develop ideas. Those
with synergy to Consulier's overall aims and goals will be considered for
licensing or purchase.

(3)(C) CONSULIER BUSINESS SERVICES, INC.

Consulier Business Services, Inc. is a wholly owned subsidiary involved in the
leasing of two 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 15
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
common 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. Electricar is currently under reorganization.
No royalty payments have been received to date.

(4) HOUSEHOLD AND TOOL PRODUCTS

In April 1997 Consulier purchased six patents for tool and ladder related
products.

The patents are for work platform and tool holding attachments to ladders and
should lead to several new product lines. Initial development was launched by
C-6 in April of a product which

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attaches to a standard stepladder, converting it into a handy work platform for
standard household chores. These concepts are being called the Tool Topper(TM)
line of products. The initial product which quickly straps to the top of any
standard stepladder is called the Tool Topper(TM) Workstation. Development has
progressed through design definition and 3-D modeling. Rapid prototypes for
several of the parts are on order. Six sets of prototypes of the Tool Topper(TM)
Workstation are scheduled for completion in 1998. Production availability is
scheduled for Fall of 1998.

C-6 contracted with Gugel Enterprise, Inc. for marketing services necessary to
sell and distribute the Tool Topper(TM). Using computer based 3-D virtual models
and artists conceptions, Gugel has been marketing the Tool Topper(TM)
Workstation. An aggressive marketing campaign is scheduled for 1998 when
prototypes are available and when production availability dates have been firmed
up. The balance of the patents are related to powered hack saws powered by
110/220 volt AC, pneumatic and battery power sources.

ITEM 2. DESCRIPTION OF PROPERTY

In 1997 Consulier reduced its office space as a cost reduction measure.
Consulier now occupies approximately 1,520 square feet in a building owned by
AVM Properties Ltd. ("Properties"), an entity affiliated with Consulier Chairman
Mosler, located at 169 Tequesta Drive, Tequesta, Florida. The space is leased
month-to-month with a monthly rental of $1,250 which includes sales tax of
$75.00.

Consulier's facilities are believed to be suitable for present requirements and
anticipated future uses.

Southeast previously leased five warehouse units comprising 22,000 square feet
of a building in Miami, month-to-month, at a cost of $6,200 per month. In May
1997, Southeast purchased a 47,000 square foot industrial warehouse in Medley,
Florida, for $1,100,000. Southeast occupied the building in September 1997.
Southeast's automotive distribution business occupies approximately 35,000
square feet and offices for its financial, marketing and administrative
personnel occupy 2,000 square feet. Southeast leases approximately 10,000 square
feet of the building to an automotive engine component manufacturer as a
distribution center. A three year lease was entered into at $4,200 per month
with an option to renew for three years at $4,500 per month.

This warehouse is expected to give Southeast the additonal space for growth it
will need for the next several years.

ITEM 3. LEGAL PROCEEDINGS

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The election of six directors and the approval of independent auditors were
submitted to a vote of shareholders at the Company's Annual Meeting held October
28, 1997. Warren B. Mosler, Alan R. Simon, Charles E. Spaeth, Burck E. Grosse,
William R. Locke, and Richard Hornstrom were elected upon receipt of the
following votes for / abstain, 2,266,878 /1,130. BDO Seidman, LLP was approved
as independent auditors by a vote for / against / abstain of 2,266,728 / 300 /
980.

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PART II

ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE AND DIVIDENDS

The following table sets forth, for the periods indicated, the high and low bid
prices for Consulier's common stock as reported by NASDAQ.

HIGH LOW
---- ---
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

YEAR ENDED DECEMBER 31, 1997:

First quarter $5.2500 $3.5000
Second quarter 4.7500 3.7500
Third quarter 5.0000 4.0000
Fourth quarter 4.2500 4.0000

As of March 23, 1998, there were approximately 592 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 (Symbol: CSLR) is listed on The NASDAQ SmallCap Market
and has been traded since Consulier's initial public offering in May 1989. On
February 26, 1998 the Company was notified by The NASDAQ Stock Market, Inc.
("NASDAQ") that the Company's securities would be delisted from the NASDAQ
SmallCap Market for failure to maintain 500,000 shares in the "public float".
The public float is defined as shares that are not held directly or indirectly
by an officer or director of the issuer or by any other person who beneficially
owns more than 10 percent of the total shares outstanding. The Company has
394,429 shares in the public float.

To remedy the deficiency, the Company decided to double the number of shares
outstanding, which would double the number of shares in the public float,
bringing the Company into compliance with the NASDAQ maintenance standard.
Doubling the number of shares outstanding is accomplished by effecting a
two-for-one stock split. However, the Company did not have sufficient authorized
capital for a stock split. Accordingly, by written consent in lieu of a meeting,
all of the directors agreed on March 9, 1998 to amend the Company's authorized
capital stock from 5,000,000 common shares to 25,000,000 common shares. The
Company's director's beneficially own more than 80 percent of the outstanding
common shares of the Company; thus the requisite action of the board of
directors and shareholders was simultaneously taken. The directors also approved
the stock split, which is not a matter requiring shareholder vote.

