Back to GetFilings.com
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended April 30, 2001
Or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from to
Commission File Number 0-3255
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
(State of incorporation) (IRS Employer Identification No.)
300 Plaza Drive, Vestal, New York 13850
(Address of principal executive office) (Zip Code)
Telephone number, including area code: (607) 729-9331
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (section
229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant is $113,793 as of June 18,
2001.
The number of shares outstanding of Registrant's Common Stock
is 2,766,396 as of June 18, 2001.
PART I
Item 1. Business
General
Jayark Corporation ("Jayark" or "the Company") conducts
its operations through three wholly owned subsidiaries, AVES
Audiovisual Systems, Inc. ("AVES"), MED Services Corp.
("Med") and Fisher Medical Corporation ("Fisher"), each of
which constitute a separate business segment for financial
reporting purposes.
AVES distributes and rents a broad range of audio, video and
presentation equipment, and supplies. Its customer base
includes businesses, churches, hospitals, hotels and
educational institutions. The warehousing, sales and
administrative operations of AVES are located in Houston,
Texas.
Med finances the manufacture, sale and rental of medical
equipment. It had no customers in fiscal 2001 or 2000, and
one customer in fiscal 1999, Vivax Medical Corporation, a
company that manufactures, sells and rents durable medical
equipment to hospitals, nursing homes and individuals. The
administrative operations of Med are located in Vestal, New
York.
Fisher develops, manufactures and distributes therapeutic
support surfaces. The Fisher support surface system is used
for the prevention and treatment of pressure ulcers,
treatment of burn and trauma patients and pain management.
The products are marketed to hospitals, nursing homes and
home health care. The production, warehousing, sales and
administrative operations of Fisher are located in
Torrington, Connecticut.
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. In December 1999, the
Company filed a Certificate of Amendment to provide for a one
for ten reverse stock split. In January 2000, each ten (10)
issued and outstanding shares of Common Stock of the
Corporation, par value $.01 per share, were automatically
converted into one (1) validly issued, fully paid and non
assessable share of Common Stock of the Corporation, par
value $.01 per share. All per share and weighted average
share amounts have been restated to reflect this reverse
stock split.
Description of AVES' Business
Products / Services
AVES distributes and rents a broad range of audio, video and
presentation equipment, and supplies. Among the items
distributed are LCD, DLP, video and slide projectors;
projection screens and lamps; video cameras and camcorders;
laser videodisk, video projection, TV monitors and receivers;
DVD and video players/recorders; still imaging systems;
public address systems, microphones and headsets; tape
recorders, record players, cassette recorders, and related
accessories and supplies. Some of the items sold (such as
blank audio cassettes, headsets and cassette recorders,
duplicating equipment and supplies, laminating film and
equipment for document protection) are either assembled by
AVES or purchased from private label and other sole source
suppliers and distributed under the "AVES" and/or "LAMCO"
names. AVES also distributes the products of brand name
manufacturers such as RCAT, GET, Mitsubishi, Elmo, Panasonic,
Sanyo, Fujitsu, Videotek, Hitachi, Pioneer, Leitch, Quasar,
Telex, Samsung, Kodak, Dukane, Sharp, Sony, 3M Brand, Canon
and various other brand names. Brand name and "house"
brand products account for approximately 98% and 2% of AVES
product sales, respectively. The Company also offers repair
services, audio visual consulting & design, engineering,
installation and servicing of audiovisual systems to
businesses, churches, hospitals, hotels and educational
institutions.
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, direct mail,
telephone orders and a field sales force. AVES participates
in various regional trade shows to exhibit its products to an
interested audience. AVES' sales are not seasonal, although
sales to schools typically are higher from April through July
than at other times during the year.
Customers
In fiscal 2001, 81% of AVES' revenue was derived from sales
to schools and other educational institutions. The remaining
19% of revenues came from sales to businesses (18%) and
rental of AVES equipment (1%). In fiscal 2000, 79% of AVES'
revenue was derived from sales to schools and other
educational institutions. The remaining 21% of revenues came
from sales to businesses (20%) and rental of AVES equipment
(1%). In fiscal 1999, 74% of AVES' revenue was derived from
sales to schools and other educational institutions. The
remaining 26% of revenues came from sales to businesses (24%)
and rental of AVES equipment (2%). No one customer accounted
for more than 10% of revenues during fiscal 2001, 2000 or
1999.
Backlog
The amount of unfilled sales orders of AVES at April 30,
2001, was $1,058,300, as compared with $953,100, at April 30,
2000, and $1,040,000 at April 30, 1999. The amount of
unfilled sales orders is not a material measure of AVES'
operations.
Competition
The Company believes that AVES is one of the most diversified
national audio visual purveyors in the United States, given
the different types of services and products offered. AVES'
principal means of competition are its aggressive pricing,
technical expertise, quick delivery and the broad range of
product lines and brands available through its distribution
channels.
Employees
At April 30, 2001, AVES had 18 employees.
Description of Med's Business
Products / Services
Med is beginning to explore distribution channels for
specialty medical equipment, but had no sales or services
during fiscal 2001 and 2000. During fiscal 1999, Med
financed the manufacture, sale and rental of durable medical
equipment by Vivax, a company that manufactures, sells and
rents this equipment to hospitals, nursing homes and
individuals.
Raw Materials
The sources and availability of raw materials are not
significant for an understanding of Med's business since
replacement materials are available from alternative
suppliers. Since there have been no sales to date, Med
believes that their current raw material inventory is
generally adequate to meet projected demand.
Patents
There are no patents, trademarks, licenses, franchises or
concessions that are material to Med's business.
1999 Transactions
In November 1998, Med terminated its Purchase and Sale,
Distribution, and Custody Agreements with Vivax. 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.
Backlog
Med does not currently have any backlog orders.
Description of Fisher's Business
Products / Services
Fisher is a developer, manufacturer and distributor of
therapeutic support surfaces. The Fisher support surface
system is used for the prevention and treatment of pressure
ulcers, treatment of burn and trauma patients and pain
management. The products are marketed to hospitals, nursing
homes and home health care.
Raw Materials
Fisher purchases raw materials from two sole source suppliers
as well as standard components readily available from
multiple sources. The sole source suppliers produce
materials to Fisher's specifications. These materials are
readily available from the suppliers with lead times of 30
days. Fisher believes that their raw material inventory is
generally adequate to meet projected demand for at least a
period of 30 days.
Patents, Trademarks, and Licenses
Fisher entered into a five-year (with a five year renewal
option) Technology License Agreement with Fisher Medical LLC,
which conveyed the technology developed by Trlby Innovative
LLC of Torrington, Connecticut ("Trlby"). Under a 20-year
Product Development and Technology Transfer Agreement
("Agreement"), Trlby has and will continue to develop
certain medical supply products for LLC. In consideration
for this November 1999 Agreement, Trlby receives consulting
fees of $42,000 per year and a royalty of 5% of net sales,
subject to minimum amounts, from any products developed by
them. The minimum royalties will consist of $24,000 for the
first full calendar year following the date of the first
commercial introduction of the product, $36,000 for the
succeeding calendar year and $48,000 for each calendar year
thereafter.
Under the terms of the Fisher Medical LLC Technology License
Agreement, in addition to all royalties and fees due Trlby,
Fisher will pay a royalty of 5% of gross income to LLC during
the five-year term of the Technology License Agreement. The
option to renew this agreement for an additional five years
requires Fisher to pay a fee of 20% of cumulative after tax
earnings for any products developed and sold during the
initial five-year term of the Technology License Agreement.
Sales
Fisher currently distributes its products in three
geographical regions: Ohio, Massachusetts and Connecticut and
plans to expand to other regions in the future. Sales are
primarily to the long-term care (nursing home) industry.
Customers
Fisher has a limited customer base of approximately twenty
facilities. The Company is in clinical trials with a broader
base of customers with the intent that these trials will
generate additional customer orders.
Backlog
There is currently no backlog. Orders are placed in this
industry on an as needed basis and product is usually shipped
out of inventory for a one or two day delivery.
Employees
At April 30, 2001, Fisher had eleven employees.
Item 2. Properties
The Company's Corporate office is located in Vestal, New
York. Corporate administrative functions are conducted from
approximately 2,000 square feet. There is currently no lease
obligation or rental expense for this space, as the property
is owned by a related party.
AVES is located in Houston, Texas. AVES' business is
conducted from approximately 13,000 square feet; 5,500 of
which are used for office, sales and demonstration purposes
and 7,500 for warehouse purposes. The current lease term
expired on April 30, 2001 and AVES has subsequently entered
into a new lease agreement which begins in October 2001.
Under the new lease agreement, AVES will be relocating their
offices to nearby Sugar Land, Texas, where AVES will occupy
14,400 square feet in the new space, 4,000 for office, sales
and demonstration purposes and 10,400 for warehouse purposes.
The new rental will be $7,500 per month. Presently, AVES has
entered into a month-to-month lease at the Houston facility,
which calls for rental payments of $7,500 per month.
Fisher's operations are located in Torrington, Connecticut.
Fisher's business is conducted from approximately 16,000
square feet; 2,500 of which are used for office, sales and
demonstration purposes, 2,000 for warehouse purposes and
11,500 for production purposes. The current lease term
expires on August 31, 2004 and the current rental is $3,000
per month. Fisher maintains additional office space in
Patterson, New York and uses approximately 500 square feet
for administrative purposes. The current lease term expires
on January 31, 2002 and the current rental is $460 per month.
Item 3. Legal Proceedings
None
Item 4. Submission Of Matters To A Vote Of Security Holders
At the Annual Meeting of Shareholders held on February 27,
2001, pursuant to the Notice of Annual Meeting of the
Shareholders and Proxy Statement dated January 19, 2001,
David L. Koffman was elected to the Board of Directors with
2,304,347 shares voted FOR and 3,390 shares WITHHELD, Frank
Rabinovitz, Richard Ryder, Stephen Fisher and Paul Garfinkle
were elected to the Board of Directors with 2,304,457 shares
voted FOR and 3,280 shares WITHHELD, the appointment of KPMG
LLP as independent public accountants for the Company for the
fiscal year ending April 30, 2001 was approved with 2,305,320
shares voted FOR, 2,353 shares voted AGAINST and 64 shares
WITHHELD, and the approval of the 2001 Stock Option Plan with
2,000,037 shares voted FOR, 17,481 shares voted AGAINST, and
290,219 shares WITHHELD.
