UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended APRIL 30, 1995
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from to
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Commission File Number 0-3255
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(Exact name of registrant as specified in its charter): JAYARK CORPORATION
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(State or jurisdiction of incorporation or organization): DELAWARE
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(I.R.S. Employer Identification No.): 13-1863419
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(Address of principal executive office): P.O. BOX 741528, HOUSTON, TEXAS
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(Zip Code): 77274
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Telephone number including area code: 713-783-9184
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR
VALUE $.30 PER
SHARE
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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 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ( Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is $5,291,152 as of June 30, 1995.
The number of shares outstanding of Registrant's Common Stock is
7,978,799 as of June 30, 1994.
Documents incorporated by reference: 1995 Proxy Statement.
PART I
ITEM 1. BUSINESS
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(a) General Development of Business
Jayark Corporation (the ``Company'') was originally organized under the laws of
the State of New York on April 25, 1958. After approval by shareholders at the
Company's 1991 Annual Meeting, the Company merged into a wholly owned subsidiary
incorporated in the state of Delaware, effectively changing its state of
incorporation to Delaware on November 1, 1991.
The Company's wholly owned subsidiary, AVES Audio Visual Systems, Inc.,
(``AVES'' or the ``Audio Visual subsidiary'') distributes audio visual and video
equipment and supplies, primarily to schools and industry. AVES rents audio
visual & video equipment primarily to hotels. The warehousing, sales and
administrative operations of AVES are headquartered in Houston, Texas.
The Company imports and distributes occasional furniture, brass beds, custom
jewelry cases, accessories and other products through its wholly owned
subsidiary, Rosalco, Inc. (the ``Household subsidiary''), located in
Jeffersonville, Indiana. Rosalco Woodworking, a discontinued division of
Rosalco, primarily manufactured juvenile wood beds.
Discontinued Operations -- During fiscal 1993, the Company discontinued two
operating subsidiaries: Diamond Press Company (the Printing & Graphics'
subsidiary) and Pilgrim Too Sportswear, Inc. (the `Sportswear'' subsidiary).
The Company divested itself of these manufacturing segments to regain focus on
its operations. To that end, the Company decided to sell the assets of the
Printing & Graphics subsidiary because the business had no commonality of
purpose with the distribution channels of the other subsidiaries. The operations
of the Sportswear subsidiary were discontinued and substantially all of the
assets sold because of operating losses generated by extreme price and delivery
pressures affecting the apparel marketplace.
Non-Recurring Charges -- During the last month of fiscal 1993, as a continued
part of the Company's operational restructuring, the Company discontinued the
manufacturing of certain products marketed by the Household subsidiary. A one
time charge of $403,000 was accrued against fiscal 1993 operating earnings, to
reduce plant and equipment to estimated net realizable value. The Company
intends to liquidate the manufacturing assets in an orderly fashion to minimize
the loss.
Recent Acquisition
On June 27, 1995, LCL International Traders, Inc. (`LCL''), a wholly owned
subsidiary of Jayark Corporation, completed the acquisition of substantially all
the assets and business of a group of affiliated companies engaged in the import
and distribution of seasonal and promotional merchandise. The sellers, located
in Hong Kong and Central Islip, New York, have operated under the trade names
`Liberty Bell Christmas'', ``Ivy Mar'', `Creative Home Products'' and ``Award
Manufacturing'' LCL acquired these trade names as part of the transaction.
(Please refer to the Company's current report on form 8-K , dated June 27,
1995.)
(b) Financial Information About Industry Segments
The following table states the revenues and operating profit for each segment of
the Company's business for the last three years ending April 30. Additional
industry segment information applicable to the three most recent fiscal years is
disclosed in Note 9 to the Consolidated Financial Statements included in this
report.
<TABLE>
<S>
YEARS ENDED APRIL 30 1995 1994 1993
(in thousands)
REVENUES
<C> <C> <C>
Audio Visual $11,632 $9,594 $8,739
Household 36,762 40,543 43,061
OPERATING PROFIT
Audio Visual $607 $581 $491
Household 1,960 1,980 1,309
IDENTIFIABLE ASSETS
Audio Visual $3,031 $2,436 $2,117
Household 13,661 11,210 12,339
</TABLE>
All the Company's sales are to unaffiliated parties. There have been no inter-
segment (inter-divisional) sales, transfers or purchases during the last three
fiscal years.
(c) Narrative Description of Business
-------------------------------------
(i) Audio Visual Subsidiary
Products
AVES distributes and rents a broad range of audio visual, video and
communications equipment and supplies. Among the items distributed are movie,
filmstrip and slide projectors; projection screens and lamps; video cameras and
systems; laser videodisc, video projection, TV monitors and receivers; video
systems; public address systems, microphones and headsets; tape recorders,
record players, cassette recorders, and related accessories and supplies. Some
of the items sold (such as blank audio cassettes, headsets and cassette
recorders, duplicating equipment and supplies, laminating film and equipment for
document protection) are either assembled by AVES itself or purchased from
private label and other sole source suppliers and distributed under the `AVES''
and `LAMCO'' names. AVES also distributes the products of brand name
manufacturers such as RCA, GE, Mitsubishi, Elmo, Panasonic, Ikegami, Videotek,
Hitachi, Pioneer, Dynatech, Leitch, Tektronix, Avid, Quasar, Telex Corporation,
Kodak, Dukane, Sharp, Sony, 3M Brand, Luxor and miscellaneous other brand names.
Brand name and `house'' brand products account for approximately 90% and 10% of
AVES sales, respectively. The Company also offers repair services, audio visual
consulting & design, engineering, installation and servicing of audio visual
systems to businesses, hospitals, and hotels.
Raw Materials
The sources and availability of raw materials are not significant for an
understanding of AVES' business since competitive products are obtainable from
alternative suppliers. AVES carries an inventory of merchandise for resale and
for rental operations that is adequate to meet the rapid delivery requirements
(frequently same-day shipments) of its distribution business.
Patents
There are no patents, trademarks, licenses, franchises or concessions that are
material to the business of AVES.
Sales
AVES currently distributes and rents its products in the United States,
primarily by means of catalogs, telephone orders and a field sales force. Sales
of AVES are not seasonal, except that sales to schools typically are higher from
April through July than at other times during the year.
Customers
Approximately 69.5% of the Audio Visual subsidiary's revenues in fiscal 1995
were from sales to schools and other educational institutions. The remaining
30.5% came from the rental of AVES systems primarily to hotels (approximately
6.3%), and sales to business and industry (approximately 24.2%). In fiscal 1994,
83.7% of the audio visual subsidiary's revenues in fiscal 1994 were from sales
to schools and other educational institutions. The remaining 16.3% came from the
rental of AVES systems primarily to hotels (approximately 8.8%), and sales to
business and industry (approximately 7.5%). In fiscal 1993, 81.9% of subsidiary
revenues were from sales to schools and other educational institutions. The
remaining 18.1% came from the rental of AVES systems primarily to hotels
(approximately 12.3%), and sales to business and industry (approximately 5.8%).
Backlog
The amount of unfilled sales orders of AVES at April 30, 1995, was $472,000 as
compared to $399,000 at April 30, 1994. The amount of unfilled sales orders is
not a material measure of AVES' operations.
Competition
The Company believes that AVES is one of the most diversified national audio
visual purveyors in the United States, given the different types of services and
products offered by the subsidiary. AVES' principal means of competition are its
aggressive pricing, technical expertise, quick delivery and the broad range of
product lines available through its distribution channels.
(ii) Household Subsidiary
Products
The Household subsidiary distributes popular merchandise in the furniture and
accessories markets. The product lines include brass-plated accent pieces, beds
(wood and brass), ready-to-assemble wood occasional pieces, jewelry armoires,
jewelry boxes and metal tubular beds. The brass plated product line was
introduced in 1987 and is sold under the Mirro Brass name. The Household
subsidiary offers selections from more than 300 different products. The majority
of the products sold by the Household subsidiary are imported from outside the
continental United States. In addition to its available product line, this
subsidiary develops special designs for several customers. Generally, these
customers have exclusive rights to these designs for one year, after which the
subsidiary has the option to incorporate them into its product line.
Raw Materials
The sources and availability of raw materials are not material for an
understanding of the Household subsidiary's business, since competitive products
are obtainable from alternative suppliers. The Household subsidiary carries a
substantial inventory of merchandise, which is generally adequate to meet its
projected sales levels for three months forward.
Patents
The Household subsidiary owns 1 trademark, 53 design patents and 1 utility
patent with respect to various products. The Household subsidiary does not
believe that the loss of any particular trademark, patent, or copyright would
materially affect its business.
Sales
The Household subsidiary currently distributes its products in the United States
through a field sales force, exhibitions at various trade shows and product
brochures. The subsidiary's business is somewhat seasonal with higher sales
occurring during the fall, prior to the holiday seasons.
Customers
The Household subsidiary provides its merchandise to more than 6,000 accounts
nationwide. Approximately 66% of revenues are from mass merchandisers, catalog
showrooms, wholesale clubs, and mail order catalog firms. Furniture retailers
account for the remainder. During the last fiscal year, one customer accounted
for approximately 15.3% of subsidiary sales. During the prior fiscal year, two
customers accounted for approximately 15.2% and 11.6% of subsidiary sales,
respectively. One customer accounted for approximately 11% of subsidiary sales
in fiscal 1993.
Backlog
Backlog is not a material measure of operations for the Household subsidiary
because the level of unfilled orders reflects primarily the timing of receipt of
merchandise imported from overseas, rather than changes in the volume of
customer orders. Unfilled orders at April 30, 1995, were $3.5 million as
compared to $5.9 million in the prior year. Order backlog is continually
changing, with the dynamic variables of shipping schedules, `on the water''
dock to stock time, and customer ship dates. Order backlog at any particular
point in time is not a material component in the operations or understanding of
the Household subsidiary's business.
Competition
Other companies offer similar products to those in the Household subsidiary
line. The Household subsidiary's principal means of competition are its
innovative products, customer service, prompt shipment, the quality and trend-
setting contemporary design of its products, and the broad range of products
available through its distribution channels.
(III) The Company's Business in General
Sales
Sales of the Company's Audio Visual and Household subsidiaries are on a national
basis. Approximately 60% of the Household subsidiary's sales are shipped to the
eastern half of the United States.
Customers
During the last fiscal year, one customer accounted for approximately 11.6% of
Company sales, the same customer accounted for approximately 12.3% of Company
sales in the prior fiscal year. During fiscal 1993 no customer accounted for
more than 10% of Company sales.
Research and Development
The Household subsidiary engages in market research to develop new products and
product lines in connection with the juvenile furniture segment of the business.
AVES does not engage in research or development.
Government Regulation
None of the Company's divisions is affected by federal, state or local
regulations relating to protection of the environment or pursuant to which the
Government may elect to re-negotiate profits or terminate contracts.
Employees
At April 30, 1995, the Company had 111 employees, of which 25 were employed by
AVES and 87 were employed by the Household subsidiary.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
The Company conducts no foreign operations and has no export sales.
