<PAGE>
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: January 31, 1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
0-3255
(Commission File Number)
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
(State or other jurisdiction of incorporation) (IRS EIN)
Post Office Box 741528, Houston, Texas 77274
(Address of principal executive offices) (Zip Code)
(713) 783-9184
(Registrant's telephone number, including area code)
(Former name, former address and fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at January 31, 1999
Common Stock $0.01 Par Value 27,663,597
<PAGE>
Part I.
Item I.
Jayark Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Unaudited Audited
1/31/99 04/30/98
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $427,646 $238,858
Accounts Receivable-Trade, Less Allowance For 1,679,217 1,723,833
Doubtful Accounts of $82,000 at 1/31/99 and $38,000 at 4/30/98
Other Accounts Receivable 16,160 2,277
Inventories 435,811 271,564
Other Current Assets 46,101 35,046
--------- ---------
Total Current Assets 2,604,935 2,271,578
Non Current Assets
Property & Equipment, Less Accum Depr & Amort 169,527 94,644
Excess of Cost Over Net Assets of Businesses Acquired, 252,722 268,742
Less Accum Amort of $479,715 at 1/31/99 and $448,000 at 4/30/98
--------- ---------
Total Non-Current Assets 422,249 363,386
--------- ---------
Total Assets $3,027,184 $2,634,964
========== ==========
Liabilities
Current Liabilities
Notes Payable & Line of Credit $650,000 $300,000
Current Maturities of Long Term Debt 699 5,899
Accounts Payable 433,631 881,266
Other Payables 187,465 197,192
Accrued Salaries and Deferred Compensation 350,730 298,734
Other Current Liabilities 568,871 431,418
--------- ---------
Total Current Liabilities 2,191,396 2,114,509
Non Current Liabilities
Notes Payable to Related Parties 1,005,603 2,046,021
Subordinated Debentures 613,263 1,400,000
--------- ---------
Total Non Current Liabilities 1,618,866 3,446,021
--------- ---------
Total Liabilities $3,810,262 $5,560,530
========== ==========
Stockholders' Equity (Deficit)
Common Stock of $.01 Par Value at 1/31/99 and $.30 at 276,636 2,766,359
4/30/98. Authorized 30,000,000 Shares at 1/31/99 and
10,000,000 Shares at 4/30/98. Issued 27,663,597 Shares
at 1/31/99 and 9,221,199 Shares at 4/30/98
Additional Paid-In Capital 12,350,084 8,066,122
Deficit (13,409,798) (13,758,047)
--------- ---------
Total Stockholders' Equity (Deficit) $(783,078) $(2,925,566)
--------- ---------
Total Liabilities & Stockholders' Equity (Deficit) $3,027,184 $2,634,964
========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1/31/99 1/31/98 1/31/99 1/31/98
---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net Revenues $3,316,028 $2,636,318 $11,624,040 $9,957,922
Cost of Revenues 2,766,779 2,183,880 9,896,455 8,424,279
---------- --------- --------- ----------
Gross Margin 549,249 452,438 1,727,585 1,533,643
Selling, General and Administrative 424,422 430,151 1,333,992 1,313,531
---------- --------- --------- ----------
Operating Income 124,827 22,287 393,593 220,112
Interest Expense 50,315 92,846 248,776 274,419
(Gain)/Loss on Sale of Assets (203,432) -- (203,432) --
---------- --------- --------- ----------
Pre Tax Earnings (losses) 277,944 (70,559) 348,249 (54,307)
Prov for Income Taxes (Benefit from) -- -- -- --
---------- --------- --------- ----------
Net Income (loss) $277,944 $(70,559) $348,249 $(54,307)
========== ========= ========= ==========
Basic & Diluted Earnings(Loss)
per Common Share $.01 $(.01) $.02 $(.01)
========== ========= ========= ==========
Weighted Average Common Shares:
Basic and Diluted 27,663,597 9,221,199 15,368,665 9,221,199
========== ========= ========= ==========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation and Subsidiaries
Consolidated Statement of Cash Flows
For the Nine Months Ended
(Unaudited)
<TABLE>
<CAPTION>
1/31/99 1/31/98
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $348,249 $(54,307)
Adjustments to Reconcile Earnings (Loss) to Cash From Operating Activities:
Depreciation and Amortization of Property and Equipment 17,664 47,433
Amort of Excess of Cost Over Net Assets of 16,020 16,020
Businesses Acquired
Change In Assets and Liabilities Net of Effects From Acquisition of Subs:
(Increase) Decrease in Accounts Receivable Net 30,732 921,887
(Increase) Decrease in Inventories (164,247) 32,959
(Increase) Decrease in Other Current Assets (11,055) (17,350)
Increase (Decrease) in Accounts Payable (457,362) (515,336)
Increase (Decrease) in Accr Salaries and Deferred Comp 51,996 148,904
Increase (Decrease) in Other Liabilities 132,252 4,011
----------- ----------
