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 Quarter Ended June 30, 1998
Commission file Number 1-3489
CLARY CORPORATION
- ----------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 95-0630196
- ----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incororation or organization) Identification No.
1960 So. Walker Avenue Monrovia, California 91016
- ------------------------------------------------------------------------
(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 July 20, 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 Operations)
<TABLE>
<CAPTION>
PROFIT AND LOSS INFORMATION Three Months Period Ended June 30,
1998 1997
- ----------------------------------- ---------------------------------
<S> <C> <C>
Sales and other revenue $ 1,020,000 $ 1,153,000
Cost and expenses:
Cost of products sold 737,000 754,000
Engineering and product development 93,000 89,000
Selling and service 176,000 152,000
General and administrative 81,000 66,000
Interest expense 36,000 33,000
--------- ---------
1,123,000 1,094,000
--------- ---------
(Loss) profit before income taxes (103,000) 59,000
Income tax expense 1,000 1,000
--------- ----------
Net (loss) profit $ (104,000) $ 58,000
========== ==========
(Loss) profit per common share:
Net (loss) profit per common share $ (.06) $ .03
========== ============
Average number of shares 1,807,319 1,807,319
Dividends per share None None
<PAGE>
CLARY CORPORATION
Statement of Operations
-----------------------
</TABLE>
<TABLE>
<CAPTION>
PART I
ITEM #1 - FORM 10-QSB
Six Months Period Ended June 30,
-------------------------------
Profit and Loss Information 1998 1997
- --------------------------- ----- ----
<S> <C> <C>
Net Sales and Other Income $ 1,955,000 $ 2,001,000
Cost and expenses:
Cost of products sold 1,388,000 1,348,000
Engineering and Product Development 191,000 174,000
Selling and Service 378,000 266,000
General and Administrative 157,000 146,000
Interest expense 71,000 63,000
--------- ---------
2,185,000 1,997,000
--------- ---------
(Loss) profit before income taxes (230,000) 4,000
Income tax expense 1,000 1,000
-------- --------
Net (loss) profit $ (231,000) $ 3,000
======== =====
(Loss) profit per common share:
Net (loss) profit per common share $ (.13) $ ---
======= =====
Average number of shares 1,807,319 1,807,319
Dividends per share None None
</TABLE>
<TABLE>
<CAPTION>
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS
-----------------------------
ASSETS June 30, 1998 December 31, 1997
- ---------------------------------- -------------- -----------------
<S> <C> <C>
CURRENT ASSETS
- --------------
<S>
Cash $ 212,000 $ 321.000
Cash restricted --- 300,000
Notes and accounts receivable less
allowance for doubtful amounts
of $13,000 in 1998 and $14,000 in
1997. 659,000 759,000
Inventories, principally finished
goods and work-in-process 1,642,000 1,442,000
Prepaid expenses and other assets 90,000 47,000
--------- ---------
Total Current Assets 2,603,000 2,869,000
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Machinery and equipment 1,405,000 1,374,000
Dies, jigs and fixtures 31,000 31,000
Leasehold improvements 71,000 68,000
--------- ---------
1,507,000 1,473,000
Less: Accumulated depreciation
and amortization 1,382,000 1,366,000
--------- ---------
125,000 107,000
OTHER ASSETS
- ------------
Miscellaneous 59,000 59,000
--------- ---------
TOTAL ASSETS $ 2,787,000 $ 3,035,000
========= =========
<PAGE>
PART I
ITEM #1 - FORM 10-QSB
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1998 December 31, 1997
- ------------------------------------ -------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------
Notes payable $ 785,000 $ 725,000
Accounts payable and accrued expenses 615,000 681,000
Accrued payroll and related expenses 74,000 98,000
Customer deposits 30,000 17,000
--------- ---------
Total Current Liabilities $ 1,504,000 $ 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' earnings (231,000) ---
--------- ---------
Total Equity 683,000 914,000
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,787,000 $ 3,035,000
========= =========
</TABLE>
<PAGE>
CLARY CORPORATION
STATEMENT OF CASH FLOWS
------------------------
<TABLE>
<CAPTION> For the Six Months Period Ended
--------------------------------
June 30,
---------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Operating (loss) profit $ (231,000) $ 3,000
Adjustment to reconcile net (loss)
profit to net cash used for
Operating Activities:
Depreciation and amortization 16,000 25,000
(Used) Provision for losses in accts. rec. (1,000) (6,000)
Change in assets and liabilities:
Decrease in cash restricted 300,000 --
Decrease(increase) in accts. receivable 101,000 (211,000)
(Increase) decrease in inventory (200,000) 241,000
(Increase) in prepaid expenses (43,000) (54,000)
(Decrease) increase in accts. payable
and accrued expenses (90,000) (13,000)
Increase(decrease) in customer deposits 13,000 (3,000)
------- --------
Net cash (used for)
operating activities (135,000) (18,000)
Cash used for investing activities:
Capital expenditures (34,000) (25,000)
------ -------
Net cash used for investing
activities (34,000) (25,000)
Cash provided by financing activities:
Net borrowing under line-of-credit 60,000 75,000
------- ------
Net cash provided by financing
activities 60,000 75,000
------- -------
Net (decrease) increase in cash and cash
equivalents (109,000) 32,000
Cash and cash equivalents at beginning of
period 321,000 123,000
-------- -------
Cash and cash equivalents at end of period $ 212,000 $ 155,000
======== ========
</TABLE>
<PAGE>
PART I
ITEM #2 - FORM 10-QSB
MANAGEMENT DISCUSSION AND ANALYSIS
- ----------------------------------
Results of Operation
- --------------------
Sales and other revenues for the second quarter of 1998 decreased
$133,000 or 11.5% from the second quarter of 1997. This reduction
was the result of older programs using the Registrant's imported
products being phased out and newer programs using the Registrant's
newly developed digital products not yet maturing.
Cost of sales decreased $17,000 or 2.3% over the two periods.
Selling and administrative expenses increased $39,000 or 17.9% over
the compared quarters. The majority of this increase was a general
reorganization of the sales department in 1998 vs. 1997. With the
new product line ready to sell, sales expenses will be once again
increasing over the next few quarters. Engineering and development
increased $4,000 over the two quarters. Interest expenses increased
$3,000 or 9.1% due to increased borrowing for adequate inventories
of the newly developed product line.
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 agreement with the
bank was renewed for one year 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 June 30, 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. The 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 - None of any significance
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>
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)
<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>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 212
<SECURITIES> 0
<RECEIVABLES> 672
<ALLOWANCES> 13
<INVENTORY> 1642
<CURRENT-ASSETS> 2602
<PP&E> 1507
<DEPRECIATION> 1382
<TOTAL-ASSETS> 2786
<CURRENT-LIABILITIES> 1509
<BONDS> 600
<COMMON> 2509
0
55
<OTHER-SE> (1887)
<TOTAL-LIABILITY-AND-EQUITY> 2786
<SALES> 1955
<TOTAL-REVENUES> 1955
<CGS> 1388
<TOTAL-COSTS> 1388
<OTHER-EXPENSES> 726
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> (230)
<INCOME-TAX> 0
<INCOME-CONTINUING> (230)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (230)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
