TO OUR SHAREHOLDERS
- -------------------
Clary Corporation emerged from several years of losses to show a modest profit
for the year 1999. Demand for our line of Uninterruptible Power Systems(UPS)
resulted in a sales increase of $2,071,000 or over 50% from the year 1998. A
noteworthy achievement which was shared across the board on all four of the
Company's UPS markets: military, transportation, medical and laboratory and
commercial industrial. We were especially pleased to show a profit of $52,000
in 1999 compared to a $625,000 loss in 1998.
During 1999, we began what is expected to be a multi-year program to supply the
U.S.Navy our rugged, special, military shipboard UPS. This program, when
finalized, will upgrade data and networking systems in American Naval fleets.
It is currently budgeted as a multi-billion dollar program and Clary is proud
and honored to be one of its major suppliers. Nova Power Solutions, Clary's
oldest and largest distributor is the sales source on this important program.
Clary's progress into the transportation UPS market continued its growth in 1999
A line of products has now been introduced, tested and proven successful at a
variety of locations. We have been successful in recruiting a nationwide
dealer network which has begun to show sustained growth. A major traffic
products manufacturer has shown an interest in private labeling our complete
lines. Discussions are continuing as this report goes to press. Your
management feels this niche market has and will continue to take a period of
time to develop but the end result will be worth the time and money invested.
Since the company's FDA cleared M Series products have special handling,
assembly and test requirements, a new subsidiary Clary Scientific Inc., was
incorporated in 1999 to see and manufacture these types of products. We have
recently added to our M Series line, a specialized UPS to supply clean power
for the new equipment used in refractive eye surgery. This market is currently
growing at an extremely fast rate.
In the commercial area, we introduced a new Global Tap switching UPS that will
adjust to a range of input power and frequencies. This model is useable in a
variety of locations and is popular with customers who ship product to a number
of different countries with different power systems. The U.S. Department of
State has recently installed these systems in embassies around the world.
We have made many organizational, production, and method improvements throughout
1999 which should increase our future ability to expand production and to
decrease costs. Strong economic growth has resulted in potential supplier
delay on certain critical electronic components whihch could have a negative
effect on production. At our current procurement levels it has become a daily
challenge to reduce or eliminate these delivery and quality problems.
Unfortunately, we are losing our Chief Operating Officer, Richard W. Henson,who
resigned as of April 1, 2000 to take a senior management position with a much
larger corporation. We wish to thank him for the efforts and contributions
that he has made over the last 5 years. Until a replacement is located, I will
fill the position of president as well as Chief Executive Officer.
Overall, we are facing the future with a solid foundation in several important
and expanding niche market. Our financial and operating positions are much
stronger than they were at the beginning of the year. At December 31,1999 we
had a backlog of over $1.5 million for delivery in 2000.
We would like to thank our staff for their outstanding efforts in 1999 to
reverse the large loss into a modest profit. We feel confident their efforts
in 2000 will lead to even further improvements. As always we would also like
to thank our shareholders for their continuing support.
Sincerely,
John G. Clary
Chairman, President and Chief Executive Officer
<PAGE>
CONTINUOUS POWER SYSTEMS
- ------------------------
Medical Applications
- --------------------
During 1999, Clary began marketing of its FDA cleared units for heart-lung
perfusion and ventilator/respirator applications. Thousands of critically ill
patients dependent on respirators to stay alive, fear the potential of power
outages during natural disasters such as heat waves, thunderstorms and the like.
Also during 1999, Clary began marketing an addition to its Medical Series line
with a system used to supply clean uninterruptible power to sensitive laser
surgical equipment. This system assures that no procedures are interrupted or
delayed by power problems. These reliable power systems are built to the same
high quality standards as Clary FDA cleared units and is the only UPS in its
class to offer true medical grade performance.
Traffic Applications
- --------------------
Clary has developed a line of power products for traffic and transportation
applications which deliver the high reliability they are known for. Keeping
intersections alive during power failures, Clary's SP Series is the world's
most advanced power system for traffic applications.