Net Cash Provided By (Used In) Operating Activities (35,751) 584,221
Cash Flows From Investing Activities:
Purchases of Property and Equipment (92,546) (7,922)
----------- ----------
Net Cash Provided By (Used In) Investing Activities (92,546) (7,922)
Cash Flows From Financing Activities:
Proceeds (Payment) of Long Term Debt -- (7,207)
Proceeds From Issuance of Notes Payable 350,000 --
Payments of Notes Payable & Subordinated Debentures (1,827,155) (400,000)
Proceeds From Issuance of Common Stock 1,794,240 --
----------- ----------
Net Cash Provided By (Used In) Financing Activities 317,085 (407,207)
Net Increase (Decrease) in Cash and Cash Equivalents 188,788 169,092
Cash & Cash Equivalents at Beginning of Year 238,858 67,140
----------- ----------
Cash & Cash Equivalents at End of Year $427,646 $236,232
=========== ==========
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $112,730 $65,919
=========== ==========
Income Taxes -- --
=========== ==========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
(Unaudited)
1.Jayark Corporation ("Jayark" or "the Company") conducts its
operations through two wholly owned subsidiaries, AVES Audiovisual
Systems, Inc. ("AVES") and MED Services Corp. ("Med"). The
consolidated balance sheet of Jayark Corporation and subsidiaries (the
"Company"), as of January 31, 1999, and the related consolidated
statements of operations and cash flows for the periods ended January
31, 1999 and 1998 are unaudited. The consolidated balance sheet as of
April 30, 1998 has been derived from audited financial statements. The
consolidated financial statements should be read in conjunction with
the audited financial statements and footnotes for the year ended April
30, 1998, included in the Company's report on Form 10-K.
2.The interim financial statements reflect all adjustments (consisting
of only normal and recurring accruals and adjustments) which are, in
the opinion of management, necessary to a fair statement of the
results for the interim periods presented. The Company's operating
results for any particular interim period may not be indicative of
results for the full year.
3.Certain reclassifications have been made in the 1998 financial
statements to conform them to and make them consistent with the
presentation used in the 1999 financial statements.
<PAGE>
Item 2.
Management's Discussion & Analysis of Results of Operations
Three Months Ended January 31, 1999 as compared to January 31, 1998
NET REVENUES
Consolidated Revenues of $3,316,000 for the three months ended
January 31, 1999 increased $680,000, or 26%, as compared to the same
period in 1998. The increase is primarily the result of an increase in
direct sales at AVES.
COST OF REVENUES
Consolidated Cost of Revenues of $2,767,000 increased $583,000, or
27%, as compared to the same period last year. The increase is a
direct result of increased revenues.
GROSS MARGIN
Consolidated Gross Margin of $549,000 was 17% of revenues, as
compared to $452,000, or 17%, for the same period last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $424,000 decreased $6,000, or 1%, as
compared to the same period last year. The new subsidiary MED Services
Corp. incurred $44,000 in expenses. These new expenses were completely
offset by decreased spending at both AVES and Corporate. AVES reduced
spending by $18,000 with decreases in advertising, exhibit, and payroll
expenses. Corporate decreased spending by $32,000. This decrease was
a result of lower than normal professional fees, due to timing
differences, reduced insurance costs, and a reduction in miscellaneous
expenses due to prior period adjustments. These decreases were
partially offset by an increase in taxes resulting from refunds
received in the prior year.
OPERATING INCOME
Consolidated Operating Income of $125,000 increased $103,000 from
operating income of $22,000 during the same period last year. This
increase is due to $97,000 in increased margin from higher revenues,
along with a $6,000 reduction in selling, general and administrative
expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $50,000 decreased $43,000, or
46%. This decrease is primarily a result of the decrease in
subordinated debt and commercial paper attributed to the conversion of
debt in conjunction with the Rights Offering. As compared to the prior
period, subordinated debt is down $786,000, with an interest rate
reduction on the $613,000 in remaining principal from 12% to 8%, and
commercial paper decreased $1,000,000. The resulting decline in
interest, from the transactions above, was partially offset by higher
interest incurred from increased borrowing levels on the line of
credit.
