<PAGE>
As filed with the Securities and Exchange Commission on September 11, 1998
Registration No. 333-56837
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________
JAYARK CORPORATION
(Exact name of registrant as specified in this charter)
DELAWARE 5020 13-1864519
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Code Number) Identification Number)
organization)
P.O. Box 741528
Houston, Texas 77274
(713) 783-9184
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
____________
DAVID L. KOFFMAN
Chairman, President and Chief Executive Officer
300 Plaza Drive
Vestal, New York 13580
(607) 729-9331
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
____________
Copies to:
James P. Jalil, Esq.
Shustak Jalil & Heller
545 Madison Avenue
New York, New York 10022
(212) 688-5900
____________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
____________
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, as amended, other than securities offered only pursuant to
dividend or interest reinvestment plans, please check the following box.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
____________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
<PAGE>
PROSPECTUS
18,442,398 SHARES
JAYARK CORPORATION
COMMON STOCK
Jayark Corporation (the "Company" or "Jayark") is issuing at no cost to
holders of record on July 31, 1998 of its common stock, par value $.01 per
share ("Common Stock"), one transferable right (individually, a "Right") for
each share of Common Stock held, entitling the holders thereof to subscribe
for an aggregate of up to 18,442,398 shares of Common Stock (the "Rights
Offering"). Each Right entitles the holder to purchase, at any time prior to
5:00 p.m., New York City time, on October 13, 1998, 2 shares of Common Stock
("Primary Subscription") at a subscription price equal to $.10 per share (the
"Subscription Price"). A group of investors more fully described in this
Prospectus (the "Koffman Group"), is the beneficial owner of 4,957,179
Shares. The Koffman Group has agreed with the Company that it will exercise
in full the Rights issued to it on Primary Subscription at the Subscription
Price. In addition, The Koffman Group has agreed to purchase at the
Subscription Price, any shares not purchased on Primary Subscription by the
stockholders of the Company. Common Stock may be purchased either by cash or
by tendering to the Company debt of the Company in a principal amount equal
to the Subscription Price. It is expected that the Koffman Group will
exercise its subscription rights, both Primary and Secondary, by the tender
to the Company of Company debt held by members of the Koffman Group.
Accordingly, the Company will realize gross proceeds in the equivalent value
(cash, together with a reduction of debt) of $1,844,240 from the Rights
Offering. See "Use of Proceeds." The Rights are transferable by holders
thereof. See "The Rights Offering."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD
BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SUBSCRIPTION PROCEEDS TO
PRICE COMPANY(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Per Share............................... $.10 $.10
- -------------------------------------------------------------------------------
Total................................... $1,844,240 $1,844,240
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company estimated to be
$50,000. The shares of Common Stock are being offered and sold directly
by the Company and no commission or other remuneration will be paid to
any person for soliciting purchases of shares of Common Stock in the
Rights Offering See "The Rights Offering - Method of Conducting the
Rights Offering." The Proceeds may be in the form of cash or debt of the
Company.
- ------------------------------------------------------------------
The Rights may not be exercised by any person, and neither this
Prospectus nor any subscription certificate shall constitute an offer to
sell or a solicitation of an offer to purchase any shares of Common
Stock, in any jurisdiction in which such transaction would be unlawful.
See "The Rights Offering -- State and Foreign Securities Laws."
____________________
September 11, 1998
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL
STATEMENTS (AND NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. EACH
INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY PRIOR TO MAKING AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
THE COMPANY
Jayark Corporation ("Jayark" or the "Company") conducts its operations
through AVES Audiovisual Systems, Inc. ("AVES"), a wholly owned subsidiary.
AVES distributes for resale, as well as rents, a broad range of audiovisual,
video and communications equipment and supplies. Its customer base includes
schools, industry and hotels. The warehousing, sales and administrative
operations of AVES are located in Houston, Texas.
The Company was originally incorporated in New York in 1958. In 1991,
the Company changed its state of incorporation to Delaware. In July 1998 the
Company amended its Certificate of Incorporation increasing its authorized
Common Stock to 30,000,000 shares and decreasing the par value of its Common
Stock from $.30 to $.01 per share.
THE RIGHTS OFFERING
The Company is distributing to holders of record of Common Stock on July
31, 1998 one transferable Right for each share held.
Primary Subscription......... Each Right entitles the holder to purchase 2
shares of Common Stock at a price per share of
$.10 (the "Subscription Price"). See "The
Rights Offering."
Oversubscription............. There will be no oversubscription privilege
available to stockholders other than the
Koffman Group (see below). See "The Rights
Offering."
Record Date.................. July 31, 1998 (the "Record Date").
Expiration Date.............. October 13, 1998 (the "Expiration Date").
Transferability
of Rights.................... The Rights are transferable. See "The Rights
Offering -- Transferability of Rights."
2
<PAGE>
Subscription by
Koffman Group................ The Koffman Group consists of David Koffman,
Chairman of the Board of Directors and
President of the Company, Richard Koffman,
Milton Koffman, Jeffrey Koffman, Sara Koffman,
Ruthanne Koffman, Elizabeth Koffman, Steven
Koffman and three entities controlled by
members of the Koffman family. The members of
the Koffman Group have agreed with the Company
that they will exercise in full the Rights
issued to it on Primary Subscription at a
price per share equal to the Subscription
Price. In addition, the Koffman Group has
agreed to purchase, at the Subscription Price,
any shares of Common Stock not purchased by
the other stockholders on Primary
Subscription. The Koffman Group beneficially
owns 4,957,179 shares of Common Stock as of
the date of this Prospectus, which represents
approximately 54% of the total votes entitled
to be cast by the holders of all of the
Company's outstanding voting securities. If
all other stockholders exercise their Rights
issued to them on Primary Subscription, the
Koffman Group will beneficially own 14,871,537
shares of Common Stock after exercise in full
of the Rights issued to it on Primary
Subscription (representing approximately 54%
of the Common Stock outstanding immediately
following consummation of the Rights
Offering). In the event that no other
stockholders exercise their rights, the
Koffman Group will own 23,399,577 shares of
common stock (representing approximately 85%
of the Common Stock outstanding immediately
following consummation of the Rights Offering)
after exercise in full of the Rights issued to
it on Primary Subscription and after giving
effects to the purchase by it of shares not
subscribed for by the other stockholders on
Primary Subscription. See "The Rights
Offering -- Background of and Purposes for the
Rights Offering" and "--Purchase of Shares by
The Koffman Group".
Dilution..................... To the extent a stockholder does not exercise
it Rights, such stockholder's percentage
equity interest in the Company and its voting
power will be diluted substantially.
Conversely, because the Subscription Price is
greater than the net tangible book value per
share of the Common Stock at April 30, 1998,
to the extent that a stockholder does exercise
its rights, there will be an immediate
dilution on a per share basis from the
Subscription Price paid by such stockholder to
the pro forma net tangible book value per
share of the Common Stock immediately
following consummation of the Rights Offering.
See "Risk Factors -- Dilution" and "The
Rights Offering -- Dilutive Effects of Rights
Offering."
3
<PAGE>
Common Stock
Outstanding After the
Offering..................... 27,663,597 shares
Risk Factors................. An investment in the Common Stock offered
hereby involves a high degree of risk. See
"Risk Factors."
Use of
Proceeds..................... The net proceeds to the Company from the sale
of the Common Stock offered hereby are
estimated to be approximately $1,844,240
(before deducting estimated expenses)
constituting cash and debt of the Company.
After payment of the expenses of the offering,
estimated to be approximately $50,000, such
net proceeds will be used by the Company to
retire $1,790,000 of notes payable and
subordinated notes, including interest with
related parties. See "Use of Proceeds."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT NUMBER OF SHARES
AND PER SHARE AMOUNTS)
Total Revenue $13,605 $12,638 $11,856
Earnings (Losses) from Continuing
Operations $76 $ (264) $ (228)
Earnings (Losses) from Discontinued
Operations -- $(5,795) $(6,957)
Net Earning (Losses) $76 $(6,059) $(7,185)
Basic Earnings (loss) per Share from
Continued Operations $.01 $(0.03) $(0.03)
Basic Earnings (loss) per Share from
Discontinued Operations -- $(0.66) $(0.89)
Weighted Average Shares Outstanding 9,221,199 8,802,528 7,833,990
</TABLE>
AT APRIL 30, 1998
<TABLE>
<CAPTION>
BALANCE SHEET DATA: ACTUAL PRO FORMA AS
ADJUSTED
------- ------------
<S> <C> <C>
Total Assets $ 2,635 $ 2,635
Long Term Obligations $ 3,446 $ 1,656
Stockholders' Equity (Deficit) $(2,926) $(1,136)
</TABLE>
5
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS, PRIOR TO PURCHASING SHARES OF COMMON STOCK,
SHOULD CONSIDER CAREFULLY THE SPECIFIC RISK FACTORS SET FORTH BELOW, AS WELL
AS THE OTHER INFORMATION REGARDING THE COMPANY APPEARING ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS STATEMENTS THAT CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF
THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT").
SUCH STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS PROSPECTUS AND INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE
COMPANY, ITS DIRECTORS OR ITS OFFICERS WITH RESPECT TO, AMONG OTHER THINGS:
(I) TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION OR RESULTS OF
OPERATIONS; (II) THE COMPANY'S FINANCING PLANS; (III) THE COMPANY'S BUSINESS
AND GROWTH STRATEGIES; (IV) THE USE OF THE PROCEEDS OF THE OFFERING; AND (V)
THE DECLARATION AND PAYMENT OF DIVIDENDS. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING
STATEMENTS. THE ACCOMPANYING INFORMATION SET FORTH UNDER THE HEADINGS "RISK
FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "BUSINESS," IDENTIFIES IMPORTANT FACTORS THAT
COULD CAUSE SUCH DIFFERENCES.
HISTORY OF LOSSES; FUTURE PROFITABILITY UNCERTAIN
The Company has had a recent history of significant losses. As a result
of continuous losses due to a soft retail market, low margins, competitive
pressures, and price reductions, the Company in early 1997 began looking for
methods to sell or otherwise dispose of the operations of Rosalco Inc.,
("Rosalco"), then a wholly owned subsidiary of Jayark. Rosalco had been in
the business of the distribution of more than 300 different products,
including occasional furniture, brass beds, custom jewelry cases and
accessories, most of which were imported from outside the continental United
States. Rosalco also developed special designs for several customers.
Rosalco was headquartered in Jeffersonville, Indiana. All efforts to sell
Rosalco were unsuccessful, and it was officially closed on October 22, 1997.
The assets of Rosalco were secured as part of its borrowing agreement.
Shortly after the closing, a receiver was assigned to liquidate the secured
assets of Rosalco to satisfy the loan principal. The financial statements of
the Company have been restated to reflect Rosalco's operations for all
periods as discontinued operations. In fiscal 1997, Jayark incurred a
$5,795,000 loss on Discontinued Operations, which includes $3,294,000 loss
from operations for the year ended April 30, 1997, the establishment of
accruals in the amount of $300,000 for expenses and guarantees related to the
closing, the write off of an intercompany receivable and other assets of
$476,000, and the write off of the remaining net assets of Rosalco of
$1,725,000.
In June 1995, a wholly-owned subsidiary of the Company, LCL
International Traders, Inc. ("LCL"), acquired certain of the assets and
assumed certain of the liabilities of a group of companies engaged in the
importation and distribution of seasonal and promotional merchandise. During
the fiscal year ended April 30, 1996, the Company experienced significant
problems with the acquisition, including, among other things, rapid and
significant deterioration of the acquired operations, as well as increasing
difficulty in financing the operations associated with the acquired assets.
As the fiscal year progressed the Company found the continued operation of
LCL to be untenable.
Finally, in the third quarter of the fiscal year ended April 30, 1996,
the Company abandoned its investment in, and wrote off its advances, to LCL.
As a result, the Company incurred a pre-tax charge of approximately
$4,700,000 in the fiscal year ended April 30, 1996, which has been charged as
a loss on investment. LCL subsequently filed under Chapter 11 of the
Bankruptcy Code. On August 1, 1996, after winding down its operations and
liquidating its assets, the Chapter 11 proceeding was dismissed on the ground
that all of the Debtor's assets have been liquidated.
6
<PAGE>
There can be no assurance that the Company will be able to reverse its
recent history of losses and return to profitability in the near future.
FUTURE BUSINESS
From time to time the Koffman family considers various business
opportunities or combinations for the Company. No assurance can be given
that any opportunity or combination will be presented to the Company, or if
presented and accepted by the Company, what effect, favorable or unfavorable,
such an opportunity or combination would have on the Company.