Without compromising existing cabinet wiring, the SP Series keeps LED signal
heads running for eight hours or more during power failures. These systems
also provide clean, regulated power for controllers and other sensitive
equipment inside the cabinet. The clean sinewave output filters our noise,
brownouts and surges, while improving equipment performance. Wherever
functionality must be maintained regardless of outside temperature and utility
conditions, these systems are designed for the rugged task at hand. Special
maintenance-free, sealed, valve regulated, lead acid batteries designed for
deep cycle, extreme temperature applications are used on Clary's SP Series for
maximum efficiency.
Military Applications
- ---------------------
Going back to World War II, Clary has been a supplier to the United States
military on several large and very important programs. Everyone knows of the
strict requirements necessary to compete in this marketplace. As with its past
products sold to the military, Clary's CT Series was designed with zero defects
in mind. It provides digitally controlled precision regenerated power and was
designed to the rugged specifications necessary to absorb the shock and
vibration of military shipboard use. Like Clary's Medical and Traffic
products, the CT Series is for mission critical applications where the primary
equipment cannot afford downtime. The CT Series connectivity features include
remote control, configuration and monitoring. They work with all major network
operating systmes using SNMP, RS-232 or remotely with a modem and are compatible
with a wide range of software.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
-------------------------------------
Results of Operations
- ---------------------
Over the past three years, the Company has developed, produced and sold a wide
range of uninterruptible power systems.
1999 vs. 1998
- -------------
Sales for 1998 increased $2,071,000 or 57.5% from 1998. This increase was due
to an increase in sales to the Navy through the Company's major representative,
Nova Power Solutions and a major sale to Celera Genomics Corporation to be used
as a power back-up for its new DNA equipment. Continuing increased sales through
Nova Power is anticipated during the coming year. The company also anticipates
increasing its sales of power products to support the traffic signal market
during the year 2000.
Cost of sales increased $1,199,000 or 46.2% over 1998. This increase was due
primarily to the sales increase but was partially offset by increased margins on
the product mix over the periods. Engineering and development increased $26,000
or 7.2% which was not considered significant. Selling increased $53,000 or 5.7%
This increase was due to increased sales commissions on the increased sales.
General and administrative remained constant while interest expenses increased
$32,000 or 23.3%. The increase in interest cost was due to increased borrowing
to support the increased sales and production level.
The increase in sales was the contributing factor for the small profit after
several year of losses.
1999 vs. 1998
- -------------
Sales for 1998 decreased $1,023,000 or 22.1% from 1997. This decrease was due to
continuing reductions in the sale of foreign imported products. The primary
market, traffic signals, for the newly developed digital products is maturing
much slower than originally anticipated.
Cost of sales decreased $623,000 or 19.4% from 1996. This decrease was due to
the decreased sales. Engineering and development increased $22,000 or 6.5% which
is not significant. Selling and service expenses increased $162,000 or 21.0%.
This increase is due to the hiring of an outside advertising agency as well as
attendance at additional tradeshows to showcase the new line of Company products
With the backlog building at year end, it appears this additional marketing
effort is begining to pay off. General and administrative was reduced by
$25,000 or 7.7% and interest expenses was increased $4,000 or 3.0%. neither
of which is believed to be significant.
The low sales volume is the contributing factor for the Company loss. It is
anticipated, however, that sales volume in 1999 will be sufficient for the
company to return to profitability.
Liquidity and Capital Requirements
- ----------------------------------
During the past three fiscal years, funds provided from operations, short-term
bank lines of credit and long-term financing through an affiliate Company have
been sufficient to fund the Company's needs for working capital. Only minor
capital expenditures will be required in 2000. The Company anticipates its
growth in 2000 will require an increase in working capital. The Company expects
to meet its working capital requirements in 2000 through internally generated
funds and expanded short-term lines of credit
The company's short-term line of credit with the bank will be reviewed for
renewal on May 1,2000.
<PAGE>
STATEMENT OF OPERATIONS
(Amounts in thousands except per share data)
<TABLE>
Year ended December 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Sales and other income
Net sales $5,672 $3,601 $4,624
Other income 20 103 33
------ ------- ------
5,692 3,704 4,657
Cost and expenses
Cost of products sold 3,794 2,595 3,218
Engineering and product development 388 362 340
Selling 988 935 773
General and administrative 299 299 324
Interest on long-term debt 78 57 57
Other interest 91 80 76
----- ----- -----
5,638 4,328 4,788
----- ----- -----
Earnig (Loss) before income taxes 54 (624) (131)
Income tax expense (Note 5) 2 1 1
------ ----- -----
Net (loss) $ 52 $ (625) $(132)
====== ====== ======
Net Earnings (loss) per common share
(Note 1) $ .03 $ (.35) $(.07)
====== ====== ======
See notes to financial statements.
