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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, 1999
[ ] 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.
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(Name of small business issuer in its charter)
Florida 59-2556878
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(State or other jurisdiction of (I.R.S Employer Indentification No.)
incorporation or organization)
169 Tequesta Drive, Suite 31E
Tequesta, FL 33469
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(Address of principal executive offices) (Zip Code)
(561) 745-9149
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(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
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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, 1999 totaled
$3,076,395.
As of March 31, 2000, there were 4,889,918 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 28, 2000 based on
the average bid and asked price on such date was $9,933,868.
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CONSULIER ENGINEERING, INC.
1999 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Description of Business....................................... 3
Item 2. Description of Property.......................................10
Item 3. Legal Proceedings.............................................10
Item 4. Submission of Matters to a Vote of
Security Holders..............................................11
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......11
Item 6. Management's Discussion and Analysis or Plan of Operation.....12
Item 7. Financial Statements..........................................15
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...........................15
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act...........................................16
Item 10. Executive Compensation........................................18
Item 11. Security Ownership of Certain Beneficial Owners
and Management................................................20
Item 12. Certain Relationships and Related Transactions................21
Item 13. Exhibits and Reports on Form 8-K..............................22
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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, 1999, the limited
partnership interest is $2,064,215 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.
On August 30, 1999, the sales and marketing contract with Gugel Enterprises,
Inc. was terminated by Consulier. The termination was due to pre-established
sales quotas not being achieved. The sales and marketing of the Tool Topper has
been taken over by the in-house sales personnel at Consulier.
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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. In previous years, efforts have also been directed
to foreign automobiles where 30 new products were developed introducing mount
products through year 1996 vehicles.
Other products include over 200 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 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 the owner and master 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 most other hand cleaners. Southeast's initial
marketing efforts targeted mechanics, spray painters, shop personnel, printers
and all other tradesmen. CRA-Z Soap is a high density, long lasting cleaner.
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. One 300 gram bar, the form in which CRA-Z Soap is manufactured, can
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.
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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.
Southeast has developed a detailed parts catalogue for its distributors.
Distributors are able to provide this catalogue 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. Sales of CRA-Z Soap
increased 93%, or $70,020, in 1999 over 1998. Trade show attendance , internet
sales and promotion is underway for 2000. Management believes sales of CRA-Z
Soap will continue to increase in 2000 and beyond.
RESEARCH AND DEVELOPMENT EXPENDITURES
Product development costs for Southeast's transmission mounts are being funded
primarily by the supplier. Approximately $60,000 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 20 employees, three in manufacturing, three in shipping and
receiving, and fourteen in sales, marketing, management and administration.
(2) INVESTMENTS SEGMENT
INVESTMENT IN AVM, L.P.
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, L.P. ("AVM"). The AVM 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
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U.S. Government securities, other fixed income instruments, and arbitrage
transactions and presently employs 62 people in addition to the four principals
of its general partner. Mosler is one of the founders of AVM and is a principal
of the general partner of AVM.
As of December 31, 1999 and 1998, Consulier's limited partnership interest
represented approximately 11% and 9%, respectively, 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% and 5% of AVM's earnings
during 1999 and 1998, respectively.
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. On September 1, 1998, HRO was placed in
liquidation and all of Consulier's investment in HRO, $150,242, was written off
as a loss.
On October 21, 1999, after 17 years of the broker dealer being known throughout
the financial community as "AVM", the legal name of Adams, Viner, and Mosler,
Ltd. was changed to AVM, L.P. In addition, AVM's general partner, AVM
Associates, converted from a Florida general partnership to AVM, LLC, a Florida
limited liability corporation on October 31, 1999.
BIOSAFE SYSTEMS, LLC
On October 31, 1997 Consulier purchased a 40% 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. Peroxygen 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. Peroxygens 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 was granted
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 management industries.
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BioSafe Systems based in Glastonbury, CT completed a profitable year in 1998
with the introduction of ZeroTol Algaecide/Fungicide to the commercial
greenhouse, nursery and turf industries.
ZeroTol has been well received by professional growers and golf course
superintendents across the country. BioSafe Systems introduced a new class of
pesticide chemistry to these markets that utilizes the power of peroxygen
oxidation to "clean" plant tissue of both disease organisms and the spores that
propagate these organisms. ZeroTol is the only product labeled for Horticulture
that is capable of inactivating algae, bacterial and fungal spores on contact.
BioSafe has developed a well-established national distribution network, serving
the greenhouse and nursery marketplace. In additional, BioSafe has established
distribution in Central and South America. Product registrations have been
secured in Costa Rica, Colombia and Ecuador.
BioSafe System introduced two new products in 1999 to both the horticultural
industry as well as general agriculture. The first product is trademarked as
OxiDate(TM) Bactericide/Fungicide and is labeled for applications to major high
value food crops such as potatoes, leafy vegetables, apples, citrus, stone
fruits, grapes and bananas. BioSafe will concentrate its efforts at expanding
its distribution network to cover a broad-spectrum distribution into the
agricultural markets and will utilize some of the already established
distributors who now carry ZeroTol to accomplish this.
BioSafe will also introduce in 2000, TerraCare Algaecide/Fungicide for use in
the commercial greenhouse/nursery and turf markets. The granular formulation
introduces a new class of peroxygen chemistry that is capable of both killing
and inhibiting algae as well as bacterial and fungal organisms. The TerraCare
product is completely biodegradable into components of oxygen, carbon dioxide
and calcium carbonate (lime). TerraCare will be distributed by the existing
distributors.
BioSafe Systems continues to work towards its goals of introducing peroxygen
chemistry to the agricultural and horticultural industry. BioSafe had revenues
of $1,512,973 for fiscal 1999. Steady and consistent progress has been made with
respect to establishing the ZeroTol algaecide /fungicide product into the
commercial greenhouse/nursery market. Slower progress has been experienced with
respect to introducing ZeroTol to the golf course industry.
While the professional turf industry offers a continuing growth market and
enjoys high profit margins, golf course superintendents do not take on new
products easily. BioSafe Systems is seeing slow and steady progress in this area
and will be introducing a Turf Only product label. This should help properly
position the product within the professional turf market.
OxiDate Bactericide/Fungicide was introduced in 1999 labeled for a variety of
agricultural crops. The EPA granted OxiDate an exemption of tolerance for
pesticide residues. BioSafe experienced interest within the potato market for
potato storage. It is the Company's expectation to continue to target the potato
storage market in 2000 as well as look towards further developing sales of
OxiDate in the Florida marketplace.
BioSafe Systems is expected to continue to grow at a slow and steady pace with
concentration put on establishing positions in the commercial greenhouse/nursery
markets as well professional turf care and potato storage markets.
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BioSafe System expects an increase in sales with the introduction of the new
products as well as the eventual registration of ZeroTol and OxiDate in
California in the second quarter of 2000.