RELIANCE ON KEY PERSONNEL
Mr. Frank Rabinovitz is President of the Company's audiovisual
subsidiary, AVES, which is the sole operating entity of the Company. The
operations of AVES are significantly dependent on the contribution and
management skills of Mr. Rabinovitz. Although Mr. Rabinovitz does not have
an employment contract, the Company has entered into a Split Dollar Insurance
Agreement pursuant to which the Company has obtained a life insurance policy
in the approximate amount of $497,700. The premium is paid by the Company.
Upon the death of Mr. Rabinovitz, the beneficiary named by Mr. Rabinovitz is
entitled to receive the benefits under the policy. The Company paid
approximately $25,400 for this coverage in fiscal year ended April 30, 1998.
LIMITED PUBLIC MARKET FOR COMMON STOCK; LACK OF LIQUIDITY
The Company's Common Stock was delisted from the NASDAQ SmallCap Market
effective July 10, 1997 due to the Company's non-compliance with NASDAQ's
minimum capital and surplus requirement. There is currently no public
trading market for the Common Stock. The Common Stock is quoted on the "pink
sheets" published by the National Quotation Bureau and is traded in the
over-the-counter market. The Company believes it is unlikely that it will
relist the Common Stock with the NASDAQ National Market or the NASDAQ Small
Cap-TM- Market in the immediate future.
DILUTION
The offering price per share of Common Stock will exceed the net
tangible book value per share of Common Stock. See "Dilution." Accordingly,
purchasers of Common Stock in this offering will experience immediate and
substantial dilution.
LACK OF DIVIDENDS
The Company has paid no cash dividends on its Common Stock, and there is
no assurance that the Company will achieve sufficient earnings to pay cash
dividends on its Common Stock in the future. The Company intends to retain
any earnings for use in its business, and therefore does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
7
<PAGE>
THE RIGHTS OFFERING
TERMS OF THE RIGHTS OFFERING
The Company is issuing to the holders of record of its Common Stock on
the Record Date rights to subscribe for shares of Common Stock (the
"Rights"). Each stockholder is being issued one transferable Right for each
share of Common Stock held on the Record Date. The Rights entitle each
stockholder to acquire at the Subscription Price 2 shares of Common Stock for
each Right held. Rights may be exercised at any time during the Subscription
Period, which commences on September 11, 1998 and ends at 5:00 p.m., New York
City time, on October 13, 1998.
For purposes of determining the maximum number of shares of Common Stock
a stockholder may acquire pursuant to the Rights Offering, broker-dealers
whose shares of Common Stock are held of record by Cede & Co. ("Cede") or by
any other depository or nominee on their behalf will be deemed to be the
holders of the Rights that are issued to Cede or such other depository or
nominee on their behalf.
BACKGROUND OF AND PURPOSES FOR THE RIGHTS OFFERING
The Rights Offering is an integral part of the recapitalization of the
Company. The immediate effect of the Rights Offering, and the participation
of the Koffman Group, will be to reduce the debt on the Company's balance
sheet with a view to enhancing the equity value of the Company. The
completion of the Rights Offering will not only reduce even further the
amount of debt on the Company's balance sheet (since debt will either be
repaid from cash proceeds, or retired as it is tendered from Common Stock),
but will also enable stockholders of the Company to participate in any
potential enhanced equity value of the Company by permitting them to purchase
additional shares of Common Stock at $.10 per share.
The Board of Directors determined that the Rights Offering should be
structured in a manner that generally permits each public stockholder to
maintain its percentage ownership interest in the Company, but not to
increase it through an oversubscription procedure pursuant to which such
public stockholder could purchase shares not subscribed for by other
stockholders on Primary Subscription.
The Board of Directors also considered the possibility that not all
stockholders would exercise fully their rights in the Rights Offering. In the
absence of some assurance that the Rights Offering would be fully subscribed,
the Board was concerned that the Company would incur the expense of the
Rights Offering without obtaining the contemplated reduction of debt.
Accordingly, the Board discussed with the Koffman Group whether it would be
willing to agree to purchase any shares of Common Stock not subscribed for by
other stockholders on Primary Subscription in order to ensure that the Rights
Offering would be fully subscribed. The Koffman Group informed the Board of
Directors that it would be willing to agree not only to subscribe fully, but
also to purchase on oversubscription, at the Subscription Price, such number
of unsubscribed shares sufficient to result in gross proceeds to the Company
of $1,844,240, in either cash or debt reduction, from the Rights Offering.
METHOD OF CONDUCTING THE RIGHTS OFFERING
The Rights Offering is being made directly by the Company. The Company
will pay no underwriting discounts or commissions, finders' fees or similar
remuneration in connection with any distribution of the Rights or sales of
the shares of Common Stock offered hereby.
8
<PAGE>
THE SUBSCRIPTION PRICE
The Subscription Price for a share of Common Stock to be issued pursuant
to the Rights will be $.10. The Subscription Price was determined by the
Board of Directors based upon an evaluation of the worth and prospects of the
Company. See "Risk Factors--History of Losses; Future Profitability
Uncertain" and "--Limited Public Market for Common Stock."
EXPIRATION OF THE RIGHTS OFFERING
The Rights Offering will expire at 5:00 p.m., New York City time, on
October 13, 1998. Rights will expire on the Expiration Date and thereafter
may not be exercised. The Company reserves the right, in its sole discretion,
to extend the Expiration Date in order to deal with any unforeseen
contingencies relating to the conduct of the Rights Offering, but does not
otherwise expect to extend the Expiration Date.
METHOD OF EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the reverse side of
the subscription certificate and mailing it in the envelope provided, or
otherwise delivering the completed and signed subscription certificate to the
Company, together with payment for the shares of Common Stock as described
below under "--Payment for Shares." Completed subscription certificates must
be received by the Company prior to 5:00 p.m., New York City time, on the
Expiration Date (unless payment is effected by means of a notice of
guaranteed delivery as described below under "--Payment for Shares") at the
offices of the Company at one of the addresses set forth below. Rights may
also be exercised through a stockholder's broker, who may charge such
stockholder a servicing fee.
SIGNED SUBSCRIPTION CERTIFICATES SHOULD BE SENT TO THE COMPANY by one of the
methods described below:
(1) BY MAIL: JAYARK CORPORATION 300 PLAZA DRIVE, VESTAL, NEW YORK 13850
(2) BY HAND, EXPRESS MAIL OR OVERNIGHT COURIER: JAYARK CORPORATION 300
PLAZA DRIVE, VESTAL, NEW YORK 13850
(3) BY FACSMILIE (TELECOPIER): JAYARK CORPORATION (607)-798-1079
PAYMENT FOR SHARES
Stockholders who acquire shares of Common Stock on Primary Subscription
may choose between the following methods of payment:
(1) A stockholder can send the subscription certificate together with
payment for the shares of Common Stock acquired on Primary
Subscription to the Company. To be accepted, such payment, together
with the executed subscription certificate, must be received by
October 13, 1998 at one of the addresses set forth above prior to
5:00 p.m., New York City time, on the Expiration Date. The Company
will deposit all stock purchase checks received by it prior to the
final due date into a segregated interest bearing account (which
interest will accrue to the benefit of the Company). A PAYMENT BY
THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER OR
CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES, MUST BE PAYABLE
TO JAYARK CORPORATION, AND MUST ACCOMPANY AN EXECUTED SUBSCRIPTION
CERTIFICATE FOR SUCH SUBSCRIPTION
9
<PAGE>
CERTIFICATE TO BE ACCEPTED. ALTERNATIVELY, PAYMENT MAY BE MADE BY
ASSIGNMENT TO THE COMPANY OF DEBT OF THE COMPANY HELD BY SUCH
HOLDER OF THE SUBSCRIPTION CERTIFICATE IN A PRINCIPAL AMOUNT EQUAL
TO THE SUBSCRIPTION PRICE.
(2) Alternatively, a subscription will be accepted by the Company if,
prior to 5:00 p.m., New York City time, on the Expiration Date, the
Company has received a notice of guaranteed delivery by facsimile
(telecopy) or otherwise from a bank or a trust company guaranteeing
delivery of (i) payment of the full Subscription Price for the
shares of Common Stock subscribed for on a Primary Subscription,
and (ii) a properly completed and executed subscription
certificate. The Company will not honor a notice of guaranteed
delivery if a properly completed and executed subscription
certificate and full payment for shares of Common Stock are not
received by the Company by the close of business on the fifth
business day after the Expiration Date (the "Confirmation Date")
October 20, 1998.
Within five business days following the Expiration Date, a confirmation
will be sent by the Company to each stockholder (or, if the stockholder's
shares of Common Stock are held by Cede or any other depository or nominee),
showing (i) the number of shares of Common Stock acquired on Primary
Subscription; and (ii) the Subscription Price and total price for the shares
of Common Stock acquired. All payments by a stockholder must be in United
States dollars by money order or check drawn on a bank located in the United
States of America and payable to Jayark Corporation or by assignment to the
Company of debt of the Company in a principal amount equal to the
Subscription Price.
Whichever of the methods described above is used, issuance and delivery
of certificates for the shares of Common Stock purchased are subject to
collection of checks and actual payment pursuant to any notice of guaranteed
delivery.
If a stockholder who subscribes shares of Common Stock on Primary
Subscription does not make payment of any amounts due, the Company reserves
the right to take any or all of the following actions: (i) allow the Koffman
Group to subscribe for such subscribed and unpaid shares of Common Stock;
(ii) apply any payment actually received by it toward the purchase of the
greatest number of shares of Common Stock which could be acquired by such
holder upon exercise of the Rights; and/or (iii) exercise any and all other
rights or remedies to which it may be entitled.
TRANSFERABILITY OF RIGHTS
The Rights are transferable, and it is possible that the Rights may be
quoted over-the-counter on the "pink sheets" published by the National
Quotation Bureau although there can be no assurance that trading will
develop. Neither the Rights nor the underlying shares of Common Stock will be
listed on a national securities exchange.
DELIVERY OF STOCK CERTIFICATES
Stockholders whose shares of Common Stock are held of record by Cede or
by any other depository or nominee on their behalf or on behalf of their
broker-dealers will have their shares of Common Stock acquired on Primary
Subscription credited to the account of Cede or such other depository or
nominee. With respect to all other stockholders, stock certificates for all
shares of Common Stock acquired on Primary Subscription will be mailed as soon
as practicable after the Confirmation Date and after payment for the shares
of Common Stock subscribed for has cleared, which clearance may take up to 15
days from the date of receipt of the payment.
10
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Each stockholder should consult his or her tax advisor concerning the
tax consequences to such stockholder, if any, of the Rights Offering.
PURCHASE OF SHARES BY THE KOFFMAN GROUP
The Koffman Group, which consists of the following David Koffman,
Chairman of the Board of Directors and President of the Company, Richard
Koffman, Milton Koffman, Jeffrey Koffman, Sara Koffman, Ruthanne Koffman,
Elizabeth Koffman, Steven Koffman and three entities controlled by members of
the Koffman family, has agreed with the Company that it will exercise in full
its Rights to purchase Common Stock on Primary Subscription and will purchase
any shares not purchased by other stockholders on Primary Subscription at the
Subscription Price. The Koffman Group beneficially owns 4,957,179 million
shares of Common Stock, and which represents approximately 54% of the Common
Stock outstanding as of such date. If all other stockholders exercise in full
their Rights on Primary Subscription, the Koffman Group will continue to own
beneficially approximately 54% of the Common Stock outstanding immediately
following consummation of the Rights Offering. In the event that no other
stockholders exercise their Rights, the Koffman Group will beneficially own
23,399,577 shares of Common Stock (representing approximately 85% of the
Common Stock outstanding immediately following consummation of the Rights
Offering) after exercise in full of the Rights issued to it on Primary
Subscription and after giving effect to the purchase by it of shares not
subscribed for by other stockholders on Primary Subscription.
The Koffman Group will not be obligated to purchase any shares of Common
Stock pursuant to the Rights Offering under certain circumstances, including
in the event of any material adverse change in the results of operations,
financial conditions or prospects of the Company.
PURPOSES OF THE COMPANY'S AGREEMENT WITH THE KOFFMAN GROUP
As noted above, the Koffman Group has agreed with the Company that it
will exercise in full the Rights issued to it on Primary Subscription at a
price per share equal to the Subscription Price. In addition, The Koffman
Group has agreed to purchase, at the Subscription Price, any shares of Common
Stock not purchased by the other stockholders on Primary Subscription. The
Company has entered into such agreement in order to ensure that the Rights
Offering will be fully subscribed and result in gross proceeds, together with
reduction in Company debt, of $1,884,240 to the Company.
INTERPRETATION; TERMINATION OF RIGHTS OFFERING
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of any subscription or request for division will be
determined by the Company, in its sole discretion, which determination shall
be final and binding. The Company reserves the absolute right to reject any
subscription if it is not in proper form or if the acceptance thereof or the
issuance of Common Stock or Rights pursuant thereto could be deemed unlawful.