GAIN (LOSS) ON SALE OF ASSETS
Consolidated Gain on Sale of Assets of $203,000 resulted from the
termination of MED's Purchase and Sale, Distribution and Custody
Agreements with Vivax.
NET INCOME (LOSS)
Consolidated Net Income of $278,000 increased as compared to a net
loss of $71,000 during the same period last year. The $349,000
increase is a result of: increased margin due to a 26% increase in
revenues, reduced selling, general and administrative spending, the
gain on sale from MED's termination of its agreements with Vivax, and
reduced interest expense, which is primarily a result of the conversion
of debt to stock with the Rights Offering.
<PAGE>
Nine Months Ended January 31, 1999 as compared to January 31, 1998
NET REVENUES
Consolidated Revenues of $11,624,000 for the period ended January
31, 1999 increased $1,666,000, or 17%, as compared to the same period
in 1998. The increase is a result of an $1,566,000 increase in AVES'
sales, primarily due to an increase in direct sales, and the addition
of $100,000 in rental sales from the new subsidiary, MED Services Corp.
COST OF REVENUES
Consolidated Cost of Revenues of $9,896,000, increased $1,472,000,
or 17%, as compared to the same period last year. The increase is
proportional to the increase in revenues.
GROSS MARGIN
Consolidated Gross Margin of $1,728,000 was 15% of revenues, as
compared to $1,534,000, or 15%, for the same period last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $1,334,000 increased $21,000, or 2%, as
compared to the same period last year. This increase is due to $65,000
in expenses for the new subsidiary MED Services Corp, a $33,000
increase in Corporate spending, partially offset by $77,000 in savings
at AVES. At Corporate, professional fees increased $24,000 due to
increased representation associated with the formation of the new
subsidiary MED Services Corp. and taxes increased $57,000 due to
refunds received in the prior year. These large increases were
partially offset with a reduction in insurance expenses and prior
period adjustments to miscellaneous expenses. The savings at AVES are
primarily attributable to a $64,000 reduction in payroll expenses.
OPERATING INCOME
Consolidated Operating Income of $393,000 increased $173,000 from
operating income of $220,000 during the same period last year. This
increase is due to $194,000 in increased margin from higher revenues;
partially offset by $21,000 in increased selling, general and
administrative expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $249,000 decreased $26,000, or
9.0%. This decrease is primarily a result of the decrease in
subordinated debt and commercial paper attributed to the conversion of
debt in conjunction with the Rights Offering which expired on October
30, 1998. As compared to the prior period, subordinated debt is down
$786,000, with an interest rate reduction on the $613,000 in remaining
principal from 12% to 8%, and commercial paper decreased $1,000,000.
The resulting decline in interest, from the transactions above, was
partially offset by higher interest experienced from increased
borrowing levels on the line of credit at AVES.
GAIN (LOSS) ON SALE OF ASSETS
Consolidated Gain on Sale of Assets of $203,000 resulted from the
termination of MED's Purchase and Sale, Distribution and Custody
Agreements with Vivax.
NET INCOME (LOSS)
Consolidated Net Income of $348,000 for the nine months ending
January 31, 1999 increased $402,000 as compared to the same period last
year. The $402,000 increase is a result of increased margin due to
higher revenues, decreased interest expense, and the gain on sale from
MED's termination of its agreements with Vivax. This increase was
partially offset by a slight increase in selling, general and
administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1999, consolidated open lines of credit available to the
Company for borrowing, were $600,000 as compared to $950,000 at April
30, 1998. 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 was $414,000 at January 31, 1999, compared $157,000 at
April 30, 1998. The increase in working capital is largely due to the
operating income generated in the current year.
Net cash used by operating activities was $36,000 in 1999 resulting
primarily from the reduction of accounts payable and an increase in
inventory.
Net cash used in investing activities was $93,000 in 1999 as a result
of capital expenditures by AVES.
Net cash provided by financing activities was $317,000 in 1999
primarily due to increased borrowing on AVES' line of credit. The
majority of the common stock issued in conjunction with the Rights
Offering was subscribed with conversion of debt. Consequentially,
there was little to no cash provided by the transaction.