ITEM 2. PROPERTIES
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The Company does not own any real property.
The Company's Corporate offices are located in Houston, Texas in a modern, two
story, concrete and glass building of approximately 45,000 square feet, which
includes adjoining parking for up to 50 cars. The Company leases approximately
1,200 square feet with a lease term expiring in November 1995 at $1,400 per
month. The business of the Company's Audio Visual subsidiary is conducted from
approximately 13,000 square feet; 5,500 of which are used for office, sales and
demonstration purposes and 7,500 for warehouse purposes; all of which space is
located in the same building as the Company's corporate offices. The current
lease term expires on November 30, 1995. The current rental is $4,720 per month.
The Household subsidiary operates from a 160,000 square foot facility located in
Jeffersonville, Indiana. The current rental is $16,400 per month with the lease
expiring November 30, 1995, with a five year renewal option.
ITEM 3. LEGAL PROCEEDINGS
-------------------------
The Company is subject to certain pending legal proceedings, most of which are
ordinary and routine litigation incidental to its business. None of such legal
proceedings, in the opinion of the Company, is material to its business or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
No matters were submitted to a vote of the Company's stockholders, through the
solicitation of proxies or otherwise, during the fourth quarter of the Company's
fiscal year ended April 30, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
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(a)-(c) Market Information - Holders - Dividends
The Company's common stock trades on The Nasdaq Small-Cap Market under the
symbol JAYA.
The following table sets forth the quarterly high and low trade prices of the
Company's common stock for the periods indicated, in each fiscal year as
reported by Nasdaq. As of June 30, 1995, there were approximately 902
stockholders of record of common stock.
The Company has not paid any dividends on its common stock during the last five
years and does not plan to do so in the foreseeable future.
<TABLE>
COMMON STOCK TRADE PRICE
<S> 1995 1994
<C> <C> <C> <C>
HIGH LOW HIGH LOW
First Quarter 1.00 .28 .53 .38
Second .60 .32 .50 .25
Quarter
Third Quarter .48 .34 .56 .19
Fourth 1.12 .32 1.06 .63
Quarter
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
April 30, 1995 1994 1993 1992 1991
Results of Continuing Operations:
----------------------------------
Net Revenues $48,393,370 50,136,673 51,800,157 57,223,383 53,449,947
Net Earnings (loss) $ 773,293 980,330 41,015 (321,986) 548,655
Primary Earnings (loss) Per Share $ 0.11 0.15 0.01 (0.04) 0.08
0.08
Average Shares Outstanding 6,867,083 6,682,344 6,704,838 7,105,240 7,188,935
At Year End:
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Total Assets $17,527,066 14,571,455 16,296,496 29,020,724 22,293,733
Long Term Obligations $ 1,542,628 1,811,820 2,117,388 4,854,265 3,154,339
Working Capital $ 8,783,780 7,542,125 6,521,949 8,912,600 6,618,274
Current Ratio $ 2.19 2.36 1.82 1.57 1.65
Stockholders' Equity $ 8,614,426 7,218,040 6,220,846 8,392,613 8,829,815
Stockholders' Equity Per Common Share $ 1.25 $ 1.08 $ 0.93 $ 1.18 $ 1.23
Debt to Equity Ratio 1.03 1.02 1.62 2.46 1.53
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------------------------------------------------------------------------------
OF OPERATIONS
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Comparison Of Fiscal Year Ended April 30, 1995 With Fiscal Year Ended April 30,
1994
Revenues
Consolidated Revenues of $48,394,000 decreased $1,743,000 or 3.5% from fiscal
1994. The Audio Visual subsidiary increased its revenues by $2,038,000 or 21.2%
from the prior reporting year, due to the continued emphasis on increasing
direct sales as opposed to rental revenues, thus resulting in increased unit
sales at a lower gross profit margin as compared to rental gross profit. The
Audio Visual subsidiary continued to expand its marketing efforts and target the
`high tech'' professional, industrial and broadcast buyers in business and
industry. The Advanced Video Technology division, created last fiscal year
contributed approximately $1,886,000 to the increase in sales at the Audio
Visual subsidiary. Household subsidiary revenues decreased $3,780,000 or 9.3%
from the prior year, reflecting the very soft retail environment. Out of
warehouse stock sales increased 3.5% from the prior fiscal year while container
and direct import sales decreased 17.9% and 34.3% respectively.
Cost of Revenues
Consolidated Cost of Revenues of $36,356,000 decreased $1,988,000 or 5.2% from
the prior fiscal year. The Audio Visual subsidiary cost of revenues increased
$1,758,000 or 22.7% reflecting the increase in sales volume. Total gross profit
increased an aggregate of 15.8% from the prior fiscal year at the Audio Visual
subsidiary. The Household subsidiary decreased its cost of revenues $4,047,000
or 13.1%, associated with the decreased sales volume. The gross margin at the
Household subsidiary improved 1.2% from the prior fiscal year.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of $10,280,000
increased $598,000 or 6.2% as compared to the prior reporting year. Expenses for
the Audio Visual subsidiary increased $254,000 or 18.4% reflecting the increase
in direct sales expenses associated with the increased sales volume. The
Household subsidiary increased expenses by $344,000 or 4.3% reflecting increased
costs. The balance of the increase in expense was associated with Corporate
expense. Corporate expenses were decreased by $1,000 compared to prior year.
Interest Expense
Consolidated Interest Expense of $893,000 increased $216,000 or 31.8% primarily
due to the increase in the amount of short term borrowings, due to increased
inventory levels spawned by the decrease in sales, and increased cost of
borrowings.
Pre-tax Net Earnings
The Company earned a Consolidated Pre-tax Profit (before income taxes) of
$1,239,000 as compared to last year's income before taxes of $1,551,000. A
decrease in earnings of $312,000 or 20.1% is a result of reduced revenues and
increased financing costs.
Discontinued Operations - Net of Income Taxes
Consolidated (Losses) (from discontinued operations - net of income tax) No
earnings or losses were recorded from discontinued operations for fiscal 1995,
as compared to a minimal loss of ($36,000) the prior year.
Net Income
Consolidated Net Income of $773,000 as compared to $1,052,000 decreased $279,000
or 26.5% as a result of reduced revenues, increased financing costs, and
increased operating expenses.
Comparison Of Fiscal Year Ended April 30, 1994 With Fiscal Year Ended April 30,
1993
Revenues
Consolidated Revenues of $50,137,000 decreased $1,663,000 or 3.2% from fiscal
1993. The Audio Visual subsidiary increased its revenues by $855,000 or 9.8%
from the prior reporting year, due to the continued emphasis on increasing
direct sales as opposed to rental revenues, thus resulting in increased unit
sales at a lower gross profit margin as compared to rental gross profit. The
Audio Visual subsidiary continued to explore new ways to increase direct sales,
systems and service revenues to overcome the decrease in hotel rentals. The
creation of a new division in the last month of the fiscal year should produce
increased sales and gross profit margins next fiscal year. The new division,
called Advance Video Technology is poised to sell and service higher-end,
broadcast quality equipment to broadcast stations throughout Texas and the
Southwest. Household subsidiary revenues decreased $2,518,000 or 5.9% from the
prior year, primarily due to reduced unit sales volume, resulting from
competitive operational strategy of selling fewer units at a higher margin. The
balance of the decrease in revenues was associated with Corporate charges.
Cost of Revenues
Consolidated Cost of Revenues of $38,344,000 decreased $2,364,000 or 5.8% from
the prior fiscal year. The Audio Visual subsidiary cost of revenues increased
12.3% reflecting the increase in sales volume. The Household subsidiary
decreased its cost of revenues 8.6%, associated with the decreased sales volume
at higher margin.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of $9,682,000
decreased $533,000 or 5.2% as compared to the prior reporting year. Expenses for
the Audio Visual subsidiary decreased $82,000 or 5.6% reflecting savings in
expense associated with the shift of revenues from rental to sales. The
Household subsidiary decreased expenses $421,000 or 5.0% reflecting the
restructuring of the subsidiary's import operations, and reduced expenses
associated with lesser unit sales at higher margins. The balance of the decrease
in expense was associated with Corporate expense.
Interest Expense
Consolidated Interest Expense of $677,000 decreased $436,000 or 39.2% primarily
due to the retirement of debt and decrease in the amount of short term
borrowings of approximately $3,010,000.
Pre-tax Net Income ( Loss)
The Company earned a Consolidated Pre-tax Profit (before income taxes) of
$1,551,000 as compared to last year's income before taxes of $211,000. A
significant improvement in earnings of $1,340,000 or 635.9% is attributable to
successful internal operational restructuring of the Company, the
discontinuation of marginal or losing operations, and reduction in overall debt
levels.
Discontinued Operations - Net of Income Taxes
Consolidated (Losses) (from discontinued operations - net of income tax) of
$(36,000) decreased $1,774,000, or 98.0%, as compared to a loss of $(1,810,000)
during the same period last year. This minimal loss was incurred to bring to
conclusion the operations and finances of the Company's discontinued Printing &
Graphics and Sportswear subsidiaries.
Net Income (Loss)
Consolidated Net Income (Loss) of $1,052,000 as compared to a loss of
$(1,768,000) in the prior fiscal year, primarily as a result of the cessation of
discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
Current Ratio
April 30
1995 1994 1993
2.19 2.36 1.82
At April 30, 1995, consolidated open lines of credit available to the Company
for borrowing, were $2,113,000 as compared to $1,809,000 at April 30, 1994. It
is the opinion of the Company's management that operating expenses, as well as
obligations coming due during the next fiscal year, will be met primarily by
cash flow generated from operations.
Working Capital
In January of 1992, the Company renewed and extended a financing arrangement
with State Street Bank and Trust Company to make available a total of
$20,300,000 in combination of revolving lines of credit and term loans. The term
loans were repaid in January 1995. This financing arrangement was used to
consolidate existing financing, to pay for the Household subsidiary acquisition,
and to provide available working capital for continuing operations.
The arrangement with State Street Bank and Trust Company was amended in March
1993, to make available a total of $16,325,000 in combination of revolving lines
of credit and term loans. The loan agreement was revised to reflect the payoff
of the revolving line and term loan associated with the sale of the Printing &
Graphics subsidiary.
The financing arrangement between State Street Bank & Trust and the Company, was
further amended in December 1993, to make available a total of $13,075,000
maximum in combination of revolving lines of credit and term loan. The loan
agreement was revised to reflect the recollateralization of certain
manufacturing assets of the Household subsidiary, as well as restructuring
certain portions of the Company debt from demand notes to revolving lines of
credit.
The current financing arrangement was further amended in December 1994: the loan
agreement was revised to reflect the renewal and extension of the maturity dates
of lines of credit to December 1995, to make available a total of $13,000,000
maximum in revolving lines of credit, reduce the rate of interest charged on the
lines of credit, approve the repayment schedule of the Company's subordinated
convertible debentures, and reflect the payoff of the term loans.