PART II
Item 5. Market For Registrant's Common Stock And Related
Stockholder Matters
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 trade
prices of the Company's common stock for the periods
indicated, in each fiscal year as reported by NASDAQ. As of
June 18, 2001, there were approximately 796 stockholders of
record of common stock.
The Company has not paid any dividends on its common stock
during the last five years and does not plan to do so in the
foreseeable future.
2001 Common Stock Trade Price 2000 Common Stock Trade Price
High Low High Low
First Quarter .81 .25 1.25 .47
Second Quarter 2.81 .55 1.41 .47
Third Quarter 1.44 .75 1.56 .47
Fourth Quarter .75 .35 1.02 .81
The above prices have been restated to reflect the reverse stock split.
Item 6. Selected Financial Data
Results of Operations:
Years Ended April 30, 2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Net Revenues $12,886,491 $13,197,866 $15,288,215 $13,604,558 $12,638,072
Income (Losses) from
Continuing Operations($500,714) $330,978 $445,805 $75,992 ($264,372)
Income (Losses) from
Discontinued Operations $-- $209,676 $-- $-- ($5,794,839)
Net Income (Losses) ($500,714) $540,654 $445,805 $75,992 ($6,059,211)
Basic and Diluted
Earnings (Loss) per
share from Continuing
Operations* ($.18) $.12 $.24 $.08 ($.30)
Basic and Diluted
Earnings (Loss) per
share from Discontinued
Operations* $-- $.08 $-- $-- ($6.58)
Weighted Average Shares
Outstanding* 2,766,396 2,766,396 1,836,661 922,120 880,253
At April 30,
Balance Sheet Information:
Total Assets $3,791,078 $3,239,126 $2,779,891 $2,634,964 $2,754,072
Long Term
Obligations $2,056,443 $1,278,571 $1,424,229 $3,446,021 $3,407,207
Working Capital
(Deficit) $947,656 $359,120 $370,914 $157,069 ($7,003)
Stockholders' Deficit($646,333) $(145,619) $(685,523)($2,925,566)($3,001,558)
* Per share and weighted average share amounts have been
restated to reflect reverse stock split.
Item 7. Management's Discussion and Analysis Of Financial
Condition And Results Of Operations
Comparison of Fiscal Year Ended April 30, 2001 With Fiscal
Year Ended April 30, 2000
Net Revenues
Consolidated Revenues of $12,886,000 decreased $312,000, or
2.4%, from fiscal 2000. The decrease was the result of a
$340,000 decrease in AVES' sales. The decrease at AVES was
primarily due to a decrease in the selling price and cost of
video equipment, partially offset by the Company's success at
winning some larger contractual school bids in fiscal 2001.
Fisher reported $29,000 in initial sales of a specialty
medical product introduced to the market for evaluation,
testing and trials.
Cost of Revenues
Consolidated Cost of Revenues of $10,837,000 decreased
$33,000, or less than 1.00%, from the prior fiscal year.
This was a result of lower selling prices at AVES only
partially offset by lower unit costs.
Gross Margin
Consolidated Gross Margin of $2,050,000 was 15.9% of
revenues, as compared with $2,328,000, or 17.6%, for the same
period last year. The decrease was due to lower profit
margins at AVES as compared to the prior year as a result of
lower selling prices only partially offset by decreases in
costs of products.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of
$2,423,000 increased $527,000, or 27.8%, as compared with the
prior reporting year. This increase was due to the addition
of $562,000 in operating expenses for Fisher. These expenses
were the result of continued research, development and
production of specialty medical products for introduction to
the market for evaluation, testing and trials. Fisher
operated for 12 months in fiscal 2001 versus 4 months in
fiscal 2000. AVES' spending decreased $16,000 as compared to
the prior year. Med's expenses decreased $22,000 from the
prior year primarily as a result of decreased professional
fees. Corporate spending increased by $3,000.
Operating Income (Loss)
Consolidated Operating Loss of $373,000 decreased $805,000,
or 186.3%, from last year's operating income of $432,000.
Fisher had an increased operating loss of $548,000 due to
continued research and development efforts, AVES operating
income decreased $276,000 as a result of reduced revenues and
margins, Corporate's operating loss increased $3,000 and
Med's operating loss decreased $22,000 as a result of
decreased spending.
Interest Expense
Consolidated Interest Expense of $140,000 increased $42,000
or 42.9% as compared with the same period last year. This
increase was the result of an increase in the outstanding
balance on the Company's line of credit primarily due to
funds used for Fisher.
Gain on Sale of Assets
Consolidated Gain on Sale of Assets of $1,000, as compared to
$8,000 in fiscal 2000, resulting from the sale of a Company
auto in the prior year.
Pre Tax Earnings (Loss)
Pre Tax Loss of $512,000 for the fiscal year ended April 30,
2001 decreased $854,000, or 249.6%, as compared with the same
period last year. This increased loss was primarily due to
$730,000 increased loss at Fisher due to research,
development and production activities. AVES' earnings
decreased $251,000, Corporate's loss decreased $92,000 and
Med's loss decreased $35,000.
Income Tax
Income Tax Benefit of $11,000 for the fiscal year ended April
30, 2001, represents a reversal of the prior year tax
accrual.
Income (Loss) from Continuing Operations
Loss from Continuing Operations of $501,000, decreased
$832,000, or 251.3%, as compared to income of $331,000 in the
prior year.
Income from Discontinued Operations
Income from Discontinued Operations of $210,000 in the prior
year was a result of the reversal of accruals relating to a
discontinued division in 1997 and the liquidation of a
business acquired in June 1995.
Consolidated Net Income (Loss)
Consolidated Net Loss of $501,000 for the fiscal year ended
April 30, 2001 decreased $1,041,000, or 192.6%, as compared
to net income of $541,000 for the same period last year.
This is primarily a result of $730,000 increased loss
recognized at Fisher due to research, development and
production activities, combined with $251,000 decreased
income at AVES as a result of lower revenues and margins.
Corporate's loss increased $95,000 due to the income from
discontinued operations recognized in the prior year and Med
experienced a $35,000 decreased loss as compared to the prior
year.
Comparison of Fiscal Year Ended April 30, 2000 With Fiscal
Year Ended April 30, 1999
Net Revenues
Consolidated Revenues of $13,198,000 decreased $2,090,000, or
13.7%, from fiscal 1999. The decrease was primarily the
result of a $1,990,000 decrease in AVES' sales. This
reduction 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 $10,870,000 decreased
$2,129,000, or 16.4%, from the prior fiscal year due to the
decrease in revenues.
Gross Margin
Consolidated Gross Margin of $2,328,000 was 17.6% of
revenues, as compared with $2,290,000, or 15.0%, for the same
period last year. The Company experienced lower unit sales
with higher profit margins, due to a number of one time sales
opportunities with lower margins in the prior year, that
resulted in a gross margin comparable to the prior year,
despite the decrease in revenues.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of
$1,896,000 increased $142,000, or 8.1%, as compared with the
prior reporting year. This increase was due to the addition
of $195,000 in operating expenses for the new subsidiary
Fisher Medical Corporation. AVES' spending increased $28,000
as compared to the prior year with increases in depreciation
expense and travel expense offset with decreases in payroll
costs. Corporate spending decreased $48,000, primarily due
to a reduction in the President's salary along with decreases
in professional fees as compared to fiscal 1999. Med's
expenses decreased $33,000 from the prior year primarily as a
result of decreased professional fees.
Operating Income
Consolidated Operating Income of $432,000 decreased $103,000,
or 19.3%, from last year's operating income of $536,000.
This decrease is primarily a result of increased operating
expenses for the new subsidiary Fisher Medical Corporation.
Interest Expense
Consolidated Interest Expense of $98,000 decreased $185,000
or 65.5% as compared with the same period last year. 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.
Gain on Sale of Assets
Consolidated Gain on Sale of Assets of $8,000 in the current
year resulted from the sale of a Company auto versus a gain
of $203,000 in the prior year which resulted from the
termination of Med's Purchase and Sale, Distribution and
Custody Agreements with Vivax.
Pre Tax Earnings
Pre Tax Earnings of $342,000 for the fiscal year ended April
30, 2000 decreased $114,000, or 25.0%, as compared with the
same period last year. This decrease was experienced due to
the gain on sale of assets recognized in the prior year along
with increased operating expenses incurred for the new
subsidiary Fisher Medical Corporation. These decreases to
earnings, as compared to the prior year, were partially
offset by a decrease in interest expense in the current year.
Income Tax
Provision for Income Taxes of $11,000 for the fiscal year
ended April 30, 2000, increased $1,000, or 10%, as compared
with $10,000 for the same period last year.
Income from Continuing Operations
Income from Continuing Operations of $331,000, decreased
$115,000, or 25.8%, as compared to the prior year.
Income from Discontinued Operations
Income from Discontinued Operations of $210,000 in the
current year is a result of the reversal of accruals relating
to a discontinued division in 1997 and the liquidation of a
business acquired in June 1995.
Consolidated Net Income
Consolidated Net Income of $541,000 for the fiscal year ended
April 30, 2000 increased $95,000, or 21.3%, as compared to
net income of $446,000 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2001, consolidated open lines of credit
available to the Company for borrowing, were $751,000 as
compared with $881,000 at April 30, 2000. 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 approximately $948,000 at April 30, 2001,
compared with $359,000 at April 30, 2000.
Net cash provided by operating activities was $125,000 in
2001 as compared with $675,000 in 2000. This decrease is
primarily the result of the decrease in income experienced
resulting from increased expenses at Fisher combined with
lower revenues and margins at AVES.
Cash flows used in investing activities during the year ended
April 30, 2001 were $316,000 primarily due to the purchase of
property and equipment and intangibles at Fisher. Net cash
used in 2000 was due to the acquisition of the assets of
Fisher Medical LLC along with increases in property and
equipment relating to the new Fisher Medical Corporation
subsidiary.
