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 30,1999
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
incororation 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
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Former name, former address and former fiscal year, if changed since last
report.
Securities registered under Section 12(b) of Exchange Act:
Title of each class: Common Stock, $1.00 par value
Name of each exchange on which registered: Pacific Exchange
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, 1999, there were 1,807,419 shares of common stock outstanding.
Transitional Small Business Disclosure Format
Yes X No
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<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,
1999 1998
- ----------------------------------- ---------------------------------
<S> <C> <C>
Sales and other revenue $ 1,351,000 $ 1,020,000
Cost and Expenses:
Cost of products sold 927,000 737,000
Engineering and Product Development 95,000 93,000
Selling and Service 190,000 176,000
General and Administrative 88,000 81,000
Interest Expense 49,000 36,000
--------- ----------
1,349,000 1,123,000
--------- ---------
Net Earning (loss) before income taxes 2,000 ( 103,000)
Income taxes Expenses 1,000 1,000
---------- -----------
Net earnings (loss) $ 1,000 $( 104,000)
=========== ===========
Earnings (loss) per common share $ -0- $ (.06)
=========== ===========
Average number of shares 1,807,419 1,807,419
Dividends per share None None
<PAGE>
PART 1
ITEM#1-FORM 10QSB
CLARY CORPORATION
(Statement of Operation)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED JUNE 30,
PROFIT AND LOSS INFORMATION 1999 1998
- ----------------------------- ------------------------------
<S> <C> <C>
Net Sales and other Revenues $3,376,000 $1,955,000
Cost and Expenses:
Cost of Products Sold 2,174,000 1,388,000
Engineering and Products Development 204,000 191,000
Selling and Service 539,000 378,000
General and Administrative 170,000 157,000
Interest Expenses 97,000 71,000
----------- -----------
3,184,000 2,185,000
----------- -----------
Net Earnings (Loss) before income taxes 192,000 ( 230,000)
Income Tax Expense 1,000 1,000
------------ ------------
Net Earnings (loss) $ 191,000 ( 231,000)
============= ==============
Net Earnings (loss) per common Share $ .11 $ (.13)
============= ==============
Average number of shares 1,807,419 1,807,419
Dividends per share None None
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS
-----------------------------
ASSETS Jun 30, 1999 Dec. 31, 1998
- ---------------------------------- -------------- -------------
<S> <C> <C>
CURRENT ASSETS
- --------------
<S>
Cash $ 291,000 $ 160,000
Notes and accounts receivable less
allowance for doubtful amounts
of $21,000 in 1999 and $11,000 in
1998. 997,000 556,000
Inventories, principally finished
goods and work-in-process 1,736,000 1,685,000
Prepaid expenses and other assets 84,000 34,000
--------- ---------
Total Current Assets $ 3,108,000 $ 2,435,000
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Machinery and equipment 1,418,000 1,392,000
Dies, jigs and fixtures 31,000 31,000
Leasehold improvements 71,000 71,000
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1,520,000 1,494,000
Less: Accumulated Depreciation
and Amortization 1,397,000 1,392,000
--------- ---------
123,000 102,000
OTHER ASSETS
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Miscellaneous 73,000 67,000
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TOTAL ASSETS $ 3,304,000 $ 2,604,000
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<PAGE>
PART I
ITEM #1 - FORM 10-QSB
CLARY CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
---------------------------------------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1999 Dec. 31, 1998
- ------------------------------------ -------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
- -------------------
Notes Payable $ 1,000,000 $ 750,000
Accounts Payable and Accrued Expenses 549,000 297,000
Accrued Payroll and Related Expenses 102,000 95,000
Customer Deposits 26,000 26,000
----------- ------------
Total Current Liabilities $ 1,677,000 $ 1,168,000
9-1/2% Convertible Subordinated Notes
due October 17, 2000 600,000 600,000
9% Convertible Subordinated Notes due
May 31,2000 -0- 550,000
STOCKHOLDERS' EQUITY
- --------------------
Preferred Stock-Class "A" 55,000 55,000
Preferred Stock-Class "B" 550,000 -0-
Common Stock and additional stated
value arising from conversion of
Class "A" preferred stock 2,509,000 2,509,000
Additional paid-in capital 5,099,000 5,099,000
Accumulated deficit ( 7,377,000) ( 7,377,000)
Current years' earnings 191,000 -0-
----------- ------------
Total Equity 1,027,000 286,000
----------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,304,000 $ 2,604,000
=========== ============
</TABLE>
<PAGE>
CLARY CORPORATION
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION> For the Six Month Period Ended
--------------------------------
June 30
------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Operating profit (loss) $ 191,000 $( 231,000)
Adjustments to reconcile net profit
(loss) to net cash used for
Operating Activities:
Depreciation and Amortization 5,000 16,000
Provision(used) for losses on accts. rec. 10,000 ( 1,000)
Change in assets and liabilities:
Decrease in cash restricted -0- 300,000
(Increase) decrease in accts. receivable (451,000) 101,000
(Increase) decrease in inventory ( 51,000) ( 200,000)
(Increase) in prepaid expenses ( 50,000) ( 43,000)
(Increase) in other assets ( 6,000) -0-
Increase (decrease) in accts. payable
and accrued expenses 259,000 ( 90,000)
(Increase) in customer deposits -0- 13,000
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Net cash (used for) Operating Activities: ( 93,000) ( 135,000)
Cash Flows from Investing Activities:
Capital expenditures (26,000) (34,000)
------------ ----------
Net Cash (used for) Investing Acitivities (26,000) (34,000)
Cash Flows from Financing Activities:
Net borrowings under line-of-credit 250,000 60,000
------------ -----------
Net Cash provided by Financing Activities 250,000 60,000
Net Increase (Decrease) in cash and cash
equivalents 131,000 ( 109,000)
Cash and cash equivalents at beginning of year 160,000 321,000
---------- ----------
Cash and cash equivalents at end of quarter $ 291,000 $ 212,000
========== ===========
</TABLE>
<PAGE>
PART I
ITEM #2 - FORM 10-QSB
MANAGEMENT DISCUSSION AND ANALYSIS
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Results of Operation
- --------------------
Sales and other revenues for the second quarter of 1999 increased
$331,000 or 32.5% from the second quarter of 1998. This increase was due
primarily through the increase of defense deliveries accelerated by the Balkan
conflict.