The Company had no material commitments for capital expenditures as of April 30,
1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------
The Report of Independent Accountants, Financial Statements, Notes to
Consolidated Financial Statements and Related Financial Schedules filed as a
part of this report are listed in the accompanying Index to Financial Statements
and Schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-----------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
The information relating to the Company's directors and nominees for election as
directors of the Company is incorporated herein by reference to the Company's
Proxy Statement (herein so called) for its 1995 Annual Meeting of Shareholders;
specifically the discussion under the heading ``Election of Directors''.
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The discussion under `Compensation of Directors and Executive Officers'' in the
Company's Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
The information relating to Security Ownership of Beneficial Owners and
Management is incorporated herein by reference to the Company's Proxy Statement;
specifically the discussion under the heading ``Principal Shareholders and
Security Ownership of Management'.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
None - The information relating to the transactions with the Company's
management and others is incorporated herein by reference to the Company's Proxy
Statement; specifically the discussion under the heading ``Transactions With
Management and Others''
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------------
(a) Documents filed as part of this report:
1. and 2. Financial Statements.
The Report of Independent Auditors', Financial Statements, Notes to
Consolidated Financial Statements filed as a part of this report are listed
in the accompanying Index to Financial Statements.
3. Exhibits - filed as part of this report are listed in the accompanying
Exhibit Index.
(b) Reports on Form 8-K. None.
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.
JAYARK CORPORATION
By:
/S DAVID L KOFFMAN Chairman of the Board and Director
------------------
DAVID L. KOFFMAN
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 date indicated.
/S/DAVID L.KOFFMAN Chairman of the Board, President, August 14,1995
------------------ Chief Executive Officer and Director
DAVID L KOFFMAN
/S/FRANK RABINOVITZ Executive Vice President, Chief Operating August 14,1995
------------------- Officer and Director
FRANK RABINOVITZ
/S/CLAYTON W. WHITEHEAD Controller, Chief Financial Officer August 14,1995
----------------------- and Secretary
CLAYTON WHITEHEAD
/S/MICHAEL J. SHERMAN Director August 14, 1995
---------------------
MICHAEL J. SHERMAN
/S/ARTHUR G. COHEN Director August 14, 1995
------------------
ARTHUR G. COHEN
/S/RONALD J. KRAMER Director August 14, 1995
-------------------
RONALD J. KRAMER
/S/MICHAEL SILVERMAN Director August 14, 1995
--------------------
MICHAEL SILVERMAN
/S/JOSEPH B. KOFFMAN Director August 14, 1995
--------------------
JOESPH B. KOFFMAN
/S/HERBERT S. ADLER Director August 14, 1995
-------------------
HERBERT ADLER
/S/ JOHN H.M. GRIFFITHS Director August 14, 1995
-----------------------
JOHN H.M. GRIFFITHS
Independent Auditors' Report
The Board of Directors
Jayark Corporation:
We have audited the consolidated financial statements of Jayark Corporation and
subsidiaries as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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
misstatement. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Jayark Corporation
and subsidiaries as of April 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 7 to the consolidated financial statements, the
Company changed it's method of accounting for income taxes in 1994 to adopt the
provisions of the Financial Accounting Standard Board's Statement of Financial
Accounting Standards No. 109, ``Accounting for Income Taxes''.
KPMG PEAT MARWICK LLP
Houston, Texas
August 9, 1995
<TABLE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1995 and 1994
Assets 1995 1994
<S> <C> <C>
------
Current assets
Cash and cash equivalents $ 1,176,700 777,075
Accounts receivable, trade, less allowance for
doubtful accounts of $496,319 and $820,765 in
1995 and 1994, respectively 5,250,957 4,460,112
Other accounts receivable 469,621 251,885
Federal and state income taxes refundable 49,550 -
Inventories 8,533,290 6,618,757
Deferred federal income taxes 295,798 532,020
Other current assets 377,876 395,319
Net assets of discontinued operations - 48,552
Total Current Assets 16,153,792 13,083,720
Property and equipment, less accumulated
depreciation and amortization 988,602 1,040,640
Excess of cost over net assets of businesses
acquired, less accumulated amortization of
$399,616 in 1995 and $378,255 in 1994 332,821 354,182
Other assets
Deferred federal income taxes 51,851 92,913
Total assets $ 17,527,066 14,571,455
See accompanying notes to consolidated financial state
</TABLE>
<TABLE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1995 and 1994
<S> <C> <C>
Liabilities and Stockholders' Equity 1995 1994
-------------------------------------
Current liabilities
Notes payable & lines of credit $ 5,045,143 1,936,561
Notes payable to related parties 500,000 500,000
Current maturities of long-term debt 23,580 182,066
Accounts payable 997,947 1,420,210
Accrued salaries and deferred compensation 144,132 449,191
Commissions payable 195,058 131,451
Federal income taxes payable - 166,128
Other current liabilities 464,152 755,988
Total Current Liabilities 7,370,012 5,541,595
Long-term debt, excluding current maturities 42,628 11,820
Convertible subordinated debentures 1,500,000 1,800,000
Total Liabilities 8,912,640 7,353,415
Stockholders' Equity
Common stock of $.30 par value. Authorized
10,000,000 shares; issued 6,978,799 shares in
1995 and 6,833,248 shares in 1994 2,093,639 2,049,973
Additional paid-in capital 7,110,480 6,691,207
Deficit (589,693) (1,362,986)
8,614,426 7,378,194
Less treasury stock, 0 shares in 1995 and
255,830 shares in 1994, at cost - 160,154
Total Stockholders' Equity 8,614,426 7,218,040
Commitments - -
Total Liabilities and Stockholders' Equity$ 17,527,066 14,571,455
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the years ended April 30, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
Revenues $ 48,393,370 50,136,673 51,800,157
Cost of revenues 36,356,232 38,343,828 40,305,603
Nonrecurring charges - - 403,000
Total cost of revenues 36,356,232 38,343,828 40,708,603
Gross margin 12,037,138 11,792,845 11,091,554
Selling, general and administrative 10,279,511 9,681,824 10,214,566
Operating income 1,757,627 2,111,021 876,988
Interest expense 893,124 677,440 1,113,542
Other inc 374,929 117,128 447,277
Earnings before income
1,239,432 1,550,709 210,723
Income tax expense:
Current:
Federal 188,856 539,295 158,431
Deferred 277,283 31,084 11,277
Total income tax expense 466,139 570,379 169,708
Income from continuing operations
for income 773,293 980,330 41,015
Discontinued operations
Income (loss) from discontinued operations
to measurement date net of, applicable income tax
expense (benefit) of ($18,586) and ($901,179)
for 1994 and 1993, respectively - (36,080) (1,953,740)
Gain on disposal of business segments $219,680
net of applicable income tax expense of $75,720 - - 143,960 Cumulative
effect of the change in
accounting for income taxes 108,074
Net income (loss) $ 773,293 1,052,324 (1,768,765)
Primary earnings (loss) per common share:
Continuing operations $ 0.11 0.15 0.01
Discontinued operations - (0.01) (0.27)
Cumulative effect of the change
in accounting for income taxes 0.02
Net income (loss) $ 0.11 0.16 (0.26)
Fully Diluted earnings (loss) per common share:
Continuing operations $ 0.11 0.14 0.02
Discontinued operations - - -
Cumulative effect of the change in
accounting for income taxes 0.01 (0.27)
Net income (loss) $ 0.11 0.15 (0.21)
Weighted average common shares:
Primary 6,867,083 6,682,344 6,704,838
Fully Diluted 7,965,438 7,903,147 8,038,181
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years ended April 30, 1995, 1994 and 1993
<S> <C> <C> <C> <C> <C>
Additional Total
Common paid-in Treasury stockholder
stock capital Deficit stock equity
Balance, April 30, 1992 $2,170,092 6,974,090 (646,545) (105,024) 8,392,613
Acquisition of 400,398 shares
of treasury stock (513,002) (a) (513,002)
Retirement of treasury
stock (120,119) (392,883) - 513,002 (a) -
Cancellation of debt - 110,000(b) - - - 110,000
Net loss - - (1,768,765) - (1,768,765)
Balance April 30, 1993 2,049,973 6,691,207 (2,415,310) (105,024) 6,220,846
Acquisition of 127,430
shares of treasury stock - - - (55,130) (55,130)
Net income - - 1,052,324 - 1,052,324
Balance, April 30, 1994 2,049,973 6,691,207 (1,362,986) (160,154) 7,218,040
Acquisition of 319,200
shares of treasury stock - - - (222,688) (222,688)
Issuance of 145,551 share 43,666(d) 419,273 - - 462,939
Retirement of treasury stock- - - 382,842(d) 382,842
Net income - - 773,293 - 773,293
Balance, April 30, 1995 2,093,639 7,110,480 (589,693) - 8,614,426
(a) Transaction resulting from successful claim under the indemnity agreement.
(b) Transaction from cancellation of notes payable as part of the sale of certain
assets of the discontinued operations.
(c) Acquisition of Treasury Shares as prescribed by the Company's stock repurchase plan
(d) Transactions of from a settlement for obligations from the discontinued
operations.
See accompanying notes to consolidated financial statement
</TABLE>
<TABLE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended April 30, 1995, 1994 and 1993
<S>
1995 1994 1993
<C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ 773,293 1,088,404 41,015
Income (loss) from discontinued operations - (36,080)(1,953,740)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Nonrecurring charge to write down machinery and equipment - - 403,000
Depreciation and amortization of
property and equipment 254,894 476,605 468,738
Amortization of excess of cost over next
assets of businesses acquired 21,361 21,360 21,370
Amortization of patents - 23,267 164,968
Discontinued manufacturing division 672,870 - -
(Increase) decrease in cash surrender
value of life insurance - - 392,856
(Gain)/loss on the disposition of assets 56,956 (6,141) 143,960
Change in assets and liabilities net of effects from acquisition of subsidiary:
(Increase) decrease on deferred federal income tax 277,284 (133,138) (230,795)
(Increase) decrease in accounts receivable net (790,845) 641,918 3,920,417
(Increase) decrease in federal and state
income taxes refundable (49,550) 664,217 (45,518)
(Increase) decrease in inventories (1,914,533) 903,862 5,170,231
(Increase) decrease in other assets (200,293) (149,249) 160,991
(Increase) decrease in net assets of
discontinued operations 48,522 - -
Increase (decrease) in accounts payable (422,263) 217,447 (2,736,363)
Increase (decrease) in federal and state income
tax payable (166,128) 166,128 -
Increase (decrease) in accrued liabilities and
deferred compensation (305,059) 142,989 10,120
Increase (decrease) in commissions payable 63,607 (51,800) (409,134)
Increase (decrease) in other liabilities (291,836) 81,089 (881,488)
Increase (decrease) in net liabilities of
discontinued operations - (316,051) (267,499)
Net cash provided by (used in) operating activities (1,971,720) 3,734,827 4,373,129
Cash flows from investing activities:
Capital expenditures for property and equipment (249,225) (211,183) (234,103)
Proceeds from sale of property and equipment 162,334 36,980 26,062
Net cash used in investing activities (86,891) (174,203) (208,041)
Cash flows from financing activities:
Principal payments on notes payable to related party - (150,000) (94,013)
Proceeds from issuance of notes payable to related party - - 1,000,000
Principal payments on notes payable to banks - (2,551,503) (2,166,039)
Proceeds from issuance of notes payable to banks 3,108,582 - -
Principal payments of long-tetm debt (127,678) (109,086) (3,639,362)
Purchase of convertible subordinated debentures (300,000) (200,000) -
Purchase of treasury stock (222,668) (55,130) -
Net cash provided by (used in) financing activities 2,458,236 (3,065,719) (4,899,414)
Net increase (decrease) in cash and cash equivalents 399,625 494,905 (734,326)
Cash and cash equivalents at beginning of year 777,075 282,170 1,016,496
Cash and cash equivalents at end of year $ 1,176,700 777,075 282,170
Supplemental schedule of cash flow information:
Interest paid $ 893,124 680,993 1,090,852
Income taxes paid $ 389,094 838,221 -
See accompanying notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
------------------------------------------
April 30, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Jayark Corporation
and its wholly owned subsidiaries (the `Company''). All material intercompany
profits, transactions and balances have been eliminated.
