UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission file Number 1-3489
CLARY CORPORATION
(Exact name of registrant as specified in its charter.)
CALIFORNIA, U.S.A. 95-0630196
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1960 S WALKER AVE. MONROVIA CA, U.S.A. 91016
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(626) 359-4486
Indicate by check mark 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 [ ]
Common Stock, $1 Par Value - 1,807-319 shares as of
October 27, 1997.
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<TABLE>
PART I. - FINANCIAL INFORMATION
CLARY CORPORATION
STATEMENTS OF LOSS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS AND NINE MONTHS
ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
__________________ _________________
1997 1996 1997 1996
______ ______ ______ ______
<S> <C> <C> <C> <C>
Net Sales $1,397 $1,217 $3,398 $4,416
Cost of goods sold 909 944 2,257 3,256
______ ______ ______ ______
Gross Profit(Loss) 488 273 1,141 1,160
Engineering & Prod.Develop. 76 97 250 294
Selling, general and
administrative expenses 373 252 785 1172 (1)
______ ______ ______ ______
Operating Earnings(loss) 39 ( 76) 106 (306)
Interest Expense 36 44 99 133
Income tax expense 0 0 1 1
______ ______ ______ ______
Net Earning (Loss) 3 ( 120) 6 (440)
_______ _______ _______ _______
Average number of shares 1,807,319 1,807,319 1,807,319 1,807,319
Net Earning(Los) per share $ 0 $ (.07) $ 0 $ (.24)
(1)In 1996 includes $300,000 for downsizing, reorgnanization, and
future legal expenses.
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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<TABLE>
CLARY CORPORATION
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 1997 December 1996
______________ ______________
<S> <C> <C>
ASSETS
Current Assets
Cash $ 212 $ 123
Cash rstricted 300 300
Accounts receivable trade 883 469
Inventories 1,537 1,908
Prepaid expenses 76 42
______ ______
Total Current Assets 3,008 2,842
Machinery and Equipment, Dies
jigs and fixtures,Leasehold
improvement.
less: accumulated depreciation of
$1,351,000 and $1,312,000 104 115
Other Assets 59 59
______ ______
TOTAL ASSETS 3,171 3,016
====== ======
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Notes Payable $ 725 $ 650
Accounts Payable and expenses 701 603
Accrued Payroll and expenses 68 90
Customer Deposits 22 24
______ ______
Total Current Liabilities 1,516 1,367
9.5% Convertible Subordinated Note
due October 17,2000 600 600
Stockholder's Equity
Preferred Stock 55 55
Common stock and additional stated
value arising from conversion of
preferred stock 2,509 2,509
Additional paid-in Capital 5,099 5,099
Beginning of year deficit (6,614) (6,614)
_______ _______
Total Stockholders' Equity $1,055 $1,049
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $3,171 $3,016
======== ========
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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<TABLE>
CLARY CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands)
<CAPTION>
1997 1996
<S> <C> <C>
Cash Flow From Operating Activities:
Operating Earnings(Loss) $ 6 $ (140)
Reserve for downsizing and legal
losses 0 (300)
_______ _______
Net earning(loss) 6 (440)
Adjustments To Reconcile Net
Income to Net Cash Provided by
Operating Activities
Depreciation and amortization 39 37
Provision for losses on Accounts
Receivable (6) 0
Changes in assets and liabilities:
(Increase)decrease in receivables (408) 104
Decrease in inventories 371 42
(Increase)decrease prepaid expenses (34) 11
Decrease in other assets 0 55
Increase in Accounts payable and
accrued expenses 76 26
Decrease in customer deposits (2) 0
_______ _______
Net Cash Used In Operating Activities $ 42 $ ( 165)
_______ _______
Cash Flow From Investing Activities:
Capital expenditures $ (28) $ (6)
------- -------
Net cash (used for)
Investing Activities $ (28) $ (6)
Cash Flow From Financing Activities:
Net borrowings (repayment) under
line-of credit 75 (135)
Reserve for legal contingencies 0 150
_______ _______
Net Cash Provided From
Financing Activities $ 75 $ 15
_______ _______
Net increase(decrease) in Cash
and cash equivalent 89 (156)
Cash and cash equivalent at
Beginning of Year $ 123 $ 292
_______ _______
Cash and cash equivalent at
End of Period $ 212 $ 136
======== ========
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
CLARY CORPORATION
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
September 30, 1997
Liquidity and Capital Resources
The registrant believes funds provided form operations and short-term
lines of credits will be sufficient to fund its immediate needs for working
capital. Capital expenditures will be minimal and funded from working or
placed on short-term leases.
