<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: July 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 July 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
7/31/99 4/30/99
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $513,734 $209,724
Accounts Receivable-Trade, Less Allowance For Doubtful
Accounts of $82,000 at 7/31/99 and $59,000 at 4/30/99 1,411,577 1,818,214
Inventories 504,204 337,914
Other Current Assets 48,966 46,247
---------- ----------
Total Current Assets 2,478,481 2,412,099
Non Current Assets
Property & Equipment, Less Accumulated Depreciation
and Amortization 112,822 120,410
Excess of Cost Over Net Assets of Businesses Acquired, Less
Accumulated Amortization of $490,000 at 7/31/99 and
$485,000 at 4/30/99 242,042 247,382
---------- ----------
Total Non-Current Assets 354,864 367,792
---------- ----------
Total Assets $2,833,345 $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 618,070 689,209
Accrued Expenses 255,916 253,796
Accrued Salaries 413,703 392,420
Accrued Interest 504,510 504,510
Other Current Liabilities 44,225 39,918
---------- ----------
Total Current Liabilities 1,997,756 2,041,185
Long Term Debt 1,420,787 1,424,229
---------- ----------
Total Liabilities $3,418,543 $3,465,414
Stockholders' Equity (Deficit)
Common Stock of $.01 Par Value. Authorized
30,000,000 Shares; Issued 27,663,597 Shares at
7/31/99 and 4/30/99 276,636 276,636
Additional Paid-In Capital 12,350,084 12,350,084
Deficit (13,211,918) (13,312,243)
Total Stockholders' Equity (Deficit) $(585,198) $(685,523)
---------- ----------
Total Liabilities & Stockholders' Equity (Deficit) $2,833,345 $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: 7/31/99 7/31/98
--------- ---------
<S> <C> <C>
Net Revenues $3,430,942 $4,046,269
Cost of Revenues 2,883,838 3,498,261
--------- ---------
Gross Margin 547,104 548,008
Selling, General and Administrative 419,392 481,177
--------- ---------
Operating Income 127,712 66,831
Other Income (Expense):
Interest Expense (27,387) (93,674)
--------- ---------
Pre Tax Earnings (losses) 100,325 (26,843)
Provision for Income Taxes -- --
--------- ---------
Net Income (loss) $100,325 $(26,843)
========= =========
Basic and Diluted Earnings (Loss)per Common Share:
Net Income (Loss) $.00 $.00
========= =========
Weighted Average Common Shares:
Basic and Diluted 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>
7/31/99 7/31/98
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $100,325 $(26,843)
Adjustments to Reconcile Earnings (Loss) to Cash
From Operating Activities:
Depreciation and Amortization of Property and Equipment 16,634 29,224
Changes In Assets and Liabilities:
(Increase) Decrease in Accounts Receivable Net 406,637 (138,419)
(Increase) Decrease in Inventories (166,290) (235,305)
(Increase) Decrease in Other Current Assets (2,718) (18,110)
Increase (Decrease) in Accounts Payable (71,138) 228,628
Increase (Decrease) in Accrued Expenses 2,120 (2,604)
Increase (Decrease) in Accrued Salaries 21,282 (9,503)
Increase (Decrease) in Accrued Interest -- 42,000
Increase (Decrease) in Other Liabilities 4,307 30,026
--------- ---------
Net Cash Provided By (Used In) Operating Activities 311,159 (100,906)
Cash Flows From Investing Activities:
Purchases of Property and Equipment (3,706) (778,395)
--------- ---------
Net Cash Provided By (Used In) Investing Activities (3,706) (778,395)
Cash Flows From Financing Activities:
Proceeds From Issuance of Long Term Debt -- 142,955
Proceeds From Issuance of Notes Payable -- 650,000
Payments of Notes Payable & Subordinated Debentures (3,443) (12,138)
--------- ---------
Net Cash Provided By (Used In) Financing Activities (3,443) 780,817
Net Increase (Decrease) in Cash and Cash Equivalents 304,010 (98,484)
Cash & Cash Equivalents at Beginning of Year 209,724 238,858
--------- ---------
Cash & Cash Equivalents at End of Year $513,734 $140,374
========= =========
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 July 31, 1999, and the related consolidated
statements of operations and cash flows for the periods ended July
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 July 31, 1999 as compared to July 31, 1998
NET REVENUES
Consolidated Revenues of $3,431,000 for the period ended July
31, 1999 decreased $615,000, or 17.9%, as compared to the same
period in 1998. Sales at AVES were down $575,000 as compared to the
same period last year. This decrease was due to a decrease in
direct sales as compared to the prior year. In addition to the
decrease at AVES, Med reported zero sales as compared to $40,000 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 $2,884,000 decreased $614,000,
or 17.6%, as compared to the same period last year. The decrease
was a result of the decrease in sales.