The accounts of purchased companies are included in the consolidated financial
statements from the dates of acquisition. The excess of cost over the fair
value of net assets of businesses acquired is being amortized using the
straight-line method over a 40-year period commencing with the dates of
acquisition.
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out method) or
market, which is considered to be replacement cost or net realizable value.
Property and Equipment, Depreciation and Amortization
-----------------------------------------------------
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
assets, ranging from approximately 3 to 20 years. On sale or retirement, the
cost of assets sold or retired and related accumulated depreciation or
amortization is eliminated from the accounts and any resulting gain or loss is
included in operations. Maintenance and repairs are expensed as incurred;
expenditures for major renewals and betterments are capitalized and amortized by
charges to operations.
Patents & Licenses
------------------
The cost of licenses and patents acquired is being amortized on a straight-line
basis over the estimated remaining economic lives of the respective licenses and
patents, which is less than the statutory life of each license or patent.
Income Taxes
------------
Deferred income taxes are provided for all material timing differences arising
from the recognition of certain items of income and expense in different
accounting periods for tax and financial accounting purposes.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement
109 requires a change from the deferred method of accounting for income taxes
under APB Opinion 11 to the asset and liability method of accounting for income
taxes. Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Under Statement 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Effective May 1, 1993, the Company adopted Statement 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes in
the 1994 consolidated statement of earnings.
Pursuant to the deferred method under APB Opinion 11, which was applied in
fiscal 1993 and prior years, deferred income taxes are recognized for income and
expense items that are reported in different years for financial reporting
purposes and income tax purposes using the tax rate applicable for the year of
the calculation. Under the deferred method, deferred taxes are not adjusted for
subsequent changes in tax rates.
Earnings per Share
------------------
Earnings per common share have been computed by dividing net earnings by the
weighted average number of common and common equivalent shares outstanding
during the respective periods. Common equivalent shares include shares that
would be issuable upon the exercise of outstanding stock options reduced by the
number of shares that are assumed to be repurchased by the Company with the
proceeds from the exercise of the stock options. The shares purchased by the
Company are assumed to be purchased at the average market price during the
respective period for primary earnings and at the higher of the average market
price or period-end price for fully diluted earnings per share. Fully diluted
earnings per share assumes the conversion of the 12% convertible subordinated
debentures issued in December 1989 (see note 6).
Changes in Financial Presentation
---------------------------------
Certain reclassifications have been made in the 1994 and 1993 financial
statements to conform to the presentation used in 1995.
Statements of Cash Flows
------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. At April 30, 1995, 1994 and 1993, cash equivalents consisted of
agreements to repurchase, certificates of deposit, and money market accounts in
the amounts of $808,230, $113,036, and $110,853 respectively.
Impact of Inflation
-------------------
Management of the Company believes that inflation has not significantly impacted
either net sales or net earnings during the three years ended April 30, 1995.
The Company has generally been able to pass along price increases from its
manufacturers.
(2) Related Party Transactions
Accrued salaries and deferred compensation payable to related parties includes
unpaid salaries, bonus, and deferred compensation to officers and directors
amounting to $60,500, $77,535, and $0, in 1995, 1994 and 1993, respectively.
Interest expense relating to notes payable to certain related parties was
$60,736, $52,012, and $51,307 in 1995, 1994 and 1993, respectively.
(3) Property and Equipment
Property and equipment are summarized as follows:
APRIL 30,
1995 1994
Machinery and equipment $ 870,579 $ 1,404,950
Furniture and fixtures 462,252 545,255
Leasehold improvements 406,171 578,673
Automobiles and trucks 218,423 243,481
Rental and demonstration equipment 950,795 970,592
Total property and equipment 2,908,220 3,742,951
Less accumulated depreciation & 1,919,618 2,702,311
amortization
Net property and equipment $ 988,602 $ 1,040,640
(4) Notes Payable & Lines of Credit
At April 30, 1995, notes payable represented notes payable to a bank under a
financing agreement that permits the Company to borrow up to an aggregate amount
of $13,000,000 (or the borrowing base as defined in the agreement). During
fiscal 1995 the Company paid off it's term loan obligations, and re-negotiated
the notes payable to reduce the interest rate. The agreement provides for
interest at the lender's prime rate plus 3/4%. The notes are secured by the
Company's receivables and inventories.
The following is a summary of certain information with respect to short-term
borrowings. The averages are weighted based on month-end balances and applicable
interest rates at that time.
APRIL 30,
1995 1994 1993
Maximum outstanding $ 7,872,000 $ 4,695,000 $ 6,916,000
Average outstanding 4,878,000 4,490,000 5,200,000
Weighted average interest
rate:
During the year 9.13% 7.29% 7.25%
At end of the year 9.75% 7.00 - 7.25% 7.12%
At April 30, 1995 and 1994, the Company had letters of credit outstanding
amounting to $2,502,269 and $4,068,254, respectively. These letters of credit
were issued primarily for the purchase of inventory from foreign sources.
(5) Long-term Debt
Long-term debt is summarized as follows:
APRIL 30,
1995 1994
Note payable to a bank with interest at the lenders
prime rate plus 1% (7.75% at April 30, 1994), due
December 31, 1995; collateralized by inventory, - $ 60,000
receivables and rental equipment.
Note payable to a bank in quarterly installments of
$25,000 through January 1995, with interest payable
monthly at the lender's prime rate plus 1% (7.75% at
April 30, 1994); collateralized by inventory and - 75,000
receivables.
Notes payable to a bank with interest rates ranging
from 7.247% to 9%, maturity dates ranging from
December 1995 to January 1999; collateralized by 66,208 58,886
vehicles.
Total long-term debt 66,208 193,886
Less current maturities of long-term debt 23,580 182,066
Long-term debt, excluding current maturities $ 42,628 $ 11,820
Aggregate yearly maturities of long-term debt for the years after April 30,
1995, are as follows:
1996 $ 23,580
1997 17,029
1998 13,949
1999 11,650
TOTAL $ 66,208
(6) Convertible Subordinated Debentures
On December 19, 1989, the Company issued $2,000,000 of 12% convertible
subordinated debentures due December 1995. Interest on the outstanding balance
is paid semiannually on April 30 and October 31. The debentures may be converted
into shares of the Company's stock at a price of $1.50 per share at any time
prior to maturity. 1,333,333 shares of the Company's stock is reserved for the
conversion at a price of $1.50 per share. The debentures will automatically
convert into shares of the Company stock at the conversion price in effect at
such time in the event that the average closing sale price of the Company stock
for any period of thirty consecutive trading days was equal to or exceeded $2.25
per share. The debentures were issued as part of the consideration paid for the
acquisition of the Household subsidiary. During the year ended April 30, 1995
and 1994, the Company retired $300,000 and $200,000, respectively of the
debentures.
(7) Income Taxes
The Company adopted Statement 109 as of May 1, 1993. Prior years' financial
statement have not been restated to apply the provisions of Statement 109.
Income tax expense (benefit) attributable to income before income taxes consists
of:
Current Deferred Total
Year ended April 30, 1995
Federal $ 188,856 $ 277,283 $ 466,139
Year ended April 30, 1994
Federal $ 539,295 $ 31,084 $ 570,379
Year ended April 30, 1993
Federal $ 158,431 $ 11,277 $ 169,708
The actual tax expense attributable to continuing operations for 1995, 1994 and
1993 differs from the `expected'' tax expense (computed by applying the U.S.
corporate rate of 34% in 1995, 1994 and 1993) as follows:
1995 1994 1993
Tax expense at statutory rate $421,407 $527,241 $71,646
Increase in tax resulting from
amortization of excess of cost over the
fair value of net assets of businesses 7,262 7,262 16,000
acquired
Accruals relating to amortization - - 68,000
Officer's life insurance 26,684 26,684 -
Permanent and other differences 10,786 9,192 14,062
Total expense provided $466,139 $570,379 $169,708
Deferred income tax expense (benefit) was recorded for temporary differences in
1993 related to the following:
1993
Tax depreciation less than book $(36,000)
Reserves not currently deductible for
tax purposes (65,000)
Additional costs inventoried 118,000
Other (5,723)
$ 11,277
The federal income tax returns for years subsequent to 1991 are subject to
review by the Internal Revenue Service.
For the years ended April 30, 1995 and 1994, deferred income tax expense of
$277,283 and $31,084 respectively results from timing differences in the
recognition of income and expense for income tax and financial reporting
purposes. The sources and tax effects of those temporary differences are
presented below:
1995 1994
Bad Debt Reserve $ 110,311 $ 35,315
(Excess) deficit of financial statement
over tax gain on sale 29,923 (16,106)
Other Reserves 141,910 10,554
Other, net (4,861) 1,321
$ 277,283 $ 31,084
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at April 30, 1995 and
1994, are presented below.
1995 1994
DEFERRED TAX ASSETS:
Bad debt reserve, principally due to $ 168,748 $ 309,225
accrual for financial statement
purposes
Inventory uniform capitalization 127,050 102,964
adjustment
Plant and equipment, principally due to
differences in depreciation 41,253 96,990
Other 10,598 115,754
Total Deferred Tax Assets $ 347,649 $ 624,933
Management believes that total deferred tax assets will more likely than not be
fully realized based on the Company's historical earnings and future
expectations of adjusted taxable income as well as reversing gross deferred tax
liabilities. However, there can be no assurance that the Company will generate
the necessary adjusted taxable income in any future period.
(8) Leases
The Company also has several operating leases that expire at various dates
ranging from April 1995 to February 1998.
Future minimum lease payments related to operating leases are detailed as
follows:
YEAR ENDING APRIL 30, OPERATING
LEASES
1996 $ 470,623
1997 295,109
1998 209,405
1999 161,885
2000 and thereafter 63,891
Total minimum lease $ 1,200,913
payments
Total rental expense for operating leases was approximately $283,000, $584,439,
and $739,000, for 1995, 1994 and 1993, respectively, of which approximately
$21,500 was paid to related parties in 1993.