Cash provided by financing activities of $495,000 for the
fiscal year ended April 30, 2001 was primarily the result of
borrowings on the Company's line of credit and proceeds from
the issuance of Fisher Medical Corporation Senior 8%
Cumulative Convertible Preferred Stock. Net cash provided in
2000 was primarily the result of borrowings on the Company's
line of credit
The Company had no material commitments for capital
expenditures as of April 30, 2001.
At a meeting of shareholders held in November 1999, the
shareholders approved an amendment to Jayark's Certificate of
Incorporation providing a one for ten reverse stock split.
In December 1999, the Company filed a Certificate of
Amendment with the Delaware Secretary of State to effect the
one for ten reverse stock split. In January 2000, each ten
(10) issued and outstanding shares of Common Stock of the
Corporation, par value $.01 per share, were automatically
converted into one (1) validly issued, fully paid and
nonassessable share of Common Stock of the Corporation, par
value $.01 per share. To avoid the existence of fractional
shares of common stock, stockholders who would otherwise have
been entitled to receive fractional shares of common stock
equal to one-half or more received one whole share. No
shares or scrip were issued to holders in respect of any
fraction less then one-half. All per share and weighted
average share amounts have been restated to reflect this
transaction.
In January 2000, the Company, through a newly formed, wholly
owned subsidiary, Fisher Medical Corporation ("Fisher"),
entered into an Asset Purchase Agreement with Fisher Medical,
LLC ("LLC"), a company that develops, manufactures and
distributes medical supplies and equipment for hospitals,
nursing homes and individuals. Under the terms of the
agreement, Fisher purchased all of the assets of LLC for cash
of $215,000. The acquisition was accounted for under the
purchase method of accounting. Fisher financed the purchase
from the Company's existing $1,250,000 revolving line of
credit at the time.
Additionally, Fisher entered into Employment Agreements with
the two principals of LLC to continue developing,
manufacturing and distributing medical products of Fisher.
In consideration for the Employment Agreements, the two
principals also entered into Non-Disclosure and Non-
Competition Agreements.
Fisher also entered into a five-year (with a five-year
renewal option) Technology License Agreement with LLC, which
conveyed the technology developed by Trlby Innovative LLC of
Torrington, Connecticut ("Trlby"). Under a 20-year Product
Development and Technology Transfer Agreement
("Agreement"), Trlby has and will continue to develop
certain medical supply products for LLC. In consideration
for this November 1999 Agreement, Trlby receives consulting
fees of $42,000 per year and a royalty of 5% of net sales,
subject to minimum amounts, from any products developed by
them. The minimum royalties consist of $24,000 for the first
full calendar year following the date of the first commercial
introduction of the product, $36,000 for the succeeding
calendar year and $48,000 for each calendar year thereafter.
Under the terms of the Fisher Medical LLC Technology License
Agreement, in addition to all royalties and fees due Trlby,
Fisher will pay a royalty of 5% of gross income to LLC during
the five-year term of the Technology License Agreement. The
option to renew this agreement for an additional five years
requires Fisher to pay a fee of 20% of cumulative after tax
earnings for any products developed and sold during the
initial five-year term of the Technology License Agreement.
In October 2000, the Company authorized 20,000 shares of
Fisher Medical Senior 8% Cumulative Convertible Preferred
Stock. The Preferred Stock has a stated value of $150 per
share, which was subsequently amended to $100 per share. The
Preferred shares are redeemable by the Company at any time at
a redemption price of $100 per share. The Preferred shares
are also convertible into an equal number of Fisher common
stock shares on a one to one basis. As of April 30, 2001 the
Company has issued 4,295 shares of the Fisher Medical
Preferred Stock for $429,500.
If Fisher can develop, manufacture and distribute medical
supplies and equipment, the income and cash flow could have a
material affect on the operating results of Jayark. There
can be no assurances that the Company will be successful in
this venture.
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, 2001.
Effect of New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging
Activities" (FASB No. 133), which establishes accounting and
reporting standards for derivative instruments and hedging
activities. The statement requires recognition of all
derivatives at fair value in the financial statements. FASB
Statement No. 137, "Accounting for Derivative Instruments
and Hedging Activities Deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB No. 133", defers
implementation of SFAS No. 133 until fiscal years beginning
after June 15, 2000. In addition, FASB statement No. 138,
"Accounting for Certain Derivative Instruments and Certain
Hedging Activities", was issued in June 2000, and amended
the accounting and reporting standards of certain derivative
and hedging activities. As the Company does not currently
engage in derivative or hedging transactions, the Company is
presently not affected by the aforementioned standards.
In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 101 ("SAB 101"),
which provides guidance in applying generally accepted
accounting principles to revenue recognition in financial
statements. SAB 101, as amended, required implementation by
the Company in the fourth quarter of fiscal 2001. The
Company has reviewed the provision of SAB 101 and
implementation of the Bulletin did not have a significant
effect on the Company's consolidated financial statements.
In March 2000, the FASB issued its Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock
Compensation-an interpretation of APB Opinion No. 25" (FIN
44). FIN 44 applies prospectively to new awards, exchanges
of awards in a business combination, modifications to
outstanding awards, and changes in grantee status that occur
on or after July 1, 2000, except for the provisions related
to repricings and the definition of an employee which apply
to awards issued after December 15, 1998. The Company
reviewed the provisions of FIN 44 and implementation of these
guidelines did not have a material impact on the Company's
consolidated financial statements.
In July 2001, the FASB issued Statement of Financial
Accounting Standards No. 141, "Business Combinations" (FASB
141) which supersedes APB Opinion No. 16, "Business
Combinations". FASB No. 141 eliminates the pooling-of-
interests method of accounting for business combinations and
modifies the application of the purchase accounting method.
The elimination of the pooling-of-interests method is
effective for transactions initiated after June 30, 2001.
The remaining provisions of FASB No. 141 will be effective
for transactions accounted for using the purchase method that
are completed after June 30, 2001. The Company is currently
addressing the Statement and has not yet made a determination
of the impact adoption of FASB No. 141 will have on the
consolidated financial statements.
In July 2001, the FASB also issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Intangible
Assets" (FASB No. 142) which supersedes APB Opinion No. 17,
"Intangible Assets". FASB No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived
intangible assets, addresses the amortization of intangible
assets with a defined life and addresses the impairment
testing and recognition for goodwill and intangible assets.
SFAS 142 will apply to goodwill and intangible assets arising
from transactions completed before and after the Statement's
effective date. FASB No. 142 is effective for fiscal 2002.
The Company is currently assessing the Statement and has not
yet made a determination of the impact adoption of FASB No.
142 will have on the consolidated financial statements.
Item 7A. Market Risk
None
Item 8. Financial Statements And Supplementary Data
The Independent Auditors' Reports, Consolidated Financial
Statements and Notes to Consolidated Financial Statements
filed as a part of this report are listed in the accompanying
Index to Consolidated Financial Statements.
Item 9. Change In and Disagreement With Accountants on
Accounting And Financial Disclosure
The Jayark Corporation Board of Directors and Audit Committee
approved KPMG LLP (KPMG) as its independent public
accountants for the fiscal year ending April 30, 2001. KPMG
replaced BDO Seidman LLP (BDO) which resigned as the
Company's principal independent auditors on November 13, 2000
(date of resignation). During the past five years, up to and
including the date of resignation, BDO's audit report of the
financial statements of the Company did not contain an
adverse or disclaimer of opinion, nor has the report been
qualified or modified as to uncertainty, audit scope, or
accounting principals. During the past five years, there
were no disagreements between the Company and BDO on any
matter of accounting principals or practices, financial
statement disclosure, or auditing scope or procedure which,
if not resolved to the satisfaction of BDO, would have caused
BDO to make reference to the subject matter of the
disagreement or disagreements.
The resignation of BDO was subsequently disclosed in Form
8K/A, dated December 5, 2000.
PART III
Item 10. Directors And Executive Officers Of The Registrant
Set forth below is a list of the directors, executive
officers and key employees of the Company and their
respective ages as of June 30, 2001, and, as to directors,
the expiration date of their current term of office:
CURRENT DIRECTORS
Name Age Term Expires Position Presently Held Director Since
- ---- --- ------------ ----------------------- --------------
David Koffman 42 2004 Chairman, President, 1983 Chief Executive Officer and Director
Frank Rabinovitz 58 2004 Executive Vice President, 1989
Chief Operating Officer, Director and
President of AVES
Robert C. Nolt 53 2001 Chief Financial Officer and Director 1998
Arthur G. Cohen 72 2002 Director 1990
Jeffrey P. Koffman 35 2002 Director 1999
Richard Ryder 55 2004 Director 2001
Stephen Fisher 55 2004 President of Fisher Medical 2001
Corporation and Director
Paul Garfinkle 60 2004 Director 2001
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
fourteen 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 of
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 28 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 ten years. Mr. Cohen is a Director of 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.
Jeffrey P. Koffman was elected Director of the Company in
1999. Mr. Koffman has served as a Director of Apparel
America, Inc. since June 1995 and Executive Vice-President of
Apparel America, Inc. from June 1994 to February 1996. Mr.
Koffman was appointed President of Apparel America, Inc. in
February 1996. Apparel America, Inc. filed for protection
from its creditors under Chapter 11 in 1998. Mr. Koffman
served as a financial analyst with Security Pacific from 1987
to 1989. In 1989, Mr. Koffman became Vice-President of
Pilgrim Industries and in 1990, he became the President of
that Company. From 1994 to present, Mr. Koffman has served
in an executive capacity with Tech Aerofoam Products.
Richard Ryder was elected Director of the Company in 2001.
Dr. Ryder has been a practicing physician in the Binghamton,
NY area for the past 23 years. He is board certified in
cardiology and internal medicine. Dr. Ryder is a graduate of
Wake Forest University Medical School and pursued his
cardiology training at Georgetown University.