(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 Services, Inc.
CORPORATE EMPLOYEES
As of December 31, 1998, the Corporate Segment of Consulier's business had five
employees engaged in marketing, engineering, management and finance activities,
and three engineers with specialized areas of expertise retained for different
engineering projects on a consulting basis. As of December 31, 1999, Consulier
had five employees engaged in sales, marketing, management, and finance
activities.
(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. Mr. Maguire
resigned from the positions of President and CEO of Consulier, and President of
C-6 Products on February 12, 1999. Mr. Warren B. Mosler, Chairman of the Board
of Consulier, reassumed the position of President and CEO on February 12, 1999.
Ralph D. Butler has continued to serve as Secretary, Treasurer and Chief
Financial Officer, positions he has held since May 1996.
Consulier's main business had been the purchase or establishment of businesses
as subsidiaries and the engineering, development and manufacturing of its own
concepts and inventions.
PRODUCTS
All products currently being sold or marketed are in support of Consulier's
subsidiaries. The major effort in 1998 was the launch of the Tool Topper(TM)
Workstation and accessory line. The products are now on the market and all
engineering has been completed.
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(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 into support of our subsidiaries or technology areas with synergy to
Consulier's business interests.
(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 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.
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(4) HOUSEHOLD AND TOOL PRODUCTS
In April 1997 C-6 Products, Inc. purchased six patents for tool and ladder
related products. The patents are for work platform and tool holding attachments
to ladders. Initial development was launched in April 1997 of a product that
attaches to a standard stepladder, converting it into a handy work platform for
standard household chores, which is the present day Tool Topper(TM) Workstation
and related accessories. The design and development was completed in 1998, and
the Tool Topper is now being sold in the United States.
C-6 contracted with Gugel Enterprise, Inc. for marketing services necessary to
sell and distribute the Tool Topper Workstation. An aggressive marketing
campaign was scheduled for 1999, including attendance at numerous trade shows,
advertising, and Internet related sales and promotions.
On August 30, 1999, we terminated the sales and marketing contract with Gugel
Enterprises, Inc., due to pre-established sales quotas not being achieved. The
sales and marketing of the Tool Topper has been taken over by the in-house sales
personnel at Consulier.
ITEM 2. DESCRIPTION OF PROPERTY
In February 1999, Consulier reduced its office space as a cost reduction
measure. Consulier now occupies approximately 750 square feet in a building
owned by AVM Properties, Ltd., an entity affiliated with Consulier Chairman,
President and CEO, Warren B. Mosler. The property is located at 169 Tequesta
Drive, Tequesta, Florida. The space is leased month to month, with a monthly
rental of $662.50.
Consulier's facilities are believed to be suitable for present requirements and
anticipated future uses.
In May 1997, Southeast purchased a 47,000 square foot industrial warehouse in
Medley, Florida. 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
The Company from time to time is involved in routine litigation arising in the
ordinary course of business. While the outcome of litigation can never be
predicted with certainty, the Company does not believe that any existing
litigation, individually or in aggregate, will have a material adverse effect
upon the Company.
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On October 15, the Company suffered extreme hurricane damage resulting in
destruction primarily of a large portion of its inventory, and certain damage
to its equipment and physical plant. The Company has begun litigation
(Consulier Engineering, Inc. vs American States Insurance Company filed in
Circuit Court of the Fifteenth Judicial Circuit Court in Palm Beach County on
February 1, 2000) against the insurance company whose policy covered the
Southeast warehouse facility and inventory, to recover the loss. However, the
insurance company is disputing the claim, therefore there can be no assurance
that a recovery will be made, and if a recovery is made that it would be for
the total amount of the loss.
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
November 11, 1999. Warren B. Mosler, Alan R. Simon, Charles E. Spaeth, Burck E.
Grosse, Skender Fani and John L. Notter were elected upon receipt of the
following votes: for 4,754,878, against 1,450, and 2,160 abstaining. BDO
Seidman, LLP was approved as independent auditors by a vote for of 4,754,878,
against 1,450, and 2,160 abstaining.
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
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YEAR ENDED DECEMBER 31, 1998:
First quarter $ 1.7500 $ 1.0315
Second quarter 4.1875 1.7500
Third quarter 2.1250 1.9690
Fourth quarter 2.0310 1.1250
YEAR ENDED DECEMBER 31, 1999:
First quarter $ 2.8750 $ 1.5000
Second quarter 2.4060 1.4380
Third quarter 2.1880 1.3130
Fourth quarter 2.1250 1.1560
As of March 17, 2000, there were approximately 645 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 thereon since Consulier's initial public offering in May
1989.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
AUTOMOTIVE PARTS DISTRIBUTION - Net sales of Consulier's Southeast automotive
parts distribution segment represented 98% of Consulier's net sales in 1999 and
1998. This segment's sales increased 14% or $360,199, in 1999 to $3,016,377
compared to $2,656,178 in 1998. The increase is primarily a result of
reorganizing the sales department along with an increased emphasis on training.
Sales of transmission mounts accounted for $164,522 of the increase with
significant increases in the sales of flex plates, nylon gears and cables.
The automotive parts distribution segment experienced a loss before income taxes
of $1,669,599 in 1999 compared to a loss before income taxes of $274,634 in
1998. A casualty loss in the amount of $1,092,586, was caused by Hurricane Irene
which made landfall in Miami (location of Southeast) on October 15, 1999. The
Company suffered extreme hurricane damage resulting in destruction of a large
portion of its inventory, damage to its equipment and physical plant, and
suffered other damage. The majority of the damage was to the CRA-Z Soap
inventory, as a direct result of the intense rain that caused substantial
flooding. Excluding the hurricane damage, the majority of the increase in 1999
costs was in payroll and sales commisssions, resulting from the increase in
sales.
The loss of $1,092,586 is reflected in the 1999 statement of operations as a
casualty loss. Litigation has been initiated in an attempt to recover the
loss through the insurance company that covers the Southeast warehouse facility
and inventory, however there can be no assurance that a recovery will be made.
On July 7, 1999, the Company settled its claims without litigation against
Masters Marketing and Development, Inc. and CRA-Z Products, Inc., and received
all their respective rights in the CRA-Z trademark, toll-free telephone numbers,
remaining soap inventory, soap grinder-dispenser design, and 20,000 shares of
common stock of Advanced Products Group, Inc, (the new name of CRA-Z Products,
Inc.) The Company recorded $63,000 of inventory and other income during 1999 as
a result of this settlement. No value was recorded for the trademark, design or
common stock of Advanced Products Group, Inc.received in the settlement.
Presently, Consulier Engineering, Inc. and Southeast, as the owner of the CRA-Z
mark, is pursuing federal trademark registration for the CRA-Z mark and is
developing an international network of distributors, product representatives,
and retailers for the CRA-Z Soap product.
