U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
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, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
COMMISSION FILE NUMBER 0-17756
CONSULIER ENGINEERING, INC.
(Name of small business issuer in its charter)
Florida 59-2556878
-------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
2391 Old Dixie Highway
Riviera Beach, FL 33404-5456
----------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(561) 842-2492
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange On Which Registered
------------------- -----------------------------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock and Redeemable Warrants
------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]
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, 2001 totaled
$3,183,254.
As of April 18, 2002, there were 4,951,150 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 April 18, 2002 based on
the average bid and asked price on such date was $1,482,968.
CONSULIER ENGINEERING, INC.
2001 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
----
Item 1. Description of Business....................................... 3
Item 2. Description of Property....................................... 6
Item 3. Legal Proceedings............................................. 6
Item 4. Submission of Matters to a Vote of
Security Holders.............................................. 7
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters........................................... 8
Item 6. Management's Discussion and Analysis or Plan of Operation .... 9
Item 7. Financial Statements.......................................... 13
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................... 13
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act........................................... 14
Item 10. Executive Compensation........................................ 15
Item 11. Security Ownership of Certain Beneficial Owners
and Management................................................ 17
Item 12. Certain Relationships and Related Transactions................ 18
Item 13. Exhibits and Reports on Form 8-K ............................. 18
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
In June 1985, Consulier Engineering, Inc. ("Consulier" or the "Company") was
incorporated in Florida. Its principal businesses are the distribution of
automobile parts in the automotive after-market, the development of household
and tool products, and corporate and investment activities. Consulier conducts
its automobile parts distribution business through a wholly owned subsidiary,
Southeast Automotive Acquisition Corporation (Southeast), which is based in
Miami, Florida. Consulier's corporate office is located in Riviera Beach,
Florida.
DESCRIPTION OF BUSINESS SEGMENTS
(1) AUTOMOTIVE PARTS DISTRIBUTION
BACKGROUND
Southeast is located in Miami, Florida. It is engaged in research, development
and distribution to the automotive wholesale market. It celebrates its 20th year
of existence in the automotive transmission industry, as a significant
contributor of OEM Quality Aftermarket Products, distributing automotive
flywheels, flex plates, transmission and engine mounts, torque struts, nylon
gears, plastic components, grommets, cables and repair kits.
PRODUCTS
The Southeast Logo features Premium Quality Mounts, which equal or exceed OEM
specifications with exacting automotive grade metals, torqued to P/F
Specification fasteners, and the use of natural or synthetic quality rubber
compounds and bonding agents. Southeast sells approximately 500 different
aftermarket mounts for both domestic and foreign applications. Development
efforts target mount and strut products, which will be able to replace two, or
more, original equipment products. The Southeast 2000 Mount replaces nine
existing General Motors' mounts, used in approximately 85% of its rear wheel
drive vehicles produced from 1954 to 1994. Foreign applications have been major
additions to our product list, including 60 new products developed since 1997,
introducing part numbers through year 1996 vehicles. Southeast also distributes
approximately 250 U.S. made automotive flywheels, flexplates, purchased from OEM
quality sources in the United States. Its plastic components from affiliates of
Parplast are QS 9000 and ISO 9002 compliant and make up a line of over 100 part
numbers. Products also include bushings for transmission repair, speedometer
gears, linkage parts, thrust washers, electrical connector plugs, sensor
switches, specialty machine shop products, a complete line of over 1000 part
numbers of detente, shift, accelerator and clutch cables for both foreign and
domestic applications, which also feature the highest quality available in the
market.
Southeast also manufactures its very own tools (Southeastools), designed to
bring new concepts to market. Southeast offers availability of product
development for tooling and manufacturing, aluminum injection and CNC
capabilities, and specialty parts in sintered powdered metals.
3
The Southeast logo on Southeast's mounts is recognized as a quality standard in
the automotive transmission industry. It provides a replacement warranty on any
item of its product line assessed as defective. Also, Southeastools come with a
limited lifetime warranty for materials and craftsmanship.
Consulier is presently working with a new U.S. based manufacturer of soap and
other cleaning products on a new and improved formula for its Captain CRA-Z
Soap. The Company expects this formula to be ready for sale in June, 2002. The
Company has also developed a new single bar, and a wall mounted dispenser for
the soap. Additionally, a combination brush/soap holder has been manufactured
and is expected to be packaged with the 200gm size bar of Captain CRA-Z Soap.
Consulier has now received Federal trademark registrations for Captain CRA-Z and
Captain CRA-Z Hand and All Purpose Soap. The Company has made design changes to
the packaging to better serve the industrial as well as retail markets. These
changes will be implemented and launched along with the new formula.
Consulier is working with Norpak Manufacturing ("Norpak") and its affiliated
company, Veridien Corp. ("Veridien") on the sale of Captain CRA-Z Soap to soap
brokers, distributors, and regional/national retail establishments utilizing the
existing network developed by Norpak and Veridien for their line of cleaning and
personal care products. The Company expects to achieve an increase in sales
volume as a result of this relationship, when the new packaging, dispenser, and
formula are available.
Consulier has engaged a European agent to handle the sales and marketing of
Captain CRA-Z Soap, with offices in Vienna, Austria and the Czech Republic. A
great deal of interest was generated in Europe for the new products through
trade show attendance and personal contact with distribution companies. The
Company expects to achieve an increase in sales volume in Europe during 2002.
SALES AND MARKETING
Automotive transmission parts are distributed primarily to specialty
transmission part distributors in the US and abroad. Southeast estimates that it
holds an approximately 40% of the automatic transmission mount aftermarket
industry and about 10% of the general automotive transmission mount market.
In the sale of automotive parts products, Southeast competes with a number of
other automotive aftermarket suppliers, many of which are considerably larger
than Southeast in terms of sales, financial resources, product development
facilities and channels of distribution. Automotive parts sales is an extremely
competitive market and prices and warranty provisions are comparable throughout
the industry.
Southeast Catalogs were developed and are edited annually for its distributors,
providing a space for distributors to include their own information to their
customer database. Part numbers have been simplified and drawings included.
Southeast's part number system is well recognized in the industry and utilized
by many as generic. Mount and flywheel drawings, copyrighted by Southeast and
Consulier are included in numerous industry catalogs, as authorized by
Southeast.
Published Wall ID Charts, featuring Southeast's mounts and flywheels, have
become a popular item in the industry, providing information on applications and
specifications. 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 worldwide. The Southeast Year 2002 Parts
Catalog is available both in printed form and electronically. Edition of the
Year 2002 Catalog is expected to provide an interactive database of crossovers
in part number systems in an easy to use format, including drawings. A
graphic-specialized university is developing an impressive web site with
Southeast, which will include a master database, e-commerce capable, providing
each distributor with its own login and password.
