SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JAYARK CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
O-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01
2) Aggregate number of securities to which transaction applies:
359,123 shares of Common Stock
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:1
The filing fee is based upon the product of 359,123 shares of Common
Stock and the merger consideration of $.40 per share. In accordance
with Section 14 (g) of the Securities Exchange Act of 1934, the
filing fee was determined by calculating a fee of $92 per $1,000,000
of the amount calculated pursuant to the preceding sentence.
4) Proposed maximum aggregate value of transaction:
$143,650
5) Total Fee Paid:
$28.73
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
JAYARK CORPORATION
300 Plaza Drive
Vestal, New York 13850
TO OUR STOCKHOLDERS:
You are cordially invited to attend a special meeting of the
stockholders of Jayark Corporation ("Jayark") to be held at
10:00 a.m., local time, on ____________, at the offices of
Jayark at 300 Plaza Drive, Vestal New York 13850.
At the special meeting, you will be asked to consider and vote
upon the adoption of an Agreement and Plan of Merger, dated
February 3, 2003, providing for the merger of J Merger Corp., a
newly formed Delaware corporation ("Merger Corp."), into Jayark.
Merger Corp. is a wholly owned subsidiary of J Acquisition Corp.,
a Nevada corporation ("Parent"), which was formed for the purpose
of the merger and is owned by certain officers and directors of
Jayark and their affiliates, including the following persons:
* David Koffman, the Chairman, President, Chief Executive Officer
and a Director of Jayark
* Vulcan Properties, Inc., a corporation indirectly controlled by
Arthur Cohen
* Frank Rabinovitz, the Executive Vice President, Chief Operating
Officer and a Director of Jayark
* Jeffrey Koffman, a Director of Jayark
* Burton I. Koffman, the father of David Koffman
* Ruthanne Koffman, the wife of Burton I. Koffman
* Certain entities affiliated with the Koffman family
In the merger, each outstanding share of our common stock will
be converted into the right to receive $.40 in cash, except for
shares held by Parent and shares held by stockholders who have
perfected their dissenters' rights, which will be subject to
appraisal in accordance with Delaware law. If the stockholders
of Jayark adopt the merger agreement, Jayark will no longer be a
publicly-traded company.
We cannot complete the merger unless we obtain the following vote
to adopt the merger agreement:
* The affirmative vote of holders of a majority of the
outstanding shares of our common stock.
Parent has agreed to vote all shares of our common stock owned by
it in favor of the adoption of the merger agreement, which votes
will be counted for purposes of the second vote described above but
not the first vote. As of the record date for the special meeting,
Parent beneficially owned approximately 87% of our outstanding
common stock.
Our Board of Directors has unanimously approved the merger
agreement. In addition, the Board of Directors has engaged
Kirlin Securities, Inc. to render a written opinion as to the
fairness from a financial point of view to the public
stockholders of Jayark (other than the officers and directors of
Jayark and their affiliated entities, including Parent). The
written opinion of Kirlin Securities, Inc. is included in the
attached proxy statement as Appendix B and you should read it
carefully for a discussion of the assumptions made, procedures
followed, factors considered and limitations upon the review
undertaken by them in rendering its opinion.
Any stockholder who does not vote in favor of adopting the merger
agreement and who properly demands appraisal under Delaware law
will have the right to have the fair value of his shares determined
by a Delaware court. A copy of Section 262 of the Delaware General
Corporation Law is included in the attached proxy statement as
Appendix B. Appraisal rights are subject to a number of restrictions
and techinical requirements described in the attached proxy statement.
The accompanying proxy statement explains the proposed merger and
provides specific information concerning the merger agreement and
the special meeting. We urge you to read these materials completely
and carefully, including the merger agreement and other appendices.
Whether or not you plan to attend the special meeting, we request
that you complete, date, sign and return the enclosed proxy card
promptly in the enclosed pre-addressed postage-paid envelope.
Failure to return a properly executed proxy card or vote at the
special meeting will have the same effect as a vote against the
adoption of the merger agreement.Your vote is very important, so
please take the time to vote your shares on this matter.
By Order of the Board of Directors
/s/ David L. Koffman
____________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ____________
TO OUR STOCKHOLDERS:
The Special Meeting of Stockholders of Jayark Corporation, a
Delaware corporation ("Jayark"), will be held at the offices of
Jayark at 300 Plaza Drive, Vestal, New York 13850 at 10:00 a.m.,
local time, on ____________, for the following purposes:
(1) To approve the Agreement and Plan of Merger dated as of
February 3, 2003, by and among Jayark Corporation ("Jayark"),
J Acquisition Corp., a Delaware corporation ("Parent"), and J Merger
Corp., a Delaware corporation ("Merger Corp."), pursuant to which
Merger Corp. will merge with and into Jayark with Jayark being the
surviving corporation (the "Merger"), and each of the transactions
contemplated thereby, including, without limitation, the Merger; and
(2) To transact such other business as may properly come before
the meeting or any adjournments thereof.
Only holders of record of Jayark common stock, par value $.01 per
share, at the close of business on January 31, 2003 are entitled to
notice of the Special Meeting and to vote at the Special Meeting. As
of January 31, 2003, there were 2,766,396 shares of Jayark common stock
outstanding. The accompanying Proxy Statement is dated ____________,
and is being first mailed to stockholders on or about ____________.
Stockholders are cordially invited to attend the meeting in person.
Whether planning to attend the meeting or not, stockholders are urged
to complete, date and sign the enclosed Proxy and to return it promptly.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted at the Special Meeting.
Proxies may be revoked by delivering to Mr. Robert C. Nolt, Secretary,
Jayark Corporation, 300 Plaza Drive, Vestal, New York 13850, a written
notice of revocation bearing a later date than the Proxy, by duly
executing and delivering to the Secretary a subsequently dated Proxy
relating to the same shares or by attending the Special Meeting and
voting in person (although attendance at the Special Meeting will not
in and of itself constitute revocation of a Proxy). The enclosed,
addressed envelope requires no postage if mailed in the United States.
By Order of the Board of Directors,
/s/ Robert C. Nolt, Secretary
____________
TABLE OF CONTENTS
Description Page
Summary Term Sheet 3
Summary Term Sheet-Vote Required 4
Summary Term Sheet - Dissenters' and Appraisal Rights 5
Summary Term Sheet - Sources of Funds; Financing of the Merger 5
Questions and Answers About the Meeting 5
Summary Financial Information 9
Summary Historical Financial Information of Jayark 9
Per Share Market Price and Dividend Information 10
Introduction 10
Voting of Shares 11
Special Factors - Background of the Merger Agreement 12
Special Factors - The Effects of the Merger 13
Special Factors - Financing Effects of the Merger; Financing
of the Merger 14
The Effects of the Merger - Effects on Affiliates 14
The Effects of the Merger - Effects on Unaffiliated Stockholders 14
Recommendation of the Board of Directors; Fairness of the
Merger Proposal 16
Parent's Determination of Fairness of the Merger Proprosal 20
Conduct of Jayark's Business After the Merger 20
Security Ownership of Certain Beneficial Owners and Management 21
Proposal One - Approval of the Merger Agreement 22
The Parties 22
Effect on Stockholders 22
Reasons for the Merger 22
Effect of the Merger Proposal on Jayark Unaffiliated Stockholders 24
Effect of the Merger Proposal on Jayark 24
The Merger Agreement 28
The Merger Agreement - Conditions to the Completions of the
Merger 30
Appendix A - Agreement and Plan of Merger A-1
Appendix B - Written Opinion of Kirlin Securities, Inc. B-1
Appendix C - Appraisal Rights C-1
Appendix D - Jayark Corporation's Report on Form 10Q for the
Six Months Ending October 31, 2002 D-1
Appendix E - Jayark Corporation Report on Form 10K for the
Fiscal Year Ending April 30, 2002 E-1
CERTAIN DEFINITIONS
As used in this proxy statement, "Jayark," "we," "our," "ours," "us"
and the "Company" refer to Jayark Corporation and all of its
subsidiaries. "Merger Corp." refers to J Merger Corp., "Parent"
refers to J Acquisition Corp. and "merger agreement" refers to the
Agreement and Plan of Merger dated as of February 3, 2003 by and between
Jayark, Parent and Merger Corp.
SUMMARY TERM SHEET
THE FOLLOWING SUMMARY TERM SHEET, TOGETHER WITH THE "QUESTIONS AND
ANSWERS ABOUT THE MEETING" AND "QUESTIONS AND ANSWERS ABOUT THE MERGER"
FOLLOWING THIS SUMMARY TERM SHEET, HIGHLIGHT SELECTED INFORMATION FROM
THE PROXY STATEMENT ABOUT OUR PROPOSED MERGER AND THE SPECIAL MEETING.
THIS SUMMARY TERM SHEET AND THE QUESTION AND ANSWER SECTIONS MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER
UNDERSTAND AND FOR A MORE COMPLETE DESCRIPTION OF THE MERGER AND THE
OTHER MATTERS ON WHICH YOU WILL VOTE, YOU SHOULD CAREFULLY READ THIS
ENTIRE DOCUMENT AND ALL OF ITS APPENDICES BEFORE YOU VOTE. FOR YOUR
CONVENIENCE, WE HAVE DIRECTED YOUR ATTENTION IN PARENTHESES TO THE
LOCATION IN THIS PROXY STATEMENT WHERE YOU CAN FIND A MORE COMPLETE
DISCUSSION OF EACH ITEM LISTED BELOW.
THE MERGER
THE MERGER AGREEMENT. (Page 28)
On February 3, 2003 we signed the merger agreement, under which Jayark
would merge with Merger Corp., a newly formed Delaware corporation.
Under the terms of the merger agreement, if the merger is completed:
o Jayark stockholders as of the effective date of the merger, other
than Merger Corp. and stockholders who have perfected their dissenters'
rights under Delaware law, will be entitled to receive a cash payment
of $.40 per share.
o the officers and directors of Jayark at the effective time of
the merger will be the officers and directors of Jayark immediately
after the merger.
THE PARTIES. (Page 22)
o Jayark is a Delaware corporation.
o Parent is a recently-formed Nevada corporation organized for
the purpose of the merger.
o Merger Corp. is a recently-formed Delaware corporation and
wholly owned subsidiary of Parent organized for the purpose of the
merger.
o The principal executive offices of each of Jayark, Parent
and Merger Corp. are located at 300 Plaza Drive, Vestal, New York 13850.
o The telephone number for each of Jayark, Parent and Merger Corp.
is 607-729-9331.
VOTING OF SHARES. (Page 11)
Approval of the merger agreement requires the affirmative vote of the
holders of at least a majority of the outstanding shares of our common
stock.
Parent has agreed to vote all shares of our common stock owned by its in
favor of the adoption of the merger agreement. As of the record date for
the special meeting, Parent beneficially owned approximately 87% of our
outstanding common stock.
EFFECTS OF THE MERGER. (Page 13)
As a result of the merger:
o The registration of Jayark common stock under the Securities
Exchange Act of 1934 will terminate. Because of this, the merger is
considered a "going private" transaction;
o cashed-out stockholders will no longer have an interest in or
be a stockholder of Jayark and, therefore, they will not be able to
participate in Jayark's future earnings and growth, if any;
REASONS FOR THE MERGER. (Page 22)
Our primary reason for the merger is that after the merger our shares
will no longer be registered under the Securities Exchange Act and we
will therefore no longer incur the costs of maintaining our registration.
For more information on our reasons for the merger, please see page 21
of this proxy statement.
BACKGROUND OF THE MERGER PROPOSAL. (Page 12)
Please see "SPECIAL FACTORS - Background of the Merger Proposal" on
page 11 for a discussion of the events leading up to the signing of the
merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER. (Page 30)
The completion of the merger depends upon the satisfaction of a number
of conditions, unless waived, including:
o approval of the merger agreement by the holders of a majority of the
outstanding shares of common stock; and
o no litigation is pending regarding the merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES. (Page 15)
The receipt of cash by certain stockholders in the merger will be
taxable for federal income tax purposes.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES TO YOU OF
THE MERGER WILL DEPEND ON YOUR OWN SITUATION. TO REVIEW THE MATERIAL
TAX CONSEQUENCES IN GREATER DETAIL, PLEASE READ THE DISCUSSION UNDER
"SPECIAL FACTORS - CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES."
DISSENTERS' AND APPRAISAL RIGHTS. (Page 25)
Under Delaware law, you are entitled to dissent from the merger and you
may have appraisal rights in connection with the merger. To exercise your
appraisal rights, you must comply with all procedural requirements of
Delaware law. A description of the relevant sections of Delaware law is
provided in "PROPOSAL ONE - FAILURE TO TAKE ANY STEPS REQUIRED BY
DELAWARE LAW MAY RESULT IN A TERMINATION OR WAIVER OF YOUR APPRAISAL
RIGHTS.
SOURCES OF FUNDS; FINANCING OF THE MERGER (Page 5)
We estimate that the total funds required to fund the payment of the
consideration to be paid to cashed-out stockholders and to pay fees and
expenses relating to the merger will be approximately $254,000. These
amounts will be paid for through our available working capital.
RECOMMENDATION OF THE BOARD OF DIRECTORS. (Page 16)
Our Board of Directors believes that the merger agreement is fair to
and in the best interests of Jayark and its stockholders, including
both affiliated and unaffiliated stockholders, and unanimously
recommends that stockholders of Jayark vote "For" the approval of the
merger agreement. As used in this proxy statement, the term
"affiliated stockholders" means Parent and its stockholders, and the
term "unaffiliated stockholder" means any stockholder other than an
affiliated stockholder.
OPINION OF KIRLIN SECURTIES, INC. (Page 18)
In connection with the merger, the Board of Directors obtained the
opinion of Kirlin Securities, Inc. which delivered its opinion to
the Board of Directors on February 3, 2003 to the effect that the
$.40 per share cash consideration is fair, from a financial point
of view, to the public stockholders of Jayark, other than parent.
You should be aware, however, that the opinion was based upon
and is subject to important limitations and qualifications.
The full text of the opinion is attached as Appendix B
to this proxy statement.
THE SPECIAL MEETING
The Special Meeting of Stockholders of Jayark will be held at the
offices of Jayark at 300 Plaza Drive, Vestal, New York, NY 13850 at
10:00 a.m., local time, on ____________. At the Special Meeting,
you will be asked to consider the following proposal:
o the approval of the merger agreement, pursuant to which Merger
Corp. will merge with and into Jayark with Jayark being the surviving
corporation, and each of the transactions contemplated thereby,
including the merger.
QUESTIONS AND ANSWERS ABOUT THE MEETING
Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this proxy statement and the enclosed proxy card
because our Board of Directors is soliciting your votes for use at
a Special Meeting of Stockholders.
This proxy statement summarizes information that you need to know in
order to cast an informed vote at the meeting. However, you do not
need to attend the meeting to vote your shares. Instead, you may
simply complete, sign and return the enclosed proxy card.
We will begin sending this proxy statement, Notice of Special
Meeting and the enclosed proxy card on or about ____________ to all
stockholders entitled to vote. Holders of our common stock are
entitled to vote at the Special Meeting. The record date for those
entitled to vote is January 31, 2003. On January 31, 2003, there
were 2,766,396 shares of our common stock outstanding. Stockholders
are entitled to one vote for each share of common stock held as of the
record date.
Q: WHAT IS THE TIME AND PLACE OF THE SPECIAL MEETING?
A: The Special Meeting will be held at the offices of Jayark at
300 Plaza Drive, Vestal, New York 13850 at 10:00 a.m., local time, on
____________.
Q: WHAT AM I BEING ASKED TO VOTE ON?
A: You are being asked to vote on the approval of the merger
agreement between Jayark, Parent and Merger Corp., pursuant to which
Merger Corp. will merge with and into Jayark. As a result of the merger,
each outstanding share of our common stock will be converted into the
right to receive $.40 in cash, except for shares held by Parent and
shares held by stockholders who have perfected their dissenters' rights,
which shares will be subject to appraisal in accordance with the
Delaware law. After the merger, Jayark intends to "go private" and end
its reporting obligations with the SEC.
Q: WHO MAY BE PRESENT AT THE SPECIAL MEETING AND WHO MAY VOTE?
A: All holders of our common stock and other interested persons may
attend the Special Meeting in person. However, only holders of our common
stock of record as of January 31, 2003 may cast their votes in person or
by proxy at the Special Meeting.
Q: WHAT IS THE VOTE REQUIRED?
A: The proposal to approve the merger agreement must receive the
affirmative vote of the holders of at least a majority of the outstanding
shares of our common stock. If you do not vote your shares or if you
abstain from voting on this matter, your shares will not be included in
the determination of the voting power present at the Special Meeting. If
you do not instruct your broker on how to vote on this proposal, your
shares will not be included in the determination of the voting power
present at the Special Meeting.
Q: WHO IS SOLICITING MY PROXY?
A: The Board of Directors of Jayark.
Q: WHAT IS THE RECOMMENDATION OF OUR BOARD OF DIRECTORS REGARDING
THE PROPOSALS?
A: Our Board of Directors has determined that the merger is
advisable and in the best interests of Jayark and its stockholders.
Our Board of Directors has, therefore, unanimously approved the merger
agreement and recommends that you vote "FOR" approval of this matter
at the Special Meeting.
Q: WHAT DO I NEED TO DO NOW?
A: Please sign, date and complete your proxy card and promptly
return it in the enclosed, self addressed, prepaid envelope so that
your shares can be represented at the Special Meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY
BROKER VOTE MY SHARES FOR ME?
A: Your broker will vote your shares for you ONLY if you instruct
your broker how to vote for you. Your broker should mail information
to you that will explain how to give these instructions.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. Just send by mail a written revocation or a later-dated,
completed and signed proxy card before the Special Meeting or simply
attend the Special Meeting and vote in person. You may not change your
vote by facsimile or telephone.
Q: WHAT IF I DON'T SEND BACK A PROXY CARD OR VOTE MY SHARES IN
PERSON AT THE SPECIAL MEETING?
A: If you don't return your proxy card or vote you shares in
person at the Special Meeting, each of those shares will be treated
as a not present at the Special Meeting and will not be included in
the voting power present.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send instructions on
how to receive any cash payments you may be entitled to receive.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: All holders of Jayark common stock as of the effective date of
the merger, other than Parent and stockholders who have perfected their
dissenters' rights under Delaware law, will be entitled to receive
$.40 in cash for each share they own.
Q: HOW WILL JAYARK BE OPERATED AFTER THE MERGER?
A: After the merger, Jayark will be a privately-held company.
Jayark expects its business and operations to continue as they are
currently being conducted and, except as disclosed in this proxy
statement, the merger is not anticipated to have any effect upon
the conduct of such business. As a result of the merger,
stockholders of Jayark who receive cash for their shares in the
merger will no longer have a continuing interest as stockholders
of Jayark and will not share in any future earnings and growth
of Jayark.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as
possible and we expect the merger to be completed shortly after the
Special Meeting.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
TO ME?
A: The receipt of cash in the merger will be taxable for
federal income tax purposes. Stockholders who do not receive cash
in the merger should not be subject to taxation as a result of the
merger. To review the material tax consequences in greater detail,
please read the discussion under "SPECIAL FACTORS - Certain U.S.
Federal Income Tax Consequences."
SUMMARY FINANCIAL INFORMATION
SUMMARY HISTORICAL FINANCIAL INFORMATION OF JAYARK
The following summary historical consolidated financial data for
Jayark for the fiscal years ended April 30, 2000, 2001 and 2002,
was derived from the audited consolidated financial statements of
Jayark. The unaudited historical consolidated financial data of
Jayark as of and for the six months ended October 31, 2001 and
2002 was derived from Jayark's unaudited interim consolidated
financial statements which, in the opinion of management of Jayark,
have been prepared on the same basis as the audited consolidated
financial statements and include all adjustments (consisting of
only normal recurring adjustments) necessary for a fair presentation
of the financial data for such periods. The statement of operations
data for the six months ended October 31, 2002 is not necessarily
indicative of results for a full year. This financial information
is only a summary and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of Jayark
and the notes thereto included in our 2002 Annual Report to
Stockholders and our Quarterly Report on Form 10-Q for the quarter
ended October 31, 2002, and the "Selected Historical Financial Data"
included elsewhere in this proxy statement.
Summary Consolidated Financial Information
- ------------------------------------------------------------------------
Six Months Ended Years Ended April 30,
October 31,
- ------------------------------------------------------------------------
2002 2001 2002 2001 2000
- ------------------------------------------------------------------------
(in thousands, except number of shares and per
share amounts)
- ------------------------------------------------------------------------
Statement of Operations:
- ---------------------------------------------------------------------------
Net Revenues $5,619 $6,734 $11,416 $12,886 $13,198
- ---------------------------------------------------------------------------
Income (Loss) from
Continuing Operations $32 ($178) ($99) ($501) $331
- ---------------------------------------------------------------------------
Income (Loss) from
Discontinued Operations $-- $-- $-- $-- $210
- ---------------------------------------------------------------------------
Net Income (Loss) $32 ($178) ($99) ($501) $541
- ---------------------------------------------------------------------------
Weighted Average Common
Shares 2,766,396 2,766,396 2,766,396 2,766,396 2,766,396
- ------------------------------------------------------------------------------
Basic and Diluted Income
(Loss) per Common Share
from Continuing Operations $.01 ($.06) ($.04) ($.18) $.12
- ------------------------------------------------------------------------------
Basic and Diluted Income
(Loss) per Common Share from
Discontinued Operations $-- $-- $-- $-- $.08
- ------------------------------------------------------------------------------
Balance Sheet Data:
- ------------------------------------------------------------------------------
Total Assets $2,810 $2,769$ $2,884 $3,757 $3,239
- ------------------------------------------------------------------------------
Long Term Obligations $2,222 $2,025 $2,195 $2,083 $1,279
- ------------------------------------------------------------------------------
Working Capital $1,425 $1,135 $1,325 $974 $359
- ------------------------------------------------------------------------------
Stockholders' Deficit ($452) ($563) ($484) ($646) ($146)
- ------------------------------------------------------------------------------
PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Effective July 10, 1997, Jayark's common stock was delisted due to the
non-compliance with NASDAQ's minimum capital and surplus requirement.
Bid quotations for the common stock may be obtained from the "pink
sheets" publichsed by the National Quotation Bureau, and the common
stock is traded in the over-the-counter market.
The following table presents the fiscal quarterly high and low trade
prices of Jayark's common stock for the periods indicated, in each
fiscal year as reported by NASDAQ. As of January 31, 2003, there were
approximately 426 stockholders of record of common stock.
Jayark 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.
2003 Common Stock 2002 Common Stock 2001 Common Stock
Trade Price Trade Price Trade Price
High Low High Low High Low
First Quarter .31 .28 .46 .35 .81 ..25
Second Quarter .25 .24 .45 .28 2.81 ..55
Third Quarter .30 .22 1.44 ..75
Fourth Quarter .50 .30 .75 ..35
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
"FORWARD LOOKING STATEMENTS" ARE THOSE STATEMENTS THAT DESCRIBE
MANAGEMENT'S BELIEFS AND EXPECTATIONS ABOUT THE FUTURE. WE HAVE
IDENTIFIED FORWARD-LOOKING STATEMENTS BY USING WORDS SUCH AS
"ANTICIPATE," "BELIEVE," "COULD," "ESTIMATE," "MAY," "EXPECT," AND
"INTEND." ALTHOUGH WE BELIEVE THESE EXPECTATIONS ARE REASONABLE, OUR
OPERATIONS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING
THOSE DESCRIBED IN THIS PROXY STATEMENT AND OTHER DOCUMENTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THEREFORE, THESE TYPES
OF STATEMENTS MAY PROVE TO BE INCORRECT. FURTHER, THE SAFE HARBOR
PROVISIONS OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED,
DO NOT APPLY TO THE MERGER.
INTRODUCTION
GENERAL
The accompanying Proxy is solicited by and on behalf of the Board
of Directors of Jayark for use at the Special Meeting of Stockholders
to be held on ______________ , at the time and place and for the
purposes set forth in the accompanying Notice and at any recess or
adjournments thereof. The original solicitation will be made by mail.
The total expense of such solicitation will be borne by Jayark and
will include reimbursement paid to brokerage firms and other
custodians, nominees and fiduciaries for their reasonable expenses
incurred in forwarding solicitation material regarding the meeting
to beneficial owners. Further solicitation of Proxies may be made
personally, electronically or by telephone following the original
solicitation. All further solicitation will be by regular employees
of Jayark, who will not be additionally compensated therefor.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted at the Special
Meeting. Proxies may be revoked by delivering to the Secretary of
Jayark, Mr. Robert C. Nolt, 300 Plaza Drive, Vestal, New York 13850,
a written notice of revocation bearing a later date than the Proxy,
by duly executing and delivering to the Secretary a subsequently dated
Proxy relating to the same shares or by attending the Special Meeting
and voting in person (although attendance at the Special Meeting will
not in and of itself constitute revocation of a Proxy).
All shares entitled to vote represented by a properly executed and
unrevoked Proxy received in time for the meeting will be voted at
the meeting in accordance with the instructions given, but in the
absence of instructions to the contrary, such shares will be voted
FOR the proposal to approve the merger agreement. Persons empowered
as Proxies will also be empowered to vote in their discretion upon
such other matters as may properly come before the meeting or any
adjournment thereof, except that discretionary authority on the part
of the Proxies will be limited to matters of which we did not have
notice a reasonable time before our mailing of this Proxy Statement
and the Proxy. The Proxy Statement and Proxy are being mailed to
stockholders on or about ______________ .
ANNUAL REPORT AND QUARTERLY REPORT
Our Annual Report on Form 10-K for the fiscal year ended April 30,
2002, and our Quarterly Report on Form 10-Q for the quarter ended
October 31, 2002 are attached to this Proxy Statement as Appendices
D and E.
VOTING OF SHARES
Holders of record of common stock of Jayark at the close of business
on January 31, 2003, the record date for those entitled to notice of
the meeting, will be entitled to vote at the Special Meeting. The
proposal to approve the merger agreement must receive the affirmative
vote of at least a majority of the outstanding shares of Jayark common
stock. With respect to any matter other than the approval of the merger
agreement, the vote of the holders of a majority of the shares present
or represented by proxy at the meeting and entitled to vote shall be
the act of the stockholders, unless the vote of a different number is
required by the General Corporation Law of Delaware or the Certificate
of Incorporation of Jayark. As of the record date, there were 2,766,396
issued and outstanding shares of common stock held of record by 426
stockholders.
As of February 3, 2003, the Parent has agreed to vote all shares of
our common stock owned by it in favor of the adoption of the merger
agreement. As of the record date for the special meeting, Parent
beneficially owned 87% of our common stock. The vote by Parent will be
sufficient by itself to approve the merger. No other stockholders have
disclosed to Jayark how they intend to vote on these matters.
QUORUM
A quorum for the transaction of business at the Special Meeting consists
of holders of a majority of the outstanding shares of Jayark's common
stock, present in person or by proxy. In the event that less than a
majority of the outstanding shares are present at the Special Meeting,
either in person or by proxy, a majority of the shares so represented
may vote to adjourn the Special Meeting from time to time without
further notice, until a quorum shall be present or represented. The
Proxies will not use their discretionary authority to adjourn or
postpone the Special Meeting in order to solicit additional proxies.