GROSS MARGIN
Consolidated Gross Margin of $547,000 was 15.9% of revenues, as
compared to $548,000, or 13.5%, 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 $419,000 decreased $62,000 or 12.8% as
compared to the same period last year. Jayark Corporate expenses
decreased $38,000 due to a reduction in the President's salary
accrual and decreased legal and audit fees as compared to last year.
Med decreased expenses $21,000 due to a reduction in legal fees from
the prior year. The prior year legal fees were a result of the
formation of the new subsidiary. AVES' spending was down $3,000 as
compared to the same period last year.
OPERATING INCOME
Consolidated Operating Income of $128,000 increased $61,000, or
91.1%, as compared to the same period last year. This increase was
possible, despite the decrease in revenues, due to the decrease in
selling, general and administrative expenses.
<PAGE>
INTEREST EXPENSE
Consolidated Interest Expense of $27,000 decreased $66,000, or
70.8%. 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 $787,000, with an interest rate reduction on the
$613,000 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 $100,000 increased as compared to a
net loss of $(27,000) during the same period last year. The
$127,000 increase, or 473.7%, was a result of decreased selling,
general and administrative costs and reduced interest expense.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At July 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 $481,000 at July 31, 1999, compared with
$371,000 at April 30, 1999.
Net cash provided by operating activities was $311,000 in 1999 as
compared with net cash used of $101,000 in 1998.
Cash flows used in investing activities were $4,000 in 1999 as
compared to $778,000 in 1998. This difference is a result of the
Med's purchase of equipment for rental in the prior year.
Cash used by financing activities was $3,000 in 1999, compared to
cash provided of $781,000 in 1998 as a result of the issuance of
notes payable and long-term debt.
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, and is in the process of determining what actions may
be required to make the equipment year 2000 compliant. 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. As a result, the Company is in the process of developing
and finalizing the appropriate contingency plans, which plans will
be established and then revised as necessary during the course of
1999. 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 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 September 10, 1999
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt September 10, 1999
Robert C. Nolt
Chief Financial Officer
<PAGE>
[ARTICLE] 5
[CIK] 0000053260
[NAME] JAYARK CORPORATION
[MULTIPLIER] 1000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] APR-30-2000
[PERIOD-START] MAY-01-1999
[PERIOD-END] JUL-31-1999
[CASH] 514
[SECURITIES] 0
[RECEIVABLES] 1,494
[ALLOWANCES] 82
[INVENTORY] 504
[CURRENT-ASSETS] 2,478
[PP&E] 433
[DEPRECIATION] 320
[TOTAL-ASSETS] 2,833
[CURRENT-LIABILITIES] 1,998
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 277
[OTHER-SE] (862)
[TOTAL-LIABILITY-AND-EQUITY] 2,833
[SALES] 3,431
[TOTAL-REVENUES] 3,431
[CGS] 2,884
[TOTAL-COSTS] 2,884
[OTHER-EXPENSES] 419
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 27
[INCOME-PRETAX] 100
[INCOME-TAX] 0
[INCOME-CONTINUING] 100
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 100
[EPS-BASIC] .00
[EPS-DILUTED] .00
</TABLE>