Cost of sales increased $190,000 or 25.7% over the two periods. This cost
increase was due to the sales increase. Selling and administrative increased
$21,000 due to commissions on the sales increase. Engineering and development
cost increased $2,000. This increase was not significant. Interest cost
increased $13,000 due to bank financing to support the higher accounts
receivable level.
The registrant showed a very insignificant profit due to the $331,000 sales
increase for the quarter. This is compared to a loss for the quarter in 1998
Liquidity and Capital Requirements
- ----------------------------------
The registrant believes funds provided from operations,short-term lines of
credit and short as well as long-term financials through an Affiliate Company
will be sufficient to fund its immediate needs for working capital. Capital
expenditures will be minimal.
The registrant's short term secured borrowing with the bank was renewed on
May 1,1999.
<PAGE>
PART I
ITEM #3 - FORM 10-QSB
CLARY CORPORATION
-----------------
NOTES TO PART I OF THIS REPORT
------------------------------
NOTE 1. As of June 30, 1999, 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 100,000 shares of common stock 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 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 - 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:
On May 20,1999, the Registrant, at its Annual Meeting of Shareholders,
submited the following matters to vote of security holders.
(1) Date of Annual Meeting - May 20,1999
(2) The following Directors of the Registrant were nominated and
elected:
Donald G. Ash, John G. Clary, John P.Clary, Hugh L. Clary,
Russell T. Gilbert, John J. Guerin, and Richard W. Henson.
(3) Other matters voted upon at the meeting were:
(a) The shareholders were asked to amend Article IV of the
Articles of Incorporation of the company. This Amendment
will provide for (1) the increase of the authorized number
of shares of $1.00 par value Common Stock from 3,000,000
shares to 10,000,000 shares, and
(b) The increase of $5.00 par Preferred Shares from the existing
26,602 shares, (which will be re-designated as Class "A") by
allowing for the issuing of a new series of Preferred Shares
up to a limit of 1,000,000 shares. The Article also provides
that the Board of Directors may issue these additional series
of Preferred Shares with terms as they determine, without
shareholders approval. The vote to approve this item was:
For=1,188,080, Against=79,685, and Abstain=4,724.
Subject to the approval of item (3) (a) and (b) above, the shareholders
were asked to approve the exchange of a 55,000 shares of a new class
of Preferred Stock for the cancellation of $550,000, 9% note due
January 15,2000 to an affiliate (Addmaster Corporation). The terms
provided for an annual dividends of $0.70 per share, 7% of the $10.00
issue price, and a convertibility into Common Stock at a ratio of
8 to1. The vote to approve this item was: For=1,194,485, Against=73,008
and Abstain=4,996.
The full text of these item was submitted to the Exchange with the
Registrant's Proxy filing in early April, 1999
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>
Date: July 23,1999
SIGNATURE TITLE
========= =====
<S> <C>
/s/ John G. Clary Chairman of the Board and
- ----------------- Chief Executive Officer
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> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Jun-30-1999
<CASH> 291
<SECURITIES> 0
<RECEIVABLES> 1018
<ALLOWANCES> 21
<INVENTORY> 1736
<CURRENT-ASSETS> 3108
<PP&E> 1520
<DEPRECIATION> 1397
<TOTAL-ASSETS> 3304
<CURRENT-LIABILITIES> 1677
<BONDS> 600
<COMMON> 2509
0
605
<OTHER-SE> (2087)
<TOTAL-LIABILITY-AND-EQUITY> 3304
<SALES> 3376
<TOTAL-REVENUES> 3376
<CGS> 2174
<TOTAL-COSTS> 2174
<OTHER-EXPENSES> 913
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 192
<INCOME-TAX> 1
<INCOME-CONTINUING> 191
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