(9) Industry Segments
The Company operated in two industries during fiscal 1995: audio-visual products
and the importation and sales of furniture. There are no inter segment sales or
sales to foreign customers.
Identifiable assets are those assets that are used in the Company's operations
in either industry. Corporate assets are principally cash and certain other
current assets.
The following is a summary of the Company's operations in different industries
for the years ended April 30, 1995, 1994 and 1993. ( Please note that corporate
amounts are adjusted and include entries for intercompany, consolidating and
eliminating entries)
Year Ended April 30, 1995 Audio Visual Household Corporate Consolidated
Revenues $ 11,631,792 36,761,578 - $ 48,393,370
Operating income (loss) $ 606,050 1,959,963 (808,386)$ 1,757,627
Identifiable assets $ 3,030,645 13,661,313 835,108 $ 17,527,066
Year ended April 30, 1994 Audio Visual Household Corporate Consolidated
Revenues $ 9,593,894 40,542,779 - $ 50,136,673
Operating income (loss) $ 581,276 1,979,679 (449,934)$ 2,111,021
Identifiable assets $ 2,436,362 11,210,414 1,089,029 $ 14,571,455
Year ended April 30, 1993 Audio Visual Household Corporate Consolidated
Revenues $ 8,738,920 43,061,237 - $ 51,800,157
Operating income (loss) $ 491,403 1,309,442 (923,857)$ 876,988
Identifiable assets $ 2,117,208 12,339,266 1,531,365 $ 16,296,496
(10) Stock Options
Effective November 24, 1981, and approved at the annual stockholders' meeting in
1982, the 1981 Incentive Stock Option Plan (ISOP) was adopted. An amendment to
the ISOP was adopted on December 11, 1989. This amendment increased the number
of incentive stock options that can be granted from 150,000 shares to 600,000
shares. The ISOP provides for the granting to key employees and officers of
incentive stock options, as defined under current tax laws. The stock options
are exercisable at a price equal to or greater than the market value on the date
of the grant.
On December 20, 1989, options to purchase an aggregate of 300,000 shares of
common stock at an exercise price of $1.38 per share was granted to key
employees of the newly purchased subsidiary, Rosalco, Inc. These options become
exercisable in five equal installments of 60,000 shares on the first through
fifth anniversaries of the date of grant, beginning December 20, 1990, and
expire on November 30, 1999. On December 9, 1990, options to purchase an
aggregate of 25,000 shares of common stock at an exercise price of $1.05 per
share was granted to key employees of the Household subsidiary. These options
become exercisable in five equal installments of 5,000 shares on the first
through fifth anniversaries of the date of grant, beginning December 9, 1991,
and expire on November 30, 1999.
During the year ended April 30, 1995, no employee options were granted. Total
stock options outstanding at April 30, 1995, 1994, and 1993 were 392,500,
467,500, and 175,000 respectively, at exercise prices ranging from $0.4375 to
$1.38 per share.
Stock Options- ISOP
Outstanding
Beginning Terminated Ending
Fiscal Year Balance orExpired Granted Balance Exercised
04/30/1993 325,000 (150,000) - 175,000 90,000
04/30/1994 475,000 (175,000) 467,500 467,500 170,000
04/30/1995 467,500 (75,000) - 392,500 228,125
Effective September 17, 1994 and approved at the annual stockholders
meeting in 1994, the 1994 Non-Employee Director Stock Option Plan (the "Director
Plan") was adopted and 200,000 shares of the Company's Common Stock reserved for
issuance under the Director Plan. The Director Plan provides for the automatic
grant of non-transferable options to purchase Common Stock to non-employee
directors of the Company; on the date immediately preceding the date of each
annual meeting of stockholders in which an election of directors is concluded,
each non-employee director then in office will receive options exercisable for
5,000 shares (or a pro rata share of the total number of shares still available
under the Director Plan). No option may be granted under the Director Plan
after the date of the 1998 annual meeting of stockholders.
Options issued pursuant to the Director Plan are exercisable at an
exercise price equal to not less than 100% of the fair market value (as defined
in the Director Plan) of shares of Common Stock on the day immediately preceding
the date of the grant. Options are vested and fully exercisable as of the date
of the grant. Unexercised options expire on the earlier of (i) the date that is
ten (10) years from the date on which they were granted, (ii) the date which is
three calendar months from the date of the termination of the optionee's
directorship for any reason other than death or disability (as defined in the
Director Plan), or (iii) one year from the date of the optionee's disability or
death while serving as a director.
The Director Plan became effective immediately following the 1994
annual meeting of shareholders; accordingly, no options have been issued
pursuant to the Director Plan to date. Each non-employee director in office on
the date immediately preceding the date of this year's annual meeting will
receive options exercisable for 5,000 shares of Common Stock.
During fiscal 1995, 35,000 director options were automatically
granted as prescribed by the plan.
Stock Options - Non-employee Director
Outstanding
Beginning Terminated Ending
Fiscal Year Balance or Expired Granted Balance Exercisable
04/30/1995 - - 35,000 35,000 35,000
(12) Business and Credit Concentrations
One of the Company's customers had an accounts receivable balance at April 30
1994, which exceeded ten percent of the Company's total stockholders' equity at
April 30, 1994. The customer's balance at April 30, 1994, was approximately
$821,739. Sales to this customer accounted for approximately 12.3% of Company
revenues. At April 30, 1995 no customer's accounts receivable balance was
greater than 10 percent of the Company's total stockholders' equity at April 30,
1995.
(13) Discontinued Operations
Effective November, 1992, and April 1993, the Company discontinued its Printing
& Graphics and Sportswear lines of business, respectively. Substantially all of
the assets of the discontinued operations were sold. Net assets of discontinued
operations are comprised of the following:
04/30/1994
Printing & Sportswear Total
Graphics
Cash & Equivalents $ 985,751 161,266 $ 1,147,017
Receivables - - -
Inventory & Other Assets - - -
Accounts & Notes Payable - 1,098,465) (1,098,465)
Accrued Liabilities - - -
$ 985,751 (937,199)$ 48,552
Income (Loss ) of the Company's discontinued operations, is comprised of the
following:
April 30, 1994 April 30, 1993
Printing & Graphics $ (136,925) $ (260,830)
Sportswear 100,845 (1,692,910)
Total $ (36,080) $ (1,953,740)
A gain on the disposal of discontinued operations assets of $219,680 ($143,960
net of tax effect of $75,720) was recorded at April 30, 1993. Approximate
revenues of the discontinued operations were $20,458,000 for the year ended
April 30, 1993. The results of operations presented in the consolidated
statements of operations are (net of tax provision (benefit)) ($1,953,740) for
the year ended April 30, 1993.
(14) Non Recurring Charge
A one time charge of $403,000 was accrued against fiscal 1993 operating
earnings, to reduce certain plant, machinery and equipment used to manufacture
certain wooden products, sold by the Household subsidiary, to estimated net
realizable value. The Company liquidated the manufacturing assets in an orderly
fashion, minimizing the loss on the disposal of the equipment.
(15) Treasury Stock
Subsequent to the purchase of the Household subsidiary in 1989, an indemnity
claim was made by the Company to reduce the purchase price because certain asset
and income items were not recorded in accordance with generally accepted
accounting principles. The settlement of the indemnity claim resulted in a
reduction in the purchase price of the Household subsidiary of approximately
$513,002 and the receipt and subsequent cancellation of approximately 400,398
shares of the Company's common stock.
Subsequent to the Company's announcement of its stock repurchase plan during the
third quarter of fiscal 1994, the Company purchased 319,200 and 127,430 shares
of the Company's common stock during the year ended April 30, 1995 and 1994
respectively.
During fiscal 1995, 720,581 shares of Company common stock, which was comprised
of 575,030 treasury shares and 145,551 newly issued shares were distributed as
part of the consideration given in acquiring a certain sales commissions
agreement between the Company, the Company's discontinued Sportswear subsidiary
and Stage II Apparel Corp, a New York corporation. The stock issued was then
distributed by the Sportswear subsidiary to certain related parties and
affiliates in partial settlement of certain promissory notes existing between
the Sportswear subsidiary and the related parties and affiliates. This
transaction was previously disclosed in the Company's proxy statement mailed to
the shareholders on August 18, 1994, under the caption `Transactions with
Management and Others''
(16) Retirement of Property and Equipment - Discontinued Operations
Machinery, equipment, furniture and fixtures, vehicles, and leasehold
improvements were retired during the fiscal year ended April 30, 1993 pursuant
to the sale of the Company's discontinued operations. Cost of property and
equipment and the related accumulated depreciation removed from the books of the
discontinued operations was $5,359,306 and $4,305,837 respectively.
(17) Subsequent Event
On June 27, 1995, LCL International Traders, Inc., (`LCL''), a wholly-owned
subsidiary of Jayark Corporation (the `Company''), completed the acquisition of
substantially all the assets and business of a group of affiliated companies
engaged in the import and distribution of seasonal and promotional merchandise.
The sellers, located in Hong Kong and Central Islip, New York, have operated
under the trade names ``Liberty Bell Christmas'', ``Ivy Mar'', `Creative Home
Products''and ``Award Manufacturing''. LCL International Traders, Inc. acquired
these trade names as part of the transaction.
Consideration paid by LCL included: $3,000,000 cash; a $3,000,000 `zero
coupon' note of LCL ; 1,000,000 newly issued, restricted shares of Jayark
Corporation common stock; assumption of approximately $3,482,000 of scheduled
liabilities of the sellers; and a contingent future additional cash payment
equal to 25% of the net income of LCL . in excess of $500,000, if any, for the
year ending May 31, 1996.
During August 1995, the Company, LCL and Rosalco, Inc. (`Rosalco''), each a
wholly-owned subsidiary of the Company, entered into a Reimbursement Agreement
with certain related third parties to provide to The CIT Group/Commercial
Services, Inc. (``CIT''), the primary lender to LCL , irrevocable standby
letters of credit and cash in the aggregate amount of $1,700,000 to serve as
additional collateral against which CIT would lend additional working capital to
LCL pursuant to CIT's lending arrangements with LCL.
The arrangement with CIT for the additional financing secured by the additional
collateral expires on February 28, 1996. On that date, in the event that CIT
shall have applied any of the additional collateral to LCL's obligations to CIT,
LCL will reimburse the parties for the collateral so applied by CIT, such
reimbursement to be made in the ordinary course of business or in the event LCL
refinances its indebtedness. Alternatively, the parties may at any time after
February 28, 1996 receive shares of the Company's Common Stock as reimbursement
for the collateral applied by CIT to LCL's obligations by CIT. Each party would
receive that number of shares that has a value equal to the amount of such
party's collateral that is applied by CIT; for purposes of the agreement, the
Company's Common Stock will be deemed to have a value of $1.25 per share.
