FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30,1997 Commission File Number 1-3489
CLARY CORPORATION
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(Exact name of registrant as specified in its charter)
California 95-0630196
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State or other Jurisdiction of (I.R.S. Employer I.D)
incorporation or organization)
1960 S. Walker Avenue Monrovia, California 91016
Registrant's telephone number, including area code (818)359-4486
Indicated by check whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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___
As of July 23,1997 there were 1,807,319 shares of common stock outstanding.
CLARY CORPORATION
Statement of Operations
Three Months Period Ended June 30,
Profit and Loss Information
1997 1996
Net Sales and Other Income $1,153,000 $1,554,000
Cost and Expenses
Cost of products sold 754,000 1,127,000
Engineering and product develop. 89,000 93,000
Selling and Service 152,000 225,000
General and Administrative 66,000 88,000
Reserve for reorganization,downsizing
and potential legal losses -0- 300,000
Interest expense 33,000 44,000
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1,094,000 1,877,000
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Profit (loss) before income taxes 59,000 ( 323,000)
Income tax expenses 1,000 1,000
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Net profit (loss) 58,000 ( 324,000)
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Net (Loss) per common share $ .03 $ (.18)
============ ============
Average number of shares 1,807,319 1,807,319
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Dividends per share None None
CLARY COPRPORATION
STATEMENT OF OPERATIONS
THREE MONTHS PERIOD ENDED JUNE30,
Profit and Loss Information 1997 1996
Net Sales and Other Income $2,001,000 $3,199,000
Cost and Expenses:
Cost of products sold 1,348,000 2,312,000
Engineering and Products Develop. 174,000 197,000
Selling and Service 266,000 447,000
General and Administrative 146,000 173,000
Reserve for reorganizations,downsizing
and potential legal losses -0- 300,000
Interest expenses 63,000 89,000
------------ -----------
1,997,000 3,518,000
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Profit (loss) before income taxes 4,000 ( 319,000 )
Income tax expense 1,000 1,000
----------- ------------
Net profit (loss) 3,000 ( 320,000)
=========== ============
Profit (loss) per common share: $ -0- $ (.18)
=========== ============
Average number of shares 1,807,319 1,807,319
Dividends per share None None
CLARY CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS June 31,1997 December 31,1996
CURRENT ASSETS
Cash $ 155,000 $ 123,000
Cash Restricted 300,000 300,000
Notes and accounts receivable
less allowance for doubtful
amounts of $14,000 in 1997 and
$20,000 in 1996. 686,000 469,000
Inventories, Principally finished goods
and work-in-process 1,667,000 1,908,000
Prepaid Expenses & other assets 96,000 42,000
---------------- ---------------
Total Current Assets 2,904,000 2,842,000
PROPERTY,PLANT & EQUIPMENT
Machinery & Equipment 1,353,000 1,336,000
Dies, Jigs and Fixtures 31,000 31,000
Leasehold improvements 68,000 60,000
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1,452,000 1,427,000
Less:
Accumulated Depreciation.
and Amortization 1,337,000 1,312,000
---------------- ----------------
115,000 115,000
OTHER ASSETS
Miscellaneous 59,000 59,000
---------------- ---------------
TOTAL ASSETS $ 3,078,000 $ 3,016,000
=============== ================
LIABILITIES AND
STOCKHOLDERS' EQUITY June 30,1997 December 31,1996
CURRENT LIABILITIES
Notes Payable $ 725,000 $ 650,000
Accounts Payable and
Accrued Expenses 607,000 603,000
Accrued Payroll and
Related Expenses 73,000 90,000
Customer deposits 21,000 24,000
---------------- --------------
Total Current Liabilities 1,426,000 1,367,000
9.5% Convertible Subordinated Notes due
October 17,2000 600,000 600,000
STOCKHOLDER'S EQUITY
Preferred Stock 55,000 55,000
Common Stock and additional stated
value arising from conversion of preferred
stock 2,509,000 2,509,000
Additional paid-in capital 5,099,000 5,099,000
Beginning of year deficit (6,614,000) (6,614,000)
Current year's earnings 3,000 -0-
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Total Equity 1,052,000 1,049,000
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TOTAL LIABILITIES & STOCKHOLDER'S
EQUITY $ 3,078,000 $ 3,016,000
============== ==============
CLARY CORPORATION
STATEMENT OF CASH FLOWS
For the Six Months Period
Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ 3,000 $( 20,000)
Reserve for downsizing and legal losses -0- (300,000)
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Net profit (loss) 3,000 (320,000
Adjustment to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 25,000 25,000
(Used)Provision for losses on
accounts receivable ( 6,000) 30,000