4
RESEARCH AND DEVELOPMENT EXPENDITURES
Primarily, the suppliers are funding product development costs for Southeast's
transmission mounts. Other research and development expenditures, including
design of specialty tools, are not significant.
EMPLOYEES
Southeast has 12 employees in various categories, including shipping and
receiving, sales, marketing, management, and administration.
(2) INVESTMENTS SEGMENT
INVESTMENT IN AVM, L.P.
Consulier owns a 10% equity interest in AVM, L.P. (AVM), a broker/dealer in U.S.
Government securities formed in October 1983 as an Illinois limited partnership
and located in West Palm Beach, Florida. AVM is registered with the Commodity
Futures Trading Commission as an Introducing Broker (IB) and conducts its IB
business with other broker/dealers on a fully disclosed basis. AVM is also
registered as a broker/dealer with the Securities and Exchange Commission, and
is a member of the National Association of Securities Dealers, Inc. The firm is
generally engaged in the brokerage of U.S. Government securities, other fixed
income instruments, and arbitrage transactions and presently employs 59 people
in addition to the four members of its general partner. Warren B. Mosler
("Mosler"), Consulier's Chairman and majority shareholder is one of the founders
of AVM and is a member of the general partner of AVM.
As of both December 31, 2001 and 2000, Consulier's limited partnership interest
represented approximately 10% of AVM's total partnership capital. Allocation of
the partnership's income to its partners varies based on amounts of appreciation
of the partnership's assets and operating profits of the partnership. Based on
earnings distributions provided in the partnership agreement, Consulier was
allocated approximately 8% of AVM's earnings in both 2001 and 2000.
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.
BIOSAFE SYSTEMS, LLC
Consulier owns a 40% equity interest in BioSafe Systems, LLC., a Connecticut
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.
BioSafe had revenues of approximately $3,300,000 for fiscal 2001 and $2,800,000
for fiscal 2000. Steady and consistent progress has been made with respect to
establishing an algaecide/fungicide product into the commercial
greenhouse/nursery market. Slower progress has been experienced with respect to
introducing such products to the golf course industry.
5
(3) CORPORATE SEGMENT
GENERAL
Consulier's Corporate Segment includes management and finance activities as well
as 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.
(3)(a) CONSULIER BUSINESS SERVICES, INC.
Consulier Business Services, Inc. is a wholly owned subsidiary involved in the
leasing of various machinery and equipment used in the engine repair and
overhaul business. Assets and revenues are not material, and corporate staff
operates the business.
(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. 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, the Company 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. On June 30, 2000, Tool Topper inventory and
tooling were written down based on the unit's failure to meet expected sales and
income goals.
ITEM 2. DESCRIPTION OF PROPERTY
In May 2000, Consulier moved its headquarters to Riviera Beach, Florida
occupying approximately 500 square feet of office space in a building owned by
Mosler.
Southeast owns a 47,000 square foot industrial warehouse in Medley, Florida. Its
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. In
March, 1998 a three-year lease was entered into at $4,200 per month, which was
renewed, in March 2001, for three years at $4,500 per month.
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.
On March 22, 2001, the District Court for the Southern District of Florida
entered an omnibus Order Granting Plaintiff's Motion for Summary Declaratory
Judgment and a Final Declaratory Judgment in favor of the Company's subsidiary,
Southeast Automotive Acquisition Corporation, against American States Insurance
Company, declaring that the subject insurance contract between the parties
covers the loss due to all damages, including water damage caused by Hurricane
Irene on October 15, 1999. In June 2001, Consulier reached settlement, which
resulted in a $1.75 million recovery.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The election of five directors and the approval of independent auditors were
submitted to a vote of shareholders at the Company's Annual Meeting held
February 5, 2002. Warren B. Mosler, Alan R. Simon, Charles E. Spaeth, Burck E.
Grosse and Skender Fani were elected upon receipt of the following votes: for
4,701,748, against -0-, and 80 shares abstaining. BDO Seidman, LLP was approved
as independent auditors by a vote for of 4,701,748, against -0-, and 80 shares
abstaining.
6
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.
YEAR ENDED DECEMBER 31, 2001:
High Low
---- ---
First quarter $2.25 $1.625
Second quarter 2.19 2.00
Third quarter 2.20 2.00
Fourth quarter 2.24 2.09
YEAR ENDED DECEMBER 31, 2000:
High Low
---- ---
First quarter $2.8750 $1.1560
Second quarter 2.3750 1.2500
Third quarter 1.7660 1.4380
Fourth quarter 2.0000 1.4380
As of March 18, 2002 there were approximately 62 record holders of Consulier's
common stock. To date, Consulier has not paid any 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.
7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CRITICAL ACCOUNTING POLICIES
Financial Reporting Release No. 60, which was recently released by the
U.S. Securities and Exchange Commission, encourages all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 to the Company's consolidated financial statements
includes a summary of the significant accounting policies and methods used in
the preparation of Consulier's consolidated financial statements.
Management believes the following critical accounting policies affect
the significant judgments and estimates used in the preparation of the financial
statements:
PARTNERSHIP INVESTMENTS AND LIMITED LIABILITY COMPANY
The Company's Partnership and Limited Liability Company investments, all of
which are less than 50% interests, are accounted for using the equity method.
Income or loss is allocated by the investee to Consulier based on the
partnership and LLC agreements.
REVENUE RECOGNITION
Sales are recorded upon shipment of goods to customers.
Shipping and handling costs are billed to customers, included in sales, and
recorded when goods are shipped to customers. Shipping costs are classified as
selling expense.
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.
RESULTS OF OPERATIONS
CONSOLIDATED OPERATING RESULTS - During the twelve months ended December 31,
2001, sales increased $140,844, to $3,183,254, over the prior twelve months.
Cost of goods sold decreased $193,283, to $1,917,951, from the comparable
amounts recorded during the twelve months ended December 31, 2000. Gross profit
for the twelve months ended December 31, 2001 increased $334,127 over the twelve
months ended December 31, 2000. The reductions in selling, general and
administrative costs were primarily as a result of reducing the number of
employees at Southeast Automotive from 20 to 12 employees. The impairment loss
in 2000 of $472,727 was not repeated in 2001. When these factors are combined
they resulted in a $955,797 decrease in operating loss, from $1,552,096 in 2000
to $596,299 in 2001.
Interest expense declined $235,598 due to the reduction in notes payable banks
and the partial redemption of bonds payable.
8
Other income, consisting primarily of investment income, interest
income/expense, and insurance recovery increased $2,246,818, from $854,410 in
2000 to $3,101,228 in 2001, primarily attributable to an insurance recovery of
$1.75 million in 2001 against a $507,000 casualty loss in 2000. Income before
income taxes increased $3,202,615 from a loss of $697,686 in 2000 to income of
$2,504,929 in 2001.