Stephen Fisher, Sr. was elected Director of the Company in
2001. Mr. Fisher is the President of Fisher Medical
Corporation, a wholly owned subsidiary of the Company. Prior
to joining the Company, he was the principal and co-founder
of Fisher Medical LLC. He was CEO and Chairman of Vivax
Medical Corporation from 1996 until he resigned in 1998 to
start Fisher Medical LLC. From 1991 to 1996 he was President
of Aztech Corporation, a firm specializing in business
development, mergers and acquisitions and technology
licensing. Prior thereto, he was President of Material
Systems, Ltd., an engineering and management consulting firm.
He was an INCRA Fellow at Carnegie-Mellon University and an
Assistant Professor of engineering and conducted research at
West Virginia Institute of Technology and Virginia
Polytechnic Institute.
Paul Garfinkle was elected Director of the Company in 2001.
Mr. Garfinkle is currently a business consultant, having
retired from BDO Seidman, LLP, where he had been employed for
36 years and was an audit partner for 26 years.
Information Concerning Operations of 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
administers the Company's 2001 Stock Option Plan, giving it
authority to exercise powers of the Board with respect to the
Plan. The Stock Option Committee consists of Mr. Robert Nolt
(Chair), Mr. Jeffrey Koffman, Mr. Paul Garfinkle and Dr.
Richard Ryder.
The Audit Committee of the Board of Directors consists of Mr.
Paul Garfinkle (Chair), Dr. Richard Ryder and Mr. Arthur
Cohen. The Audit Committee was created in 2001 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 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. Jeffrey Koffman
(Chair), Dr. Richard Ryder and Mr. Paul Garfinkle.
Item 11. 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 the chief executive
officer and each of the most highly compensated executive
officers whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE (1,2,3,4)
Annual Compensation
Year Salary Bonus
---- ------ -----
David L. Koffman 2001 $ 81,000 $--
Chairman, President and Chief Executive Officer 2000 $ 81,000 $--
1999 $141,750 $--
Frank Rabinovitz 2001 $187,000 $62,000
Director, Executive Vice President, 2000 $162,000 $50,000
Chief Operating Officer, President of AVES 1999 $162,000 $50,000
(1) Does not include the value of non-cash compensation to
the named individuals, which did not exceed the lesser of
$50,000 or, 10% of such individuals' 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 David L. Koffman and Frank Rabinovitz,
pursuant to which the Company has obtained insurance
policies on their lives in the approximate amounts of
$5,743,400 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, 2001 for this insurance coverage were $0 and
$25,373, respectively. Such amounts are not included in
the above table.
(3) The Company has accrued Mr. Koffman's fiscal 2001, 2000
and 1999 salary, however, he has deferred payment until
such time as the Company's working capital position
improves.
(4) Stephen Fisher, Sr., President of Fisher Medical
Corporation, waived his $120,000 salary for fiscal 2001
due to the working capital position of Fisher Medical
Corporation.
The Company's 2001 Stock Option Plan allows for the granting
of 250,000 shares of the Company's common stock. The Plan
provides for the granting to employees and to others who are
in a position to make significant contribution to the success
of the Company and its subsidiaries. The options granted may
be either incentive stock options as defined in Section 422
of the Internal Revenue Code of 1986, as amended, or options
that are not incentive options, or both. The exercise price
of each option shall be determined by the Board but, in the
case of an incentive option, shall not be less than 100%
(110% in the case of an incentive option granted to a ten-
percent stockholder) of the fair market value of the stock
subject to the option on the date of grant; nor shall the
exercise price of any option be less, in the case of an
original issue of authorized stock, than par value.
Options shall be exercisable during such period or periods as
the Board may determine, but in no case after the expiration
of Ten years (Five years in the case of an incentive option
granted to a "ten percent stockholder" from the date of
grant.) In the discretion of the Board, options may be
exercisable (i) in full upon grant or (ii) over or after a
period of time conditioned on satisfaction of certain
Company, division, group, office, individual or other
performance criteria, including the continued performance of
services to the Company or its subsidiaries.
Unexercised options expire on the earlier of (i) the date
that is ten years from the date on which they were granted
(five years in the case of an Incentive Option granted to a
"ten percent stockholder"), (ii) the date of the
termination of an option holder for any reason other than
termination not for cause, death or disability (as defined in
the Stock Option Plan), or (iii) the earlier of one year, or
the expiration date of such option, from the date of the
optionee's disability or death.
There were no stock options outstanding at April 30, 2001.
Report of the Compensation Committee of the Board of
Directors on Executive Compensation
Except pursuant to its 2001 Stock Option 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 executives 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.
Item 12. Security Ownership Of Certain Beneficial Owners And
Management
The following table sets forth as of June 18, 2001, 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
Amount and Nature of % of
Name and Address of Beneficial Owner Beneficial Ownership Note (1) Class
- ------------------------------------ -------------------- -------- -----
David L. Koffman
300 Plaza Drive, Vestal, NY 13850 1,283,033 46.4%
Vulcan Properties, Inc.
505 Eighth Avenue Suite 300 New York, NY 10018 292,189 10.6%
Burton I. Koffman
300 Plaza Drive, Vestal, NY 13850 185,819 2,3 6.7%
Ruthanne Koffman
300 Plaza Drive, Vestal, NY 13850 183,665 6.6%
Jeffrey P. Koffman
150 East 52nd Street, New York, NY 10022 148,402 5.4%
Frank Rabinovitz
6116 Skyline Drive, Houston, TX 77057 68,426 2.5%
Richard Ryder
15 Campbell Road, Binghamton, NY 13905 24,000 0.9%
Robert C. Nolt
300 Plaza Drive, Vestal, NY 13850 10,000 0.4%
All Directors & Executive Officers as a Group 1,533,861 55.4%
1. All shares are owned directly by the individual named,
except as set forth herein. David L. Koffman and Jeffrey
P. Koffman are sons of Burton I. Koffman. Ruthanne
Koffman is the wife of Burton I. Koffman.
2. Excludes 4,200 shares owned by a charitable foundation of
which Burton I. Koffman is President and Trustee.
3. Includes 53,700 shares owned as tenants in common by
brothers Richard E. Koffman and Burton I. Koffman.
Item 13. Certain Relationships And Related Transactions
Except as noted share amounts are reported as they were prior
to the reverse stock split.
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 notes payable to related parties, 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,
Burton Koffman, Richard Koffman, Milton Koffman, Jeffrey
Koffman, Sara Koffman, Ruthanne Koffman, Elizabeth Koffman,
Steven Koffman, and two entities controlled by members of the
Koffman family, agreed to acquire all shares not purchased by
other stockholders on Primary Subscription. As a result,
adjusted to reflect the reverse stock split, the Koffman
Group beneficially owns 2,046,658 shares of Common Stock,
which represents approximately 74% of the Common Stock
outstanding at April 30, 2001.
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports
On Form 8-K
(a) Documents filed as part of this report:
1. And 2. Consolidated Financial Statements.
The Independent Auditors' Reports, Consolidated
Financial Statements and Notes to Consolidated
Financial Statements which are filed as a part of this
report are listed in the Index to Consolidated
Financial Statements.
Note - no financial statement schedules were required
to be filed.
3. Exhibits, which are filed as part of this
report, are listed in the accompanying Exhibit Index.
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JAYARK CORPORATION
By:
/s/ David L. Koffman Chairman of the Board and Director July 23, 2001
DAVID L. KOFFMAN
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the date indicated.
/s/ David L. Koffman Chairman of the Board, President, July 23, 2001
DAVID L. KOFFMAN Chief Executive Officer and Director
/s/ Frank Rabinovitz Executive Vice President, Chief July 23, 2001
FRANK RABINOVITZ Operating Officer and Director
/s/ Robert C. Nolt Chief Financial Officer and Director July 23, 2001
ROBERT C. NOLT
/s/ Arthur G. Cohen Director July 23, 2001 ARTHUR G. COHEN
/s/ Jeffrey P. Koffman Director July 23, 2001 JEFFREY P. KOFFMAN
/s/ Richard Ryder Director July 23, 2001 RICHARD RYDER
/s/ Stephen Fisher, Sr. Director July 23, 2001 STEPHEN FISHER, SR.
/s/ Paul Garfinkle Director July 23, 2001 PAUL GARFINKLE
JAYARK CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements Page
Independent Auditors' Reports 21-22
Consolidated Balance Sheets as of April 30, 2001 and 2000 23
Consolidated Statements of Operations for the Years Ended
April 30, 2001, 2000 and 1999 24
Consolidated Statements of Stockholders' Deficit for the
Years Ended April 30, 2001, 2000 and 1999 25
Consolidated Statements of Cash Flows for the Years Ended
April 30, 2001, 2000 and 1999 26
Notes to Consolidated Financial Statements 27-37
Independent Auditors' Report
To the Shareholders and Directors
Jayark Corporation:
We have audited the accompanying consolidated balance sheet
of Jayark Corporation and subsidiaries as of April 30, 2001,
and the related consolidated statements of operations,
stockholders' deficit, and cash flows for the year then
ended. 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 audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides 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, 2001, and the results of their operations and
their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States
of America.
/s/ KPMG LLP
July 11, 2001
Syracuse, New York
Independent Auditors' Report
To the Shareholders and Directors
Jayark Corporation
Vestal, New York
We have audited the accompanying consolidated balance sheet
of Jayark Corporation and Subsidiaries as of April 30, 2000,
and the related consolidated statements of operations,
changes in stockholders' deficit, and cash flows for each of
the two years in the period ended April 30, 2000. 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, 2000, and the results of their operations and
their cash flows for each of the two years in the period
ended April 30, 2000 in conformity with generally accepted
accounting principles.