Abstentions and broker non-votes (shares held by broker or nominee as
to which a broker or nominee indicates on the proxy that it does not
have the authority, either express or discretionary, to vote on a
particular matter) are counted for the purpose of determining the
presence or absence of a quorum at the Special Meeting. For all
other matters, an abstention from voting and broker non-votes, since
they are not affirmative votes, will have the same practical effect
as a vote against the respective matters.
PROXIES
Stockholders may vote at any meeting of the stockholders by proxies
duly authorized in writing. Proxies with rubber stamped facsimile
signatures may be used and unexecuted proxies may be counted upon
receipt of a photographic, photo-static, facsimile or similar
reproduction of an executed proxy from the stockholder. Proxies
meeting these requirements submitted at any time prior to the votes
being taken during the Special Meeting will be accepted.
SPECIAL FACTORS
BACKGROUND OF THE MERGER PROPOSAL
Of Jayark's approximately 426 current record stockholders, approximately
390 hold fewer than 1,000 shares. Collectively, the approximately 390
record holders holding fewer than 1,000 shares (approximately 91% of
all record holders) own an aggregate of approximately 21,302 shares,
representing approximately .76% of Jayark's outstanding shares. The
Board and Jayark's management are of the view that the recurring
expense and burden of maintaining these small stockholder accounts
coupled with the costs associated with maintaining registration of
Jayark's common stock under Section 12 of the Securities Exchange Act
is not cost efficient for Jayark. Additionally, Jayark believes that
there is a very limited market for the shares of Jayark's common stock
and that Jayark's stockholders derive little benefit from Jayark's
status as a publicly-reporting corporation.
In making this determination, the Board of Directors considered other
means of achieving the same result but rejected these alternatives
because the Board believed that the Merger would be simpler and less
costly. These alternatives were:
o A TENDER OFFER AT A SIMILAR PRICE PER SHARE. The Board was
uncertain as to whether this alternative would result in shares being
tendered by a sufficient number of record shareholders so as to
accomplish the going private objective and reducing recurring costs.
The Board found it unlikely that many holders of small numbers of
shares would make the effort to tender their shares.
o A REVERSE STOCK SPLIT. This alternative would accomplish the
objective of reducing the number of record shareholders, assuming
approval of the reverse stock split by Jayark's stockholders. In a
reverse stock split, Jayark would acquire the interests of the
cashed-out stockholders pursuant to an amendment to Jayark's
Certificate of Incorporation to reduce the number of issued and
outstanding shares of common stock such that the cashed-out
stockholders would own less than one full share of Jayark common
stock. Jayark would then distribute cash for the resulting fractional
share interests. Since the reverse stock split and the merger would
both achieve the same objective of reducing the number of record
stockholders, the Board chose the merger as the superior method as
it would ensure that the cashed-out stockholders would receive
dissenters' rights under the General Corporation Law of Delaware
(the "DGCL"). Dissenters' rights would not be available under the
DGCL to the cashed-out stockholders in a reverse stock split.
The proposal for a Merger (the "Merger Proposal") is being made at
this time because the sooner the proposal can be implemented, the
sooner Jayark will cease to incur the expenses and burdens and the
sooner stockholders who are to receive cash in the merger will
receive and be able to reinvest or otherwise make use of such
cash payments.
After consideration of the various alternatives described above,
the Board determined that the Merger Proposal was the best choice
for the stockholders and Jayark.
The Board determined that the positive aspects of going private
included eliminating SEC reporting thereby eliminating Jayark's
costs for securities compliance and mailings to stockholders.
Additionally, a going private transaction would provide liquidity
to Jayark's stockholders with no brokerage fees. Finally, such a
transaction could be structured so that stockholders could cash out
at a control premium.
The Board determined that the positives to doing nothing were that
there would remain some limited liquidity in Jayark's common stock.
The negatives to doing nothing were that the stockholders still
would be unable to trade their stock freely and Jayark would remain
responsible for ever increasing securities compliance costs,
especially in light of recent legislation and expected regulation.
This would result in a reduction in the cash flow of Jayark.
Effective January 13, 2003 the Board of Directors entered into an engagement
letter with Kirlin Securities, Inc. to render a written opinion to the
Board of Directors as to the fairness, from a financial point of view
to the public stockholders of Jayark (other than the parent and officers and
directors of Jayark and their affiliated persons and entities) of the
consideration to be received by the public stockholders pursuant to
the merger agreement. In connection with rendering its opinion,
Kirlin Securities, Inc. reviewed financial and other information
provided by Jayark and discussed the business and affairs of Jayark
with Senior Management.
On February 4, 2003 Kirlin Securities, Inc. delivered to the Board its
written option, a copy of which is attached to this proxy statement
as Appendix B, that as of the date of this opinion and subject to the
assumption set forth in the opinion, the cash merger consideration is
fair from a financial point of view to the public stockholders of Jayark.
After reviewing the opinion and discussing the financial information
with management, the directors unanimously determined, after giving
careful consideration to a number of factors, that the merger agreement
and the merger were fair to, and in the best interests of, Jayark and
its public shareholders, other than parent, and unanimously approved the merger
agreement and the merger.
On February 3, 2003, the Company Merger Corp and Parent entered into
the merger agreement.
THE EFFECTS OF THE MERGER
EFFECTS ON JAYARK. The merger will have various effects as described
below.
DECREASE IN CAPITAL. As a result of the merger, Jayark's capital
will be slightly reduced, but Jayark anticipates that it will remain
well capitalized.
TERMINATION OF EXCHANGE ACT REGISTRATION. The common stock is currently
registered under the Exchange Act. Such registration may be terminated
by Jayark if the common stock is no longer held by 300 or more
stockholders of record. As a result of the merger, the number of
stockholders of record of Jayark will be reduced to one. Termination
of registration of the common stock under the Exchange Act would
substantially reduce the information required to be furnished by the
surviving corporation to its shareholders and to the SEC and would make
certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b) of the Exchange Act, proxy statement
disclosure in connection with stockholder meetings and the related
requirement of an annual report to stockholders, no longer applicable
to the surviving corporation. Accordingly, Jayark estimates it will
eliminate costs and expenses associated with continuance of the Exchange
Act registration, which Jayark estimates to be approximately $133,000 on
an annual basis.
With respect to the executive officers and directors of Jayark, in the
event the registration of the common stock is terminated under the
Exchange Act:
o executive officers, directors and other affiliates would no
longer be subject to many of the reporting requirements and
restrictions of the Exchange Act, including without limitation the
reporting and short-swing profit provisions of Section 16, and
o executive officers and directors of Jayark may be deprived of
the ability to dispose of shares of common stock of the surviving
corporation pursuant to Rule 144 under the Securities Act of 1933.
FINANCIAL EFFECTS OF THE MERGER; FINANCING OF THE MERGER. Jayark
expects that the merger and the use of approximately $254,000
cash to complete the merger, which includes approximately $110,100
in professional fees and other expenses related to the transaction,
will not have any material adverse effect on Jayark's capital adequacy,
liquidity, results of operations or cash flow. You should read the
discussion under "PROPOSAL ONE--Fees and Expenses" for a description
of the fees and expenses Jayark expects to incur in connection with
the merger.
Jayark expects to be able to finance the cash amount to be paid to
stockholders in the merger out of the working capital of Jayark.
EFFECTS ON AFFILIATES. As a result of the merger, Merger Corp. will
cease to exist and the Parent will become the sole stockholder of
Jayark.
NO FURTHER REPORTING OBLIGATIONS UNDER THE EXCHANGE ACT. After the
merger and the resulting deregistration of Jayark's shares under the
Exchange Act, the executive officers, directors and other affiliates
of Jayark will no longer be subject to many of the reporting
requirements and restrictions of the Exchange Act, including without
limitation the reporting and short-swing profit provisions of Section 16.
RULE 144 NOT AVAILABLE. After the merger and the resulting deregistration
of Jayark's shares under the Exchange Act, executive officers and
directors of Jayark may be deprived of the ability to dispose of shares
of Jayark common stock pursuant to Rule 144 under the Securities Act of
1933.
EFFECTS ON UNAFFILIATED STOCKHOLDERS. The merger will have various
effects on stockholders who are not affiliates of Jayark, as described
below.
o CASHED-OUT UNAFFILIATED STOCKHOLDERS. Unaffiliated stockholders
will, upon consummation of the merger:
o be entitled to receive $.40 per share in cash;
o no longer have any equity interest in Jayark and therefore will
not participate in its future potential earnings or growth, if any;
o not be able to re-acquire an equity interest in Jayark unless
they purchase shares from the remaining stockholder, although Jayark
does not anticipate that the remaining stockholder will transfer its
shares to third parties;
o be required to pay federal and, if applicable, state and local
income taxes on the cash amount received in the merger.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
Summarized below are the material federal income tax consequences to
Jayark and its stockholders resulting from the merger. This summary
is based on existing U.S. federal income tax law, which may change,
even retroactively. This summary does not discuss all aspects of
federal income taxation which may be important to you in light of
your individual circumstances. Many stockholders (such as financial
institutions, insurance companies, broker-dealers, tax-exempt
organizations, and foreign persons) may be subject to special tax
rules. Other stockholders may also be subject to special tax rules,
including but not limited to stockholders who received Jayark common
stock as compensation for services or pursuant to the exercise of an
employee stock option, or stockholders who have held, or will hold,
stock as part of a straddle, hedging, or conversion transaction for
federal income tax purposes. In addition, this summary does not discuss
any state, local, foreign, or other tax considerations.
This summary assumes that you are one of the following: (1) a citizen
or resident of the United States; (2) a corporation or other entity
taxable as a corporation created or organized under U.S. law (federal
or state); (3) an estate the income of which is subject to U.S. federal
income taxation regardless of its sources; (4) a trust if a U.S. court
is able to exercise primary supervision over administration of the
trust and one or more U.S. persons have authority to control all
substantial decisions of the trust; or (5) any other person whose
worldwide income and gain is otherwise subject to U.S. federal income
taxation on a net basis. This summary also assumes that you have held
and will continue to hold your shares as capital assets for investment
purposes under the Internal Revenue Code of 1986, as amended.
For federal income tax purposes, it is intended that neither Jayark,
Parent nor Merger Corp. will recognize gain or loss for federal or
state income tax purposes as a result of the merger.
STOCKHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISOR AS TO THE
PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES,
IN LIGHT OF THEIR SPECIFIC CIRCUMSTANCES.
FEDERAL INCOME TAX CONSEQUENCES TO CASHED-OUT STOCKHOLDERS WHO DO NOT
CONTINUE TO OWN JAYARK COMMON STOCK AFTER THE MERGER:
If you receive cash as a result of the merger and do not continue to
hold Jayark common stock immediately after the merger, your tax
consequences will depend on whether, in addition to receiving cash,
a person or entity related to you (as determined by the Internal
Revenue Code) continues to hold Jayark common stock immediately
after the merger, as explained below.
If you (1) receive cash in exchange for Jayark common stock as a
result of the merger but do not continue to hold Jayark common stock
immediately after the merger, and (2) you are not related to any
person or entity which holds Jayark common stock immediately after
the merger, you will recognize capital gain or loss. The amount of
capital gain or loss you recognize will equal the difference between
the cash you receive for your cashed-out stock and your aggregate
adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold
Jayark common stock immediately after the merger (as determined
by the Internal Revenue Code) you may be treated as owning shares
actually or constructively owned by such individuals or entities
which may cause your receipt of cash in exchange for Jayark common
stock to be treated first as ordinary dividend income to the extent
of your ratable share of Jayark's undistributed earnings and profits,
then as a tax-free return of capital to the extent of your aggregate
adjusted tax basis in your shares, and any remaining amount will be
treated as capital gain. If you are related to a person or entity who
continues to hold Jayark common stock immediately after the merger,
a waiver of the family attribution rules is available under Section
302(c)(2) of the Internal Revenue Code which will allow the
transaction to be treated as a sale. The waiver is permitted if the
stockholder (1) retains no interest in Jayark after the redemption
(including any proprietary interest as well as interest as officer,
director or employee of Jayark), other than an interest as a creditor;
(2) does not acquire any such interest (other than stock acquired by
bequest or inheritance) within ten (10) years from the date of the
distribution; and (3) agrees to notify the Internal Revenue Service
of the acquisition of any such interest within the ten (10) year
period. There are additional restrictions that apply to such waiver.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL,
STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF THE TRANSACTION,
IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
CAPITAL GAIN AND LOSS:
For individuals, net capital gain (defined generally as your total
capital gains in excess of capital losses for the year) recognized
upon the sale of capital assets that have been held for more than
12 months generally will be subject to tax at a rate not to exceed
20%. Net capital gain recognized from the sale of capital assets
that have been held for 12 months or less will continue to be subject
to tax at ordinary income tax rates. In addition, capital gain
recognized by a corporate taxpayer will continue to be subject to
tax at the ordinary income tax rates applicable to corporations.
There are limitations on the deductibility of capital losses.
BACKUP WITHHOLDING:
Stockholders will be required to provide their social security or
other taxpayer identification numbers (or, in some instances,
additional information) in connection with the merger to avoid backup
withholding requirements that might otherwise apply. The letter of
transmittal will require each stockholder to deliver such information
when the common stock certificates are surrendered following the
effective date of the merger. Failure to provide such information
may result in backup withholding.
AS EXPLAINED ABOVE, THE AMOUNTS PAID TO YOU AS A RESULT OF THE
MERGER MAY RESULT IN DIVIDEND INCOME, CAPITAL GAIN INCOME, OR SOME
COMBINATION OF DIVIDEND AND CAPITAL GAIN INCOME TO YOU DEPENDING ON
YOUR INDIVIDUAL CIRCUMSTANCES. THE U.S. FEDERAL INCOME TAX DISCUSSION
SET FORTH ABOVE IS BASED UPON PRESENT LAW, WHICH IS SUBJECT TO CHANGE
POSSIBLY WITH RETROACTIVE EFFECT. YOU SHOULD CONSULT YOUR TAX ADVISOR
AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF THE TRANSACTION, IN LIGHT OF YOUR SPECIFIC
CIRCUMSTANCES.
RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE MERGER
PROPOSAL
The Board believes that the Merger Proposal, taken as a whole, is
fair to, and in the best interests of, Jayark and its stockholders,
including unaffiliated stockholders and stockholders who will receive
cash in the merger. The Board also believes that the process by which
the transaction is to be approved is fair. The Board recommends that
the stockholders vote for approval and adoption of the Merger Proposal
as described above. Parent has advised Jayark that it intends to vote
its shares in favor of the Merger Proposal. As of January 31, 2003,
the Parent beneficially owned a total of 2,407,273 shares of Jayark
stock, or approximately 87% of the total shares entitled to vote at
the Special Meeting. The vote of Parent will be sufficient of approve
merger. No other stockholders have disclosed to Jayark how they
intend to vote on the Merger Proposal.
The Board has retained for itself the absolute authority to reject
(and not implement) the Merger Proposal (even after approval thereof
by stockholders) if it determines subsequently that the Merger Proposal
is not then in the best interests of Jayark and its stockholders. The
Board unanimously approved the Merger Proposal.
The Board considered a number of factors in determining to approve the
merger agreement. Jayark's primary reason for the merger is that after
the merger Jayark's shares will no longer be registered under the
Exchange Act. The Board considered the views of management relating to
cost savings to be achieved by terminating the registration of the
common stock under the Exchange Act. Jayark's management determined
that cost savings of approximately $133,000 per year could be achieved
if Jayark terminated the registration of its shares under the Exchange
Act, including indirect savings resulting from reductions in the time
and effort currently required of management to comply with the
reporting and other requirements associated with continued registration
of the common stock under the Exchange Act. The Board also considered
the effect that terminating the registration of the common stock would
have on the market for the common stock and the ability of stockholders
to buy and sell shares. However, the Board determined that, even as a
publicly-traded corporation, there is a very limited market for the
shares of Jayark's common stock, especially for sales of large blocks
of such shares, and that Jayark's stockholders derive little benefit
from Jayark's status as a publicly-held corporation. The Board
determined that the cost savings and reduced burden on management to
be achieved by terminating registration of the common stock under the
Exchange Act outweighed any potential detriment from terminating such
registration.
The Board considered several alternative transactions to accomplish
the proposed going-private transaction but ultimately approved the
Merger Proposal. Please read the discussion under "--Background of
the Merger Proposal" for a description of these alternatives considered
by the Board.
The Board considered numerous factors, discussed below, in reaching
its conclusion as to the fairness of the Merger Proposal to our
stockholders, including both affiliated and unaffiliated stockholders.
The Board did not assign any specific weights to the factors listed below.
Moreover, in their considerations individual directors may have given
differing weights to different factors.
o HISTORICAL MARKET PRICES OF JAYARK'S COMMON STOCK. Jayark's
common stock is not traded on any stock exchange. The Board reviewed
trade prices for the common stock from May 1, 2000 to October 31,
2002, which ranged from $.24 to $2.81 per share. You should read the
discussion under "SUMMARY FINANCIAL INFORMATION--Per Share Market
Price and Dividend Information" for more information about our stock
prices.
o NET BOOK VALUE. As of October 31, 2002, the book value per share
of outstanding common stock was approximately ($.16). Although book
value was a factor that was considered by the Board among others in
determining the consideration to be paid to cashed-out stockholders
in the merger, the Board determined that it was not directly relevant
due to the negative book value.
o EARNINGS. The Board reviewed the earnings of Jayark for the
previous three fiscal years and for the first two quarters of fiscal
2003. For the three years ended April 30, 2000, 2001 and 2002,
Jayark reported net income (loss) of $541,000, ($501,000) and
($99,000), respectively. For the six months ended October 31, 2002,
Jayark reported a net income of $32,000.
o OPINION OF KIRLIN SECURITIES, INC. The Board requested the
opinion of Kirlin Securities, Inc. who on February 3, 2003, rendered
to the Board an opinion to the effect that as of the date of the
opinion, and subject to the assumptions, limitations and qualifications
set forth in the opinion, the cash merger consideration is fair from a
financial point of view to the public stockholders of Jayark other than
parent and the officers and directors and their affiliates. You
should read the discussion under "Opinion of Kirlin Securities, Inc."
and copy of the opinion of Kirlin Securities, Inc. attached as
Appendix B to this proxy statement.
No firm offers, other than in conjunction with the merger, of which
the Board is aware have been made by an unaffiliated person during
the preceding two years for (i) the merger or consolidation of Jayark
into or with such person, (ii) the sale or other transfer of all or any
substantial part of the assets of Jayark, or (iii) the purchase of a
number of shares of common stock that would enable the holder thereof to
exercise control of Jayark.
After consideration of all this information, the Board determined that
a fair price to be paid cashed-out stockholders in the merger is $.40.
The transaction is not structured so that approval of at least a
majority of unaffiliated stockholders is required. The Board determined
that any such voting requirement would usurp the power of the holders
of at least a majority of Jayark's voting power represented at the
meeting to consider and approve the merger agreement as provided under
Delaware law, Jayark's charter documents and the terms of the merger
agreement. The Board also considered such a provision unnecessary in
light of the right of stockholders, whether affiliated or unaffiliated,
to dissent from the merger. No independent committee of the Board has
reviewed the fairness of the Merger Proposal. No unaffiliated
representative acting solely on behalf of the stockholders for the
purpose of negotiating the terms of the Merger Proposal was retained
by Jayark or by a majority of directors who are not employees of
Jayark. Jayark has not made any provision in connection with the
merger to grant unaffiliated stockholders access to Jayark's
corporate files or to obtain counsel or appraisal services at
Jayark's expense. With respect to unaffiliated stockholders' access
to Jayark's corporate files, the Board determined that this proxy
statement, together with Jayark's other filings with the SEC, provide
adequate information for unaffiliated stockholders to make an informed
decision with respect to the Merger Proposal. The Board also considered
the fact that under Delaware corporate law, and subject to certain
conditions set forth under Delaware law, stockholders have the right
to review Jayark's relevant books and records of account. As for
obtaining counsel or appraisal services for unaffiliated stockholders
at Jayark's expense, the Board did not consider these necessary or
customary. Jayark expects the Merger Proposal to result in the cash
out of approximately 359,123 shares of common stock, for a total
purchase price approximating $143,649, excluding related costs
and expenses estimated at approximately $110,100. After
consideration of the factors described above, the Board believes
that the transaction is fair notwithstanding the absence of such
an unaffiliated stockholder approval requirement, independent
committee or unaffiliated representative. The Board believes that
the transaction is procedurally fair because after consideration
of all aspects of the proposed transaction as described above,
all of the directors, including the directors who are not employees
of Jayark, approved the Merger Proposal.
OPINION OF KIRLIN SECURITIES, INC.
Effective January 13, 2003 the Board of Directors engaged Kirlin Securities,
Inc. to render a written opinion to the Board as to the fairness, from
a financial point of view, to the public stockholders of Jayark
(other than the parent and the officers and directors of Jayark
and their affiliated persons and entities) of the consideration
to be received by the public stockholders pursuant to the merger
agreement. On February 3, 2003, Kirlin Securities, Inc. rendered
its written opinion to the Board that as of that date and based upon
and subject to the assumptions, limitations and qualifications set
forth in that opinion, the consideration to be received in the merger
by the public stockholders of Jayark is fair, from a financial point
of view, to those stockholders.
THE FULL TEXT OF KIRLIN SECURITIES, INC.'S WRITTEN OPINION DATED
FEBRUARY 3, 2003 IS ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT.
STOCKHOLDERS SHOULD READ THAT OPINION FOR A DISCUSSION OF THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, FACTORS CONSIDERED AND
LIMITATIONS UPON THE REVIEW UNDERTAKEN BY KIRLIN SECURITIES, INC.
IN RENDERING ITS OPINION. THE FOLLOWING IS A SUMMARY OF THAT
OPINION AND THE METHODOLOGY THAT KIRLIN SECURITIES, CIN. USED
TO RENDER ITS FAIRNESS OPINION.
Kirlin Securities, Inc.'s opinion was provided to the Board of
Directors in connection with its consideration of the merger
agreement and the merger. The opinion is not intended to be
and does not constitute a recommendation to any stockholder of
Jayark as to how such stockholder should vote with respect to
the merger.
In arriving at its opinion, Kirlin Securities, Inc. reviewed
and analyzed:
* merger agreement and the specific terms of the merger;
* the audited annual and unaudited financial statements of
Jayark in Jayark's report to stockholders and filings under the
Securities Exchange Act of 1934, as amended;
* Drafts of Jayark's Rule 13E-3 Transaction Statement on
Schedule 13E-3;
* Drafts of this preliminarty proxy statement
* Internal financial and operating budgets and projections for
Jayark provided by management;
* Discussions with certain executive officers of Jayark concerning
the business, properties, results of operation and future prospects
of Jayark;
* Comparisons of the results of operations of Jayark with those of
publicly held companies deemed by Kirlin Securities, Inc. to be
comparable to Jayark;
* Comparisons of the merger consideration to be received by public
stockholders pursuant to the merger agreement with values received
in certain other transactions which Kirlin Securities, Inc. believed
are of comparable nature;
* The trading range and trading volume of Jayark's common stock
since January 1998;
* The liquidation value of Jayark's assets as perceived by Kirlin
Securities, Inc.;
* Whether there existed any other potential purchasers of Jayark's
assets;
* General economic and monetary conditions;
* Past, current and prospective stock market conditions; and
* Other factors as Kirlin Securities, Inc. deemed appropriate
In arriving at its opinion, Kirlin Securities, Inc. assumed and relied
upon the accuracy and completeness of the financial and other
information provided to Kirlin Securities, Inc. and/or was publicy
available and niether atempted independently to verify nor assumed
any responsibility for verifying any of such information and further
relied upon the assurances of management of Jayark that they were not
aware of any facts or circumstances that would make that information
incomplete or misleading. With respect to the financial projections
of Jayark, Kirlin Securities, Inc. assumed that they were reasonably
prepared on a basis reflecting the best currently available estimates
and judgments of the management of Jayark as to the future financial
performance of Jayark.
In arriving at its opinion, Kirlin Securities, Inc. did not conduct
a physical inspection of the properties and facilities of Jayark
and did not make or obtain any evaluations or appraisals of the
assets or liabilities of Jayark.
In connection with rendering its opinion, Kirlin Securities, Inc.
performed certain financial, comparative and other analyses as
described below. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant
methods of financial and comparative analysis and the application
of those methods to the particular circumstances, and therefore,
is not readily susceptible to summary description. Furthermore,
in arriving at its opinion, Kirlin Securities, Inc. considered
the results of all of its analyses and did not attribute any
particular weight to any analysis or factor considered by it.
Accordingly, Kirlin Securities, In. believes that its analyses
must be considered as a whole and that considering any portion
of those analyses and factors, without considering all analyses and
factors as a whole, could create a misleading or incomplete view
of the process underlying its opinion. Kirlin Securities, Inc.
also noted that its opinion necessarily was based upon conditions
existing and which could be evaluated at that time.
PARENT'S DETERMINATION OF FAIRNESS OF THE MERGER PROPOSAL
Parent and its Board of Directors believe that the Merger is fair
to, and in the best interests of, each of Jayark's stockholders,
including unaffiliated stockholders. In reaching this conclusion,
Parent relied upon the factors considered by and the analysis and
conclusions of the Board of Directors of Jayark. Parent has adopted
such analysis as its own. See "Special Factors - Recommendation of
the Board of Directors; Fairness of the Merger Proposal." The
merger agreement has been approved by Parent's Board of Directors.
CONDUCT OF JAYARK'S BUSINESS AFTER THE MERGER
Jayark expects to fund the merger through Jayark's working capital.
As a result, Jayark's net stockholder equity will decline by
approximately $254,000. The lost earnings that would have
otherwise been recognized on the working capital utilized in
the merger, will have only a slightly negative impact on the net
income of Jayark. Otherwise, Jayark expects its business and
operations to continue as they are currently being conducted and,
except as disclosed below, the merger is not anticipated to have
any effect upon the conduct of such business. If the merger is
consummated, unaffiliated stockholders will no longer have any
equity interest in, and will not be stockholders of, Jayark and
therefore will not participate in its future potential or earnings
and growth. Instead, each such owner of Jayark common stock will
have the right to receive $.40 per share in cash, without interest.
Jayark plans, as a result of the merger, to become a privately-held
company. Jayark will terminate the registration of its common stock
under the Exchange Act after the merger. Because the common stock
will no longer be registered under the Exchange Act, Jayark will
be relieved of the obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act, and its
officers and directors and stockholders owning more than 10% of
the common stock will be relieved of certain obligations under
the Exchange Act. You should read the discussion under "--The
Effects of the Merger " for more discussion regarding the
effects of Jayark terminating the registration of its shares under
the Exchange Act. Jayark estimates that termination of the
registration of the common stock under the Exchange Act will save
Jayark approximately $133,000 per year in legal, accounting and
other expenses.
As stated throughout this Proxy Statement, Jayark believes that
there are significant advantages to it in effecting the Merger
Proposal and "going private" and Jayark plans to avail itself of
any opportunities it may hereafter have as a private company,
including, but not limited to, making itself a more viable
candidate with respect to and entering into a merger or acquisition
transaction, making any public or private offering for its shares,
or entering into any other arrangement or transaction as it may
deem appropriate. Although management does not presently have an
intent to enter into any such transaction nor is management currently
in negotiations with respect to any such transaction, there is
always a possibility that Jayark may enter into such an arrangement
or transaction in the future and the remaining stockholders of
Jayark may receive payment for their shares in any such transaction
lower than, equal to or in excess of the amount paid to cashed-out
stockholders in the merger.