<PAGE>
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 January 31, 1999, AVES had $650,000 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 September 1998, the Company offered to each stockholder, the right
to purchase, pro rata, two shares of Common Stock at a price of $.10
per share. The Company filed a Registration Statement on Form S-1 with
the Securities and Exchange Commission in order to register such rights
to purchase Common Stock, under the Securities Act of 1933, as amended.
The Rights Offering expired on October 30, 1998. The total offering of
18,442,398 shares was fully subscribed with 111,600 shares purchased
with cash and the balance subscribed by conversion of debt. The Company
issued the new shares in November 1998. The conversion of debt to
stock in conjunction with the Rights Offering resulted in a $1,000,000
reduction in commercial paper, a $761,000 reduction in subordinated
debt, and a $72,000 reduction in accrued interest. The end result was
$1,794,000 of equity enhancement.
The Koffman Group, which 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, agreed to acquire all shares not
purchased by other stockholders on Primary Subscription. As a result,
the Koffman Group beneficially owns 20,417,188 shares of Common Stock,
which represents approximately 74% of the Common Stock outstanding.
On November 13, 1998 Jayark Corporation, through its newly formed,
wholly owned subsidiary, MED Services Corp. ("Med"), terminated its
Purchase and Sale, Distribution, and Custody Agreements 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 Purchase and Sale Agreement, dated
June 17, 1998, 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 was entitled to a range of forty-
eight to sixty-seven percent of the rental proceeds, based upon the
equipment rented. Vivax had an option to purchase the medical
equipment from Med after the twenty-fourth, thirty-six and forty-eighth
month of the consignment period. Med, under the Purchase and Sale
Agreement had an option, through October 31, 1999 to purchase an
additional $2,475,000 of medical equipment from Vivax.
In consideration for terminating the Agreements, MED received $840,000
from Vivax. MED, in turn, paid off the $450,000 outstanding on its
revolving line of credit to the bank and outstanding interest due on
the line. As a result of the termination, MED realized a $203,000 gain
on the sale of assets.
<PAGE>
Year 2000
The Company believes that the cost of administering its Year 2000
issues will not have a material adverse impact on future earnings.
The Company is continuing its review of its internal business software,
which presently appears to be Year 2000 compliant. The Company is in
the process of replacing some of its older hardware with new equipment
to enable a successful Year 2000 transition. The Company anticipates
having these modifications in place by early 1999. The Company will
continue its internal review and will correct further issues as they
are identified, but the Company does not believe that the impact of the
Year 2000 transition will have a material adverse impact on future
results.
The Company is communicating with, but is presently uncertain of the
compliance status of, its customers' businesses. This may have an
effect on the Company's ability to collect outstanding receivables, but
the Company does not believe that this would have a material effect on
its operations. Since all customer situations cannot be anticipated,
particularly those involving third-party products, the Company may see
an increase in warranty and other claims as a result of the Year 2000
transition. Such claims, if successful, could have a material adverse
impact on future results.
The Company is asking its suppliers about compliance, but is presently
uncertain as to their Year 2000 status. The majority of the Company's
suppliers are very large corporations, such as Sony, Panasonic,
Mitsubishi, 3M, and others, who are carefully reviewing and updating
their systems to ensure compliance. While it is likely that their
efforts will be successful, if necessary modifications and conversions
are not completed in a timely manner, the Year 2000 issue could have a
material adverse effect on certain operations and the financial
position of the Company. There is currently no contingency plan in
place to replace suppliers should their Year 2000 efforts be
unsuccessful.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10(42)Amendment to certain 12% Convertible Subordinated
Debentures dated April 30, 1990.
10(43)Amendment to certain Note dated March 12, 1997
between Jayark Corporation and A-V Texas Holding, LLC.
(b) Report on Form 8-K.