The effective tax rate increased to approximately 37%in 2001 from 25% in 2000
due to the prior utilization of net operating loss carry forward amounts.
Consulier's consolidated income for the year ended December 31, 2001 was
$1,589,629, or $0.32 basic and diluted loss per share compared to a loss of
($522,066), or ($0.11) basic and diluted loss per share for 2000.
AUTOMOTIVE PARTS DISTRIBUTION - Net sales of Consulier's Southeast automotive
parts distribution segment represented 96% and 99% of Consulier's net sales in
2001 and 2000 respectively. This segment's sales increased 1% or $32,654 in 2001
to $3,060,414 compared to $3,027,760 in 2000.
The automotive parts distribution segment had income before income taxes of
$1,581,067 in 2001 compared to a loss before income taxes of $576,462 in 2000.
This segment recovered $1,750,000 in 2001 as a result of the casualty loss in
the amount of $1,092,586 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. Upon further inspection and
evaluation during the latter part of April 2000, management estimated that the
remaining CRA-Z Soap located at Southeast was unsaleable. The $506,937 change in
estimate, representing the remaining CRA-Z Soap inventory held at Southeast,
plus additional disposal costs, was recorded as a casualty loss during the three
months ended March 31, 2000.
In October 2000, excessive rains flooded Southeast's warehouse. The Company
suffered damage to inventory items, furniture and the building. Expenses were
recorded for clean-up and an insurance claims consultant that handled the filing
of the claim.
HOUSEHOLD AND TOOL PRODUCTS - During the second quarter of 2000, based upon the
lack of significant product sales of the C-6 Products, Inc. product line (Tool
Topper Laddertop Workstation), management determined that the remaining
inventory should be written down by $266,255 and the tooling for the product had
suffered an impairment loss of $472,727. The write-down was based upon the
unit's failure to meet expected sales and income goals.
INVESTMENT IN AVM - Investment income from Consulier's AVM limited partnership
interest was $1,186,343 in 2001, a 5.5% increase from 2000 income of $1,124,247.
This represents annualized returns of 57% and 55%, respectively, on Consulier's
average investment during each year.
INVESTMENT IN BIOSAFE - Equity in income of BioSafe was $39,861 in 2001, a 64%
decrease over 2000 income of $111,912. This represents the Company's 40%
interest in BioSafe's net income of approximately $100,000 in 2001, compared to
$280,000 in 2000.
OUTLOOK FOR 2002
Based on AVM's recent operations and operating results over the past five years,
management expects continued annualized returns in 2002 on Consulier's limited
partnership investment. However, there is no guarantee that the returns of 57%
and 55% in 2001 and 2000, respectively, will be maintained.
9
Sales in the automotive parts distribution segment are expected to increase in
2002 due to the reorganization of the sales department and training of
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.
In December 2000, Consulier entered into a multi-year strategic alliance and
distribution agreement with Norpak Manufacturing Inc. (Norpak) of Toronto,
Canada and its related company Veridien Corp. (Veridien) of St. Petersburg,
Florida. Veridien has a full line of top quality cleaning products that they
manufacture and distribute to national and regional retailers and distributors.
Norpak also with a full line of cleaning products and retail as well as
distribution sources, has been contracted to be the main distributor for the
soap in Canada. Norpak is responsible for the sales, marketing, retailing and
distribution of the soap in Canada. These agreements include pricing schedules
for products at distributorship levels.
Veridien and Norpak are working with Consulier to launch the product to national
and regional retailers and major distributors.
In addition to the above, Consulier maintains a sales and marketing department
developing new retail and distribution outlets nationally and internationally.
There are several trade shows scheduled for marketing the soap throughout 2002
and the internet web site continues to be a good lead generator with
applications for distribution being received through the site from countries all
over the world.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001, Consulier's cash totaled $150,032 as compared to $418,634
at December 31, 2000, a decrease of $268,602. Net cash provided in operations
was $1,322,796 in 2001, compared to net cash used of $231,322 in 2000. The
increase in cash provided by operations is due primarily to a change from a net
loss of $522,066 in 2000 to net income of $1,589,629 in 2001, of which
$1,750,000 is the result of an insurance recovery.
Net cash used in investing activities was $43,717 in 2001, compared to net cash
provided by investing activities of $2,712,625 in 2000. The decrease is
primarily the result of $1,812,331 of related party loan proceeds in 2000,
compared to an increase in due from principal shareholder of $1,232,182 in 2001.
Net cash used in financing activities was $1,547,681 primarily for partial
repayments of bonds payable of $500,000 and approximately $1,048,000 of bank
loan repayments compared to cash used of $2,142,766 in 2000, primarily due to
repayments of notes payable of $2,120,000. Bank indebtedness was retired during
2001 with the insurance proceeds received.
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.
10
During 2001, a significant portion of the Company's excess cash funds was
advanced to Mr. Warren Mosler under demand receivables.
Below is a chart setting forth the Company's contractual cash payment
obligations, which have been aggregated to facilitate a basic understanding of
the Company's liquidity as of December 31, 2001.
PAYMENTS DUE BY PERIOD
Contractual Less Than 1 - 3 4 - 5 After 5
Obligations Total 1 Year Years Years Years
----------- ----- ------ ----- ----- -----
Bonds Payable $308,380 $ -- $ 308,380 $ -- $ --
-------- ---- --------- ---- ----
TOTAL CONTRACTUAL
CASH OBLIGATIONS $308,380 $ -- $308,380 $ -- $ --
======== ==== ======== ==== ====
On April 16, 2002, the Company entered into agreement granting a line of credit
of up to $900,000 to Asset Assistance Group, LLC. The line of credit expires one
year from April 16, 2002 and has $175,000 outstanding at April 16, 2002. Sources
for funding the line of credit will be investment income from AVM and repayments
of outstanding amounts/advances by the principal shareholder.
The Company does not trade derivative instruments. The Company is invested in
AVM, which enters various transactions involving derivatives and other
off-balance sheet financial instruments. These derivatives and off-balance sheet
instruments are subject to varying degrees of market and credit risk.
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 $1.1 million as of December 31, 2001. 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.
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
11
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 BioSafe and AVM 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.
12
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERSAND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS
Positions and Offices Held and
Principal Occupation or Other Employment
Director Name Age Since During the Past Five Years
-------------- --- ----- ----------------------------------------
Warren B. Mosler 52 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. 51 1985 General Counsel, Treasurer and Secretary
since November 2001. 1982 to present,
private practice of law in Palm Beach
Gardens, Florida.
Charles E. Spaeth 78 1992 Chief Engineer 1992 to present. 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 72 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.