The Company also reserves the right to waive any defect with regard to any
particular subscription. The Company shall not be under any duty to give
notification of any defect or irregularity in subscription, nor shall it
incur any liability for failure to give such notification of any defect or
such notification. Subscriptions will not be deemed to have been made until
any such defect or irregularity has been cured or waived within such time as
the Company shall determine. Subscriptions with defects or irregularities
which have not been cured or waived will be returned by the Company to the
appropriate holder of the Rights as soon as possible. See also "--State and
Foreign Securities Laws."
11
<PAGE>
The Company further reserves the right to terminate the Rights Offering
prior to acceptance of subscriptions by the Company; however, in the absence
of a material adverse change in its business, financial condition or results
of operations, the Company expects to consummate the Rights Offering. The
Koffman Group will not be obligated, however, to purchase any shares of
Common Stock pursuant to the Rights Offering under certain circumstances,
including in the event of any material adverse change in the results of
operations, financial condition or prospects of the Company. See "The Rights
Offering -- Purchase of Shares by The Koffman Group."
RISK OF DELIVERY; DELIVERY BY MAIL
The risk of delivery of all documents and payments is on subscribers,
not the Company. If the mail is used, it is recommended that insured,
registered mail be used and that a sufficient number of days be allowed to
ensure delivery to the Company before the Expiration Date. The Company will
accept subscriptions delivered via U.S. Mail before 5:00 p.m., New York City
time, on October 20, 1998 (one week after the Expiration Date), provided such
subscriptions are postmarked on or before the Expiration Date. Thereafter,
unexercised Rights will be void.
DILUTIVE EFFECTS OF RIGHTS OFFERING
To the extent a stockholder does not exercise its Rights, such
stockholder's percentage equity interest in the Company and voting power
immediately upon completion of the Rights Offering could be diluted by as
much as 67% as a result of the 18,442,398 shares of Common Stock issuable in
connection with the Rights Offering. Consequently, such stockholder's
participation in any potential future increase in the value of the Company
would be reduced. See "--Purchase of Shares by The Koffman Group."
Conversely, to the extent that a stockholder does exercise its Rights,
the Subscription Price is greater than the net tangible book value per share
of the Common Stock, which was $(.35) at April 30, 1998. Assuming all of the
shares offered hereby are purchased on Primary Subscription, there will be an
immediate dilution from the Subscription Price paid by purchasers to the pro
forma net tangible book value per share of the Common Stock immediately
following consummation of the Rights Offering in an amount of $.15.
The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Subscription Price ..................................................... $.10
Net tangible book value per share prior to the Rights Offering,
as of April 30, 1998 ................................................. ($.35)
Increase in net tangible book value per share attributable to the
Rights Offering ...................................................... $.30
Pro forma net tangible book value per share as of April 30, 1998 ......... ($.05)
Dilution to purchaser of Common Stock in the Rights Offering ............. $.15
</TABLE>
12
<PAGE>
STATE AND FOREIGN SECURITIES LAWS
The Company will not offer, sell or issue any of the Rights or the
Common Stock in any jurisdiction where it is unlawful to do so or whose laws,
rules, regulations or orders would require the Company, in its sole
discretion, to incur costs, obligations or time delays disproportionate to
the net proceeds to be realized by the Company from such offers, sales or
issuances. The Rights may not be exercised by any person, and neither this
Prospectus nor any subscription certificate shall constitute an offer to sell
or a solicitation of an offer to purchase any shares of Common Stock, in any
jurisdiction in which such transactions would be unlawful. No action has been
taken in any jurisdiction outside the United States to permit offers and
sales of the Rights of Common Stock. Consequently, the Company may reject
subscriptions pursuant to the exercise of Rights by any holder of Rights
outside the United States, and the Company may also reject subscriptions from
holders in jurisdictions within the United States if it should later
determine that it may not lawfully issue shares to such holders, even if it
could by qualifying the shares for sale or by taking other actions in such
jurisdictions, or that the costs, obligations or time delays related thereto
are disproportionate to the net proceeds to be realized therefrom.
NO REVOCATION
Once a holder of Rights has exercised the subscription privilege, such
exercise may not be revoked.
USE OF PROCEEDS
The net proceeds of $1,790,000 to the Company from the sale of the
Common Stock offered hereby will be used to retire $1,790,000 of notes payable
and subordinated notes, including accrued interest, with related parties.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock, and there is
no assurance that the Company will achieve sufficient earnings to pay cash
dividends on its Common Stock in the future. The Company intends to retain
any earnings for use in its business, and therefore does not anticipate
paying any cash dividends on its Common Stock in the foreseeable future.
PRICE RANGE OF COMMON STOCK
Effective July 10, 1997, the Company's Common Stock was delisted due to
the Company's non-compliance with the NASDAQ's minimum capital and surplus
requirement. Bid quotations for the Company's Common Stock may be obtained
from the "pink sheets" published by the National Quotation Bureau, and the
Common Stock is traded in the over-the-counter market. The following table
presents the quarterly high and low bid quotations during the last two fiscal
years. These quotations reflected the inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
COMMON STOCK TRADE PRICE AS OF:
1998 1997 1996
----------- ----------- -----------
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter 0.31 0.19 0.56 0.19 2.56 0.81
Second Quarter 0.19 0.19 0.41 0.13 1.06 1.00
Third Quarter 0.19 0.19 0.50 0.19 0.91 0.56
Fourth Quarter 0.17 0.09 0.50 0.25 0.69 0.44
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table set forth the consolidated capitalization of the
Company at April 30, 1998, and as adjusted to reflect: (i) the sale of the
Common Stock offered by the Company and (ii) the application of the estimated
net proceeds therefrom as described under "Use of Proceeds."
<TABLE>
<CAPTION>
PRO FORMA AS
AS OF APRIL 30, 1998 ACTUAL PRO FORMA ADJUSTED(1)
- -------------------------------------- ------ --------- ------------
(in thousands)
<S> <C> <C> <C>
Long-term Debt $ 3,446 $ 3,446 $ 1,656
Stockholders' equity (deficit)(2)
Common Stock of $0.01 par value.
Authorized 30,000,000 shares and
9,221,197 issued and outstanding,
27,633,595 share issued and
outstanding pro forma. 2,766 276 276
Additional Paid-in-Capital 8,066 12,346 12,346
Accumulated Deficit (13,758) (13,758) (13,758)
Total Stockholders' Deficit (2,926) (1,136) (1,136)
Total Capitalization $ 520 $ 2,310 $ 520
</TABLE>
(1) The "Pro Forma as Adjusted" reflects the repayment of notes payable
and subordinated notes with related parties.
(2) Adjusted to reflect Amendment to Certificate of Incorporation filed
in July 1998 increasing authorized common stock to 30,000,000 shares and
decreasing par value to $0.01 per share.
14
<PAGE>
DILUTION
The net tangible book value of the Company at April 30, 1998 was
$(3,194,308), or ($.35) per share of Common Stock. "Net tangible book value
per share" represents the amount of tangible assets less total liabilities
and divided by the number of shares of Common Stock outstanding. After giving
effect to the sale by the Company of the 18,442,398 shares of Common Stock
offered hereby (after deduction of the estimated offering expenses), the pro
forma net tangible book value of the Company at April 30, 1998 would have
been (1,404,308) or (.05) per share of Common Stock. This represents an
immediate increase in net tangible book value of $.30 per share to current
stockholders and an immediate dilution of $.15 per share to new stockholders
purchasing shares of Common Stock in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C>
Subscription Price ....................................................... $ .10
-----
Net tangible book value per share prior to this offering ................. (.35)
-----
Increase in net tangible book value per share attributable to
this offering .......................................................... .30
-----
Pro forma net tangible book value after giving effect to this
offering ............................................................... (.05)
-----
Dilution to new purchasers of Common Stock in this offering .............. ($.15)
-----
-----
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
YEAR ENDED APRIL 30,
RESULTS OF OPERATIONS: 1998 1997 1996 1995 1994
- ------------------------------- --------- --------- --------- --------- ---------
(all amounts in thousands except number of shares
and per share data)
<S> <C> <C> <C> <C> <C> <C>
Net Revenue $13,605 $12,638 $11,856 $11,631 $9,594
Earnings (Losses) from
Continuing Operations $76 ($264) ($228) $1 ($154)
Earnings (Losses) from
Discontinuing Operation -- ($5,795) ($6,957) $772 $1,206
Net Earnings (Losses) $76 ($6,059) ($7,185) $773 $1,052
Basic Earnings (loss) per
Per Share from
Continuing Operations $.01 ($0.03) ($0.03) $0.00 ($0.02)
Basic Earnings (loss) per
Per Share from
Discontinuing Operations -- ($0.66) ($0.89) $0.11 $0.18
Average Shares Outstanding 9,221,199 8,802,528 7,833,990 6,867,083 6,682,344
BALANCE SHEET INFORMATION
Total Asset $2,635 $2,754 $8,327 $18,085 $10,419 $9,426
Long Term Obligations $3,446 $3,407 $1,972 $1,543 $1,812 $2,117
Working Capital (Deficit) $157 ($7) ($233) $2,067 $1,331 $1,916
Stockholders' Equity (Deficit) ($2,926) ($3,002) $2,586 $8,614 $11,543 $11,236
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THE DISCUSSION BELOW, INCLUDING, WITHOUT
LIMITATION, STATEMENTS CONTAINING THE WORDS "BELIEVES," "EXPECTS," AND WORDS
OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING" STATEMENTS WITHIN THE MEANING
OF THE PRIVATE SECURITIES REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY
CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR
INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE EFFECTS OF
FUTURE EVENTS ON THE COMPANY'S FINANCIAL PERFORMANCE; THE RISK THAT THE
COMPANY MAY NOT BE ABLE TO FINANCE ITS PLANNED GROWTH; RISKS RELATED TO THE
RETAIL INDUSTRY IN WHICH THE COMPANY COMPETES, INCLUDING POTENTIAL ADVERSE
IMPACT OF EXTERNAL FACTORS SUCH AS INFLATION, CONSUMER CONFIDENCE,
UNEMPLOYMENT RATES AND CONSUMER TASTES AND PREFERENCES; AND THE RISK OF
POTENTIAL INCREASE IN MARKET INTEREST RATES FROM CURRENT RATES. GIVEN THESE
UNCERTAINTIES, CURRENT AND PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY
OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO PUBLICLY ANNOUNCE THE RESULT OF
ANY REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO
REFLECT FUTURE EVENTS OR DEVELOPMENTS.
COMPARISON OF FISCAL YEAR ENDED APRIL 30, 1998
WITH FISCAL YEAR ENDED APRIL 30, 1997
NET REVENUES
Consolidated Revenues of $13,604,000 increased $966,000, or 7.6%, from
fiscal 1997. The increase is the result of a $1,130,000 increase in direct
sales due to volume increases. However, these increases were primarily
offset by decreases in rental sales ($206,000).
COST OF REVENUES
Consolidated Cost of Revenues of $11,446,000 increased $854,000, or
8.1%, from the prior fiscal year primarily due to increased revenues. The
total gross margin decreased .3% from the prior fiscal year due to a change
in product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Consolidated Selling, General and Administrative Expenses of $1,717,000
decreased $331,000 or 16.2% as compared to the prior reporting year. Jayark
Corporate recognized cost reductions in legal and professional fees of
$119,000 due to reduced legal representation in the current year and higher
than normal audit and accounting fees incurred in Fiscal 1997, an $88,000
decrease in taxes due to a reduction in Franchise Tax expenses and refunds
received from prior year returns, and, decreases in other miscellaneous
expense accounts of $86,000 as a result of the Company's overall cost
reduction plan. AVES decreased spending $38,000, primarily a result of an
increase in miscellaneous income.
INTEREST EXPENSE
Consolidated Interest Expense of $366,000 increased $26,000 or 7.5%.
Corporate interest increased due to an increase in borrowing.
17
<PAGE>
OTHER INCOME
Consolidated Other Income of $200 decreased $78,349 or 99.7%. This
decrease is a result of 1997 gains on the disposal of fixed assets and other
miscellaneous income.
PRE TAX INCOME FROM CONTINUING OPERATIONS
Consolidated Pre Tax Income from Continuing Operations is $76,000 as
compared to a prior year's net loss of $264,000. This is a result of higher
revenues combined with lower Selling, General, and Administrative expenses.
COMPARISON OF FISCAL YEAR ENDED APRIL 30, 1997
WITH FISCAL YEAR ENDED APRIL 30, 1996
REVENUES
Consolidated Revenues of $12,638,000 increased $782,000 or 6.6% from
fiscal 1996. The increase was the result of a $1,105,000 increase in direct
sales and a slight increase in rental sales from 1996. However, these
increases were offset primarily by decreases in contract sales ($323,000).
