<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: October 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 October 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 Audit
10/31/99 4/30/99
---------- ---------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $445,010 $209,724
A/R-Trade, Less Allowance For Doubtful Accounts of
$78,000 at 10/31/99 and $59,000 at 4/30/99 1,652,879 1,818,214
Inventories 409,277 337,914
Other Current Assets 44,591 46,247
---------- ---------
Total Current Assets 2,551,757 2,412,099
Non Current Assets
Property & Equipment, Less Accum Depr & Amort 120,746 120,410
Excess of Cost Over Net Assets of Businesses
Acquired, Less Accum Amort of $495,000 at 10/31/99
and $485,000 at 4/30/99 236,702 247,382
---------- ---------
Total Non-Current Assets 357,448 367,792
---------- ---------
Total Assets $2,909,205 $2,779,891
========== =========
Liabilities
Current Liabilities
Notes Payable & Line of Credit $0 $0
Current Maturities of Long Term Debt 161,332 161,332
Accounts Payable 464,635 689,209
Accrued Expenses 255,917 253,796
Accrued Salaries 453,066 392,420
Accrued Interest 504,510 504,510
Other Current Liabilities 51,752 39,918
---------- ---------
Total Current Liabilities 1,891,212 2,041,185
Long Term Debt 1,387,362 1,424,229
---------- ---------
Total Liabilities $3,278,574 $3,465,414
========== =========
Stockholders' Equity (Deficit)
Common Stock of $.01 Par Value. Authorized 30,000,000
Shares; Issued 27,663,597 Shares at 10/31/99 and 4/30/99 276,636 276,636
Additional Paid-In Capital 12,350,084 12,350,084
Deficit (12,996,089) (13,312,243)
---------- ---------
Total Stockholders' Equity (Deficit) $(369,369) $(685,523)
Total Liabilities & Stockholders' Equity (Deficit) $2,909,205 $2,779,891
========== =========
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
10/31/99 10/31/98 10/31/99 10/31/98
---------------------------------------------
<S> <C> <C> <C> <C>
Net Revenues $3,657,061 $4,260,743 $7,088,003 $8,308,012
Cost of Revenues 3,010,907 3,630,414 5,894,745 7,129,676
---------------------------------------------
Gross Margin 646,154 630,329 1,193,258 1,178,336
Selling, General & Admin 402,401 428,394 821,792 909,570
---------------------------------------------
Operating Income 243,753 201,935 371,466 268,766
Other Income (Expense):
Interest Expense (27,924) (104,786) (55,312) (198,461)
---------------------------------------------
Pre Tax Earnings (Losses) 215,829 97,149 316,154 70,305
Provision for Income Taxes -- -- -- --
---------------------------------------------
Net Income (Loss) $215,829 $97,149 $316,154 $70,305
=============================================
Basic and Diluted Earnings (Loss) per Common Share
Net Income (Loss) $.01 $.01 $.01 $.00
=============================================
Weighted Average Common Shares:
Basic and Diluted 27,663,597 9,221,199 27,663,597 9,221,199
See accompanying notes to consolidated financial statements
</TABLE>
<PAGE>
Jayark Corporation and Subsidiaries
Consolidated Statement of Cash Flows
For the Three Months Ended
(Unaudited)
<TABLE>
<CAPTION>
10/31/99 10/31/98
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $316,154 $70,305
Adjustments to Reconcile Earnings (Loss) to Cash from Operating Activities:
Depr and Amort of Property and Equipment 33,658 70,483
Changes In Assets and Liabilities:
(Increase) Decrease in Accounts Receivable Net 165,335 (646,114)
(Increase) Decrease in Inventories (71,363) (224,883)
(Increase) Decrease in Other Current Assets 1,656 (49,382)
Increase (Decrease) in Accounts Payable (224,573) 101,559
Increase (Decrease) in Accrued Expenses 2,120 (9,899)
Increase (Decrease) in Accrued Salaries 60,646 33,368
Increase (Decrease) in Accrued Interest -- 87,938
Increase (Decrease) in Other Liabilities 11,834 110,193
-------- --------
Net Cash Provided By (Used In) Operating Activities 295,467 (456,432)
Cash Flows From Investing Activities:
Purchases of Property and Equipment (23,314) (817,788)
-------- --------
Net Cash Provided By (Used In) Investing Activities (23,314) (817,788)
Cash Flows From Financing Activities:
Proceeds From Issuance of Long Term Debt -- 140,940
Proceeds From Issuance of Notes Payable -- 950,000
Payments of Notes Payable & Subordinated Debentures (36,867) (24,581)
-------- --------
Net Cash Provided By (Used In) Financing Activities (36,867) 1,066,359
Net Increase (Decrease) in Cash and Cash Equivalents 235,286 (207,861)
Cash & Cash Equivalents at Beginning of Year 209,724 238,858
-------- --------
Cash & Cash Equivalents at End of Year $445,010 $30,997
======== ========
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"), each of which
constitute a business segment for financial reporting purposes. The
consolidated balance sheet of Jayark Corporation and subsidiaries
(the "Company"), as of October 31, 1999, and the related
consolidated statements of operations and cash flows for the periods
ended October 31, 1999 and 1998 are unaudited. The consolidated
balance sheet as of April 30, 1999 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, 1999, 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 October 31, 1999 as compared to October 31, 1998
NET REVENUES
Consolidated Revenues of $3,657,000 for the three months ended
October 31, 1999, decreased $604,000, or 14.2%, as compared to the
same period in 1998. Sales at AVES were down $545,000 as compared
to the same period last year. This decrease was due to a decrease
in direct sales as compared to the prior year due to a number of one
time sales opportunities in the prior year, the dramatic drop in
cost of video equipment over the past year, and the hesitation of
AVES' Broadcast customers to invest in new broadcast equipment at
this time, when this well educated customer base knows that there is
new digital equipment under development. In addition to the sales
decrease at AVES, Med reported zero sales as compared to $60,000 in
prior year rental sales, as a result of the November 1998
termination of its distribution agreements with Vivax Medical
Corporation.
COST OF REVENUES
Consolidated Cost of Revenues of $3,011,000 decreased $621,000,
or 17.1%, as compared to the same period last year. The decrease
was a result of the decrease in sales.
GROSS MARGIN
Consolidated Gross Margin of $646,000 was 17.7% of revenues, as
compared to $630,000, or 14.8%, for the same period last year. The
Company experienced lower unit sales with higher profit margins that
resulted in a gross margin increase as compared to the prior year,
despite the decrease in revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $402,000 decreased $26,000 or 6.1% as
compared to the same period last year. Jayark Corporate expenses
decreased $69,000 primarily due to a reduction in the President's
salary accrual and decreased professional fees as compared to last
year. Med's expenses increased $26,000 due to professional fees
incurred in its efforts to pursue additional opportunities in the
medical field. AVES' spending increased $17,000 as compared to the
same period last year primarily due to increased advertising and
exhibit costs.
<PAGE>
OPERATING INCOME
Consolidated Operating Income of $244,000 increased $42,000, or
20.7%, as compared to the same period last year. This increase was
possible, despite the decrease in revenues, due to the increase in
gross margin and decreases in selling, general and administrative
expenses.
INTEREST EXPENSE
Consolidated Interest Expense of $28,000 decreased $77,000, or
73.3%. This decrease was primarily a result of the decrease in
subordinated debt and notes payable attributed to the conversion of
debt in conjunction with the Rights Offering which expired on
October 30, 1998. As compared with the prior period, subordinated
debt was down $818,000, with an interest rate reduction on the
$582,000 in remaining principal from 12% to 8%, and notes payable
decreased $1,000,000 due to the exchange of equity for debt.
NET INCOME (LOSS)
Consolidated Net Income of $216,000 increased as compared to
net income of $97,000 during the same period last year. The
$119,000 increase, or 122.2%, was a result of increased gross
margin, decreased selling, general and administrative costs and
reduced interest expense.