/s/ BDO Seidman, LLP
New York, New York
July 10, 2000
Jayark Corporation and Subsidiaries
Consolidated Balance Sheets
April 30, 2001 and 2000
2001 2000
---- ----
Assets
Current Assets:
Cash and Cash Equivalents $834,145 $530,540 Accounts Receivable - Trade, less allowance for
Doubtful accounts of $67,000 and $76,000, in 2001 and
2000, respectively 1,352,457 1,384,212
Inventories (Note 3) 670,320 460,627
Other Current Assets 42,202 89,915
--------- ---------
Total Current Assets 2,899,124 2,465,294
Property, Plant & Equipment, net (Note 4) 542,204 453,594
Goodwill and Other Intangibles net of accumulated amortization,
of $534,292 and $517,553 in 2001 and 2000, respectively 349,750 320,238
--------- ---------
Total Assets $3,791,078 $3,239,126
========= =========
Liabilities
Current Liabilities:
Borrowings Under Lines of Credit (Note 5) $499,060 $368,954
Current Portion of Long Term Debt -
Related Parties (Note 6) 161,332 161,332
Accounts Payable and Accrued Expenses 922,605 542,375
Accrued Interest - Related Parties (Notes 6 and 12) -- 504,510
Accrued Salaries (Note 12) 295,143 445,640
Other Current Liabilities 73,328 83,363
--------- ---------
Total Current Liabilities 1,951,468 2,106,174
Long Term Debt - Related Parties, excluding current
portion (Note 6) 1,213,661 1,278,571
Deferred Compensation (Note 12) 338,272 --
Accrued Interest - Related Parties (Notes 6 and 12) 504,510 --
--------- ---------
Total Liabilities 4,007,911 3,384,745
--------- ---------
Commitments and Contingencies (Notes 13 and 14)
8% Cumulative Convertible Preferred Stock
of Subsidiary (Note 10) 429,500 --
--------- ---------
Stockholders' Deficit
Common Stock of $.01 Par Value, Authorized 30,000,000
Shares; issued 2,773,896 Shares 27,739 27,739
Additional Paid-In Capital 12,598,980 12,598,980
Accumulated Deficit (13,272,302)(12,771,588)
Treasury Stock, at cost, 7,500 shares in 2001 and 2000 (750) (750)
--------- ---------
Total Stockholders' Deficit (646,333) (145,619)
--------- ---------
Total Liabilities & Stockholders' Deficit $3,791,078 $3,239,126
========= =========
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Operations
Years Ended April 30, 2001, 2000 and 1999
2001 2000 1999
---- ---- ----
Net Revenues $12,886,491 $13,197,866 $15,288,215
Cost of Revenues 10,836,632 10,869,794 12,998,508
---------- ---------- ----------
Gross Margin 2,049,859 2,328,072 2,289,707
Selling, General and Administrative (Note 12) 2,422,739 1,895,922 1,754,169
---------- ---------- ----------
Operating Income (Loss) (372,880) 432,150 535,538
Other Income (Expense):
Interest Expense, Net (140,134) (97,828) (283,165)
Gain on Sale of Assets 1,156 7,800 203,432
---------- ---------- ----------
Pre Tax Earnings (Loss) (511,858) 342,122 455,805
Income Tax Expense (Benefit) (Note 11) (11,144) 11,144 10,000
---------- ---------- ----------
Income (Loss) from Continuing Operations (500,714) 330,978 445,805
---------- ---------- ----------
Income from Discontinued Operations (Note 15) -- 209,676 --
---------- ---------- ----------
Net Income (Loss) ($500,714) $540,654 $445,805
========== ========== ==========
Basic and Diluted Earnings (Loss) per Common Share:
Continuing Operations ($.18) $.12 $.24
Discontinued Operations $-- $.08 $--
---------- ---------- ----------
Net Income (Loss) per Common Share ($.18) $.20 $.24
========== ========== ==========
Weighted Average Common Shares:
Basic and Diluted 2,766,396 2,766,396 1,836,661
========== ========== ==========
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Stockholders' Deficit
Years Ended April 30, 2001, 2000 and 1999
Common Additional Accumulated Treasury Total
Stock Paid-In Deficit Stock Stockholders'
Capital Deficit
------- ---------- ----------- ------ -------------
Balance at April 30, 1998 276,711 10,555,770 (13,758,047) -- (2,925,566)
Decreased Par Value to
$.01 from $.30 per Share(267,415) 267,415 -- -- --
Issue of 1,844,240 shares
in Offering (Note 9) 18,443 1,775,795 -- -- 1,794,238
Net Income -- -- 445,805 -- 445,805
------- ---------- ----------- ------ ------------
Balance at April 30, 1999 27,739 12,598,980 (13,312,242) -- (685,523)
Purchase of Treasury Stock -- -- -- (750) (750)
Net Income -- -- 540,654 -- 540,654
------- ---------- ----------- ------ ------------
Balance at April 30, 2000 27,739 12,598,980 (12,771,588) (750) (145,619)
Net Loss -- -- (500,714) -- (500,714)
------- ---------- ----------- ------ ------------
Balance at April 30, 2001 $27,739 $12,598,980 ($13,272,302)($750) ($646,333)
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended April 30, 2001, 2000 and 1999
2001 2000 1999
--------- --------- --------
Cash Flows From Operating Activities:
Net Income (Loss) ($500,714) $540,654 $445,805
Adjustments to Reconcile Net Income (Loss) Provided
By Operating Activities:
Depreciation and Amortization of Property, Plant
and Equipment 182,191 91,533 109,353
Amortization of Goodwill and Other Intangibles 16,739 32,498 21,360
Miscellaneous Write Off -- -- (26,027)
Gain on Disposition of Assets (1,156) (7,800) (203,432)
Changes In Assets and Liabilities, net of business
acquisition:
Accounts Receivable 31,755 434,001 (94,381)
Inventories (209,693) (83,158) (66,350)
Other Current Assets 47,713 (28,663) (8,924)
Accounts Payable and Accrued Expenses 380,230 (400,630) (77,812)
Accrued Salaries and Deferred Compensation 187,775 53,221 93,687
Accrued Interest - Related Parties -- -- 183,239
Other Liabilities (10,035) 43,445 (55,503)
--------- --------- --------
Net Cash Provided By Operating Activities 124,805 675,101 321,015
--------- --------- --------
Cash Flows From Investing Activities:
Purchase of Assets -- -- (724,625)
Proceeds from Sale of Assets 1,156 7,800 884,925
Purchases of Property, Plant and Equipment (270,801) (349,193) (91,987)
Purchase of Fisher Medical, LLC, net of cash
acquired (Note 14) -- (215,000) --
Purchases of Intangibles (46,251) (20,438) --
--------- --------- --------
Net Cash Provided By (Used In)
Investing Activities (315,896) (576,831) 68,313
--------- --------- --------
Cash Flows From Financing Activities:
Net Borrowings Under Lines of Credit 130,106 368,955 --
Payments of Long Term Debt - Related Parties (64,910) (145,659) (379,622)
Proceeds From Issuance of 8% Cumulative Convertible
Preferred Stock of Subsidiary (Note 10) 429,500 -- --
Purchase of Treasury Stock -- (750) --
Proceeds From Issuance of Common Stock -- -- 11,160
Costs Paid for Issuance of Common Stock -- -- (50,000)
--------- --------- --------
Net Cash Provided By (Used In)
Financing Activities 494,696 222,546 (418,462)
--------- --------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 303,605 320,816 (29,134)
Cash & Cash Equivalents at Beginning of Year 530,540 209,724 238,858
--------- --------- --------
Cash & Cash Equivalents at End of Year $834,145 $530,540 $209,724
========= ========= ========
Supplemental Disclosures:
Cash Paid During the Year for:
Interest $140,969 $120,159 $142,939
========= ========= ========
Taxes $-- $33,001 $--
========= ========= ========
See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements
April 30, 2001, 2000 and 1999
(1) Summary of Significant Accounting Policies
Operations
The Company conducts its operations through three wholly
owned subsidiaries, AVES AudioVisual Systems, Inc.
("AVES"), Med Services Corporation ("Med") and Fisher
Medical Corporation ("Fisher"), each of which constitutes a
separate business segment for financial reporting purposes.
AVES distributes and rents a broad range of audio, video and
presentation equipment. Med finances the manufacture, sale
and rental of medical equipment. Fisher develops,
manufactures and distributes therapeutic support surfaces
used in hospitals, nursing homes and home health care.
Principles of Consolidation
The consolidated financial statements include the accounts of
Jayark Corporation and its wholly owned subsidiaries (the
"Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash
equivalents. The Company's cash equivalents consist of
certificates of deposits aggregating $0 and $250,000 at April
30, 2001 and 2000, respectively.
Inventories
Inventories are stated at the lower of cost or market value.
Cost is determined by using the first-in, first-out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation of plant and equipment is calculated using the
straight-line method over the estimated useful lives of the
assets. Amortization of leasehold improvements is calculated
on a straight-line basis over the lesser of the lease term or
estimated useful lives of the improvements. The useful lives
of these assets and lease terms of the leasehold improvements
range from approximately 3 to 20 years. At the time of sale
or retirement, the costs and accumulated depreciation or
amortization of such assets are removed from the respective
accounts, and any resulting gain or loss is reflected in
income. Maintenance and repairs are charged to operations as
incurred, and 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 (goodwill) is being amortized
using the straight-line method over a 20 to 40-year period
commencing with the dates of acquisition.
The cost of patents obtained for some of the Company's
products are being amortized over the life of the patents.
Income Taxes
The Company utilizes the asset and liability method of
accounting for income taxes. Under this method, 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 and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. 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. Deferred tax assets are reduced by a
valuation allowance when there is uncertainty as to the
ultimate realization of the asset.
Earnings (Loss) per Common 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. Assumed exercise of options are
not included in the calculation of diluted earnings per share
for the fiscal years ended April 30, 2001, 2000 and 1999
since the effect would be antidilutive due to the option
price being greater than the average market price.
Accordingly, basic and diluted net earnings per share do not
differ for any period presented.
The following table summarizes securities that were
outstanding as of April 30, 2001, 2000 and 1999 but not
included in the calculation of diluted net earnings per share
because such shares are antidilutive.
For the year ending April 30, 2001 2000 1999
- ------------------------------------------------------------------------
Stock Options -- 10,500 10,500
All outstanding options relating to stock option plans prior
to the 2001 Stock Option Plan were terminated with the
approval of the 2001 Stock Option Plan. As of April 30,
2001, there have been no options issued under the new 2001
Stock Option Plan.