Dr. Skender Fani 62 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.
No family relationships exist among the directors and officers of Consulier.
Messrs. Mosler and Simon have been directors since the inception.
13
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, 52, 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.
Alan R. Simon, 51, is a director, and has served as the Corporation's General
Counsel and its Secretary-Treasurer since November 2001. He has been in the
private practice of law in Boca Raton, Florida since 1982, and has relocated his
practice to Palm Beach Gardens, Florida in 2001.
Bernardo Davila, 50, 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.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid to Consulier's
Chief Executive Officer for the last three years.
SUMMARY COMPENSATION TABLE
Name and Fiscal All Other
Principal Position Year Salary Compensation
------------------ ------ -------- ------------
Warren B. Mosler, 2001 $ 75,000 $ --
Chairman of the Board, 2000 $ 75,000 $ --
President and CEO 1999 $ 75,000 $ --
Bernardo Davila 2001 (1) $ --
President and CEO 2000 (1) $ --
Of Subsidiary 1999 $ 85,000 $ 17,383(2)
(1) Total annual salary and bonus was less than $100,000.
(2) Amount primarily consists of automobile allowance and life insurance
premiums.
Certain columns have been omitted from the above table because there is no
compensation required to be reported in such columns.
14
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no stock options/SARs granted to executive officers during 2001
requiring disclosure.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
There were no stock options/SARs exercised during 2001 and no stock options/SARs
outstanding at December 31, 2001.
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 2000 and 2001 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.
15
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, 2001:
Amount and Nature Percent of Class
Name and Address Of Beneficial At
Title Of Class of Beneficial Owner Ownership December 31, 2001
-------------- --------------------- ----------------- ------------------
Common Stock Warren B. Mosler 4,241,854 85.7%
1020 Fairview Lane
Singer Island, Fl 33404
Common Stock Alan R. Simon 180,000 (1) 3.6%
3980 RCA Boulevard, Suite 8012
Palm Beach Gardens, FL 33420
Common Stock Burck E. Grosse 10,000 (2)
11 Huntly Circle
Palm Beach Gardens, FL 33418
Common Stock Bernardo Davila 45,850 (2)
7575 NW 74th Avenue
Miami, FL 33166
Common Stock Charles Spaeth 10,000 (2)
13 Paddock Circle
Tequesta, FL 33469
All directors and executive
Officers as a group (6 people) 4,307,704 87.0%
(1) Consists of options to acquire shares of Consulier common stock from
Mr. Mosler at $1.25 per share.
(2) Does not exceed one (1%) percent of the class.
16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AVM PROPERTIES LIMITED PARTNERSHIP LEASE OF OFFICE SPACE
Consulier leased approximately 750 square feet of office space located in
Tequesta, Florida from AVM Properties, Ltd. on a month-to-month basis, at $663
per month, which management believed to be at competitive market rates. In May
2000, Consulier moved its headquarters to Riviera Beach, Florida occupying
approximately 500 square feet of office space in a building owned by Warren B.
Mosler, Consulier's Chairman of the Board, President and CEO.
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, which has an interest rate of one month
U.S. Dollar London Interbank Offering Rate (LIBOR), will mature on May 11, 2003.
It had an unpaid balance of $430,559 at December 31, 2001, plus accrued interest
of $28,487.
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, which was
to mature in December 2001, of $2,500,000 with interest at one month LIBOR. In
2001, the maturity date was extended to December 2003.
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.
On November 1st, 14th and 16th 2000, Mr. Mosler made payments totaling
$2,000,000 reducing interest and principal owed on this promissory note. The
balance of principal and interest at December 31, 2001 and 2000 was $1,748,357.
During October 2000, Mr. Mosler purchased outstanding bonds previously issued by
the Company from a third-party bondholder at face value of $680,000. On July 2,
2001, the Company redeemed $500,000 of Mr. Mosler's bonds. These bonds continue
to carry a due date of 2004 with interest of 8% per annum, payable quarterly.
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.
17
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 25, 2002 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:
Name Title Date
---- ----- ----
/s/ Warren B. Mosler Chairman of the Board of Directors, April 25, 2002
--------------------------- President and Chief Executive Officer
Warren B. Mosler
/s/ Alan R. Simon Secretary, Treasurer April 25, 2002
--------------------------- Corporate Counsel
Alan R. Simon
/s/ Charles E. Spaeth Director April 25, 2002
---------------------------
Charles E. Spaeth
/s/ Burck E. Grosse Director April 25, 2002
---------------------------
Burck E. Grosse
/s/ Skender Fani Director April 25, 2002
---------------------------
Skender Fani
18
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, 001 and 2000............. F-3
Consolidated Statements of Operations for the
years ended December 31, 2001 and 2000............................... F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 2001 and 2000....................... F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 2001 and 2000............................... F-6
Notes to Consolidated Financial Statements........................... F-7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors Consulier Engineering, Inc.
Riviera Beach, Florida
We have audited the accompanying consolidated balance sheets of Consulier
Engineering, Inc. and subsidiaries as of December 31, 2001 and 2000 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
West Palm Beach, Florida
BDO SEIDMAN, LLP
April 19, 2002
F-2
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2001 2000
------------ ------------
ASSETS
Current:
Cash $ 150,032 $ 418,634
Receivables, net (Note 2) 560,848 1,213,967
Due from principal shareholder (Note 11 (d)) 1,232,182 0
Receivables - related parties (note 11(a) and (c)) 67,693 460,923
Inventories (Note 3) 1,137,168 1,167,793
Deferred income taxes (Note 8) 158,800 177,400
Other current assets 38,550 31,151
----------- -----------
TOTAL CURRENT ASSETS 3,345,273 3,469,868
Property and equipment, net (Note 4) 1,355,466 1,438,185
Limited partnership interests (Note 5) 2,531,379 2,491,518
Notes receivable - related parties (Note 11 (c)) 1,420,714 990,155
Deferred income taxes (Note 8) 35,025 226,248
----------- -----------
$ 8,687,857 $ 8,615,974
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
CURRENT :
Accounts payable and accruals $ 232,330 $ 1,002,537
Income taxes payable (Note 8) 710,297 0
Notes payable - banks (Note 6 (a)) 0 1,047,681
Notes payable - related parties 65,693 0
----------- -----------
TOTAL CURRENT LIABILITIES 1,008,320 2,050,218
Bonds payable 308,380 792,840
TOTAL LIABILITIES 1,316,700 2,843,058
STOCKHOLDERS' EQUITY (Note 9): Common stock of $.01 par value:
Authorized --- 25,000,000 shares;
Issued --- 5,198,298 shares 51,983 51,983
Additional paid-in capital 3,110,700 3,110,700
Retained earnings 4,780,265 3,190,636
----------- -----------
7,942,948 6,353,319
Less: Treasury stock at cost - 247,148 shares (468,363) (468,363)
Other comprehensive loss (26,888) (35,500)
Notes receivable for common stock (76,540) (76,540)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,371,157 5,772,916
----------- -----------
$ 8,687,857 $ 8,615,974
=========== ===========
See accompanying notes to consolidated financial statements.