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On March 24, 1998 the Company filed Articles of Amendment at the Florida State
Department increasing the Company's authorized capital.

On March 24, 1998 the Company's officers filed an Issuer 10b-17 Report at NASDAQ
disclosing the terms of the stock split, which is scheduled for April 15, 1998.
On such date the Company shall file a Form 8-K Current Report and a Form 10-C
with the Securities and Exchange Commission and NASDAQ disclosing the terms of
the stock split and that the number of outstandng shares has doubled.

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 represented 99% of Consulier's net sales in 1997 and
1996. This segment's sales decreased 6% to $3,291,952 after increasing 35% to
$3,487,964 in 1996. The 1997-96 decrease in sales are attributable to the
extreme competitive forces in the automotive - parts market. Although the
customer base has remained fairly constant, orders have been for a decreasing
number of units.

The automotive parts distribution segment experienced a loss before taxes of
$396,583 in 1997 compared to income before taxes of $395,391 in 1996. Selling,
General and Administrative expenses increased dramatically in 1997. Selling,
General and Administrative expenses were $1,637,000 or 49.7% of net sales in
1997 compared to $851,000 or 24.4% of net sales in 1996. Selling, General and
Administrative expenses increased $786,000 in 1997.

Bad debt expense was $331,128 in 1997 with no comparable charges in 1996. This
charge was the result of an amount that was expended to bring inventory into the
United States that was deemed unrecoverable.

Payroll expenses were $433,583 in 1997 as compared to $299,815 in 1996. This
increase was the result of an increase in officers' salaries, hiring of three
new employees and temporary workers involved with the move from leased space to
Southeast's new building.

Interest expense was $276,609 in 1997 as compared to interest expense of
$109,057 in 1996. The increase in interest expense was primarily due to an
increase in bank borrowings and the interest paid on those loans.

In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income." SFAS
130 establishes standards for reporting and presentation of comprehensive income
and its components in a full set of general-purpose financial statements. SFAS
130 is effective for periods beginning after December 15, 1997, and is not
expected to have a material impact on the Company's consolidated financial
statements.

In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS requires that public business
enterprises report certain information about operating segments, their products,
and services, the geographic areas in which they operate and their major
customers. SFAS 131 is effective for periods beginning after December 15, 1997
and is not expected to require significant revision of prior disclosures.

<PAGE> 12

The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.

The Company is utilizing both internal and external resources to identify,
correct or reprogram, and test the systems for the year 2000 compliance. It is
anticipated that all reprogramming efforts will be complete by December 31,
1998, allowing adequate time for testing. To date, confirmations have been
received from the Company's primary processing vendors that plans are being
developed to address processing of transactions in the year 2000. Management
believes the year 2000 compliance expense and related potential effect will not
have a material effect on the Company's earnings.

CORPORATE RESEARCH AND DEVELOPMENT - During 1997 Consulier direct expenditures
on research and development totaled $168,781. This represents an increase of 3%
from 1996 direct expenditures of $163,383. During 1997 an analysis was made of
the active patents to determine if development should continue. All development
of the previous active patents was discontinued. The major effort in 1997 was
the design and development of the Tool Topper(TM) Workstation. In addition, C-6
expended $133,000 in marketing expenses associated with the Tool Topper(TM)
Workstation.

INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $1,385,963 in 1997, a 24% decrease from 1996 income of $1,831,143.
This represents annualized returns of 69% and 83%, 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 to purchase CRA-Z Soap inventory.

CONSOLIDATED OPERATING RESULTS - Consulier's consolidated net income for the
year ended December 31, 1997 was $405,107, or $.16 per share compared to
$1,210,841, or $.48 per share for 1996.

OUTLOOK FOR 1998

Based on AVM's current operations and operating results over the past five
years, management expects continued returns in 1998 on Consulier's limited
partnership investment. However, there is no guarantee that the returns of 69%
and 83% in 1997 and 1996 respectively can be maintained. Sales in the automotive
parts distribution segment should continue to improve in 1998 due to the
introduction of new products and the strengthening of existing product lines.
Southeast has high expectations for Cra-Z Soap in 1998. As of year end Southeast
had approximately $1,600,000 of CRA-Z Soap inventory on hand. CRA-Z Soap has not
had the rapid growth in sales that were anticipated with large inventory
purchases. The product has been very slow to catch on. For the year 1997, CRA-Z
Soap sales were $55,000. For the first quarter of 1998, CRA-Z Soap sales were
$22,364.