<PAGE>
BALANCE SHEETS
--------------
</TABLE>
<TABLE>
Year Ended December 31
1999 1998
------ ------
<S> <C> <C>
ASSETS
Current Assets
Cash $284,000 $160,000
Notes and accounts receivable,
less allowance for doubtful accounts
of $24,000 in 1999 and $11,000 in 1998 (Note 4) 587,000 556,000
Inventories (Notes 1, 2 and 4) 1,783,000 1,685,000
Prepaid expenses and other asset 57,000 34,000
--------- ---------
Total current assets 2,711,000 2,435,000
Property and equipment Net (Notes 1 and 3) 130,000 102,000
Other assets 12,000 67,000
--------- --------
$2,853,000 $2,604,000
============ ============
1999 1998
---- ----
<S> <C> <C>
LIABLITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable (Notes 4 and 11) $815,000 $750,000
Accounts payable and accrued expenses (Note 11) 473,000 297,000
Accrued payroll, payroll taxes and amounts withheld
from employees 77,000 95,000
Customer deposits 25,000 26,000
-------- --------
Total current liabilities 1,390,000 1,168,000
Convertible subordinated debt (Notes 6 and 11) 600,000 1,150,000
Commitments and contingencies (Note 7) - -
Stockholders' equity (Note 6,8 and 11)
Cumulative convertible preferred stock, 5.5%,
par value $5 per share; authorized and
outstanding, 11,033 in 1999 and 1998 55,000 55,000
Cumulative convertible Series B Preferred stock
7%, par value $5 per share;authorized 988,967 shares
issued and oustanding, 55,000 shares in 1999 550,000 -
Common stock, par value $1 per share, authorized
10,000,000 shares; issued and outstanding,
1,807,419 in 1999 and 1998 2,509,000 2,509,000
Additional paid-in capital 5,099,000 5,099,000
Accumulated deficit (7,350,000) (7,377,000)
----------- ----------
863,000 286,000
----------- ----------
$2,853,000 $2,604,000
============ ==========
See notes to financial statements.
<PAGE>
STATEMENT OF CASH FLOWS
-----------------------
(Amounts in thousands)
</TABLE>
<TABLE>
Year ended December 31
1999 1998 1997
----- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ 52 $(625) $(132)
Adjustments to reconcile net earnings (loss)
to net cash (used for) provided by
operating activities:
Depreciation and amortization 8 26 54
Provision for losses on accounts receivable 13 ( 3) -
Change in assets and liabilities:
Decrease in cash restricted - 300 -
Decrease (increase) in accounts receivable ( 44) 206 (290)
(Increase) decrease in inventory ( 98) (243) 466
Decrease (increase) in prepaid expenses ( 23) 13 ( 5)
(Increase) decrease in other assets 55 ( 8) -
(Decrease) increase in accounts payable and
accrued expenses 158 (387) 86
Increase (decrease) in customer deposits ( 1) 9 (7)
------ ------ ------
Net cash (used for) provided by
operating activities 120 (712) 172
CASH FLOWS FROM OPERATING ACTIVITIES:
Capital expenditures ( 36) ( 21) ( 46)
------- ------ -----
Net cash (used for) investing activities ( 36) ( 21) ( 46)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing(repayments)under line-of-credit 65 25 75
Proceeds from issuance of Long-Term Notes - 550 -
Dividends paid ( 25) ( 3) ( 3)
----- ----- -----
Net cash provided by financing activities 40 572 72
------ ---- -----
Net(decrease)increase in cash and cash
equivalents 124 (161) 198
Cash and cash equivalents at beginning of year 160 321 123
----- ----- ------
Cash and cash equivalents at end of year $284 $160 $321
====== ===== ======
See notes to financial statements.
