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 March 31, 1998
Commission file Number 1-3489
CLARY CORPORATION
- ----------------------------------------------------------------------------
(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
incorporation or organization) Identification No.)
1960 So. Walker Avenue Monrovia, California 91016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (626) 359-4486
N/A
- ----------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 April 29, 1998, there were 1,807,319 shares of common stock out-
standing.
Transitional Small Business Disclosure Format
Yes X No
----- -----
<PAGE>
PART 1
ITEM #1 - FORM 10-QSB
CLARY CORPORATION
(Statement of Operation)
<TABLE>
<CAPTION>
PROFIT AND LOSS INFORMATION Three Months Period Ended March
1998 1997
- ----------------------------------- ---------------------------------
<S> <C> <C>
Sales and other revenue $ 935,000 $ 848,000
Cost and expenses:
Cost of products sold 651,000 594,000
Engineering and product development 98,000 85,000
Selling and service 202,000 114,000
General and administrative 76,000 80,000
Interest expense 35,000 30,000
--------- ---------
1,062,000 903,000
--------- ---------
Net (loss) earnings $ (127,000) $ (55,000)
========= =========
Net (loss) per common share $ (.07) $ (.03)
========= =========
Average number of shares 1,807,319 1,807,319
Dividends per share None None
</TABLE>
<TABLE>
<CAPTION>
PART I
ITEM #1 - FORM 10-QSB
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS
-----------------------------
ASSETS March 31, 1998 December 31, 1997
- ---------------------------------- -------------- -----------------
<S> <C> <C>
CURRENT ASSETS
- --------------
<S>
Cash $ 195,000 $ 321,000
Cash restricted 300,000 300,000
Notes and accounts receivable less
allowance for doubtful accounts
of $14,000 in 1998 and 1997 582,000 759,000
Inventories, principally finished
goods and work-in-process 1,495,000 1,442,000
Prepaid expenses and other assets 67,000 47,000
--------- ---------
Total Current Assets 2,639,000 2,869,000
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Machinery and equipment 1,402,000 1,374,000
Dies, jigs and fixtures 31,000 31,000
Leasehold improvements 71,000 68,000
--------- ---------
1,504,000 1,473,000
Less: Accumulated depreciation
and amortization 1,374,000 1,366,000
--------- ---------
130,000 107,000
OTHER ASSETS
- ------------
Miscellaneous 59,000 59,000
--------- ---------
TOTAL ASSETS $ 2,828,000 $ 3,035,000
========= =========
<PAGE>
PART I
ITEM #1 - FORM 10-QSB
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1998 December 31, 1997
- ------------------------------------ -------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------
Notes payable $ 725,000 $ 725,000
Accounts payable and accrued expenses 609,000 681,000
Accrued payroll and related expenses 84,000 98,000
Customer deposits 23,000 17,000
--------- ---------
Total Current Liabilities $ 1,441,000 $ 1,521,000
9-1/2% Convertible Subordinated Notes
due October 17, 2000 600,000 600,000
STOCKHOLDERS' 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 (6,749,000) (6,749,000)
Current years' loss (127,000) ---
--------- ---------
Total Equity 787,000 914,000
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,828,000 $ 3,035,000
========= =========
</TABLE>
<PAGE>
CLARY CORPORATION
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION> For the Three Month Period Ended
--------------------------------
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (127,000) $ (55,000)
Adjustments to reconcile net (loss)
to net cash (used for) provided by
operating activities:
Depreciation and amortization 8,000 12,000
Provision for losses on accts. rec. -- (7,000)
Change in assets and liabilities:
Decrease in accounts receivable 177,000 104,000
(Increase) decrease in inventory (53,000) 82,000
(Increase) in prepaid expenses (20,000) (19,000)
(Decrease) increase in accts. payable
and accrued expenses (86,000) 64,000
Increase in customer deposits 6,000 5,000
------- --------
Net cash (used for) provided by
operating activities (95,000) 186,000
Cash flows from investing activities:
Capital expenditures (31,000) ---
------ -------
Net cash (used for) investing
activities (31,000) ---
Cash flows from financing activities:
Net (repayments) under line-of-credit --- (50,000)
------- ------
Net cash (used for) financing
activities --- (50,000)
------- -------
Net (decrease) increase in cash and cash
equivalents (126,000) 136,000
Cash and cash equivalents at beginning of
year 321,000 123,000
-------- -------
Cash and cash equivalents at end of quarter $ 195,000 $ 259,000
======== ========
</TABLE>
<PAGE>
PART I
ITEM #2 - FORM 10-QSB
MANAGEMENT DISCUSSION AND ANALYSIS
- ----------------------------------
Results of Operation
- --------------------
Sales and other revenues for the first quarter of 1998 increased
$87,000 or 10.3% from the first quarter in 1997. This increase was
achieved through increased sales of the Company's newly developed
digital products.
Cost of sales increased $57,000 or 9.6% over the period. This cost
increase was due to increased sales and product mix. Selling and
administrative expenses increased $84,000 or 43.3% over the period.
This increase was due to a complete reorganization of the sales dept.
in mid-1997 to begin selling the recently developed products into new
markets, as well as increased sales commissions on the sales increase.
Engineering and development expenses in the quarter for 1998 increased
$13,000 or 15.3%. This increase was not significant. Interest expense
increased $5,000 or 16.6% due to increased borrowing over the reporting
period.
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 on May 1, 1998.
<PAGE>
PART I
ITEM #3 - FORM 10-QSB
CLARY CORPORATION
-----------------
NOTES TO PART I OF THIS REPORT
------------------------------
NOTE 1. As of March 31, 1998, 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 Incentive Stock
Option Plan and an additional 100,000 shares reserved for purchase by
officeers 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. This report has not been reviewed by
our independent public accountants and is, therefore, unaudited.
<PAGE>
FORM 10-QSB
CLARY CORPORATION
PART II
OTHER INFORMATION
-----------------
Item 1 Legal Proceedings - Refer to Registrant's Annual Report to Share-
holders and Form 10-KSB filed with the SEC
on March 26, 1998. On April 14, 1998, the
Supreme Court of Texas overruled motions by
both parties for rehearing of the case.
Once the lower courts have had the opportunity
to determine the exact amount of any judg-
ment including interest, this case will be
settled and concluded. The amount reserved
by the Registrant for the judgment plus
interest as well as additional accrued legal
cost will exceed the final cost. The
$300,000 certificate of deposit securing the
supersedeas bond will also be released at
time of settlement.
Item 2 Change 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
<PAGE>
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
By: /s/ John G. Clary
==================
John G. Clary
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
========= =====
<S> <C>
/s/ John G. Clary President, Chief Executive Officer,
- ----------------- Chairman of the Board and Director
John G. Clary
/s/ Donald G. Ash Treasurer, Chief Financial Officer,
- ----------------- Assistant Secretary and Director
Donald G. Ash
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Mar-31-1998
<CASH> 495
<SECURITIES> 0
<RECEIVABLES> 596
<ALLOWANCES> 14
<INVENTORY> 1495
<CURRENT-ASSETS> 2639
<PP&E> 1504
<DEPRECIATION> 1374
<TOTAL-ASSETS> 2828
<CURRENT-LIABILITIES> 1441
<BONDS> 600
<COMMON> 2509
0
55
<OTHER-SE> 1777
<TOTAL-LIABILITY-AND-EQUITY> 2828
<SALES> 935
<TOTAL-REVENUES> 935
<CGS> 651
<TOTAL-COSTS> 651
<OTHER-EXPENSES> 376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (127)
<INCOME-TAX> 0
<INCOME-CONTINUING> (127)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
