SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 1)
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 Section 240.14a-11(c) or
Section 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)
and 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 $80 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:
$11.62
[X] 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. The accompanying Proxy
Statement is dated ____________ and is being first mailed to our
stockholders on or about ____________.
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 owned by the wife
of 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. 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
1
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 C. Appraisal rights are subject to a number
of restrictions and technical 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
David L. Koffman
____________
2
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 ____________ are entitled
to notice of the Special Meeting and to vote at the Special
Meeting. As of ___________, 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 1
Summary Term Sheet-Vote Required 2
Summary Term Sheet - Dissenters' and Appraisal Rights 3
Summary Term Sheet - Sources of Funds; Financing
of the Merger 3
Questions and Answers About the Meeting 4
Summary Financial Information 7
Summary Historical Financial Information of Jayark 7
Per Share Market Price and Dividend Information 8
Introduction 8
Voting of Shares 9
Special Factors - Background of the Merger Agreement 10
Special Factors - The Effects of the Merger 12
Special Factors - Financing Effects of the Merger;
Financing of the Merger 13
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 17
Parent's Determination of Fairness of the Merger
Proposal 22
Conduct of Jayark's Business After the Merger 22
Additional Considerations Concerning Jayark 24
Security Ownership of Certain Beneficial Owners
and Management 24
Proposal One - Approval of the Merger Agreement 26
The Parties 26
Effect of the Merger Proposal on Jayark
Unaffiliated Stockholders 28
Effect of the Merger Proposal on Jayark 28
The Merger Agreement 33
The Merger Agreement - Conditions to the
Completions of the Merger 36
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
Table of Contents
Description
Appendix D - Jayark Corporation Report on Form 10K for
the Fiscal Year Ending April 30, 2003. D-1
Appendix E - Jayark Corporaiton Report on Form 10-K/A for the
Fiscal Year Ending April 30, 2003 E-1
Appendix F - Jayark Corporation Report on Form 10-Q for the
Three Months Ending July 31, 2003 F-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 33)
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 26)
o Jayark is a Delaware corporation.
o Parent is a recently-formed Nevada corporation organized
for the purpose of the merger. Parent is wholly-owned by officers
and directors of Jayark and their affiliates.
o Merger Corp. is a recently-formed Delaware corporation and
wholly owned subsidiary of Parent organized for the purpose of
the merger.
1
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 9)
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
it 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. Approval of
the merger is therefore assured.
EFFECTS OF THE MERGER. (Page 12)
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 26)
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 17 of this proxy statement.
BACKGROUND OF THE MERGER PROPOSAL. (Page 10)
Please see "SPECIAL FACTORS - Background of the Merger Proposal"
on page 10 for a discussion of the events leading up to the signing
of the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER. (Page 36)
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.
2
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 29)
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.
FINANCIAL EFFECTS OF THE MERGER; FINANCING OF THE MERGER. (Page 13)
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 17)
Our Board of Directors believes that the merger agreement is fair to
and in the best interests of Jayark and its 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
all officers, directors and control persons of Jayark, and the term
"unaffiliated stockholder" means any stockholder other than an
affiliated stockholder.
OPINION OF KIRLIN SECURTIES, INC. (Page 20)
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 4, 2003 to the effect that the
$.40 per share cash consideration is fair, from a financial point
of view, to the unaffiliated stockholders of Jayark. You should be
aware, however, that the opinion was based upon and is subject to
important limitations and qualifications and the Kirlin Securities,
Inc. did not make a presentation to the Board, but merely rendered
its opinion. 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:
3
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 _____________. On ______________,
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 _________________
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
4
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 unaffiliated
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, pre-addressed, postage paid 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
5
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.
The only stockholder that will not receive cash in the merger will
be J. Acquisition Corp. All other stockholders will receive cash in
the merger. To review the material tax consequences in greater detail,
please read the discussion under "SPECIAL FACTORS - U.S.
Federal Income Tax Consequences."
6
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, 2001, 2002 and 2003,
was derived from the audited consolidated financial statements of
Jayark. The unaudited historical consolidated financial data of
Jayark as of and for the three months ended July 31, 2002 and 2003
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 three months ended July 31, 2003 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 2003 Annual Report to Stockholders and our Quarterly
Report on form 10-Q for the quarter ended July 31, 2003, and the
"Selected Historical Financial Data" included elsewhere in this
proxy statement.
Summary Consolidated Financial Information
Three Months
Ended July 31, Years Ended April 30,
2003 2002 2003 2002 2001
Statement of
Operations: (in thousands, except number of shares and per share amounts)
Net Revenues $2,889 $2,889 $9,916 $11,416 $12,886
Net Income (Loss) ($35) ($7) ($143) ($99) ($501)
Weighted Average Common
Shares 2,766,396 2,766,396 2,766,396 2,766,396 2,766,396
Basic and Diluted Income
(Loss) per Common Share ($.01) ($.00) ($.05) ($.04) ($.18)
Balance Sheet Data:
Total Assets $2,793 $2,916 $2,769 $2,844 $3,757
Long Term Obligations $2,367 $2,246 $2,319 $2,195 $2,083
Working Capital $1,372 $1,389 $1,346 $1,325 $ 974
Stockholders' Deficit ($662) ($491) ($627) ($484) ($646)
7
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" published 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 410 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 .24 .21 .30 .22 1.44 .75
Fourth Quarter .38 .34 .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
8
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
Our Annual Report on Form 10-K for the fiscal year ended April 30,
2003, our Amendment No. 1 to our Annual Report on Form 10K/A for the
fiscal year ended April 30, 2003 and our Quarterly Report on Form 10-Q
for the quarter ended July 31, 2003 are attached to this Proxy Statement
as Appendices D, E and F.