Revenue Recognition
The Company recognizes revenues when products are shipped to
customers. Rental revenue is recognized over the rental
period and service revenue is recognized when services are
performed. Allowances for returns and losses are recorded in
the period such returns and losses are determined.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment,
goodwill and other intangibles 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. No write-
downs have been necessary through April 30, 2001.
Stock Based Compensation
The Company accounts for its stock option plan in accordance
with the provision of APB Opinion No. 25 "Accounting for
Stock Issued to Employees," and related interpretations. As
such, compensation expense is measured on the date of grant
and recognized over the vesting period only if the current
market price of the underlying stock exceeds the exercise
price. The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 123, " Accounting for Stock
Based Compensation," which permits entities to recognize as
expense over the vesting period the fair value of all stock-
based awards on the date of grant. Alternatively, SFAS 123
also allows entities to continue to apply the provisions of
APB Opinion No. 25 and provide pro forma net income
disclosures for employee stock option grants made in 1995 and
future years as if the fair value based method defined in
SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosures stipulated by SFAS No. 123.
Research and Development Costs
Research and development costs are charged to expense as
incurred. Research and development expense was $655,245,
$173,818 and $0 in fiscal 2001, 2000 and 1999, respectively,
and is recorded within selling, general and administrative
expenses.
Financial Instruments
The Company's financial instruments, which include cash and
cash equivalents, accounts receivable, accounts payable,
borrowings under lines of credit, and long-term debt are
stated at costs which approximates fair value at April 30,
2001 and 2000.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America 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.
Recent Pronouncements
In June 1998 the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging
Activities" (FASB No. 133), which establishes accounting and
reporting standards for derivative instruments and hedging
activities. The statement requires recognition of all
derivatives at fair value in the financial statements. FASB
Statement No. 137, "Accounting for Derivative Instruments
and Hedging Activities Deferral of the Effective Date of FASB
Statement No. 133, an amendment of FASB No. 133", defers
implementation of SFAS No. 133 until fiscal years beginning
after June 15, 2000. In addition, FASB statement No. 138,
"Accounting for Certain Derivative Instruments and Certain
Hedging Activities", was issued in June 2000, and amended
the accounting and reporting standards of certain derivative
and hedging activities. As the Company does not currently
engage in derivative or hedging transactions, the Company is
presently not affected by the aforementioned standards.
In December 1999, the Securities and Exchange Commission
(SEC) issued Staff Accounting Bulletin No. 101 ("SAB 101"),
which provides guidance in applying generally accepted
accounting principles to revenue recognition in financial
statements. SAB 101, as amended, required implementation by
the Company in the fourth quarter of fiscal 2001. The
Company has reviewed the provision of SAB 101 and
implementation of the Bulletin did not have a significant
effect on the Company's consolidated financial statements.
In March 2000, the FASB issued its Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock
Compensation-an interpretation of APB Opinion No. 25" (FIN
44). FIN 44 applies prospectively to new awards, exchanges
of awards in a business combination, modifications to
outstanding awards, and changes in grantee status that occur
on or after July 1, 2000, except for the provisions related
to repricings and the definition of an employee which apply
to awards issued after December 15, 1998. The Company
reviewed the provisions of FIN 44 and implementation of these
guidelines did not have a material impact on the Company's
consolidated financial statements.
In July 2001, the FASB issued Statement of Financial
Accounting Standards No. 141, "Business Combinations" (FASB
141) which supersedes APB Opinion No. 16, "Business
Combinations". FASB No. 141 eliminates the pooling-of-
interests method of accounting for business combinations and
modifies the application of the purchase accounting method.
The elimination of the pooling-of-interests method is
effective for transactions initiated after June 30, 2001.
The remaining provisions of FASB No. 141 will be effective
for transactions accounted for using the purchase method that
are completed after June 30, 2001. The Company is currently
addressing the Statement and has not yet made a determination
of the impact adoption of FASB No. 141 will have on the
consolidated financial statements.
In July 2001, the FASB also issued Statement of Financial
Accounting Standards No. 142, "Goodwill and Intangible
Assets" (FASB No. 142) which supersedes APB Opinion No. 17,
"Intangible Assets". FASB No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived
intangible assets, addresses the amortization of intangible
assets with a defined life and addresses the impairment
testing and recognition for goodwill and intangible assets.
SFAS 142 will apply to goodwill and intangible assets arising
from transactions completed before and after the Statement's
effective date. FASB No. 142 is effective for fiscal 2002.
The Company is currently assessing the Statement and has not
yet made a determination of the impact adoption of FASB No.
142 will have on the consolidated financial statements.
Reclassifications
Certain 2000 and 1999 amounts have been reclassified to
conform with the 2001 presentation.
(2) Segment and Related Information
The Company operates in three reportable business segments as
follows:
The Company's audio-visual subsidiary, AVES Audio Visual
Systems, Inc. ("AVES"), distributes and rents a broad range
of audio, video and presentation equipment, and supplies to
businesses, churches, hospitals, hotels and educational
institutions
MED Services Corp. ("Med") finances the manufacture, sales
and rental of medical equipment.
Fisher Medical Corporation ("Fisher") develops,
manufactures and distributes therapeutic support surfaces to
hospitals, nursing homes and home health care.
The following table reflects the results of the segments
consistent with the Company's internal financial reporting
process. The following results are used in part, by
management, both in evaluating the performance of, and in
allocating resources to, each of the segments.
Corporate
and
AVES Fisher Med Unallocated Consolidated
----------- ------- ------ --------- -----------
Twelve Months Ended April 30, 2001
Net Revenues $12,857,841 $28,650 $-- $-- $12,886,491
Depreciation and Amortization 71,047 100,875 5,648 21,360 198,930
Net Operating Income (Loss) 655,390 (742,053)(10,761)(275,456) (372,880)
Net Income (Loss) 525,788 (924,775) (4,070) (97,657) (500,714)
Twelve Months Ended April 30, 2000
Net Revenues 13,197,866 -- -- -- 13,197,866
Depreciation and Amortization 79,916 20,802 1,953 21,360 124,031
Net Operating Income (Loss) 932,075 (194,620)(32,706)(272,599) 432,150
Net Income (Loss) 776,819 (194,620)(39,398) (2,147) 540,654
Twelve Months Ended April 30, 1999
Net Revenues 15,188,215 -- 100,000 -- 15,288,215
Depreciation and Amortization 64,323 -- 43,132 23,258 130,713
Net Operating Income (Loss) 895,084 -- (38,679)(320,867) 535,538
Net Income (Loss) 763,288 -- 139,754 (457,237) 445,805
Total Identifiable Assets at:
April 30, 2001 2,630,383 712,105 232,545 216,045 3,791,078
April 30, 2000 2,483,384 406,170 94,855 254,717 3,239,126
April 30, 1999 2,417,714 -- 80,289 281,888 2,779,891
(3) Inventories
Inventories are summarized as follows:
April 30, 2001 April 30, 2000
-------------- --------------
Raw Materials $201,877 $81,331
Work In Process 22,660 --
Finished Goods 445,783 379,296
-------------- --------------
$670,320 $460,627
============== ==============
(4) Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
April 30, 2001 April 30, 2000
-------------- --------------
Machinery and equipment $413,419 $202,435
Furniture and fixtures 117,665 110,414
Leasehold improvements 109,662 86,728
Automobiles and trucks 182,098 182,098
Rental and demonstration equipment 230,481 200,850
-------------- --------------
Total property and equipment 1,053,327 782,526
Less accumulated depreciation and amortization 511,123 328,932
-------------- --------------
Net property and equipment $542,204 $453,594
============== ==============
(5) Borrowings Under Lines of Credit
The Company has two lines of credit which are split between
the AVES and Med subsidiaries. The AVES line of credit is
secured by the related accounts receivable and inventories,
and provides for borrowings up to $750,000 through September
30, 2001. The Med line of credit is guaranteed by AVES, and
provides for borrowing up to $500,000 through September 30,
2001. The borrowings under the lines of credit bear interest
at prime, which was 7.5% and 9.0% at April 30, 2001 and 2000,
respectively. The Company had $750,940 and 881,046 available
under the lines of credit at April 30, 2001 and 2000,
respectively.
There are no financial covenants associated with the lines of
credit.
(6) Long-term Debt - Related Parties
Long-term debt with related parties is summarized as follows:
2001 2000
------------ -------------
Subordinated note payable due December 2004;
quarterly interest payments at fixed
interest rate of 7.5% $850,000 $895,858
Subordinated notes payable due December 2004;
quarterly interest payments at fixed
interest rate of 8% $524,993 $544,045
------------ -------------
1,374,993 1,439,903
Less: Current Installments 161,332 161,332
------------ -------------
$1,213,661 $1,278,571
============ =============
The Company has a subordinated note payable to a related
party which aggregated $850,000 and $895,858 at April 30,
2001 and 2000, respectively. The note payable requires
annual principal payments of $100,000 due on December 31.
The note matures in December 2004, at which time the entire
unpaid principal balance plus accrued interest is due. The
note is unsecured. Due to the Company's cash flow position,
the unpaid portion of the December 31, 2000 principal payment
was waived until the maturity date of the note. Interest
expense on the note payable aggregated $67,852, $64,438 and
$68,799 in fiscal 2001, 2000 and 1999, respectively. Cash
paid for interest on the note was $51,915, $64,438 and
$68,799 in 2001, 2000 and 1999, respectively.
On December 19, 1989, the Company issued $2,000,000 of 12
percent convertible subordinated debentures, to affiliates of
the Company, due in December 1995, and later extended to
December 1999. As of April 30, 1998, the Company had retired
$600,000 of the subordinated debentures. During fiscal 1999,
in conjunction with the common stock rights offering (Note
9), the Company retired an additional $761,000 in
subordinated debentures, as the holders of these notes
converted the debentures into Company stock. In November
1998, new subordinated notes with no conversion rights were
issued for the remaining debt (two notes). In conjunction
with the new subordinated notes, all unpaid interest from the
original notes aggregating $397,463 was waived by the holders
of these notes until maturity of these new notes (December
2004) and is included in accrued interest - related parties
in the consolidated balance sheet.