CORPORATE RESEARCH AND DEVELOPMENT - During 1999, direct expenditures on
research and development totaled $11,300. This represents a decrease of 74% from
1998 expenditures of $42,733. The major effort undertaken in 1998 was the design
and development of the Tool Topper(TM) Workstation and accessory line, which are
now on the market, with sales of $51,833 in 1999, compared to sales of $37,528
in 1998.
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INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $1,162,807 in 1999, a 14% decrease from 1998 income of $1,355,012.
This represents annualized returns of 56% and 66%, respectively, on Consulier's
average investment during each year.
CONSOLIDATED OPERATING RESULTS - Consulier's consolidated loss for the year
ended December 31, 1999 was ($655,187), or ($0.13) basic and diluted loss per
share compared to net income of $75,014, or $.02 basic and diluted income per
share for 1998.
OUTLOOK FOR 2000
Based on AVM's current operations and operating results over the past five
years, management expects continued annualized returns in 2000 on Consulier's
limited partnership investment. However, there is no guarantee that the returns
of 56% and 66% in 1999 and 1998, respectively, will be maintained. Sales in the
automotive parts distribution segment are expected to increase in 2000 due to
the hiring and training of new salespeople, strengthening of existing product
lines, and increased marketing and promotion. Southeast is scheduled to attend
numerous trade shows in key locations around the world to promote and sell its
products.
While sales of CRA-Z Soap increased in 1999 over previous years, the results
have not been what the Company expected. As a result, a new sales and marketing
plan is being developed for CRA-Z Soap which includes the development of a
network of sales representatives to represent and sell the product in addition
to our present distribution and retail sales network. We anticipate increased
sales and exposure of CRA-Z Soap once this plan is implemented in the second
half of 2000. In addition, numerous trade shows in the automotive, mechanical,
hardware, household and marine industries are scheduled for the promotion and
selling of CRA-Z Soap in 2000.
In 1999 Southeast hired a European sales representative in the Czech Republic
for the sales and marketing of it's auto parts and CRA-Z Soap to European
countries. Now that CRA-Z Soap has received official certification for sale,
purchase orders are anticipated. During the test marketing of the product during
the certification process, CRA-Z Soap was well received by the users and
companies they represented. In Mexico, a large distribution company has been
granted the exclusive right to sell and market CRA-Z Soap in that country with
sales expected to begin in 2000. Southeast has a representative in China and the
first shipment to this market was made in March 2000.
The recent inclusion of the Southeast Wall Product ID Charts in Gears Magazine,
the most widely distributed magazine in the industry has reached over 25,000
transmission specialists world-wide. The Southeast Year 2000 Parts Catalog is
available in printed form and is expected to become available electronically,
opening the doors to the world of business to business e-commerce in the second
half of 2000. Southeast expects increased sales of its auto parts, Southeast
Tools, and plastic component parts areas as a result of increasing the sales
staff and training the salespeople to be more effective in their efforts.
Southeast has also received GSA approval and is beginning to establish its CRA-Z
Soap and other parts in the U.S. government catalogs and purchasing schedules.
13
<PAGE> 14
C-6 Products, Inc. has received a vendor number and initial purchase order from
Kmart for the sale of the Tool Topper Ladder Workstation. The initial order of
approximately 400 units or $4,800 was shipped to the Kmart regional distribution
centers in March 2000. The Tool Topper will be marketed by the in house sales
personnel at Consulier, until a new network of Sales Representatives is
developed during 2000.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, Consulier's cash totaled $80,097 as compared to $265,952
at December 31, 1998, a decrease of $185,855. Net cash used in operations
increased $494,248 from $650,779 in 1998 to $1,145,027 in 1999. The increase in
cash used in operations is due primarily to a change from net income of $75,014
in 1998 to a net loss of $655,187 in 1999, and a change from income taxes
payable to income taxes receivable in 1999 producing a net use of cash of
approximately $476,000.
The ability of Consulier to continue to generate cash flow in excess of its
operating requirements depends in the short term 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) orders.
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 $1.9 million as of December 31, 1999. 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 will be significantly reduced, 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 payable and notes receivable are floating and
should move with inflation.
14
<PAGE> 15
FORWARD LOOKING STATEMENTS
Statements made in this Management's Discussion and Analysis 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
Not applicable.
15
<PAGE> 16
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATION OR
NAME AGE SINCE OTHER EMPLOYMENT DURING THE PAST FIVE YEARS
- ---- --- ----- -------------------------------------------------------
<S> <C> <C>
Warren B.Mosler 50 1985 Chairman of the Board, 1985 to present. President
and Chief Executive Officer, June 1985 to May 1994.
In February 1999, Mr. Mosler reassumed the
positions of President and Chief Executive Officer.
Principal in AVM, L.P., a broker/dealer engaged in
arbitrage and government securities trading, 1983
to present.
Alan R. Simon, Esq. 50 1985 1982 to present, private practice of law, Boca Raton,
Florida.
Charles E. Spaeth 76 1992 Project Engineer, Pratt & Whitney Aircraft, 1949 to
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. Grosse 70 1992 1991 to present, President, BG Consulting Group,
Inc. 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.
John L. Notter 65 1999 Mr. Notter presently serves on the board of
directors of Hilton Hotels and the Frank
Jobe Foundation. He is the developer of Westlake
Village, CA. Mr. Notter was the operating head of
the the D.K. Ludwig Group of companies from 1964 to
1979. Mr. Notter resigned as a director on February
8, 2000.
Dr. Skender Fani 60 1999 Dr. Fani is the Chairman of the Board of Otis
Elevators, Austria. Dr. Fani is a corporate
lawyer in Austria, also specializing in sports and
entertainment law. For the past 20 years he has
represented top sports and entertainment
personalities throughout Europe.
</TABLE>
No family relationships exist among the directors and officers of Consulier.
Messrs. Mosler and Simon have been directors since the inception.
16
<PAGE> 17
EXECUTIVE OFFICERS
The principal occupation of each executive officer of Consulier is set forth
below. All of the executive officers are elected annually, or until their
successors have been duly elected.
Warren B. Mosler, 50, 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 March 1989 and from August 1989 to May 1994. In
February 1999 Mr. Mosler reassumed the positions of President and Chief
Executive Officer. From 1983 to the present, Mr. Mosler has been a principal in
AVM, LP, a broker/dealer engaged in arbitrage and government securities trading
in West Palm Beach, Florida.
Bernardo Davila, 48, has served as President and CEO of Southeast Automotive
Acquisition Corporation since 1991. In 1980 Mr. Davila founded Southeast
Automotive Parts, Inc. of Dade which was purchased by Consulier in 1991. From
1971 to 1980 Mr. Davila was in management at Carfel, Inc., an importer of
automotive parts.
Michael G. Maguire, 62, is the former President and Chief Executive Officer of
Consulier. He was elected to these offices in April 1997. In February 1999, Mr.