VOTING OF SHARES
Holders of record of common stock of Jayark at the close of business
on ______________, 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 410 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
9
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 410 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
10
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 affiliates of Jayark involved in this merger transaction include
Parent, which owns a majority of Jayark's common stock and the
officers and directors of Jayark. A majority of Parent is owned by
Mr. David Koffman and his family. The remaining stockholders
of Parent are certain officers and directors of Jayark. The officers
and directors of Jayark who are owners of Parent are David Koffman,
Jeffrey Koffmans and Frank Rabinovitz, the stockholders of Parent
obtained their shares of Parent's common stock in exchange for all of
their shares of Jayark common stock. Parent has the ability to approve
the merger without obtaining approval from any unaffiliated
stockholders of Jayark. Parent and Merger Corp., a wholly owned
subsidiary of Parent, were formed for the sole purpose of effecting
the merger.
The Board also considered the effect of the merger on its
unaffiliated stockholders. As a result of the merger,
unaffiliated stockholders will receive $.40 for each share of
common stock held, and will not be required to pay any service
charges or brokerage commissions to convert their stock to cash.
Since there is a very limited market for shares of Jayark common
stock the merger will give unaffiliated shareholders a way in
which to cash out their stock and avoid paying any transaction costs.
The Board determined that the ability of unaffiliated stockholders to
dispose of their stock without any transaction costs outweighed any
potential detriment from the merger.
Jayark's common stock is not publicly traded on any exchange, and
there is a very limited market for Jayark common stock. The trading
range of Jayark's common stock over the last twelve (12) months has
been between $.21 and $.38. Given this trading range for an
extremely thin volume of shares traded, there can be no assurance
that if a significant block of Jayark's stock were traded it would
receive that price. As such, the Board determined that a price of
$.40 per share is a fair price. The price was determined by deciding
to give the unaffiliated stockholders a premium to the market price
over the last year. As there is a negative book value and recurring
losses, two of the more traditional methods of valuations, that is a
multiple of book value or a multiple of earnings, would be in both
11
cases yield a price value of zero. Using some market valuation for the
stock was also difficult because of the scarce trading volume. After
consideration of fairness and in an effort to be as absolutely fair
as possible, the median of historical stock price was obtained ($.26
per share) and a 50% premium was added to it, resulting in a merger
consideration of $.40.
The Board did not consider appointing a special committee of
disinterested directors or appointing an unaffiliated
representative to act solely on behalf of the unaffiliated
stockholders in negotiating the merger transaction. After
consideration of the all the factors above, the Board believes
that the transaction is procedurally fair to its unaffiliated
stockholders, notwithstanding the absence of an unaffiliated
stockholder approval requirement, independent committee or
unaffiliated representative based on the fact that unaffiliated
stockholders still have the right to dissent from the merger and
retain all dissenters rights under Delaware law. In addition,
the transaction is procedurally fair because a very small minority
of Jayark stockholders will not be able to prevent the merger by
merely failing to vote, which would deprive themselves and other
unaffiliated stockholders from receiving a fair cash price for
their stock.
The Board determined that the positives of not completing the merger
are 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 the officers and directors of Jayark
and their affiliated persons and entities) of the consideration
to be received by the unaffiliated 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, Merger Corp and Parent entered into the merger
agreement.
After considering all of the above information regarding the
various alternatives available and the opinion of Kirlin Securities,
Inc., the affiliates of Jayark who are filers of Schedule 13 E-3
reasonably believe that the merger transaction is fair to
unaffiliated stockholders of Jayark.
THE EFFECTS OF THE MERGER
12
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. A beneficial effect of the
merger is that as a result of the merger, the number of stockholders
of record of Jayark will be reduced to one and Jayark would be able to
terminate its registration under the Exchange Act. 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 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.
REDUCTION IN THE NUMBER OF STOCKHOLDERS AND THE NUMBER
OF OUTSTANDING SHARES. As a result of the merger, the number of
Jayark stockholders will be reduced to one. The benefit of this
effect of the merger is that Jayark may seek to terminate
registration of its stock and save an estimated $133,000
annually on related costs and expenses associated with the its
current Exchange Act registration.
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.
This one time expense associated with the merger will result in a
cost savings of approximately $133,000 annually for the surviving
13
entity as a result of its deregistration.
TAX BENEFIT. Jayark has incurred significant losses during the prior
two (2)fiscal years. After the merger, the surviving company will be
able to carry-forward net operating losses of Jayark, which will result
in a tax benefit for Jayark. If Jayark's Board of Directors had sought
to sell the company rather than pursuing a going-private transaction,
this tax benefit would have been unavailable since there would have
been a change of control of Jayark as a result. The net operating loss
carryforward as of April 30, 2002 is approximately $11,247,000.
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. The owners of Parent, David Koffman, Vulcan Properties, Frank
Ravinovitz, Jeffrey Koffman, Burton Koffman, Ruthanne Koffman, and family
entities controlled by the Koffman family, who now own 87% of Jayark will
indirectly own 100% of Jayark. David Koffman and Frank Rabinovitz will
become directors of Jayark. No decision has been made on any other
possible directors of Jayark after the Merger.
NO FURTHER REPORTING OBLIGATIONS UNDER THE EXCHANGE ACT.
One beneficial effect of the merger is that 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. One detrimental effect to Jayark's affiliates
is that 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. Although Rule 144 may not be available to Jayark's
officers and directors, the beneficial effect of no longer being
subject to the reporting requirements and restrictions of the
Exchange Act outweighs the loss of this means of disposing
Jayark's common stock.
EFFECTS ON UNAFFILIATED STOCKHOLDERS. The merger will have various
effects on stockholders who are not affiliates of Jayark, as
described below.
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; and
o be required to pay federal and, if applicable, state and local
income taxes on the cash amount received in the merger.