Other than as described in this Proxy Statement, neither Jayark nor
its management has any current plans or proposals to effect any
extraordinary corporate transaction, such as a merger, reorganization
or liquidation; to sell or transfer any material amount of its assets;
to change its Board of Directors or management; to change materially
its indebtedness or capitalization; or otherwise to effect any material
change in its corporate structure or business.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based upon information received by Jayark upon request from the
persons concerned, each person known by Jayark to be the beneficial
owner of more than five percent of Jayark's common stock, each
director, named executive officer and all directors and executive
officers of Jayark as a group, owned beneficially as of January 31,
2003, the number and percentage of outstanding shares indicated in
the following table:
Name and Addresss of Amount and Nature of Percentage
Benefical Owner (1) Beneficial Ownership of Class
J Acquisition Corp. 2,407,273 (3) 87.1%
David Koffman 1,263,033 (2) 45.7%
Robert C. Nolt 10,000 .4%
Richard Ryder 24,000 .9%
(1) Except as otherwise provided, the address of each person is
300 Plaza Drive, Vestal, New York 13850.
(2) Consists of 1,263,033 shares owned by J Acquisition Corp.
Mr. Koffman is the Chief Executive Officer and a Director of
J Acquisition Corp.
(3) The following persons owned the number of shares of common
stock and the percentage of outstanding shares of common stock of
J Acquisition Corp. set forth opposite their names. Jayark does
not believe that under rules promulgated by the SEC, such persons
are deemed to beneficially own the shares of Jayark common stock
owned by J Acquisition Corp., since none of such persons control
J Acquisition Corp. :Jeffrey Koffman - 148,402, 5.4%, Frank
Rabinovitz - 68,426, 2.5%, Vulcan Properties, Inc., an entity
indirectly controlled by Arthur Cohen, 292,189, 10.6%.
PROPOSAL ONE
APPROVAL OF THE MERGER AGREEMENT
SUMMARY
Jayark, Parent and Merger Corp. entered into the merger agreement
on February 3, 2003. A copy of the merger agreement is attached
to this proxy statement as Appendix A. If the merger agreement
is approved by Jayark's stockholders, stockholders of Jayark other
than Parent will be entitled to receive a cash payment of $.40 per
share (the "Merger Consideration"). The merger agreement requires the
affirmative vote of the holders of at least a majority of the
outstanding shares of Jayark's common stock.
REASONS FOR THE TRANSACTION:
Our primary reason for the merger is that after the merger our shares
will no longer be registered under the Securities Exchange Act of 1934.
Jayark's board of directors and management are of the view that the
recurring expense and burden of maintaining registration of Jayark's
common stock under Section 12 of the Exchange Act is not cost efficient
for Jayark. Jayark also believes that there is a very limited market
for the shares of Jayark's common stock, especially for sales of large
blocks of such shares, and that Jayark's stockholders derive little
benefit from Jayark's status as a publicly-held corporation.
THE PARTIES:
o Jayark is a Delaware corporation.
o Parent is a recently-formed Nevada corporation organized for
the purpose of the Merger.
o Merger Corp. is a recently-formed Delaware corporation and
a wholly owned subsidiary of Parent organized for the sole purpose
of the merger.
o The principal executive offices of both Jayark, Parent and
Merger Corp. are located at 300 Plaza Drive, Vestal, New York 13850.
o The telephone number for each Jayark, Parent and Merger Corp.
is 607-729-9331.
EFFECT ON STOCKHOLDERS:
If approved at the Special Meeting, the merger will affect Jayark
stockholders as follows after completion:
Stockholder as of Effective Time Net Effect After Merger
- -------------------------------- -----------------------
Parent Shares of common stock will
continue to be outstanding
and stockholder will receive
no cash.
Stockholders other than Parent Shares of common stock will be
cashed out at a price of $.40
per share.
REASONS FOR THE MERGER
Jayark's reason for the merger is to cash-out the equity interests in
Jayark of the approximately 426 record and beneficial holders of
common stock other than the Parent, that, as of the Effective Time,
will own approximately 359,123 shares of common stock at a price
determined to be fair by the entire Board of Directors in order (i)
to reduce the number of stockholders of record of Jayark to fewer
than 300 persons in order to relieve Jayark of the administrative
burden and cost associated with filing reports and otherwise
complying with the requirements of registration under the Exchange
Act, by deregistering its common stock under the Exchange Act, and
(ii) to permit cashed-out stockholders to receive cash for their
shares without having to pay brokerage commissions. See "Special
Factors--Background of the Merger Proposal" and "SPECIAL FACTORS
- --The Effects of the Merger" for a discussion regarding the burden
of continued registration of the Jayark common stock and the intended
benefits to Jayark of the Merger Proposal.
The merger will provide unaffiliated stockholders with a cost-
effective way to cash out their investments, because Jayark will
pay all transaction costs in connection with the merger. Moreover,
Jayark will benefit from substantial cost savings as a result of the
merger, as more fully described below.
The Board believes that the disadvantages of having Jayark continue
to be a public company outweigh any advantages. The Board has no
present intention to raise capital through sales of securities in a
public offering in the future or to acquire other business entities
using stock as the consideration for any such acquisition. Accordingly,
Jayark is not likely to make use of any advantage (for raising capital,
effecting acquisitions or other purposes) that Jayark's status as a
public company may offer.
Jayark incurs direct and indirect costs associated with compliance with
the SEC's filing and reporting requirements imposed on public companies.
Jayark also incurs substantial indirect costs as a result of, among other
things, the executive time expended to prepare and review such filings.
Since Jayark has relatively few executive personnel, these indirect costs
can be substantial. Jayark's direct costs related to being
a public company are estimated to approximate $133,000 annually as
follows:
Independent Auditors $90,000
SEC Counsel $10,000
Printing and Mailing $15,000
Miscellaneous $18,000
Total $133,000
In light of these disproportionate costs, the Board believes that it is
in the best interests of Jayark and its stockholders as a whole to
eliminate the administrative burden and costs associated with being a
public company.
Although many of these factors have existed for some time, Jayark
began to consider the merger during calendar year 2002, and based
upon an analysis of its options, risks and expenses relating to
remaining a public company which is detailed in this Proxy Statement,
approved the Merger Proposal. Another reason the Board approved the
Merger Proposal is the continued illiquidity of the Jayark stock. You
should read the discussion under "Special Factors--Background of the
Merger Proposal" for more information relating to the background of the
Merger Proposal and Jayark's reasons for the Merger Proposal.
The Board has determined that the Merger Proposal is the most
expeditious and economical way of changing Jayark's status from that
of a public company to that of a closely-held, non-reporting company.
You should read the discussion under "Special Factors--Recommendation
of the Board of Directors; Fairness of the Merger Proposal" for more
information regarding the Board's reasons for the Merger Proposal.
The merger is structured to be a "going private" transaction as
defined in Rule 13e-3 promulgated under the Exchange Act because it
is intended to, and, if completed, will likely terminate Jayark's
reporting requirements under Section 12(g) of the Exchange Act. In
connection with the Merger Proposal, Jayark, Parent and Merger Corp.
have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 with
the SEC.
EFFECT OF THE MERGER PROPOSAL ON JAYARK UNAFFILIATED STOCKHOLDERS
If the Merger Proposal is implemented:
o You will become entitled to receive cash equal to $.40 for
each share you hold.
o After the merger, you will have no further interest in
Jayark with respect to your cashed-out shares, and you will no
longer be entitled to vote as a stockholder or share in Jayark's
assets, earnings, or profits, if any. Your only right will be to
receive cash for these shares.
o You will not have to pay any service charges or brokerage
commissions in connection with the merger.
o All amounts owed to you will be subject to applicable federal
and state income taxes and state abandoned property laws.
o You will not receive any interest on cash payments owed to you
as a result of the merger.
o You will receive a transmittal letter from Jayark as soon as
practicable after the Effective Time. The letter of transmittal will
contain instructions on how to surrender your existing certificate(s),
if applicable, to Jayark for your cash payment. You will not receive
your cash payment until you surrender your outstanding certificate(s),
if applicable, in accordance with the instructions provided to you by
Jayark, together with a completed and executed copy of the letter of
transmittal. Please do not send your certificates until you receive
your letter of transmittal.
EFFECT OF THE MERGER PROPOSAL ON JAYARK
The Merger Proposal will affect the public registration of Jayark's
common stock with the SEC under the Exchange Act, as Jayark intends
to apply for such termination as soon as practicable after the
merger. You should read the discussion under "SPECIAL FACTORS--The
Effects of the Merger--Termination of Exchange Act Registration"
for more information regarding the effect of the merger on the
registration of Jayark's shares under the Exchange Act.
The Merger Proposal, if approved and effected, will reduce the
number of Jayark stockholders to one. You should read the discussion
under "Special Factors--The Effects of the Merger--Reduction in the
Number of Stockholders and the Number of Outstanding Shares" for more
information regarding the reduction in the number of Jayark's
stockholders that would result from the merger. Jayark believes that
completion of the merger and deregistration of Jayark's common stock
under the Exchange Act will cause the public market for shares of
Jayark common stock to be eliminated.
Jayark has no current plans to issue shares of its common stock other
than pursuant to Jayark's existing stock option plans, but Jayark
reserves the right to do so at any time and from time to time at such
prices and on such terms as Jayark's Board determines to be in the best
interests of Jayark and its then stockholders. Persons who continue as
stockholders following implementation of the Merger Proposal will not
have any preemptive or other preferential rights to purchase any of
Jayark's stock that may be issued by Jayark in the future, unless such
rights are specifically granted to the stockholders. Jayark's Certificate
of Incorporation expressly deny preemptive rights.
Based on its stockholder records, Jayark believes that approximately
359,123 shares of common stock will have to be cashed out by Jayark.
EXCHANGE AND PAYMENT PROCEDURES
Soon after the merger becomes effective, Jayark will mail to each
stockholder who appears may be entitled to a cash payment pursuant to
the merger a letter of transmittal and instructions explaining how to
exchange their stock certificates for cash. Upon surrender to Jayark
of valid share certificates and properly completed letters of
transmittal, along with such other documents as Jayark may reasonably
require, cashed-out stockholders will be entitled to receive $.40 in
cash per share. Until surrendered in this manner, each stock certificate
representing cashed-out shares will represent only the right to receive
the cash consideration payable in the merger. No service charges will be
payable by stockholders in connection with the exchange of certificates
or the payment of cash pursuant to the merger agreement, all expenses
of which will be borne by Jayark.
YOU SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM
ONLY AFTER YOU RECEIVE A LETTER OF TRANSMITTAL FROM JAYARK. LETTERS OF
TRANSMITTAL WILL BE MAILED SOON AFTER THE MERGER IS COMPLETED.
DISSENTERS' AND APPRAISAL RIGHTS
Under the Delaware General Corporation Law ("DGCL"), holders of
shares of Jayark common stock who do not want to accept the merger
consideration, and who follow the procedures set forth in Section 262
of the DGCL, will be entitled to have their shares appraised by
the Delaware Chancery Court and to receive payment of the
"fair value" of these shares, exclusive of any element of value
arising from the accomplishment or expectation of the merger,
together with a fair rate of interest, if any, as determined by such
court.
The following discussion is a summary of the material provisions of
Section 262 of the DGCL and is qualified in its entirety by the full
text of Section 262 that is reprinted in Appendix C. All references
in Section 262 of the DGCL and in this summary to a "stockholder"
or "holder" are to the record holder of the shares of Jayark common
stock as to which appraisal rights are asserted. A person having
a beneficial interest in shares of Jayark common stock held of
record in the name of another person, such as a broker or nominee,
must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect
appraisal rights.
If you wish to exercise your appraisal rights or you wish to preserve
your right to do so, you should review the following discussion
and Appendix C carefully, because failure to timely and properly
comply with the procedures therein specified will result in the loss
of appraisal rights under the DGCL.
Holders of record of Jayark common stock who do not vote in favor
of the merger agreement and who otherwise comply with the
applicable statutory procedures will be entitled to appraisal
rights under Section 262 of the DGCL. Under Section 262 of the DGCL,
where a proposed merger is to be submitted for approval at a meeting
of stockholders, Jayark must, not less than 20 days prior to the
meeting, notify each of its stockholders who was a stockholder
on the record date for such meeting, that appraisal rights are
available, and must include in such notice a copy of Section 262
of the DGCL. This proxy statement constitutes such notice.
A holder of shares for which appraisal rights are available who
wishes to exercise such rights:
- - must not vote in favor of the merger agreement or consent
thereto in writing (including by returning a signed proxy without
any voting instructions as to the proposal); and
- - must deliver to Jayark, prior to the vote on the merger agreement
at the special meeting, a written demand for appraisal of the
holder's shares.
This written demand for appraisal must be in addition to and separate
from any proxy abstaining from or vote against the merger.
This demand must reasonably inform Jayark of the identity of
the stockholder and of the stockholder's intent to demand appraisal
of his, her or its shares. A holder of shares wishing to exercise
such holder's appraisal rights must be the record holder of such
shares on the date the written demand for appraisal is made, and
must continue to hold such shares until the consummation
of the merger. Accordingly, a holder of shares for which appraisal
rights are available who is the record holder of shares on the
date the written demand for appraisal is made, but who
thereafter transfers such shares prior to consummation of the
merger, will lose any right to appraisal in respect of such shares.
Only a holder of record of shares for which appraisal rights are
available is entitled to assert appraisal rights for the shares
registered in that holder's name. A demand for appraisal should be
executed by or on behalf of the holder of record, fully and correctly,
as this holder's name appears on such holder's stock certificates.
If the shares for which appraisal rights are available are owned
of record in a fiduciary capacity, for example, by a trustee,
guardian or custodian, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than one owner
as in a joint tenancy or tenancy in common, the demand should be
executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal
on behalf of a holder of record. The agent, however, must identify the
record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners.
Those beneficial owners who wish to exercise appraisal rights
under Section 262 of the DGCL are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for
appraisal by such a nominee.
All written demands for appraisal should be sent or delivered to:
Jayark Corporation
300 Plaza Drive
Vestal, NY 13850
Attn: Secretary
Within 10 days after the effective time of the merger, Jayark will
notify each stockholder (i) that has properly asserted appraisal
rights under Section 262 of the DGCL, and (ii) that has not voted
in favor of the merger agreement, of the date the merger became
effective.
Within 120 days after the effective time of the merger, but not
later, Jayark, as the surviving corporation, or any stockholder
who has complied with the statutory requirements summarized above,
may file a petition in the Delaware Chancery Court demanding a
determination of the fair value of the shares of Jayark common
stock that are entitled to appraisal rights. Jayark is under no
obligation, and has no present intention, to file a petition with
respect to the appraisal of the fair value of such shares.
Accordingly, it will be the obligation of stockholders wishing
to assert appraisal rights to initiate all necessary action to
perfect their appraisal rights within the time prescribed in
Section 262 of the DGCL.
Within 120 days after the consummation of the merger, any stockholder
that has complied with the requirements for exercise of appraisal
rights will be entitled, upon written request, to receive from
Jayark a statement setting forth (i) the aggregate number of
shares for which appraisal rights are available not voted in
favor of adoption of the merger agreement and for which demands for
appraisal have been received, and (ii) the aggregate number of
holders of these shares. These statements must be mailed within 10
days after a written request has been received by Jayark, or within
10 days after expiration of the period for delivery of demands for
appraisal under Section 262 of the DGCL, whichever is later.
If a petition for an appraisal is filed on a timely basis, after a
hearing on such petition, of which the Register in Chancery
(if so ordered by the Delaware Chancery Court) will give notice
to stockholders, the Delaware Chancery Court will determine the
stockholders entitled to appraisal rights. The Delaware Chancery
Court will also appraise the "fair value" of the shares for
which appraisal rights are available, exclusive of any element
of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value.
Stockholders considering seeking appraisal should be aware that
the fair value of their shares of Jayark common stock as determined
under Section 262 of the DGCL could be more than, the same as, or
less than the merger consideration, and that investment banking
opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262 of the
DGCL. The Delaware Supreme Court has stated, however, that
"proof of value by any techniques or methods that are
generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings.
The Delaware Chancery Court will determine the amount of interest,
if any, to be paid upon the amounts to be received by stockholders
whose shares have been appraised. The costs of the action may be
determined by the Delaware Chancery Court and allocated among the
parties as the Delaware Chancery Court deems equitable. The
Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an
appraisal be charged pro rata against the value of all of the shares
entitled to appraisal.
Any holder of shares who has duly demanded an appraisal in compliance
with Section 262 of the DGCL will not, after the completion of
the merger, be entitled to vote the shares subject to such demand
for any purpose, or be entitled to the payment of dividends or
other distributions on those shares (except dividends or other
distributions payable to holders of record as of a record date prior
to the completion of the merger).
If any stockholder that properly demands appraisal of his, her
or its shares under Section 262 of the DGCL fails to perfect, or
effectively withdraws or loses, his, her or its right to appraisal,
as provided in Section 262 of the DGCL, the shares of this stockholder
will be converted into the right to receive the merger consideration of
$.40 per share. A stockholder will fail to perfect, or effectively
lose or withdraw its right to appraisal if, among other things, no
petition for appraisal is filed within 120 days after the effective
time of the merger, or if this stockholder delivers to Jayark a written
withdrawal of his, her or its demand for appraisal. At any time
within 60 days after the effective time of the merger, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal
and to accept the merger consideration of $.40 per share. Any attempt
to withdraw an appraisal demand more than 60 days after the effective
time of the merger will require the written approval of Jayark as the
surviving corporation.
Cash received pursuant to the exercise of your appraisal rights
will be subject to income tax. We refer you to the information
under the heading "Special Factors - Material United States Federal
Income Tax Considerations."
Failure to follow the steps required by Section 262 of the DGCL
for perfecting appraisal rights may result in the loss of your rights.
Under these circumstances, you will be entitled to receive the $.40
merger consideration with respect to your shares of Jayark common
stock in accordance with the merger agreement.
The foregoing summary of the rights of dissenting public stockholders
does not purport to be a complete statement of the procedures to be
followed by stockholders desiring to exercise any available
appraisal rights. The preservation and exercise of appraisal rights
require strict adherence to the applicable provisions of Section 262
of the DGCL, a copy of which is attached hereto as Appendix C.
INTERESTS OF OFFICERS AND DIRECTORS IN THE MERGER
All of Jayark's officers and directors, with the exception of
Robert C. Nolt and Richard Ryder, have exchanged shares of Jayark
common stock previously owned by them for shares of common stock of
Parent. Their ownership of Parent's common stock is referred to in
footnotes (2) and (3) to the table contained in "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
FEES AND EXPENSES
Jayark estimates that merger-related fees and expenses, consisting
primarily of financial advisory fees, SEC filing fees, fees and expenses
of attorneys and accountants and other related charges, will total
approximately $110,100, assuming the merger is completed. This amount
consists of the following estimated fees:
Description Amount
Legal fees and expenses $40,000
Fairness Opinion $30,000
Accounting fees and expenses $10,000
SEC filing fee $100
Printing, solicitation and mailing costs $30,000
Total $110,100
REGULATORY REQUIREMENTS
In connection with the merger, Jayark will be required to make a
number of filings with and obtain a number of approvals from various
federal and state governmental agencies, including:
o filing of a certificate of merger with the Secretary of State
of the State of Delaware in accordance with the General Corporation
Law of Delaware after the approval of the merger agreement by Jayark's
stockholders; and
o complying with federal and state securities laws, including
Jayark's filing, prior to the date of this proxy statement, of a
Rule 13e-3 Transaction Statement on Schedule 13E-3 with the
Securities and Exchange Commission.
THE MERGER AGREEMENT
This section is a summary of the material terms of the merger
agreement, a copy of which is attached as Appendix A to this
Proxy Statement. Because this is a summary, it does not include
all of the information that may be important to you. You should
read the entire merger agreement and this Proxy Statement and
related appendices before deciding how to vote at the Special
Meeting.
THE MERGER
Merger Corp., formed for the sole purpose of effecting the merger,
will be merged with and into Jayark, which will be the surviving
corporation. The merger will occur following the approval of the
merger agreement by the Jayark stockholders and the satisfaction
of other conditions to the merger.
CONVERSION OF SHARES IN THE MERGER
The merger agreement provides that, at the effective time of the
merger (the "Effective Time"):
(a) all outstanding shares of Jayark stock, other than shares
owned by Parent and shares held by stockholders who have perfected
these dissenters' rights under Delaware law, without any action on
the part of the holder thereof, shall be canceled and converted into
the right to receive cash equal to $.40 per share (the "Merger
Consideration");
(b) all outstanding shares of Jayark stock other than those
described in paragraph (a) as being converted into the right to
receive the Merger Consideration shall remain outstanding with all
rights, privileges, and powers existing immediately before the
Effective Time; and
(c) the outstanding shares of Merger Corp. shall, without any
action on the part of the holder thereof, be canceled.
EXCHANGE OF CERTIFICATES
The merger agreement provides that promptly after the Effective Time,
Jayark will mail to each holder of a certificate or certificates
which immediately prior to the Effective Time evidenced outstanding
shares that have been converted into the right to receive the Merger
Consideration (other than shares as to which rights of dissent have
been perfected) ("Certificates"), a letter of transmittal (which
shall contain a certification as to the number of shares held and
such other matters as Jayark may determine and shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
Jayark) and instructions to effect the surrender of the Certificates
in exchange for the Merger Consideration, if any, payable with respect
to such Certificates. Upon surrender of a Certificate for cancellation
to Jayark, together with such letter of transmittal, duly completed and
executed, and such customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall, subject to
the above provisions of the merger agreement, be entitled to receive
in exchange therefor the Merger Consideration payable with respect to
the shares formerly represented by such Certificate and the Certificate
so surrendered shall be canceled. In the event of a transfer of
ownership of shares which is not registered in the share transfer
records of Jayark, the Merger Consideration, if any, payable in
respect of such shares may be paid or issued to the transferee
if the Certificate representing such shares is presented to
Jayark, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
TIMING OF CLOSING
If the merger agreement is approved by the Jayark stockholders, the
merger closing will take place as soon as practicable after the Special
Meeting, provided that all other conditions to the closing have been
satisfied or waived. On the date the merger closes, a certificate of
merger will be filed with the Secretary of State of the State of
Delaware. The merger will become effective when the certificate of
merger has been duly filed with the Secretary of State of the State
of Delaware.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors and officers of
Jayark immediately prior to the effective time of the merger shall be
the directors and officers of Jayark, as the surviving corporation,
immediately after the merger.
CERTIFICATE OF INCORPORATION AND BYLAWS
The merger agreement provides that the Certificate of Incorporation
and By-laws of Jayark in effect immediately prior to the effective
time of the merger shall be the Certificate of Incorporation and
By-laws of Jayark, as the surviving corporation, immediately after
the merger.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and
warranties made by Jayark, Parent and Merger Corp. regarding
various matters, including representations by as to the
enforceability of the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER
The obligations of Jayark, Parent and Merger Corp. to complete
the merger are subject to the satisfaction or waiver of all of
the following conditions:
o approval of the merger agreement by the holders of at least
a majority of the outstanding shares of our common stock; and
o no litigation is pending regarding the merger.
TERMINATION OF MERGER AGREEMENT
The merger agreement may be terminated by either Jayark, Parent
or Merger Corp. at any time prior to closing.
OTHER MATTERS
Management of Jayark knows of no other business to be presented
at the meeting, but if other matters do properly come before the
meeting, unless otherwise instructed, it is intended that the
persons named in the proxy will vote shares according to their
best judgment.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational filing requirements of the
Securities Exchange Act, and, in accordance therewith, are required
to file periodic reports, proxy statements and other information
with the SEC relating to our business, financial condition and other
matters. Information as of particular dates concerning our directors
and officers, their remuneration, the principal holders of our
securities and any material interest of such persons in
transactions with us is required to be disclosed in periodic reports
filed with the SEC. Such reports, proxy statements and other
information should be available for inspection at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also should be
available for inspection at the SEC's regional office located at
the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may also be obtained by
mail, upon payment of the SEC's customary fees, by writing to its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
These materials filed by us with the SEC are also available on
the website of the SEC at www.sec.gov.
Because the merger is a "going private" transaction, Jayark,
Parent and Merger Corp. have filed with the SEC a Rule 13E-3
Transaction Statement on Schedule 13E-3 under the Securities
Exchange Act of 1934, as amended (the "Schedule 13E-3"). This
Proxy Statement does not contain all of the information set forth in
the Schedule 13E-3 and the exhibits thereto. Copies of the Schedule
13E-3 and the exhibits thereto are available for inspection and
copying at our principal executive offices during regular business
hours by any of our stockholders, or a representative who has been
so designated in writing, and may be inspected and copied, or
obtained by mail, by written request directed to the same address
given above, or from the SEC as described above.
Upon completion of the merger, we will seek to terminate the
registration of our common stock under the Securities Exchange Act,
which will relieve us of any obligation to file reports and forms,
such as an Annual Report on Form 10-K, with the SEC under the
Securities Exchange Act.
ADDITIONAL DOCUMENTS AND OTHER INFORMATION
INCORPORATED BY REFERENCE
The rules and regulations of the SEC allow Jayark to incorporate into
this document by reference certain reports, proxy and information
statements and other information, which means that important
information may be disclosed to you by Jayark by referring you to
another report, proxy or information statement or other information
filed separately by Jayark with the SEC. The reports, proxy and
information statements and other information incorporated into
this document by reference are deemed to be part of this document,
except for any information superseded by information contained
in, or incorporated by reference into, this document. This
document hereby incorporates by reference the reports listed below,
which have been previously filed by Jayark with the SEC, provided
that any reference to any claim of reliance on the Private
Securities Litigation Reform Act's forward looking statement safe
harbor contained in such document is excluded, and is not
incorporated herein by reference. The following reports
contain information about Jayark and its financial condition,
results of operations and business that are important to you,
and we encourage you to read it carefully in connection with
your review of this document.
(1) Annual Report on Form 10-K, filed by Jayark with the SEC
on July 26, 2002, to report results for its fiscal year ended
April 30, 2002.
(2) Quarterly Report on Form 10-Q, filed by Jayark with the SEC
on December 4, 2002, to report results for its fiscal quarter ended
October 31, 2002.
Jayark is also incorporating by reference all additional reports,
proxy and information statements and other information filed by
Jayark with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act between the date of this document and the Special
Meeting described herein.
Jayark has supplied all information contained in or incorporated by
reference in this document relating to Jayark, provided that any
reference to any claim of reliance on the Private Securities
Litigation Reform Act's forward looking statement safe harbor
contained in any such document is excluded, and is not incorporated
herein by reference.
Specifically, the information set forth in the following sections
of our Annual Report on Form 10-K for the fiscal year ended April 30,
2002, is incorporated by reference in this proxy statement and
deemed to be a part hereof:
Item 1: Business;
Item 2: Properties;
Item 3: Legal Proceedings;
Item 6: Management's Discussions and Analysis or Plan of
Operations;
Item 7: Financial Statements and Supplementary Data; and
Item 8: Changes in and Disagreement with Accountants on
Accounting.
Financial Disclosure
Our Annual Report on Form 10-K for the fiscal year ended April 30,
2002 is enclosed with this Proxy Statement. See Appendix E. Our
Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2002 is enclosed with this proxy statement. See
Appendix D. Any statement contained in a document incorporated by
reference in this proxy statement shall be deemed to be modified or
superseded for all purposes to the extent that a statement
contained in this Proxy Statement modifies or supersedes the
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute part
of this proxy statement.