The Hand Cleaner Industry generates approximately $3.4 billion in gross sales
each year. Southeast's goal is to achieve gross sales of $1,000,000 in CRA-Z
Soap for 1998. After analyzing the sales organization used over the past years
it has been determined that there was no proper sales and marketing plan for
CRA-Z Soap. Additionally, there was insufficient manpower and sales expertise at
Southeast.

<PAGE> 13

Robert Kurlander has been hired to lead the CRA-Z Soap sales efforts worldwide.
He commenced employment in January of 1998. He has been working closely with
Bernardo Davila, the CEO of Southeast.

Mr. Davila and Mr. Kurlander have determined that the focus of Southeast with
regard to CRA-Z Soap is to build a brand name and get the product in the hands
of distributors as quickly as possible. The first course of action was to create
the CRA-Z Soap Web Site.

Secondly, Southeast is in the process of hiring up to four salespeople who will
focus solely on CRA-Z Soap. Southeast expects this to be completed within the
next 45 days. The salespeople will be hired to follow up on the "leads" from the
Web Site, trade shows, magazine advertisements, and other related business for
CRA-Z Soap.

Production tooling contracts for the Tool Topper(TM) Workstation have been
implemented. Business arrangements and plans have been completed for a major
U.S. plastic molding company to provide initial production quantities in the
fall of 1998.

Research and development expenditures are expected to continue at current
levels. No other significant fluctuations in costs or expenses are anticipated
in 1998.

Consulier will continue in its efforts to expose its engineering products and
technology to manufacturers as well as distributors.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997, Consulier's cash totaled $7,013 as compared to $557,639 at
December 31, 1997. During fiscal 1997, Consulier's cash decreased by $550,626.
Net cash used in operations decreased $760,775 from $2,218,267 in 1996 to
$1,457,492 in 1997. This was primarily due to decreased inventory purchases in
1997. Working capital decreased $1,036,000 in 1997 primarily due to the
acquisition of the building and related remodeling for Southeast. Cash provided
by operating activities decreased primarily due to lower income from operations.
Cash provided by financing activities reflects the proceeds of credit line loan.

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 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.

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 had inventories of
approximately $2.6 million as of

13
<PAGE> 14

December 31, 1997. 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.

FORWARD LOOKING STATEMENTS

Statements made in this Management's Discussion and Analysis or Plan of
Operation and elsewhere in this Annual Report that state Consulier's or
management's intentions, hopes, beliefs, expectations or predictions of the
future contain forward looking statements. Such forward looking statements
include, without limitation, 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.

ITEM 7. FINANCIAL STATEMENTS

See index to Financial Statements on page F-1.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

14
<PAGE> 15

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. 48 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. 47 1985 1982 to present, private practice of law, Boca Raton,
Simon, Esq. Florida.

Charles E. 73 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. 67 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 division.

William R. 51 1992 1971 to present, First Bank of Florida, currently
Locke Consumer Loan Officer and Coordinator of Indirect
Dealer Lending.

Richard N. 37 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.

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, 48, is the Chairman of the Board of Directors. Mr. Mosler has
served as Chairman since the inception of Consulier and as Chief Executive
Officer from inception to

15
<PAGE> 16

March 1989 and from August 1989 to May 1994. From 1983 to the present, Mr.
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.

Michael G. Maguire, 60, is the President and Chief Executive Officer. He was
elected to these offices in April 1997. Prior to joining Consulier in October
1995 as Manager of Business Development, he was employed in engineering,
technology planning and program management at United Technologies Corporation's
Pratt & Whitney Division. From 1960 to 1976 Mr. Maguire worked at Pratt &
Whitney's Commercial Engine Business Division in East Hartford, Connecticut.
Transferring to the Government Engine and Space Propulsion Division in West Palm
Beach, Florida, Mr. Maguire held various management positions in their
engineering and program management departments from 1976 through 1993.

Ralph D. Butler, 51, 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 for the
last three years.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------- LONG TERM
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
- ---------------------------- ---- ------ ------------
<S> <C> <C> <C>
Warren B. Mosler 1997 $ 75,000 -
Chairman of the Board 1996 $ 75,000 -
of Directors 1995 $ 75,000 -

Michael G. Maguire 1997 (1) -
President and Chief 1996 (1) -
Executive Officer 1995 (1) -

Ralph D. Butler 1997 (1) -
Secretary, Treasurer 1996 (1) -
and Chief Financial Officer 1995 (1) -

</TABLE>

(1) Total annual salary and bonus was less than $100,000.

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 executive officers during 1997 requiring
disclosure.

16
<PAGE> 17

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 1997 fiscal year. No stock options were exercised by any of the named
executive officers during 1997. All options presented are exercisable.