Maguire resigned from Consulier.
Ralph D. Butler, 53, 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.
17
<PAGE> 18
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
------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
- --------------------------- ---- ------ ------------
<S> <C> <C> <C>
Warren B. Mosler 1999 $ 75,000 --
Chairman of the Board 1998 75,000 --
of Directors (1) 1997 75,000 --
Bernardo Davila 1999 85,000 $17,383
President and Chief 1998 (2) --
Executive Officer 1997 (2) --
of Subsidiary
Michael G. Maguire 1999 7,152 --
President and Chief 1998 51,624 --
Executive Officer (3) 1997 43,386 --
Ralph D. Butler 1999 (2) --
Secretary, Treasurer 1998 (2) --
and Chief Financial Officer 1997 (2) --
</TABLE>
(1) Mr. Mosler became President and Chief Executive Officer in February 1999.
(2) Total annual salary and bonus was less than $100,000.
(3) Mr. Maguire resigned from Consulier in February 1999.
Certain columns have been omitted from the above table because there is no
compensation required to be reported in such columns.
18
<PAGE> 19
OPTION GRANTS TABLE
There were no stock options granted to executive officers during 1999 requiring
disclosure.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning unexercised,
in-the-money stock options held by the named executive officers as of the end of
the 1999 fiscal year. No stock options were exercised by any of the named
executive officers during 1999. All options presented are exercisable.
<TABLE>
<CAPTION>
NUMBER VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME AT 1999 YEAR-END AT 1999 YEAR-END
---- -------------------- ---------------------
<S> <C> <C>
Warren B. Mosler 7,020 -0-
</TABLE>
LONG-TERM INCENTIVE AND PENSION PLANS
On January 1, 1998 employees of Consulier became members of the Mosler Auto Care
Center, Inc. 401(k) Retirement Plan (the "Plan"). The Plan allows employees to
save up to 15% of their gross pay. Consulier may match a percentage of the
employees' savings contributions or provide more money, through discretionary
contributions. During 1998 and 1999 there were no matching or discretionary
contributions made by the Company to employees' accounts. The benefit derived by
employees was the tax deferral on earnings until they receive them as benefits.
Mr. Mosler and the directors do not participate in this Plan.
COMPENSATION OF DIRECTORS
Directors are compensated $100 for attendance at each Board of Directors'
meeting.
19
<PAGE> 20
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following officers and directors of Consulier beneficially own the indicated
number of shares of Common Stock of Consulier as of December 31, 1999:
<TABLE>
<CAPTION>
AMOUNT AND
TITLE NATURE OF PERCENT OF
OF NAME AND ADDRESS BENEFICIAL CLASS AT
CLASS OF BENEFICIAL OWNER OWNERSHIP DECEMBER 31, 1999
----- ------------------- --------- -----------------
<S> <C> <C> <C>
Common Warren B. Mosler 4,130,414 (1) 84.5%
Stock 1020 Fairview Lane
Riviera Beach, FL 33404
Common Alan R. Simon 180,000 (2) 3.7%
Stock 7777 Glades Rd., #204
Boca Raton, FL 33434
Common Burck E. Grosse 25,000 (3) .5%
Stock 11 Huntly Circle
Palm Beach Gardens, FL
33418
Common Charles Spaeth 10,000 (3) .2%
Stock 13 Paddock Circle
Tequesta, FL 33469
Common Bernardo Davila 150,000 (4) 3.1%
Stock 7575 NW 74th Ave.
Miami, FL 33166
Common Dr. Skender Fani
Stock Walfischgasse 14
Vienna, 1010 Austria -- --
Common Ralph D. Butler 3,000 .1%
Stock 2391 Old Dixie Hwy.
Riviera Beach, FL 33404
Common All directors and 4,318,414 (5) 88.0%
Stock executive officers
as a group, excluding
duplications (6 people)
</TABLE>
(1) Includes exercisable stock options to acquire 7,020 Consulier shares of
common stock at $1.25 share.
(2) Consists of options to acquire shares of Consulier common stock from Mr.
Mosler at $1.25 per share.
(3) Includes stock options granted under Consulier's Tandem Stock Option Plan.
Exercise prices for the options range from $1.25 to $2.50 per share.
(4) Includes exercisable stock options to acquire 80,000 Consulier shares of
common stock at $1.50 per share.
(5) Includes exercisable stock options to acquire 112,020 Consulier common
shares.
20
<PAGE> 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AVM PROPERTIES LIMITED PARTNERSHIP LEASE OF OFFICE SPACE
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. In the first quarter of 1999 Consulier vacated
one suite of offices leaving 750 sq. ft. leased. This property is leased at $663
per month, which management believes to be 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 $430,558 at December 31, 1999, 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. In January 1993 the interest rate was reduced to prime plus 1%. In
October 1997 the interest rate was further reduced to one month LIBOR. 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.
21
<PAGE> 22
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 one month LIBOR. In October 1997, the Committee reduced the rate on
the property note to 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.