<PAGE>
Six Months Ended October 31, 1999 as compared to October 31, 1998
NET REVENUES
Consolidated Revenues of $7,088,000 for the six months ended
October 31, 1999 decreased $1,220,000, or 14.7%, as compared to the
same period in 1998. Sales at AVES were down $1,120,000 as compared
to the same period last year. This decrease was due to a decrease in
direct sales as compared to the prior year due to a number of one
time sales opportunities in the prior year, the dramatic drop in
cost of video equipment over the past year, and the hesitation of
AVES' Broadcast customers to invest in new broadcast equipment at
this time, when this well educated customer base knows that there is
new digital equipment under development. In addition to the
decrease at AVES, Med reported zero sales as compared to $100,000 in
prior year rental sales, as a result of the November 1998
termination of its distribution agreements with Vivax Medical
Corporation.
COST OF REVENUES
Consolidated Cost of Revenues of $5,895,000 decreased
$1,235,000, or 17.3%, as compared to the same period last year. The
decrease was a result of the decrease in sales.
GROSS MARGIN
Consolidated Gross Margin of $1,193,000 was 16.8% of revenues,
as compared to $1,178,000, or 14.2%, for the same period last year.
The Company experienced lower unit sales with higher profit margins
that resulted in a gross margin comparable to the prior year,
despite the decrease in revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $822,000 decreased $88,000 or 9.7% as
compared to the same period last year. Jayark Corporate expenses
decreased $107,000, or 50.5%, due to a reduction in the President's
salary accrual along with decreases in professional fees and
insurance expense as compared to last year. Med's expenses
increased $5,000, 24.6%, from the prior year as a result of
increased professional fees. AVES' spending increased $14,000, or
2.1%, as compared to the same period last year.
OPERATING INCOME
Consolidated Operating Income of $371,000 increased $103,000,
or 38.2%, as compared to the same period last year. This increase
was possible, despite the decrease in revenues, due to an increase
in the gross margin percentage along with the decrease in selling,
general and administrative expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $55,000 decreased $143,000, or
72.1%. This decrease was primarily a result of the decrease in
subordinated debt and notes payable attributed to the conversion of
debt in conjunction with the Rights Offering which expired on
October 30, 1998. As compared with the prior period, subordinated
debt was down $818,000, with an interest rate reduction on the
$582,000 in remaining principal from 12% to 8%, and notes payable
decreased $1,000,000 due to the exchange of equity for debt.
NET INCOME (LOSS)
Consolidated Net Income of $316,000 increased as compared to
net income of $70,000 during the same period last year. The
$246,000 increase, or 349.7%, was a result of increased margin,
decreased selling, general and administrative costs and reduced
interest expense.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1999, and at April 30, 1999, consolidated open lines
of credit available to the Company for borrowing were $1,250,000.
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 $661,000 at October 31, 1999, compared with
$371,000 at April 30, 1999.
Net cash provided by operating activities was $295,000 in 1999 as
compared with net cash used of $456,000 in 1998.
Cash flows used in investing activities were $23,000 in 1999 as
compared to $818,000 in 1998.
Cash used by financing activities was $37,000 in 1999, compared to
cash provided of $1,066,000 in 1998 as a result of the issuance of
notes payable and long-term debt.
On December 2, 1999, the Company amended its Certificate of
Incorporation to effect a one-for-ten reverse stock split of the
issued and outstanding shares of common stock.
Year 2000
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year.
Certain information technology systems and their associated software
("IT Systems"), and certain equipment that uses programmable logic
chips to control aspects of their operation ("embedded chip
equipment"), may recognize "00" as a year other than the year 2000.
The year 2000 issue could result, at the Company and elsewhere, in
system failures or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to
process transactions or to engage in other normal business
activities.
The Company has addressed, and continues to address, its year 2000
issues, including efforts relating to IT Systems and embedded chip
equipment used within the Company, efforts to address issues the
Company faces if third parties who do business with the Company are
not prepared for the year 2000, and contingency planning. The
Company has used both internal and external resources to identify,
correct, upgrade or replace and test its IT systems and embedded
chip equipment for year 2000 compliance.
The Company's IT Systems have been tested and determined to be
compliant in a simulated year 2000 environment. As a result, the
Company believes that its IT systems are ready for the year 2000,
although isolated incidences of non-compliance may be experienced.
The Company plans to allocate internal resources and retain
dedicated consultants and vendor representatives to be ready to take
action should these events occur.