The increased sales were primarily a result of the increased emphasis on
direct sales rather than contract sales.
COST OF REVENUES
Consolidated Cost of Revenues of $10,592,000 increased $822,000 or 8.4%
from the prior fiscal year. The increase reflected the higher costs
associated with direct sales rather than those incurred on contract sales.
Total gross margin decreased an aggregate of 1.9% from the prior fiscal year
due to decreases in margin related to the transition to direct sales, which
had a lower margin with higher volume.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Consolidated Selling, General and Administrative Expenses of $2,000,000
decreased $110,000 or 5.2% as compared to the prior reporting year. AVES
decreased depreciation expense by $38,000 due to the disposal of assets at
the end of fiscal 1996. The Corporate office decreased insurance expenses
$50,000 due to savings on premiums and $22,000 in payroll expense.
INTEREST EXPENSE
Consolidated Interest Expense of $340,000 increased $11,000 or 3.3%. The
increase was due to increased borrowing levels during fiscal 1997.
OTHER INCOME
The Company incurred consolidated Other Income of $79,000 as a result of
gains on the disposal of fixed assets and other miscellaneous
income.
PRE TAX LOSS FROM CONTINUING OPERATIONS
Consolidated Pre tax Loss from Continuing Operations was $264,000 as
compared to a prior year's net loss of
18
<PAGE>
$116,000. This was primarily a result of lower spending associated with
Selling, General, and Administrative expenses and other miscellaneous income.
NET LOSS ON DISCONTINUED OPERATIONS
Consolidated Net Loss from Discontinued Operations was $5,795,000, which
represented losses from the discontinued Rosalco operation of $3,294,000, the
establishment of accruals in the amount of $300,000 for expenses and
guarantees related to the closing, the write off of an intercompany
receivable and other assets of $476,000, and the write off of the remaining
net assets of Rosalco of $1,725,000.
COMPARISON OF FISCAL YEAR ENDED APRIL 30, 1996
WITH FISCAL YEAR ENDED APRIL 30, 1995
REVENUES
Consolidated Revenues of $11,856,000 increased $225,000 or 1.9% from
fiscal 1995. AVES increased its revenues, by 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.
COST OF REVENUES
Consolidated Cost of Revenues of $9,770,000 increased $260,000 or 2.7%
from the prior fiscal year. The increase in AVES' cost of revenues reflects
the increase in sales revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Consolidated Selling, General and Administrative Expenses of $2,109,000
decreased $36,000 or 1.7% as compared to the prior reporting year primarily
due to a decrease in payroll and related benefit costs incurred by AVES.
INTEREST EXPENSE
Consolidated Interest Expense increased $161,000 primarily due to the
increase in the amount of short-term borrowings, resulting from increased
inventory levels due to the decrease in sales, and increased cost of
borrowings.
LOSS ON ABANDONMENT OF INVESTMENT
The Company incurred a consolidated Loss on Investment of $4,363,000.
The loss was incurred as a result of Corporate abandoning its investment and
writing off its advances in certain assets and a business acquired in June,
1995. This expense was mainly comprised of writing off investment costs and
wind down costs such as payroll expenses and other accruals which were
necessary for proper liquidation.
LOSS ON DISCONTINUING OPERATIONS
Loss on Discontinued Operations reflects the losses incurred by the
discontinued Rosalco operation. The increase in losses of Rosalco in 1996
indicates the effect of a soft retail market, change in product mix, slower
deliveries from overseas suppliers and credit restraints from suppliers.
19
<PAGE>
NET INCOME
Consolidated Net Loss of $7,185,000 as compared to income of $773,000
decreased $7,958,000 as a result of reduced revenues, write-offs of
investments, discontinued operations, and increased operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1998, consolidated open lines of credit available to the
Company for borrowing, were $950,000 as compared to $750,000 at April 30,
1997. 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 and from available borrowing
levels.
WORKING CAPITAL
Working capital was $157,067 at April 30, 1998, compared to a working
capital deficit of $7,003 at April 30, 1997. The increase in working capital
is largely due to cash flows from operations.
Net cash provided by operating activities was $384,540 in 1998 resulting
from a decrease in accounts receivable and inventory as well as an increase
in accrued salaries. This was partially offset by a decrease in the accrued
losses related to the discontinued operations of Rosalco.
Cash flows used for investing activities during the year ended April 30,
1998 were $51,636 as a result of capital expenditures by the continuing AVES
division.
Cash used by financing activities of $161,186 arose from payment on
AVES' line of credit.
In March 1997, AVES established a line of credit with BSB Bank & Trust,
Binghamton, New York, in the amount of $1,250,000. The interest rate is 8.75%
annually and the line is due and payable on March 1, 2000. There are no
financial covenants associated with the line of credit. As of April 30, 1998,
AVES has $300,000 outstanding.
In July 1998, the Company amended its Certificate of Incorporation
increasing its authorized Common Stock from 10,000,000 to 30,000,000 shares
and decreasing the par value of its Common Stock from $.30 to $.01 per share.
In June 1998 Jayark Corporation, through a newly formed, wholly owned
subsidiary, MED Services Corp. ("Med"), entered into a Purchase and Sale
Agreement with Vivax Medical Corporation ("Vivax"), a company that
manufactures, sells and rents durable medical equipment to hospitals, nursing
homes and individuals. Under the terms of the agreement, Med purchased
certain medical equipment from Vivax for cash of $579,700 and a $144,925
unsecured promissory note due in five years. Med then entered into a
Consignment Agreement with Vivax whereby this medical equipment was consigned
to Vivax to rent through its distribution network. In consideration of Vivax
renting and maintaining the Med equipment, Vivax is entitled to a range of
forty-eight to sixty-seven percent of the rental proceeds, based upon the
equipment rented. Vivax has an option to purchase the medical equipment from
Med after the twenty-fourth, thirty-sixth and forty-eighth month of the
consignment period. Med, under the Purchase and Sale Agreement has an option,
through October 31, 1999 to purchase an additional $2,475,000 of medical
equipment from Vivax. Upon the expiration of the consignment period, which is
five years from the purchase of the equipment, Med has the option to sell the
equipment back to Vivax.
20
<PAGE>
Med negotiated a $1,000,000 revolving line of credit with Atlantic Bank
of New York and invested approximately $130,000 of the Company's presently
available working capital to purchase the medical equipment. The $1,000,000
line of credit is due one year from signing and bears interest at prime plus
2%. The line of credit is secured by the inventories and accounts receivable
of Med. There are no financial covenants associated with the line of credit. As
of July 31, 1998 Med has $450,000 outstanding on the line of credit.
If the medical equipment is successfully rented, the rental income and
cash flow could have a material affect on the operating results of Jayark
Corporation. There can be no assurances that the Company will be successful
in renting the medical equipment.
The Company had no material commitments for capital expenditures as of
April 30, 1998.
IMPACT OF INFLATION
Management of the Company believes that inflation has not significantly
impacted either net sales or net earnings during the year ended April 30,
1998. The Company has generally been able to pass along price increases from
its manufacturers.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued two new disclosure standards. Results of
operations and financial position will be unaffected by implementation of
these new standards.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes
in equity except those resulting from investments by owners and distributions
to owners.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", which supersedes SFAS No. 14, "Financial Reporting for Segments
of a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in financial
statements. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers.
Both of these new standards are effective for financial statements for
Fiscal 1999, and require comparative information for earlier years to be
restated. Management does not expect these two standards to have a
significant impact on future financial statement
disclosures.
YEAR 2000
Management is in the process of determining whether all of the Company's
accounting and operational systems are year 2000 compliant. Management does
not expect the costs associated with any required conversions of systems to
ensure year 2000 compliance to be significant.
21
<PAGE>
BUSINESS
GENERAL
Jayark Corporation ("Jayark" or "the Company") conducts its operations
through AVES Audiovisual Systems, Inc. ("AVES"), a wholly owned subsidiary.
AVES distributes for resale, as well as rents, a broad range of
audiovisual, video and communications equipment and supplies. Its customer
base includes schools, industry and hotels. The warehousing, sales and
administrative operations of AVES are located in Houston, Texas.
The Company was originally incorporated in New York in 1958. In 1991,
the Company changed its state of incorporation to Delaware.
DISCONTINUED OPERATIONS
As a result of continued losses due to a soft retail market, low
margins, competitive pressures, and price reductions, the Company had been
looking for methods to sell or otherwise dispose of the operations of Rosalco
Inc., ("Rosalco") a wholly owned subsidiary of Jayark. Rosalco had been in
the business of the distribution of more than 300 different products,
including occasional furniture, brass beds, custom jewelry cases and
accessories, most of which are imported from outside the continental United
States. Rosalco also developed special designs for several customers. Rosalco
was headquartered in Jeffersonville, Indiana. All efforts to sell Rosalco
were unsuccessful, and it was officially closed on October 22, 1997. The
assets of Rosalco were secured as part of its borrowing agreement. Shortly
after the closing, a receiver was assigned to liquidate the secured assets of
Rosalco to satisfy the loan principal. The financial statements have been
restated to reflect Rosalco's operations for all periods as discontinued
operations. In fiscal 1997, Jayark incurred a $5,795,000 loss on Discontinued
Operations, which includes $3,294,000 loss from operations for the year ended
April 30, 1997, the establishment of accruals in the amount of $300,000 for
expenses and guarantees related to the closing, the write off of an
intercompany receivable and other assets of $476,000, and the write off of
the remaining net assets of Rosalco of $1,725,000.
RECENT EVENTS
In July 1998, the Company amended its Certificate of Incorporation
increasing its authorized Common Stock from 10,000,000 to 30,000,000 shares
and decreasing the par value of its Common Stock from $.30 to $.01 per share.
In June 1998 Jayark Corporation, through a newly formed, wholly owned
subsidiary, MED Services Corp. ("Med"), entered into a Purchase and Sale
Agreement with Vivax Medical Corporation ("Vivax"), a company that
manufactures, sells and rents durable medical equipment to hospitals, nursing
homes and individuals. Under the terms of the agreement, Med purchased
certain medical equipment from Vivax for cash of $579,700 and a $144,925
unsecured promissory note due in five years. Med then entered into a
Consignment Agreement with Vivax whereby this medical equipment was consigned
to Vivax to rent through its distribution network. In consideration of Vivax
renting and maintaining the Med equipment, Vivax is entitled to a range of
forty-eight to sixty-seven percent of the rental proceeds, based upon the
equipment rented. Vivax has an option to purchase the medical equipment from
Med after the twenty-fourth, thirty-sixth and forty-eighth month of the
consignment period. Med, under the Purchase and Sale Agreement has an option,
through October 31, 1999 to purchase an additional $2,475,000 of medical
equipment from Vivax. Upon the expiration of the consignment period, which is
five years from the purchase of the equipment, Med has the option to sell the
equipment back to Vivax.
22
<PAGE>
Med negotiated a $1,000,000 revolving line of credit with Atlantic Bank
of New York and invested approximately $130,000 of the Company's presently
available working capital to purchase the medical equipment. The $1,000,000
line of credit is due one year from signing and bears interest at prime plus
2%. The line of credit is secured by the inventories and accounts receivable
of Med. There are no financial covenants associated with the line of credit.
As of July 31, 1998 Med has $450,000 outstanding on the line.
If the medical equipment is successfully rented, the rental income and
cash flow could have a material affect on the operating results of Jayark
Corporation. There can be no assurances that the Company will be successful
in renting the medical equipment.
DESCRIPTION OF AVES' BUSINESS
PRODUCTS
AVES distributes and rents a broad range of audio 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 projection) 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-TM-, GE-TM-, Mitsubishi, Elmo,
Panasonic, Ikegami, Videotek, Hitachi, Pioneer, Leitch, Quasar, Telex
Corporation, Kodak, Dukane, Sharp, Sony, 3M Brand, Luxor and miscellaneous
other brand names. Brand name and "house" brand products account for
approximately 97% and 3% of AVES sales, respectively. The Company also offers
repair services, audio visual consulting & design, engineering, installation
and servicing of audiovisual 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 Aves' business.
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
23
<PAGE>
In fiscal 1998, 72% of AVES revenues were to schools and other
educational institutions. The remaining 28% came from sales to business and
industry (25%) and rental of AVES equipment, primarily to hotels, (3%).
Approximately 70% of the AVES revenues in fiscal 1997 were from sales to
schools and other educational institutions. The remaining 30% came from the
rental of AVES systems primarily to hotels (approximately 3%) and sales to
business and industry (approximately 27%). In fiscal 1996, 70.2% of AVES
revenues were from sales to schools and other educational institutions. The
remaining 29.8% came from the rental of AVES systems primarily to hotels
(approximately 3.8%), and sales to business and industry (approximately 26%).