<PAGE>
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
(Amounts in thousands)
</TABLE>
<TABLE>
Cumulative
convertible Additional
preferred Common paid-in Accumulated
stock stock capital deficit
---------- ------ ---------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $55 $2,509 $5,099 $(6,614)
Cash dividend on preferred stock
$.275 per share - - - (3)
Net loss for year - - - (132)
---------- ------ --------- -----------
Balance at December 31, 1997 55 2,509 5,099 (6,749)
Cash dividend on preferred stock
$.275 per share - - - (3)
Net loss for year - - - (625)
---------- ------ --------- -----------
Balance at December 31, 1998 55 2,509 5,099 (7,377)
Issuance of Series "B"
preferred stock 550 - - -
Cash dividend on Seies "A"
preferred stock $.275 per share - - - (3)
Cash dividend on Series "B"
preferred Stock - - - (22)
Net earnings for year - - - 52
--------- ------ -------- ----------
Balance at December 31, 1999 $605 $2,509 $5,099 $(7,350)
========= ======= ========= ==========
See notes to financial statements.
<PAGE>
NOTE TO FINANCIAL STATEMENTS
----------------------------
December 31, 1999, 1998 and 1997
Note 1- SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
The Company's operations are in manufacturing of uninterruptible power systems
and related products. A summary of the Company's significant accounting
policies, consistently applied in the preparation of the financial statements,
follows.
Use of Estimates:
- -----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value:
- -----------
Unless otherwise indicated, the fair values of all reported assets and
liabilities which represent financial instruments (none of which are held for
trading purposes) approximate carrying values of such amounts.
Cash Equivalents:
- ----------------
Cash equivalents consist of short-term, highly liquid investments which are
readily convertible into cash.
Inventories:
- -----------
Inventories are stated at the lower of cost (including direct materials, direct
labor and manufacturing overhead) or market on the first-in, first-out basis.
Obsolete and possible excess quantities are reduced to their estimated net
realizable values in the period such obsolescence is determined.
Property and Equipment:
- -----------------------
Property and equipment are carried at cost less accumulated depreciation.
Improvements to leased property are amortized over the term of the lease.
Depreciation is provided on a straight-line basis over estimated useful lives
from 3 to 20 years.
Earnings (Loss) Per Common Share:
- ---------------------------------
Earnings (Loss) per common share is based upon the weighted average number of
common shares outstanding during each period (1,807,419 in 1999 and 1998,and
1,807,319 in 1997) after giving effect to dividend requirements on the preferred
stock. No effect is given to stock options, as the impact would be anti-dilutive
New Accounting Pronouncement:
- -----------------------------
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income" and No.133, "Accounting for Derivative
Instrument and Hedging Activities." The company also adopted Statement of
Position No. 98-5 "Reporting on the Cost of Start-Up Activities." Adoption
of these pronouncements did not materially affects the financial statements.
<PAGE>
Note 2-INVENTORIES:
- -------------------
Inventories were composed of the following amounts
as of December 31,
</TABLE>
<TABLE>
1999 1998
------- --------
<S> <C> <C>
Finished goods $ 512,000 $ 625,000
Work-in-progress 1,271,000 1,060,000
----------- ----------
$1,783,000 $1,685,000
========= ===========
Note 3-PROPERTY AND EQUIPMENT:
- ------------------------------
Property and equipment were composed of the following amounts as of December 31,
</TABLE>
<TABLE>
1999 1998
------ ------
<S> <C> <C>
Machinery and equipment $1,428,000 $1,392,000
Dies, jigs and fixtures - 31,000
Leasehold improvements - 71,000
---------- ----------
1,428,000 1,494,000
Less accumulated depreciation
and amortization 1,298,000 1,392,000
---------- -----------
$ 130,000 102,000
========== ==========
Note 4 - NOTES PAYABLE:
- -----------------------
At December 31, 1999 and 1998, the Company had a short-term borrowing agreement
with a bank. At December 31, 1999 and 1998, the Company also had short-term
notes for $400,000 with an affiliate company bearing an interest rate of 10.75%
per annum. The borrowing with the bank was collateralized by essentially all the
assets of the Company. The short-term notes are collateralized by a second
position on the same assets. The bank agreement requires the maintenance of
certain ratios pertaining to working capital and debt to equity. It is to be
evaluated for renewal on May 1, 2000.