Change in assets and liabilities:
Decrease(increase) in accts. receivable (211,000) (384,000)
Decrease(Increase) in Inventory 241,000 (110,000)
Decrease(increase) prepaid expenses ( 54,000) ( 22,000)
Decrease in other assets -0- 45,000
Increase(decrease) in accounts payable
and accrued Expenses ( 13,000) 365,000
Increase(decrease) in customer deposits ( 3,000) 15,000
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Net cash used for Operating Activities: ( 18,000) (356,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ( 25,000) ( 5,000)
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Net Cash (used) by investing activities ( 25,000) ( 5,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under line-of-credit 75,000 55,000
Reserve for legal contingencies -0- 150,000
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Net cash provided by financing activities 75,000 205,000
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Net increase(decrease)in cash
and cash equivalents 32,000 (156,000)
Cash and cash equivalents at beginning of period 123,000 292,000
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Cash and cash equivalents at end of quarter $ 155,000 $ 136,000
============ ==========
Part I
Item #2
Management Discussion and Analysis
Results of Operation
Sales and other revenues for the second quarter 1997 decreased $401,000 or
25.8% from the second quarter of 1996. This reduction was planned in the
Registrant's efforts to replace imported products for resale with its newly
developed power peoducts.
Cost of orders decreased $373,000 or 33.1% over the two periods. This cost
decrease was due primarily by the sales decrease but was further assisted by
larger margin on the newer products sold. Selling and administrative expenses
were decreased $95,000 or 36.4% over compared quarters. The majority of this
decrease was commission on the reduced sales as well as a general reorganization
of the sales department. With the new product line ready to sell, sales expenses
will be once again increasing over the next few quarters. Engineering and
development decreased $4,000 over the two quarters. Interest expenses decreased
$11,000 or 25.0% due to reduced borrowing as cash flow was enhanced through
operating earnings and inventory reductions.
In the second quarter 1996, the Registrant established a $300,000 reserve for
reorganization expenses and additional legal fees associated with a prior law
suit.
Liquidity and Capital Requirements
The Registrant believes funds provided from operations and short-term lines of
credit will be sufficient to fund its immediate needs for working capital.
Capital expenditures will be minimal and funded from working capital or placed
on short-term leases.
The Registrant's short-term secured borrowing with the bank is subject to
renewal in May 1,1997.
Item #3
NOTES TO PART I OF THIS REPORT
NOTE 1: As of June 30,1997, the registrant has 12,688 shares of common
stock reserved for conversion of preferred stock and 600,000 shares reserved
for the conversion of the 9 1/2 % convertible subordinated notes. In addition,
the registrant has reserved 26,000 shares of common stock for purchase
by officers or employees under its 1984 Employee Incentive Stock Option
Plan and an additional 100,000 shares reserved for purchase by officers and
key employees under its 1996 Employee Incentive Stock Option Plan. Also, the
Company has 40,000 shares of common stock for purchase by its Executive Vice-
President under a non-qualified stock option plan.
NOTE 2: This report reflects all adjustments which are, in the opinion of
management, necessary to present a fair statement of the results for the
interim period. The report has not been reviewed by our independent public
accountants and is therefore, unaudited.
PART II
OTHER INFORMATION
Item 1 Legal Proceedings-
Refer to registrant's Annual Report to Shareholders and Form 10KSB filed with
the Securities and Exchange Commission on March 28,1997. Since this filing the
Second Court of Appeals rendered a Judgment on Remand on July 3,1997 reversing,
remanding, rendering and affirming, in part, the judgment of the original trial
court. Essentially, the Second Court of Appeals reduced the net damages to
approximately 20% of the original award. The distributor is expected to file
for a hearing by the Supreme Court of Texas on this matter.
Item 2 Changes in Securities - Inapplicable
Item 3 Defaults Upon Senior Securities - Inapplicable
Item 4 Submission of Matters to a Vote of Security Holders-Inapplicable
Item 5 Other Information - Inapplicable
Item 6 Exhibits and Reports on Form 8K - None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARY CORPORATION
(Registrant)
Date:July 25,1997
John G. CLary
President and Chief Executive Officer
Date:July 25,1997
Donald G. Ash
Treasurer and Chief Financial Officer
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