In consideration for providing the additional collateral, on February 28, 1996
the parties will receive a total approximately of 400,000 shares of Common Stock
of the Company in proportion to the amount of additional collateral initially
provided by them.
Exhibit Index
-------------
3(1) Certificate of Incorporation of the Company. Incorporated herein by
reference to the Company's Proxy Statement for its 1991 Annual Meeting of
Shareholders, Exhibit B thereto.
3(2) Bylaws of the Company. Incorporated herein by reference to the
Company's Proxy Statement for its 1991 Annual Meeting of Shareholders,
Exhibit C thereto.
4(1) Specimen Certificate of Common Stock, par value $0.30 per share,
incorporated herein by reference from Registration Statement on Form S-1,
File Number 2-18743, Exhibit 4 thereto.
4(2) 12% Convertible Subordinated Debenture due 1994, incorporated herein
by reference to the Report on Form 8-K filed January 4, 1990, Exhibit 28(a)
thereto.
4(3) Registration rights agreement dated as of December 20, 1989, by and
between the Company and Rosalco, Inc., incorporated herein by reference to
the Report on Form 8-K filed January 4, 1990, Exhibit 28(c) thereto.
10(1)* 1981 Incentive Stock Option Plan, as amended as of December 15, 1989,
incorporated herein by reference to the Annual Report on Form 10-K for the
year ended April 30, 1990, Exhibit 10(1) thereto.
10(2) Notes and Loan and Security Agreements (Inventory & Accounts
Receivable) each dated as of January 20, 1992, between Jayark Corporation,
AVES Audio Visual Systems, Inc., Rosalco, Inc., Rosalco Woodworking Inc.,
Diamond Press Company, and State Street Bank & Trust Company of Boston,
Massachusetts, incorporated herein by reference from the Annual Report on
Form 10-K for the year ended April 30, 1992, Exhibit 10(3) thereto.
10(3) Letter Agreement dated December 6, 1989, among Arthur Cohen, Burton I.
Koffman, and Richard E. Koffman. Incorporated herein by reference to the
Annual Report on Form 10-K for the year ended April 30, 1990, Exhibit 10(3)
thereto.
10(4) Indemnity escrow Agreement dated as of December 20, 1989, by and
between the Company, Rosalco, Inc. and certain individuals named therein,
incorporated herein by reference to the Report on Form 8-K filed January 4,
1990, Exhibit 28(c) thereto.
10(5) Factoring Agreements dated as of February 7, 1992, by and between the
Company, Pilgrim Too Sportswear, Inc., J.F.D. Distributors, Inc., and
others named therein, and Barclays Commercial Corporation, incorporated
herein by reference to the Annual Report on Form, 10-K for the year ending
April 30, 1992, Exhibit 10(10) thereto
10(6) Diamond Press Asset Sale and Purchase Agreement dated as of November
23, 1992 by and between the Company and Harstan, Inc, incorporated herein
by reference to the Company's Form 8-K, as amended, as of November 23,
1992, Exhibit 2 thereto.
10(7) Asset Sale and Lease Termination Agreement, by and between Pilgrim Too
Manufacturing Company, Inc., New Images, Inc, Victor Freitag, Jr. and wife
Gilbert R. Freitag, and Robert E. Skirboll and wife Robin T. Skirboll,
dated as of April 2, 1993; Asset Purchase Agreement by and between the
Company, Pilgrim Too Sportswear, Inc, Pilgrim Too Manufacturing Company,
Inc, Stage II Apparel Corp., Shambuil Ltd., and Pilgrim II Apparel Corp.,
dated as of April 2, 1993; both incorporated herein by reference to the
Company's Form 8-K as of April 2, 1993, Exhibits thereto.
10(8) Amendment to certain Notes and Loan and Security Agreements each dated
as of January 20, 1992, incorporated herein by reference from the Annual
Report on Form 10-K for the year ended April 30, 1993, Exhibit 10(8)
thereto.
10(9) Amendment to certain Notes and Loan and Security Agreements each dated
as of December 31, 1993 incorporated herein by reference from the Annual
Report on Form 10-K for the year ended April 30, 1994, Exhibit 10(9)
thereto.
10(10) Asset Purchase Agreement, dated June 5, 1995, among LIB-Com Ltd.,
Liberty Bell Christmas, Inc., Ivy Mar Co., Inc., Creative Home Products,
Inc., and Liberty Bell Christmas Realty, Inc. as the sellers and LCL
International Traders, Inc. as the buyer, incorporated herein by reference
from the Company's report on Form 8-K dated June 27, 1995, Exhibit 2(a)
thereto.
10(11) Asset Purchase Agreement, dated June 5, 1995, between Award
Manufacturing Corporation as the seller, and LCL International Traders,
Inc., as the buyer, incorporated herein by reference from the Company's
report on Form 8-K dated June 27, 1995, Exhibit 2(b) thereto.
10(12) Guarantee Agreement, dated June 5, 1995, by Award Manufacturing
Corporation in favor of LCL International Traders, Inc., incorporated
herein by reference from the Company's report on Form 8-K dated June 27,
1995, Exhibit 2(c) thereto.
10(13) Guarantee Agreement, dated June 5, 1995, by LIB-Com Ltd., Liberty Bell
Christmas, Inc., Ivy Mar Co., Inc., Creative Home Products, Inc., and
Liberty Bell Christmas Realty, Inc. in favor of LCL International Traders,
Inc., , incorporated herein by reference from the Company's report on Form
8-K dated June 27, 1995, Exhibit 2(d) thereto.
10(14) Promissory Note of LCL International Traders, Inc., due July 29, 1998,
payable to the order of Commerzbank AG, Hong Kong Branch, , incorporated
herein by reference from the Company's report on Form 8-K dated June 27,
1995, Exhibit 2(e) thereto.
10(15) Confirmation Letter agreement, dated June 22, 1995, among Citibank,
N.A., Commerzbank AG, Bayerische Vereinsbank AG, LCL International Traders,
Inc., and Jayark Corporation, , incorporated herein by reference from the
Company's report on Form 8-K dated June 27, 1995, Exhibit 2(f) thereto.
10(16) Factoring Agreement dated June 23, 1995, between LCL International
Traders, inc. and The CIT Group/Commercial Services, Inc., incorporated
herein by reference from the Company's report on Form 8-K dated June 27,
1995, Exhibit 99(a) thereto.
10(17) Inventory Security Agreement dated June 23, 1995, between LCL
International Traders, Inc. and The CIT Group/Commercial Services, Inc.,
incorporated herein by reference from the Company's report on Form 8-K
dated June 27, 1995, Exhibit 99(b) thereto.
10(18) Letter Agreement dated June 23, 1995, between LCL International
Traders, Inc. and The CIT Group/Commercial Services, Inc., incorporated
herein by reference from the Company's report on Form 8-K dated June 27,
1995, Exhibit 99(c) thereto.
10(19) Letter Agreement dated June 23, 1995, between LCL International
Traders, Inc. and The CIT Group/Commercial Services, Inc., Liberty Bell
Christmas, Inc., Ivy Mar Co., Inc., and Creative Home Products, Inc.,
incorporated herein by reference from the Company's report on Form 8-K
dated June 27, 1995, Exhibit 99(d) thereto.
10(20) Amendment to certain Notes and Loan and Security Agreements each
dated as of December 31, 1994
11 Computation of Earnings Per Share
22 Subsidiaries: AVES Audio Visual Systems, Inc., (wholly-owned by the
Company); Rosalco, Inc. (wholly-owned by the Company); Pilgrim Too
Sportswear, Inc. (wholly-owned by the Company); J.F.D. Distributors, Inc.
(wholly-owned by Pilgrim Too Sportswear, Inc.);Pilgrim Too Manufacturing
Company, Inc. (wholly-owned by Pilgrim Too Sportswear, Inc.), LCL
International traders, Inc.(wholly-owned by the Company).
23(1) Consent of KPMG Peat Marwick LLP
* - Management Compensation Plan
Exhibit 11
JAYARK CORPORATION AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
April 30,
1995 1994 1993
GIVEN:
Weighted Average Shares 6,778,272 6,682,344 6,704,848
Income (Loss) From Continuing Operations 773,293 980,330 41,015
Loss From Discontinued Operations - (36,080)(1,809,780)
Cumulative effect of the change for
income tax accounting - 108,074 -
Net Income $ 773,293 1,052,324 (1,768,765)
Dividends $ - - -
Average Closing Bid $ 0.6209 0.4345 0.5198
Closing Bid Price $ 0.8750 0.6250 0.3750
Dilutive Option Price $ 0.8750 0.6250 0.5198
DILUTIVE SECURITIES:
Shares:
Subordinated Debentures $1,500,000 1,800,000 2,000,000
$1.50 Conversion Price $ 1.50 1.50 1.50
Net Convertible Shares 1,000,000 1,200,000 1,333,333
INTEREST EXPENSE:
Subordinated Debentures $ 1,500,000 1,800,000 2,000,000
12% Semi Annual 180,000 216,000 240,000
Weighted Average 180,000 216,000 240,000
Net of 34% Tax $ 118,800 142,560 158,000
STOCK OPTIONS (Prime):
Number Employee Stock Options 427,500 467,500 175,000
Multiplied by the Option Price $ 0.49 0.55 1.33
$ 210,292 256,437 233,250
Divided By The Average Market Bid $ 0.6209 0.4345 0.5198
Yields Required Shares 338,689 590,223 448,752
Net Additional Shares 88,811 (122,723) (273,752)
STOCK OPTIONS (Dilutive):
Number Employee Stock Options 427,500 467,500 175,000
Multiplying by the Option Price $ 0.49 0.55 1.33
$ 210,292 256,437 233,250
Divided By Higher of Average Market $ 0.8750 0.6250 0.5198
Yields Required Shares 240,334 410,300 448,752
Net Additional Shares 187,166 57,200 (273,752)
CALCULATION (PRIME):
Income From Continuing Operations 773,293 980,330 41,015
Loss From Discontinued Operations - (36,080) (1,809,780)
Cumulative effect of the change
for income tax - 108,074 -
Net Income 773,293 1,052,324 (1,768,765)
Divided By:
Average Outstanding Shares 6,778,272 6,682,344 6,704,848
Stock Options 88,811 - -
Total 6,867,083 6,682,344 6,704,848
EARNINGS PER COMMON SHARE
From Continuing Operations $ 0.11 0.15 0.01
From Discontinued Operations - (0.01) (0.27)
Cumulative effect of the change for
income tax change - 0.02 -
Net Income $ 0.11 0.16 (0.26)
CALCULATION (FULLY DILUTIVE)
Income From Continuing Operations 773,293 980,330 41,015
Plus Interest Savings 118,800 142,560 158,400
Loss From Discontinued Operations - (36,080) (1,809,780)
Cumulative effect of the change for
income tax change - 108,074 -
Net Income 892,093 1,194,884 (1,610,365)
Divided By:
Average Outstanding Shares 6,778,272 6,682,344 6,704,848
Convertible Shares 1,000,000 1,200,000 1,333,333
Stock Options 187,166 57,200 -
Total 7,965,438 7,939,544 8,038,181
EARNINGS PER COMMON SHARE FULLY DILUTED
From Continuing Operations $ 0.11 0.14 0.02
From Discontinued Operations - - (0.23)
Cumulative effect of the change for
income tax change - .01 -
Net Income $ 0.11 0.15 (0.21)
, 1994
Rosalco, Inc.