14
Jayark believes that there is a very limited market for the shares of
Jayark common stock, especially 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 merger will benefit
unaffiliated stockholders by providing them with a cost-effective
way to cash out their investments, since Jayark will pay all
transaction costs associated with the merger and unaffiliated
stockholders will receive cash for their shares without having to
pay service charges or brokerage commissions.
Unaffiliated stockholders will no longer have an interest in Jayark
or share in Jayark's assets, earnings or profits, if any, and will
not be able to re-acquire an equity interest in Jayark after the
merger. This detrimental effect is outweighed by the fact that the
stockholders will receive cash equal to $.40 for each share of stock
held and the fact that Jayark's Board of Directors has no present
intentions of raising capital through sales of its securities in
a public offering in the future or acquiring other business
entities for stock, thereby eliminating any possible market for
shares of Jayark's common stock and its status as a public company.
MATERIAL 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:
15
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. This applies to all stockholders
other than Parent.
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. This
provision applies only to the stockholders of Parent.
It is anticipated that neither Jayark or its affiliates will have
a taxable event due to the Merger. Since Jayark and its affilates
will not receive any cash, only stock, the merger will qualify as
a tax free merger with respect to Jayark and its affilates.
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.
16
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 unaffiliated
stockholders who will receive cash in the merger. The Board also
believes that the process by which the transaction is to be
approved is fairto unaffiliated stockholders. 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
______________, 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 to 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
17
blocks of such shares, and that Jayark's stockholders derive little
benefit from Jayark's status as a publicly-held corporation. The
Board also considered the effect of the merger on its unaffiliated
stockholders. As a result of the merger, unaffiliated stockholders
will receive $.40 for each share of common stock held, and will not
be required to pay service charges or brokerage commissions to
convert their stock to cash. Since there is a very limited market
for shares of Jayark common stock the merger will give unaffiliated
shareholders a way in which to cash out their stock and avoid paying
transaction costs. 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 and the
ability of unaffiliated stockholders to dispose of their stock without
any transaction costs 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 did not consider, as an
alternative to this transaction, seeking out an interested third
party buyer to purchase Jayark since Jayark has been losing money
and has a negative net worth. The only asset of Jayark currently
is its net operating loss carry-forward, which would be lost in the
event there was a change of control of Jayark. The Board also did
not consider an auction of Jayark since in the current business
environment such an attempt would not be meaningful.
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 CURRENT MARKET PRICES OF JAYARK'S COMMON STOCK. Jayark's
common stock is not traded on any exchange. As a result, there
is a very limited market for Jayark's stock and there is no
current market price and the Board did not consider this factor
in its determination of the fairness of the merger proposal. See
the discussion below of "Historical Market Prices of Jayark Common
Stock" for the trade prices over the last three years, which was a
factor considered by the Board.
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. Jayark's common stock price has been consistently
falling since 2001 and the trading range of the stock from May 1,
2002 through January 31, 2003 has been between $.21 and $.31. As
a result, there would be no assurance that in the event unaffiliated
stockholders sought to sell their shares of Jayark common stock they
would even receive this price.
o NET BOOK VALUE. As of January 31, 2003, the book value per share
of outstanding common stock was approximately ($.21). 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 GOING CONCERN VALUE. As there is no going concern value for
Jayark's common stock, the Board did not consider this as a factor
18
in determining the consideration to be paid to cashed-out stockholders
in the merger.
o LIQUIDATION VALUE. The Board did not consider the liquidation
value of Jayark as a factor in determining the fairness of the merger
proposal since the only current asset Jayark has is its net operating
carry-forward tax loss.
o PRIOR STOCK PURCHASES. Jayark has not been purchasing its own
stock, therefore, this factor was not a consideration by the Board in
its determination of the fairness of the merger proposal and the
consideration to be paid to cashed-out stockholders in the merger.
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 four years ended April 30, 2000, 2001, 2002,and 2003,
Jayark reported net income (loss) of $541,000, ($500,714),
($99,329)and ($142,965), respectively. Jayark's earnings have
significantly decreased and there is no assurance that Jayark will
report a profit for its fiscal year 2003 given its significant
losses the previous two fiscal years. As a result, stockholders
of Jayark common stock will not see any return on their investment
and there is no assurance that in the future Jayark will earn profits
sufficient to an increase in the price of its stock.
o OPINION OF KIRLIN SECURITIES, INC. The Board requested the
opinion of Kirlin Securities, Inc. who on February 4, 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
stockholders of Jayark (that is, other than parent and the officers
and directors and their affiliated persons and entities). Since there
are no independent members of the Board, the Board sought this opinion
to have an independent consideration of the fairness of the merger
transaction to Jayark's unaffiliated stockholders. The Board did not
meet with Kirlin Securities. Inc. prior to making its decision to
proceed with the Merger, but did condition going forward with the
merger on receiving an opinion from Kirlin Securities on the fairness
of the merger consideration. The Board did not consider it necessary
to have Kirlin Securities Inc. make a presentation to the Board.
Instead,the Board viewed the favorable opinion as a condition to going
through with the merger.
You should read the discussion under Opinion of Kirlin
Securities, Inc. and copy of the "Opinion of Kirlin Securities, Inc."
and copy of the opinion of Kirlin Securities, Inc. attached as Appendix
B to this proxy statement.
o FIRM OFFERS. No firm offers, other than by Parent 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 Board further feels that each of the factors discussed
above supports the fairness merger price to the unaffiliated
stockholders. The current market price, even in a thinly traded
market, is below the merger price. The trading range over the
last year, as looses continue, is also below the merger price.
Jayark has a negative book value. The merger price therefore is
significantly greater than the net book value per share which is
less than zero. As Jayark's only asset is it net operating loss
carryforward, a liquidation would yield unaffiliated stockholders
zero.