The Company's subordinated notes to related parties resulting
from the debenture conversion aggregated $524,993 and
$544,045 at April 30, 2001 and 2000, respectively. These
subordinated notes require combined annual principal payments
of $61,332 due on December 31. The notes mature in December
2004, at which time the entire unpaid principal balance plus
accrued interest is due. These subordinated notes are not
secured. Due to the Company's cash flow position, the unpaid
portion of the December 31, 2000 principal payments related
to these subordinated notes was waived until the maturity
date of the notes. Interest expense on the subordinated
notes aggregated $43,142, $45,680 and $104,023 in fiscal
2001, 2000 and 1999, respectively. Cash paid for interest on
the subordinated notes was $32,642, $45,680 and $24,531 in
2001, 2000 and 1999, respectively.
The aggregate maturities of all long-term debt for the years
subsequent to April 30, 2001 are summarized as follows:
2002 $161,332
2003 161,332
2004 1,052,329
---------
$1,374,993
(7) Stock Options
The Company's 2001 Stock Option Plan, (the "Plan") allows
for the granting of 250,000 shares of the Company's common
stock. The Plan provides for the granting to employees and
to others who are in a position to make significant
contribution to the success of the Company and its
subsidiaries. The options granted may be either incentive
stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, or options that are not
incentive options, or both. The exercise price of each
option shall be determined by the Board but, in the case of
an incentive option, shall not be less than 100% (110% in the
case of an incentive option granted to a ten-percent
stockholder) of the fair market value of the stock subject to
the option on the date of grant; nor shall the exercise price
of any option be less, in the case of an original issue of
authorized stock, than par value.
Options shall be exercisable during such period or periods as
the Board may determine, but in no case after the expiration
of ten years (five years in the case of an incentive option
granted to a "ten percent stockholder" from the date of
grant. At the discretion of the Board, options may be
exercisable (i) in full upon grant or (ii) over or after a
period of time conditioned on satisfaction of certain
Company, division, group, office, individual or other
performance criteria, including the continued performance of
services to the Company or its subsidiaries.
Unexercised options expire on the earlier of (i) the date
that is ten years from the date on which they were granted
(five years in the case of an incentive option granted to a
"ten percent stockholder", (ii) the date of the termination
of an option holder for any reason other than termination not
for cause, death or disability (as defined in the Plan), or
(iii) the earlier of one year, or the expiration date of such
option, from the date of the optionee's disability or death.
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 share as if the
optional fair value method had been applied to determine
compensation costs for the Company's Stock option plan.
Since no options were granted in the fiscal years ended April
30, 2001, 2000 and 1999, no pro forma disclosures are
applicable.
(8) Common Stock
In 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.
At a meeting of shareholders held in November 1999, the
shareholders approved an amendment to Jayark's Certificate of
Incorporation providing a one for ten reverse stock split.
In December 1999, the Company filed a Certificate of
Amendment with the Delaware Secretary of State to effect the
one for ten reverse stock split and in January 2000, each ten
(10) issued and outstanding shares of Common Stock of the
Corporation, par value $.01 per share, were automatically
converted into one (1) validly issued, fully paid and
nonassessable share of Common Stock of the Corporation, par
value $.01 per share. To avoid the existence of fractional
shares of common stock, stockholders who would otherwise have
been entitled to receive fractional shares of common stock
equal to one-half or more received one whole share. No
shares or scrip were issued to holders in respect of any
fraction less then one-half. All per share and weighted
average share amounts have been restated to reflect this
reverse stock split.
(9) Common Stock Rights Offering
During fiscal 1999 the Company issued to its shareholders
rights to purchase shares of the Company's $.01 par value
Common Stock. The subscription price of $.10 per share was
good for an aggregate of up to 18,442,398 shares prior to the
reverse stock split. The Common Stock could have been
purchased either with cash or by tendering Company debt in a
principal amount equal to the subscription price.
The primary shareholders of the Company chose to participate
in the offering and as such, all offered shares were issued.
In lieu of cash, these shareholders tendered debt of the
Company in exchange for the shares. As a result of these
transactions, the Company effectively extinguished
approximately $1,000,000 of notes payable to related parties,
$761,000 of subordinated debentures and $72,000 of accrued
interest (Notes 6 and 12).
The shareholders who participated in the offering were
primarily related parties and as such the resulting gains and
losses from the extinguishment of debt were recorded as
additional paid in capital in the Statement of Stockholders'
Deficit.
(10) Preferred Stock of Subsidiary
In October 2000, the Company authorized 20,000 shares of
Fisher Medical 8% Senior Cumulative Convertible Preferred
Stock. The preferred stock has a stated value of $150 per
share, which was subsequently amended to $100 per share. The
preferred shares are redeemable by the Company at any time at
a redemption price of $100 per share. The preferred shares
are voting and each share is convertible into an equal number
of Fisher Medical Corporation common stock shares on a one to
one basis. In the event of a voluntary or involuntary
liquidation, dissolution or winding up of the Company, the
holders of preferred stock are entitled to distribution or
payment, before any distributions or payments to holders of
common stock. The holders of preferred shares are entitled
to receive, when declared by the Board of Directors, out of
funds legally available for that purpose, cumulative semi-
annual dividends at the rate of 8% per annum, commencing on
April 30, 2001. As of April 30, 2001 the Company had issued
4,295 shares of Fisher Medical Senior Cumulative Convertible
Preferred Stock for $429,500.
(11) Income Taxes
Income tax expense (benefit) for the years ending April 30
consist of the following:
2001 2000 1999
--------- -------- ---------
Current:
Federal ($11,144) $11,144 $10,000
State -- -- --
--------- -------- ---------
(11,144) 11,144 10,000
Deferred -- -- --
--------- -------- ---------
($11,144) $11,144 $10,000
Actual income tax expense (benefit) differs from the amount
computed by applying the U.S. Federal corporate income tax
rate of 34% to pre tax earnings, primarily as a result of
valuation allowances netted against potential deferred tax
assets.
The tax effects of temporary differences that give rise to
the deferred tax assets and deferred tax liabilities at April
30, are as follows:
2001 2000
---------- ---------
Deferred tax assets:
Allowance for doubtful accounts $23,000 $26,000
Allowance for obsolete inventories/unicap costs 18,000 16,000
Property, plant and equipment, principally due
to differences in depreciation 34,000 35,000
Accrued compensation 28,000 --
Net operating loss carryforwards and tax credits 4,022,000 4,023,000
---------- ---------
Total gross deferred tax assets 4,125,000 4,100,000
Less valuation allowance (4,125,000) (4,100,000)
---------- ---------
Net deferred tax assets $-- $--
========== ==========
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. As a
result of this assessment, management has recorded a
valuation allowance amounting to the entire deferred tax
asset balance at April 30, 2001 and 2000.
At April 30, 2001, the Company has net operating loss
carryforwards for Federal tax purposes of approximately
$11,800,000, which are available to offset future taxable
income, if any, through 2021.
(12) Related Party Transactions
At April 30, 2001 and 2000, the Company had accrued unpaid
wages aggregating $419,272 and $338,272, respectively. The
unpaid wages relate to salary deferral by the President of
the Company for prior services rendered. The terms of the
salary deferral is such that the President of the Company has
agreed to defer his salary until which time the working
capital position of the Company improves. Based upon the
intent of the parties, the Company has reflected $81,000 and
$338,272 as a current liability within accrued salaries in
the consolidated balance sheet at April 30, 2001 and 2000,
respectively, and reflected $338,272 as a long-term liability
(deferred compensation) in the consolidated balance sheet at
April 30, 2001.
During fiscal 2001, the President of the Fisher subsidiary
waived his rights to his fiscal 2001 salary which aggregated
$120,000. As the President of the Fisher subsidiary does not
have an equity ownership interest in the Company, the Company
has reflected this amount as a reduction of compensation
expense in selling, general and administrative expenses in
the consolidated statements of operations.
In connection with the common stock rights offering in fiscal
1999 (Note 9), the Company's President exchanged debt for
common stock of the Company. At the time of conversion, the
unpaid interest on the original debt, which aggregated
$107,047, was waived by the President until such time as the
Company's working capital position improves. At April 30,
2001, the waived interest balance of $107,047 is reflected as
a long-term liability based upon the intent of the parties
and is displayed in accrued interest - related parties in the
consolidated balance sheet.
(13) Commitments and Contingencies
The Company is obligated under various non-cancelable
operating lease agreements that expire at various dates
ranging through September 2011. Future minimum lease
payments related to these leases are as follows:
2002 $138,140
2003 138,000
2004 138,000
2005 136,000
2006 and thereafter 577,500
----------
$1,127,640
==========
Rental expense for these leases was $101,185, $74,490 and
$62,430 for the years ended April 30, 2001, 2000, and 1999,
respectively.
(14) Business Acquisition
On January 5, 2000, the Company entered into an Asset
Purchase Agreement with Fisher Medical, LLC ("LLC"), a
company that develops, manufactures and distributes medical
supplies and equipment for hospitals, nursing homes and
individuals. Under the terms of the agreement, Fisher
purchased all of the assets of LLC for cash of $215,000. The
acquisition has been accounted for under the purchase method
of accounting.
Additionally, Fisher entered into Employment Agreements with
the two principals of LLC to continue developing,
manufacturing and distributing medical products of Fisher.
In consideration for the Employment Agreements, the two
principals also entered into Non-Disclosure and Non-
Competition Agreements.
Fisher also entered into a five-year (with a five-year
renewal option) Technology License Agreement with LLC, which
conveyed the technology developed by Trlby Innovative LLC of
Torrington, Connecticut ("Trlby"). Under a 20-year Product
Development and Technology Transfer Agreement
("Agreement"), Trlby has and will continue to develop
certain medical supply products for LLC. In consideration
for this November 1999 Agreement, Trlby receives consulting
fees of $42,000 per year and a royalty of 5% of net sales,
subject to minimum amounts, from any products developed by
them. The minimum royalties consist of $24,000 for the first
full calendar year following the date of the first commercial
introduction of the product, $36,000 for the succeeding
calendar year and $48,000 for each calendar year thereafter.