<PAGE>
The Company has identified some non-IT systems, embedded chip
equipment, such as telephones, fax machines, climate control devices
and building security systems, which may be impacted by the year
2000 problem. These non-IT systems are minor in nature and would
not significantly impact the Company's operations.
With respect to the IT and non-IT Systems of critical third parties,
such as product vendors, utilities, communications, transportation,
government, banking and other important services, the Company has
established communication to obtain assurances regarding their
respective year 2000 efforts. While the Company expects such third
parties to address the year 2000 issues based on the representations
it has received to date, the Company cannot guarantee that these
systems will be made year 2000 compliant in a timely manner.
Computer errors or failures in any of these areas may have the
potential to disrupt business operations. The Company will continue
to monitor the progress of such third parties.
Although the Company values established relationships with key
vendors, substitute products for most goods may be obtained from
other vendors. If certain vendors are unable to deliver product on
a timely basis, due to their own year 2000 issues, the Company
anticipates that there will be others who will be able to deliver
similar goods. However, the lead-time involved in sourcing certain
goods may result in temporary shortages of relatively few items.
The Company expects all expenditures relating to their year 2000
readiness to be funded by cash flows from operations and that this
will not materially impact other operating or investment plans.
The Company believes that the IT and non-IT technologies which
support its critical functions will be ready for the transition to
the year 2000. There can be no assurance that similar unresolved
issues for key third parties will not cause an adverse effect on the
Company. Although the Company believes that its efforts to address
the year 2000 issue will be sufficient to avoid a material adverse
impact on the Company, there can be no assurances that these efforts
will be fully effective.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. Submission of Matter to a Vote of Security Holders.
At the Annual Meeting of Shareholders held on November 22,
1999, pursuant to the Notice of Annual Meeting of the Shareholders
and Proxy Statement dated October 26, 1999, the voting results were
as follows:
a) Each of the two nominees (Arthur G. Cohen and Jeffrey P.
Koffman) were elected to the Board of Directors as follows:
Director's Name Shares Voted FOR Shares WITHHELD
--------------------------------------------------------------
Arthur G. Cohen 19,974,196 11,813
Jeffrey P. Koffman 19,974,196 11,813
b) The appointment of BDO Seidman, LLP as independent public
accountants for the Company for the fiscal year ending April 30,
2000 was approved (19,677,938 shares voted FOR; 5,863 shares voted
AGAINST; and 2,208 shares WITHHELD).
c) An amendment to the Company's Certificate of Incorporation to
effect a one-for-ten reverse stock split of the issued and
outstanding shares of common stock was approved (19,634,325 shares
voted FOR; 48,743 shares voted AGAINST; and 2,941 shares WITHHELD).
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Report on Form 8-K - None
<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 December 13, 1999
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt December 13, 1999
Robert C. Nolt
Chief Financial Officer
<PAGE>
[ARTICLE] 5
[CIK] 0000053260
[NAME] JAYARK CORPORATION
[MULTIPLIER] 1000
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 3-MOS 6-MOS
[FISCAL-YEAR-END] APR-30-2000 APR-30-2000
[PERIOD-START] AUG-01-1999 MAY-01-1999
[PERIOD-END] OCT-31-1999 OCT-31-1999
[CASH] 445 445
[SECURITIES] 0 0
[RECEIVABLES] 1,731 1,731
[ALLOWANCES] (78) (78)
[INVENTORY] 409 409
[CURRENT-ASSETS] 2,552 2,552
[PP&E] 453 453
[DEPRECIATION] (332) (332)
[TOTAL-ASSETS] 2,909 2,909
[CURRENT-LIABILITIES] 1,891 1,891
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 0 0
[COMMON] 277 277
[OTHER-SE] (646) (646)
[TOTAL-LIABILITY-AND-EQUITY] 2,909 2,909
[SALES] 3,657 7,088
[TOTAL-REVENUES] 3,657 7,088
[CGS] 3,011 5,895
[TOTAL-COSTS] 3,011 5,895
[OTHER-EXPENSES] 402 822
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 28 55
[INCOME-PRETAX] 216 316
[INCOME-TAX] 0 0
[INCOME-CONTINUING] 216 316
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 216 316
[EPS-BASIC] .01 .01
[EPS-DILUTED] .01 .01
</TABLE>