We undertake to provide by first class mail, without charge and
within two business days of receipt of any written request, to any
person to whom a copy of this proxy statement has been delivered,
a copy of any or all of the documents referred to above which
have been incorporated by reference in this proxy statement,
other than exhibits to the documents, unless the exhibits
are specifically incorporated by reference therein. Requests
for copies should be directed to Jayark Corporation,
300 Plaza Drive, Vestal, New York 13850, Attention: Secretary.
By Order of the Board of Directors
Dated: ________________
APPENDIX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated effective as of February 3,
2003 (this "Agreement"), is entered into by and between Jayark
Corporation, a Delaware corporation (the "Company"), J Acquisition
Corp., a Nevada corporation ("Parent"), and J Merger Corp., a Delaware
corporation ("Merger Corp.").
WITNESSETH
WHEREAS, the Company is a corporation duly incorporated and validly
existing under the laws of the State of Delaware having its principal
office in Vestal, New York, with authorized capital stock consisting
of Three Million (3,000,000) shares ("Shares") of common stock, $.01
par value per share (the "Company Stock"), of which 2,766,396 shares
are issued and outstanding; and
WHEREAS, Merger Corp. is a corporation duly organized and validly
existing under the laws of the State of Delaware, with authorized
capital stock consisting of twenty thousand (20,000) shares of common
stock, $1.00 par value per share (the "Merger Corp. Stock"), of which
ten (10) shares are issued and outstanding; and
WHEREAS, the boards of directors of the Company, Parent and Merger
Corp. have each approved the terms and conditions of this Agreement
pursuant to which Merger Corp. will be merged with and into the
Company (the "Merger") with the Company surviving the Merger.
NOW, THEREFORE, in consideration of the foregoing premises and of
the mutual covenants and undertakings contained herein, and for such
other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby
agree as follows:
ARTICLE I
MERGER
1.01. GENERAL. At the Effective Time (as defined in Article VIII
below) of the Merger and pursuant to the provisions of this Agreement,
the corporate existence of Merger Corp. will be merged with and into
the Company (hereinafter referred to as the "Surviving Corporation"
whenever reference is made to it as of the Effective Time or
thereafter) and continued in the Surviving Corporation, and the
Surviving Corporation shall be deemed to be a continuation of the
entities and identities of Merger Corp. and the Company.
1.02. NAME AND ORGANIZATION. The name of the Surviving Corporation
shall remain and thereafter be "Jayark Corporation." The Certificate
of Incorporation and By-laws of the Company in effect at the Effective
Time shall remain the Certificate of Incorporation and By-laws of the
Surviving Corporation until changed as provided therein or by law. The
established offices and facilities of the Company shall remain the
established offices and facilities of the Surviving Corporation. The
registered office and registered agent of the Company shall remain the
registered office and registered agent of the Surviving Corporation.
1.03. RIGHTS AND INTERESTS. At the Effective Time, all rights,
franchises, and interests of the Company and Merger Corp., respectively,
in and to every type of property shall be transferred to and vested in
the Surviving Corporation by virtue of the Merger without any deed or
other transfer. The Surviving Corporation at the Effective Time, and
without any order or other action on the part of any court or otherwise,
shall hold and enjoy all rights of property, franchises, and interests,
including appointments, powers, designations, and nominations, and all
other rights and interests as trustee, executor, administrator, agent,
transfer agent, registrar of stocks and bonds, administrator of estates,
assignee, and receiver, and in every other fiduciary and agency capacity
in the same manner and to the same extent as such rights, franchises,
and interests were held or enjoyed by the Company and Merger Corp.,
respectively, immediately prior to the Effective Time.
1.04. LIABILITIES AND OBLIGATIONS. Except as otherwise provided
herein, the Surviving Corporation shall be liable for all liabilities
of the Company and Merger Corp. All debts, liabilities, obligations,
and contracts of the Company and Merger Corp., matured or unmatured,
whether accrued, absolute, contingent, or otherwise, and whether or
not reflected or reserved against on the balance sheets, books of
account, or records of the Company or Merger Corp., as the case may
be, shall be those of, and are hereby expressly assumed by, the
Surviving Corporation and shall not be released or impaired by the
Merger. All rights of creditors and other obligees and all liens on
property of either the Company or Merger Corp. shall be preserved
unimpaired.
1.05. DIRECTORS AND OFFICERS. The directors, advisory directors,
and officers of the Surviving Corporation at the Effective Time shall
be those persons who were directors, advisory directors, and officers,
respectively, of the Company immediately before the Effective Time.
The committees of the Board of Directors of the Surviving Corporation
at the Effective Time shall be the same as, and shall be composed of
the same persons who were serving on, the committees appointed by the
Board of Directors of the Company as they existed immediately before
the Effective Time.
1.06. ADOPTION. Unless contrary to the laws of the State of
Delaware or the United States of America or other applicable laws,
all corporate acts, plans, policies, applications, agreements, orders,
registrations, licenses, approvals, and authorizations of the Company
and Merger Corp., their respective shareholders, boards of directors,
committees elected or appointed by their boards of directors or officers,
and agents that were valid and effective immediately before the Effective
Time shall be taken for all purposes at and after the Effective Time as
the acts, plans, policies, applications, agreements, orders,
registrations, licenses, approvals, and authorizations of the Surviving
Corporation and shall be effective and binding thereon as the same were
with respect to the Company and Merger Corp. immediately before the
Effective Time.
ARTICLE II
TERMS OF THE MERGER
2.01. GENERAL. The manner of exchanging and converting the issued
and outstanding shares of Company Stock and Merger Corp. Stock shall
be as hereinafter provided in this Article II.
2.02. CONVERSION AND CANCELLATION OF STOCK. At the Effective Time,
by virtue of the Merger and without any action on the part of the
parties to this Agreement or the holders of the following securities:
(a) Each share of the Company Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of
Company Stock owned by Parent and other than shares to be canceled
and retired pursuant to Section 2.03 and Dissenting Shares (as
defined in Section 2.05) shall be converted automatically into the
right to receive $.40 in cash, without interest. (the "Merger
Consideration"). At the Effective Time, each Continuing Share
shall thereafter without any action on the part of the holder be
deemed to represent the same number of shares of the Surviving
Corporation.
(b) From and after the Effective Time, all shares of
Company Stock (other than continuing shares and other than shares
of Company Stock to be canceled and retired pursuant to Section
2.03 and Dissenting Shares) shall automatically be redeemed and
canceled and shall cease to exist, and each holder of a certificate
which previously represented any such share of Company Stock (each,
a "Company Certificate" and, collectively, the Company
Certificates") shall cease to have any rights with respect thereto
other than the right to receive the Merger Consideration such holder
is entitled to receive pursuant to this Section 2.03 upon surrender
of such certificate in accordance with Section 2.04 hereof, in each
case without interest.
2.03 CANCELLATION OF SHARES. Immediately prior to the Effective
Time each share of Company Stock held in the Company's treasury
immediately prior to the Effective Time and each share of Merger
Corp. stock, shall be canceled and extinguished without any
conversion thereof or payment therefor.
2.04 EXCHANGE OF CERTIFICATES.
(a) PAYMENT PROCEDURE. Promptly after the Effective Time,
the Surviving Corporation will mail to each holder of a
certificate or certificates which immediately prior to the
Effective Time evidenced outstanding Shares that have been
converted into the right to receive the Merger Consideration
(other than Dissenting Shares as to which rights of dissent have
been perfected as provided in Section 2.05) ("Certificates"), a
letter of transmittal (which shall contain such matters as the
Surviving Corporation may determine and shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates
to the Surviving Corporation) and instructions to effect the
surrender of the Certificates in exchange for the Merger
Consideration, if any, payable with respect to such Certificates.
Upon surrender of a Certificate for cancellation to the Surviving
Corporation, together with such letter of transmittal, duly completed
and executed and such other customary documents as may be required
pursuant to such instructions, the holder of such Certificate shall,
subject to the provisions of Section 2.02, be entitled to receive in
exchange therefor the Merger Consideration payable with respect to
the Shares formerly represented by such Certificate and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer
of ownership of Shares which is not registered in the share transfer
records of the Company, the Merger Consideration, if any, payable in
respect thereof may be paid or issued to the transferee if the
Certificate representing such Shares is presented to the Surviving
Corporation, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(b) ABANDONED PROPERTY LAWS. The Surviving Corporation shall not
be liable to any holder of a Certificate for any cash properly
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.05 APPRAISAL RIGHTS OF SHAREHOLDERS. Stockholders may dissent
from the Merger and exercise their appraisal rights pursuant to and
subject to the provisions of Section 262 of the General Corporation
Law of Delaware. The Shares held by holders who have perfected such
appraisal rights are referred to as "Dissenting Shares."
ARTICLE III
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF THE COMPANY
The Company hereby represents, warrants, and covenants to and with
Parent and Merger Corp. as of the date of this Agreement and as of
the Closing Date (as defined in Article VIII below) as follows:
3.01. ORGANIZATION. The Company is a corporation duly incorporated,
validly existing, and in good standing under the laws of the State
of Delaware. The Company has the corporate power to carry on its
business as is presently being conducted and is qualified to do
business in every jurisdiction in which the character and location
of the assets owned by it or the nature of the business transacted
by it requires qualification.
3.02. GOVERNMENTAL AUTHORIZATIONS. The Company is in compliance
in all material respects with all applicable federal, state, and
local laws, rules, regulations, and orders, including, without
limitation, those imposing taxes. The approval, execution,
delivery, and performance of this Agreement, and the consummation
of the transactions contemplated hereby, subject to the receipt of
the consents and approvals described in Section 6.03 below, will not
violate in any material respect any provision of, or constitute a
default under, any applicable law, rule, or regulation of any
governmental agency or instrumentality, either domestic or foreign,
applicable to the Company.
3.03. NO CONFLICT WITH OTHER INSTRUMENTS. The consummation of
the Merger in accordance with the terms, conditions, and provisions
of this Agreement will not conflict with, or result in a breach of,
any term, condition, or provision of, or constitute a default under,
any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party, and will not conflict
with any provisions of the Certificate of Incorporation or Bylaws of
the Company or any of its subsidiaries, and will not constitute an
event that with the lapse of time or action by a third party could
result in any default under any of the foregoing, or result in the
creation of any lien, charge, or encumbrance upon any of the assets
or properties of the Company or upon the Company Stock.
3.04. NO CONFLICT WITH JUDGMENTS OR DECREES. The consummation
of the transactions in accordance with the terms, conditions, and
provisions of this Agreement will not conflict with, or result in
a breach of, any term, condition, or provision of any judgment,
order, injunction, decree, writ, or ruling of any court or tribunal,
either domestic or foreign, to which the Company is a party or is
subject.
3.05. APPROVAL OF AGREEMENTS. The board of directors of the
Company has approved this Agreement and the transactions contemplated
hereby and has authorized the execution and delivery of this Agreement
by the Company. The Company has full corporate power, authority, and
legal right to enter into this Agreement.
3.06. CAPITAL STOCK. The authorized capital stock of the Company
consists solely of the Company Stock, all of the shares of which are
validly issued, fully paid, and not issued in violation of the
preemptive rights of any stockholder.
ARTICLE IV
REPRESENTATIONS, WARRANTIES, AND COVENANTS
OF PARENT AND MERGER CORP.
Each of Parent and Merger Corp. hereby jointly and severally
represents, warrants, and covenants to and with the Company as of
the date of this Agreement and as of the Closing Date as follows:
4.01. ORGANIZATION. Parent is a Nevada corporation duly
incorporated, validly existing and in good standing under the laws
of the state of Nevada and Merger Corp. is a Delaware corporation
duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware. Each of Parent and Merger Corp. has
the corporate power and authority to carry on its business as is
presently being conducted and is qualified to do business in every
jurisdiction in which the character and location of the assets owned
by it or the nature of the businesses conducted by it requires
qualification.
4.02. CAPITAL STOCK. The authorized capital stock of Merger
Corp. consists solely of the Merger Corp. Stock, of which ten (10)
shares are currently issued and held by the Parent. There are no
outstanding subscriptions, warrants, options, or rights of any kind
to acquire from Merger Corp. any shares of Merger Corp. Stock,
other equity securities, or debt securities.
4.03. SUBSIDIARIES OR AFFILIATES. Merger Corp. does not own of
record or beneficially, and is not obligated to acquire any capital
stock, other equity securities, debt securities, or other interest
of or in any corporation, government, or other entity. Between the
date hereof and the Effective Time, Merger Corp. will not create or
acquire any subsidiaries without the prior written consent of the
Company.
4.04. APPROVAL OF AGREEMENTS. The Boards of Directors of Parent
and Merger Corp. have approved this Agreement and the transactions
contemplated hereby and has authorized the execution and delivery by
Parent and Merger Corp. of this Agreement. Each of Parent and Merger
Corp. has full corporate power, authority, and legal right to enter
into this Agreement and, upon appropriate vote of the shareholders of
Parent and Merger Corp., to approve this Agreement and consummate the
transactions contemplated hereby.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER CORP.
The obligations of Parent and Merger Corp. to cause the Merger to
be consummated shall be subject to the satisfaction on or before
the Closing Date of all of the following conditions, except as
Merger Corp. may waive such conditions in writing:
5.01. LITIGATION. On the Closing Date, there shall not be
pending or threatened litigation in any court or any proceeding
by any governmental commission, board, or agency with a view to
seeking, or in which it is sought, to restrain or prohibit
consummation of the Merger, or in which it is sought to obtain
divestiture, rescission, or damages in connection with the Merger
or the consummation of the Merger, and to the knowledge of any of
the parties hereto, no investigation by any governmental agency
shall be pending or threatened that might result in any such suit,
action, or other proceeding.
5.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Company contained in this Agreement, other than
any representations and warranties as to future events, shall be
true in all material respects on and as of the Closing Date as if
such representations and warranties were made on and as of the
Closing Date, and the Company shall have performed all agreements
and covenants required by this Agreement to be performed by it on
or prior to the Closing Date.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to cause the Merger to be consummated
shall be subject to the satisfaction on or before the Closing Date
of all the following conditions, except as the Company may waive
such conditions in writing:
6.01. LITIGATION. On the Closing Date, there shall not be
pending or threatened litigation in any court or any proceeding by
any governmental commission, board, or agency with a view to seeking,
or in which it is sought, to restrain or prohibit consummation of the
Merger, or in which it is sought to obtain divestiture, rescission,
or damages in connection with the Merger or the consummation of the
Merger, and to the knowledge of any of the parties hereto, no
investigation by any governmental agency shall be pending or
threatened that might result in any such suit, action, or other
proceeding.
6.02. REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Parent and Merger Corp. contained in this Agreement,
other than any representations and warranties as to future events,
shall be true in all material respects on and as of the Closing
Date as if such representations and warranties were made on and
as of the Closing Date, and each of Parent and Merger Corp. shall
have performed all agreements and covenants required by this
Agreement to be performed by it on or prior to the Closing Date.
6.03. STOCKHOLDER APPROVAL. This Agreement shall have been
approved by a vote of the holders of not less than a majority of
the outstanding shares of Company Stock.
ARTICLE VII
EXPENSES
Costs and expenses relating to the negotiation and drafting of
this Agreement and the transactions contemplated hereby shall
be borne and paid by the Company.
ARTICLE VIII
CLOSING DATE AND EFFECTIVE TIME
The closing of this Agreement and the transactions contemplated
hereby shall be held on the Closing Date (as defined in this
Article VIII) at such time and place as the parties hereto may
mutually agree upon. The "Closing Date" shall be such date as
the Presidents of the Company and Merger Corp., respectively,
may agree upon. Subject to the terms and upon satisfaction on
or before the Closing Date of all requirements of law and
conditions specified in this Agreement, the Company, Parent
and Merger Corp. shall, at the Closing Date, execute,
acknowledge, and deliver such other documents and instruments
and take such further action as may be necessary or appropriate
to consummate the Merger. The "Effective Time" is the date on
which the Merger is effective, which shall be on the date
specified in the certificate of merger to be issued by the
Secretary of State of Delaware, and if no date is specified
in such certificate, then the Effective Time shall be the time
of the opening of business on the date the certificate of merger
is filed with by the Secretary of State of Delaware.
ARTICLE IX
AMENDMENTS
This Agreement may be amended only by written agreement duly
authorized by the boards of directors of the parties hereto
prior to the Closing Date.
ARTICLE X
TERMINATION
This Agreement may be terminated by either the Company or Parent
at any time prior to the Effective Time. In the event of a
termination of this Agreement, this Agreement shall become
void and shall have no effect and create no liability on the
part of any of the parties hereto or their respective directors,
officers, or stockholders.
ARTICLE XI
NOTICES
All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have
been duly given at the time either personally delivered or sent
by registered or certified mail, postage prepaid, as follows:
If to the Company, at
300 Plaza Drive
Vestal, New York 13850
If to Merger Corp., at
300 Plaza Drive
Vestal, New York 13850
ARTICLE XII
MISCELLANEOUS
12.01. FURTHER ASSURANCES. Each party hereto agrees to perform
any further acts and to execute and deliver any further documents
that may be reasonably necessary to carry out the provisions of
this Agreement.
12.02. SEVERABILITY. In the event that any of the provisions,
or portions thereof, of this Agreement are held to be illegal,
unenforceable, or invalid by any court of competent jurisdiction,
the legality, enforceability, and validity of the remaining
provisions, or portions thereof, shall not be affected thereby,
and, in lieu of the illegal, unenforceable, or invalid provision,
or portion thereof, there shall be added a new legal, enforceable,
and valid provision as similar in scope and effect as is necessary
to effectuate the results intended by the deleted provision or
portion.
12.03. CONSTRUCTION. Whenever used herein, the singular number
shall include the plural, and the plural number shall include the
singular.
12.04. GENDER. Any references herein to the masculine gender,
or to the masculine form of any noun, adjective, or possessive,
shall be construed to include the feminine or neuter gender and form,
and vice versa.
12.05. HEADINGS. The headings contained in this Agreement are
for purposes of reference only and shall not limit or otherwise
affect the meaning of any of the provisions contained herein.
12.06. MULTIPLE COUNTERPARTS. This Agreement may be executed
in multiple counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the
same instrument.
12.07. GOVERNING LAW. THIS AGREEMENT HAS BEEN EXECUTED IN AND
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS RULES THEREOF OR OF ANY STATE.
12.08. COURT COSTS AND ATTORNEYS' FEES. If any action at law or
in equity, including an action for declaratory relief, is brought to
enforce or interpret the provisions of this Agreement, the prevailing
party shall be entitled to recover costs of court and reasonable
attorneys' fees from the other party or parties to such action, which
fees may be set by the court in the trial of such action or may be
enforced in a separate action brought for that purpose, and which fees
shall be in addition to any other relief that may be awarded.
12.09. INUREMENT. Subject to any restrictions against transfer or
assignment as may be contained herein, the provisions of this Agreement
shall inure to the benefit of, and shall be binding on, the assigns and
successors in interest of each of the parties hereto.
12.10. WAIVERS. No waiver of any provision or condition of this
Agreement shall be valid unless executed in writing and signed by the
party to be bound thereby, and then only to the extent specified in such
waiver. No waiver of any provision or condition of this Agreement shall
be construed as a waiver of any other provision or condition of this
Agreement, and no present waiver of any provision or condition of this
Agreement shall be construed as a future waiver of such provision or
condition.
12.11. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties hereto concerning the subject matter
contained herein. There are no representations, agreements, arrangements,
or understandings, oral or written, between or among the parties hereto
relating to the subject matter of this Agreement that are not fully
expressed herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by as of the date first written above.
JAYARK CORPORATION
By: /s/ David L. Koffman
Title: President and Chief Executive Officer
J ACQUISITION CORP.
By: /s/ David L. Koffman
Title: President
J MERGER CORP.
By: /s/ David L. Koffman
Title: President
APPENDIX B
WRITTEN OPINION OF KIRLIN SECURITIES, INC.
KIRLIN SECURITIES, INC.
6901 Jericho Turnpike
Syosset, New York 11791
February 4, 2003
Board of Directors of
Jayark Corporation
300 Plaza Drive
Vestal, New York 13850
Gentlemen:
We understand that Jayark Corporation, a Delaware Corporation
(the "Company") has entered into an Agreement and Plan of Merger (the
"Merger Agreement"), dated February 3, 2003, by and among the Company,
J Merger Corp., a newly formed Delaware corporation ("Merger Corp."),
and J Acquisition Corp., a Nevada corporation and owner of all of the
issued and outstanding common stock of Merger Co.
Based upon your representations to us, we understand that all of
the issued and outstanding common stock of Parent (the "Parent Stock"),
will be owned prior to the Merger (as defined below) by certain officers
and directors of the Company and their affiliates including, among
others, David Koffman, the Chairman, President, Chief Executive Officer
and a Director of the Company, Vulcan Properties, Inc., a corporation
controlled by Arthur Cohen, Frank Rabinovitz, the Executive Vice
President, Chief Operating Officer, and a Director of the Company,
Jeffrey Koffman, a Director of the Company, Burton I. Koffman, the
father of David Koffman, Ruthanne Koffman, the wife of Burton I. Koffman,
and certain entities affiliated with the Koffman family (collectively,
the "Buyout Group"). We understand that the Buyout Group will obtain
all of the Parent Stock in exchange for all of such persons respective
stock in the Company, which exchange will occur prior to the Merger.
Pursuant to the Merger Agreement, Merger Corp. will be merged with and
into the Company (the "Merger"), and each of the then outstanding
shares of common stock of the Company (the "Shares"), other than
Shares held by the Buyout Group and/or by the Company in treasury
(which will be cancelled without further consideration) and other
than Shares held by stockholders who properly exercise any dissenters'
appraisal rights available under the General Corporation Law of the
State of Delaware, will be converted in the Merger into the right to
receive $.40 per share in cash (the "Merger Price"). You have
requested our opinion as to the fairness of the Merger Price, from a
financial point of view, to the holders of the Shares other than the
Buyout Group (the "Public Stockholders").
In arriving at our opinion, we have, among other things: (i) reviewed
the Merger Agreement; (ii) reviewed and analyzed the audited annual
and unaudited financial statements of the Company in the Company's
reports to stockholders and filings under the Securities Exchange Act
of 1934, as amended; (iii) reviewed the Company's Rule 13E-3
Transaction Statement on Schedule 13E-3; (iv) reviewed the Company's
preliminary Proxy Statement relating to the Merger; (v) reviewed
internal financial and operating budgets and projections for the
Company provided to us by the management of the Company; (vi)
discussed with certain of the Company's executive officers the
business, properties, results of operations and future prospects
of the Company; (vii) compared the results of operations of the
Company with those of publicly held companies deemed by us to be
comparable to the Company; (vii) compared the Merger Price to be
received by the Public Stockholders pursuant to the Merger Agreement
with the values received in certain other transactions which we
believed are of a comparable nature; (ix) reviewed the trading
range and trading volume of the Shares since January 1998; (x)
reviewed our perceived liquidation value of the assets of the
Company; (xi) discussed with the Company whether other potential
purchasers for the Company and/or its assets exists and/or existed; (xii)
reviewed current general economic and monetary conditions;
(xiii) reviewed past, current and our view of future stock market
conditions; and (xiv) conducted such other analyses and/or inquiries
as we deemed appropriate.
In our review and analysis and in arriving at our opinion, we have
assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to us and/or publicly
available and have neither attempted independently to verify nor
assumed responsibility for verifying any of such information. With
respect to the financial projections of the Company, we have assumed
that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's
management as to the future financial performance of the Company,
and we express no opinion with respect to such forecasts and/or the
assumptions on which they are based. We further relied upon the
assurance of management of the Company that they were unaware of
any facts that would make such information incomplete or misleading.
We have not made nor obtained and/or assumed any responsibility for
making and/or obtaining any independent evaluations or appraisals of
any of the assets (including properties and facilities) or liabilities
of the Company.
We have also taken into account our assessment of general economic
market and financial conditions and our general knowledge of securities
valuations. Our opinion necessarily is based upon conditions as they
exist and can be evaluated on the date hereof, and we assume no
responsibility to update or revise our opinion based upon circumstances
or events occurring after the date hereof. Our opinion, as expressed
below, does not imply any conclusion as to the likely value of the
Company following the consummation of the Merger, which may vary
depending upon, among other factors, market conditions, general
economic conditions and other facts that generally influence the value
of a Company. Our opinion does not address the Company's underlying
business decision to effect the Merger. Our opinion is directed only
to the fairness, from a financial point of view, of the Merger Price
to the Public Stockholders and does not constitute a recommendation
to the Public Stockholders (and/or anyone else) of the Merger and/or
the Merger Price.
In rendering our opinion we have assumed that the Merger will be
consummated on the terms described in the Merger Agreement without
any waiver of any material terms and conditions by the Company and
that no restrictions will be imposed that would have a material
adverse effect on the contemplated benefits of the Merger Price to
the Public Stockholders. It is understood that this Opinion may not
be disclosed or otherwise referred to without our prior written
consent, except as may otherwise be required by law or by a court
of competent jurisdiction.
Based on and subject to the foregoing, it is our opinion that the
Merger Price to be received pursuant to the Merger Agreement is fair,
from a financial point of view, to the Public Stockholders.
Very truly yours,
KIRLIN SECURITIES, INC.
By: /s/ Brendan C. Rempel
APPENDIX C
ss. 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such
shares, who continuously holds such shares through the effective
date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted
in favor of the merger or consolidation nor consented thereto
in writing pursuant to ss. 228 of this title shall be entitled
to an appraisal by the Court of Chancery of the fair value of
the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include
what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument
issued by a depository representing an interest in one or more shares,
or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository. (b) Appraisal rights shall be available
for the shares of any class or series of stock of a constituent
corporation in a merger or consolidation to be effected pursuant to
ss. 251 (other than a merger effected pursuant to ss. 251(g) of this
title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title: (1) Provided, however, that no appraisal rights under
this section shall be available for the shares of any class or
series of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc. or (ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in
subsection (f) of ss. 251 of this title. (2) Notwithstanding
paragraph (1) of this subsection, appraisal rights under this
section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation
pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except: a. Shares of stock
of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect
thereof; b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock
(or depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders; c. Cash in lieu
of fractional shares or fractional depository receipts described
in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs
a., b. and c. of this paragraph. (3) In the event all of the
stock of a subsidiary Delaware corporation party to a merger
effected under ss. 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware
corporation. (c) Any corporation may provide in its
certificate of incorporation that appraisal rights under
this section shall be available for the shares of any class
or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation
in which the corporation is a constituent corporation or the
sale of all or substantially all of the assets of the corporation.