22
<PAGE> 23
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 14, 2000 By: /s/ WARREN B. MOSLER
-----------------------------------
Warren B. Mosler
Chairman of the Board of Directors,
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 14, 2000
of Directors, President
and Chief Executive
Officer
/s/ RALPH D. BUTLER
- -----------------------------------
Ralph D. Butler Secretary, Treasurer, April 14, 2000
Chief Financial Officer
/w/ ALAN R. SIMON
- -----------------------------------
Alan R. Simon Director April 14, 2000
/s/ CHARLES E. SPAETH
- -----------------------------------
Charles E. Spaeth Director April 14, 2000
/w/ BURCK E. GROSSE
- -----------------------------------
Burck E. Grosse Director April 14, 2000
/w/ SKENDER FANI
- -----------------------------------
Skender Fani Director April 14, 2000
</TABLE>
23
<PAGE> 24
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
FORM 10-KSB ITEM 7 FINANCIAL STATEMENTS
Financial Statements:
Report of Independent Certified Public
Accountants..........................................................F-2
Consolidated Balance Sheets at December 31,
1999 and 1998........................................................F-3
Consolidated Statements of Operations for the
years ended December 31, 1999 and 1998...............................F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1999 and 1998.......................F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1999 and 1998...............................F-6
Notes to Consolidated Financial Statements.............................F-7
F-1
<PAGE> 25
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, 1999 and 1998 and the
related consolidated statements of operations, 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, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
West Palm Beach, Florida BDO Seidman, LLP
April 7, 2000
F-2
<PAGE> 26
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT:
Cash $ 80,097 $ 265,952
Receivables, net (Note 2) 496,204 516,197
Receivables - related parties (Note 11(a)) 1,091,054 964,875
Inventories (Notes 1 and 3) 1,535,726 1,305,500
Income taxes receivable (Note 8) 311,124 --
Other current assets 10,094 11,746
------------ ------------
TOTAL CURRENT ASSETS 3,524,299 3,064,270
Property and equipment, net (Notes 1 and 4) 2,098,175 2,142,388
Limited partnership interests (Notes 1 and 5) 2,379,606 2,337,073
Notes receivable - related parties (Note 11(c)) 2,172,357 2,172,357
Non-current inventory (Notes 1 and 3) 311,000 1,440,902
Deferred income taxes (Note 8) 197,289 --
Patents and other assets 44,410 63,441
------------ ------------
$ 10,727,136 $ 11,220,431
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT :
Accounts payable and accruals $ 428,907 $ 249,232
Income taxes payable (Notes 1 and 8) -- 51,489
Notes payable - banks (Note 6(a)) 3,167,681 1,777,697
Advances payable - related parties (Note 6(c)) 22,766 946,278
------------ ------------
TOTAL CURRENT LIABILITIES 3,619,354 3,024,696
Bonds payable (Notes 6(b) and 9(b)) 777,300 1,275,000
Deferred income taxes (Notes 1 and 8) -- 14,766
------------ ------------
TOTAL LIABILITIES 4,396,654 4,314,462
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES 5,7,14 AND 16)
STOCKHOLDERS' EQUITY: (NOTES 1 AND 9)
Common stock of $.01 par value:
Authorized - 25,000,000 shares;
Issued - 5,137,066 and 5,136,066 shares 51,371 51,361
Additional paid-in capital 3,034,772 2,955,082
Retained earnings 3,712,702 4,367,889
------------ ------------
6,798,845 7,374,332
Less treasury stock at cost - 247,148 shares (468,363) (468,363)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,330,482 6,905,969
------------ ------------
$ 10,727,136 $ 11,220,431
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 27
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1999 1998
---------------- ---------------------
<S> <C> <C>
REVENUES:
Net sales (Note 12)
$ 3,076,395 $ 2,713,044
----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 1,712,072 1,495,634
Selling, general and administrative 2,619,201 2,453,712
Research and development expense 11,300 42,733
----------- -----------
4,342,573) 3,992,079
----------- -----------
Operating loss (1,266,178) (1,279,035)
----------- -----------
OTHER INCOME (EXPENSE):
Investment income - related parties (Note 5) 1,162,807 1,372,456
Interest income - related parties (Note 11(c)) 214,128 228,563
Interest expense (296,836) (272,308)
Loss on investment - HRO (Note 5) -- (150,242)
Casualty loss (Note 16) (1,092,586) --
Other income 155,984 247,354
----------- -----------
143,497 1,425,823
----------- -----------
Income (loss) before income taxes (1,122,681) 146,788
Income tax provision (benefit) (Notes 1 and 8) (467,494) 71,774
----------- -----------
Net (loss) income ($655,187) $ 75,014
=========== ===========
Basic and diluted (loss) earnings per share (Note 13) ($0.13) $ 0.02
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 28
CONSULIER ENIGNEERING, 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, 1998 5,124,066 $ 51,241 (247,148) ($ 468,363) $ 2,856,202 $ 4,292,875 $ 6,731,955
Net income
for the year -- -- -- -- -- 75,014 75,014
Sales of
common stock 2,000 20 -- -- 4,730 -- 4,750
Exercise of
stock options 10,000 100 -- -- 400 -- 500
Disgorgement of
profit on sale of
common stock by
insider (Note 17) -- -- -- -- 93,750 -- 93,750
--------- ----------- -------- ----------- ----------- ----------- -----------
Balance,
December 31, 1998 5,136,066 51,361 (247,148) (468,363) 2,955,082 4,367,889 6,905,969
Net loss for
the year -- -- -- -- -- (655,187) (655,187)
Fair value of
warrants (Note 9(b)) -- -- -- -- 77,700 -- 77,700
Sales of common
stock 1,000 10 -- -- 1,990 -- 2,000
--------- ----------- -------- ----------- ----------- ----------- -----------
Balance,
December 31, 1999 5,137,066 $ 51,371 (247,148) ($ 468,363) $ 3,034,772 $ 3,712,702 $ 6,330,482
========= =========== ======== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 29
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Note 10)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998
------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (655,187) $ 75,014
Adjustments to reconcile net (loss) income to net
cash used in operations:
Depreciation 127,608 122,002
Amortization 19,031 32,112
Provision for doubtful accounts 50,000 --
Provision for obsolete inventory 50,000 --
Write off of investment in HRO -- 150,242
Investment income (1,162,807) (1,372,456)
Casualty loss 1,092,586 --
Deferred income taxes (145,119) --
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets (28,355) 241,911
(Increase) in inventories (242,910) (88,139)
Decrease in patents and other assets -- 143,811
Increase (decrease) in accounts payable and accruals 179,675 (1,534)
(Decrease) increase in net income taxes payable (429,549) 46,258
----------- -----------
NET CASH USED IN OPERATIONS (1,145,027) (650,779)
----------- -----------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (83,395) (726,834)
Distributions from partnership interest 1,133,512 1,464,149
Investment in limited partnerships (13,238) (446,210)
Loans to related parties, net of repayments (126,179) (103,290)
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 910,700 187,815
----------- -----------
FINANCING ACTIVITIES:
Net borrowings of bank and other loans 1,389,984 28,922
Repayments, borrowings of related parties (923,512) 593,981
Redemption of corporate bonds (420,000) --
----------- -----------
Sales of common stock 2,000 5,250
Disgorgement of profit on sale of common stock -- 93,750
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 48,472 721,903
----------- -----------
(DECREASE) INCREASE IN CASH (185,855) 258,939
CASH, BEGINNING OF YEAR 265,952 7,013
----------- -----------
CASH, END OF YEAR $ 80,097 $ 265,952
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE> 30
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
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 CRA-Z Soap and automobile and
truck parts in the automotive/truck after-market, investment activities, and
the distribution 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 12) in AVM, L.P. ("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.
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. Inventory that management estimates will take more than one
year to sell is classified as non-current.
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.
The Company reviews the carrying values of its long-lived and identifiable
intangible assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable.
F-7
<PAGE> 31
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PARTNERSHIP INVESTMENTS AND LIMITED LIABILITY COMPANY
The Company's Partnership and Limited Liability Company investments are
accounted for using the equity method. Income or loss is allocated to Consulier
based on the partnership and LLC agreements.
REVENUE RECOGNITION
Sales are recorded upon shipment of goods to customers.
STOCK-BASED COMPENSATION
The Company accounts for stock based compensation as set forth in Accounting
Principles Board ("APB") 25, "Accounting for Stock Issued to Employees," and
related interpretations, and discloses the pro forma effect on net (loss) income
and (loss) income per share of adopting the full provisions of Statement of
Financial Accounting Standards ("SFAS") 123 "Accounting for Stock-Based
Compensation". Accordingly, the Company has elected to continue using APB 25 and
has disclosed in the footnotes pro forma (loss) income and (loss) income per
share information as if the fair value method has been applied.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are for product development These costs are
expensed in the period incurred. Legal costs incurred to perfect patents are
amortized over the estimated economic life of 60 months.