In fiscal 1995, 69.5% of AVES revenues 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%).
BACKLOG
The amount of unfilled sales orders of AVES at April 30, 1998, was
$904,000 as compared to $758,320 at April 30, 1997. The amount of unfilled
sales orders is a meaningful 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.
EMPLOYEES
At April 30, 1998, AVES had 20 employees.
MANAGEMENT
Set forth below is a list of the directors, executive officers and key
employees of the Company and their respective ages as of April 30, 1998, and,
as to directors, the expiration date of their current term of office:
CURRENT DIRECTORS
<TABLE>
<CAPTION>
Name Age Term Expires Position Presently Held Director Since
- ---- --- ------------ ----------------------- --------------
<S> <C> <C> <C> <C>
David L. Koffman 39 2000 Chairman, President, Chief 1983
Executive Officer and Director
Frank Rabinovitz 55 2000 Executive Vice President, Chief 1989
Operating Officer, Director and
President of AVES
Robert C. Nolt 50 2001 Chief Financial Officer and Director N/A
Arthur G. Cohen 69 1999 Director 1990
</TABLE>
24
<PAGE>
DAVID L. KOFFMAN was elected President and Chief Executive Officer of
the Company in December 1988. Prior to that time, he served as Director and
Vice President of the Company for over seven years.
FRANK RABINOVITZ was elected Executive Vice President, Chief Operating
Officer and Director of the Company in 1989. In addition, he is the President
of the Company's audiovisual subsidiary and has served in this capacity for
more than eight years, as well as in various other executive and management
capacities since 1980.
ROBERT C. NOLT is Chief Financial Officer and Director of the Company.
In addition, Mr. Nolt is Chief Financial Officer in Binghamton Industries,
Inc., a company controlled by the principal shareholders of the Company.
Prior to joining the Company, Mr. Nolt was Vice President of Finance of
RRT-Recycle America, Inc. Mr. Nolt is a Certified Public Accountant with over
25 years of experience in the Accounting field and has served in a number of
executive positions. Before joining RRT in 1993, Mr. Nolt was Chief Financial
Officer for the Vestal, NY based Ozalid Corporation.
ARTHUR G. COHEN has been a real estate developer and investor for more
than six years. Mr. Cohen is a Director of Apparel America, Inc., Baldwin,
and Arlen, Inc. Burton I. Koffman and Richard E. Koffman are parties to an
agreement with Arthur G. Cohen pursuant to which they have agreed to vote
their shares in favor of the election of Mr. Cohen to the Board of Directors
of the Company.
INFORMATION CONCERNING OPERATIONS FOR THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors consists of Mr. David
L. Koffman (Chair) and Mr. Frank Rabinovitz. The function of the Executive
Committee is to exercise the powers of the Board of Directors to the extent
permitted by Delaware law. As a rule, the Executive Committee meets to take
action with respect to matters requiring Board of Directors approval and
which cannot await a regular meeting of the Board or the calling of a
special meeting. Under Delaware law and the Company's By-laws, both the Board
and Executive Committee can act by unanimous written consent to all members.
The Stock Option Committee of the Board of Directors was created to
administer the Company's 1981 Incentive Stock Option Plan, as amended,
pursuant to resolution adopted November 24, 1981, giving it authority to
exercise powers of the Board with respect to the Plan. The Stock Option
Committee consists of Mr. Frank Rabinovitz and Mr. Robert Nolt.
The Audit Committee of the Board of Directors was created in 1991 to
administer and coordinate the activities and results of the annual audit of
the Company by independent accountants and to comply with NASDAQ listing
requirements. The Audit Committee is comprised of Mr. Frank Rabinovitz and
Mr. Robert Nolt.
The Compensation Committee of the Board of Directors was created in 1993
to administer and review compensation structure, policy and levels of the
Company. The Compensation Committee is composed of Mr. Frank Rabinovitz and
Mr. David Koffman.
EXECUTIVE COMPENSATION
Set forth in the following table is certain information relating to the
approximate remuneration paid by the Company during the last three fiscal
years to each of the most highly compensated executive officers whose total
compensation exceeded $100,000.
25
<PAGE>
SUMMARY COMPENSATION TABLE (1,2,3)
<TABLE>
<CAPTION>
Annual Compensation
-------------------------
Year Salary Bonus
---- -------- -------
<S> <C> <C> <C>
David L. Koffman 1998 $162,000 0
Chairman, President and Chief 1997 162,000 0
Executive Officer 1996 162,000 0
Frank Rabinovitz 1998 $162,000 $50,000
Director, Executive Vice President, 1997 162,000 50,000
Chief Operating Officer, President of AVES 1996 162,000 50,000
</TABLE>
(1) Does not include that value of non-cash compensation to the named
individuals, which did not exceed the lesser of $50,000 or, 10% of such
individual's total annual salary and bonus. The Company provides a vehicle
to each of the named executives for use in connection with Company
business but does not believe the value of said vehicles and other
non-cash compensation, if any, exceeds the lesser of $50,000 or 10% of
the individual's total annual salary and bonus.
(2) The Company has entered into Split Dollar Insurance Agreements with
Messrs. David L. Koffman and Frank Rabinovitz, pursuant to which the
Company has obtained insurance policies on their lives in the approximate
amount of $1,054,000 and $497,700, respectively. The premium is paid by
the Company. Upon the death of the individual, the beneficiary named by
the individual is entitled to receive the benefits under the policy.
The approximate amounts paid by the Company during the fiscal year ended
April 30, 1998 for this insurance coverage were $36,540 and $25,373,
respectively. Such amounts are not included in the above table.
(3) The Company has accrued Mr. Koffman's 1998 salary, however, he has
deferred payment until such time as the Company's working capital position
improves.
The following table sets forth-certain information relating to the value
of stock options at April 30, 1998:
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised in-the-
at Fiscal Year End Money Options at Fiscal Year End
----------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank Rabinovitz 100,000 0 $9,000 0
</TABLE>
Based on the $0.09 per share closing bid price of the common stock on
the NASDAQ Stock Exchange on April 30, 1998.
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
26
<PAGE>
date of the grant. No stock options were granted during the fiscal year ended
April 30, 1998.
Effective September 15, 1994 and approved at the annual stockholders
meeting in 1994, the 1994 NonEmployee Director Stock Option Plan (the
"Director Plan") was adopted and 200,000 shares of the Company's common stock
reserved for issuance under the Direct Plan. The Director Plan provided for
the automatic grant of nontransferable options to purchase common stock to
nonemployee directors of the Company; on the date immediately preceding the
date of each annual meeting of stockholder in which an election of directors
is concluded, each nonemployee then in office will receive options
exercisable for 5,000 share (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 years from the date of 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. Each nonemployee director in office on the date
immediately preceding the date of each year's annual meeting will receive
options exercisable for 5,000 shares of common stock.
During fiscal year ended April 30, 1998, no director options were
granted to nonemployee directors.
Report of the Compensation committee of the Board of Directors on
Executive Compensation.
Except pursuant to its ISOP and the Director Plan, the Company does not
have any formal annual incentive program, cash or otherwise, nor does it make
annual grants of stock options. Cash bonuses and stock options, including
bonuses and options paid to executive officers, have generally been awarded
based upon individual performance, business unit performance and corporate
performance, in terms of cash flow, growth and net income as well as meeting
budgetary, strategic and business plan goals.
The Company is committed to providing a compensation program that helps
attract and retain the best people for the business. The Company endeavors to
achieve symmetry of compensation paid to a particular employee or executive
and the compensation paid to other employees or executive both inside the
Company and at comparable companies.
The remuneration package of the Chief Executive Officer includes a
percentage bonus based on the Company's profitable performance.
Compensation Committee
Frank Rabinovitz
David L. Koffman
27
<PAGE>
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 30, 1998, the holdings of the
Company's Common Stock by those persons owning of record, or known by the
Company to own beneficially, more than 5% of the Common Stock, the holdings
by each director or nominee, the holdings by certain executive officers and
by all of the executive officers and directors of the Company as a group.
PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of % of
Beneficial Owner Beneficial Ownership Note (1) Class
- ----------------------------- --------------------- -------- -----
<S> <C> <C> <C>
David L. Koffman
300 Plaza Drive, Vestal,
NY 13850 1,446,727 2 15.7%
Commerzbank AG
31 Charter Road, Hong Kong 1,000,000 10.8%
Ben Arnold Company
700 Gervais Street, Columbia,
SC 29201 795,189 8.6%
Burton I. Koffman
300 Plaza Drive, Vestal,
NY 13850 703,500 3,4,5 7.6%
Joel Margolin
6116 Skyline Drive, Houston,
TX 77057 517,600 5.6%
Richard E. Koffman
300 Plaza Drive, Vestal,
NY 13850 278,500 4,6 3.0%
Frank Rabinovitz
6116 Skyline Drive, Houston,
TX 77057 46,000 7 .4%
All Directors &
Executive Officers as a Group 1,492,727 2,3,4,5,6,7,8 16.2%
</TABLE>
28
<PAGE>
1. All shares are owned directly by the individual named, except as set
forth herein. Includes actual shares beneficially owned and Employee and
Director Stock Options exercisable within 60 days. Burton I. Koffman and
Richard E. Koffman are brothers. David L. Koffman is the son of Burton
I. Koffman.
2. Excludes $720,587.79 principal amount of the Company's 12% Convertible
Subordinated Debenture, due December 1999, which are convertible into
480,392 shares of Common Stock at a price of $1.50 per share. Excludes
4,166,667 shares of Common Stock subject to a warrant further described
under Item 13, Certain Relationships and Certain Transactions. David
Koffman may be said to have a beneficial interest in these warrants.
3. Excludes 37,000 shares owned by a charitable foundation of which Burton I.
Koffman is President and Trustee.
4. Includes 537,000 shares owned as tenants in common by brothers Richard E.
Koffman and Burton I. Koffman.
5. Excludes 665,962 shares owned by the spouse of Burton I. Koffman.
6. Excludes 180,000 shares owned by the spouse of Richard E. Koffman.
7. Excludes $49,096.99 principal amount of the Company's 12% Convertible
Subordinated Debentures, due December 1999, which are convertible into
32,731 shares of Common Stock at a price of $1.50 per share.
8. Excludes 656,364 shares owned by a spouse of Arthur Cohen.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During August 1995, the Company, and Rosalco, Inc. entered into a
Reimbursement Agreement with: i) Ben Arnold Company, a corporation
beneficially owned by several members of the Burton I. Koffman and Richard E.
Koffman families (including David L. Koffman, who is the president and a
director of the Company) then Karen Cohen, the wife of Arthur C. Cohen, a
director of the Company, who disclaims any beneficial interest in Ben Arnold
Company, ii) Ruthanne Koffman (the mother of David L. Koffman and the wife of
Burton I. Koffman), iii) Whitehorn Associates, a New York Corporation, and
iv) Joel Margolin pursuant to which each of Rosalco, Ben Arnold Company,
Ruthanne Koffman, Whitehorn Associates, and Joel Margolin (the then Vice
President of LCL) pursuant to which each of Rosalco, Ben Arnold Company,
Ruthanne Koffman, Whitehorn Associates, and Joel Margolin agreed 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. Each of Rosalco and Joel Margolin provided $500,000 in cash and letter
of credit, each of Ruthanne Koffman and the Ben Arnold Company provided
$250,000 in irrevocable standby letters of credit, and Whitehorn Associates
provided a $200,000 irrevocable standby letter of credit.
In consideration for providing the additional collateral, the parties were
to receive a total of 282,400 shares of Common Stock of the Company in
proportion to the amount of additional collateral initially provided by then,
as follows: Joel Margolin was issued 117,600 shares; each of Ruthanne Koffman
and the Ben Arnold Company were issued 58,800 shares; and Whitehorn
Associates was issued 47,200 shares. All the above shares were issued in
fiscal 1997.
29
<PAGE>
On March 12, 1997, in connection with the State Street Bank financing and the
establishing of the BSB Bank & Trust line of credit described under the working
capital section above, the Company issued stock warrants totaling 4,166,667 to
A-V Texas Holding, LLC, an affiliate of the Company of which David Koffman is a
principal shareholder. The warrants allow the holder to purchase 4,166,667
shares of the Company's common stock at $.30. The effectiveness of the warrants
is subject to an increase in the available authorized shares of the Company.
The warrants expire on February 1, 2007.
The arrangement with CIT for the additional financing secured by the
additional collateral expired on February 28, 1996. In terms of the
agreement, subsequent to that date, to the extent that CIT applied additional
collateral to LCL's obligations to CIT, LCL would reimburse the parties for
the collateral so applied by CIT, such reimbursement to be made in the
ordinary course of business. Alternatively, the parties could 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 to CIT.