If the certificate of incorporation contains such a provision, the
procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is
practicable. (d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for
approval at a meeting of stockholders, the corporation, not
less than 20 days prior to the meeting, shall notify each of
its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights
are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing
to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger
or consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the
date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant
to ss. 228 or ss. 253 of this title, then either a constituent
corporation before the effective date of the merger or consolidation
or the surviving or resulting corporation within 10 days thereafter
shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series
of stock of such constituent corporation, and shall include in
such notice a copy of this section. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of the
merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing such notice,
demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent [sic] corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent [sic] corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation
or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice,
such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of
such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either
notice, each constitutent [sic] corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date
the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding
the day on which the notice is given. (e) Within 120 days after the
effective date of the merger or consolidation, the surviving
or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all
such stockholders. Notwithstanding the foregoing, at any time
within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw
such stockholder's demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days
after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with
respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later. (f) Upon the filing
of any such petition by a stockholder, service of a copy thereof
shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly
verified list containing the names and addresses of all
stockholders who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached
by the surviving or resulting corporation. If the petition shall
be filed by the surviving or resulting corporation, the petition
shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time
and place fixed for the hearing of such petition by registered
or certified [sic] mail to the surviving or resulting corporation
and to the stockholders shown on the list at the addresses therein
stated. Such notice shall also be given by 1 or more publications
at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware
or such publication as the Court deems advisable. The forms of the
notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting
corporation. (g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for their
shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder. (h) After
determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive
of any element of value arising from the accomplishment or
expectation of the merger or consolidation, together with a fair
rate of interest, if any, to be paid upon the amount determined to
be the fair value. In determining such fair value, the Court shall
take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving
or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates
of stock to the Register in Chancery, if such is required,
may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section. (i) The Court shall direct the payment
of the fair value of the shares, together with interest, if
any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to
each such stockholder, in the case of holders of uncertificated
stock forthwith, and the case of holders of shares represented
by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be
enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state. (j) The costs of the
proceeding may be determined by the Court and taxed upon the
parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a
portion of the expenses incurred by any stockholder in connection
with the appraisal proceeding, including, without limitation,
reasonable attorney's fees and the fees and expenses of experts,
to be charged pro rata against the value of all the shares
entitled to an appraisal. (k) From and after the effective
date of the merger or consolidation, no stockholder who has
demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose
or to receive payment of dividends or other distributions on
the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective
date of the merger or consolidation); provided, however,
that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if
such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's demand for
an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in
the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just. (l) The
shares of the surviving or resulting corporation to which
the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation
shall have the status of authorized and unissued shares of the
surviving or resulting corporation. (8 Del. C. 1953, ss. 262;
56 Del. Laws, c. 50; 56 Del. Laws, c. 186, ss. 24; 57 Del. Laws,
c. 148, ss.ss. 27-29; 59 Del. Laws, c. 106, ss. 12;
60 Del. Laws, c. 371, ss.ss. 3-12; 63 Del. Laws, c. 25,
ss. 14; 63 Del. Laws, c. 152, ss.ss. 1, 2; 64 Del. Laws, c. 112,
ss.ss. 46-54; 66 Del. Laws, c. 136, ss.ss. 30-32; 66 Del. Laws,
c. 352, ss. 9; 67 Del. Laws, c. 376, ss.ss. 19, 20; 68 Del. Laws,
c. 337, ss.ss. 3, 4; 69 Del. Laws, c. 61, ss. 10; 69 Del. Laws,
c. 262, ss.ss. 1-9; 70 Del. Laws, c. 79, ss. 16; 70 Del. Laws,
c. 186, ss. 1; 70 Del. Laws, c. 299, ss.ss. 2, 3; 70 Del. Laws,
c. 349, ss. 22; 71 Del. Laws, c. 120, ss. 15; 71 Del. Laws, c. 339,
ss.ss. 49-52; 73 Del. Laws, c. 82, ss. 21.)
APPENDIX D
JAYARK CORPORATION'S REPORT ON FORM 10Q FOR THE SIX MONTHS ENDING
OCTOBER 31, 2002
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: October 31, 2002
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
0-3255
------
(Commission File Number)
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
-------- ----------
(State of incorporation) (IRS Employer Identification No.)
1.1 300 Plaza Drive, Vestal, New York 13850
(Address of principal executive offices) (Zip Code)
(607) 729-9331
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at November 27, 2002
----- --------------------------------
Common Stock $0.01 Par Value 2,766,396
Jayark Corporation and Subsidiaries
INDEX
Part I. FINANCIAL INFORMATION Page
Item 1. Consolidated Condensed Financial Statements
(Unaudited)
Consolidated Condensed Balance Sheets - October 31,
2002(Unaudited)and April 30, 2002................3
Consolidated Condensed Statements of Operations -
Three and Six Months Ended October 31, 2002 and
2002 (Unaudited) ................................ 4
Consolidated Condensed Statements of Cash Flows -
Six Months Ended October 31, 2002 and 2001
(Unaudited) ....................................5
Notes to Consolidated Condensed Financial Statements
(Unaudited).......................................6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............11-20
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.......................................20
Item 4. Controls and Procedures............................20
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..................20
Signatures.........................................21
Certifications.....................................22-23
Exhibits...........................................24
PART I.
ITEM 1. Consolidated Condensed Financial Statements
Jayark Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Unaudited)
October 31, 2002 April 30, 2002
Assets
Current Assets:
Cash and Cash Equivalents $1,098,567 $866,971
Accounts Receivable - Trade, less
allowance for doubtful accounts of
$109,916 and $109,028, respectively 891,381 1,197,823
Inventories 383,546 393,612
Other Current Assets 90,846 40,206
____________________________
Total Current Assets 2,464,340 2,498,612
Property, Plant & Equipment, net 140,559 180,783
Goodwill 204,662 204,662
_____________________________
Total Assets $2,809,561 $2,884,057
=============================
Liabilities
Current Liabilities:
Borrowings Under Lines of Credit $250,000 $299,000
Current Portion of Long Term Debt -
Related Parties 161,332 161,332
Accounts Payable and Accrued Expenses 419,424 440,589
Accrued Salaries 130,215 187,684
Other Current Liabilities 78,073 85,030
____________________________
Total Current Liabilities 1,039,044 1,173,635
Long Term Debt - Related Parties, excluding
current portion 1,213,661 1,213,661
Deferred Compensation 319,067 344,272
Accrued Interest - Related Parties 689,571 636,696
____________________________
Total Liabilities 3,261,343 3,368,264
____________________________
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 12,860,435 12,860,435
Accumulated Deficit (13,339,206) (13,371,631)
Treasury Stock, at cost, 7,500 shares (750) (750)
_______________________________
Total Stockholders' Deficit (451,782) (484,207)
_______________________________
Total Liabilities & Stockholders'
Deficit $2,809,561 $2,884,057
===============================
See accompanying notes to consolidated condensed financial
statements
Jayark Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
October 31, October 31, October 31, October 31,
2002 2001 2002 2001
_______________________________________________
Net Revenues $2,730,974 $3,017,302 $5,619,499 $6,734,005
Cost of Revenues 2,306,982 2,564,396 4,769,541 5,665,568
_______________________________________________
Gross Margin 423,992 452,906 849,958 1,068,437
Selling, General and
Administrative 357,215 527,206 762,846 1,184,857
Operating Income (Loss) 66,777 (74,300) 87,112 (116,420)
Interest Expense, Net 27,226 29,232 52,947 61,263
______________________________________________
Income (Loss) Before
Income Taxes 39,551 (103,532) 34,165
(177,683)
Income Taxes -- -- 1,740 --
______________________________________________
Net Income (Loss) $39,551 ($103,532) $32,425 ($177,683)
==============================================
Weighted Average
Common Shares 2,766,396 2,766,396 2,766,396 2,766,396
==============================================
Basic and Diluted Income(Loss)
per Common Share $.01 ($.04) $.01 ($.06)
================================================
See accompanying notes to consolidated condensed financial statements
Jayark Corporation and Subsidiaries
Consolidated Condensed Statement of Cash Flows
(Unaudited)
Six Months Ended
October 31, 2002 October 31, 2001
_________________________________
Cash Flows From Operating Activities:
Net Income (Loss) $32,425 ($177,683)
Adjustments to Reconcile Net Income (Loss) to Net Cash Flows Provided By
Operating Activities:
Depreciation and Amortization of Property,
Plant and Equipment 35,595 91,098
Amortization of Patent -- 1,201
Provision for Doubtful Accounts 888 18,309
Changes In Assets and Liabilities, Net of
Divestiture of Fisher:
Accounts Receivable 305,554 533,332
Inventories 10,066 215,886
Other Current Assets (50,640) (47,622)
Accounts Payable & Accrued Expenses 31,710 (166,439)
Accrued Salaries & Deferred Compensation (82,674) 89,220
Other Liabilities (6,957) (25,490)
_______________________________
Net Cash Provided By Operating Activities 275,967 531,812
_______________________________
Cash Flows From Investing Activities:
Purchases of Plant and Equipment -- (33,047)
Proceeds from Sale of Equipment 4,629 --
Purchases of Patent -- (4,093)
_______________________________
Net Cash Provided By (Used In)
Investing Activities 4,629 (37,140)
_______________________________
Cash Flows Used In Financing Activities -
Payments Under Lines of Credit (49,000) (100,000)
_______________________________
Net Increase in Cash & Cash Equivalents 231,596 394,672
Cash & Cash Equivalents at Beginning of Period 866,971 834,145
_______________________________
Cash & Cash Equivalents at End of Period $1,098,567 $1,228,817
===============================
Supplemental Disclosures:
Cash Paid For Interest $7,325 $16,680
================================
Cash Paid For Taxes $1,740 $--
================================
See accompanying notes to consolidated condensed financial statement
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. Basis of Presentation
The consolidated condensed financial statements include the accounts of
Jayark Corporation and its wholly owned subsidiaries (the "Company").
The accompanying unaudited consolidated condensed financial statements
reflect all adjustments (consisting of only normal and recurring accruals
and adjustments) which are, in the opinion of management, necessary to
a fair statement of the results for the interim periods presented. These
consolidated financial statements are condensed and therefore do not
include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for
complete financial statements. The consolidated condensed financial
statements should be read in conjunction with the audited financial
statements and footnotes for the year ended April 30, 2002, included
in the Company's report on Form 10-K. The Company follows the same
accounting policies in preparation of interim reports. The Company's
operating results for any particular interim period may not be
indicative of results for the full year.
2. Divestiture of Fisher
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 development
stage developer, manufacturer, and distributor of 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. LLC remained the owner of certain
intellectual property utilized in Fisher's medical products line.
The owner of LLC was Steve Fisher who also became a member of the
board of directors of the Company. Fisher also negotiated a
five-year technology license with LLC, which conveyed certain
technology rights developed by Trlby Innovative LLC of Torrington,
Connecticut. The acquisition was accounted for under the purchase
method of accounting.
Fisher continued to develop medical supply products with the
financing provided by the Company. The Company initially utilized
its existing working capital and lines of credit to fund Fisher's
development efforts. The development time horizon exceeded the
projected investment horizon as determined by the Company. Due to
the need for additional funding for this development, the Company
endeavored to infuse additional capital into Fisher with a private
placement of preferred stock. In 2000, the Company sold $429,500
of newly issued Fisher Medical preferred stock. The Company
continued to seek new capital via the preferred stock offering
to various potential investors in 2001.
In September 2001, the Company received a proposal from Alberdale
LLC to provide a $500,000 bridge loan to Fisher, which is
convertible, under certain conditions, to Fisher common stock.
In addition to the bridge loan, Alberdale was proposing to offer
a new series of preferred stock for equity financing to continue
the operations of Fisher. As a condition to this refinancing,
Alberdale required that Jayark contribute 50% of its Fisher Medical
Corporation common stock to the new refinanced entity, as well as
provide an option for Alberdale to purchase the remaining 50% common
interest the Company would hold in Fisher at predetermined amounts
ranging from approximately $915,000 to $1,464,000 for periods not
exceeding 15 months.
On October 1, 2001 the Company approved the merger of its wholly
owned subsidiary, Fisher Medical Corporation with Fisher Medical
LLC, the owner of the intellectual property utilized in Fisher's
medical products line. Pursuant to the merger agreement, the
Company assigned 50% of its common equity holdings in Fisher
Medical Corporation to the sole member of Fisher Medical LLC,
Dr. Stephen Fisher. Dr. Fisher serves as President of Fisher
Medical Corporation and as a Director of the Company. As a
result of this transaction, the Company has effectively
relinquished its control of Fisher Medical Corporation;
however given its continuing 50% common stock ownership
interest, the Company will account for its investment on the
equity method prospectively commencing October 1, 2001. The
Company has no future obligations to fund any deficits of
the merged entity or any commitments to provide future funding.
As of October 1, 2001, the Company had invested approximately
$1,248,000 of cash in Fisher and incurred net losses as 100%
owner of approximately $1,509,000; therefore the Company's net
investment and advance position at the date of the divestiture
was a negative balance of approximately $261,000. In connection
with the transaction, the Company received from the merged
entity a five-year $525,715 promissory note, which represents a
portion of the aforementioned advances the Company had made
during its 100% ownership period. The note is secured by all
assets of the company except the intellectual property. There
can be no assurances that the merged entity will be successful
in completing the development of its products or in the raising
of the additional working capital required. Additionally,
since the merged entity has minimal liquidation value, the note
is deemed not to be collectible. Accordingly, the Company has
not assigned any value to this note and has recognized its
divestiture of its net investment of $261,455 at October 1, 2001
as an increase in additional paid in capital, which reduces the
investment in Fisher to zero. The Company has not recognized
its 50% share of losses of the merged entity in the post
transaction period as its investment is reflected as zero.
The net liabilities of Fisher at October 1, 2001 deconsolidated
as a result of the divestiture are as follows:
Accounts Receivable - Trade $31,350
Inventories 85,001
Other Current Assets 16,134
Property, Plant & Equipment, Net 361,418
Goodwill 90,432
Patent, Net 57,546
Accounts Payable & Accrued Expenses (295,817)
Accrued Salaries (177,415)
Other Current Liabilities (604)
Preferred Stock (429,500)
__________
($261,455)
==========
In connection with the transaction, the Company was granted
warrants to purchase 47,190 shares of common stock of the
merged entity at $10 per share, which expire in three years.
As the Company has relinquished its control of Fisher, it
has effectively deconsolidated Fisher as of October 1, 2001
and reflected its recorded excess losses as additional
paid-in-capital. As the Company experienced no historical
successes as 100% owner, and has no tangible evidence of
its historical investment recoverability, it has reflected
its equity investment position at zero. In the event the
merged entity is successful in the future, the Company would
record its 50% interest in the earnings, if any, to the extent
that they exceed equity losses not otherwise recorded, and
could experience subsequent gains resulting from the repayment
of the note receivable, if such amounts are collected, and
from the proceeds of the Alberdale buyout option, if
exercised. However, as described above, due to the
uncertainties over the ultimate recoverability of the note
or the exercise of the option, no value has been assigned
to either.
The following unaudited pro forma financial information
presents the combined results of operations of the Company
as if the divestiture of Fisher had taken place as of
May 1, 2001. The unaudited pro forma information has been
prepared by the Company based upon assumptions deemed
appropriate and takes into consideration the elimination
of Fisher operating activities included in the consolidated
statements of operations for the periods presented herein.
Three Months Ended Six Months Ended
October 31, October 31, October 31, October 31,
2002 2001 2002 2001
_____________________________________________________
Net Revenues $2,730,974 $3,003,345 $5,619,499 $6,699,595
Net Income $39,551 $23,649 $32,425 $182,026
=====================================================
Net Income per Common Share
- - Basic and Diluted $.01 $.01 $.01 $.07
=====================================================
The unaudited pro forma information presented herein are shown for
illustrative purposed only and are not necessarily indicative of the
future financial position or future results of operations of the
Company and does not necessarily reflect the results of operations
that would have occurred had the transaction been in effect for the
periods presented. The unaudited pro forma information should be
read in conjunction with the historical consolidated financial
statements and related notes of the Company.
As of April 30, 2002, the $500,000 Alberdale LLC bridge loan to
Fisher provided by Hobart Associates II, LLC (Hobart) was in
default and the Company's $525,715 five-year promissory note to
Fisher was also in default. Both notes provided for the
acceleration of the notes and the transfer of the secured assets
to the note holders upon an event of default. In order to avoid
liquidation of Fisher, Hobart and the Company proposed a
restructuring program for Fisher. On June 3, 2002 Stephen
Fisher Sr. (President of Fisher), Fisher, Hobart and the Company
entered into the Fisher Medical Restructuring Agreement
(the Agreement). Under the terms of the Agreement, Hobart and
the Company formed a new corporation, Unisoft International
Corporation ("UIC"). UIC will assume the international rights
for sale and marketing of Fisher's Unisoft mattress and all
associated products, designs, and all rights related thereto,
as well as certain employees and their obligations. As part
of the agreement, UIC will commit to a supply contract with
Fisher with a guaranteed minimum order quantity.
In addition, UIC must assume the Fisher promissory notes payable
to Hobart and the Company. The Company will also contribute its
500,000 shares of common stock of Fisher and Hobart will
contribute $250,000 to UIC, resulting in both the Company and
Hobart owning approximately 36% of UIC. The Company's 36%
interest is comprised of 100,000 shares of common stock and
60,000 shares of Super Voting Series A Preferred Stock. Each
share of Series A Preferred Stock provides for 5 shares of
voting rights for each share of common stock. Hobart and
UIC have an option to purchase approximately 95% of Jayark's
interest in UIC for approximately $800,000 for a one-year
period. Alberdale LLC's option to purchase 50% of Jayark's
common interest in Fisher was converted in 20,000 shares of
UIC common stock under the restructuring.
There can be no assurances that the new entity will be
successful in selling and marketing the Unisoft internationally
or the raising of the additional working capital required to
sustain the business. The Company has no future obligations
to fund any deficits of the new entity or any commitments to
provide funding. Due to the uncertainties over the ultimate
recoverability of its investment in UIC, no value has been
assigned.
3. Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 143, "Accounting for Asset Retirement Obligations"
(SFAS No. 143). SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement
of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 is required for adoption for
fiscal years beginning after June 15, 2002. The Company has
reviewed the provisions of SFAS No. 143, and believes that
upon adoption, the Statement will not have a significant
effect on its consolidated financial statements.
In April 2002, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 145, "Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections" (SFAS No. 145). SFAS No. 145 is required for
adoption for fiscal years beginning after May 15, 2002,
with early adoption of the provisions related to the
rescission
of Statement 4 encouraged. The Company has
reviewed the provisions of SFAS No. 145, and believes
that upon adoption, the Statements will not have a
significant effect on its consolidated financial statements.
In July 2002, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 146, "Accounting for Restructuring Costs" (SFAS 146).
SFAS 146 applies to costs associated with an exit activity
(including restructuring) or with a disposal of long-lived
assets. Those activities can include eliminating or reducing
product lines, terminating employees and contracts, and
relocating plant facilities or personnel. Under SFAS 146, a
company will record a liability for a cost associated with an
exit or disposal activity when that liability is incurred and
can be measured at fair value. SFAS 146 will require a company
to disclose information about its exit and disposal activities,
the related costs, and changes in those costs in the notes to
the interim and annual financial statements that include the
periods in which an exit activity is initiated and in any
subsequent period until the activity is completed. SFAS 146
is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption
encouraged. Under SFAS 146, a company may not restate its
previously issued financial statements and the new Statement
grandfathers the accounting for liabilities that a company
had previously recorded under EITF Issue 94-3.
4. Reclassifications
Certain reclassifications have been made in the fiscal 2002
consolidated condensed financial statements to conform to
the presentation used in the fiscal 2003 consolidated condensed
financial statements.
5. Segment Data
The Company conducts its operations through two reportable
business segments as follows:
AVES Audiovisual Systems, Inc. ("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.
MED Services Corp. ("Med") finances the manufacture, sale and
rental of medical equipment. Its customer base includes
companies that sell and rent durable medical equipment to
hospitals, nursing homes and individuals.
Effective October 1, 2001, the Company approved the merger of
its formerly wholly owned subsidiary, Fisher Medical Corporation
("Fisher") with Fisher Medical LLC. As a result, the Company has
relinquished control of Fisher and has deconsolidated Fisher
effective October 1, 2001. Operations at Fisher consist of
developing, manufacturing and distributing 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 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
____________________________________________________
Three Months Ended October 31, 2002
Net Revenues $2,730,974 $-- $-- $-- $2,730,974
Depreciation and
Amortization 16,915 -- 1,885 -- 18,800
Operating Income (Loss) 133,147 -- (1,855) (64,485) 66,777
Net Income (Loss) 101,998 -- (5,515) (56,932) 39,551
Three Months Ended October 31, 2001
Net Revenues 3,002,647 13,957 698 -- 3,017,302
Depreciation and
Amortization 15,011 22,460 1,885 -- 39,356
Operating Income (Loss) 106,667 (119,637) (5,076) (56,254) (74,300)
Net Income(Loss) 72,365 (127,181) (4,958) (43,758) (103,532)
Six Months Ended October 31, 2002
Net Revenues 5,619,499 -- -- -- 5,619,499
Depreciation and
Amortization 31,825 -- 3,770 -- 35,595
Operating Income (Loss) 235,336 -- (6,145) (142,079) 87,112
Net Income (Loss) 172,393 -- (12,050) (127,918) 32,425
Six Months Ended October 31, 2001
Net Revenues 6,696,826 34,411 2,768 -- 6,734,005
Depreciation and
Amortization 32,676 56,112 3,511 -- 92,299
Operating Income (Loss) 347,473 (367,724) (4,856) (91,313) (116,420)
Net Income (Loss) 282,609 (389,709) (4,738) (65,845) (177,683)
Total Assets at
Oct. 31, 2002 2,491,300 -- 219,345 98,916 2,809,561
Goodwill at Oct. 31, 2002 204,662 -- -- -- 204,662
Total Assets at
April 30, 2002 2,560,614 -- 227,764 95,679 2,884,057
Goodwill at April 30, 2002 204,662 -- -- -- 204,662
Intersegment transactions included a management fee between
Corporate and Fisher for the six months ended October 31, 2001,
of $30,000.
6. Inventories
Inventories are summarized as follows:
October 31, 2002 April 30, 2002
Raw Materials $172,081 $172,081
Work In Process 2,032 2,032
Finished Goods 209,433 219,499
__________________________________
$383,546 $393,612
==================================
7. Income (Loss) Per Common Share
Basic income (loss) per common share is based upon the weighted
average number of common shares outstanding. Diluted income
(loss) per common share is based upon the weighted average
number of common shares outstanding, as well as dilutive
potential securities, which in the Company's case, comprise
shares issuable under the stock option plan. Dilutive stock
options, totaling 180,000 shares, had no impact on the income
(loss) per common share calculation in any periods presented
as their impact was antidilutive.
ITEM 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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 development stage developer, manufacturer, and distributor of
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. LLC remained
the owner of certain intellectual property utilized in Fisher's
medical products line. The owner of LLC was Steve Fisher who
also became a member of the board of directors of the Company.
Fisher also negotiated a five-year technology license with LLC,
which conveyed certain technology rights developed by Trlby
Innovative LLC of Torrington, Connecticut. The acquisition was
accounted for under the purchase method of accounting.
Fisher continued to develop medical supply products with the
financing provided by the Company. The Company initially utilized
its existing working capital and lines of credit to fund Fisher's
development efforts. The development time horizon exceeded the
projected investment horizon as determined by the Company. Due to
the need for additional funding for this development, the Company
endeavored to infuse additional capital into Fisher with a private
placement of preferred stock. In 2000, the Company sold $429,500
of newly issued Fisher Medical preferred stock. The Company
continued to seek new capital via the preferred stock offering
to various potential investors in 2001.
In September 2001, the Company received a proposal from Alberdale
LLC to provide a $500,000 bridge loan to Fisher, which is convertible,
under certain conditions, to Fisher common stock. In addition to the
bridge loan, Alberdale was proposing to offer a new series of
preferred stock for equity financing to continue the operations of
Fisher. As a condition to this refinancing, Alberdale required that
Jayark contribute 50% of its Fisher Medical Corporation common stock
to the new refinanced entity, as well as provide an option for
Alberdale to purchase the remaining 50% common interest the Company
would hold in Fisher at predetermined amounts ranging from
approximately $915,000 to $1,464,000 for periods not exceeding 15
months.
On October 1, 2001 the Company approved the merger of its wholly
owned subsidiary, Fisher Medical Corporation with Fisher Medical
LLC, the owner of the intellectual property utilized in Fisher's
medical products line. Pursuant to the merger agreement, the
Company assigned 50% of its common equity holdings in Fisher Medical
Corporation to the sole member of Fisher Medical LLC, Dr. Stephen
Fisher. Dr. Fisher serves as President of Fisher Medical
Corporation and as a Director of the Company. As a result of
this transaction, the Company has effectively relinquished its
control of Fisher Medical Corporation; however given its continuing
50% common stock ownership interest, the Company will account for
its investment on the equity method prospectively commencing
October 1, 2001. The Company has no future obligations to fund
any deficits of the merged entity or any commitments to provide
future funding.
As of October 1, 2001, the Company had invested approximately
$1,248,000 of cash in Fisher and incurred net losses as 100%
owner of approximately $1,509,000; therefore the Company's net
investment and advance position at the date of the divestiture
was a negative balance of approximately $261,000. In connection
with the transaction, the Company received from the merged entity
a five-year $525,715 promissory note, which represents a portion
of the aforementioned advances the Company had made during its
100% ownership period. The note is secured by all assets of the
company except the intellectual property. There can be no
assurances that the merged entity will be successful in completing
the development of its products or in the raising of the additional
working capital required. Additionally, since the merged entity
has minimal liquidation value, the note is deemed not to be
collectible. Accordingly, the Company has not assigned any value
to this note and has recognized its divestiture of its net
investment of $261,455 at October 1, 2001 as an increase in
additional paid in capital, which reduces the investment in Fisher
to zero. The Company has not recognized its 50% share of losses
of the merged entity in the post transaction period as its investment
is reflected as zero.
The net liabilities of Fisher at October 1, 2001 deconsolidated as
a result of the divestiture are as follows:
Accounts Receivable - Trade $31,350
Inventories 85,001
Other Current Assets 16,134
Property, Plant & Equipment, Net 361,418
Goodwill 90,432
Patent, Net 57,546
Accounts Payable and Accrued Expenses (295,817)
Accrued Salaries (177,415)
Other Current Liabilities (604)
Preferred Stock (429,500)
----------
($261,455)
==========
In connection with the transaction, the Company was granted warrants
to purchase 47,190 shares of common stock of the merged entity at
$10 per share, which expire in three years.
As the Company has relinquished its control of Fisher, it has
effectively deconsolidated Fisher as of October 1, 2001 and reflected
its recorded excess losses as additional paid-in-capital. As the
Company experienced no historical successes as 100% owner, and has no
tangible evidence of its historical investment recoverability, it has
reflected its equity investment position at zero. In the event the
merged entity is successful in the future, the Company would record
its 50% interest in the earnings, if any, to the extent that they
exceed equity losses not otherwise recorded, and could experience
subsequent gains resulting from the repayment of the note receivable,
if such amounts are collected, and from the proceeds of the Alberdale
buyout option, if exercised. However, as described above, due to the
uncertainties over the ultimate recoverability of the note or the
exercise of the option, no value has been assigned to either.
The following unaudited pro forma financial information presents the
combined results of operations of the Company as if the divestiture of
Fisher had taken place as of May 1, 2001. The unaudited pro forma
information has been prepared by the Company based upon assumptions
deemed appropriate and takes into consideration the elimination of
Fisher operating activities included in the consolidated statements
of operations for the periods presented herein.
Three Months Ended Six Months Ended
October 31, October 31 October 31, October 31,
2002 2001 2002 2001
______________________________________________
Net Revenues $2,730,974 $3,003,345 $5,619,499 $6,699,595
Net Income $39,551 $23,649 $32,425 $182,026
==============================================
Net Income per Common Share
- - Basic and Diluted $.01 $.01 $.01 $.07
=============================================
The unaudited pro forma information presented herein are shown for
illustrative purposed only and are not necessarily indicative of the
future financial position or future results of operations of the
Company and does not necessarily reflect the results of operations
that would have occurred had the transaction been in effect for
the periods presented. The unaudited pro forma information should
be read in conjunction with the historical consolidated financial
statements and related notes of the Company.