Results of Operations
Sales and other revenues for the third quarter of 1997 increased $180,000
or 14.8% from the third quarter of 1996. This increase was due to the
Registrant's new digital power products introduction to the marketplace.
Cost of sales decreased $35,000 or 3.7% over the two periods. This cost
decrease was due to larger margins on the newer products sold. Selling and
Administrative expenses increased $121,000 or 48.0% over the compared quarters.
The majority of this increase was commission on the increased sales as well
as a general rebuilding of the sales department. With the new product line ready
to sell, sales expenses will de gradually increasing over the next few quarters
Engineering and development decreased $21,000 or 21.6% over the two quarters.
This decrease was due to outsourcing projects in a strategic partnership.
Interest expenses decreased $8,000 or 18.2% 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.
<PAGE>
NOTES TO PART I OF THIS REPORT
NOTE 1
As of September 30,1997. the Registrant has 12,688 shares of common stock
reserved for convertion of preferred stock and 600,000 shares reserved for the
conversion of the 9.5% convertible subordinated notes. In additio the Regis-
trant has reserve 26,000 shares of common stock for purchases by officers or
employees under its 1984 Incentive Stock Plan and an additional 80,000 shares
reserved for purchases by officers and key employees under 1996 Employee Incen-
tive Stock Option Plan. Also, the Company has 40,000 shares of common stock for
purchases by its Executive Vice-President under a non-qualified stock option
plan.
NOTE 2
This report reflects all adjustmens which are, in the opinion of the
management, neccesary to present a fair statement of the results for the interim
period. The reports has not been reviewed by our independent public accountants
and is, therefore, unaudited.
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Refer to registrant's Annual Report to Shareholders and Form 10-KSB
file with the Securities and Exchange Commision on March 28,1997
Since this filing, the Second Court of Appeals rendered a Judgment
on Remand on July 3,1997 reversing, rremanding, rendering and affirming,
in part, the judgment of the original trial court. Essentially, the
Second Court of Appeals reduced the net damages tp approximately 20% of
original award. The distributor is expected to file for hearing by the
Supreme Court of Texas on this matter.
Item 2 Changes in Securities - Inapplicable
Item 3 Defaults Upon Senior Securities - Innaplicable
Item 4 Submission of Matters to a Vote of Security Holders - Innaplicable
Item 5 Other Information - Innaplicable
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
<PAGE>
CLARY CORPORATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CLARY CORPORATION
Registrant
Date:October 27, 1997
John G. Clary
President and Chief Executive Officer
Date:October 27, 1997
Donald G. Ash
Treasurer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 512
<SECURITIES> 0
<RECEIVABLES> 897
<ALLOWANCES> 14
<INVENTORY> 1537
<CURRENT-ASSETS> 3008
<PP&E> 1455
<DEPRECIATION> 1351
<TOTAL-ASSETS> 3171
<CURRENT-LIABILITIES> 1516
<BONDS> 600
<COMMON> 2509
0
55
<OTHER-SE> ( 1509)
<TOTAL-LIABILITY-AND-EQUITY> 3171
<SALES> 3398
<TOTAL-REVENUES> 3398
<CGS> 2257
<TOTAL-COSTS> 2257
<OTHER-EXPENSES> 1035
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<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 7
<INCOME-TAX> 1
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