Each party would receive that number of shares that had a value equal to the
amount to such party's collateral that was applied by CIT; for purposes of
the agreement, the Company's Common Stock were deemed to have a value of
$1.25 per share.
In July 1996, CIT notified the parties that CIT was applying the additional
collateral to LCL's obligations. As a result of the application of the
collateral by CIT in October 1996, the parties received the following shares
of the Company's Common Stock: Joel Margolin was issued 400,000 shares; each
of Ruthanne Koffman and the Ben Arnold Company were issued 200,000 shares;
and Whitehorn Associates was issued 160,000 shares.
In September 1996, certain related parties advanced an additional $500,000
to the Company, which was applied to Rosalco's outstanding line of credit.
The related party advances now totaling $1,000,000 are payable on demand and
interest is paid monthly at prime plus 2 1/2%.
30
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Amended Certificate of Incorporation authorizes the
Company to issue up to 30,000,000 shares of Common Stock, $.01 par value per
share and 5,000,000 shares of Preferred Stock, $0.01 par value per share.
COMMON STOCK
The holders of Common Stock will be entitled to one vote for each share on
all matters voted upon by stockholders, including the election of directors.
Cumulative voting for the election of directors is not permitted, enabling
holders of a majority of the outstanding Common Stock to elect all members of
the class of directors whose terms are then expiring. Any director, or the
entire Board of Directors, may be removed by the stockholders at any time,
with or without cause, by the affirmative vote for the election of directors.
The holders of Common Stock will have no preemptive rights to purchase
shares of stock of the Company. Shares of Common Stock will not be subject
to any redemption provisions and will not be Convertible into any other
securities of the Company.
The holders of the Common Stock will be entitled to such dividends as may
be declared in the discretion of the Board of Directors out of funds legally
available therefore. Holders of Common Stock will be entitled to share
ratably in the net assets of the Company upon liquidation after payment or
provision for all liabilities.
STATUTORY BUSINESS COMBINATION PROVISION
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Section 203 provides, with certain
exceptions, that a Delaware corporation may not engage in any of a broad
range of business combinations with a person or an affiliate, or associate of
such person, who is an "interested stockholder" for a period of three years
from the date that such person becomes an interested stockholder unless: (i)
the transaction resulting in a person becoming an interested stockholder, or
the business combination, is approved by the Board of Directors of the
corporation before the person becomes an interested stockholder; (ii) the
interested stockholder acquired 85% or more of the outstanding voting stock
of the corporation in the same transaction that makes such person an
interested stockholder excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain
employee stock ownership plan); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by
the corporation's board of directors and by the holders of at least 66 2/3%
of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the interested stockholder. Under Section
203, an "interested stockholder" is defined as any person who is (i) the
owner of 15% or more of the outstanding voting stock of the corporation; or
(ii) an affiliate or associate of the corporation and who was the owner of
15% or more of the outstanding voting stock of the corporation at any time
within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or By-laws by action
of its stockholders to exempt itself from coverage, provided that such bylaw
or certificate of incorporation amendment shall not become effective until 12
months after the date it is adopted. The Company has not adopted such an
amendment to its Amended and Restated Certificate of Incorporation or By-laws.
31
<PAGE>
LEGAL MATTERS
The validity of the Common Stock to be issued upon exercise of the Rights
will be passed upon by Shustak Jalil & Heller, New York, New York, counsel
for the Company.
EXPERTS
The financial statements on pages F-1 through F-21 included in this Prospectus
have been audited by BDO Seidman, LLP, independent certified public accountants,
to the extent and for the periods set forth in their report appearing elsewhere
herein and are included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information worth the Securities
and Exchange Commission (the "Commission"). The Registration Statement,
including the exhibits and schedules thereto, as well as such reports and
other information filed by the Company with the Commission, may be inspected
without charge, and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza Building, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the regional offices of the Commission
located as Seven World Trade Center, Suite 1300, New York, New York, 10048
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and from its public reference facilities
located in New York, New York and Chicago, Illinois, at prescribed rates.
The Commission also maintains a website at: http:\www.sec/gov.
The Company has filed with the Commission a registration statement on Form
S-1 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted
in accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement, exhibits
and schedules. Statements contained in the Prospectus as to the contents
made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference.
32
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX PAGE
- --------------------------------------------------------------------------------------------
<S> <C>
Consolidated Financial Statements:
Report of Independent Certified Public Accountants F-2
Balance Sheets - April 30, 1998 and 1997 F-3
Statements of Operations - For the years ended April 30, 1998, 1997 and 1996 F-4
Statements of Cash Flows - For the years ended April 30, 1998, 1997 and 1996 F-5
Statements of Stockholders' Equity - For the years ended April 30, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7 - F-17
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Shareholders and Directors
Jayark Corporation
We have audited the accompanying consolidated balance sheets of Jayark
Corporation and Subsidiaries as of April 30, 1998 and 1997 and the related
consolidated statements of operations, changes in stockholders' equity, and
cash flows for each of the three years in the period ended April 30, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated 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 presentation of the financial statements. 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, 1998 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended April 30, 1998 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
New York, New York
July 15, 1998, except for Note 15 for which the date is August 7, 1998
F-2
<PAGE>
Jayark Corporation And Subsidiaries
Consolidated Balance Sheets
April 30, 1998 and 1997
ASSETS
<TABLE>
<CAPTION>
Current Assets 1998 1997
----------------------------
<S> <C> <C>
Cash and Cash Equivalents $ 238,858 $ 67,140
Accounts Receivable-Trade, Less Allowance For Doubtful, 1,723,833 1,838,585
Accounts of $38,000 in 1998 and $42,000 in 1997
Other Accounts Receivable 2,277 2,277
Inventories 271,564 412,846
Other Current Assets 35,046 20,572
----------------------------
Total Current Assets 2,271,578 2,341,420
Non Current Assets
Property & Equipment, Less Accumulated Depreciation and Amortization 94,644 122,550
Excess of Cost Over Net Assets of Businesses Acquired, Less 268,742 290,102
Accumulated Amortization of $463,695 in 1998 and $442,335 in 1997
----------------------------
Total Non-Current Assets 363,386 412,652
----------------------------
Total Assets $ 2,634,964 $ 2,754,072
----------------------------
----------------------------
LIABILITIES
Current Liabilities
Notes Payable & Line of Credit $ 300,000 $ 500,000
Current Maturities of Long Term Debt 5,899 7,394
Accounts Payable 881,266 905,407
Accrued Salaries and Deferred Compensation 298,734 106,531
Accrual Related to Loss on Discontinued Operations - Rosalco 84,124 305,000
Accrual Related to LCL Investment 113,068 164,579
Other Current Liabilities 431,418 359,512
----------------------------
Total Current Liabilities 2,114,511 2,348,423
Non Current Liabilities
Long Term Debt, Excluding Current Maturities - 7,207
Notes Payable to Related Parties 2,046,021 2,000,000
Subordinated Debentures 1,400,000 1,400,000
----------------------------
Total Non Current Liabilities 3,446,021 3,407,207
----------------------------
Total Liabilities $ 5,560,530 $ 5,755,630
Commitments
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock of $.30 Par Value. Authorized 10,000,000 Shares, 2,766,359 2,766,359
Issued 9,221,199 Shares in 1998 and 1997
Additional Paid-In Capital 8,066,122 8,066,122
Deficit (13,758,047) (13,834,039)
----------------------------
Total Stockholders' Equity (Deficit) $ (2,925,566) $ (3,001,558)
----------------------------
Total Liabilities & Stockholders' Equity (Deficit) $ 2,634,964 $ 2,754,072
----------------------------
----------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For The Years Ended April 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Continuing Operations: 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net Revenues $13,604,558 $12,638,072 $11,856,148
Costs & Expenses
Cost of Revenues 11,445,669 10,591,857 9,769,969
Selling, General and Administrative 1,717,442 2,049,274 2,109,182
Interest 365,655 339,862 328,687
Other Income (200) (78,549) (5,300)
----------- ----------- -----------
Total Costs & Expenses 13,528,567 12,902,444 12,202,538
Pre Tax Earnings (losses) From Continuing Operations 75,992 (264,372) (346,390)
Provision for Income Taxes (Benefit from) - - (118,000)
----------- ----------- -----------
Income (loss) from Continuing Operations 75,992 (264,372) (228,390)
Income (loss) On Abandonment of Investment, net of
tax benefit of $365,173 in 1996 - - (4,363,263)
Income (loss) from Discontinued Operations, net of
Taxes of -, $350,000, ($100,503) respectively - (3,294,109) (2,593,594)
Loss on disposition of subsidiary - (2,500,730) -
----------- ----------- -----------
Net Income (loss) $75,992 ($6,059,211) ($7,185,247)
----------- ----------- -----------
----------- ----------- -----------
Basic and Diluted Earnings (Loss) per Common Share:
Continuing Operations $0.01 ($0.03) ($0.03)
Discontinued Operations $0.00 ($0.66) ($0.89)
----------- ----------- -----------
Net Income (loss) $0.01 ($0.69) ($0.92)
----------- ----------- -----------
----------- ----------- -----------
Weighted Average Common Shares:
Basic and Diluted 9,221,199 8,802,528 7,833,990
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For The Years Ended April 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Cash Flows From Operating Activities: 1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
Net Income (loss) $75,992 ($6,059,211) ($7,185,247)
Adjustments to Reconcile Earnings (Loss) to Cash From Operating Activities:
Stock Issued in Connection with Abandoned Investment - - 1,156,250
Depreciation and Amortization of Property and Equipment 79,542 40,089 273,378
Amortization of Excess of Cost Over Net Assets of Businesses Acquired 21,360 21,360 21,360
Net Assets of Discontinued Operations -- written off - 4,268,849 -
(Gain) Loss on Disposition of Assets - 21,516 -
Change In Assets and Liabilities Net of Effects From Acquisition of Subs:
(Increase) Decrease in Deferred Federal Income Tax Expense (Benefit) - 350,000 -
(Increase) Decrease in Accounts Receivable Net 114,752 (105,667) (787,431)
(Increase) Decrease in Federal & State Income Taxes Refundable - 695,501 (645,951)
(Increase) Decrease in Inventories 141,282 91,709 (121,087)
(Increase) Decrease in Other Current Assets (14,474) (12,685) 74,440
Increase (Decrease) in Accounts Payable (24,141) 320,349 831,184
Increase (Decrease) in Accrued Salaries and Deferred Compensation 192,202 (77,374) (15,142)
Increase (Decrease) in Commissions Payable - - 85,572
Increase (Decrease) in Accrual for Discontinued Operations -- Rosalco (220,876) 305,000 -
Increase (Decrease) in Other Liabilities 18,901 (931,198) 1,784,881
---------- ----------- -----------
Net Cash Provided By (Used In) Operating Activities 384,540 (1,071,762) (4,527,793)
Cash Flows From Investing Activities:
Capital Expenditures for Property and Equipment (51,636) (83,556) (66,042)
---------- ----------- -----------
Net Cash Provided By (Used In) Investing Activities (51,636) (83,556) (66,042)
Cash Flows From Financing Activities:
Payments of Long Term Debt (7,207) (27,555) (33,188)
Proceeds From Insurance of Notes Payable 46,021 2,001,084 4,084,000
Principal Payments on Notes Payable (200,000) (1,101,997) -
Purchase (Repayment) of Subordinated Debentures - - (100,000)
Purchase of Treasury Stock - - -
---------- ----------- -----------
Net Cash Provided By (Used In) Financing Activities (161,186) 871,532 3,950,812
Net Increase (Decrease) in Cash and Cash Equivalents 171,718 (283,786) (643,023)
Cash & Cash Equivalents at Beginning of Year 67,140 350,926 1,176,700
Cash & Cash Equivalents relative to discontinued operations - - (182,751)
---------- ----------- -----------
Cash & Cash Equivalents at End of Year $238,858 $67,140 $350,926
---------- ----------- -----------
---------- ----------- -----------
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $87,626 $171,862 $965,197
---------- ----------- -----------
---------- ----------- -----------
Income Taxes - - 167,000
---------- ----------- -----------
---------- ----------- -----------
Non-Cash Transactions:
Common Stock Issued in Connection With LCL Investment - 472,112 1,156,250
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE>
JAYARK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
For The Years Ended April 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock Paid-In Capital Deficit Total Equity
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at April 30, 1995 $2,093,639 $7,110,480 $(589,581) $8,614,538
Issue of 1,000,000 shares of stock 300,000 856,250 - 1,156,250
Net loss - - (7,185,247) (7,185,247)
------------ --------------- ------------ ------------
Balance at April 30, 1996 2,393,639 7,966,730 (7,774,828) 2,585,541
Issue of 1,242,400 shares of stock 372,720 99,392 - 472,112
Net loss - - (6,059,211) (6,059,211)
------------ --------------- ------------ ------------
Balance at April 30, 1997 2,766,359 8,066,122 (13,834,039) (3,001,558)
Net Income - - 75,992 75,992
------------ --------------- ------------ ------------
Balance at April 30, 1998 $2,766,359 $8,066,122 ($13,758,047) ($2,925,566)
------------ --------------- ------------ ------------
------------ --------------- ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
Notes to Consolidated Financial Statements
April 30, 1998, 1997 and 1996
(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.