A comparison of information with respect to notes payable to the financial
institutions at December 31, is as follows:
</TABLE>
<TABLE>
1999 1998
------ ------
<S> <C> <C>
Line of credit subject to
collateral available $750,000 $750,000
Outstanding loans 415,000 350,000
Unused credit available 18,000 8,000
Interest rate prime plus 2.5% 2.5%
Average interest rate at 12/31 10.25% 10.25%
Average during the year
Short-term borrowings $470,000 $386,000
Weighted average interest rate 10.52% 10.50%
Maximum month end short-term
borrowing during the year $600,000 $460,000
Note 5 - TAXES ON INCOME
- ------------------------
As of December 31, 1999 and 1998, the Company has no deferred tax liabilities
in either year and total deferred tax assets of $973,000 and $1,031,000
respectively. The Company has recorded a valuation allowance for the amount by
which total deferred tax assets exceed total deferred tax liabilities, and as a
result, the Company has not recorded any liability or asset for deferred taxes
as of December 31, 1999 or 1998. Significant components of the Company's
deferred tax assets and liabilities as of December 31,1999 and 1998 are as
follows:
</TABLE>
<TABLE>
1999 1998
----- ------
<S> <C> <C>
Deferred tax assets
Allowance for doubtful accounts $10,000 $5,000
Inventory reserve 50,000 6,000
Accrued legal fees 7,000 10,000
Tax credit carryforward 52,000 82,000
Net operating loss carryforward 823,000 900,000
Inventory adjustment 31,000 28,000
-------- --------
973,000 1,031,000
Valuation allowance 973,000 1,031,000
--------- ---------
-0- -0-
Deferred tax liabilities
Inventory adjustments - -
--------- --------
- -
--------- ---------
$ -0- $ -0-
========== =========
The federal regular and alternative minimum tax net operating loss carryforwards
totaling $2,295,000 and $2,009,000, respectively, expire at various dates from
2003 to 2018. The general tax credit carryforwards expire in 1999 through 2001.
Note 6 - CONVERTIBLE SUBORDINATED DEBT
- --------------------------------------
Convertible subordinated debt at December 31, consists of the following:
</TABLE>
<TABLE>
1999 1998
------ ------
<S> <C> <C>
91/2% convertible subordinated notes
due October 17, 2000 and
convertible into common stock at
$1.00 per share $600,000 $600,000
9% convertible subordinated notes
due January 15, 2000 - $550,000
The convertible subordinated debt is generally subordinated to notes payable
and indebtedness to financial institutions now outstanding or subsequently
incurred. The 9.5% convertible subordinated notes were originally due on October
17,2000. The Company requested the holders to extend these notes until January
17,2002. This offer was unanimously accepted by al holders.
The maker (the Company) of the 9% notes had the right, at any time prior to June
30,1999, to require the holder to exchange the note for 55,000 shares of Series
"B" preferred stock of the Company. The Company exercised this option on May 31,
1999 and $550,000 of notes were converted to 55,000 shares of the Company's
Series "B" preferred stock on that date.
Note 7 - COMMITMENTS AND CONTIGENCIES
- -------------------------------------
Aggregate rental commitments under operating leases at December 31, 1999 for
property are as follows: $92,000 (2000) and $55,000 (2001).
The total rental expense under all leases was $82,000 for all three years,
1999,1998 and 1997.
Note 8 - STOCKHOLDER'S EQUITY
- -----------------------------
The 5.5% cumulative convertible Series "A" preferred stock may be redeemed in
whole or in part by the Company upon not less than 30 days notice, at $5.50 a
share, plus accrued dividends to the date of redemption. The preferred stock is
convertible on a basis of 1.15 shares of common stock for each share of
preferred stock. During 1999 and 1998, there were no shares of preferred stock
converted to common stock. As of December 31, 1999, 12,688 shares of common
stock were reserved for conversion of the Series "A" preferred stock
The 7% cumulative convertible Series "B" preferred stock may be redeemed after
the second anniversary of the date of issuance, in whole or in part, at the
option of Company upon not less than 30 days notice at $10.00 a share plus
accrued dividends to the date of redemption. The stock is convertible on a
basis of 8 shares of common stock for each share of preferred stock. As of
December 31,1999 440,000 shares of common stock were reserved for conversion of
the Series "B" preferred stock. The Series "B" preferred stock also has the
right to vote together with holders of common stock as a single class on any and
all matters with respect to which holders of common stock have voting or consent
right.