F-3
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
December 31,
-------------------------------
2001 2000
----------- -----------
Revenues:
Net sales (Note 12) $ 3,183,254 $ 3,042,410
----------- -----------
OPERATING COSTS AND EXPENSES:
Cost of goods sold 1,917,951 2,111,234
Selling, general and administrative 1,861,602 2,010,545
Loss on impaired assets (Note 4) 0 472,727
----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 3,779,553 4,594,506
----------- -----------
OPERATING LOSS (596,299) (1,552,096)
----------- -----------
OTHER INCOME (EXPENSE):
Investment income - related parties (Note 5) 1,186,343 1,124,247
Interest income - related parties 107,584 265,040
Interest expense (81,761) (317,359)
Casualty loss (recovery) (Notes 3 and 15) 1,750,000 (506,937)
Undistributed income of equity investee (Note 5) 39,861 111,912
Other income 99,202 177,507
----------- -----------
TOTAL OTHER INCOME 3,101,228 854,410
----------- -----------
Income (loss) before income taxes 2,504,929 (697,686)
Income tax provision (benefit) 915,300 (175,620)
----------- -----------
NET INCOME (LOSS) $ 1,589,629 ($ 522,066)
=========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE (NOTE 4) $ 0.32 ($ 0.11)
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
CONSULIER ENIGNEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Notes Other
------------------------------------------ Addi- Receivable Compre- Total
Treasury Stock tional for hensive Stock-
--------------------- Paid-in Retained Common Income holders
Shares Amount Shares Amount Capital Earnings Stock (Loss) Equity
--------- ------- --------- ---------- ---------- ---------- -------- -------- ----------
Balance, January 1, 2000 5,137,066 $51,371 (247,148) ($468,363) $3,034,772 $3,712,702 $ 0 $ 0 $6,330,482
--------- ------- --------- ---------- ---------- ---------- -------- -------- ----------
Comprehensive Loss:
Net Loss -- -- -- -- -- (522,066) -- -- (522,066)
Unrealized loss on marketable
securities, net of tax -- -- -- -- -- -- -- (35,500) (35,500)
----------
Total comprehensive loss (557,566)
----------
Exercise of stock
options (Note 9(a) 61,232 612 -- -- 75,928 -- (76,540) -- --
--------- ------- --------- ---------- ---------- ---------- -------- -------- ----------
Balance, December 31, 2000 5,198,298 51,983 (247,148) (468,363) 3,110,700 3,190,636 (76,540) (35,500) 5,772,916
Comprehensive Income:
Net income 1,589,629 1,589,629
Change in unrealized
loss on marketable
securities, net of tax -- -- -- -- -- -- -- 8,612 8,612
Total comprehensive income 1,598,242
----------
Balance, December 31, 2001 5,198,298 $51,983 (247,148) $(468,363) $3,110,700 $4,780,265 $(76,540) $(26,888) $7,371,158
========= ======= ======== ========= ========== ========== ======== ======== ==========
See accompanying notes to consolidated financial statements.
F-5
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-------------------------------
2001 2000
----------- -----------
OPERATING ACTIVITIES:
Net Income (loss) $ 1,589,629 ($ 522,066)
Adjustments to reconcile net income (loss) to net
cash used in operations:
Depreciation 108,961 102,159
Amortization 15,540 59,950
Provision (recovery) for doubtful accounts (31,303) 23,000
Provision for obsolete inventory 0 302,255
Undistributed income of equity investee (39,861) (111,912)
Investment income - related party (1,186,343) (1,124,247)
Casualty loss 0 506,937
Impairment loss 0 472,727
Deferred income taxes 205,000 (175,620)
Changes in operating assets and liabilities:
Decrease (increase) in receivables and other current assets 695,569 (207,878)
(Increase) decrease in inventories 30,625 (130,259)
Increase in income tax payable 710,297 0
(Decrease) increase in accounts payable and accruals (770,207) 573,632
----------- -----------
NET CASH PROVIDED BY (USED) IN OPERATING ACTIVITIES 1,327,907 (231,322)
----------- -----------
INVESTING ACTIVITIES:
Property and equipment additions, net of dispositions (26,242) (37,731)
Distributions from partnership interest 1,181,232 938,025
Increase in related party loans 28,364 1,812,331
Increase in due from principal shareholder (1,232,182) --
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (48,828) 2,712,625
----------- -----------
FINANCING ACTIVITIES:
Net repayments of bank and other loans (1,047,681) (2,120,000)
Payments on bond payable (500,000) 0
Repayments, borrowings of related parties 0 (22,766)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (1,547,681) (2,142,766)
----------- -----------
(DECREASE) INCREASE IN CASH (268,602) 338,537
CASH, BEGINNING OF YEAR 418,634 80,097
----------- -----------
CASH, END OF YEAR $ 150,032 $ 418,634
=========== ===========
See accompanying notes to consolidated financial statements.
F-6
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consulier Engineering, Inc. (Consulier) and its subsidiaries are engaged in four
primary businesses: the distribution of Captain CRA-Z Soap, sales of automobile
parts in the automotive after-market, investment activities and other
activities.
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.
BASIS OF PRESENTATION
The consolidated financial statements include Consulier and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in, first-out
basis, or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line and declining balance methods over estimated
useful lives or related lease terms, as appropriate. Depreciation for income tax
purposes is computed using declining balance methods over statutory lives.
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.
PARTNERSHIP INVESTMENTS AND LIMITED LIABILITY COMPANY
The Company's Partnership and Limited Liability Company investments, all of
which are less than 50% interests, are accounted for using the equity method.
Income or loss is allocated to Consulier based on the partnership and LLC
agreements.
LONG-LIVED ASSETS - IMPAIRMENTS AND DISPOSALS
The Company reviews the carrying values of its long-lived assets, including its
partnership and limited liability investments, for possible impairment whenever
events or changes in circumstances indicate that the carrying amounts of the
assets may not be recoverable through the estimated undiscounted future cash
flows resulting from the use of these assets. At December 31, 2001, no
long-lived assets were held for disposal.
F-7
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
REVENUE RECOGNITION
Sales are recorded upon shipment of goods to customers. Shipping and handling
costs billed to customers are included in sales when the goods are shipped to
customers. Shipping and handling expenses incurred by the Company are recorded
as selling expenses, and are classified in the caption selling, general and
administrative expenses in the accompanying consolidated statements of
operations. Shipping and handling costs totaled $39,600 and $39,800 in 2001 and
2000, respectively.