257 America Place
Jeffersonville, IN 47130
Attn: David L. Koffman, President
Gentlemen:
Reference is made to our Amended and Restated Loan and Security Agreement
(Accounts Receivable and Inventory) dated as of December 31, 1993, together with
all amendments and additions thereto (hereinafter called the "AGREEMENT").
Notwithstanding the provisions of the Agreement, it is agreed, effective as of
November 1, 1994, that the Agreement shall be amended as follows:
1. Section 2(b) of the Agreement is hereby stricken in its entirety and
the following new Section 2(b) substituted therefor:
"(B) ALL LOANS SHALL BE EVIDENCED BY BANK'S RECORDS OF LOANS AND
REPAYMENTS AND LOANS WILL BEAR INTEREST, CALCULATED ON THE BASIS OF
ACTUAL DAYS ELAPSED AND A 360-DAY YEAR AND PAYABLE MONTHLY IN ARREARS,
AT A FLUCTUATING PER ANNUM RATE OF INTEREST THREE QUARTERS OF ONE
(3/4%) PERCENT IN EXCESS OF THE PRIME RATE. THE TERM "PRIME RATE" AS
USED HEREIN SHALL MEAN THE RATE OF INTEREST ANNOUNCED BY BANK IN
BOSTON, MASSACHUSETTS, FROM TIME TO TIME AS ITS PRIME RATE. PRINCIPAL
AND INTEREST SHALL BE PAYABLE AT THE OFFICE OF BANK LOCATED AT 225
FRANKLIN STREET, BOSTON, MASSACHUSETTS 02101, IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA WITHOUT SET-OFF, DEDUCTION OR COUNTERCLAIM.
BORROWER AUTHORIZES BANK TO CHARGE ITS DEPOSIT ACCOUNT(S) WITH BANK
FOR ALL PAYMENTS HEREUNDER."
2. The following new subsection 8(m) is hereby added to the Agreement:
"(M) (DEBT COVERAGE RATIO) PERMIT ITS DEBT COVERAGE RATIO TO BE
---------------------
LESS THAN 1.5 IN EACH OF ITS FISCAL YEARS. FOR PURPOSES OF THIS
SUBSECTION (M), DEBT COVERAGE RATIO SHALL BE DETERMINED BY DIVIDING
THE SUM OF AFTER TAX EARNINGS AND DEPRECIATION FOR THE FISCAL YEAR BY
THE SUM OF ALL PRINCIPAL PAYMENTS (EXCLUDING PAYMENTS MADE UNDER THIS
AGREEMENT) FOR THAT YEAR ON LONG TERM LIABILITIES, AND/OR LIABILITIES
MATURING WITHIN ONE (1) YEAR, THAT ARE RENEWABLE OR EXTENDABLE TO A
DATE BEYOND ONE (1) YEAR, INCLUDING WITHOUT LIMITATION, THE
SUBORDINATED DEBT DUE TO JAYARK CORPORATION."
3. Section 14(a) of the Agreement is hereby stricken in its entirety and
the following new Section 14(a) substituted therefor:
"(A) UNLESS CONTINUED IN WRITING BY THE BANK, THIS AGREEMENT
SHALL TERMINATE AND ALL OBLIGATIONS OF BORROWER TO BANK SHALL BECOME
DUE AND PAYABLE ON DECEMBER 31, 1995. BORROWER, AT SUCH TERMINATION
DATE, SHALL MAKE PAYMENT IN FULL OF ALL OBLIGATIONS WHETHER OR NOT ALL
OR ANY PART OF SUCH OBLIGATIONS IS OTHERWISE DUE AND PAYABLE PURSUANT
TO THE AGREEMENT OR INSTRUMENT EVIDENCING SAME. BANK MAY TERMINATE
THIS AGREEMENT IMMEDIATELY AND WITHOUT NOTICE UPON THE OCCURRENCE OF
AN EVENT OF DEFAULT. NO TERMINATION OF THIS AGREEMENT SHALL IN ANY
WAY AFFECT OR IMPAIR ANY RIGHTS OF BANK NOR RELIEVE BORROWER OR ANY
GUARANTOR OF ANY OBLIGATIONS UNTIL ALL OBLIGATIONS HAVE BEEN
IRREVOCABLY PAID AND PERFORMED IN FULL."
Kindly note that the alterations contained herein do not in any way alter,
release or change any other sections contained in the Agreement.
Please acknowledge your agreement to the foregoing by signing the enclosed
copy of this letter and returning the same to the undersigned.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By:
---------------------------------
John D. Gaziano, Jr.
Vice President
UNDERSTOOD AND AGREED TO:
ROSALCO, INC.
By:
---------------------------
, 1994
Rosalco, Inc.
257 America Place
Jeffersonville, IN 47130
Attn: David L. Koffman, President
Jayark Corporation
6116 Skyline Drive
Houston, TX 77057
Attn: David L. Koffman, President
Gentlemen:
Reference is made to the Subordination Agreement dated December, 1989,
together with all amendments and additions thereto (hereinafter called the
"AGREEMENT"), pursuant to which Jayark Corporation subordinated the indebtedness
represented by registered debentures designated as the twelve (12%) percent
convertible subordinated debentures due 1994 to all indebtedness of Rosalco,
Inc. to State Street Bank and Trust Company. Notwithstanding the provisions of
the Agreement, it is agreed, effective immediately, that the Agreement shall be
amended as follows:
The following new Section 2(a) is hereby added to the Agreement:
"(A) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN,
THE BORROWER MAY PAY AND THE UNDERSIGNED MAY ACCEPT AND RETAIN FOR ITS
OWN ACCOUNT, PAYMENTS OF PRINCIPAL AND INTEREST ON THE DEBT
SUBORDINATED HEREBY, PROVIDED (I) THERE HAS NOT OCCURRED AN EVENT OF
DEFAULT (AS DEFINED IN THE LOAN AND SECURITY AGREEMENT (ACCOUNTS
RECEIVABLE AND INVENTORY) DATED AS OF DECEMBER 31, 1993, BETWEEN THE
BORROWER AND THE BANK) OR AN EVENT WHICH, WITH NOTICE OR LAPSE OF TIME
OR BOTH, WOULD CONSTITUTE AN EVENT OF DEFAULT, (II) IMMEDIATELY AFTER
GIVING EFFECT TO ANY PAYMENT OF PRINCIPAL OR INTEREST, BORROWER IS IN
COMPLIANCE WITH THE DEBT TO COVERAGE RATIO SET FORTH IN SECTION 8(M)
OF THE AFOREMENTIONED LOAN AND SECURITY AGREEMENT (ACCOUNTS RECEIVABLE
AND INVENTORY), AND (III) PRINCIPAL PAYMENTS DO NOT EXCEED THE
FOLLOWING AMOUNTS DURING THE FOLLOWING PERIODS:
111 AMOUNT PERIOD
------ ------
$300,000.00 THE DATE HEREOF
THROUGH APRIL 30, 1995
$250,000.00 MAY 1, 1995
THROUGH APRIL 30, 1996
$250,000.00 MAY 1, 1996
THROUGH APRIL 30, 1997
$250,000.00 MAY 1, 1997
THROUGH APRIL 30, 1998
$250,000.00 MAY 1, 1998
THROUGH APRIL 30, 1999
$250,000.00 MAY 1, 1999
THROUGH APRIL 30, 2000
$250,000.00 MAY 1, 2000
OR THEREAFTER"
Kindly note that the alterations contained herein do not in any way alter,
release or change any other sections contained in the Agreement.
Please acknowledge your agreement to the foregoing by signing the enclosed
copy of this letter and returning the same to the undersigned.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By:
---------------------------------
John D. Gaziano, Jr.
Vice President
UNDERSTOOD AND AGREED TO:
ROSALCO, INC.
By:
---------------------------
David L. Koffman, President
JAYARK CORPORATION
By:
---------------------------
David L. Koffman, President
, 1994
AVES Audio Visual Systems, Inc.
6116 Skyline Drive
Houston, Texas 77057
Attn: David L. Koffman, Vice President
Gentlemen:
Reference is made to our Amended and Restated Loan and Security Agreement
(Accounts Receivable and Inventory) dated as of December 19, 1991, together with
all amendments and additions thereto (hereinafter called the "AGREEMENT").
Notwithstanding the provisions of the Agreement, it is agreed, effective as of
November 1, 1994, that the Agreement shall be amended as follows:
1. Section 2(b) of the Agreement is hereby stricken in its entirety and
the following new Section 2(b) substituted therefor:
"(B) ALL LOANS SHALL BE EVIDENCED BY BANK'S RECORDS OF LOANS AND
REPAYMENTS AND LOANS WILL BEAR INTEREST, CALCULATED ON THE BASIS OF
ACTUAL DAYS ELAPSED AND A 360-DAY YEAR AND PAYABLE MONTHLY IN ARREARS,
AT A FLUCTUATING PER ANNUM RATE OF INTEREST THREE-QUARTERS OF ONE
(3/4%) PERCENT IN EXCESS OF THE PRIME RATE. THE TERM "PRIME RATE" AS
USED HEREIN SHALL MEAN THE RATE OF INTEREST ANNOUNCED BY THE BANK IN
BOSTON, MASSACHUSETTS, FROM TIME TO TIME AS ITS PRIME RATE. THE
EFFECTIVE INTEREST RATE APPLICABLE TO BORROWER'S LOANS SHALL CHANGE ON
THE DATE OF EACH CHANGE IN THE PRIME RATE. PRINCIPAL AND INTEREST
SHALL BE PAYABLE AT THE OFFICE OF THE BANK LOCATED AT 225 FRANKLIN
STREET, BOSTON, MASSACHUSETTS 02101, IN LAWFUL MONEY OF THE UNITED
STATES OF AMERICA WITHOUT SET-OFF, DEDUCTION OR COUNTERCLAIM.
BORROWER AUTHORIZES BANK TO CHARGE ITS DEPOSIT ACCOUNT(S) WITH BANK
FOR ALL PAYMENTS HEREUNDER."