As of April 30, 2002, the $500,000 Alberdale LLC bridge loan to
Fisher provided by Hobart Associates II, LLC (Hobart) was in
default and the Company's $525,715 five-year promissory note to
Fisher was also in default. Both notes provided for the
acceleration of the notes and the transfer of the secured assets
to the note holders upon an event of default. In order to avoid
liquidation of Fisher, Hobart and the Company proposed a
restructuring program for Fisher. On June 3, 2002 Stephen
Fisher Sr. (President of Fisher), Fisher, Hobart and the
Company entered into the Fisher Medical Restructuring Agreement
(the Agreement). Under the terms of the Agreement, Hobart and
the Company formed a new corporation, Unisoft International
Corporation ("UIC"). UIC will assume the international rights
for sale and marketing of Fisher's Unisoft mattress and all
associated products, designs, and all rights related thereto,
as well as certain employees and their obligations. As part of
the agreement, UIC will commit to a supply contract with Fisher
with a guaranteed minimum order quantity.
In addition, UIC must assume the Fisher promissory notes payable
to Hobart and the Company. The Company will also contribute its
500,000 shares of common stock of Fisher and Hobart will
contribute $250,000 to UIC, resulting in both the Company and
Hobart owning approximately 36% of UIC. The Company's 36%
interest is comprised of 100,000 shares of common stock and
60,000 shares of Super Voting Series A Preferred Stock. Each
share of Series A Preferred Stock provides for 5 shares of
voting rights for each share of common stock. Hobart and
UIC have an option to purchase approximately 95% of Jayark's
interest in UIC for approximately $800,000 for a one-year
period. Alberdale LLC's option to purchase 50% of Jayark's
common interest in Fisher was converted in 20,000 shares of
UIC common stock under the restructuring.
There can be no assurances that the new entity will be
successful in selling and marketing the Unisoft
internationally or the raising of the additional working
capital required to sustain the business. The Company has
no future obligations to fund any deficits of the new entity
or any commitments to provide funding. Due to the
uncertainties over the ultimate recoverability of its
investment in UIC, no value has been assigned.
Three Months Ended October 31, 2002 as compared to October 31, 2001
NET REVENUES
Net Revenues of $2,731,000 for the three months ended
October 31, 2002, decreased $286,000, or 9.5%, as compared to
the same period in 2001. This was a result of a $272,000, or
9.0%, revenue decrease at AVES due partially to the nation's
economic slowdown resulting in decreased budgets for many of
our customers causing them to look to more inexpensive and, or,
purchase fewer quantity of products. This was also coupled
with the fact that there has been a continued price decline
in video equipment. As a result of the October 1, 2001
divestiture transaction, there were zero Fisher sales in 2002
versus $14,000 in 2001.
COST OF REVENUES
Cost of Revenues of $2,307,000 decreased $257,000, or 10.0%,
as compared to the same period last year. This was primarily
a result of the decreased revenues discussed above.
GROSS MARGIN
Gross Margin of $424,000 was 15.5% of revenues, as compared to
$453,000, or 15.0%, for the same period last year. The
decrease was due to the decreased revenues discussed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative Expenses of $357,000
decreased $170,000 or 32.2% as compared to the same period
last year. Fisher's expenses decreased $130,000 as a result
of the October 1, 2001 divestiture transaction. AVES'
expenses decreased $45,000 primarily due to decreased payroll
expenses and Med's expenses decreased $4,000 due to decreased
travel expenses. These reductions were partially offset by a
$8,000 increase in Corporate's expenses primarily due to
increased professional fees.
OPERATING INCOME (LOSS)
Operating Income of $67,000 increased $141,000, or 189.8%, as
compared to consolidated operating loss of $74,000 for the
same period last year. The increase in operating income was
primarily the result of the Company not picking up Fisher's
operating loss due to the October 1, 2001 merger transaction
which aggregated $120,000 for the same period last year. AVES'
operating income increased $26,000 due to decreased expenses
discussed above, Corporate's operating loss increased $8,000
due to increased expenses and Med's operating loss decreased
$3,000.
NET INTEREST EXPENSE
Net Interest Expense of $27,000 decreased $2,000, or 6.9%.
This decrease was the result of decreased debt combined with
lower interest rates as compared to the prior year.
NET INCOME (LOSS)
Net Income of $40,000 increased $143,000 as compared to
consolidated net loss of $104,000 during the same period last
year. This increase is principally due to a $127,000
improvement to the bottom line as a result of the
October 1, 2001 Fisher divestiture transaction combined with
a $29,000 increase in net income at AVES due to expense
reductions. These increases were partially offset by a
$13,000 increase in net loss at Corporate.
Six Months Ended October 31, 2002 as compared to October 31, 2001
NET REVENUES
Net Revenues of $5,619,000 for the six months ended October 31,
2002, decreased $1,115,000, or 16.5%, as compared to the same
period in 2001. This was a result of an $1,077,000, or 16.1%,
revenue decrease at AVES due partially to the nation's economic
slowdown resulting in decreased budgets for many of our
customers causing them to look to more inexpensive and, or,
purchase fewer quantity of products. This was also coupled
with the fact that there has been a continued price decline
in video equipment. As a result of the October 1, 2001
divestiture transaction, there were zero Fisher sales in
2002 versus $35,000 in 2001. Med had zero sales in 2002
versus $3,000 in 2001.
COST OF REVENUES
Cost of Revenues of $4,770,000 decreased $896,000, or 15.8%,
as compared to the same period last year. This was primarily
a result of the decreased revenues discussed above.
GROSS MARGIN
Gross Margin of $850,000 was 15.1% of revenues, as compared to
$1,068,000, or 15.9%, for the same period last year. The
slight 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 lower unit costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative Expenses of $763,000
decreased $422,000 or 35.6% as compared to the same period
last year. Fisher's expenses decreased $392,000 as a result
of the October 1, 2001 divestiture transaction. AVES'
expenses decreased $79,000 due to decreased payroll, property
tax and bad debt expenses and Med's expenses decreased $2,000
over the prior year. These reductions were partially offset
by a $51,000 increase in Corporate's expenses due to $30,000
of intersegment management fees charged to Fisher in the prior
year which offset overall selling, general and administrative
expenses at the Corporate level combined with increased travel,
insurance and professional fees.
OPERATING INCOME (LOSS)
Operating Income of $87,000 increased $204,000, or 174.8%,
as compared to consolidated operating loss of $116,000 for
the same period last year. The increase in operating income
was the result of the Company not picking up Fisher's
operating loss due to the October 1, 2001 merger transaction
which aggregated $368,000 for the same period last year.
AVES' operating income decreased $112,000 due to decreased
gross margin discussed above, Corporate's operating loss
increased $51,000 due to increased expenses and no
intersegment management fee to offset expenses and Med's
operating loss increased $1,000.
NET INTEREST EXPENSE
Net Interest Expense of $53,000 decreased $8,000, or 13.6%.
This decrease was the result of decreased debt combined
with lower interest rates as compared to the prior year.
INCOME (LOSS) BEFORE INCOME TAXES
Income Before Income Taxes of $34,000 increased $212,000, or
119.2% as compared to a loss before income taxes of $178,000
for the same period last year. Overall change in income
before income taxes was a result of those fluctuations noted
above.
INCOME TAXES
Income Taxes of $2,000 for the six months ended October 31, 2002
were incurred for state income tax expenses.
NET INCOME (LOSS)
Net Income of $32,000 increased $210,000 as compared to
consolidated net loss of $178,000 during the same period
last year. This increase is principally due to a $389,000
improvement to the bottom line as a result of the October 1,
2001 Fisher divestiture transaction, partially offset by a
$110,000 decrease in net income at AVES, a $62,000 increase
in net loss at Corporate and a $7,000 increased loss at Med.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The methods, estimates and judgments the Company uses in
applying their most critical accounting policies has a
significant impact on the results reported in our consolidated
financial statements. The U.S. Securities and Exchange
Commission has defined the most critical accounting policies
as the ones that are most important to the portrayal of the
Company's financial condition and results, and requires the
Company to make their most difficult and subjective judgment,
often as a result of the need to make estimates of matters that
are inherently uncertain. Based on this definition, the
Company's most critical policies include: valuation of
accounts receivables, which impact selling, general and
administrative expense; valuation of inventory, which impacts
cost of sales and gross margin; the assessment of
recoverability of goodwill, which impacts write-offs of
goodwill and; accounting for income taxes, which impacts
the valuation allowance and the effective tax rate.
The Company reviews estimates including, but not limited to,
the allowance for doubtful accounts, inventory reserves and
income tax valuations on a regular basis and makes adjustments
based upon historical experiences, current conditions and
future expectations. The reviews are performed regularly and
adjustments are made as required by current available
information. The Company believes these estimates are
reasonable, but actual results could differ from these estimates.
We value inventories at the lower of cost or market on a
first-in-first-out basis. The recoverability of inventories
is based upon the types and levels of inventory held,
forecasted demand, pricing, competition and changes in
technology. The Company's accounts receivable represent
those amounts, which have been billed to our customers but
not yet collected. The Company analyzes various factors,
including historical experience, credit-worthiness of
customers and current market and economic conditions. The
allowance for doubtful accounts balance is established based
on the portion of those accounts receivable, which are deemed
to be potentially uncollectible. Changes in judgments on
these factors could impact the timing of costs recognized.
The Company records valuation allowances to reduce deferred
tax assets when it is more likely than not that some portion
of the amount may not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of
future taxable income during those periods in which temporary
differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected
future income and tax planning in making this assessment. The
Company evaluates the need for valuation allowances on a regular
basis and adjusts as needed. These adjustments, when made,
would have an impact on the Company's financial statements in
the period that they were recorded.
Goodwill is tested annually for impairment by the Company at
the reporting unit level, by comparing the fair value of the
reporting unit with its carrying value. Valuation methods
for determining the fair value of the reporting unit include
reviewing quoted market prices and discounted cash flows.
If the goodwill is indicated as being impaired (the fair
value of the reporting unit is less than the carrying amount),
the fair value of the reporting unit is then allocated to its
assets and liabilities in a manner similar to a purchase price
allocation in order to determine the implied fair value of the
reporting unit goodwill. This implied fair value of the
reporting unit goodwill is then compared with the carrying
amount of the reporting unit goodwill and, if it is less, the
Company would then recognize an impairment loss. The
projection of future cash flows requires significant judgments
and estimates with respect to future revenues related to the
asset and the future cash outlays related to those revenues.
Actual revenues and related cash flows or changes in anticipate
revenues and related cash flows could result in changes in this
assessment and result in an impairment charge. The use of
different assumptions could increase or decrease the related
impairment charge.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2002 and April 30, 2002, consolidated open lines
of credit available to the Company for borrowing were $1,000,000
and $951,000, respectively. 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 existing cash balances, cash flow generated from operations,
and from available borrowing levels.
Working capital was $1,425,000 at October 31, 2002, compared
with
$1,325,000 at April 30, 2002.
Net cash provided by operating activities was $276,000 in 2002
as compared with $532,000 in 2001. This decrease in cash provided
in the current period is primarily a result of increased accounts
receivable and inventory levels partially offset by increased
earnings.
Cash flows provided by investing activities were $5,000 in 2002
as compared with cash used of $37,000 in 2001. The difference
is a result of the purchases of plant and equipment in the prior
year.
The Company continues to be obligated under notes payable to
related parties aggregating $1,374,993. The related parties
and corresponding outstanding obligations include David Koffman,
Chairman of the Board of Directors and President of the Company
($201,113), AV Texas Holding LLC, an entity controlled by members
of the Koffman family ($850,000) and CCB Associates, LP, an
entity with indirect control by a Board Member ($323,830).
The current portion of the related notes aggregated $161,332,
with an additional principal payment of $161,332 due in
December 2003. The remaining balance on these related notes
matures in December 2004 at which time the entire remaining
unpaid principal balance, aggregating $1,052,329, plus accrued
interest is due.
At October 31, 2002, the Company continues to have accrued
unpaid wages aggregating $390,772. The unpaid wages relate to
salary deferral by the President of the Company for prior
services rendered. The terms of the salary deferral are such
that the President 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 as a current liability within accrued salaries in the
consolidated condensed balance sheet, and reflected $309,772
as deferred compensation in the consolidated condensed balance
sheet at October 31, 2002.
DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Accounting standards require disclosure concerning a registrant's
obligations and commitments to make future payments under
contracts, such as debt and lease agreements, and under
contingent commitments, such as debt guarantees. The Company's
obligations and commitments are as follows:
Less than 2-3 4-5 After
Total 1 Year Years Years 5 Years
_____________________________________________________________________
Contractual Obligations Payments Due by Period
_____________________________________________________________________
Long Term Debt -
Related Parties $1,374,993 $161,332 $1,213,661 $-- $--
Operating Lease $802,500 $90,000 $180,000 $180,000 $352,500
Accrued Interest -
Related Parties $689,571 $-- $689,571 $-- $--
_____________________________________________________________________
Other Commercial
Commitments Amount of Commitment Expiration Per Period
_____________________________________________________________________
Lines of Credit $250,000 $250,000 $-- $-- $--
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS No. 143).
SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143
is required for adoption for fiscal years beginning after
June 15, 2002. The Company has reviewed the provisions of
SFAS No. 143, and believes that upon adoption, the Statement
will not have a significant effect on its consolidated
financial statements.
In April 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections" (SFAS No. 145).
SFAS No. 145 is required for adoption for fiscal years beginning
after May 15, 2002, with early adoption of the provisions related
to the rescission of Statement 4 encouraged. The Company has
reviewed the provisions of SFAS No. 145, and believes that upon
adoption, the Statement will not have a significant effect on its
consolidated financial statements.
In July 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 146,
"Accounting for Restructuring Costs" (SFAS 146). SFAS 146
applies to costs associated with an exit activity (including
restructuring) or with a disposal of long-lived assets. Those
activities can include eliminating or reducing product lines,
terminating employees and contracts, and relocating plant
facilities or personnel. Under SFAS 146, a company will record
a liability for a cost associated with an exit or disposal
activity when that liability is incurred and can be measured
at fair value. SFAS 146 will require a company to disclose
information about its exit and disposal activities, the related
costs, and changes in those costs in the notes to the interim
and annual financial statements that include the periods in
which an exit activity is initiated and in any subsequent
period until the activity is completed. SFAS 146 is effective
prospectively for exit or disposal activities initiated after
December 31, 2002, with earlier adoption encouraged. Under
SFAS 146, a company may not restate its previously issued financial
statements and the new Statement grandfathers the accounting for
liabilities that a company had previously recorded under EITF
Issue 94-3.
Forward-Looking Cautionary Statement
In an effort to provide investors a balanced view of the
Company's current condition and future growth opportunities,
this Quarterly Report on Form 10-Q includes comments by the
Company's management about future performance. Because
these statements are forward-looking statements pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, management's forecasts involve risks and
uncertainties, and actual results could differ materially from
those predicted in the forward-looking statements.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The following discusses the Company's possible exposure to market
risk related to changes in interest rates on the Company's lines
of credit.
As of October 31, 2002, the Company has outstanding lines of credit
which are renegotiated every 12 months and bear interest at prime.
Funds available for borrowing under these lines of credit are
subject to interest rate risk and will increase interest expense
if the prime rate increases. The Company does not believe that
an immediate increase in interest rates would have a significant
effect on its financial condition or results of operations.
ITEM 4. Controls and Procedures
Within the 90 days prior to the filing date of this Quarterly
Report, the Company carried out an evaluation, under the
supervision and with the participation of the company's
management, including the Company's President and its Vice
President of Finance, of the effectiveness of the design and
operation of the company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
Mr. David Koffman and Mr. Robert Nolt concluded that the
Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings. There have not
been any significant changes in the Company's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of the evaluation, including any corrective
actions with regard to significant deficiencies or material
weaknesses (as no such deficiencies or weaknesses were discovered
in the course of the evaluation).
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
99.1 Certification of the Chief Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of the Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Report on Form 8-K - None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
JAYARK CORPORATION
Registrant
/s/ David L. Koffman December 4, 2002
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt December 4, 2002
Robert C. Nolt
Chief Financial Officer
Certifications
I, David L. Koffman, certify that:
1. I have reviewed this quarterly report on Form 10Q of Jayark
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report.
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly reporting is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ David L. Koffman December 4, 2002
David L. Koffman, President
Chief Executive Officer
I, Robert C. Nolt, certify that:
1. I have reviewed this quarterly report on Form 10Q of Jayark
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
d) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly reporting is being prepared;
e) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
f) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors:
c) all significant deficiencies in the design or operation of
internal
controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
d) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ Robert C. Nolt December 4, 2002
Robert C. Nolt
Chief Financial Officer
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jayark
Corporation (the "Company") on Form 10-Q for the quarter
ended October 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I,
David L. Koffman, President and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Company.
/s/ David L. Koffman December 4, 2002
David L. Koffman, President
Chief Executive Officer
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jayark
Corporation (the "Company") on Form 10-Q for the quarter
ended October 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I,
Robert C. Nolt, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Company.
/s/ Robert C. Nolt December 4, 2002
Robert C. Nolt
Chief Financial Officer
APPENDIX E
JAYARK CORPORATION'S REPORT ON FORM 10K FOR THE FISCAL YEAR ENDING
APRIL 30, 2002
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, 2002
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 offices (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 $100,788 as of June 6, 2002.
The number of shares outstanding of Registrant's Common Stock is
2,766,396 as of June 6, 2002.
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. Effective October 1, 2001, the Company
approved the merger of Fisher Medical Corporation ("Fisher"), a
formerly wholly owned subsidiary, with Fisher Medical LLC.
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 Sugar Land, Texas (a suburb of Houston).
Med finances the manufacture, sale and rental of medical equipment.
Its customer base in fiscal 2002 included companies that sell and
rent durable medical equipment to hospitals, nursing homes and
individuals. Med had no customers in fiscal 2001 or 2000. The
administrative operations of Med are located in Vestal, New York.
Effective October 1, 2001, the Company approved the merger of this
formerly wholly owned subsidiary, Fisher Medical Corporation
("Fisher") with Fisher Medical LLC. As a result, the Company has
relinquished control of Fisher and has deconsolidated Fisher
effective October 1, 2001. Operations at Fisher consist of
developing, manufacturing and distributing 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,
microphonesand headsets; tape recorders, record players,
cassette recorders, and related accessories and supplies.
AVES distributes the products of brand name manufacturers
such as RCA(tm), GE(tm), Mitsubishi, Elmo, Panasonic, Sanyo,
Fujitsu, Videotek, Pioneer, Leitch, Quasar, Telex, Samsung,
Kodak, Dukane, Sharp, Sony, 3M Brand, Canon and various other
brand names. The Company also offers repair services,
audiovisual 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 or franchises 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 2002, 84% of AVES' revenue was derived from sales to
schools and other educational institutions. The remaining 16%
of revenues came from sales to businesses (15%) and rental of
AVES equipment (1%). 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%).
No one customer accounted for more than 10% of revenues during
fiscal 2002, 2001 or 2000.
Backlog
The amount of unfilled sales orders of AVES at April 30, 2002, was
$374,570, as compared with $1,058,300 at April 30, 2001, and $953,100
at April 30, 2000. This decrease in backlog is partially due to the
nation's economic slowdown. However, the amount of unfilled sales
orders is variable and largely dependent on timing and thus is not
a material measure of AVES' operations.
Competition
The Company believes that AVES is one of the most diversified national
audiovisual 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, 2002, AVES had 15 full time employees.
Description of Med's Business
Products / Services
Med continues to explore distribution channels for specialty medical
equipment. During fiscal 2002, Med financed the manufacture, sale
and rental of durable medical equipment to companies that sell and
rent durable medical equipment to hospitals, nursing homes and
individuals. Med did not have any sales or services during fiscal
2001 and 2000.
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. Med believes that their current
raw material inventory is generally adequate to meet projected demand.
Patents
There are no patents, trademarks, licenses or franchises that are
material to Med's business.
Sales
During fiscal 2002, Med had sales to companies that sell and rent
durable medical equipment to hospitals, nursing homes and individuals
Backlog
Med does not currently have any backlog orders.
Description of Fisher's Business
Effective October 1, 2001, the Company approved the merger of this
formerly wholly owned subsidiary, Fisher Medical Corporation
("Fisher") with Fisher Medical LLC. As a result, the Company has
relinquished control of Fisher and has deconsolidated Fisher
effective October 1, 2001 and is accounting for its investment
in Fisher under the equity method.
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. Fisher distributes
its products nationwide through Durable Medical Equipment ("DME") and
Home Medical Equipment ("HME") dealers. Sales are primarily to the
long-term care (nursing home) industry and home care. Fisher has two
customers who act as master distributors. One for the long-term care
industry and another for the retail market.
Item 2. Properties
The Company's Corporate office is located in Vestal, New York.
Corporate administrative functions are conducted from
approximately 200 square feet of office space. There is
currently no lease obligation or rental expense for this
space, as the property is owned by a related party and the
related interest expense would be diminutive.
AVES is located in Sugar Land, Texas. AVES' business is
conducted from approximately 14,400 square feet; 4,000 of
which are used for office, sales and demonstration purposes
and 10,400 for warehouse purposes. The current lease term
expires on September 30, 2011. The rental payments are $7,500
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 December 17, 2001, pursuant
to the Notice of Annual Meeting of the Shareholders and Proxy Statement
dated October 23, 2001, Robert C. Nolt was elected to the Board of
Directors with 2,276,540 shares voted FOR and 2,066 shares WITHHELD
and the appointment of KPMG LLP as independent public accountants
for the Company for the fiscal year ending April 30, 2002 was approved
with 2,274,335 shares voted FOR, 785 shares voted AGAINST and 3,486
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 6, 2002, there were
approximately 795 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.
2002 Common Stock Trade Price 2001 Common Stock Trade Price
_____________________________ _____________________________
High Low High Low
_____________________________ _____________________________
First Quarter .46 .35 .81 .25
Second Quarter .45 .28 2.81 .55
Third Quarter .30 .22 1.44 .75
Fourth Quarter .50 .30 .75 .35
Item 6. Selected Financial Data
Results of Operations:
Years Ended April 30, 2002 2001 2000 1999 1998
_______________________________________________________________________________
Net Revenues $11,415,537 $12,886,491 $13,197,866 $15,288,215 $13,604,558
_______________________________________________________________________________
Income (Loss) from
Continuing Operations ($99,329) ($500,714) $330,978 $445,805 $75,992
_______________________________________________________________________________
Income (Loss) from
Discontinued Operations $-- $-- $209,676 $-- $--
_______________________________________________________________________________
Net Income (Loss) ($99,329) ($500,714) $540,654 $445,805 $75,992
_______________________________________________________________________________
Basic and Diluted Earnings
(Loss) per share from
Continuing Operations* ($.04) ($.18) $.12 $.24 $.08
_______________________________________________________________________________
Basic and Diluted Earnings
(Loss) per share from
Discontinued Operations* $-- $-- $.08 $-- $--
_______________________________________________________________________________
Weighted Average Shares
Outstanding* 2,766,396 2,766,396 2,766,396 1,836,661 922,120
_______________________________________________________________________________
At April 30,
Balance Sheet Information:
Total Assets $2,884,057 $3,757,353 $3,239,126 $2,779,891 $2,634,964
_______________________________________________________________________________
Long Term
Obligations $2,194,629 $2,082,881 $1,278,571 $1,424,229 $3,446,021
_______________________________________________________________________________
Working Capital $1,324,977 $974,094 $359,120 $370,914 $157,069
_______________________________________________________________________________
Stockholders'
Deficit ($484,207) ($646,333) ($145,619) ($685,523)($2,925,566)
_______________________________________________________________________________
*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
Fisher Divestiture
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 developmentstage developer, manufacturer, and distributor of
medical supplies and equipment for hospitals, nursing homes and
individuals. Under the termsof the agreement, Fisher purchased all
of the assets of LLC for cash of $215,000. LLC remained the owner
of certain intellectual property utilized in Fisher's medical
products line. The owner of LLC was Steve Fisher who also
became a member of the board of directors of the Company.
Fisher also negotiated a five-year technology license with
LLC, which conveyed certain technology rights developed by
Trlby Innovative LLC of Torrington, Connecticut. The
acquisition was accounted for under thepurchase method of
accounting.
Fisher continued to develop medical supply products with the
Financing provided by the Company. The Company initially
utilized its existing working capital and lines of credit
to fund Fisher's development efforts. The development time
horizon exceeded the projected investment horizon as determined
by the Company. Due to the need for additional funding for
this development, the Company endeavored to infuse additional
capital into Fisher with a private placement of preferred stock.
In late 2000, The Company sold approximately $429,500 of newly
issued Fisher Medical preferred stock. The Company continued
to seek new capital via the preferred stock offering to various
potential investors in 2001.
In September 2001, the Company received a proposal from
Alberdale LLC to provide a $500,000 bridge loan to Fisher, which
is convertible, Under certain conditions, to Fisher common stock.
In addition to the bridge loan, Alberdale was proposing to offer
a new series of preferred stock for equity financing to continue
the operations of Fisher. As a condition to this refinancing,
Alberdale required that Jayark contribute 50% of its Fisher
Medical Corporation common stock to the new refinanced entity,
as well as provide an option for Alberdale to purchase the
remaining 50% common interest the Company would hold in Fisher
at predetermined amounts ranging from approximately $915,000
to $1,464,000 for periods not exceeding 15 months.
On October 1, 2001 the Company approved the merger of its wholly
owned subsidiary, Fisher Medical Corporation with Fisher Medical LLC,
the owner of the intellectual property utilized in Fisher's medical
products line. Pursuant to the merger agreement, the Company assigned
50% of its common equity holdings in Fisher Medical Corporation to the
sole member of Fisher Medical LLC, Dr. Stephen Fisher. Dr. Fisher
serves as President of Fisher Medical Corporation and as a Director
of the Company. As a result of this transaction, the Company has
effectively relinquished its control of Fisher Medical Corporation;
however given its continuing 50% common stock ownership interest, the
Company will account for its investment on the equity method
prospectively commencing October 1, 2001. The Company has no future
obligations to fund any deficits of the merged entity or any deficits
of the merged entity or any commitments to provide future funding.
As of October 1, 2001, the Company had invested approximately
$1,248,000 of cash in Fisher and incurred net losses as 100% owner
of approximately $1,509,000; therefore the Company's net investment
and advance position at the date of the divestiture was a negative
balance of approximately $261,000. In connection with the transaction,
the Company received from the merged entity a five-year $525,715
promissory note, which represents a portion of the aforementioned
advances the Company had made during its 100% ownership period. The
note is secured by all assets of the company except the intellectual
property. There can be no assurances that the merged entity will be
successful in completing the development of its products or in the
raising of the additional working capital required. Additionally,
since the merged entity has minimal liquidation value, the note is
deemed not to be collectible. Accordingly, the Company has not
assigned any value to this note and has recognized its divestiture
of its net investment of $261,455 at October 1, 2001 as an increase
in additional paid in capital, which reduces the investment in Fisher
to zero. The Company has not recognized its 50% share of losses of
the merged entity in the post transaction period of October 1 to
January 31, 2002 as its investment is reflected as zero.