19
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 procedurally fair
to both its affiliated and unaffiliated stockholders, notwithstanding
the absence of such an unaffiliated stockholder approval requirement,
independent committee or unaffiliated representative based on the fact
that unaffiliated stockholders still have the right to dissent from
the merger and retain all dissenters rights under Delaware law. Each
filing person relied upon the fact that this transaction meets the
procedural requirements of Delaware law in determining the fairness
of the merger proposal. In addition, the transaction is procedurally
fair because a very small minority of Jayark stockholders will not be
able to prevent the merger by merely failing to vote, which would
deprive themselves and other unaffiliated stockholders from receiving
a fair cash price for their stock. After consideration of all aspects
of the proposed transaction, the Board unanimously 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 unaffiliated
stockholders pursuant to the merger agreement. Kirlin Securities,
Inc. was chosen because of its reputation as an established, reputable
investment banking firm. Kirlin Securities, Inc. is wholly owned
subsidiary of Kirlin Holding Corp.,a publicly traded company. Kirlin
Securities, Inc., provides small and middle market companies with
investment banking services. Kirlin Securities, Inc. was chosen
particularly because it specializes in small and middle market companies,
such as Jayark. The Board of Directors felt that being
a small cap company, Jayark would get prompt and professional service
from an investment banking firm that specialized in this market, rather
than approaching other, larger investment banks. Kirlin Securities,
Inc. has had not material relationship with Jayark within the past two
years. On February 4, 2003, Kirlin Securities, Inc. rendered its
written opinion to the Board that as of that date and based upon the
subject to the assumptions, limitations and qualifications set forth
in that opinion, the consideration to be received in the merger by the
unaffiliated stockholders of Jayark is fair, from a financial point of
20
view, to those stockholders. Jayark has been informed that Kirlin
Securities, Inc. engaged in an analysis consistent with standard
investment accounting techniques in including fair price per share.
THE FULL TEXT OF KIRLIN SECURITIES, INC.'S WRITTEN OPINION
DATED FEBRUARY 4, 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, INC. 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:
o merger agreement and the specific terms of the merger;
o 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;
o Drafts of Jayark's Rule 13E-3 Transaction Statement on
Schedule 13E-3;
o Drafts of this preliminary proxy statement
o Internal financial and operating budgets and informal
projections for Jayark of future performance consistent
with performance with performance of the past three years
provided by management;
o Discussions with certain executive officers of Jayark
concerning the business properties, results of operation
and future prospects of Jayark of future performance
consistent with performance of the past three years;
o Comparisons of the results of operations of Jayark with
those of publicly held companies deemed by Kirlin Securities,
Inc. to be comparable to Jayark;
o 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;
o The trading range and trading volume of Jayark's common stock
since January 1998;
o The liquidation value of Jayark's assets as perceived by
Kirlin Securities, Inc.;
o Whether there existed any other potential purchasers of
Jayark's assets;
o General economic and monetary conditions;
o Past, current and prospective stock market conditions; and
o 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 publicly
available and neither attempted 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
21
given by Jayark management, Kirlin Securities, Inc. assumed that they were
reasonable and reflecting the best currently available estimates
and judgments of the management of Jayark as to the future financial
performance of Jayark. The Board projected future performance consistent
with performance of the past three years. The Board reviewed for
accuracy and completeness, the financial information, forecasts,
projections, assumptions and other information provided by management
to Kirlin Securities, Inc. and found that Kirlin Securities, Inc.'s
reliance on those materials to be reasonable.
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,
Inc. believes that its analyses must be considered as a whole and that
considering any portion of those 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 existing conditions which could be evaluated at that
time.
DETERMINATION OF FAIRNESS OF THE MERGER PROPOSAL OF PARENT, DAVID
KOFFMAN, VULCAN PROPERTIES, FRANK RABINOVITZ, JEFFREY KOFFMAN,
BURTON KOFFMAN AND RUTHANNE KOFFMAN
Parent, David Koffman, Vulcan Properties, Frank Rabinovitz, Jeffrey
Koffman, Burton Koffman and Ruthanne Koffman believes that the Merger
is fair to, and in the best interests of, each Jayark's stockholders,
including unaffiliated stockholders. In reaching this conclusion,
they relied upon the factors considered by and the analysis and
conclusions of the Board of Directors of Jayark, which they have
adopted as their own. They did not conduct any additional analysis
of 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.
22
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." 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. Jayark believes that these
options, including making public and private offerings, would be more
readily available to it as a private company since it would have
decreased it expenses annually by $133,000 and reduced time and effort
of management in complying with reporting and other requirements by
termination of its registration under the Exchange Act thereby making
Jayark more profitable. 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. It is highly unlikely that
any public offering will be made in the foreseeable future. However,
it will be significantly easier to make private offerings as Jayark
will be more attractive to potential investors once Jayark is relieved
of its costly and time consuming reporting obligation. Furthermore,
Jayark will be more attractive to potential investors because Investors
will not have to report their investment on Form 3, nor will
investors be required to disclose their investment publicly. Investment
in a private company for many investors, is preferable to investment in
a public company and Jayark will target those investors. Sophisticated
investors in private companies recognize that a company struggling to
succeed is better able to allocated resources to development, rather
than complying with federal securities laws disclosures and compliance
directed at a very thinly traded market whose total ownership is less
than 14% of the company and which would be further diluted by a
significant investment by a private investor. It is conceivable that
after a large private investment the unaffiliated stockholder could own
significantly less than 10% of outstanding stock making it hard to
justify remaining as a public company.
Other than the proposed merger transaction set forth in this proxy
statement to merge Jayark with Merger Corp., 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.