1. Other Events
Termination of Purchase and Sale, Distribution and Custody
Agreements between MED Services Corp. and Vivax Medical
Corporation on November 13, 1998.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
JAYARK CORPORATION
Registrant
/s/ David L. Koffman March 15, 1999
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt March 15, 1999
Robert C. Nolt
Chief Financial Officer
<PAGE>
EXHIBITS
Exhibit 10(42)
SUBORDINATED PROMISSORY NOTE
$381,035.00 November 1, 1998
FOR VALUE RECEIVED, the undersigned Jayark Corporation, a
Delaware corporation (the "Maker"), hereby promises to pay to CCB
Associates, (the "Holder"), at such place as the Holder may from time
to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of THREE
HUNDRED EIGHTY ONE THOUSAND THIRTY FIVE DOLLARS ($381,035.00), together
with interest on such principal sum at the rate of eight percent (8%)
per annum by payment of interest quarterly in arrears commencing
January 31, 1999 and by payment of $38,103.50 on the 31st day of
December, 1999 and the same amount on the 31st day of each December
thereafter until December 31, 2004 when the entire unpaid principal
balance plus accrued interest shall be due and payable.
The principal and accrued interest under this Note may be
prepaid by the Maker, in whole or in part, without premium or penalty.
The right to receive payments under this Note is and shall be
subordinated to the prior payment in full and in cash of all amounts
payable under the Senior Indebtedness (as hereinafter defined) of Maker
(including interest thereon) from time to time outstanding. No payment
or prepayment of any amount of principal or interest under this Note
shall be made without the written consent of the Senior Lender (as
hereinafter defined). Upon any dissolution, winding up or total or
partial liquidation or reorganization of Maker, the Senior Indebtedness
shall be paid in full in cash or cash equivalents, before the Holder
shall be entitled to receive any payment of principal of or interest on
this Note or any distribution of any assets or securities. If,
notwithstanding the foregoing, the Holder shall receive any payment
under this Note at a time when such payment is prohibited or before the
payment in full of all Senior Indebtedness of Maker, then such payment
or distribution shall be received and paid over or delivered to the
holders of the Senior Indebtedness to the extent necessary to pay in
full the principal of and interest on such Senior Indebtedness in
accordance with its terms. "Senior Indebtedness" shall mean all
obligations of Maker to BSB Bank and Trust Company or any substitute
lender (the "Senior Lender") now or hereafter in place.
This Note shall, at the option of the Holder, become
immediately due and payable upon the occurrence of any of the following
events:
a. failure of the Maker to pay the principal or
interest due under this Note, after 10 days notice to the Maker;
b. insolvency of the Maker or its inability to pay
debts as they mature;
c. voluntary application by the Maker to a tribunal
for the appointment of a trustee or receiver of any substantial part of
the assets of the Maker or the voluntary commencement of proceedings by
<PAGE>
the Maker (other than for voluntary liquidation and/or dissolution of a
subsidiary of the Maker) with respect to the Maker under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or other liquidation law of any jurisdiction;
d. application to such tribunal or commencement of
such proceedings against the Maker by a third party, and the Maker
indicates its approval, consent or acquiescence, or an order is entered
appointing a receiver or trustee or adjudicating the Maker bankrupt or
insolvent or approving the petition in any such proceeding, and such
order remains in effect for ninety (90) days; or
e. any conveyance of all or substantially all of the
assets of Maker;
Presentment, protest, notice of nonpayment and protest and
all other similar notices are hereby waived by the Maker.
In any action for collection of this Note, the court shall
award costs and expenses in the action, including reasonable attorneys'
fees, to the prevailing party. If the positions of the parties are
partially sustained, the court may allocate the costs and expenses
proportionately as it deems equitable, or not at all.
This Note may not be modified orally. Any notice relating to
this Note shall be in writing and effective only when it has been
delivered as required for notices under the Asset Purchase Agreement.
This Note shall be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State of
Illinois applicable to agreements made and to be performed entirely
within such State. The provisions of this Note shall be binding upon
the Maker and its successors and assigns, and shall inure to the
benefit of the Holder and its legal assigns.
Intending to be bound, the Maker has caused this Note to be
executed by its duly authorized Chief Financial Officer, as of the day
and year first above written.
Jayark Corporation
By: /s/ Robert C. Nolt
Name: Robert C. Nolt
Title: Chief Financial Officer
<PAGE>
SUBORDINATED PROMISSORY NOTE
$232,228.00 November 1, 1998
FOR VALUE RECEIVED, the undersigned Jayark Corporation, a
Delaware corporation (the "Maker"), hereby promises to pay to David L.