<TABLE>
<CAPTION>
Number Value of Unexercised
Unexercised Options In-the-Money Options
Name at 1997 Year-End at 1997 Year-End
- ---- ------------------- ---------------------
<S> <C> <C>
Warren B. Mosler 3,510 $ 6,143

</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
TITLE NATURE OF PERCENT OF
OF NAME AND ADDRESS BENEFICIAL CLASS AT
CLASS OF BENEFICIAL OWNER OWNERSHIP DECEMBER 31, 1997
----- ------------------- ----------- ------------------
<S> <C> <C> <C>
Common Warren B. Mosler 1,986,690 (1) 81.4%
Stock 483 S. Beach Road
Hobe Sound, FL 33455

</TABLE>

(1) Includes options to acquire 3,510 shares of Consulier Common Stock.

<PAGE> 18

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, 1997:

Common Alan R. Simon 90,000 (2) 3.7%
Stock 7777 Glades Rd., 204
Boca Raton, FL 33434

Common Richard N. Hornstrom 15,950 .7%
Stock 15607 Cochester Rd.
Tampa, Florida 33647

Common Burck E. Grosse 12,500 (3) .5%
Stock 11 Huntly Circle
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 Ralph D. Butler 200 (4)
Stock 2391 Old Dixie Hwy.
Riviera Beach, FL 33404

Common All directors and 2,025,340 82.2%
Stock executive officers
as a group, excluding
duplications (7 people)

</TABLE>

(1) Includes stock options to acquire 3,510 Consulier shares at $2.50 per
share.

(2) Consists of options to acquire shares of Consulier common stock from Mr.
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.

(4) Does not exceed 1% of the class.

18
<PAGE> 19

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. In 1997 Consulier reduced its office space by
approximately 730 square feet. 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 Mr. 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 Mr. Mosler.

SALE AND LEASEBACK OF REAL ESTATE

In December 1989, Consulier engaged in a sale and partial leaseback of real
estate to Mr. Mosler, subject to existing bond indebtedness collateralized by
the property. This real estate is located in Riviera Beach, Florida. In
consideration for the property, Mr. 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
interest rate was reduced to the one month LIBOR in October 1997. The note
matures in December 2001.

Simultaneously with the execution of the sale, Consulier entered into a lease
with Mr. 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.

19
<PAGE> 20

INTEREST RATE ADJUSTMENTS

In January 1993, the Affiliated Transaction Committee of the Board of Directors
reviewed the promissory notes receivable from MACC and Mr. 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. In October 1997, the Committee reduced the
rate on the property 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.

20
<PAGE> 21

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed by the undersigned, thereunto duly authorized.

CONSULIER ENGINEERING, INC.

Dated: April 13, 1998 By: /s/ MICHAEL G. MAGUIRE
----------------------------------
Michael G. Maguire
President and Chief Executive Officer

In accordance with the Exchange Act, 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 13, 1998
of Directors

/s/ MICHAEL G. MAGUIRE
- ----------------------------------
Michael G. Maguire President, Chief April 13, 1998
Executive Officer
/s/ RALPH D. BUTLER
- ----------------------------------
Ralph D. Butler Secretary, Treasurer, April 13, 1998
Chief Financial Officer
/s/ ALAN R. SIMON
- ----------------------------------
Alan R. Simon Director April 13, 1998

/s/ CHARLES E, SPAETH
- ----------------------------------
Charles E. Spaeth Director April 13, 1998

/s/ BURCK E. GROSSE
- ----------------------------------
Burck E. Grosse Director April 13, 1998

- ----------------------------------
William R. Locke Director April 13, 1998

/s/ RICHARD N. HORNSTROM
- ----------------------------------
Richard N. Hornstrom Director April 13, 1998

</TABLE>

21
<PAGE> 22

CONSULIER ENGINEERING, INC. AND SUBSIDIARIES

FORM 10-KSB ITEM 7 FINANCIAL STATEMENTS

<S> <C>
Financial Statements:

Report of Independent Certified Public
Accountants..................................................................... F-2

Consolidated Balance Sheets at December 31,
1997 and 1996................................................................... F-3

Consolidated Statements of Income for the
years ended December 31, 1997 and 1996.......................................... F-4

Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997 and 1996.................................. F-5

Consolidated Statements of Cash Flows for the
years ended December 31, 1997 and 1996.......................................... F-6

Notes to Consolidated Financial Statements...................................... F-7
</TABLE>

F-1
<PAGE> 23

A. 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, 1997 and 1996 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, 1997 and 1996, 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 /s/BDO Seidman, LLP
April 9, 1998

F-2
<PAGE> 24

CONSULIER ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

DECEMBER 31, DECEMBER 31,
ASSETS 1997 1996
- ----------------------------------------- -------------- ----------------
<S> <C> <C>
CURRENT:
Cash (Note 1) $ 7,013 $ 557,639
Receivables (Note 2) 664,154 676,383
Receivables - related parties (Note 11(a)) 861,585 666,859
Notes receivable - related parties (Note 11(c)) 430,558 430,558
Inventories (Notes 1 and 3) 2,058,263 2,383,976
Other current assets 105,700 4,213
------------------------------------