ADVERTISING COSTS
Advertising costs of $191,974 and $235,366 in 1999 and 1998 were expensed as
incurred.
INCOME TAXES
The Company and its subsidiaries file consolidated Federal income tax returns.
Income taxes are calculated using the liability method specified by SFAS 109,
"Accounting for Income Taxes". Deferred income taxes are provided for temporary
differences arising from differences between financial statement and income tax
basis of assets and liabilities.
F-8
<PAGE> 32
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. In May 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB
Statement No. 133" which deferred the provisions of SFAS 133 to financial
statements with years beginning after June 15, 2000. Management does not believe
that the implementation of this standard will significantly affect the financial
statements of the Company.
RECLASSIFICATIONS
Certain amounts in the 1998 financial statements have been reclassified to
conform to 1999 presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Consulier's financial instruments approximate estimated fair value as of
December 31, 1999 and 1998.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is calculated according to SFAS 128,
"Earnings Per Share" which requires companies to present basic and diluted
earnings per share. Net income (loss) per common share - basic is based on the
weighted average number of common shares outstanding during the year. Net income
(loss) per common share - diluted is based on the weighted average of common
shares and dilutive potential common shares outstanding during the year.
Certain common stock options and common stock warrants are excluded from the
computations of net loss per share for the years ended December 31, 1999 and
1998, because the effect of their inclusion would be anti-dilutive.
F-9
<PAGE> 33
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - RECEIVABLES
Receivables consist of the following:
DECEMBER 31,
---------------------
1999 1998
---- ----
Capital and income
distribution due from AVM $ 80,883 $ 51,588
Trade accounts 439,471 412,132
Employee advances and other 40,850 67,477
--------- ---------
561,204 531,197
Less allowance for doubtful
trade accounts (65,000) (15,000)
--------- ---------
$ 496,204 $ 516,197
========= =========
F-10
<PAGE> 34
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Raw materials $ 95,788 $ 169,956
CRA-Z Soap 217,861 156,000
Finished goods 1,316,077 1,023,544
Obsolescence Reserve (94,000) (44,000)
------------ -----------
$ 1,535,726 $ 1,305,500
============ ===========
Non-Current inventory - CRA-Z Soap $ 311,000 $ 1,440,902
============ ===========
</TABLE>
The non-current portion of inventory consists of CRA-Z Soap which the Company
believes will take longer than one year to sell. As discussed in Note 16,
certain of the Company's CRA-Z Soap inventory was damaged by a hurricane.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following
<TABLE>
<CAPTION>
DECEMBER 31,
RANGE OF --------------------------------
USEFUL LIVES 1999 1998
------------ ---- ----
<S> <C> <C> <C>
Building and improvements 30 yrs $ 943,121 $ 930,013
Land N/A 412,000 412,000
Machinery and equipment 5 - 7 yrs 1,120,097 1,084,827
Furniture and fixtures 5 - 7 yrs 180,150 177,667
Vehicles 5 yrs 207,241 233,970
------------ ------------
2,862,609 2,838,477
Less accumulated depreciation
and amortization (764,434) (696,089)
------------ ------------
$ 2,098,175 $ 2,142,388
============ ============
</TABLE>
F-11
<PAGE> 35
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5- PARTNERSHIP INTEREST AND CONCENTRATION OF CREDIT RISK
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
$17,444 for the year ended December 31, 1998. On September 1, 1998, HRO was
placed in liquidation and Consulier's investment in HRO of $150,242 was written
off as a loss.
Additionally, the Company owns a 40% interest in BioSafe, LLC. Bio Safe, LLC's
total assets at December 31, 1999 were approximately $458,000 and its total
revenue was approximately $1,513,000 in 1999. The investment is recorded at
$315,391 and $272,858 at December 31, 1999 and 1998, further, equity in income
for 1999 and 1998 was $42,533 and $22,858, respectively.
Following is a summary of financial position and results of operations of AVM as
of and for the years ended December 31:
1999 1998
---- ----
Cash $20,991,314 $11,621,962
Due from brokers 10,189,728 2,944,120
Securities owned 1,720,440 3,591,044
Customer receivables -- 1,303,004
Investment in affiliate & other assets 9,456,624 10,981,669
----------- -----------
$42,358,106 $30,441,799
=========== ===========
Due to brokers $ 146,536 $ 1,407,922
Customer payables 19,131,859 3,960,008
Securities sold under agreements
to repurchase 192,858 649,120
Other liabilities 798,344 --
Anticipated partners'
withdrawals 2,970,199 1,524,643
----------- -----------
Total liabilities 23,239,796 7,541,693
Partners' capital 19,118,310 22,900,106
----------- -----------
$42,358,106 $30,441,799
=========== ===========
Revenue $34,076,024 $47,330,402
=========== ===========
Net income $20,870,452 $27,104,105
=========== ===========
Consulier's share of
AVM's Earnings $ 1,162,807 $ 1,355,012
=========== ===========
F-12
<PAGE> 36
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consulier owned approximately 11% and 9% of AVM's capital as of December 31,
1999 and 1998. Based on capital and earnings distributions provided in the
partnership agreement, Consulier was allocated approximately 6% and 5% of AVM's
earnings during 1999 and 1998, 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 partnership through payment of the balance of
Consulier's capital account.
NOTE 6 - NOTES AND BONDS PAYABLE
(A) CURRENT NOTES PAYABLE - BANKS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Note payable to bank, collateralized primarily
by investment in AVM, guaranteed
by the Chairman of the Board, President
and CEO, maturing April 30, 2000.
(See (a)(1) below) $1,000,000 $ --
Note payable to bank,unsecured, guaranteed
by the Chairman of the Board,
President and CEO, due on demand
(see (a)(1) below) 2,000,000 1,500,000
Note payable at prime plus 2 percent
(10.25% at 12-31-99) to a bank affiliated
by common ownership, collateralized by all
the assets of the Automotive parts
distribution segment, maturing May 1, 2001 167,681 277,697
---------- ----------
$3,167,681 $1,777,697
========== ==========
</TABLE>
(A)(1) The $1,000,000 and $2,000,000 notes payable to bank bear interest at a
floating rate computed as the Eurodollar rate applicable to such loan (6.66% at
December 31, 1999) plus 2.10% and 1.90%, respectively.
(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 the expiration date of 70,000
F-13
<PAGE> 37
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
warrants to purchase shares of the Company's common stock at a price of $1.71875
held by such bondholders,was extended to December 31, 1999 (see note 9(b)). On
December 7, 1999 the expiration date of the warrants was extended to December
31, 2004. The fair market value of the 70,000 warrants at December 7, 1999 of
approximately $77,700 (see Note 9(b)) has been recorded as original issue
discount and will be amortized over the remaining term of the bonds payable.
