UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
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
Securities registered pursuant to Section 12 (b) of the exchange Act:
Title of each class: COMMON STOCK, $1.00 PAR VALUE
Name of each exchange on which registered: PACIFIC EXCHANGE
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 ninety (90) days.
YES [X] NO [ ]
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 definite proxy or informa
tion statements incorporated by reference to part III of this Form 10-KSB or
any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most fiscal year were $3,704,000
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 12,1999 amounted to $1,138,000
The Registrant had 1,807,419 shares of common stock outstanding as of March
12, 1999.
LISTING OF DOCUMENTS INCORPORATED BY REFERENCE:
- ----------------------------------------------
(1) Part II-Items 5, 6, 7 and 8 - Annual Report to Shareholders for fiscal year
ended December 31, 1998.
(2) Part III - Items 10-11, 12 and 13. Definitive proxy statement for the 1997
Annual Meeting of Shareholders to be filed pursuant to Regulation 14A
within 120 days after the close of the fiscal year ended December 31, 1998.
Item 1:
Business
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The Registrant's operations are presently conducted through its Continuous Power
Systems located in Monrovia, California. The product presently being produced
consist of a line of uninterruptible power supplies (U.P.S.) ranging in size
from 500VA to 37.5 kVA. The U.P.S is a power system that can both smooth out
voltage fluctuations and maintain a power load under power blackout conditions.
U.P.S.'s are designed to provide fifteen minutes or more (depending on the
number of batteries) of support power to computers, scientific products, commu
nication systems, or similar equipment should the utility power fail, While the
utility power is available, the U.P.S. provides isolation from voltage or fre-
quency transients which may disturb the systems operation.
The Registrant markets the U.P.S line through trade publication, tradeshows and
telemarketing. However, sales are generally made by the Registrant through
distributors who sell the products to end-users. For the year ended 1998, Nova
Power Systems, a major distributor through its direct and indirect sales
accounted for approximately thirty-eight percent of the Registrant's total sales
The Registrant assembles finished components and other materials to produce its
products. Relatively little fabrication or raw materials is done by the Regis-
trant. The Registrant purchases raw materials and finished components used in
production of the Registrant's products, some of which are imported. Thus, the
Registrant is dependent upon ability of suppliers to meet performance speci-
fication, quality standards and delivery schedules. The Registrant endeavors
to assure availability of source of supplies and does not anticipate any
shortages which would adversely affect production schedules.
Competition:
- -----------
The markets for the Registrant's products are highly competitive. The Registrant
is aware of approximately thirty competitors for online UPS products. Many of
these companies have far greater financial resources than the Registrant.
The Registrant competes primarily on the basis of the quality, reliability and
technical sophistication of its products, although price remains an important
factor. The Registrant attempts to locate niche markets for UPS products where
greater reliablity is required by customers.
Substantially, all of the Registrant's products are the subject of on-going
modification and improvement and are subject to scientific and technological
changes.
Backlog
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The following table sets forth the amounts representing orders believed by the
Registrant to be firm. The backlog at December 31, 1998 represent orders which
the Registrant expects to deliver during 1999. There are no seasonal effects
on orders.
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FIRM BACKLOG AS OF DECEMBER 31,
------------------------------
1998 1997
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<S> <C> <C>
Backlog $1,509,000 $232,667
======== ========
Other:
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As of December 31, 1998, the Registrant employed 32 people, all of which are
full-time employees.
Other required information to the Registrant's description of business
operations and its general development is incorporated herein by reference
to pages 1 through 3 in the Registrant's 1998 Annual Report to Shareholders
and the Registrant's financial statements contained therein, each incorporated
by reference in this report.
<PAGE>
</TABLE>
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Item 2.
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Properties Sq. Feet Leased Annual Rental Term Date
---------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
Home Office and Continuous 26,000 $110,000 05/31/2001
Power Systems Division ======== ========= ==========
Monrovia, California
During fiscal year 1998 properties were utilized at approximately 60% of
capacity.
The Registrant believes its properties are suitable for its needs.
<PAGE>
PART II
---------
ANNUAL REPORT
PAGES
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Item 4:
- -------
Submission Matters to a vote of Security Holders - NOT APPLICABLE
Item 5:
- -------
Market for Registrant's Common Equity and Related Shareholder
Matters. 10
Item 6:
- -------
Selected Financial Data 11
Item 7:
- -------
Management's Discussion and Analysis of Financial Conditions and
Results of Operations. 3
Item 8:
- -------
Financial Statements and Supplemental Data 4,5,6
On above items 5 through 8 reference is made to the Registrant's
Annual Report to Shareholders for the year ended December 31,1998
incorporated by reference in this report.