TOTAL CURRENT ASSETS 4,127,273 4,719,628

Property and equipment, net (Notes 1, 4 and 6) 1,537,554 237,190
Limited partnership interests (Notes 1 and 5) 2,132,798 2,124,148
Notes receivable - related parties (Note 11(b)) 1,741,797 1,741,797
Non-current inventory (Notes 1 and 3) 600,000 --
Patents and other assets 239,366 21,480
------------------------------------

$10,378,788 $8,844,243
====================================

LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------

LIABILITIES:
CURRENT:
Accounts payable and accruals $250,765 $188,663
Income taxes (Notes 1 and 8) 5,231 93,939
Notes payable - banks (Note 6(a)) 1,748,775 402,018
Note payable - related parties (Note 6(c)) 352,297 282,597
---------------- ---------------

TOTAL CURRENT LIABILITIES 2,357,068 967,217

Bonds payable (Note 6(b)) 1,275,000 1,275,000
Deferred income taxes (Notes 1 and 8) 14,766 14,766
---------------- ---------------

TOTAL LIABILITIES 3,646,834 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 2,881,823 2,881,823
Retained earnings 4,292,874 3,887,767
---------------- ---------------

7,200,317 6,795,210
Less treasury stock at cost - 123,574 shares
in 1997 and 62,538 shares in 1996 (Note 9(c)) (468,363) (207,950)
---------------- ---------------

TOTAL STOCKHOLDERS' EQUITY 6,731,954 6,587,260
---------------- ---------------

$10,378,788 $8,844,243
================ ===============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3

<PAGE> 25

CONSULIER ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------

1997 1996
----------------- -----------------
<S> <C> <C>
REVENUES:
Net sales $3,320,963 $3,523,793
----------------- -----------------

OPERATING COSTS AND EXPENSES:
Cost of goods sold 1,901,195 2,240,822
Selling, general and
Administrative 2,215,735 1,256,565
Research and development expense 168,781 163,383
----------------- -----------------

4,285,711 3,660,770
----------------- -----------------

Operating loss (964,748) (136,977)
----------------- -----------------

OTHER INCOME (EXPENSE):
Investment income - related party (Note 5) 1,394,613 1,855,290
Interest income - related parties 319,288 331,649
Interest expense - other (228,259) (113,305)
Other income 128,628 4,726
----------------- -----------------

1,614,270 2,078,360
----------------- -----------------

Income before income taxes 649,522 1,941,383
Income taxes (Notes 1 and 8) 244,415 730,542
----------------- -----------------

Net income $405,107 $1,210,841
================= =================

Basic and diluted earnings per share $0.16 $0.48
================= =================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4

<PAGE> 26

CONSULIER ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------------------
TREASURY STOCK ADDITIONAL TOTAL
--------------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------------- ------------ ------------ ------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1996 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
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

Net income
for the year -- -- -- -- -- 405,107 405,107

Purchase of
shares for
Treasury
(Note 9(c)) -- -- (61,036) (260,413) -- -- (260,413)
--------------- ------------ --------- ----------- --------------- --------------- ---------------

Balance,
December 31,
1997 2,562,033 $25,620 (123,574) ($468,363) $2,881,823 $4,292,874 $6,731,954
=============== ============ ========= =========== =============== =============== ================
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-5
<PAGE> 27

CONSULIER ENGINEERING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 10)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------

1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 405,107 $ 1,210,841
Adjustments to reconcile net income to net
Cash used in operations:
Depreciation 92,105 98,059
Provision for uncollectible accounts -- (5,999)
Amortization 21,088 14,132
Investment income - related party (1,394,613) (1,855,291)
Investment in the High Risk Opportunities Fund L.P. -- (100,000)
Changes in operating assets and liabilities:
(Increase) in receivables and other current assets (280,285) (12,105)
(Increase) in inventories (274,287) (1,733,850)
Increase in accounts payable and accruals 62,101 16,325
(Decrease) increase in income taxes payable (88,708) 149,621
----------- -----------

NET CASH USED IN OPERATIONS (1,457,492) (2,218,267)
----------- -----------

INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (1,392,469) (64,165)
Capital distribution -- 292,403
Distributions from partnership interest 1,338,017 1,789,431
Loans to related parties (194,726) (204,499)
----------- -----------

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (249,178) 1,813,170
----------- -----------

FINANCING ACTIVITIES:
Repayment of bank and other loans (2,018) (4,837)
Borrowings 1,418,475 682,597
Purchase of stock for the treasury and stock options (260,413) (36,944)
----------- -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES 1,156,044 640,816
----------- -----------

(DECREASE) INCREASE IN CASH (550,626) 235,719
CASH, BEGINNING OF YEAR 557,639 321,920
----------- -----------

CASH, END OF YEAR $ 7,013 $ 557,639
=========== ===========
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-6
<PAGE> 28

CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996

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
Tool Topper(TM) Workstation 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 11(c)) 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. The Tool Topper(TM) Workstation has been
designed and developed through a wholly-owned subsidiary, C-6 Products, Inc.