Koffman, (the "Holder"), at such place as the Holder may from time to
time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of TWO
HUNDRED THIRTY TWO THOUSAND TWO HUNDRED TWENTY-EIGHT DOLLARS
($232,228.00), together with interest on such principal sum at the rate
of eight percent (8%) per annum by payment of interest quarterly in
arrears commencing January 31, 1999 and by payment of $23,228.00 on the
31st day of December, 1999 and the same amount on the 31st day of each
December thereafter until December 31, 2004 when the entire unpaid
principal balance plus accrued interest shall be due and payable.
The principal and accrued interest under this Note may be
prepaid by the Maker, in whole or in part, without premium or penalty.
The right to receive payments under this Note is and shall be
subordinated to the prior payment in full and in cash of all amounts
payable under the Senior Indebtedness (as hereinafter defined) of Maker
(including interest thereon) from time to time outstanding. No payment
or prepayment of any amount of principal or interest under this Note
shall be made without the written consent of the Senior Lender (as
hereinafter defined). Upon any dissolution, winding up or total or
partial liquidation or reorganization of Maker, the Senior Indebtedness
shall be paid in full in cash or cash equivalents, before the Holder
shall be entitled to receive any payment of principal of or interest on
this Note or any distribution of any assets or securities. If,
notwithstanding the foregoing, the Holder shall receive any payment
under this Note at a time when such payment is prohibited or before the
payment in full of all Senior Indebtedness of Maker, then such payment
or distribution shall be received and paid over or delivered to the
holders of the Senior Indebtedness to the extent necessary to pay in
full the principal of and interest on such Senior Indebtedness in
accordance with its terms. "Senior Indebtedness" shall mean all
obligations of Maker to BSB Bank and Trust Company or any substitute
lender (the "Senior Lender") now or hereafter in place.
This Note shall, at the option of the Holder, become
immediately due and payable upon the occurrence of any of the following
events:
a. failure of the Maker to pay the principal or
interest due under this Note, after 10 days notice to the Maker;
b. insolvency of the Maker or its inability to pay
debts as they mature;
c. voluntary application by the Maker to a tribunal
for the appointment of a trustee or receiver of any substantial part of
the assets of the Maker or the voluntary commencement of proceedings by
the Maker (other than for voluntary liquidation and/or dissolution of a
subsidiary of the Maker) with respect to the Maker under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or other liquidation law of any jurisdiction;
<PAGE>
d. application to such tribunal or commencement of
such proceedings against the Maker by a third party, and the Maker
indicates its approval, consent or acquiescence, or an order is entered
appointing a receiver or trustee or adjudicating the Maker bankrupt or
insolvent or approving the petition in any such proceeding, and such
order remains in effect for ninety (90) days; or
e. any conveyance of all or substantially all of the
assets of Maker;
Presentment, protest, notice of nonpayment and protest and
all other similar notices are hereby waived by the Maker.
In any action for collection of this Note, the court shall
award costs and expenses in the action, including reasonable attorneys'
fees, to the prevailing party. If the positions of the parties are
partially sustained, the court may allocate the costs and expenses
proportionately as it deems equitable, or not at all.
This Note may not be modified orally. Any notice relating to
this Note shall be in writing and effective only when it has been
delivered as required for notices under the Asset Purchase Agreement.
This Note shall be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State of
Illinois applicable to agreements made and to be performed entirely
within such State. The provisions of this Note shall be binding upon
the Maker and its successors and assigns, and shall inure to the
benefit of the Holder and its legal assigns.
Intending to be bound, the Maker has caused this Note to be
executed by its duly authorized Chief Financial Officer, as of the day
and year first above written.
Jayark Corporation
By: /s/ Robert C. Nolt
Name: Robert C. Nolt
Title: Chief Financial Officer
<PAGE>
Exhibit 10(43)
SUBORDINATED PROMISSORY NOTE
$1,000,000.00 November 1, 1998
FOR VALUE RECEIVED, the undersigned Jayark Corporation, a
Delaware corporation (the "Maker"), hereby promises to pay to AV Texas
Holding, LLC, (the "Holder"), at such place as the Holder may from time
to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of ONE
MILLION DOLLARS ($1,000,000.00), together with interest on such
principal sum at the rate of seven and one-half percent (7.5%) per
annum by payment of interest quarterly in arrears commencing January
31, 1999 and by payment of $100,000.00 on the 31st day of December,
1999 and the same amount on the 31st day of each December thereafter
until December 31, 2004 when the entire unpaid principal balance plus
accrued interest shall be due and payable.