Item 9:
- -------
Disagreements on Accounting and Financial Disclosure - NONE
<PAGE>
PART III
--------
PROXY PAGES
------------
Item 10:
- --------
Directors and Executive Officers of the Registrant 2-3
The Directors and Executive Officers are incorporated by reference
to information contained in Registrant's Proxy Statement to be
filed wirh the commission pursuant to Regulation 14A.
Item 11:
- --------
Management Remuneration and Transactions 4-5
Item 12:
- --------
Security Ownership of Certain Beneficial Owners and Management 4
Item 13:
- --------
Certain Relationships and Related Transactions 3-4
Items 10 through 13 are incorporated by reference to information
in the Registrant's proxy statement to be filed with the Commission
pursuant to regulation 14A.
<PAGE>
PART IV
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Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------
(a) (1) Financial Statements Annual Report
-------------------- Pages
-------------
The following financial statements are included in the
Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 (incorporated by reference in
this report):
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 10
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER
31, 1998, 1997 AND 1996 4
BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31, 1998
AND 1997 5
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS
ENDED DECEMBER 31, 1998 7
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER
31, 1998, 1997 AND 1996 6
NOTES TO THE FINANCIAL STATEMENTS 7-10
(2) Report of Independent Certified Public Accountants on Schedules
---------------------------------------------------------------
The following schedules are included in this report:
II- Valuation Accounts and Reserves - 1998 and 1997
Schedules other than those listed above are omitted as not applicable,
not required or the information is included in the financial statements
or notes thereto.
(3) Exhibits
--------
3.1) Articles of incorporation with all amendments to date
(incorporated by reference from Registrant's Annual
Report with Form 10K for the year ended December 31,
1992).
3.2) Bylaws of the Registrant (incorporated by reference from
Registrant's Annual Report with Form 10K for the year ended
December 31, 1992).
4.1) 9.5% Convertible Subordinated Note Agreement (incorporated by
reference from Registrant's Annual Report with Form 10K for
the year ended December 31, 1992). See Exhibit 3.1.
4.2) 9% Convertible Subordinated Note Agreement (incorporated by
(reference in this report)
10.1) Credit Agreement between Clary Corporation and First American
Bank (incorporated with Form 10K for the year ended December
31, 1995)
10.3) 1984 Stock Option Plan (incorporated by reference form Registrant's
Annual Report with Form 10K for the year ended December 31, 1992)
10.4) 1996 Stock Option Plan (incorporated with Form 10KSB for the year
ended December 31, 1996).
13.1) Annual Report to Shareholders for the year ended December 31, 1998
(incorporated by reference in this report).
(b) Reports on Form 8-K - NONE
<PAGE>
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CLARY CORPORATION
SCHEDULE II - VALUATION ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1998 AND 1997
BALANCE AT ADDITIONAL BALANCE
BEGINNING CHARGED TO AT END OF
DESCRIPTION OF PERIOD COST & EXPNS. DEDUCTIONS PERIOD
----------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended 12/31/98
Allowance for doubtful
accounts and inventory
reserves $34,000 $30,000 $38,000 $26,000
======= ======= ======= =======
Year ended 12/31/97
Allowance for doubtful
accounts and inventory
reserves $40,000 $30,000 $36,000 $34,000
======= ======= ======= =======
<PAGE>
CLARY CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CLARY CORPORATION
By: D.G Ash
Treasurer
Pursuant to the requirements of the Securities 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.
John G.Clary
Date:March 22,1999 Chairman of the Board and Chief Executive
Directors:
Date:MARCH 22,1999
Donald G. Ash
Date:MARCH 22,1999
John G. Clary
Date:MARCH 22,1999
John P. Clary
Date:MARCH 22,1999
John J. Guerin
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors
Clary Corporation
In connection with our audit of the financial statements of Clary Corporation
referred to in our report dated February 11,1999, which is included in the
annual report to security holders and incorporated by reference in Part II of
this form, we have also audited Schedule II for the years ended Decenber 31,1998
and 1997. In our opinion, ths schedule present fairly, in all material respect,
the information required to be set forth therein.
STONEFIELD JOSEPHSON, INC
Certified Public Accountats
Santa Monica, California
February 11,1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Clary Corporation
We have audited the accompanying balance sheets of Clary Corporation(a Califor-
nia corporation) as of December 31,1998 and 1997, and the related statements of
operation, stockholders' equity, and cash flows for two years ended.
These financial statements are the responsability of the Company's management.
Our responsability is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material mistate-
ment. An audit includes examining , on a test basis, evidence supporting the
amount and disclosures in the financial statements. An audit also includes
assesing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material repects, the financial position of Clary Corporation as of December
31, 1998 and 1997, and the result of its operations and its cash floww for the
years ended, in conformity with generally accepted accounting principles.
STONEFIELD JOSEPHSON, INC
CERTIFIED PUBLIC ACCOUNTS
SANTA MONICA, CALIFORNIA
FEBRUARY 11,1999
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