BASIS OF PRESENTATION

The consolidated financial statements include Consulier and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

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> 29
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.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising expenses were $77,551 in
1997 as compared to $52,901 in 1996.

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

Basic earnings per share is based on the weighted average number of common and
common equivalent shares outstanding during each year as follows: 1997 -
2,478,642; 1996- 2,500,764. In both 1997 and 1996, 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

In February 1997, the FASB issued SFAS 129, "Disclosure of Information about
Capital Structure." SFAS 129 provides required disclosures for the capital
structure of both public and nonpublic companies and is effective for fianancial
statements for periods ending after December 15, 1997. The required disclosures
had been included in number of separate SFAS's and opinions. As such, the
issuance of SFAS 129 is not expected to require significant revision of prior
disclosures.

In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income." SFAS
130 establishes standards for reporting and presentation of comprehensive income
and its

F-8

<PAGE> 30
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

components in a full set of general-purpose financial statements. SFAS 130 is
effective for periods beginning after December 15, 1997, and is not expected to
have a material impact on the Company's consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Consulier's financial instruments approximate estimated fair value as of
December 31, 1997 and 1996.

NOTE 2 - RECEIVABLES

Receivables consist of the following:
<TABLE>
<CAPTION>

As of December 31,
--------------------------------------

1997 1996
------------ -----------
<S> <C> <C>
Capital and income
distribution due from AVM $ 160,726 $ 112,781
Trade accounts 482,203 541,677
Employee advances 36,225 36,925
------------ ------------
679,154 691,383
Less allowance for doubtful
trade accounts 15,000 15,000
------------ ------------

$ 664,154 $ 676,383
============ ============
</TABLE>

F-9
<PAGE> 31
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - INVENTORIES

Inventories are summarized as follows:

As of December 31,
---------------------------------

1997 1996
----------- ------------

Raw materials $ 26,161 $ 63,235
CRA-Z Soap 1,010,561 1,606,006
Finished goods 1,065,541 758,735
Obsolescence Reserve (44,000) (44,000)
----------- -----------
$ 2,058,263 $ 2,383,976
=========== ===========
Non - Current inventory $ 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.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

As of December 31,
--------------------------------------

1997 1996
------------ ------------

Building and improvements $ 884,47 $ --
Land 425,000 --
Machinery and equipment 452,973 401,423
Furniture and fixtures 115,227 107,010
Vehicles 237,970 237,970
Leasehold improvements -- 41,244
------------ ------------
2,115,641 787,647
Less accumulated depreciation
and amortization 578,087 550,457
------------ ------------
$ 1,537,554 $ 237,190
============ ============

F-10
<PAGE> 32
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - LIMITED PARTNERSHIP INTEREST AND CONCENTRATION OF CREDIT RISK

5(A) The limited partnership interests consist of Consulier's investment in AVM
and The High Risk Opportunities Fund L.P. ("HRO"). Investment income from HRO
was $8,650 for the year ended December 31, 1997 and $24,147 for year ended
December 31, 1996.

Following is a summary of financial position and results of operations of AVM as
of and for the years ended December 31:

1997 1996
------------- ------------

Cash $14,048,707 $ 8,569,279
Due from brokers 1,409,685 790,944
Securities owned 5,403,669 48,043,581
Customer receivables 913,982 34,570
Investment in affiliate & other assets 10,984,696 7,681,249
------------- ------------
$32,760,739 $65,119,623
============= ============

Due to brokers $ 1,095,059 $ 7,457,369
Securities sold under
Agreement to repurchase -- 26,014,866
Customer payables 5,618,809 7,448,998
Other liabilities 1,510,608 2,086,044
Anticipated partners'
withdrawals 2,655,598 1,683,616
------------- ------------
Total liabilities $10,880,074 $44,690,893
Partners' capital 21,880,665 20,428,730
------------- ------------
$32,760,739 $65,119,623
============= ============
Revenue $40,356,253 $43,799,624
============= ============
Net income $23,231,213 $25,285,907
============= ============
Consulier's share of
Earnings $ 1,385,963 $ 1,831,143
============= ============

Consulier owned approximately 9% and 10% of AVM's capital as of December 31,
1997 and 1996, respectively. Based on capital and earnings distributions
provided in the partnership agreement, Consulier was allocated approximately 6%
and 7% of AVM's earnings during 1997 and 1996, respectively.