23
ADDITIONAL CONSIDERATIONS CONCERNING JAYARK
The Company has established total gross deferred tax assets of 4,080,000
for 2003 and 4,071,000 for 2002.However, in assessing the realizability
of deferred assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. Since the ultimate realization of deferred tax assets is
dependent on future taxable income, and since management does not
believe there will be taxable income in the foreseeable future, these
deferred tax assets have been booked at zero for 2003. Additional
information on the Company's deferred tax assets can be found in
Note 10 of the Company's Report on Form 10K for the fiscal year
ending April 30, 2003.
One of the Company's subsidiaries, MED Services Corp. ("Med") had been
in the business of developing specialty medical equipment. Due to economic
conditions, along with a curtailment of healthcare spending, Med wrote
down 100 percent of the inventory value of 102,000 on January 31, 2003
and is trying to find buyers for this inventory. Additional information
can be found in Note 14 of the Company's Report on Form 10K for the fiscal
year ending April 30, 2003.
As of October 1, 2001, the Company had invested approximately 1,248,000
of cash in its subsidiary, Fisher Medical Corporation ("Fisher") and
incurred net losses of approximately 1,509,000. The Company had
previously received a five year 525,000 promissory note, secured by
all the assets of Fisher. Since Fisher has minimal liquidation value,
and net losses, the note has been deemed not collectible and is carried
on books of the Company at zero. Additional information regarding the
Fisher divesture can be found in Note 13 of Company's Report on Form 10K
for the fiscal year ending April 30, 2003.
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 2003, the number
and percentage of outstanding shares indicated in the following table:
Name and Address of Amount and Nature of Percentage of
Beneficial Owner (1) Beneficial Ownership Class
Parent 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 Parent. Mr. Koffman
is the Chief Executive Officer and a Director of Parent.
(3) The following persons owned the number of shares of common
stock and the percentage of outstanding shares of common stock
24
of Parent 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 Parent, since none of such
persons control Parent :Jeffrey Koffman - 148,402,
5.4%, Frank Rabinovitz - 68,426, 2.5%, Vulcan Properties, Inc.,
an entity owned by the wife of Arthur Cohen, 292,189, 10.6%.
(4) David Koffman is the registered owner of all shares.
25
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. Parent is wholly owned by officers
and directors of Jayark and their affiliates.
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
26
Jayark's reason for the merger is to cash-out the equity interests in
Jayark of the approximately 410 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
27
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 with respect to your chased-out shares 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 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
28
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 of Parent 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 denies 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 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
29
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.
28
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
30
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
31
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." Mr. Nolt's and Mr. Ryder's
shares of Jayark common stock will be cashed out in the merger and
they will not obtain any shares of Parent's common stock. Upon the
completion of the merger and their surrender of their shares, they
will receive $4,000 and $9,600 respectively.
No officer or director of Jayark will receive an increase in their
compensation as a result of the merger. In addition, no position
of any affiliate of Jayark will change as a result of the merger.
FEES AND EXPENSES
Jayark estimates that merger-related fees and expenses, consisting
primarily of financial advisory fees, SEC filing fees, fees and
32
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 majority of 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");
33
(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
34
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 as to the enforce
ability of the merger agreement. A summary of these
representations and warranties is as follows:
JAYARK REPRESENTATIONS AND WARRANTIES:
o ORGANIZATION - Jayark is duly incorporated, validly existing
and in good standing under Delaware law, and has the power to carry
on its business;
o GOVERNMENTAL AUTHORIZATIONS - Jayark is in material compliance
with all applicable federal, state and local laws, rules and
regulations, and the performance of the merger will not violate in
a material way or constitute a default under any applicable law,
rule or regulation applicable to Jayark;
o NO CONFLICT WITH OTHER INSRUMENTS- The merger transaction will
not conflict with or constitute a default under any material agreement
which Jayark is a party to, and will not conflict with any provisions
of the Certificate of Incorporation or Bylaws of Jayark;
o NO CONFLICT WITH JUDGMENTS OR DECREES - The merger transaction
will not conflict with or result in a breach of any judgment, order,
injunction, decree, writ or ruling to which Jayark is a party or is
subject to;
o APPROVAL OF AGREEMENTS - Jayark's Board has approved the merger
transaction and the merger agreement, and Jayark has full corporate
power, authority and legal right to enter into the merger; and
o CAPITAL STOCK - All shares of Jayark's authorized stock are
validly issued, fully paid and not issued in violation of the
preemptive rights of any stockholder.
PARENT AND MERGER CORP. REPRESENTATIONS AND WARRANTIES:
o ORGANIZATION - Parent and Merger Corp. are each duly
incorporated, validly existing and in good standing in their states of
incorporation, and have the corporate power and authority to carry on
their respective business;
o CAPITAL STOCK - Of the authorized capital stock of Merger Corp.
only ten shares are currently issued and held by 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;
o SUBSIDIARIES OR AFFILIATES - Merger Corp. does not own and is
not obligated to acquire any capital stock or other interest of or
in any corporation or other entity. Merger Corp. will not create or
acquire any subsidiaries without the prior written consent of Jayark;
and
o APPROVAL OF AGREEMENTS - Each of Parent and Merger Corp.'s
Boards have approved the merger transaction and the merger agreement,
and each of Parent and Merger Corp. has full corporate power,
authority and legal right to enter into the merger and consummate
the transactions contemplated thereby.
35
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 Jayark 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. 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
36
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 report listed below, which has 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 them carefully in
connection with your review of this document.
(1) Annual Report on Form 10-K, filed by Jayark with the SEC
on July 29, 2003, to report results for its fiscal year ended
April 30, 2003.
(2) Amendment No. 1 on Form 10-K/A, filed by Jayark with the SEC
on September 24, 2003, to report results for its fiscal quarter ended
July 31, 2003.
(3) Quarterly Report on Form 10-Q, filed by Jayark with the SEC
on September 11, 2003, to report results for its fiscal quarter ended
July 31, 2003.