The net liabilities of Fisher at October 1, 2001 deconsolidated as
a result of the divestiture are as follows:
Accounts Receivable - Trade $31,350
Inventories 85,001
Other Current Assets 16,134
Property, Plant & Equipment, Net 361,418
Goodwill 90,432
Patent, Net 57,546
Accounts Payable and Accrued Expenses (295,817)
Accrued Salaries (177,415)
Other Current Liabilities (604)
Preferred Stock (429,500)
________
($261,455)
==========
In connection with the transaction, the Company was granted warrants
to purchase 47,190 shares of common stock of the merged entity at $10
per share, which expire in three years.
As the Company has relinquished its control of Fisher, it has
effectively deconsolidated Fisher as of October 1, 2001 and reflected
its recorded excess losses as additional paid-in-capital. As the
Company experienced no historical successes as 100% owner, and has
no tangible evidence of its historical investment recoverability, it
has reflected its equity investment position at zero. In the event
the merged entity is successful in the future, the Company would
record its 50% interest in the earnings, if any, to the extent that
they exceed equity losses not otherwise recorded, and could experience
subsequent gains resulting from the repayment of the note receivable,
if such amounts are collected, and from the proceeds of the Alberdale
buyout option, if exercised. However, as described above, due to the
uncertainties over the ultimate recoverability of the note or the
exercise of the option, no value has been assigned to either.
The following unaudited pro forma financial information presents the
combined results of operations of the Company as if the divestiture
of Fisher had taken place as of May 1, 1999. The unaudited pro forma
information has been prepared by the Company based upon assumptions
deemed appropriate and takes into consideration the elimination of
Fisher operating activities included in the consolidated statements
of operations for the periods presented herein.
2002 2001 2000
____________________________________
Net Revenues $11,381,126 $12,857,841 $13,197,866
Net Income $260,380 $304,061 $735,274
====================================
Net Income per Common Share -
Basic and Diluted $.09 $.11 $.27
====================================
The unaudited pro forma information presented herein are shown for
illustrative purposed only and are not necessarily indicative of the
future financial position or future results of operations of the
Company and does not necessarily reflect the results of operations
that would have occurred had the transaction been in effect for the
periods presented. The unaudited pro forma information should be
read in conjunction with the historical consolidated financial
statements and related notes of the Company.
As of April 30, 2002, the $500,000 Alberdale LLC bridge loan to
Fisher provided by Hobart Associates II, LLC (Hobart) was in default
and the Company's $525,715 five-year promissory note to Fisher was
also in default. Both notes provided for the acceleration of the
notes and the transfer of the secured assets to the note holders upon
an event of default. In order to avoid liquidation of Fisher, Hobart
and the Company proposed a restructuring program for Fisher. On
June 3, 2002 Stephen Fisher Sr. (President of Fisher), Fisher, Hobart
and the Company entered into the Fisher Medical Restructuring Agreement
(the Agreement). Under the terms of the Agreement, Hobart and the
Company formed a new corporation, Unisoft International Corporation
("UIC"). UIC will assume the international rights for sale and
marketing of Fisher's Unisoft mattress and all associated products,
designs, and all rights related thereto, as well as certain employees
and their obligations. As part of the agreement, UIC will commit to
a supply contract with Fisher with a guaranteed minimum order quantity.
In addition, UIC must assume the Fisher promissory notes payable to
Hobart and the Company. The Company will also contribute its 500,000
shares of common stock of Fisher and Hobart will contribute $250,000
to UIC, resulting in both the Company and Hobart owning approximately
36% of UIC. The Company's 36% interest is comprised of 100,000 shares
of common stock and 60,000 shares of Super Voting Series A Preferred
Stock. Each share of Series A Preferred Stock provides for 5 shares
of voting rights for each share of common stock. Hobart and UIC have
an option to purchase approximately 95% of Jayark's interest in UIC for
approximately $800,000 for a one-year period. Alberdales LLC's option
to purchase 50% of Jayark's common interest in Fisher was converted in
20,000 shares of UIC common stock under the restructuring.
There can be no assurances that the new entity will be successful in
selling and marketing the Unisoft internationally or the raising of the
additional working capital required to sustain the business. The Company
has no future obligations to fund any deficits of the new entity or any
commitments to provide funding. Due to the uncertainties over the
ultimate recoverability of its investment in UIC, no value has been
assigned.
Comparison of Fiscal Year Ended April 30, 2002 With Fiscal Year Ended
April 30, 2001
During the first quarter of fiscal 2002 (effective May 1, 2001), the
Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Intangible Assets", which supercedes APB Opinion No. 17,
"Intangible Assets". SFAS 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 of goodwill and intangible
assets. The following information describes the impact that the
adoption of SFAS No. 142 had on net income (loss) and net income
(loss) per common share for the fiscal years ending April 30:
2002 2001 2000
______________________________________
Net Income (Loss) ($99,329) ($500,714) $540,654
Add Back: Goodwill Amortization -- $26,068 $22,734
______________________________________
Adjusted Net Income (Loss) ($99,329) ($474,646) $563,388
======================================
Net Income (Loss) per Common Share ($.04) ($.18) $.20
Goodwill Amortization $-- $.01 $.01
______________________________________
Adjusted Net Income (Loss) ($.04) ($.17) $.21
======================================
There was no goodwill acquired or any goodwill impairment losses
recognized during the fiscal year ended April 30, 2002.
Net Revenues
Consolidated Revenues of $11,416,000 decreased $1,471,000, or 11.4%,
from fiscal 2001. The decrease was primarily the result of a
$1,485,000 decrease in AVES' sales. The decreased sales at AVES
were due partially to the nation's economic slowdown resulting in
decreased budgets for many of our customers causing them to look to
more inexpensive products and, or, purchase fewer quantity of
products. This was coupled with the fact that there has been a
continued price decline in video equipment and the Company did
not win some large contractual school bids that were won in the
prior year. Med had sales of $8,000 versus $0 in fiscal 2001
and Fisher had increased sales of $6,000 prior to the divestiture.
Cost of Revenues
Consolidated Cost of Revenues of $9,430,000 decreased $1,407,000,
or 12.9%, from the prior fiscal year. This was a result of the
decrease in revenues.
Gross Margin
Consolidated Gross Margin of $1,986,000 was 17.4% of revenues, as
compared with $2,050,000, or 15.9%, for the same period last year.
The increase in gross margin percentage was primarily the result
of decreases in the costs of video products at AVES, which were
sold at pre-established higher selling prices.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of
$1,983,000 decreased $440,000, or 18.1%, as compared with the
prior reporting year. Fisher's expenses decreased $484,000 due
to five months of expenses in fiscal 2002 versus twelve months
in fiscal 2001, as a result of the October 1, 2001 divestiture
transaction. AVES' expenses decreased $132,000 due to decreased
payroll expenses, decreased amortization expenses due to the
adoption of SFAS No. 142 described above, and increased
miscellaneous income, partially offset by increased rental expense.
Corporate's expenses increased $168,000 partially due to $90,000
of intersegment management fees charged to Fisher in the prior
year which offset overall selling, general and administrative
expenses at the Corporate level. In addition, Corporate had
increased payroll, travel, insurance and printing expenses. Med's
expenses increased $8,000 due to travel expenses associated with the
exploration of new product markets.
Operating Income (Loss)
Consolidated Operating Income of $3,000 increased $376,000, or 100.7%,
from last year's operating loss of $373,000. Due to the October 1,
2001 divestiture transaction, Fisher's operating loss decreased
$494,000 as the Company incurred only five months of loss in fiscal
2002 versus twelve months in fiscal 2001. AVES' operating income
increased $52,000 due to decreased selling, general and administrative
expenses, Corporate's operating loss increased by $168,000 due to
increased expenses discussed above, and Med's operating loss increased
$2,000.
Interest Expense
Consolidated Interest Expense of $115,000 decreased $25,000 or 17.8%
as compared with the same period last year. This decrease was a result
of decreased outstanding balances and decreased interest rates on the
Company's outstanding line of credit, combined with increased interest
income.
Gain on Sale of Assets
Consolidated Gain on Sale of Assets of $14,000, as compared to $1,000
in fiscal 2001, resulting from the sale of a Company auto at AVES.
Income (Loss) Before Income Taxes
Loss Before Income Taxes of $99,000 for the fiscal year ended
April 30, 2002 decreased $413,000, as compared with the same period
last year. Overall change in loss before income taxes was a result
of those fluctuations noted above.
Income Taxes
Income Taxes of $1,000 were incurred at Med for state income tax
expenses in fiscal 2002. The income tax benefit of $11,000 in
fiscal 2001 represents a reversal of the prior year tax accrual.
Consolidated Net Income (Loss)
Consolidated Net Loss of $99,000 for the fiscal year ended
April 30, 2002 decreased $401,000, as compared to net loss of
$501,000 for the same period last year. This decrease was due
to a $535,000 improvement in the bottom line as a result of the
Company including only five months of Fisher losses in the
current year, versus twelve months in 2001, due to the October 1,
2001 divestiture transaction; combined with a $61,000 improvement
at AVES and offset by $178,000 decrease at Corporate and a $17,000
decrease at Med.
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.
Income (Loss) Before Income Taxes
Loss Before Income Taxes 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 Taxes
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.
Critical Accounting Policies and Significant Estimates
The methods, estimates and judgments the Company uses in
applying their most critical accounting policies has a
significant impact on the results reported in our consolidated
financial statements. The U.S. Securities and Exchange
Commission has defined the most critical accounting policies
as the ones that are most important to the portrayal of the
Company's financial condition and results, and requires the
Company to make their most difficult and subjective judgment,
often as a result of the need to make estimates of matters
that are inherently uncertain. Based on this definition,
the Company's most critical policies include: valuation of
accounts receivables, which impact selling, general and
administrative expense; valuation of inventory, which
impacts cost of sales and gross margin; the assessment of
recoverability of goodwill, which impactswrite-offs of
goodwill and; accounting for income taxes, which impacts
the valuation allowance and the effective tax rate.
The Company reviews estimates including, but not limited to,
the allowance for doubtful accounts, inventory reserves and
income tax valuations on a regular basis and makes
adjustments based upon historical experiences,
current conditions and future expectations. The reviews
are performed regularly and adjustments are made as
required by current available information. The Company
believes these estimates are reasonable, but actual results
could differ from these estimates.
We value inventories at the lower of cost or market on a
first-in-first-out basis. The recoverability of inventories
is based upon thetypes and levels of inventory held, forecasted
demand, pricing, competition and changes in technology.
The Company's accounts receivable represent those amounts,
which have been billed to ourcustomers but not yet collected.
The Company analyzes various factors, including historical
experience, credit-worthiness of customers and current
market and economic conditions. The allowance
for doubtful accounts balance is established based
on the portion of those accounts receivable, which are deemed
to be potentially uncollectible. Changes in judgments on these
factors could impact the timing of costs recognized.
The Company records valuation allowances to reduce deferred
tax assets when it is more likely than not that some portion
of the amount may not be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of
future taxable income during those periods in which temporary
differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected
future income and tax planning in making this assessment.
As a result of this assessment, the Company feels that a
valuation allowance for the entire deferred tax asset balance
at April 30, 2002 is required. The Company evaluates the
need for valuation allowances on a regular basis and adjusts
as needed. These adjustments, when made, would have
an impact on the Company's financial statements in the
period that they were recorded.
Goodwill is tested annually for impairment by the Company
at the reporting unit level, by comparing the fair value of
the reporting unit with its carrying value. Valuation methods
for determining the fair value of the reporting unit include
reviewing quoted market prices and discounted cash flows.
If the goodwill is indicated as being impaired (the fair
value of the reporting unit is less than the carrying amount),
the fair value of the reporting unit is then allocated
to its assets and liabilities in a manner similar to a
purchase price allocation in order to determine the implied
fair value of the reporting unit goodwill. This implied
fair value of the reporting unit goodwill is then compared
with the carrying amount of the reporting unit goodwill
and, if it is less, the Company would then recognize an
impairment loss. The preparation of future cash flows requires
significant judgments and estimates with respect to future
revenues related to the asset and the future cash outlays
related to those revenues. Actual revenues and related cash
flows or changes in anticipate revenues and related cash
flows could result in changes in this assessment and result
in an impairment charge. The use of different assumptions
could increase or decrease the related impairment charge.
Liquidity and Capital Resources
At April 30, 2002, consolidated open lines of credit available
to the Company for borrowing, were $951,000 as compared with
$751,000 at April 30, 2001. 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 $1,325,000 at April 30, 2002,
Compared with 974,000 at April 30, 2001.
Net cash provided by operating activities was $345,000 in 2002 as
Compared with $125,000 in 2001. This is primarily a result of
decreased net losses and decreased inventory levels partially
offset by decreased accounts payable and accrued expenses.
Cash flows used in investing activities were $112,000 in 2002
compared with $316,000 used in 2001. The difference is a result
of decreased purchases of property and equipment in the current
year.
Cash used in financing activities of $200,000 for 2002 as compared
to cash provided by financing activities of $495,000 in 2002. This
was the result of payments on the Company's line of credit in the
current year as compared to borrowings on the Company's line of
credit in 2001 and proceeds from the issuance of Fisher Medical
Corporation Senior 8% Cumulative Convertible Preferred Stock in 2001.
The Company had no material commitments for capital expenditures as
of April 30, 2002.
The Company continues to be obligated under notes payable to
related parties aggregating $1,374,993. The related parties
and corresponding outstanding obligations include David Koffman,
Chairman of the Board of Directors and President of the Company
($201,113), AV Texas Holding LLC, an entity controlled by members
of the Koffman family ($850,000) and CCB Associates, LP, an
entity with indirect control by a Board Member ($323,830).
The current portion of the related notes aggregated $161,332,
with an additional principal payment of $161,332 due in
December 2003. The remaining balance on these related notes
Matures in December 2004 at which time the entire remaining
unpaid principal balance, aggregating $1,052,329, plus accrued
interest is due.
At a meeting of shareholders held in November 1999, the
shareholdersapproved 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.
Contractual Obligations and Commercial Commitments
Accounting standards require disclosure concerning a registrant's
obligations and commitments to make future payments under contracts,
such as debt and lease agreements, and under contingent commitments,
such as debt guarantees. The Company's obligations and commitments
are as follows:
Less than 2-3 4-5 After
Total 1 Year Years Years 5 Years
________________________________________________________________________
Contractual Obligations Payments Due by Period
________________________________________________________________________
Long Term Debt -
Related Parties $1,374,993 $161,332 $1,213,661 $-- $--
Operating Lease $847,500 $90,000 $180,000 $180,000 $397,500
Accrued Interest -
Related Parties $636,696 $-- $636,696 $-- $--
_________________________________________________________________________
Other Commercial
Commitments Amount of Commitment Expiration Per Period
_________________________________________________________________________
Lines of Credit $299,000 $299,000 $-- $-- $--
Impact of Inflation
Management of the Company believes that inflation has not
Significantly impacted either net sales or net income during the
year ended April 30, 2002.
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board (FASB)
Issued Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS No. 143).
SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143
is required for adoption for fiscal years beginning after
June 15, 2002. The Company has reviewed the provisions of
SFAS No. 143, and believes that upon adoption, the Statement
will not have a significant effect on its consolidated
financial statements.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets." SFAS No. 144 addresses financial accounting
and reporting for the impairment of long-lived assets and for long-
lived assets to be disposed of. SFAS No. 144 is required for
adoption for fiscal years beginning after December 15, 2001 and
interim periods within those fiscal years. The Company has
reviewed the provisions of SFAS No. 144, and believes that upon
adoption, the Statement will not have a significant effect on
its consolidated financial statements.
In April 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections" (SFAS No. 145).
SFAS No. 145 is required for adoption for fiscal years beginning
after May 15, 2002, with early adoption of the provisions
related to the rescission of Statement 4 encouraged. The Company
has reviewed the provisions of SFAS No. 145, and believes that
upon adoption, the Statement will not have a significant effect
on its 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
years ending April 30, 2002 and 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 principles. During the
past five years, there were no disagreements between the Company and
BDO on any matter of accounting principles 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,
2002, and, as to directors, the expiration date of their current
term of office:
CURRENT DIRECTORS
Term Director
Name Age Expires Position Presently Held Since
_______________________________________________________________________
David Koffman 43 2004 Chairman, President, Chief 1983
Executive Officer & Director
_______________________________________________________________________
Frank Rabinovitz 59 2004 Executive Vice President, 1989
Chief Operating Officer,
Director and President of AVES
_______________________________________________________________________
Robert Nolt 54 2005 Chief Financial Officer and 1998
President
_______________________________________________________________________
Arthur G. Cohen 73 2002 Director 1990
_______________________________________________________________________
Jeffrey P.Koffman 36 2002 Director 1999
________________________________________________________________________
Richard Ryder 56 2004 Director 2001
________________________________________________________________________
Stephen Fisher 56 2004 President of Fisher Medical 2001
Corporation and Director
________________________________________________________________________
Paul Garfinkle 61 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 eight 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 fifteen 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 29 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 eleven 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 24 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 former
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 2002 $81,000 $--
Chairman, President and 2001 $81,000 $--
Chief Executive Officer 2000 $81,000 $--
Frank Rabinovitz 2002 $162,000 $50,000
Director, Executive Vice 2001 $187,000 $62,000
President, Chief Operating Officer, 2000 $162,000 $50,000
President of AVES
(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 $36,000 and $25,373, respectively. Such
amounts are not included in the above table.
(3) The Company has accrued Mr. Koffman's fiscal 2002, 2001 and 2000
salary, however, he has deferred payment until such time as the
Company's working capital position improves.
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 180,000 stock options
outstanding at April 30, 2002.
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 6, 2002, 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 Note % of
Name and Address of Beneficial Owner Beneficial Ownership (1) Class
___________________________________________________________________________
David L. Koffman
300 Plaza Drive, Vestal, NY 13850 1,263,033 45.7%
___________________________________________________________________________
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
12610 W. Airport Blvd. Suite 150,
Sugar Land, TX 77478 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 1,513,861 54.7%
===========================================================================
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, beneficially owns 2,046,658 shares of Common
Stock, which represents approximately 74% of the Common Stock outstanding
at April 30, 2002.
The Company continues to be obligated under notes payable to related
parties aggregating $1,374,993. The related parties and corresponding
outstanding obligations include David Koffman, Chairman of the Board of
Directors and President of the Company ($201,113), AV Texas Holding LLC,
an entity controlled by members of the Koffman family ($850,000) and CCB
Associates, LP, an entity with indirect control by a Board Member
($323,830). The current portion of the related notes aggregated
$161,332,with an additional principal payment of $161,332 due in
December 2003.The remaining balance on these related notes matures
in December 2004 at which time the entire remaining unpaid principal
balance, aggregating $1,052,329, plus accrued interest is due.
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 17, 2002
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 17, 2002
DAVID L. KOFFMAN Chief Executive Officer and Director
/s/ Frank Rabinovitz Executive Vice President, Chief July 17, 2002
FRANK RABINOVITZ Operating Officer and Director
/s/ Robert C. Nolt Chief Financial Officer & Director July 17, 2002
ROBERT C. NOLT
/s/ Arthur G. Cohen Director July 17, 2002
ARTHUR G. COHEN
/s/ Jeffrey P. Koffman Director July 17, 2002
JEFFREY P. KOFFMAN
/S/ Richard Ryder Director July 17, 2002
RICHARD RYDER
/s/ Stephen Fisher, Sr. Director July 17, 2002
STEPHEN FISHER, SR.
/s/ Paul Garfinkle Director July 17, 2002
PAUL GARFINKLE
JAYARK CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements Page
Independent Auditors' Reports 23-24
Consolidated Balance Sheets as of April 30, 2002 and 2001 25
Consolidated Statements of Operations for the Years Ended
April 30, 2002, 2001 and 2000 26
Consolidated Statements of Stockholders' Deficit for the Years Ended
April 30, 2002, 2001 and 2000 27
Consolidated Statements of Cash Flows for the Years Ended
April 30, 2002, 2001 and 2000 28
Notes to Consolidated Financial Statements 29-42
Independent Auditors' Report
To the Shareholders and Directors
Jayark Corporation:
We have audited the accompanying consolidated balance sheets of
Jayark Corporation and subsidiaries as of April 30, 2002 and 2001,
and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the years 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 audits.
We conducted our audits 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 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, 2002 and 2001,
and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted
in the United States of America.
As discussed in Note 2 to the consolidated financial statements,
effective May 1, 2001, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets.
/s/ KPMG LLP
June 25, 2002
Syracuse, New York
Independent Auditors' Report
To the Shareholders and Directors
Jayark Corporation
We have audited the accompanying consolidated statements of
operations, changes in stockholders' deficit, and cash flows
of Jayark Corporation for the year 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 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 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 results of Jayark
Corporation's and Subsidiaries' operations and their cash flows for
the year ended April 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.
/s/ BDO Seidman, LLP
New York, New York
July 10, 2000
Jayark Corporation and Subsidiaries
Consolidated Balance Sheets
April 30, 2002 and 2001
2002 2001
____________________
Assets
Current Assets:
Cash and Cash Equivalents $866,971 $834,145
Accounts Receivable - Trade, less allowance
for doubtful accounts of $109,028 and
$100,363, in 2002 and 2001, respectively 1,197,823 1,318,732
Inventories (Note 3) 393,612 670,320
Other Current Assets 40,206 42,202
____________________
Total Current Assets 2,498,612 2,865,399
Property, Plant & Equipment, net (Note 4) 180,783 542,204
Goodwill (Note 2) 204,662 295,094
Patent, net -- 54,656
____________________
Total Assets $2,884,057 $3,757,353
====================
Liabilities
Current Liabilities:
Borrowings Under Lines of Credit (Note 5) $299,000 $499,060
Current Portion of Long Term Debt - Related
Parties (Note 6) 161,332 161,332
Accounts Payable and Accrued Expenses 440,589 862,442
Accrued Salaries (Note 10) 187,684 295,143
Other Current Liabilities 85,030 73,328
____________________
Total Current Liabilities 1,173,635 1,891,305
Long Term Debt - Related Parties, excluding
current portion (Note 6) 1,213,661 1,213,661
Deferred Compensation (Note 10) 344,272 338,272
Accrued Interest - Related Parties
(Notes 6 and 10) 636,696 530,948
____________________
Total Liabilities 3,368,264 3,974,186
____________________
8% Cumulative Convertible Preferred Stock of
Subsidiary (Note 8) -- 429,500
____________________
Concentrations, Commitments And Contingencies (Notes 11 and 12)
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 12,860,435 12,598,980
Accumulated Deficit (13,371,631)(13,272,302)
Treasury Stock, at cost, 7,500 shares
in 2002 and 2001 (750) (750)
______________________
Total Stockholders' Deficit (484,207) (646,333)
______________________
Total Liabilities & Stockholders' Deficit $2,884,057 $3,757,353
======================
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Operations
Years Ended April 30, 2002, 2001 and 2000
2002 2001 2000
Net Revenues $11,415,537 $12,886,491 $13,197,866
Cost of Revenues 9,429,755 10,836,632 10,869,794
___________________________________
Gross Margin 1,985,782 2,049,859 2,328,072
Selling, General and Administrative
(Note 10) 1,983,095 2,422,739 1,895,922
___________________________________
Operating Income (Loss) 2,687 (372,880) 432,150
Other Income (Expense):
Interest Expense, Net (115,148) (140,134) (97,828)
Gain on Sale of Assets 13,900 1,156 7,800
__________________________________
Income (Loss) Before Income Taxes (98,561) (511,858) 342,122
Income Taxes (Note 9) 768 (11,144) 11,144
__________________________________
Income (Loss) from Continuing
Operations (99,329) (500,714) 330,978
__________________________________
Income from Discontinued Operations
(Note 13) -- -- 209,676
__________________________________
Net Income (Loss) ($99,329) ($500,714) $540,654
==================================
Basic and Diluted Income (Loss) per Common Share:
Continuing Operations ($.04) ($.18) $.12
Discontinued Operations $-- $-- $.08
__________________________________
Net Income (Loss) per Common Share ($.04) ($.18) $.20
==================================
Weighted Average Common Shares: 2,766,396 2,766,396 2,766,396
==================================
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Stockholders' Deficit
Years Ended April 30, 2002, 2001 and 2000
Common Additional Accumulated Treasury Total
Stock Paid-In Deficit Stock Stockholders
Capital Deficit
_____________________________________________________
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)
Gain from Divestiture of
Fisher (Note 12) -- 261,455 -- -- 261,455
Net Loss -- -- (99,329) -- (99,329)
_____________________________________________________
Balance at April 30, 2002 $27,739 $12,860,435 $13,371,631 ($750) ($484,207)
=====================================================
See accompanying notes to consolidated financial statements
Jayark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended April 30, 2002, 2001 and 2000
2002 2001 2000
___________________________________
Cash Flows From Operating Activities:
Net Income (Loss) ($99,329) ($500,714) $540,654
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By
Operating Activities:
Depreciation and Amortization of Property,
Plant and Equipment 121,649 182,191 91,533
Amortization of Goodwill and Patent 1,203 16,739 32,498
Gain on Disposition of Assets (13,900) (1,156) (7,800)
Provision for Doubtful Accounts 8,665 24,363 17,000
Changes In Assets and Liabilities, Net of
Divestiture of Fisher (Note 12):
Accounts Receivable - Trade 80,894 41,118 417,001
Inventories 191,707 (209,693) (83,158)
Other Current Assets (14,138) 47,713 (28,663)
Accounts Payable and Accrued Expenses (126,036) 320,067 (400,630)
Accrued Salaries and Deferred Compensation 75,956 187,775 53,221
Accrued Interest - Related Parties 105,748 26,437 --
Other Liabilities 12,306 (10,035) 43,445
_________________________________
Net Cash Provided by Operating Activities 344,725 124,805 675,101
_________________________________
Cash Flows From Investing Activities:
Proceeds from Sale of Assets 13,900 1,156 7,800
Purchases of Plant and Equipment (121,646) (270,801) (349,193)
Purchase of Fisher Medical, LLC, net of
cash acquired (Note 12) -- -- (215,000)
Purchases of Patent (4,093) (46,251) (20,438)
_________________________________
Net Cash Used In Investing Activities (111,839) (315,896) (576,831)
Cash Flows From Financing Activities:
Net Borrowings (Payments) Under Lines of
Credit (200,060) 130,106 368,955
Payments of Long Term Debt - Related Parties -- (64,910) (145,659)
Proceeds From Issuance of 8% Cumulative Convertible
Preferred Stock of Subsidiary (Note 8) -- 429,500 --
Purchase of Treasury Stock -- -- (750)
_________________________________
Net Cash Provided By (Used In) Financing
Activities (200,060) 494,696 222,546
_________________________________
Net Increase in Cash and Cash Equivalents 32,826 303,605 320,816
Cash and Cash Equivalents at
Beginning of Year 834,145 530,540 290,724
_________________________________
Cash and Cash Equivalents at End of Year $866,971 $834,145 $530,540
=================================
Supplemental Disclosures:
Cash Paid During the Year for:
Interest $26,029 $140,969 $120,159
================================
Taxes $768 $-- $33,001
================================
See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements
April 30, 2002, 2001 and 2000
(1) Summary of Significant Accounting Policies
Operations
The Company conducted its operations through three wholly owned
subsidiaries in fiscal years 2002, 2001 and 2000. AVES AudioVisual
Systems, Inc. ("AVES"), Med Services Corporation ("Med") and Fisher
Medical Corporation ("Fisher"), each of which constituted 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.