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 income and
earnings 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 income (loss) and earnings (loss) per share
information as if the fair value method has been applied.
ADVERTISING COSTS
Advertising costs of $94,986 and $120,042 in 2001 and 2000 were expensed as
incurred.
INCOME TAXES
The Company and its subsidiaries file a consolidated Federal income tax return.
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.
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.
RECLASSIFICATIONS
Certain amounts in the 2000 financial statements have been reclassified to
conform to 2001 presentation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Consulier's financial instruments approximate estimated fair value as of
December 31, 2001 and 2000.
F-8
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB finalized FASB Statements No. 141, "Business
Combinations" (SFAS 141), and No. 142, "Goodwill and Other Intangible Assets"
(SFAS 142). SFAS 141 requires the use of the purchase method of accounting and
prohibits the use of the pooling-of-interest method of accounting for business
combinations initiated after June 30, 2001. SFAS 141 also requires that the
Company recognize acquired intangible assets apart from goodwill if the acquired
intangible assets meet certain criteria. SFAS 141 applies to all business
combinations initiated after June 30, 2001 and for purchase business
combinations completed on or after July 1, 2001. It also requires, upon adoption
of SFAS 142, that the Company reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.
SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purpose of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangibles assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142. The impact of the adoption of
SFAS 141 and SFAS 142 on the Company's financial position and results of
operations is not expected to be material.
In October 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" which resolves significant implementation issues
related to FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," and supersedes the
accounting and reporting provisions of APB Opinion No. 30, Reporting the Results
of Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,
for the disposal of a business segment. SFAS 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The impact of adoption of SFAS 144 on
the Company's financial position and results of operations is not expected to be
material.
F-9
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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 income (loss) per share for the year ended December 31,
2000, because the effect of their inclusion would be antidilutive.
SEGMENT INFORMATION
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company has four reportable segments: automotive parts
distribution, household and tool products, investments, and corporate. The
automotive parts distribution segment distributes after-market automotive and
truck parts to wholesale markets. The household and tool products segment is
engaged in sales of tool and ladder related products. The investments segment
maintains investment interests in an investment limited partnership and a
limited liability company. The corporate segment is engaged in management of the
business and finance activities.
F-10
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 2 - RECEIVABLES
Receivables consist of the following:
2001 2000
----------- -----------
Capital and income distribution due from AVM $ 67,428 $ 62,317
Trade accounts 520,105 574,106
Employee advances and other receivables 30,012 44,310
Insurance claim receivable (a) -- 621,234
----------- -----------
617,545 1,301,967
Less allowance for doubtful trade accounts (56,697) (88,000)
----------- -----------
$ 560,848 $ 1,213,967
=========== ===========
(a) During October 2000, the Company experienced destruction of inventory,
damage to furniture, equipment and physical plant due to water damage
caused by excessive rains. An insurance claim was filed, and insurance
proceeds of $621,234 were received in January 2001.
F-11
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
December 31,
-------------------------------
2001 2000
----------- -----------
Raw materials $ 5,719 $ 3,869
CRA-Z Soap 24,123 62,339
Finished goods 1,237,326 1,231,585
Obsolescence Reserve (130,000) (130,000)
----------- -----------
$ 1,137,168 $ 1,167,793
=========== ===========
During June 2000, based upon the lack of significant product sales of the C-6
Products, Inc. product line (Tool Topper Laddertop Workstation), management
determined that the remaining inventory should be written down by $266,255 which
is included in cost of goods sold in the accompanying 2000 consolidated
statement of operations.
F-12
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
Range of
Useful Lives 2001 2000
------------ ----------- ----------
Building and improvements 30 yrs $830,463 $818,240
Land N/A 412,000 412,000
Machinery and equipment (a) 5 - 7 yrs 661,911 661,911
Furniture and fixtures 5 - 7 yrs 204,883 195,553
Vehicles 5 yrs 157,241 157,241
----------- ----------
$2,266,498 $2,244,945
Less accumulated depreciation and amortization (911,032) (806,760)
----------- ----------
$1,355,466 $1,438,185
=========== ===========
(a) During June 2000, based upon the lack of significant product sales of
the C-6 Products, Inc. product line (Tool Topper Laddertop
Workstation), management determined that the remaining tooling of
$472,727 was impaired. Therefore, such amount was recorded as a
reduction of machinery and equipment and included as loss on impaired
assets in the accompanying 2000 consolidated statement of operations.
F-13
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 5- PARTNERSHIP INTEREST AND CONCENTRATION OF CREDIT RISK
The limited partnership interests consist of Consulier's investment in AVM, L.P.
and BioSafe Systems, LLC.
BIOSAFE SYSTEMS, LLC
The Company owns a 40% interest in BioSafe Systems, LLC. Bio Safe Systems, LLC's
total assets (unaudited) at December 31, 2001 and 2000 were approximately
$965,000 and $783,000 respectively. Total revenue was approximately $3,304,000
in 2001 and $2,789,000 in 2000. The investment is recorded at $467,164 and
$427,303 at December 31, 2001 and 2000, further, equity in income for 2001 and
2000 was $39,861 and $111,912, respectively.
AVM, L.P
Consulier owned approximately 10% of AVM's capital as of December 31, 2001 and
2000. Based on capital and earnings distributions provided in the partnership
agreement, Consulier was allocated approximately 8% of AVM's earnings during
2001 and 2000. 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.
Following is a summary of financial position and results of operations of AVM as
of and for the years ended December 31:
2001 2000
----------- -----------
Cash $30,287,780 $40,016,800
Due from brokers 5,485,366 166,730
Securities owned 838,721 1,230,670
Investment in affiliate & other assets 1,261,712 1,326,026
----------- -----------
TOTAL ASSETS $37,873,579 $42,740,226
=========== ===========
Due to brokers 2,077,100 75,219
Customer payables 11,531,437 19,797,957
Other liabilities 2,379,347 1,109,423
Anticipated partners' withdrawals 856,093 791,205
Total liabilities 16,843,977 21,773,804
Partners' capital 21,029,602 20,966,422
----------- -----------
TOTAL LIABILITIES & PARTNERS' CAPITAL $37,873,579 $42,740,226
=========== ===========
Revenue $35,542,020 $29,971,020
=========== ===========
Net income $14,898,919 $13,845,016
=========== ===========
Consulier's share of AVM's Earnings $ 1,186,343 $ 1,124,247
=========== ===========
F-14
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 6 - NOTES AND BONDS PAYABLE
(a) CURRENT NOTES PAYABLE - BANKS
2001 2000
----- ----------
Note payable to bank, collateralized primarily by investment in AVM, guaranteed
by the Chairman of the Board, President and CEO, maturing April 30, 2001. (See
(a)(1) below) $ 0 $1,000,000
Note payable at prime plus 2 percent (11.5% at December 31, 2000) to a bank
affiliated by common ownership, collateralized by all the assets of the
Automotive parts distribution segment, maturing May 1, 2001 0 47,681
---- ----------
$ 0 $1,047,681
==== ==========
(a)(1) The $1,000,000 note payable to bank bore interest at a floating rate
computed as the Eurodollar rate applicable to such loan (6.62% at
December 31, 2000) plus 2.10%, and was repaid in April, 2001.