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.
35
Specifically, the information set forth in the following sections
of our Annual Report on Form 10-K for the fiscal year ended
April 30, 2003, 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 7: Management's Discussions and Analysis or Plan
of Operations;
Item 8: Financial Statements and Supplementary Data; and
Item 9: Changes in and Disagreement with Accountants on
Accounting.
37
Financial Disclosure
Our Annual Report on Form 10-K for the fiscal year ended
April 30, 2003 is enclosed with this Proxy Statement. See
Appendix D. Our Amendment No. 1 on Form 10-K/A for the fiscal year
ended April 30, 2003 is enclosed with this Proxy Statement. See
Appendix E. Our Quarterly Report on Form 10Q for the fiscal
quarter ended July 31, 2003 is enclosed with this Proxy Statement.
See Appendix F. See Appendix E. 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: ________________
38
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
A-1
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
A-2
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
A-3
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
A-4
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
A-5
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
A-6
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.
A-7
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
A-8
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 "unaffiliated 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.
B-1
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
B-2
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
C-1
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
C-2
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 constituent
[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.
C-3
(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,
C-4
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.)
C-5
APPENDIX D
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, 2003
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 or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Plaza Drive, Vestal, New York 13850
(Address of principal executive office) (Zip Code)
Telephone number, including area code: (607) 729-9331
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the Registrant is $81,281 as of July 16, 2003.
The number of shares outstanding of Registrant's Common Stock is
2,766,396 as of July 16, 2003.
D-1
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 historically has engaged various contractors to design and develop
specialty medical equipment for its distribution. Its customer base
in 2002 included companies that sell and rent durable medical equipment
to hospitals, nursing home and individuals. The decision was made by
management in January 2003, due to continued economic decline through
the third quarter of fiscal 2003, coupled with continued curtailments in
healthcare spending, and due to the lack of any firm purchase commitments
for finished beds, to cease any further development of the NetSafe
Enclosure Bed. As the Company is not posturing to convert the existing
component parts portion of the inventory into saleable items in the
future, the Company wrote down 100 percent of the component parts
inventory value at January 31, 2003. Med's marketing approach with
respect to the remaining inventory ($102,000) is to continue to
pursue those parties who have previously expressed an interest
in the product. 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.
The Company was originally incorporated in New York in 1958. In 1991,
the Company changed its state of incorporation to Delaware. In July
1998, the Company amended its Certificate of Incorporation increasing
its authorized Common Stock to 30,000,000 shares and decreasing the par
value of its Common Stock from $.30 to $.01 per share. In December 1999,
the Company filed a Certificate of Amendment to provide for a one for
ten reverse stock split. In January 2000, each ten (10) issued and
outstanding shares of Common Stock of the Corporation, par value $.01
per share, were automatically converted into one (1) validly issued,
fully paid and non assessable share of Common Stock of the Corporation,
par value $.01 per share. All per share and weighted average share
amounts have been restated to reflect this reverse stock split.
Description of AVES' Business
Products / Services
AVES distributes and rents a broad range of audio, video and
presentation equipment, and supplies. Among the items distributed
are LCD, DLP, video and slide projectors; projection screens and
lamps; video cameras and camcorders; laser videodisk, video projection,
TV monitors and receivers; DVD and video players/recorders; still
imaging systems; public address systems, microphones and headsets;
tape recorders, record players, cassette recorders, and related
accessories and supplies. AVES distributes the products of brand
name manufacturers such as RCA(tm), GE(tm), Mitsubishi, Elmo, Panasonic,
D-2
Sanyo, Fujitsu, Videotek, Leitch, Telex, Kodak, Dukane, Sharp, Sony,
3M Brand, Canon and various other brand names. The Company also
offers design, engineering and installation 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, E-mail, and a
field sales force. AVES exhibits at various regional trade shows to
promote 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 2003, 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 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 18% of revenues came from sales
to businesses (19%) and rental of AVES equipment (1%). No one customer
accounted for more than 10% of revenues during fiscal 2003, 2002 or 2001.
Backlog
The amount of unfilled sales orders of AVES at April 30, 2003 was
$800,900, as compared with $374,570 at April 30, 2002, and $1,058,300
at April 30, 2001. This increase in backlog is partially due to the
aggressive stand, including price concessions, that AVES has taken in
order to maintain market share during the economy's 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 audiovisual
suppliers 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, 2003, AVES had 14 full time employees.
D-3
Description of Med's Business
Products / Services
The decision was made by management in January 2003, due to continued
economic decline through the third quarter of fiscal 2003, coupled with
continued curtailments in healthcare spending, and due to the lack of
any firm purchase commitments for finished beds, to cease any further
development of the NetSafe Enclosure Bed. Med's marketing approach
with respect to the remaining inventory is to continue to pursue those
parties who have previously expressed an interest in the product.
Med did not have sales or services revenues during fiscal 2003. 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.
Raw Materials
The decision was made by management in January 2003, due to continued
economic decline through the third quarter of fiscal 2003, coupled with
continued curtailments in healthcare spending, and due to the lack of
any firm purchase commitments for finished beds, to cease any further
development of the NetSafe Enclosure Bed. As the Company is not
posturing to convert the existing component parts portion of the
inventory into saleable items in the future, the Company wrote down
100 percent of the component parts inventory value at January 31, 2003.
Patents
There are no patents, trademarks, licenses or franchises that are
material to Med's business.
Sales
Med did not have sales or services during fiscal 2003. Med's marketing
approach is to continue to pursue those parties who have previously
expressed an interest in the product. 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
D-4
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 November 25, 2002,
pursuant to the Notice of Annual Meeting of the Shareholders and
Proxy Statement dated October 7, 2002, Arthur Cohen and Jeffrey P.