The Company also has reserved 600,000 shares of common stock for conversion of
the 9.5% convertible subordinated notes.
In the event of liquidation, the holders of the preferred stock have
preferential rights to the Company's assets.
The Company has an Employee Incentive Stock Option Plan which was adopted in
1996. Under the plan, the Company has reserved 100,000 shares of common stock
for purchase by officers and key employees. During 1999,there were adoptions
granted, 20,000 shares forfeited and no shares exercised. At December 31,1999
under the plan, there are no shares outstanding. Grants under the plan are made
by a committee consisting of two members of the Board of Directors. Exercise
price of options may not be less than the fair market value of the common stock
at the time of grant. The options are exercisable in annual installments,
commencing one year after the date of grant and expiring five years after the
date of the grant.
In addition, the Company had reserved 40,000 shares of common stock for
purchase by its President under non-qualified stock option plan at $1.00 per
share. The option is immediately exercisable and expires five years after
date of grant.
The Company adopted FASB Statement No. 123, "Accounting for Stock-Based
Compensation", effective for 1996. Under this pronouncement, the Company
has elected to follow Accounting principles Board Opinion No. 25," Accounting
for Stock Issued to Employees" (APB 25) and related interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock option equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share as required by
Statement 123 has not been presented as the amounts are immaterial.
Note 9 - STATEMENT OF CASH FLOW
Supplemental disclosures of cash flows information:
</TABLE>
<TABLE>
Cash paid during
the year for: 1999 1998 1997
- ----------------- ----- ------ ------
<S> <C> <C> <C>
Interest $169,000 $137,000 $133,000
Income taxes $ 2,000 $ 1,000 $ 1,000
Conversion of debt to Preferred stock $550,000 - -
Note 10 - SIGNIFICANT CUSTOMERS
- -------------------------------
Sales, as a percent of total sales, to the Company's largest customer was 31%
in 1999 and 38% in 1998.
Note 11 - RELATED PARTY TRANSACTIONS
- -----------------------------------
The Company's Chairman of the Board and a major shareholder is the President,
Director and a principal shareholder of Addmaster Corporation. During 1999, 1998
and 1997, the Company and Addmaster engaged in the transactions as summarized
below:
a:The Company sold Addmaster nonrecourse rights to receive royalties under a
royalty agreement with an unrelated party for $130,000 in 1997. At December
31, 1999, Addmaster has been fully paid by the unrelated party.
b:During 1998, Addmaster loaned the Company an additional $75,000, under a
10.75% secured promissory note. The loan is secured by a second position to
a bank on all the assets of the Company and is due along with a loan of
$325,000 on October 15,2000.
c:The Company purchased inventory items from Addmaster amounting to $650,000
in 1999, $603,000 in 1998 and $544,000 in 1997.
d:During 1995 and 1998, Addmaster loaned the Company $400,000 and $550,000,
respectively. The $400,000 in 1995 was in exchange for $400,000 9.5%
convertible subordinated debentures due October 2000 (which in 1999 was
extended to January 17,2002). The $550,000 in 1998 was in exchange for a
$550,000 9% convertible subordinated note due January 31, 2000.
On May 31,1999,this $550,000 9% convertible stock was converted into 55,000
shares of the company's Series "B" 7% preferred stock.
Amounts due to Addmaster at December 31, are included in the following balance
sheet accounts:
</TABLE>
<TABLE>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Notes payable $400,000 $400,000 $325,000
Accounts payable and accrued
expenses $283,000 $123,000 $227,000
Convertible subordinated debt $400,000 $950,000 $400,000
S.E.C. Form 10-K Available
- --------------------------
Copies of the Company's annual report on Form 10-K filed with Securities and
Exchange Commission are available to stockholders, without charge, by written
request addressed to the Secretary of the Company.