F-15
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
(b) BONDS PAYABLE
Bonds payable are due in 2004 with interest of 8% per annum, payable quarterly.
On December 7, 1999 the December 31, 1999 expiration date of 70,000 warrants
held by bondholders 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 is being 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.
During October 2000, Mr. Mosler purchased outstanding bonds issued by the
Company from a bond holder at face value of $680,000. These bonds continue to
carry a due date of 2004 with interest of 8% per annum, payable quarterly. On
July 2, 2001, $500,000 of Mr. Mosler's bonds were redeemed.
NOTE 7 - LEASES
Consulier leases office space under month-to-month leases. Rent expense charged
to operations was approximately $8,300 in 2001 and 2000, all of which was to
related parties.
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,
-----------------------------
2001 2000
--------- ---------
Current:
Federal $ 650,500 $ 0
State 59,800 0
--------- ---------
710,300 0
Deferred:
Federal $ 186,200 ($150,936)
State $ 18,800 ($ 24,684)
--------- ---------
$ 205,000 ($175,620)
TOTAL INCOME TAX EXPENSE (BENEFIT) $ 915,300 ($175,620)
========= =========
F-16
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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,
-----------------------------
2001 2000
--------- ---------
Tax expense (benefit) at statutory rate $ 852,500 $(237,213)
State income tax (benefit) 90,900 (25,326)
net of federal tax effect
Other (28,100) 86,919
--------- ---------
INCOME TAX EXPENSE (BENEFIT) $ 915,300 $(175,620)
========= =========
The approximate tax effects of temporary differences that give rise to deferred
tax assets (liabilities) are as follows:
December 31,
-----------------------------
2001 2000
--------- ---------
Current:
Allowance for doubtful accounts $ 10,000 $ 21,800
Inventory Items 132,600 132,600
Unrealized loss on available for sale securities 16,200 23,000
--------- ---------
Total Current 158,800 177,400
--------- ---------
Non-current:
Depreciation 39,200 (49,000)
Other (4,200) 8,200
Net operating loss carry forward 0 267,000
--------- ---------
Total Non-Current 35,000 226,200
--------- ---------
TOTAL NET DEFERRED TAX ASSET $ 193,800 $ 403,600
========= =========
F-17
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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.
Options to purchase 61,232 shares of common stock by employees were exercised in
2000. Loans totaling $76,540 were made to these employees for a term up to five
years at an 8% annual interest rate for the exercise. At December 31, 2001 and
2000, such loans remain outstanding and are recorded as notes receivable for
common stock, included as a reduction of stockholders' equity. As of December
31, 2001, there were no outstanding options.
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 loss and 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 2001 and 2000 no options
were granted. Under the accounting provisions of SFAS 123, the Company's net
income (loss) and earnings (loss) per share would not have changed to different
pro forma amounts.
F-18
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
The following summary sets forth activity under the plan for the years ended
December 31:
2001 2000
-------------------------- --------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
-------- -------- -------- --------
Outstanding at 95,000 $ 1.66 198,512 $ 1.56
Beginning of Year
Granted -- -- -- --
Expired (95,000) ($ 1.66) (42,280) ($ 1.40)
Exercised -- -- (61,232) ($ 1.25)
-------- ----- -------- --------
Outstanding and Exercisable
At Year End -- -- 95,000 $ 1.66
======== ===== ======== ========
F-19
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
(b) COMMON STOCK WARRANTS
In connection with the issuance of the bonds payable (see Note 6(b)), Consulier
issued warrants to purchase shares of its common stock at a purchase price of
$1.71875 per share. At December 31, 2001 and 2000, 70,000 warrants remain
outstanding. No warrants have been exercised to date. On December 7, 1999 the
Board of Directors extended the December 31, 1999 expiration date 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 assumptions: 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, which is being 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, 2001 and 2000 totaled
approximately $71,000 and $312,000, respectively. Cash paid for income taxes
during both 2001 and 2000 was $0. Cash received for refunds of income taxes
totaled approximately $0 and $303,000 in 2001 and 2000.
NOTE 11 - RELATED PARTY TRANSACTIONS
(a) CASH ADVANCES
During 2001 and 2000, Mosler and Consulier continued to incur certain joint
costs and expenses incurred in the normal course of business. Mosler owed
Consulier $67,693 and $30,364, due on demand, at December 31, 2001 and 2000
respectively, resulting from these transactions. Interest was accrued on the
outstanding balance at monthly LIBOR (2.435 % at December 31, 2001) see Note 11
(c)(1).
(b) OTHER
For other related party transactions see Notes 5, 6, and 7.
F-20
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
(c) NOTES RECEIVABLE - RELATED PARTIES
Notes receivable - related parties consist of the following:
2001 2000
----------- -----------
Mosler (see (c)(1) below) $ 1,748,357 $ 1,748,357
MACC (see (c) (2) below) 430,559 430,559
----------- -----------
$ 2,178,916 $ 2,178,916
Less excess of face amount of note (758,202) (758,202)
over carrying cost of real estate
----------- -----------
NOTES RECEIVABLE $ 1,420,714 $ 1,420,714
=========== ===========
Less: Current portion -- (430,559)
----------- -----------
----------- -----------
NOTES RECEIVABLE - LONG TERM $ 1,420,714 $ 990,155
=========== ===========
Interest income relating to the above notes totaled approximately $89,100 in
2001 and $179,300 in 2000.
(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, with interest at one month
LIBOR (2.435% at December 31, 2001). Principal on the note was payable at the
original maturity in December 2001, which was extended to December 2003 in 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.
In November 2000, Mosler made a payment of $2,000,000 on his note receivable,
including $1,248,357 of interest and $751,643 of principal.
(c)(2) SALE OF AUTOMOBILE OPERATIONS
In 1990, Consulier sold its automobile manufacturing business to MACC. As
consideration for the purchase, MACC executed a promissory note for $750,000,
which note was personally guaranteed by Mosler. This promissory note accrues
interest at an annual rate of one month LIBOR (2.435% at December 31, 2001). The
note, which was to mature on May 11, 2001 and was extended to May 11, 2003 in
2001, has an outstanding balance of $430,559 at both December 31, 2001 and 2000.