Under the partnership agreement, Consulier may withdraw all or any portion of
its capital account upon 30 days written notice. AVM's general partner may also
expel Consulier from the

F-11

<PAGE> 33
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 1997 and 1996, there were no concentrations of credit
risk other than the investment in AVM. 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

During 1997 a Grid Time Promissory Note, at a fixed rate per annum equal to the
Adjusted Eurodollar Rate applicable to such loan plus 1.90%, (7.86875% at
December 31, 1997) in the amount of $2,000,000, of which $1,360,000 was
outstanding at December 31, 1997, was made to Southeast Automotive Acquisition
Corporation that was guaranteed by Warren B. Mosler. Additionally, the credit
line loan of $400,000 at 10.25% was converted to a term loan at prime rate plus
2% with an institution related by common ownership. The amount outstanding under
this credit line loan at December 31, 1997, was $388,775.

(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.

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 was
unpaid. During 1997 Southeast repaid $282,597 to Warren B. Mosler. During 1997
Mr. Mosler advanced a total of $420,192 to Consulier as a non-interest bearing
note. As of December 31,1997 $352,297 remains unpaid.

NOTE 7 - LEASES

Consulier leases office and operating facilities under various month-to-month
leases. Rent expense charged to operations was $69,369 in 1997 and $90,242 in
1996. Of this expense, $18,550 was paid to related parties in 1997 and $23,850
in 1996.

F-12

<PAGE> 34
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - INCOME TAXES

Provisions for federal and state income taxes in the consolidated statements of
income consist of the following:

As of December 31,
-----------------------------

1997 1996
---------- ----------
Current:
Federal $ 208,691 $ 623,766
State 35,724 106,776
---------- ----------
Total income taxes $ 244,415 730,542
========== ==========

Applicable income taxes for financial reporting purposes differ from the amount
computed by applying the statutory federal income tax rate as follows:

As of December 31,
------------------------------
1997 1996
----------- -----------

Tax at statutory rate $ 220,837 $ 660,070
State income tax net
of federal tax benefits 23,578 70,472
----------- -----------
Income taxes $ 244,415 $ 730,542
=========== ============

F-13
<PAGE> 35
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. 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:

1997 1996
------------------------------------ -------------------------------
Weighted Average Weighted Average
Options Exercise Price Options Exercise Price
---------- ----------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at
Beginning of
Year 104,256 $2.97 331,256 $11.00
Forfeited -- -- 227,000 14.66
------- ----- ------- ------

Outstanding and
Exercisable at year end 104,256 $2.97 104,256 $ 2.97
======= ===== ======= ======
</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1997.

Weighted
Range Average Weighted Options Weighted
of Exercise Options Remaining Average Exercisable at Average
Price Outstanding Contractual Life Exercise Price 12/31/1997 Exercise Price
----------- ----------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$. 10 5,000 3.00 $0.10 5,000 $0.10
$2.50 41,756 3.00 $2.50 41,756 $2.50
$3.00 40,000 4.00 $3.00 40,000 $3.00
$4.38 5,000 2.75 $4.38 5,000 $4.38
$5.00 12,500 4.75 $5.00 12,500 $5.00
</TABLE>

F-14
<PAGE> 36
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.

During 1997 Consulier acquired 61,036 shares of Common Stock as Treasury Stock
at a cost of $260,413. During 1996, 12,222 shares were purchased at a cost of
$36,944.

NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid during the years ended December 31, 1997 and 1996 totaled $228,259
and $113,305, respectively. Income taxes paid during 1997 and 1996 totaled
approximately $298,000 and $581,000 respectively. During the current year, the
company reclassified $600,000 of CRA-Z Soap inventory to non-current inventory.

NOTE 11 - RELATED PARTY TRANSACTIONS

(A) CASH ADVANCES

During 1997, Mosler and Consulier continued to share certain costs and expenses
incurred in the normal course of business. Mosler owed Consulier $861,585 and
$666,859 at December 31, 1997 and 1996 resulting from these transactions.
Interest was paid on the outstanding balance at the rate of 9.25% for three
quarters of 1997. The Affiliated Transaction Committee approved a rate change
during the fourth quarter to monthly LIBOR, which was 5.96875%.

(B) OTHER

For other related party transactions see Notes 5, 6(c), and 7.

F-15
<PAGE> 37
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notes receivable - related parties consist of the following:

As of December 31,
---------------------------

1997 1996
---------- ----------

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
---------- ----------

Interest income relating to the above notes totaled $236,631 in 1997 and
$255,896 in 1996.

(C)(1) SALE AND LEASEBACK OF REAL ESTATE

In 1989, Consulier sold to and partially leased-back real estate from 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%. On March 25,1997 the prime rate was increased by .25%
which changed the interest rate to 9.50% which remained constant through the end
of the third quarter. On October 28,1997, The Affiliated Transaction Committee
approved a change in rate to monthly LIBOR (5.96875 % at December 31, 1997).
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 -
5.71875 at January 2, 1998). 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.