Koffman were elected to the Board of Directors with 2,554,196 and
2,554,136 shares voted FOR, respectively, and 2,977 and 3,037 shares
WITHHELD, respectively, and the appointment of KPMG LLP as independent
public accountants for the Company for the fiscal year ending
April 30, 2003 was approved with 2,553,588 shares voted FOR, 2,877
shares voted AGAINST and 708 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. Such over-the-counter market quotations reflect inter-dealer
prices without retail mark-up, mark-down or commission as may not
necessarily represent actual transactions.
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 July 16, 2003, there were approximately
410 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.
2003 Common Stock Trade Price 2002 Common Stock Trade Price
High Low High Low
First Quarter .31 .28 .46 .35
Second Quarter .25 .24 .45 .28
Third Quarter .24 .21 .30 .22
D-5
Fourth Quarter .38 .21 .50 .30
Item 6. Selected Financial Data
Results of Operations:
Years Ended April 30, 2003 2002 2001 2000 1999
_______________________________________________________________________________
Net Revenues $9,915,954 $11,415,537 $12,886,491 $13,197,866 $15,288,215
________________________________________________________________________________
Income (Loss) from
Continuing Operations ($142,965) ($99,329) ($500,714) $330,978 $445,805
________________________________________________________________________________
Income from
Discontinued Operations $-- $-- $-- $209,676 $--
________________________________________________________________________________
Net Income (Loss) ($142,965) ($99,329) ($500,714) $540,654 $445,805
________________________________________________________________________________
Basic and Diluted
Earnings (Loss) per
share from Continuing
Operations* ($.05) ($.04) ($.18) $.12 $.24
________________________________________________________________________________
Basic and Diluted
Earnings per share
from Discontinued
Operations* $-- $-- $-- $.08 $--
_______________________________________________________________________________
Weighted Average
Shares Outstanding* 2,766,396 2,766,396 2,766,396 2,766,396 1,836,661
_______________________________________________________________________________
At April 30,
Balance Sheet Information:
Total Assets $2,769,145 $2,884,057 $3,757,353 $3,239,126 $2,779,891
_______________________________________________________________________________
Long Term
Obligations $2,318,772 $2,194,629 $2,082,881 $1,278,571 $1,424,229
_______________________________________________________________________________
Working Capital $1,345,886 $1,324,977 $974,094 $359,120 $370,914
_______________________________________________________________________________
Stockholders'
Deficit ($627,172) ($484,207) ($646,333) ($145,619) ($685,523)
________________________________________________________________________________
* 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 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
D-6
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
D-7
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.
2003 2002 2001
__________________________________________
Net Revenues $9,915,954 $11,381,126 $12,857,841
Net Income (Loss) ($142,965) $260,380 $304,061
==========================================
Net Income (Loss) per Common
Share - Basic and Diluted: ($.05) $.09 $.11
==========================================
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
D-8
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.
Going Private Transaction
In February 2003, the Company filed a Preliminary Proxy Statement
regarding a Special Meeting of Stockholders. In June 2003, the Company
filed an Amended Preliminary Proxy Statement in response to SEC comment
letters. At this special meeting, the shareholders 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.
("Merger Corp"), a newly formed Delaware corporation, 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.
In accordance with the merger, each outstanding share of 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.
The merger will not be complete without the affirmative vote of holders
of a majority of the outstanding shares of common stock to adopt the
merger agreement. The Parent has agreed to vote all shares of common
stock owned by it in favor of the adoption of the merger agreement. The
Parent currently owns approximately 75% of the outstanding common stock.
The Board of Directors of Jayark Corporation has unanimously approved
the merger agreement.
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.
Comparison of Fiscal Year Ended April 30, 2003 With Fiscal Year Ended
April 30, 2002
Net Revenues
Consolidated Revenues of $9,916,000 decreased $1,500,000, or 13.1%,
from fiscal 2002. The decrease was primarily the result of a
$1,457,000 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. As a result of the October 1, 2001
divestiture transaction, there were zero Fisher sales in 2003 versus
$34,000 in 2002. Med had zero sales in 2003 versus $9,000 in 2002. The
decision was made by management in January 2003, due to continued economic
decline through the third quarter of fiscal 2003, coupled with continued
curtailments in healthcare spending, and due to the lack of any firm
purchase commitments for finished beds, to cease any further development
of the NetSafe Enclosure Bed. As the Company is not posturing to convert
D-9
the existing component parts portion of the inventory into saleable items
in the future, the Company wrote down 100 percent of the component parts
inventory value at January 31, 2003. Med's marketing approach with
respect to the remaining inventory ($102,000) is to continue to pursue those
parties who have previously expressed an interest in the product.
Cost of Revenues
Consolidated Cost of Revenues of $8,409,000 decreased $1,021,000, or
10.8%, from the prior fiscal year. This was primarily a result of
the decreased revenues discussed above. This decrease was partially
offset by a $100,000 write down on Med component parts related to the
NetSafe Enclosure Beds. The decision was made by management in January
2003, due to continued economic decline through the third quarter of
fiscal 2003, coupled with continued curtailments in healthcare spending,
and due to the lack of any firm purchase commitments for finished beds,
to cease any further development of Med's NetSafe Enclosure Bed. As the
Company is not posturing to convert the existing component parts portion
of the inventory into saleable items in the future, the Company wrote
down 100 percent of Med's component parts inventory value at January 31,
2003. Med's marketing approach with respect to the remaining inventory
is to continue to pursue those parties who have previously expressed an
interest in the product.
Gross Margin
Consolidated Gross Margin of $1,507,000 was 15.2% of revenues, as
compared with $1,986,000, or 17.4%, 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 lower unit costs, as well as the write down in Med's
inventory as discussed above.