MARKET INFORMATION
- ------------------
As of December 31, 1999 there were approximately 1,900 shareholders of the
Company's Common Stock. The Common Stock is traded on the Pacific Stock Exchange
and the prices listed below reflect actual sales.
</TABLE>
<TABLE>
1999 1998
----------------------------
High Low High Low
------------- ------------
<S> <C> <C>
1st Quarter 1 1/8 3/4 13/16 5/8
2nd Quarter 1 1/16 11/16 7/8 11/16
3rd Quarter 1 1/16 1 13/16 1/2
4th Quarter 7/8 5/8 1 3/8
<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, 1999 and 1998, and the related statements of
operations, stockholders, equity, and cash flows for the two years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 misstate-
ment. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clary Corporation as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Certified Public Accountants
Santa Monica, California
February 10, 2000
<PAGE>
SELECTED FINANCIAL INFORMATION
------------------------------
(Amounts in thousands excepts for per share data)
</TABLE>
<TABLE>
5 Year Summary
------------------------------------
Operating Results 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues $5,690 $3,704 $4,657 $5,360 $6,401
(Loss) earnings before income taxes $ 54 $ (624) $ (131) $ (652) $ (189)
Provision for income taxes 2 1 1 1 1
------ ------- ------ ------ -------
Net Earnings (loss) $ 52 $ (625) $ (132) $ (653) $ (190)
------ ------- ------- ------ -------
Net Earnings (loss) per common share $. 03 $ (.35) $ (.07) $ (.36) $ (.11)
====== ======= ====== ====== =======
Balance Sheet Highlights
- ------------------------
Assets
Current assets $2,711 $2,435 $2,869 $2,842 $3,501
Property and equipment (net) 130 102 107 115 151
Other assets 12 67 59 59 120
----- ------ ------ ------ -------
Total assets $2,853 $2,604 $3,035 $3.016 $3,772
====== ====== ====== ====== =======
Liabilities and Equity
Current liabilities $1,390 $1,168 $1,522 $1,367 $1,467
Convertible subordinated debt 600 1,150 600 600 600
Equity 863 286 914 1,049 1,705
------- ------ ------ ------ ------
Total liabilities and equity $2,853 $2,604 $3,035 $3,016 $3,772
======= ====== ====== ====== ======
Working capital $1,321 $1,267 $1,347 $1,475 $2,034
======= ======= ======= ====== ======
See footnotes 1 and 9 to financial statements.
<PAGE>
OFFICERS
John G. Clary
Chairman of the Board, President and C.E.O.
Donald G. Ash
Treasurer and Assistant Secretary
John J. Guerin
Secretary
BOARD OF DIRECTORS
John G. Clary*
President, Addmaster Corporation
Donald G. Ash*
John P. Clary*
Vice-President, Addmaster Corporation
Hugh L. Clary**
Vice-President, Addmaster Corporation
Russell T. Gilbert**
Retired Founder, President and C.E.O.
Cimco, Inc.
John J. Guerin*
Attorney at Law
**Members of the Executive Committee
**Members of the Audit Committee
REGISTRAR AND TRANSFER AGENT
U.S. Stock Transfer Corporation, Glendale, California
LEGAL COUNSEL
O'Melveny & Myers, Los Angeles, California
AUDITORS
Stonefield Josephson, Inc.
Santa Monica, California
SUBSIDIARY
Clary Scientific, inc.
OFFICES-CLARY CORPORATION
AND SUBSIDIARY
1960 South Walker Avenue
Monrovia, California 91016
Phone (626) 359-4486
Fax (626) 305-0254
LISTING
Pacific Stock Exchange
Symbol: CLY TT
Annual Meeting
- --------------
The Annual Meeting of the Shareholders of the Company will be held at the
Company's offices, 1960 South Walker Avenue, Monrovia, California on Wednesday
May 24, 2000 at 3:00 o'clock p.m. Pacific Daylight Time.
Dividend Information
- --------------------
The Company has not paid a dividend on its Common Stock in recent years.
The Company has paid quarterly dividends at the annual rate of $.275 per share
on its Series "A" Preferred Stock; the minimum rate these shareholders are
entitled to on a cumulative basis. The Company also paid the first annualized
dividend on its Series "B" preferred stock of $.41 per share for the seven
months the stock was outstanding during 1999.
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