F-16

<PAGE> 38
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. 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 $430,558.

NOTE 12 - BUSINESS SEGMENT INFORMATION

Information related to Consulier's operations in its different industry segments
is as follows:

Year ended December 31,
--------------------------------
1997 1996
------------ -------------
REVENUES AND INVESTMENT INCOME:
Automotive parts
Distribution $ 3,291,952 $ 3,487,964
Investments 1,394,613 1,855,290
Corporate 29,011 35,829
------------ ------------
$ 4,715,576 $ 5,379,083
============ ============

OPERATING PROFITS (LOSSES):
Automotive parts
Distribution $ (396,583) $ 395,371
Investments 1,394,613 1,855,290
Corporate (568,165) (532,348)
------------ ------------
429,865 1,718,313
Interest, net 91,029 218,344
Other 128,628 4,726
------------ ------------
Income before income taxes $ 649,522 $ 1,941,383
============ ============

IDENTIFIABLE ASSETS:
Automotive parts
Distribution $ 4,686,696 $ 3,202,996
Investments 2,132,798 2,124,147
Corporate 3,559,294 3,517,100
------------ ------------
$ 10,378,788 $ 8,844,243
============ ============

F-17
<PAGE> 39
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - EARNINGS PER SHARE Year ended December 31,
-----------------------

1997 1996
---- ----
Numerator:
Net income,
numerator for basic and diluted
Earnings per share $405,107 $1,210,841

Denominator:
Denominator for basic Earnings
per share, weighted - average shares 2,478,642 2,500,764

Effect of dilutive securities:
Stock options 29,546 17,945
Warrants 4,395 --
--------- ----------
Dilutive potential common shares 33,941 17,945

Denominator for diluted Earnings
per share, adjusted weighted - average
shares 2,512,583 2,518,709
========= =========

Basic earnings per share $.16 $.48

Diluted earnings per share $.16 $.48

Options to purchase 17,500 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.

NOTE 14 - 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
agreement for manufacturing costs the manufacturer agreed to pay Southeast
Automotive 3.5% of all net sales. As sales through December 31, 1997 have been
minimal, no amounts have been recorded by the company under this agreement.

F-18
<PAGE> 40
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 - SUBSEQUENT EVENT

The company has increased its authorized capital from 5,000,000 common shares to
25,000,000 common shares by amending its Articles of Incorporation. The
Company's Board of Directors and holders of approximately 80 percent of the
Company's outstanding common shares authorized such action by written consent on
March 9, 1998.

Additionally, on April 6, 1998, the company approved a two-for-one split of its
oustanding common shares effective April 15, 1998, in order to maintain its
qualification for trading on the NASDAQ SmallCap Market.

NOTE 16 - SIGNIFICANT FOURTH QUARTER ADJUSTMENT

In the fourth quarter of fiscal 1997, the company made an adjustment related to
amounts expended to bring inventory into the United States that were deemed
unrecoverable. The company wrote off $323,260 of accounts receivable. The net
effect of the write-off was a decrease in net income of $202,406, net of the tax
effect, or $.08 per share.

F-19
<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 (2)
10(b) Lease Agreement (2)
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)
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)
</TABLE>

E-1
<PAGE> 42
<TABLE>
<CAPTION>
<S> <C>
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. (10)
20 Notice of corporate action regarding election of new directors (4)
21 List of subsidiaries of Consulier (see page E-3)
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.
10 - Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1996.

E-2

<PAGE> 1

EXHIBIT 21

CONSULIER ENGINEERING, INC.

LIST OF SUBSIDIARIES OF REGISTRANT

STATE OF
SUBSIDIARY INCORPORATION NAMES
- ---------- ------------- -----
Southeast Automotive Florida Southeast
Acquisition Southeast Tools
Corporation

Consulier Business Florida None
Services, Inc.

C-6 Products, Inc. Florida None

E-3

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 1,956
<ALLOWANCES> 44
<INVENTORY> 2,058
<CURRENT-ASSETS> 4,127
<PP&E> 2,116
<DEPRECIATION> 578
<TOTAL-ASSETS> 10,379
<CURRENT-LIABILITIES> 2,357
<BONDS> 1,275
0
0
<COMMON> 26
<OTHER-SE> 6,706
<TOTAL-LIABILITY-AND-EQUITY> 10,379
<SALES> 3,321
<TOTAL-REVENUES> 3,321
<CGS> 1,901
<TOTAL-COSTS> 1,901
<OTHER-EXPENSES> 2,384
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228
<INCOME-PRETAX> 649
<INCOME-TAX> 244
<INCOME-CONTINUING> 405
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 405
<EPS-PRIMARY> .16
<EPS-DILUTED> .16

</TABLE>