2. Section 14(a) of the Agreement is hereby stricken in its entirety and
the following new Section 14(a) substituted therefor:
"(A) UNLESS CONTINUED IN WRITING BY BANK, THIS AGREEMENT SHALL
TERMINATE AND ALL OBLIGATIONS OF BORROWER TO BANK SHALL BECOME DUE AND
PAYABLE ON DECEMBER 31, 1995. BORROWER, AT SUCH TERMINATION DATE,
SHALL MAKE PAYMENT IN FULL OF ALL OBLIGATIONS WHETHER OR NOT ALL OR
ANY PART OF SUCH OBLIGATIONS IS OTHERWISE DUE AND PAYABLE PURSUANT TO
THE AGREEMENT OR INSTRUMENT EVIDENCING THE SAME. BANK MAY TERMINATE
THIS AGREEMENT IMMEDIATELY AND WITHOUT NOTICE UPON THE OCCURRENCE OF
AN EVENT OF DEFAULT. NO TERMINATION OF THIS AGREEMENT SHALL IN ANY
WAY AFFECT OR IMPAIR ANY RIGHTS OF BANK NOR RELIEVE BORROWER OR ANY
GUARANTOR OF ANY OBLIGATIONS UNTIL ALL OBLIGATIONS HAVE BEEN
IRREVOCABLY PAID AND PERFORMED IN FULL."
Kindly note that the alterations contained herein do not in any way alter,
release or change any other sections contained in the Agreement.
Please acknowledge your agreement to the foregoing by signing the enclosed
copy of this letter and returning the same to the undersigned.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By:
---------------------------------
John D. Gaziano, Jr.
Vice President
UNDERSTOOD AND AGREED TO:
AVES AUDIO VISUAL SYSTEMS, INC.
By:
--------------------------------
NOTE-GRID-FLUCTUATING INTEREST
$1,000,000.00 , 1994
For value received, AVES Audio Visual Systems, Inc. (the "BORROWER")
promises to pay to the order of State Street Bank and Trust Company (the "BANK")
at the office of the Bank located at 225 Franklin Street, Boston, Massachusetts
02101, or such other place as the holder hereof shall designate, One Million
($1,000,000.00) Dollars or, if less, the aggregate unpaid principal amount of
all loans made by the Bank to the Borrower upon the termination of the Amended
and Restated Loan and Security Agreement (Accounts Receivable and Inventory)
dated as of December 19, 1991, between the Borrower and the Bank, as amended
(the "AGREEMENT"), upon the earlier to occur of (i) December 31, 1995, or (ii)
the occurrence of an Event of Default under the Agreement upon which the Bank
makes demand for payment; together with interest on unpaid balances payable
monthly in arrears on the first day of each calendar month at a fluctuating
interest rate per annum equal to three-quarters of one (3/4%) percent above the
Bank's Prime Rate in effect from time to time. Each change in such interest
rate shall take effect simultaneously with the corresponding change in such
Prime Rate. The term "PRIME RATE" as used herein shall mean the rate of
interest announced by the Bank in Boston, Massachusetts, from time to time as
its Prime Rate. Interest shall be calculated on the basis of actual days
elapsed and a 360-day year. If this note is not paid in full upon the
termination of the Agreement or earlier upon the occurrence of an Event of
Default under the Agreement upon which the Bank makes demand for payment
thereof, interest on unpaid balances shall thereafter be payable on demand at a
fluctuating interest rate per annum equal to three (3%) percent above the Prime
Rate in effect from time to time.
If not sooner paid, the principal balance of this note, together with
accrued interest thereon, shall be due and payable on December 31, 1995.
All loans hereunder and all payments on account of principal and interest
hereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed
on the grid contained on Page 3 hereof WHICH IS PART of this note. The entries
on the records of the Bank (including any appearing on this note) shall, absent
manifest error, be prima facie evidence of amounts outstanding hereunder.
Any deposits or other sums at any time credited by or due from the holder
to the Borrower, or to any endorser or guarantor hereof, and any securities or
other property of the Borrower or any such endorser or guarantor at any time in
the possession of the holder may at all times be held and treated as collateral
for the payment of this note and any and all other liabilities (direct or
indirect, absolute or contingent, sole, joint or several, secured or unsecured,
due or to become due, now existing or hereafter arising) of the Borrower to the
holder. Regardless of the adequacy of collateral, the holder may apply or set
off such deposits or other sums against such liabilities at any time after the
occurrence of an Event of Default under the Agreement in the case of the
Borrower, but only with respect to matured liabilities in the case of endorsers
and guarantors.
The Borrower and every endorser and guarantor of this note hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and consent that no indulgence, and no substitution, release or surrender
of collateral, and no discharge or release of any other party primarily or
secondarily liable hereon, shall discharge or otherwise affect the liability of
the Borrower or any such endorser or guarantor. No delay or omission on the
part of the holder in exercising any right hereunder shall operate as a waiver
-2-
of such right or of any other right hereunder, and a waiver of any such right on
any one occasion shall not be construed as a bar to or waiver of any such right
on any future occasion.
This note is secured by any and all collateral at any time granted to the
Bank to secure any obligations of any maker hereof, including without
limitation, the Agreement and an Amended and Restated Supplementary Security
Agreement - Goods and Chattels dated as of December 19, 1991.
The Borrower and every endorser and guarantor hereof agree to pay on demand
all costs and expenses (including legal costs and attorneys' fees) reasonably
incurred or paid by the holder in enforcing this note on default.
This note shall take effect as a sealed instrument as of the date first
above written and shall be governed by the laws of the Commonwealth of
Massachusetts.
AVES AUDIO VISUAL SYSTEMS, INC.
By:
-------------------------- --------------------------------
Witness David L. Koffman, Vice President
Address: 6116 Skyline Drive
Houston, Texas 77057
NOTE-GRID-FLUCTUATING INTEREST
$12,000,000.00 , 1994
For value received, Rosalco, Inc. (the "BORROWER") promises to pay to the
order of State Street Bank and Trust Company (the "BANK") at the office of the
Bank located at 225 Franklin Street, Boston, Massachusetts 02101, or such other
place as the holder hereof shall designate, Twelve Million ($12,000,000.00)
Dollars or, if less, the aggregate unpaid principal amount of all loans made by
the Bank to the Borrower upon the termination of the Amended and Restated Loan
and Security Agreement (Accounts Receivable and Inventory) dated as of December
31, 1993, between the Borrower and the Bank, as amended (the "AGREEMENT"), upon
the earlier to occur of (i) December 31, 1995, or (ii) the occurrence of an
Event of Default under the Agreement upon which the Bank makes demand for
payment; together with interest on unpaid balances payable monthly in arrears on
the first day of each calendar month at a fluctuating interest rate per annum
equal to three-quarters of one (3/4%) percent above the Bank's Prime Rate in
effect from time to time. Each change in such interest rate shall take effect
simultaneously with the corresponding change in such Prime Rate. The term
"PRIME RATE" as used herein shall mean the rate of interest announced by the
Bank in Boston, Massachusetts, from time to time as its Prime Rate. Interest
shall be calculated on the basis of actual days elapsed and a 360-day year. If
this note is not paid in full upon the termination of the Agreement or earlier
upon the occurrence of an Event of Default under the Agreement upon which the
Bank makes demand for payment thereof, interest on unpaid balances shall
thereafter be payable on demand at a fluctuating interest rate per annum equal
to three (3%) percent above the Prime Rate in effect from time to time.
If not sooner paid, the principal balance of this note, together with
accrued interest thereon, shall be due and payable on December 31, 1995.
All loans hereunder and all payments on account of principal and interest
hereof shall be recorded by the Bank and, prior to any transfer hereof, endorsed
on the grid contained on Page 3 hereof WHICH IS PART of this note. The entries
on the records of the Bank (including any appearing on this note) shall, absent
manifest error, be prima facie evidence of amounts outstanding hereunder.
Any deposits or other sums at any time credited by or due from the holder
to the Borrower, or to any endorser or guarantor hereof, and any securities or
other property of the Borrower or any such endorser or guarantor at any time in
the possession of the holder may at all times be held and treated as collateral
for the payment of this note and any and all other liabilities (direct or
indirect, absolute or contingent, sole, joint or several, secured or unsecured,
due or to become due, now existing or hereafter arising) of the Borrower to the
holder. Regardless of the adequacy of collateral, the holder may apply or set
off such deposits or other sums against such liabilities at any time after the
occurrence of an Event of Default under the Agreement in the case of the
Borrower, but only with respect to matured liabilities in the case of endorsers
and guarantors.
The Borrower and every endorser and guarantor of this note hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
hereof and consent that no indulgence, and no substitution, release or surrender
of collateral, and no discharge or release of any other party primarily or
secondarily liable hereon, shall discharge or otherwise affect the liability of
the Borrower or any such endorser or guarantor. No delay or omission on the
part of the holder in exercising any right hereunder shall operate as a waiver
of such right or of any other right hereunder, and a waiver of any such right on
-2-
any one occasion shall not be construed as a bar to or waiver of any such right
on any future occasion.
This note is secured by any and all collateral at any time granted to the
Bank to secure any obligations of any maker hereof, including without
limitation, the Agreement and an Amended and Restated Supplementary Security
Agreement - Goods and Chattels dated as of December 31, 1993.
The Borrower and every endorser and guarantor hereof agree to pay on demand
all costs and expenses (including legal costs and attorneys' fees) reasonably
incurred or paid by the holder in enforcing this note on default.
This note shall take effect as a sealed instrument as of the date first
above written and shall be governed by the laws of the Commonwealth of
Massachusetts.
ROSALCO, INC.
By:
-------------------------- --------------------------------
Witness David L. Koffman, President
Address: 257 America Place
Jeffersonville, IN 47130
, 1994
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02101
Re: Reaffirmation of Multi-Entity
Guaranty dated January 17, 1992
Gentlemen:
Reference is made to a Multi-Entity Guaranty dated January 17, 1992 (the
"MULTI-ENTITY GUARANTY"), pursuant to which each of the undersigned, Diamond
Press Company ("DIAMOND") and Rosalco Woodworking, Inc. ("WOODWORKING")
guaranteed the obligations of each other to State Street Bank and Trust Company
(the "BANK").
Each of the undersigned (including the Bank) hereby acknowledges and agrees
that: (i) the Multi-Entity Guaranty shall remain in full force and effect
without modification, counterclaim, offset or defense; (ii) each of the
undersigned shall continue to guarantee all obligations of the other to the
Bank; (iii) Diamond has sold all of its assets and is no longer an active
corporation; and (iv) Woodworking has merged into Rosalco, Inc.
Please acknowledge your agreement to the matters contained herein by
signing this letter in the space provided and returning it to the undersigned.
Very truly yours,
JAYARK CORPORATION
By:
--------------------------------
David L. Koffman, President
ROSALCO, INC.
By:
--------------------------------
David L. Koffman, President
AVES AUDIO VISUAL SYSTEMS, INC.
By:
--------------------------------
David L. Koffman, Vice President
ACCEPTED AND AGREED TO:
STATE STREET BANK AND TRUST COMPANY
By:
------------------------------------
The Board of Directors
Jayark Corporation
We consent to incorporation by reference in the registration
statement on Form S-8 of Jayark Corporation of our report
dated August 9, 1995, relating to the consolidated balance
sheets of Jayark Corporation and subsidiaries as of April 30,
1995 and 1994, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of
the years in the three-year period ended April 30, 1995,
which report appears in the April 30, 1995 annual report on
Form 10-K of Jayark Corporation .
Houston, Texas
August 14, 1995