F-21
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
(d) DUE FROM PRINCIPAL SHAREHOLDER
Prior to 2001, capital and income distributions from the Company's investment in
AVM were distributed directly from AVM to the Company on a monthly basis.
Beginning in 2001, the Company has been advancing its cash distributions from
AVM to the principal shareholder. These distributions are included in due from
principal shareholder of $1,232,182 at December 31, 2001 in the consolidated
balance sheet.
NOTE 12 - BUSINESS SEGMENT INFORMATION
Information related to Consulier's operations in its different industry segments
is as follows:
As of and for the
Year ended December 31
---------------------------------
2001 2000
----------- -----------
REVENUES AND INVESTMENT INCOME:
Automotive parts distribution $ 3,175,960 $ 3,027,760
Household and tool products -- 7,114
Investments 1,226,420 1,124,247
Corporate 7,294 7,536
----------- -----------
$ 4,409,674 $ 4,166,657
=========== ===========
OPERATING PROFITS (LOSSES):
Automotive parts distribution (a) $ 1,581,067 ($ 576,462)
Household and tool products (28,073) (800,743)
Investments 1,226,420 1,236,159
Corporate (399,525) (681,828)
----------- -----------
2,379,889 (822,874)
Interest, net 25,823 (52,319)
Other 99,217 177,507
----------- -----------
INCOME (LOSS) BEFORE INCOEM TAXES $ 2,504,929 $ (697,686)
=========== ===========
IDENTIFIABLE ASSETS:
Automotive parts distribution $ 2,989,282 $ 3,712,810
Household and tool products 4,367 3,440
Investments 2,562,579 2,507,443
Corporate 3,131,629 2,392,281
----------- -----------
$ 8,687,857 $ 8,615,974
=========== ===========
(a) Operating profits of this segment for 2001 include an insurance
recovery of $1,750,000 received in connection with a casualty loss, of
which $506,937 is included in the operating losses of this segment in
2000 (see notes 3 and 15).
F-22
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 13 - EARNINGS (LOSS) PER SHARE
Year Ended December 31,
--------------------------------
2001 2000
----------- -----------
NUMERATOR:
Net income (loss),
numerator for basic and diluted
earnings (loss) per share $ 1,589,629 ($ 522,066)
DENOMINATOR:
Denominator for basic earnings (loss)
per share, weighted - average shares 4,951,150 4,920,700
EFFECT OF DILUTIVE SECURITIES:
Stock options -- --
Warrants 11,124
----------- -----------
Dilutive potential common shares 11,124 --
----------- -----------
DENOMINATOR FOR DILUTED EARNINGS
(loss) per share, adjusted
weighted - average shares 4,962,274 4,920,700
----------- -----------
BASIC EARNINGS (LOSS) PER SHARE $ 0.32 ($ 0.11)
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.32 ($ 0.11)
=========== ===========
Options to purchase 15,000 shares of common stock at $2.50 per share in 2000
were not included in the computation of diluted loss per share because the
effect would be antidilutive. Options and warrants to purchase 150,000 shares of
common stock at prices ranging from $1.25 to $1.72 per share were not included
in the 2000 computation of diluted loss per share as the effect would be
antidilutive.
F-23
CONSULIER ENGINEERING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 14 - CAPITAL STOCK
During 2000, former employees of Consulier, who are now employees of MACC,
exercised stock option agreements with the Company, 61,232 shares of restricted
common stock were issued as a result.
Consulier loaned a total of $76,540 to these individuals to allow them to
exercise their options and purchase the restricted common stock. Each person
signed a promissory note with an interest rate of 8% per annum. The note is
secured by the maker pursuant to the terms of the stock pledge agreement between
the maker and the holder.
NOTE 15 - CASUALTY LOSSES
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.
The loss of $1,092,586 was reflected in the 1999 statement of operations as a
casualty loss. The Company began litigation against the insurance company whose
policy covered the Southeast warehouse facility and inventory, to recover the
loss. However, the insurance company disputed the claim.
Upon further inspection and evaluation during the latter part of April 2000,
management estimated that the remaining CRA-Z Soap located at Southeast was
unsaleable. The product's unique fragrance was severely impaired by the
conditions that were a result of the hurricane. Also, it was determined the soap
was unsaleable because of discoloration, a change in texture and the soap stuck
to packaging. The $506,937 change in estimate, representing the remaining CRA-Z
Soap inventory held at Southeast, was recorded as a casualty loss during the
three months ended March 31, 2000.
On March 22, 2001, the Court entered an omnibus Order Granting Plaintiff's
Motion for Summary Declaratory Judgment and a Final Declaratory Judgment in
favor of Southeast against American States Insurance Company, declaring that the
subject insurance contract between the parties covers the loss due to all
damages, including water damage caused by a hurricane, and noted there is no
dispute that the rainfall associated with Hurricane Irene caused the damage to
Plaintiff's (Southeast Automotive Acquisition Corp.) property. In June 2001 the
Company settled its lawsuit with American States Insurance Company for
$1,750,000, recorded as insurance recovery in the accompanying 2001 statement of
operations.
See Note 2 regarding a casualty loss incurred in October, 2000.
NOTE 16 - SUBSEQUENT EVENT
On April 16, 2002, the Company entered into an agreement granting a line of
credit of up to $900,000, at an interest rate of 4% per annum, payable on
demand, to Asset Assistance Group, LLC ("AAG"). As of April 16, 2002, the
outstanding amount drawn on the line of credit was $175,000. The line of credit
expires one year from April 16, 2002. Further, in consideration for the line of
credit, the Company was granted an option to acquire 95% of AAG. That option
expires one year from April 16, 2002 and has an exercise price of $950.
F-24
CONSULIER ENGINEERING, INC. AND SUBSIDIARIES
FORM 10-KSB ITEM 13(A) EXHIBITS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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)
E-1
Exhibit Description
------- ------------
10(m) Promissory Note of Warren B. Mosler for $2,500,000 dated December
31, 1989 regarding sale of real estate (2)
10(n) Mortgage Indenture regarding Bonds and Class B Warrants dated June
30, 1989 (8)
10(o) Agreement between Mosler Auto Care Center, Inc., and Consulier
dated October 31, 1993, relinquishing Consulier's option to
repurchase the automobile business in exchange for option to
purchase U.S. Electricar, Inc. restricted stock at $.50 per share,
and for the right to future royalty payments (9)
10(p) Royalty Agreement, Covenant Not to Compete and Security Agreement
between Mosler Auto Care Center, Inc., and U.S. Electricar, Inc.,
dated October 31, 1993 (9)
10(q) Employment Agreement dated May 16, 1994, between George E. Mount
and Consulier wherein George E. Mount is hired as President and
CEO for a term of two years (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
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