No principal payments are due until maturity. The bonds are redeemable by
Consulier at face value after June 30, 1994. On May 1, 1999, 8% Bonds totaling
$420,000 were redeemed. The bonds 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.
(C) ADVANCES PAYABLE - RELATED PARTY
During 1998 Mr. Mosler advanced Consulier subsidiaries $2,453,000 of which
$946,278 remained unpaid as of December 31, 1998. On May 1, 1999 Mosler's loans
were paid in full. At December 31, 1999 Consulier owed Mr. Mosler $22,766.
NOTE 7 - LEASES
Consulier leases office space under a month-to-month lease. Rent expense charged
to operations was $8,612 and $15,900 in 1999 and 1998, all of which was paid to
related parties in both 1999 and 1998.
NOTE 8 - INCOME TAXES
Provisions for federal and state income tax (benefit) in the consolidated
statements of operations consist of the following:
Year ended December 31,
-----------------------
1999 1998
--------- -------
Current:
Federal ($260,629) $ 60,083
State (61,746) 11,691
--------- ---------
(322,375) 71,774
Deferred (145,119) --
--------- ---------
Total income tax provision (benefit) ($467,494) $ 71,774
========= =========
F-14
<PAGE> 38
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Applicable income taxes (benefit) for financial reporting purposes differ from
the amount computed by applying the statutory federal income tax rate as
follows:
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998
------ ------
Tax (benefit) provision at statutory rate ($381,712) $ 49,908
State income tax (benefit) net
of federal tax effect (40,753) 7,716
Other (45,029) 14,150
--------- ---------
Income tax (benefit) ($467,494) $ 71,774
========= =========
The approximate tax effects of temporary differences that give rise to deferred
tax assets (liabilities) are as follows:
DECEMBER 31,
------------------
1999 1998
---- ----
Depreciation $ 40,100 $ --
Allowance for
doubtful accounts 24,500 --
Other 51,400 (14,800)
Net operating loss
carry forward 81,300 --
-------- --------
Total net deferred
tax asset $197,300 $(14,800)
======== ========
F-15
<PAGE> 39
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - STOCKHOLDERS' EQUITY
(A) STOCK OPTION PLANS
Consulier has established a Tandem Stock Option Plan (Tandem Plan) and an
Incentive Stock Option Plan (Incentive 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 200,000 options to purchase shares
of Consulier's common stock may be granted to officers, directors and other key
employees of Consulier and MACC. The Incentive Plan provides that an aggregate
of 100,000 options to purchase shares of Consulier's common stock may be granted
to officers and other key employees of Consulier.The options under both plans
are exercisable after two years of continuous employment or service and have a
maximum life of ten years from the date of grant.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options. Under APB 25, 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.
SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to
provide pro forma information regarding net income (loss) and income (loss) per
share as if compensation cost for the Company's employee stock option plan had
been determined in accordance with the fair value based method prescribed in
SFAS 123. The Company estimates the fair value of each option at the grant date
by using the Black-Scholes option pricing model. During 1999 and 1998 no options
were granted, and under the accounting provisions of SFAS 123, the Company's net
(loss) income and (loss) income per share would not have changed to different
pro forma amounts.
F-16
<PAGE> 40
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following summary sets forth activity under the plan for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding at
Beginning of
Year 198,512 $ 1.56 208,512 $ 1.49
Granted -- -- -- --
Forfeited/Canceled -- -- -- --
Exercised -- -- 10,000 .05
------- -------- ------- -------------
Outstanding and
Exercisable at year end 198,512 $ 1.56 198,512 $ 1.56
======= ======== ======= =============
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1999.
<TABLE>
<CAPTION>
WEIGHTED
RANGE AVERAGE WEIGHTED OPTIONS WEIGHTED
OF EXERCISE OPTIONS REMAINING AVERAGE EXERCISABLE AT AVERAGE
PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE 12/31/1999 EXERCISE PRICE
------------ ----------- ---------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
$1.25 83,512 .50 $1.25 83,512 $1.25
$1.50 80,000 2.00 $1.50 80,000 $1.50
$2.19 10,000 .75 $2.19 10,000 $2.19
$2.50 25,000 2.75 $2.50 25,000 $2.50
------------- ------- ---- ------ ------- -----
$1.25 - $2.50 198,512 1.41 $ 1.56 198,512 $1.56
============= ======= ==== ====== ======= =====
</TABLE>
F-17
<PAGE> 41
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMON STOCK WARRANTS
In connection with the issuance of the bonds payable (see Note 6(b)), Consulier
issued warrants to purchase 910,000 shares of its common stock at a purchase
price of $1.71875 per share. A total of 800,000 of these warrants expired
December 31, 1994. The expiration date of the remaining 110,000 warrants was
extended to December 31, 1999 in exchange for a reduction in the interest rate
on the bonds from 8% to 6%. During 1995 an additional 40,000 warrants were
retired in conjunction with an early redemption of bonds. At December 31, 1999,
70,000 warrants remain outstanding. No warrants have been exercised to date. On
December 7, 1999 the directors extended the expiration date of the remaining
70,000 warrants to December 31, 2004. Using the Black-Scholes option pricing
model, the fair market value of the 70,000 warrants at the December 7, 1999
extension date was calculated as approximately $77,700 with the following
aassumptions: 46% volatility, 4.5 years expected life, and a 5.86% risk free
interest rate. The fair value of the warrants represents an original issue
discount to be amortized over the remaining term of the bonds payable.
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest during the years ended December 31, 1999 and 1998
totaled approximately $297,000 and $272,000, respectively. Cash paid for income
taxes during 1999 and 1998 totaled approximately $107,000 and $68,000
respectively.
In connection with the extension of the expiration date on common stock warrants
(see Notes 6(b) and 9(b), the estimated fair value of the warrants of $77,700
was recorded as original issue discount on bonds payable and additional paid-in
capital.
NOTE 11 - RELATED PARTY TRANSACTIONS
(A) CASH ADVANCES
During 1999, Mosler and Consulier continued to incur certain joint costs and
expenses incurred in the normal course of business. Mosler owed Consulier
$1,091,054 and $964,875, due on demand, at December 31, 1999 and 1998
respectively, resulting from these transactions. Interest was paid on the
outstanding balance at monthly LIBOR (6.47875% at December 31, 1999.)
(B) OTHER
For other related party transactions see Notes 5, 6, and 7.