The principal and accrued interest under this Note may be
prepaid by the Maker, in whole or in part, without premium or penalty.
The right to receive payments under this Note is and shall be
subordinated to the prior payment in full and in cash of all amounts
payable under the Senior Indebtedness (as hereinafter defined) of Maker
(including interest thereon) from time to time outstanding. No payment
or prepayment of any amount of principal or interest under this Note
shall be made without the written consent of the Senior Lender (as
hereinafter defined). Upon any dissolution, winding up or total or
partial liquidation or reorganization of Maker, the Senior Indebtedness
shall be paid in full in cash or cash equivalents, before the Holder
shall be entitled to receive any payment of principal of or interest on
this Note or any distribution of any assets or securities. If,
notwithstanding the foregoing, the Holder shall receive any payment
under this Note at a time when such payment is prohibited or before the
payment in full of all Senior Indebtedness of Maker, then such payment
or distribution shall be received and paid over or delivered to the
holders of the Senior Indebtedness to the extent necessary to pay in
full the principal of and interest on such Senior Indebtedness in
accordance with its terms. "Senior Indebtedness" shall mean all
obligations of Maker to BSB Bank and Trust Company or any substitute
lender (the "Senior Lender") now or hereafter in place.
This Note shall, at the option of the Holder, become
immediately due and payable upon the occurrence of any of the following
events:
a. failure of the Maker to pay the principal or
interest due under this Note, after 10 days notice to the Maker;
b. insolvency of the Maker or its inability to pay
debts as they mature;
c. voluntary application by the Maker to a tribunal
for the appointment of a trustee or receiver of any substantial part of
the assets of the Maker or the voluntary commencement of proceedings by
the Maker (other than for voluntary liquidation and/or dissolution of a
subsidiary of the Maker) with respect to the Maker under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or other liquidation law of any jurisdiction;
<PAGE>
d. application to such tribunal or commencement of
such proceedings against the Maker by a third party, and the Maker
indicates its approval, consent or acquiescence, or an order is entered
appointing a receiver or trustee or adjudicating the Maker bankrupt or
insolvent or approving the petition in any such proceeding, and such
order remains in effect for ninety (90) days; or
e. any conveyance of all or substantially all of the
assets of Maker;
Presentment, protest, notice of nonpayment and protest and
all other similar notices are hereby waived by the Maker.
In any action for collection of this Note, the court shall
award costs and expenses in the action, including reasonable attorneys'
fees, to the prevailing party. If the positions of the parties are
partially sustained, the court may allocate the costs and expenses
proportionately as it deems equitable, or not at all.
This Note may not be modified orally. Any notice relating to
this Note shall be in writing and effective only when it has been
delivered as required for notices under the Asset Purchase Agreement.
This Note shall be interpreted and the rights and liabilities of the
parties hereto determined in accordance with the laws of the State of
Illinois applicable to agreements made and to be performed entirely
within such State. The provisions of this Note shall be binding upon
the Maker and its successors and assigns, and shall inure to the
benefit of the Holder and its legal assigns.
Intending to be bound, the Maker has caused this Note to be
executed by its duly authorized Chief Financial Officer, as of the day
and year first above written.
Jayark Corporation
By: /s/ Robert C. Nolt
Name: Robert C. Nolt
Title: Chief Financial Officer
<PAGE>
[ARTICLE] 5
[CIK] 0000053260
[NAME]
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] APR-30-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] JAN-31-1999
[CASH] 427,646
[SECURITIES] 0
[RECEIVABLES] 1,679,217
[ALLOWANCES] 0
[INVENTORY] 435,811
[CURRENT-ASSETS] 2,604,935
[PP&E] 430,300
[DEPRECIATION] (260,773)
[TOTAL-ASSETS] 3,027,184
[CURRENT-LIABILITIES] 2,191,396
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 276,636
[OTHER-SE] (1,059,714)
[TOTAL-LIABILITY-AND-EQUITY] 3,027,184
[SALES] 11,624,040
[TOTAL-REVENUES] 11,624,040
[CGS] 9,896,455
[TOTAL-COSTS] 9,896,455
[OTHER-EXPENSES] 1,130,560
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 248,776
[INCOME-PRETAX] 348,249
[INCOME-TAX] 0
[INCOME-CONTINUING] 348,249
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 348,249
[EPS-PRIMARY] .02
[EPS-DILUTED] .02
</TABLE>