Under the terms of the Technology License Agreement, in
addition to all royalties and fees due Trlby, Fisher will pay
a royalty of 5% of gross income to LLC during the five-year
term of the Technology License Agreement. The option to
renew this agreement for an additional five years requires
Fisher to pay a fee of 20% of cumulative after tax earnings
for any products developed and sold during the initial five-
year term of the Technology License Agreement.
(15) Discontinued Operations
In fiscal 2000, the Company wrote-off accrued expenses in the
amount of $209,676, related to the abandonment of the
Company's investment in LCL International Traders, Inc. in
1996 and the discontinuance of Rosalco, Inc. in 1997.
Accordingly, the amount has been classified as income from
discontinued operations in the consolidated statements of
operations.
(16) Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly
financial information for the years ended April 30, 2001 and
2000:
2001 Quarter Ended
July 31 October 31 January 31 April 30
---------- ---------- ---------- ----------
Net Revenues $3,928,080 $3,063,945 $2,808,090 $3,086,376
Cost of Revenues $3,357,328 $2,524,915 $2,360,408 $2,593,981
Net Income (Loss) ($124,451) ($113,772) ($246,802) ($15,689)
Basic and Diluted Net Income
(Loss) per Common Share: ($.04) ($.04) ($.09) ($.01)
2000 Quarter Ended
July 31 October 31 January 31 April 30
---------- ---------- ---------- ----------
Net Revenues $3,430,942 $3,657,061 $2,823,951 $3,285,912
Cost of Revenues $2,883,838 $3,010,907 $2,306,901 $2,668,148
Net Income (Loss) $100,325 $215,829 $37,161 $187,339
Basic and Diluted Net Income
(Loss) per Common Share: $.04 $.08 $.01 $.07
Exhibit Index
3(1) Certificate of Incorporation of the Company.
Incorporated herein by reference to the Company's Proxy
Statement for its 1991 Annual Meeting of Shareholders,
Exhibit B thereto.
3(2) Bylaws of the Company. Incorporated herein by reference
to the Company's Proxy Statement for its 1991 Annual
Meeting of Shareholders, Exhibit C thereto.
4(1) Specimen Certificate of Common Stock, par value $0.30
per share, incorporated herein by reference from
Registration Statement on Form S-1, File Number 2-18743,
Exhibit 4 thereto.
4(2) 12% Convertible Subordinated Debenture due 1994,
incorporated herein by reference to the Report on Form
8-K filed January 4, 1990, Exhibit 28(a) thereto.
4(3) Registration rights agreement dated as of December 20,
1989, by and between the Company and Rosalco, Inc.,
incorporated herein by reference to the Report on Form
8-K filed January 4, 1990, Exhibit 28(c) thereto.
10(1)* 1981 Incentive Stock Option Plan, as amended as of
December 15, 1989, incorporated herein by reference to
the Annual Report on Form 10-K for the year ended April
30, 1990, Exhibit 10(1) thereto.
10(2) Notes and Loan and Security Agreements (Inventory &
Accounts Receivable) each dated as of January 20, 1992,
between Jayark Corporation, AVES Audio Visual Systems,
Inc., Rosalco, Inc., Rosalco Woodworking, Inc., Diamond
Press Company, and State Street Bank & Trust Company of
Boston, Massachusetts, incorporated herein by reference
from the Annual Report on Form 10-K for the year ended
April 30, 1992, Exhibit 10(3) thereto.
10(3) Letter Agreement dated December 6, 1989, among
Arthur Cohen, Burton I. Koffman, and Richard E. Koffman.
Incorporated herein by reference to the Annual Report on
Form 10-K for the year ended April 30, 1990, Exhibit
10(3) thereto.
10(4) Indemnity escrow Agreement dated as of December 20,
1989, by and between the Company, Rosalco, Inc. and
certain individuals named therein, incorporated herein
by reference to the Report on Form 8-K filed January 4,
1990, Exhibit 28(c) thereto.
10(5) Factoring Agreements dated as of February 7, 1992,
by and between the Company, Pilgrim Too Sportswear,
Inc., J.F.D. Distributors, Inc., and others named
therein, and Barclays Commercial Corporation,
incorporated herein by reference to the Annual Report on
Form 10-K for the year ending April 30, 1992, Exhibit
10(10) thereto.
10(6) Diamond Press Asset Sale and Purchase Agreement
dated as of November 23, 1992 by and between the Company
and Harstan, Inc., incorporated herein by reference to
the Company's Form 8-K, as amended, as of November 23,
1992, Exhibit 2 thereto.
10(7) Asset Sale and Lease Termination Agreement, by and
between Pilgrim Too Manufacturing Company, Inc., New
Images, Inc., Victor Freitag, Jr. and wife Gilbert R.
Freitag, and Robert E. Skirboll and wife Robin T.
Skirboll, dated as of April 2, 1993; Asset Purchase
Agreement by and between the Company, Pilgrim Too
Sportswear, Inc., Pilgrim Too Manufacturing Company,
Inc. Stage II Apparel Corp., Shambuil Ltd., and Pilgrim
II Apparel Corp., dated as of April 2, 1993; both
incorporated herein by reference to the Company's Form
8-K as of April 2, 1993, Exhibits thereto.
10(8) Amendment to certain Notes and Loan and Security
Agreements each dated as of January 20, 1992,
incorporated herein by reference from the Annual Report
on Form 10-K for the year ended April 30, 1993, Exhibit
10(8) thereto.
10(9) Amendment to certain Notes and Loan and Security
Agreements each dated as of December 31, 1993,
incorporated herein by reference from the Annual Report
on Form 10-K for the year ended April 30, 1994, Exhibit
10(9) thereto.
10(10) Asset Purchase Agreement, dated June 5, 1995, among
LIB-Com Ltd., Liberty Bell Christmas, Inc., Ivy Mar Co.,
Inc., Creative Home Products, Inc., and Liberty Bell
Christmas Realty, Inc. as the sellers and LCL
International Traders, Inc. as the buyer, incorporated
herein by reference from the Company's report on Form 8-
K dated June 27, 1995, Exhibit 2(a) thereto.
10(11) Asset Purchase Agreement, dated June 5, 1995,
between Award Manufacturing Corporation as the seller,
and LCL International Traders, Inc., as the buyer,
incorporated herein by reference from the Company's
report on Form 8-K dated June 27, 1995, Exhibit 2(b)
thereto.
10(12) Guarantee Agreement, dated June 5, 1995, by Award
Manufacturing Corporation in favor of LCL International
Traders, Inc., incorporated herein by reference from the
Company's report on Form 8-K dated June 27, 1995,
Exhibit 2(c) thereto.
10(13) Guarantee Agreement, dated June 5, 1995, by LIB-Com
Ltd., Liberty Bell Christmas, Inc., Ivy Mar Co., Inc.,
Creative Home Products, Inc., and Liberty Bell Christmas
Realty, Inc. in favor of LCL International Traders,
Inc., incorporated herein by reference from the
Company's report on Form 8-K dated June 27, 1995,
Exhibit 2(d) thereto.
10(14) Promissory Note of LCL International Traders, Inc.,
due July 29, 1998, payable to the order of Commerzbank
AG, Hong Kong Branch, incorporated herein by reference
from the Company's report on Form 8-K dated June 27,
1995, Exhibit 2(e) thereto.
10(15) Confirmation Letter Agreement dated June 22, 1995,
among Citibank, N.A., Commerzbank AG, Bayerische
Vereinsbank AG, LCL International Traders, Inc., and
Jayark Corporation, incorporated herein by reference
from the Company's report on Form 8-K dated June 27,
1995, Exhibit 2(f) thereto.
10(16) Factoring Agreement dated June 23, 1995, between
LCL International Traders, Inc. and the CIT
Group/Commercial Services, Inc., incorporated herein by
reference from the Company's report on Form 8-K dated
June 27, 1995, Exhibit 99(a) thereto.
10(17) Inventory Security Agreement dated June 23, 1995,
between LCL International Traders, Inc. and the CIT
Group/Commercial Services, Inc., incorporated herein by
reference from the Company's report on Form 8-K dated
June 27, 1995, Exhibit 99(b) thereto.
10(18) Letter Agreement dated June 23, 1995, between LCL
International Traders, Inc. and the CIT Group/Commercial
Services, Inc., incorporated herein by reference from
the Company's report on Form 8-K dated June 27, 1995,
Exhibit 99(c) thereto.
10(19) Letter Agreement dated June 23, 1995, between LCL
International Traders, Inc. and the CIT Group/Commercial
Services, Inc., Liberty Bell Christmas, Inc., Ivy Mar
Co., Inc., and Creative Home Products, Inc.,
incorporated herein by reference from the Company's
report on Form 8-K dated June 27, 1995, Exhibit 99(d)
thereto.
10(20) Amendment to certain Notes and Loan and Security
Agreements each dated as of December 31, 1994,
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.
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 AudioVisual 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.
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.
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.
10(44) Asset Purchase Agreement dated January 5, 2000,
between Fisher Medical LLC and Fisher Medical
Corporation.
10(45) Technology License dated January 5, 2000, between
Fisher Medical LLC and Fisher Medical Corporation.
10(46) Employment Agreement dated January 5, 2000, between
Fisher Medical Corporation and Stephen Fisher, Jr.
10(47) Non-Disclosure and Non-Competition Agreement dated
January 5, 2000, between Fisher Medical Corporation and
Stephen Fisher, Jr.
10(48) Employment Agreement dated January 5, 2000, between
Fisher Medical Corporation and Stephen Fisher, Sr.
10(49) Non-Disclosure and Non-Competition Agreement dated
January 5, 2000, between Fisher Medical Corporation and
Stephen Fisher, Sr.
10(50) Amendment to Employment Agreement dated August 25,
2000, between Fisher Medical Corporation and Stephen
Fisher, Sr.
10(51) Amendment to Employment Agreement dated August 25,
2000, between Fisher Medical Corporation and Stephen
Fisher, II.