As discussed in Note 12, the Company relinquished control of Fisher
and has deconsolidated Fisher effective October 1, 2001 and is
accounting for its investment in Fisher under the equity method.
Prior to the divestiture, Fisher developed, manufactured and
distributed 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
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.
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 operations. Maintenance and repairs are charged to operations
as incurred, and expenditures for major renewals and betterments
are capitalized and amortized by charges to operations.
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 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.
Income (Loss) Per Common Share
Basic income (loss) per common share is based on the weighted average
number of common shares outstanding. Diluted income (loss) per common
share is based on the weighted average number of common shares
outstanding, as well as dilutive potential common shares, which,
in the Company's case comprise shares issuable under the stock
option plan described in Note 7. The treasury stock method is used
to calculate dilutive shares which reduces the gross number of
dilutive shares by the number of shares purchasable from the
proceeds of the options assumed to be exercised.
Outstanding stock options, assumed to be exercised, aggregating
180,000, 0 and 10,500 at April 30 2002, 2001 and 2000, respectively,
are not included in the calculation of diluted income (loss) per
common share for the fiscal years since the effects would be
antidilutive due to the option price being greater than the
average market prices. Accordingly, basic and diluted net
income (loss) per common share do not differ for any periods
presented.
Revenue Recognition
The Company generally recognizes revenues at the time products are
shipped to customers provided that persuasive evidence of an
arrangement exists, the sales price is fixed or easily determinable,
collectibility is reasonably assured and title and risk of loss have
passed to the customer. Rental revenue is recognized over the rental
period and service revenue is recognized when services are performed.
Estimated allowances for returns and doubtful accounts are recorded
in the period such returns and losses are determined.
Long-Lived Assets
Prior to the adoption of SFAS 142, as discussed in Note 2, long-lived
assets, such as property, plant and equipment, goodwill and other
intangibles were 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 such impairment existed, the
related assets were written down to their fair value.
Upon adoption of SFAS 142, effective May 1, 2001, goodwill is
Tested annually for impairment at the reporting unit level, by
comparing the fair value of the reporting unit with its carrying
value. Valuation methods for determining the fair value of the
reporting unit include reviewing quoted market prices and discounted
cash flows. If the goodwill is indicated as being impaired, the fair
value of the reporting unit is then allocated to its assets and
liabilities in a manner similar to a purchase price allocation in
order to determine the implied fair value of the reporting unit
goodwill. This implied fair value of the reporting unit goodwill
is then compared with the carrying amount of the reporting unit
goodwill, and if it is less, the Company would then recognize an
impairment loss. No impairment losses were recorded through
April 30, 2002.
Stock Based Compensation
The Company accounts for its stock option plan in accordance with the
provisions 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 $305,639, $655,245 and
$173,818 in fiscal 2002, 2001 and 2000, 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 cost which
approximates fair value at April 30, 2002 and 2001.
Concentrations
For the years ended April 30, 2002, 2001 and 2000 approximately 84%,
81% and 79% of the Company's consolidated net revenues relate to AVES'
sales to schools and other educational institutions.
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" (SFAS No. 143). SFAS No. 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. SFAS No. 143 is required for adoption for fiscal
years beginning after June 15, 2002. The Company has reviewed the
provisions of SFAS No. 143, and believes that upon adoption, the
Statement will not have a significant effect on its consolidated
financial statements.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets." SFAS No. 144 addresses financial accounting
and reporting for the impairment of long-lived assets and for
long-lived assets to be disposed of. SFAS No. 144 is required
for adoption for fiscal years beginning after December 15, 2001
and interim periods within those fiscal years. The Company has
reviewed the provisions of SFAS No. 144, and believes that upon
adoption, the Statement will not have a significant effect on its
consolidated financial statements.
In April 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" (SFAS No. 145). SFAS
No. 145 is required for adoption for fiscal years beginning after
May 15, 2002, with early adoption of the provisions related to the
rescission of Statement 4 encouraged. The Company has reviewed the
provisions of SFAS No. 145, and believes that upon adoption, the
Statements will not have a significant effect on its consolidated
financial statements.
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.
Reclassifications
Certain amounts have been reclassified to conform with the fiscal
2002 presentation.
(2) Adoption of Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, "Business Combinations" which supersedes APB
Opinion No. 16, "Business Combinations". SFAS 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 SFAS No. 141 are effective for transactions accounted for using
the purchase method that are completed after June 30, 2001. The
Company adopted SFAS No. 141 during the first quarter of fiscal 2002
(effective May 1, 2001). Adoption of the Statement did not have an
impact on the Company, as the Company has not historically had pooling-
of-interest transactions and had not initiated any business combinations
after June 30, 2001.
During the first quarter of fiscal 2002 (effective May 1, 2001), the
Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Intangible Assets", which supercedes APB Opinion No. 17,
"Intangible Assets". SFAS 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 of goodwill and intangible assets.
The following information describes the impact that the adoption of
SFAS No. 142 had on net income (loss) and net income (loss) per common
share for the fiscal years ending April 30:
2002 2001 2000
______________________________
Net Income (Loss) ($99,329) ($500,714) $540,654
Add Back: Goodwill Amortization -- $26,068 $22,734
______________________________
Adjusted Net Income (Loss) ($99,329) ($474,646) $563,388
==============================
Net Income (Loss) per Common Share
- Basic and Diluted ($.04) ($.18) $.20
Goodwill Amortization $-- $.01 $.01
______________________________
Adjusted Net Income (Loss) ($.04) ($.17) $.21
==============================
(3) Inventories
Inventories are summarized as follows:
April 30, 2002 April 30,2001
________________________________
Raw Materials $172,081 $201,877
Work In Process 2,032 22,660
Finished Goods 219,499 445,783
________________________________
$393,612 $670,320
================================
(4) Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
April 30, 2002 April 30,2001
_________________________________
Machinery and Equipment $ 46,438 $413,419
Furniture and fixtures 76,571 117,665
Leasehold improvements 18,215 109,662
Automobiles and trucks 197,615 182,098
Rental and demonstration equipment 222,652 230,481
_________________________________
Total property and equipment 561,491 1,053,327
Less Accumulated depreciation
And amortization 380,708 511,123
_________________________________
Net property and equipment $180,783 $542,204
================================
(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, 2002. The Med line of credit is
guaranteed by AVES, and provides for borrowing up to $500,000 through
September 30, 2002. The borrowings under the lines of credit bear
interest at prime, which was 4.75% and 7.5% at April 30, 2002 and 2001,
respectively. The Company had $951,000 and $750,940 available under
the lines of credit at April 30, 2002 and 2001, 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:
2002 2001
_____________________
Subordinated note payable due December 2004;
quarterly interest payments at fixed interest
rate of 7.5% $850,000 $850,000
Subordinated notes payable due December 2004;
quarterly interest payments at fixed interest
rate of 8% $524,993 $524,993
_____________________
$1,374,993 $1,374,993
Less: Current Installments 161,332 161,332
_____________________
$1,213,661 $1,213,661
=====================
The Company has an $850,000 unsecured subordinated note payable to
a related party. The note 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. Due to the Company's cash flow position, unpaid
principal aggregating $150,000 has been waived until the maturity
date of the note. Interest expense on the note payable aggregated
$63,750, $67,852 and $64,438 in fiscal 2002, 2001 and 2000,
respectively. Cash paid for interest on the note was $0, $51,915
and $64,438 in 2002, 2001 and 2000, respectively.
Additionally, the Company has an aggregate $524,993 of unsecured
subordinated notes to related parties. These 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. Due to the Company's cash flow
position, unpaid principal aggregating $95,724, has been waived until
the maturity date of the notes. Interest expense on the subordinated
notes aggregated $41,998, $43,142 and $45,680 in fiscal 2002, 2001
and 2000, respectively. Cash paid for interest on the subordinated
notes was $0, $32,642 and $45,680 in 2002, 2001 and 2000, respectively.
Accrued interest - related parties in the consolidated balance sheets
includes unpaid interest on the subordinated notes to related parties,
and $397,463 of unpaid interest relating to certain debentures converted
to equity in fiscal 1999. The unpaid interest relating to the historical
debentures was waived by the holders of these notes until December 2004.
The aggregate maturities of all long-term debt for the fiscal years
subsequent to April 30, 2002 are summarized as follows:
2003 $161,332
2004 $161,332
2005 $1,052,329
___________
$1,374,993
===========
(7) Stock Options
In fiscal 2001, the Company adopted the 2001 Stock Option Plan (Plan)
which allows for the granting of 250,000 options to purchase 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
contributions to the success of the Company and its subsidiaries.
The options granted may be either incentive stock options (ISO's) as
defined in Section 422 of the Internal Revenue Code of 1986, as
amended, or options that are not incentive options (NSO's), or both.
The exercise price of each option shall be determined by the Board but,
in the case of an incentive stock option, shall not be less than 100%
(110% in the case of an incentive stock 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 stock option
be less, in the case of an original issue of authorized stock, than par value.
Stock 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 stock 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
ompany or its subsidiaries.
Unexercised stock 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 stock 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.
During fiscal 2002, the Company granted 187,500 stock options under
this Plan. Information relating to option activity under this Plan
are summarized as follows:
Shares
________________________________
ISO
______________________ Option Weighted Average
Employee Director Total Price Exercise Price
___________________________________________________________________________
Outstanding at
April 30, 2001 -- -- -- -- --
___________________________________________________________________________
Issued 107,500 80,000 187,500 $.50 $.50
Cancelled (7,500) -- (7,500) -- --
___________________________________________________________________________
Outstanding at
April 30, 2002 100,000 80,000 180,000 $.50 $.50
===========================================================================
Shares Exercisable at
April 30, 2002 100,000 80,000 180,000 $.50 $.50
===========================================================================
Shares available for Grant at
April 30, 2002 70,000
=======================================================
SFAS No. 123, Accounting for Stock Based Compensation, requires the use
of option valuation models to provide supplemental information regarding
options granted after 1995. Proforma information regarding net income
(loss) and net income (loss) per common share shown below was determined
as if the Company has accounted for its stock options under the fair
value method of that Statement.
In order to disclose the proforma net income (loss) related to the stock
options, the fair value of the stock options was estimated at the date
of grant using the Black-Scholes option pricing model with the following
assumptions: expected option life of 3 years; risk-free interest rate of
4.0%; volatility factors of the Company's common stock of 198.19%; and
an expected dividend yield of 0%. Stock based compensation costs would
have increased both loss before income taxes and net loss after income
taxes by $56,904 and would have increased net loss per common share by
$.02 in fiscal 2002, if the fair value of the options granted in the
current year had been recognized as compensation expense on a straight-
line basis over the vesting period of the grant.
(8) 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. As discussed in Note 12, the
Company relinquished control of Fisher and has deconsolidated
Fisher effective October 1, 2001.
(9) Income Taxes
Income tax expense (benefit) consist of the following:
Current Deferred Total
_______________________________
Year Ended April 30, 2002
Federal $-- $-- $--
State $768 $-- $768
_______________________________
$768 $-- $768
===============================
Year Ended April 30, 2001
Federal ($11,144) $-- ($11,144)
State -- -- --
________________________________
($11,144) $-- ($11,144)
================================
Year Ended April 30, 2000
Federal $11,144 $-- $11,144
State -- -- --
________________________________
$11,144 $-- $11,144
================================
A reconciliation of the expected consolidated income tax expense
(benefit), computed by applying the U.S. Federal corporate income
tax rate of 34% to income (loss) before income taxes, to income
tax expense (benefit), is as follows:
2002 2001
______________________
Expected tax benefit ($33,511) ($174,032)
State income taxes net of Federal Benefit 507 --
Change in valuation allowance 20,000 166,754
Non-deductible expenses 1,746 7,271
Effect of graduated Federal income tax rates 11,750 --
Over accrual of prior year taxes -- ($11,144)
Other, net 276 7
______________________
$768 ($11,144)
======================
Actual income tax expense (benefit) for 2000 differs from the amount
computed by applying the U.S. Federal corporate income tax rate of
34% to pre tax income (loss), 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:
2002 2001
_____________________
Deferred tax assets:
Allowance for doubtful accounts $37,000 $34,000
Allowance for obsolete inventories/unicap costs 12,000 16,000
Property, plant and equipment, principally due
to differences in depreciation 41,000 40,000
Accrued compensation 147,000 143,000
Net operating loss carryforwards and
tax credits 3,834,000 3,818,000
_____________________
Total gross deferred tax assets 4,071,000 4,051,000
Less valuation allowance (4,071,000) (4,051,000)
_____________________
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, 2002
and 2001.
At April 30, 2002, the Company has net operating loss carryforwards
for Federal tax purposes of approximately $11,000,000, which are
available to offset future taxable income, if any, through 2020.
(10) Related Party Transactions
At April 30, 2002 and 2001, the Company had accrued unpaid wages
aggregating $431,469 and $419,272, 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 $87,197 and
$81,000 as a current liability within accrued salaries in the
consolidated balance sheet at April 30, 2002 and 2001, respectively,
and reflected $344,272 and $338,272 as a long-term liability (deferred
compensation) in the consolidated balance sheet at
April 30, 2002 and 2001, respectively.
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 fiscal 1999, 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, 2002, 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.
(11) Commitments
The Company is obligated under a non-cancelable operating lease
agreement that expires in September 2011. Future minimum lease
payments related to this lease is as follows:
2003 $90,000
2004 90,000
2005 90,000
2006 90,000
2007 and thereafter $487,500
________
$847,500
========
Rental expense for operating leases was $105,547, $101,185 and
$74,490 for the years ended April 30, 2002, 2001, and 2000,
respectively.
(12) Divestiture of Fisher
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
development stage developer, manufacturer, and distributor of
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. LLC remained the
owner of certain intellectual property utilized in Fisher's
medical products line. The owner of LLC was Steve Fisher who
also became a member of the board of directors of the Company.
Fisher also negotiated a five-year technology license with LLC,
which conveyed certain technology rights developed by Trlby
Innovative LLC of Torrington, Connecticut. The acquisition was
accounted for under the purchase method of accounting.
Fisher continued to develop medical supply products with the
financing provided by the Company. The Company initially utilized
its existing working capital and lines of credit to fund Fisher's
development efforts. The development time horizon exceeded the
projected investment horizon as determined by the Company. Due
to the need for additional funding for this development, the
Company endeavored to infuse additional capital into Fisher with
a private placement of preferred stock. As discussed in Note 8,
in 2000, the Company sold $429,500 of newly issued Fisher Medical
preferred stock. The Company continued to seek new capital via
the preferred stock offering to various potential investors in 2001.
In September 2001, the Company received a proposal from Alberdale
LLC to provide a $500,000 bridge loan to Fisher, which is
convertible, under certain conditions, to Fisher common stock.
In addition to the bridge loan, Alberdale was proposing to offer
a new series of preferred stock for equity financing to continue
the operations of Fisher. As a condition to this refinancing,
Alberdale required that Jayark contribute 50% of its Fisher Medical
Corporation common stock to the new refinanced entity, as well as
provide an option for Alberdale to purchase the remaining 50%
common interest the Company would hold in Fisher at predetermined
amounts ranging from approximately $915,000 to $1,464,000 for
periods not exceeding 15 months.
On October 1, 2001 the Company approved the merger of its wholly
owned subsidiary, Fisher Medical Corporation with Fisher Medical LLC,
the owner of the intellectual property utilized in Fisher's medical
products line. Pursuant to the merger agreement, the Company
assigned 50% of its common equity holdings in Fisher Medical
Corporation to the sole member of Fisher Medical LLC, Dr. Stephen
Fisher. Dr. Fisher serves as President of Fisher Medical Corporation
and as a Director of the Company. As a result of this transaction,
the Company has effectively relinquished its control of Fisher
Medical Corporation; however given its continuing 50% common stock
ownership interest, the Company will account for its investment on
the equity method prospectively commencing October 1, 2001. The
Company has no future obligations to fund any deficits of the merged
entity or any commitments to provide future funding.
As of October 1, 2001, the Company had invested approximately
$1,248,000 of cash in Fisher and incurred net losses as 100%
owner of approximately $1,509,000; therefore the Company's net
investment and advance position at the date of the divestiture
was a negative balance of approximately $261,000. In connection
with the transaction, the Company received from the merged
entity a five-year $525,715 promissory note, which represents a
portion of the aforementioned advances the Company had made
during its 100% ownership period. The note is secured by all
assets of the company except the intellectual property. There
can be no assurances that the merged entity will be successful
in completing the development of its products or in the raising
of the additional working capital required. Additionally, since
the merged entity has minimal liquidation value, the note is deemed
not to be collectible. Accordingly, the Company has not assigned
any value to this note and has recognized its divestiture of its
net investment of $261,455 at October 1, 2001 as an increase in
additional paid in capital, which reduces the investment in
Fisher to zero. The Company has not recognized its 50% share of
losses of the merged entity in the post transaction period of
October 1 to January 31, 2002 as its investment is reflected as zero.
The net liabilities of Fisher at October 1, 2001 deconsolidated as
a result of the divestiture are as follows:
Accounts Receivable - Trade $31,350
Inventories 85,001
Other Current Assets 16,134
Property, Plant & Equipment, Net 361,418
Goodwill 90,432
Patent, Net 57,546
Accounts Payable and Accrued Expenses (295,817)
Accrued Salaries (177,415)
Other Current Liabilities (604)
Preferred Stock (429,500)
________
($261,455)
==========
In connection with the transaction, the Company was granted
warrants to purchase 47,190 shares of common stock of the merged
entity at $10 per share, which expire in three years.
As the Company has relinquished its control of Fisher, it has
effectively deconsolidated Fisher as of October 1, 2001 and
reflected its recorded excess losses as additional paid-in-capital.
As the Company experienced no historical successes as 100% owner,
and has no tangible evidence of its historical investment
recoverability, it has reflected its equity investment position
at zero. In the event the merged entity is successful in the
future, the Company would record its 50% interest in the earnings,
if any, to the extent that they exceed equity losses not otherwise
recorded, and could experience subsequent gains resulting from the
repayment of the note receivable, if such amounts are collected,
and from the proceeds of the Alberdale buyout option, if exercised.
However, as described above, due to the uncertainties over the
ultimate recoverability of the note or the exercise of the option,
no value has been assigned to either.
The following unaudited pro forma financial information presents
the combined results of operations of the Company as if the
divestiture of Fisher had taken place as of May 1, 1999. The
unaudited pro forma information has been prepared by the Company
based upon assumptions deemed appropriate and takes into
consideration the elimination of Fisher operating activities
included in the consolidated statements of operations for the
periods presented herein.
2002 2001 2000
___________________________________
Net Revenues $11,381,126 $12,857,841 $13,197,866
Net Income $260,380 $304,061 $735,274
===================================
Net Income per Common Share
- Basic and Diluted: $.09 $.11 $.27
===================================
The unaudited pro forma information presented herein are shown
for illustrative purposed only and are not necessarily indicative
of the future financial position or future results of operations
of the Company and does not necessarily reflect the results of
operations that would have occurred had the transaction been in
effect for the periods presented. The unaudited pro forma
information should be read in conjunction with the historical
consolidated financial statements and related notes of the Company.
As of April 30, 2002, the $500,000 Alberdale LLC bridge loan to
Fisher provided by Hobart Associates II, LLC (Hobart) was in
default and the Company's $525,715 five-year promissory note to
Fisher was also in default. Both notes provided for the
acceleration of the notes and the transfer of the secured assets
to the note holders upon an event of default. In order to avoid
liquidation of Fisher, Hobart and the Company proposed a
restructuring program for Fisher. On June 3, 2002 Stephen
Fisher Sr. (President of Fisher), Fisher, Hobart and the
Company entered into the Fisher Medical Restructuring Agreement
(the Agreement). Under the terms of the Agreement, Hobart
and the Company formed a new corporation, Unisoft International
Corporation ("UIC"). UIC will assume the international rights
for sale and marketing of Fisher's Unisoft mattress and all
associated products, designs, and all rights related thereto,
as well as certain employees and their obligations. As part
of the agreement, UIC will commit to a supply contract with
Fisher with a guaranteed minimum order quantity.
In addition, UIC must assume the Fisher promissory notes
payable to Hobart and the Company. The Company will also
contribute its 500,000 shares of common stock of Fisher and
Hobart will contribute $250,000 to UIC, resulting in both the
Company and Hobart owning approximately 36% of UIC. The
Company's 36% interest is comprised of 100,000 shares of common
stock and 60,000 shares of Super Voting Series A Preferred Stock.
Each share of Series A Preferred Stock provides for 5 shares of
voting rights for each share of common stock. Hobart and UIC
have an option to purchase approximately 95% of Jayark's interest
in UIC for approximately $800,000 for a one-year period.
Alberdales LLC's option to purchase 50% of Jayark's common
interest in Fisher was converted in 20,000 shares of UIC common
stock under the restructuring.
There can be no assurances that the new entity will be successful
in selling and marketing the Unisoft internationally or the
raising of the additional working capital required to sustain
the business. The Company has no future obligations to fund
any deficits of the new entity or any commitments to provide
funding. Due to the uncertainties over the ultimate
recoverability of its investment in UIC, no value has been assigned.
(13) 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.
(14) Segment and Related Information
The Company operated in three reportable business segments during
fiscal 200, 2001 and 2002 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.
As discussed in Note 12, the Company relinquished control of Fisher
Medical Corporation ("Fisher") and has deconsolidated Fisher
effective October 1, 2001 and is accounting for its investment in
Fisher under the equity method. Prior to the deconsolidation,
Fisher developed, manufactured and distributed 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
________________________________________________________
Year Ended April 30,2002
Net Revenues $11,372,588 $34,411 $8,538 $-- $11,415,537
Depreciation & Amortization 60,753 56,114 5,985 -- 122,852
Operating Income (Loss) 686,578 (367,724) (12,968) (303,199) 2,687
Interest (Expense) Income 45,382 (21,985) (6,828) (131,717) (115,148)
Net Income (Loss) 565,860 (389,709) (20,563) (254,917) (99,329)
Year Ended April 30, 2001
Net Revenues $12,857,841 28,650 -- -- 12,886,491
Depreciation and Amortization 92,407 100,875 5,648 -- 198,930
Operating Income (Loss) 643,030 (862,053) (10,761) (134,096) (372,880)
Interest (Expense) Income 49,243 (62,723) 6,691 (133,345) (140,134)
Net Income (Loss) 504,428 (924,775) (4,070) (76,297) (500,714)
Year Ended April 30, 2000
Net Revenues $13,197,866 -- -- -- 13,197,866
Depreciation and Amortization 101,276 20,802 1,953 -- 124,031
Operating Income (Loss) 910,715 (194,620) (32,706) (251,239) 423,150
Interest (Expense) Income 24,744 -- (6,691) (115,881) (97,828)
Net Income (Loss) 755,459 (194,620) (39,398) 19,213 540,654
Total Identifiable Assets at
April 30, 2002 $2,355,952 -- 227,764 300,341 2,844,057
Goodwill at April 30, 2002 204,662 -- -- -- 204,662
Total Identifiable Assets at
April 30, 2001 $2,630,383 712,105 232,545 182,320 3,757,353
Goodwill at April 30, 2001 204,662 90,432 -- -- 295,094
Intersegment transactions include a management fee between Corporate
and Fisher for the year ended April 30, 2002 and 2001 of $30,000 and
$120,000, respectively.
(15) Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited quarterly financial
information for the years ended April 30, 2002 and 2001:
2002 Quarter Ended
July 31 October 31 January 31 April 30
_______________________________________________
Net Revenues $3,716,702 $3,017,302 $2,233,040 $2,448,493
===============================================
Cost of Revenues 3,101,171 2,564,396 1,812,437 1,951,751
===============================================
Net Income (Loss) (74,152) (103,532) 7,895 70,460
===============================================
Basic and Diluted Net
Income (Loss) per
Common Share: ($.03) ($.04) $.00 $.03
===============================================
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 Loss ($124,451) ($113,772) ($246,802) ($15,689)
===============================================
Basic and Diluted Net
Loss per Common Share: ($.04) ($.04) ($.09) ($.01)
===============================================
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.
10(52) Articles of Merger of Fisher Medical Corporation and
Fisher Medical LLC effective October 1, 2001
10(53) Agreement and Plan of Merger of Fisher Medical LLC with
and into Fisher Medical Corporation effective October 1, 2001.
JAYARK CORPORATION
300 Plaza Drive
Vestal, New York 13850
(607)-729-9331
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ________________
-----------------
PROXY
-----------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Jayark Corporation (the "Company")
hereby appoints David L. Koffman and Robert C. Nolt, and each of
them separately, with full power of substitution, proxies to vote
all shares of Company common stock, par value $.01 per share, that
the undersigned is entitled to vote at the close of business on
January 31, 2003, at the Special Meeting of Stockholders to be held
on ________________ at 10:00 a.m., or any adjournment(s) thereof, on
the following proposals:
1. PROPOSAL TO APPROVE AND ADOPT the Agreement and Plan of Merger
dated as of February 3, 2003, by and among the Company, J Acquisition
Corp. and J Merger Corp., and the consummation of the transactions
contemplated thereby.
/ / FOR / / AGAINST / / ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE STOCKHOLDERS' MEETING
OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF, EXCEPT SUCH DISCRETIONARY
AUTHORITY TO VOTE SHALL BE LIMITED TO MATTERS OF WHICH THE COMPANY DID
NOT HAVE NOTICE A REASONABLE TIME BEFORE MAILING OF THE PROXY STATEMENT
AND THIS PROXY.
ANY PROXY GIVEN PURSUANT TO THIS SOLICITATION MAY BE REVOKED BY THE
PERSON GIVING IT ANY TIME BEFORE IT IS VOTED AT THE SPECIAL MEETING.
PROXIES MAY BE REVOKED BY DELIVERING TO THE SECRETARY OF THE COMPANY,
MR. ROBERT C. NOLT, 300 PLAZA DRIVE , VESTAL, NEW YORK 13850, A
WRITTEN NOTICE OF REVOCATION BEARING A LATER DATE THAN THE PROXY, BY
DULY EXECUTING AND DELIVERING TO THE SECRETARY A SUBSEQUENTLY DATED
PROXY RELATING TO THE SAME SHARES OR BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON (ALTHOUGH ATTENDANCE AT THE SPECIAL MEETING WILL
NOT IN AND OF ITSELF CONSTITUTE REVOCATION OF A PROXY).
THIS PROXY WILL BE VOTED AS MARKED. SIGNED BUT UNMARKED PROXIES WILL
BE VOTED IN FAVOR OF THE PROPOSALS.
The undersigned acknowledges receipt of the NOTICE OF STOCKHOLDERS'
MEETING to be held ________________ and the PROXY STATEMENT dated
________________, and hereby revokes all Proxies heretofore given by
the undersigned.
Dated: ________________
- ----------------------------------------
Signature
- ----------------
Number of Shares
- -----------------------------------------
Signature (If Held Jointly)
- ----------------------------------------
Title or Authority (If Applicable)
SIGNATURE OF STOCKHOLDER(S) SHOULD CORRESPOND WITH THE NAME IN
WHICH SHARES ARE REGISTERED. JOINT HOLDERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY-IN-FACT, TRUSTEE, EXECUTOR, ADMINISTRATOR,
GUARDIAN, PARTNER, OR DULY AUTHORIZED OFFICER, PLEASE GIVE TITLE
OR AUTHORITY AND ATTACH AUTHORIZATION DOCUMENTS.