Prior to April 30, 1997, a decision was made to discontinue the operations of
Rosalco, Inc. ("Rosalco"), a wholly owned subsidiary of the Company. Rosalco
was officially closed on October 22, 1997 and shortly thereafter a receiver
was assigned to liquidate its secured assets. The accompanying financial
statements have been adjusted retroactively to segregate and report
separately the net assets and results of operations of Rosalco as a
discontinued operation.
INVENTORIES
Inventories comprise finished goods and are stated at the lower of cost
(first in, first out method) or market.
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.
INTANGIBLES
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.
REVENUE RECOGNITION
Revenues are recorded when products are shipped. Allowances are recorded for
estimated returns and losses.
INCOME TAXES
The Company follows the asset and liability method required by Financial
Accounting Standards Board Statement of Financial Accounting Standards No.
109 in accounting for income taxes. 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
F-7
<PAGE>
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. The effect of deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
EARNINGS PER SHARE
In the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share", which requires
the presentation of both basic and diluted earning per share on the face of
the Statements of Operations and the restatement of all prior periods
earnings per share amounts. Conversion of the subordinated debentures and
assumed exercise of options are not included in the calculation of diluted
earnings per share for the fiscal years ended April 30, 1998, 1997 and 1996
since the effect would be antidilutive. Accordingly, basic and diluted net
loss per share do not differ for any period presented.
The following table summarizes securities that were outstanding as of
April 30, 1998, 1997 and 1996 but not included in the calculation of diluted
net loss per share because such shares are antidilutive.
<TABLE>
<S> <C>
Stock Options 242,500
Convertible Subordinated Debentures 933,333
Warrants 4,166,667
</TABLE>
CHANGES IN FINANCIAL PRESENTATION
Certain reclassifications have been made in the 1996 and 1997 financial
statements to conform to the presentation used in 1998.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
LONG-LIVED ASSETS
Long-lived assets, such as property, equipment, and goodwill are evaluated
for impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When any such
impairment exists, the related assets will be written down to their fair
value. This policy is in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be
Disposed Of", which was adopted on May 1, 1996. No write-downs have been
necessary through April 30, 1998, except for assets of the discontinued
operation (Note 16).
F-8
<PAGE>
STOCK-BASED COMPENSATION
The Company uses the intrinsic value method for accounting for stock
compensation plans, as permitted by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", which was
adopted on May 1, 1996. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount the employee must pay to
acquire the stock.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued two new disclosure standards. Results of
operations and financial position will be unaffected by implementation of
these new standards.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by owners and distributions to owners.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which supersedes SFAS No. 14, "Financial Reporting for Segments
of a Business Enterprise," establishes standards for the way that public
enterprises report information about operating segments in financial
statements. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers.
Both of these new standards are effective for financial statements for fiscal
1999, and require comparative information for earlier years to be restated.
Management does not expect these two standards to have a significant impact
on future financial statement disclosures.
(2) Business
The Company's continuing operation, AVES Audio Visual Systems, Inc. ("AVES")
is in the business of resale and renting of a broad range of audio visual,
video and communication equipment and supplies to schools, industry, and
hotels.
(3) Related Party Transactions
The Company has subordinated notes (Note 7) with related parties amounting to
$795,712, with an annual interest rate of 12%. Interest expense relating to
subordinated notes payable to related parties was $95,485 in 1998, 1997 and
1996, respectively.
The Company had long term notes payable to related parties amounting to
$2,046,021 and $2,000,000 at April 30, 1998 and 1997, respectively. The
interest rate is Libor plus .95% on $1,000,000 and prime plus 2.5% on the
remaining $1,000,000. The maturity date of the notes has been extended to
December 31, 1999. Interest expense relating to these notes for the years
ended April 30, 1998 and 1997 was $172,139 and $154,650.
(4) Property and Equipment
F-9
<PAGE>
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
April 30, 1998 April 30, 1997
---------------------------------
<S> <C> <C>
Machinery and equipment $59,144 $59,144
Furniture and fixtures 80,329 80,329
Leasehold improvements 37,290 37,290
Automobiles and trucks 200,580 200,580
Rental and demonstration equipment 74,073 22,437
---------------------------------
Total property and equipment 451,416 399,780
Less accumulated depreciation and amortization 356,772 277,230
---------------------------------
Net property and equipment $94,644 $122,550
---------------------------------
</TABLE>
(5) Lines of Credit
On April 30, 1996, the Company had $1,100,915 outstanding on its Line of
Credit with State Street Bank. During the year ended April 30, 1997, the
Company renegotiated the terms of the agreement to provide for monthly
interest at prime rate plus 1% to 1 3/4%. Subsequently, the line was paid
off with proceeds from a $1,000,000 note to related parties and the remaining
amount paid. In March 1997, AVES negotiated a line of credit with BSB Bank &
Trust, Binghamton, New York. The line of credit permits AVES to borrow up to
an aggregate amount of $1,250,000. The interest rate is 8.75% annually and
the line is due and payable on March 1, 2000. The line of credit is secured
by the AVES' accounts receivable and inventories. There are no financial
covenants associated with the line of credit. At April 30, 1998 and 1997,
$300,000 and $500,000, respectively, was outstanding on the above line of
credit.
In connection with the guarantee for the AVES line of credit described above
and the interim financing of the Rosalco discontinued operations by State
Street Bank, the Company issued stock warrants totaling 4,166,667 to A-V
Texas Holding, LLC, an affiliate of the Company. The warrants allow the
holder to purchase 4,166,667 shares of the Company's common stock at $.30 per
share. The warrants were deemed to have a minimal fair value and no amount
was recorded for them. The warrants expire on February 1, 2007.
(6) Long Term Debt
Long term debt is summarized as follows:
<TABLE>
<CAPTION>
Description April 30, April 30,
1998 1997
---------------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable to a bank with interest rate of 9% per annum and a $5,899 $14,601
maturity date of March 1999, collateralized by vehicles.
---------------------------------------------------------------------------------------------
Total long term debt 5,899 14,601
Less: Current maturities of long term debt 5,899 7,394
---------------------------------------------------------------------------------------------
Long term debt, excluding current maturities $0 $7,207
---------------------------------------------------------------------------------------------
</TABLE>
(7) Subordinated Debentures
On December 19, 1989, the Company issued $2,000,000 of 12% convertible
subordinated debentures to affiliates of the Company due December 1995. The
maturity date on these debentures has been extended until December 1999.
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
F-10
<PAGE>
to maturity. Prior to April 30, 1996, the Company had retired $600,000 of
debentures. At April 30, 1998 and 1997, no additional debentures had been
retired. At April 30, 1998 and 1997, 933,333 shares of the Company's common
stock are reserved for this conversion. The debentures will automatically
convert into shares of the Company's 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.
(8) Income Taxes
Income tax expense (benefit) attributable to income before income taxes
consists of:
<TABLE>
<CAPTION>
Year ended April 30, Current Deferred Total
---------------------------------------------------------------------
<S> <C> <C> <C>
1998 $0 $0 $0
1997 $0 $350,000 $350,000
1996 ($583,676) $0 ($583,676)
</TABLE>
The tax benefit recorded in 1996 represents the taxes refundable due to the
carryback of that year's loss.
At April 30, 1998, the Company had, for federal tax reporting purposes, net
operating loss carryforwards of approximately $10,000,000, expiring in years
through 2012.
The actual tax expense (benefit) differs from the "expected" tax expense
(computed by applying the U.S. Corporate rate of 34%) in each of the 3 years
ended April 30, 1998 primarily as a result of valuation allowances against
potential deferred tax assets.
Deferred tax assets were approximately $4,300,000 as of April 30, 1998 and
1997, arising primarily as a result of net operating losses. Valuation
allowances of $4,300,000 as of April 30, 1998 and 1997 offset the deferred
tax assets, resulting in net deferred tax assets of $0 as of April 30, 1998
and 1997.
(9) Leases
The Company has several operating leases that expire at various dates ranging
through April 2001. Future minimum lease payments related to operating
leases are detailed as follows:
<TABLE>
<CAPTION>
Year ending April 30, Operating leases
--------------------- ------------------
<S> <C>
1999 86,856
2000 86,856
2001 86,856
Thereafter 0
------------------
Total minimum lease payments $260,568
------------------
------------------
</TABLE>
Total rental expense for operating leases was $97,015, $96,671 and $95,959
for the years ended April 30, 1998, 1997, and 1996, respectively.
(10) Stock Options
At April 30, 1998, the Company had two stock options plans which are
described below. The Company
F-11
<PAGE>
applies APB Opinion 25 - "Accounting for Stock Issued to Employees", and
related Interpretations in accounting for the plans. In terms of APB Opinion
25, when the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of the grant, no
compensation cost is recognized.
The Company's Incentive Stock Option Plan ("ISOP"), as amended, allows
for the granting of 600,000 shares of the Company's common stock. 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.
Option activity under the ISOP is as follows:
Stock Option - ISOP
<TABLE>
<CAPTION>
Exercise Weighted
Options Price Range Average
-------- ------------ --------
<S> <C> <C> <C>
Outstanding April 30, 1995 392,500 $.44 - $1.05 $0.48
Granted -
Exercised -
Terminated/Expired (150,000) $0.44
-------- ------------ --------
Outstanding April 30, 1996 242,500 $.44 - $1.05 $0.50
Granted -
Exercised -
Terminated/Expired -
-------- ------------ --------
Outstanding April 30, 1997 242,500 $.44 - $1.05 $0.50
Granted -
Exercised -
Terminated/Expired -
-------- ------------ --------
Outstanding April 30, 1998 242,500 $.44 - $1.05 $0.50
</TABLE>
<TABLE>
<CAPTION>
Exercise Weighted
Options Price Range Average
-------- ------------ --------
<S> <C> <C> <C>
Exercisable at year end:
April 30, 1996 242,500 $.44 - $1.05 $0.50
April 30, 1997 242,500 $.44 - $1.05 $0.50
April 30, 1998 242,500 $.44 - $1.05 $0.50
-------- ------------ --------
</TABLE>
<TABLE>
<S> <C>
Available for future grants:
April 30, 1996 357,500
April 30, 1997 357,500
April 30, 1998 357,500
</TABLE>
The following summarizes information regarding stock options outstanding
at April 30, 1998.
F-12
<PAGE>
Range of Exercise prices:
<TABLE>
<S> <C> <C>
Outstanding Options: $0.44 $1.05
Number outstanding at April 30, 1998 217,500 25,000
Weighted average remaining Contractual life
(years) 1.6 1.6
Weighted average exercise price $0.44 $1.05
</TABLE>
Effective September 17, 1994 and approved at the annual stockholders'
meeting in 1994, the 1994 Non-Employee Director Stock Option Plan (the
"Director's Plan") was adopted and 200,000 shares of the Company's Common
Stock reserved for issuance under the Director's Plan. The Director's Plan
provides for the automatic grant of nontransferable options to purchase
common stock to nonemployee 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 nonemployee 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's Plan). No option
may be granted under the Director's Plan after the date of the 1998 annual
meeting of stockholders.
Options issued pursuant to the Director's Plan are exercisable at an
exercise price equal to not less than 100% of the fair market value (as
defined in the Director's 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 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's Plan), or (iii) one year from the
date of the optionee's disability or death while serving as a director.
Option activity under the Plan is as follows:
Stock Option - ISOP
<TABLE>
<CAPTION>
Exercise Weighted Options
Options Price Range Average Exercisable
------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Outstanding April 30, 1995 35,000 $0.49 $0.49 35,000
Granted -
Terminated/Expired (10,000)
Outstanding April 30, 1996 25,000 $0.49 $0.49 25,000
Granted -
Terminated/Expired -
Outstanding April 30, 1997 25,000 $0.49 $0.49 25,000
Granted -
Terminated/Expired -
Outstanding April 30, 1998 25,000 $0.49 $0.49 25,000
</TABLE>
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock - Based Compensation", requires the Company to provide
pro forma disclosure of net income (loss) and earnings (loss) per as if the
optional fair value method had been applied to determine compensation costs
for the Company's
F-13
<PAGE>
Stock option plans. Since no options were granted in the years ended April
30, 1998, 1997 and 1996, no pro forma disclosures are applicable.