F-18
<PAGE> 42
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(C) NOTES RECEIVABLE - RELATED PARTIES
Notes receivable - related parties consist of the following:
DECEMBER 31,
-------------------------
1999 1998
---- ----
Mosler (see (c)(1) below) $ 2,500,000 $ 2,500,000
Mosler Auto Care Center,
Inc. (see (c)(2) below) 430,559 430,559
----------- -----------
2,930,559 2,930,559
Less excess of face
amount of note over
carrying cost of
real estate (758,202) (758,202)
----------- -----------
Notes receivable $ 2,172,357 $ 2,172,357
=========== ===========
Interest income relating to the above notes totaled $153,429 in 1999 and
$164,149 in 1998.
(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%. In 1997, The Affiliated Transaction Committee approved a change
in rate to one month LIBOR (6.47875% at December 31, 1999). 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 one month
LIBOR (6.47875% at December 31, 1999). The note provided for monthly payments 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-19
<PAGE> 43
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. Electricar is
currently unnder reorganization. No royalty payments have been received to date.
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:
<TABLE>
<CAPTION>
AS OF AND FOR THE
YEAR ENDED DECEMBER 31,
1999 1998
---- ------------------------
<S> <C> <C>
REVENUES AND INVESTMENT INCOME:
Automotive parts distribution $3,016,377 $2,656,178
Household and tool products 51,833 37,528
Investments 1,162,807 1,372,456
Corporate 8,185 19,338
----------- -----------
$4,239,202 $4,085,500
=========== ===========
OPERATING PROFITS (LOSSES):
Automotive parts distribution $(1,431,082) $(274,634)
Household and tool products (416,043) (598,494)
Investments 1,162,807 1,222,214
Corporate (511,639) (405,907)
----------- -----------
(1,195,957) (56,821)
Interest, net (82,708) (43,745)
Other 155,984 247,354
----------- -----------
(Loss) income before income taxes $(1,122,681) $146,788
=========== ===========
IDENTIFIABLE ASSETS:
Automotive parts distribution $3,630,019 $4,742,313
Household and tool products 782,824 803,400
Investments 2,379,606 2,337,073
Corporate 3,934,687 3,337,645
----------- -----------
$10,727,136 $11,220,431
=========== ===========
</TABLE>
Approximately 10% of the Automotive parts distribution company's sales were to
Transtar Industries in 1999 and Anchor Industries in 1998.
F-20
<PAGE> 44
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - (LOSS) EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net (loss) income,
numerator for basic and diluted
(loss) earnings per share $ (655,187) $ 75,014
Denominator:
Denominator for basic (loss) earnings
per share - weighted - average shares 4,889,021 4,885,959
Effect of dilutive securities:
Stock options -- 54,441
Warrants -- 11,520
--------- ---------
Dilutive potential common shares -- 65,961
Denominator for diluted (loss) earnings
per share - adjusted weighted - average
shares 4,889,021 4,951,920
========= =========
Basic (loss) earnings per share $ (.13) $ .02
Diluted (loss) earnings per share $ (.13) $ .02
</TABLE>
Options to purchase 35,000 shares of common stock at prices ranging from $2.19
to $2.50 per share were not included in the computation of diluted (loss)
earnings per share for both 1999 and 1998 because the options exercise price was
greater than the average market price of the common shares and, therefore, the
effect would be antidilutive. Options and warrants to purchase 233,512 shares of
common stock at prices ranging from $1.25 to $1.72 per share were not included
in the 1999 computation of diluted loss per share as 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 net sales of CRA-Z Soap. As sales through December 31, 1998
were minimal, no amounts of royalty expense or income were recorded by the
Company under this agreement. On July 7, 1999 the Company settled its claims
without litigation with the manufacturer and agreed to terminate the agreement.
F-21
<PAGE> 45
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - CAPITAL STOCK
During 1998, the company increased its authorized capital from 5,000,000 common
shares to 25,000,000 common shares by amending its Articles of Incorporation.
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
public float qualification for trading on the NASDAQ SmallCap Market. All share
and per share data for all periods presented have been restated for the effect
of such stock split.
NOTE 16 - CASUALTY LOSS
A casualty loss in the amount of $1,092,586 was caused by Hurricane Irene which
made landfall in Miami (location of Southeast's facility) on October 15, 1999.
The Company suffered extreme hurricane damage resulting in destruction primarily
of a large portion of its inventory, and certain damage to its equipment and
physical plant. The majority of the damage was to the CRA-Z Soap inventory,
which was a direct result of the intense rain that caused substantial flooding.
The loss of $1,092,586 is reflected in the 1999 statement of operations as a
casualty loss. The Company has begun litigation against the insurance company
whose policy covered the Southeast warehouse facility and inventory, to recover
the loss. However, the insurance company is disputing the claim, therefore there
can be no assurance that a recovery will be made, and if a recovery is made that
it would be for the total amount of the loss.
NOTE 17 - DISGORGEMENT OF PROFIT ON SALE OF COMMON STOCK BY INSIDER
Section 16(b) of the Securities Exchange Act of 1934 calls for the disgorgement
of any profits realized by insiders as a result of securities purchased and sold
or sold and purchased within a six month period. The recovery provisions of
Section 16(b) constitute an absolute bar against profit. Pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, Warren B.
Mosler, Chairman, has disgorged profits in the amount of $93,750 to the Company
which he earned as a result of two trades in the Company's common stock in 1998.
No such trades occurred during 1999.
F-22
<PAGE> 46
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.
EXHIBIT DESCRIPTION
- ------- -----------
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)
E-1
<PAGE> 47
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 (3)
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. (3)
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)
- -------------------------------------------------------------
(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, March 31, 1990 and April 17, 1998.
(3) Incorporated by reference to Registrant's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1992, June 30, 1994, June 30, 1996 and
June 30, 1998.
(4) Incorporated by reference to Registrant's Current Report on Form 8-K filed
April 16, 1990
(5) Incorporated by reference to Registrant's Current Report on Form 8-K filed
March 1, 1991
(6) Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1989
(7) Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1991
(8) Incorporated by reference to Registrant's Annual Report on Form 10-KSB
filed for the year ended December 31, 1993.
(9) Incorporated by reference to Registrant's Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1994.
E-2
<PAGE> 1
EXHIBIT 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
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 80
<SECURITIES> 0
<RECEIVABLES> 1,652
<ALLOWANCES> 65
<INVENTORY> 1,536
<CURRENT-ASSETS> 3,524
<PP&E> 2,863
<DEPRECIATION> 764
<TOTAL-ASSETS> 10,727
<CURRENT-LIABILITIES> 3,619
<BONDS> 777
51
0
<COMMON> 0
<OTHER-SE> 6,279
<TOTAL-LIABILITY-AND-EQUITY> 10,727
<SALES> 3,076
<TOTAL-REVENUES> 3,076
<CGS> 1,712
<TOTAL-COSTS> 1,712
<OTHER-EXPENSES> 2,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297
<INCOME-PRETAX> (1,123)
<INCOME-TAX> (467)
<INCOME-CONTINUING> (655)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (655)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