(11) Loss on Abandonment of Investment
On June 27, 1995, LCL International Traders, Inc. ("LCL"), a wholly-owned
subsidiary of Jayark, 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 "Acquisition").
The sellers, located in Hong Kong and Central Islip, New York, 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.
The purchase price for the Acquisition comprised the following: issue of
1,000,000 common shares of Jayark to the sellers, cash paid by LCL of
$3,000,000, a note payable by LCL to the sellers for $3,000,000 and the
assumption of certain liabilities of the sellers. The Company advanced
$1,000,000 to LCL in connection with the cash portion of the purchase price.
LCL obtained a credit facility for the balance of the cash portion of the
purchase price.
During August 1995, Jayark, LCL and Rosalco 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.
In consideration for providing the additional collateral, the guarantors were
to receive shares of common stock of the Company in proportion to the amount
of additional collateral initially provided by them. Excluding the shares
attributable to Rosalco, the Company was obligated to issue a total of
282,400 shares of its common stock to the guarantors.
The arrangement with CIT for the additional financing secured by the
additional collateral expired on February 28, 1996. The arrangement indicated
that on that date, in the event that CIT had applied any of the additional
collateral to LCL's obligations to CIT, LCL would reimburse the parties for
the collateral so applied by CIT. Alternatively, the parties could 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 to CIT.
Each party would receive that number of shares that had a value equal to the
amount of such party's collateral that is applied by CIT. Excluding the
shares attributable to Rosalco, the Company is obligated to issue a total of
960,000 shares of its common stock to the guarantors.
In July 1996, CIT notified the parties that CIT was applying the additional
collateral to LCL's obligations. As a result of the application of the
collateral by CIT, the parties received the following shares of the Company's
Common Stock: Joel Margolin received 400,000 shares; each of Ruthanne Koffman
and the Ben Arnold Company received 200,000 shares; and Whitehorn Associates
received 160,000 shares.
In fiscal 1997, the Company issued 1,242,400 shares of its common stock in
connection with the above transactions, which were valued at $472,112.
During fiscal 1996, the Company abandoned the investment in LCL, which in
turn filed for bankruptcy
F-14
<PAGE>
protection under Chapter 11 of the Bankruptcy Code. Due to the nature of the
investment and the short period of operation of LCL, the operations of LCL
were not consolidated with the Company's operations. The Company provided for
all realized and expected losses on the abandonment, summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
Value of shares issued $1,156,250
Cash paid 1,000,000
Provision for issuance of shares to guarantors
(using the most recent quoted stock price) 500,000
Rosalco obligation under the reimbursement agreement 500,000
Anticipated costs of abandonment 1,572,186
----------
Total loss on abandonment $4,728,436
----------
----------
</TABLE>
(12) Financial Instruments
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and notes payable
approximated fair value as of April 30, 1998 due to the short maturity of
these items. The fair value of the convertible debentures is not reasonably
determinable.
(13) Fourth Quarter Adjustments
During the fourth quarter of fiscal 1996, the Company made the following
significant adjustments to reported earnings:
<TABLE>
<CAPTION>
<S> <C>
Increase in accounts receivable reserves $550,000
Increase in inventory reserves 1,195,534
</TABLE>
During the fourth quarter of fiscal 1997, the Company recorded the effects of
the discontinuance of Rosalco. See note 14.
(14) Discontinued Operations
As a result of continued losses due to a soft retail market, low margins,
competitive pressures, and price reductions, the Company had been looking to
sell or otherwise dispose of the operations of Rosalco. Rosalco had been in
the business of the distribution of more than 300 different products,
including occasional furniture, brass beds, custom jewelry cases and
accessories, most of which are imported from outside the continental United
States. Rosalco also developed special designs for several customers. Rosalco
was headquartered in Jeffersonville, Indiana. All efforts to sell Rosalco
were unsuccessful, and the company was officially closed on Wednesday,
October 22, 1997. The assets of the company were secured as part of the
borrowing agreement. Shortly after the closing, a receiver was assigned to
liquidate the secured assets of the company to satisfy the loan principal. As
a result, Jayark incurred a $5,794,000 loss on Discontinued operations, which
includes $3,294,000 loss from operations for the year ended April 30, 1997,
the establishment of accruals in the amount of $300,000 for expenses and
guarantees related to the closing, the write off of an intercompany
receivable and other assets of $476,000, and the remaining net asset of
Rosalco of $1,725,000.
The Rosalco business has been presented as a discontinued operation, and the
consolidated balance sheets and statements of operations have been restated
to conform with this presentation. Financial results of the Rosalco operation
are as follows:
F-15
<PAGE>
<TABLE>
<CAPTION>
Years Ended April 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating Data:
Net Revenues $37,505,589 $32,149,279
Costs and Expenses 40,449,698 34,843,376
Income before Tax (2,994,109) (2,694,097)
Provision for (Benefit From)
Income Tax 350,000 (156,503)
Net Income (Loss) (3,294,109) (2,537,594)
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
April 30, 1997
--------------
<S> <C>
ASSETS
Current Assets
Cash $107,540
Accounts Receivable 3,859,808
Other Receivables 294,713
Inventory 4,703,319
Deferred Tax -
Other Current 272,702
---------
Total Current Assets 9,238,082
NON-CURRENT ASSETS
PP&E, Net of
Accumulated Depreciation 541,248
Intercompany (414,435)
---------
Total Non-Current Assets 126,813
---------
Total Assets 9,364,895
LIABILITIES
Notes Payable & L.O.C 5,685,407
Accounts Payable 1,576,777
Accrued Liabilities 117,040
Other Current 260,291
---------
Total Current Liabilities 7,639,515
Net Assets $1,725,380*
</TABLE>
Note - these net assets were written off at April 30, 1997
F-16
<PAGE>
(15) Subsequent Events
In July 1998, the Company amended its Certificate of Incorporation increasing
its authorized Common Stock from 10,000,000 to 30,000,000 shares and
decreasing the par value of its Common Stock from $.30 to $.01 per share.
In June 1998, Jayark Corporation, through a newly formed, wholly owned
subsidiary, MED Services Corp. ("Med"), entered into a Purchase and Sale
Agreement with Vivax Medical Corporation ("Vivax"), a company that
manufactures, sells and rents durable medical equipment to hospitals, nursing
homes and individuals. Under the terms of the agreement, Med purchased
certain medical equipment from Vivax for cash of $579,700 and a $144,925
unsecured promissory note due in five years. Med then entered into a
Consignment Agreement with Vivax whereby this medical equipment was consigned
to Vivax to rent through its distribution network. In consideration of Vivax
renting and maintaining the Med equipment, Vivax is entitled to a range of
forty-eight to sixty-seven percent of the rental proceeds, based upon the
equipment rented. Vivax has an option to purchase the medical equipment from
Med after the twenty-fourth, thirty-six and forty-eight month of the
consignment period. Med, under the Purchase and Sale Agreement has an
option, through October 31, 1999 to purchase an additional $2,475,000 of
medical equipment from Vivax. Upon the expiration of the consignment period,
which is five years from the purhcase of the equipment, Med has the option to
sell the equipment back to Vivax.
On August 7, 1998 Med completed negotiations for a $1,000,000 revolving line
of credit with Atlantic Bank of New York and invested approximately $130,000
of the Company's presently available working capital to purchase the medical
equipment. The $1,000,000 line of credit is due one year from signing and
bears interest at prime plus 2%. The line of credit is secured by the
inventories and accounts receivable of Med. The are no financial covenants
associated with the line of credit. As of July 31, 1998 Med has $450,000
outstanding on the line.
If the equipment is successfully rented, the rental income and cash flow
could have a material affect on the operating results of Jayark Corporation.
There can be no assurances that the Company will be successful in renting the
medical equipment.
F-17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expense to be borne by the Company in
connection with the issuance and distribution of the securities being
registered hereby. All figures are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 510
Accounting fees and expenses...................................... 20,000
Legal fees and expenses........................................... 15,000
Blue sky fees and expenses
(including legal fees)........................................... 2,500
Cost of printing.................................................. 7,500
Miscellaneous..................................................... 4,490
--------
Total........................................................ $50,000
--------
--------
</TABLE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
NONE
ITEM 16. EXHIBITS.
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.
II-1
<PAGE>
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.
II-2
<PAGE>
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, incorporated herein by reference
from the Annual Report on Form 10-K for the year ended April 30,
1995, Exhibit 10(20) thereto.
10(21)* Loan and Security Agreements dated April 29, 1996 between
Rosalco, Inc., and State Street Bank & Trust Company of Boston,
Massachusetts.
II-3
<PAGE>
10(22)* Loan and Security Agreements dated April 29, 1996 between AVES
Audio Visual Systems, Inc., and State Street Bank & Trust Company of
Boston, Massachusetts.
10(23)* First amendment to Loan and Security Agreements dated as of
September 19, 1996 between Rosalco, Inc. and State Street Bank &
Trust Company of Boston, Massachusetts.
10(24)* Agreement of Extension of Maturity of 12% Convertible Subordinated
Debentures dated April 30, 1990.
10(25)* Forbearance and Modification Agreement dated March 12, 1997,
between Jayark Corporation, Rosalco, Inc., AVES Audio Visual
Systems, Inc., David L. Koffman, and State Street Bank and Trust
Company of Boston, Massachusetts.
10(26)* Stock Pledge Agreement dated March 12, 1997, between Jayark
Corporation and State Street Bank and Trust Company of Boston,
Massachusetts.
10(27)* Subordination Agreement dated March 12, 1997, between Jayark
Corporation, Rosalco, Inc., AVES Audio Visual Systems, Inc., David
L. Koffman, and State Street Bank and Trust Company of Boston,
Massachusetts.
10(28)* Revolving Note dated March 12, 1997 between Jayark Corporation and
A-V Texas Holding, LLC.
10(29)* Stock Pledge Agreement dated March 12, 1997 between Jayark
Corporation and A-V Texas Holding, LLC.
10(30)* Stock Warrant to purchase 3,666,667 shares of common stock dated
March 12, 1997 between Jayark Corporation and A-V Texas Holding,
LLC.
10(31)* Commercial Security Agreement dated February 18, 1997, between AVES
Audio Visual Systems, Inc. and BSB Bank and Trust Company.
10(32)* Promissory Note dated February 18, 1997, between AVES Audio Visual
Systems, Inc. and BSB Bank and Trust Company.
10(33)* Commercial Guaranty dated February 18, 1997, between AVES Audio
Visual Systems, Inc., David L. Koffman and BSB Bank and Trust Company.
10(34)* Subordinated Promissory Note date March 12, 1997 between Rosalco,
Inc. and Jayark Corporation.
10(35)* Second Forbearance and Modification Agreement dated June 1, 1997,
between State Street Bank and Trust Company of Boston,
Massachusetts, Rosalco, Inc., and Jayark Corporation.
10(36)* Stock Warrant to purchase 500,000 shares of common stock dated
March 12, 1997 between Jayark Corporation and A-V Texas Holding,
LLC.
10(37)* Certificate of Amendment of The Certificate of Incorporation of
Jayark Corporation dated July 10, 1998.
II-4
<PAGE>
10(38)* Purchase and Sale Agreement dated June 1, 1998, between Vivax
Medical Corporation and MED Services Corp.
10(39)* Distribution Agreement dated June 1, 1998, between MED Services
Corp. and Vivax Medical Corporation.
10(40)* Revolving Line of Credit Grid Promissory Note dated August 7, 1998,
between MED Services Corp. and Atlantic Bank of New York.
10(41)* Security Agreement dated August 7, 1998, between MED Services Corp.
and Atlantic Bank of New York.
23(1) Consent of BDO Seidman LLP
* Filed previously
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution to previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual
II-5
<PAGE>
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the By-laws and other provisions summarized in
Item 15 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York and State of New York on the 11th day of September, 1998.
JAYARK CORPORATION
/s/ David L. Koffman
--------------------------------
David L. Koffman
Chief Executive Officer
Pursuant to the requirements of the securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacity and on the date indicated.
/s/ David L. Koffman Chairman of the Board, President
- -------------------- Chief Executive Officer and Director September 11, 1998
David L. Koffman
/s/ Frank Rabinovitz Executive Vice President, Chief
- -------------------- Operating Officer and Director September 11, 1998
Frank Rabinovitz
/s/ Robert C. Nolt Chief Financial Officer and Director September 11, 1998
- --------------------
Robert C. Nolt
/s/ Arthur G. Cohen Director September 11, 1998
- --------------------
Arthur G. Cohen
II-7
<PAGE>
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Jayark Corporation
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated July 15, 1998 (except for Note 15
for which the date is August 7,1998) relating to the consolidated financial
statements of Jayark Corp., which is contained in that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
New York, New York
September 11, 1998