Selling, General and Administrative Expense
Consolidated Selling, General and Administrative Expenses of $1,556,000
decreased $427,000, or 21.5%, as compared with the prior reporting year.
Fisher's expenses decreased $392,000 as a result of the October 1, 2001
divestiture transaction. AVES' expenses decreased $93,000 due to
decreased payroll and advertising expenses. Med's expenses decreased
$6,000 primarily due to decreased travel and bad debt expenses. These
reductions were partially offset by a $64,000 increase in Corporate's
expenses partially 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 and professional fees, partially offset by decreased
insurance expenses.
Operating Income (Loss)
Consolidated Operating Loss of $49,000 decreased $52,000, from last
year's operating income of $3,000. AVES' operating income decreased
$255,000 due to decreased gross margin discussed above, Corporate's
operating loss increased $64,000 due to increased expenses and no
intersegment management fee to offset expenses and Med's operating loss
increased $101,000 primarily due to the write down in Med's inventory as
discussed above. This was partially offset by 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.
Interest Expense
Consolidated Interest Expense of $100,000 decreased $15,000 or 12.9% as
compared with the same period last year. This decrease was the result of
decreased debt combined with lower interest rates as compared to the
prior year.
D-10
Gain on Sale of Assets
Consolidated Gain on Sale of Assets of $3,000, decreased $11,000, or
78.6%, as compared to $14,000 in fiscal 2002, as a result of the sale
of a Company auto at AVES in the prior year.
Loss Before Income Taxes
Loss Before Income Taxes of $146,000 for the fiscal year ended April 30,
2003 increased $48,000, 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 Benefit of $3,000 for the fiscal year ended April 30,
2003 as compared to income taxes of $1,000 in the same period last year.
This is primarily the result of income tax refunds received in the current
fiscal year.
Consolidated Net Loss
Consolidated Net Loss of $143,000 for the fiscal year ended April 30,
2003 increased $44,000, or 43.9%, as compared to $99,000 for the same
period last year. This increase is due to a $247,000 decrease in net
income at AVES, an $81,000 increase in net loss at Corporate, a $105,000
increase in net loss at Med as a result of those items discussed
previously. These increases were partially offset by a $390,000
improvement to the bottom line as a result of the October 1, 2001
Fisher divestiture transaction.
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 loss and net loss per common share
for the fiscal years ending April 30:
2002 2001
______________________________________
Net Loss ($99,329) ($500,714)
Add Back: Goodwill Amortization -- $26,068
______________________________________
Adjusted Net Loss ($99,329) ($474,646)
======================================
Net Loss per Common Share ($.04) ($.18)
Goodwill Amortization $-- $.01
______________________________________
Adjusted Net Loss ($.04) ($.17)
======================================
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%,
D-11
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.
D-12
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.
Critical Accounting Policies and Significant Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make decisions based upon estimates,
assumptions, and factors it considers as relevant to the circumstances.
Such decisions include the selection of applicable accounting principles
and the use of judgment in their application, the results of which could
differ from those anticipated.
A summary of significant accounting policies used in the preparation of
the consolidated financial statements is contained in Note 1, in the
Company's Report on Form 10K. 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.
The Company values 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. During the quarter ended
January 31, 2003, the Company recorded an inventory write down in the
amount of $100,000, related to Med's NetSafe Enclosure Bed components.
The write down relates to the slow movement of the inventory over the
past twelve months, the continued decline in the overall economy, lack
of any purchase commitments for finished product, as well as management's
estimate of future demand and selling price of the current levels of
inventory related to the NetSafe Enclosure Beds.
In the event that actual results differ from these estimates or the
Company adjusts these estimates in future periods, the Company may need
D-13
to write down the inventory further which could materially impact the
financial position and results of operations of the Company.
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
anticipated 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, 2003, consolidated open lines of credit available to the
Company for borrowing through September 2003, were $1,000,0000 as
compared with $951,000 at April 30, 2002. 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
Working capital was approximately $1,346,000 at April 30, 2003, compared
with $1,325,000 at April 30, 2002.
Net cash provided by operating activities was $365,000 in 2003 as compared
with $345,000 in 2002.
Cash flows used in investing activities were $184,000 in 2003 compared
with $112,000 in 2002. This increase in cash used was a result of a
note receivable from a related party for $162,000 in fiscal 2003
partially offset by decreased purchases of plant and equipment as
compared to the prior year.
Cash used in financing activities of $49,000 for 2003 as compared
to $200,000 in 2002, relate to payments on the Company's line of credit.
D-14
The Company had no material commitments for capital expenditures as of
April 30, 2003.
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 ($323,880). The current portion of the related notes aggregated
$161,332. The remaining balance on these related notes matures in
December 2004 at which time the entire remaining unpaid principal
balance, aggregating $1,213,661, plus accrued interest, aggregating
$237,936, is due.
The Company has a note receivable from a related party, New Valu,
Inc., for $161,865. New Valu, Inc. is a company controlled by members
of the Koffman family, of which David Koffman and Robert Nolt are
officers. The note is payable on demand with annual interest rate of
5.5%.
At January 31, 2003, the Company continues to have accrued unpaid wages
aggregating $443,665. 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 balance
sheet, and reflected $362,665 as deferred compensation in the consolidated
balance sheet at April 30, 2003.
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 $757,500 $90,000 $180,000 $180,000 $307,500
Accrued Interest
- - Related Parties $742,446 $-- $742,446 $-- $--
_________________________________________________________________________
Other Commercial
Commitments Amount of Commitment Expiration Per Period
_________________________________________________________________________
Lines of Credit $250,000 $250,000 $-- $-- $--
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,
2003.
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
D-15
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 June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and requires that the liabilities associated with these costs
be recorded at their fair value in the period in which the liability
is incurred. SFAS No. 146 is effective for disposal activities initiated
after December 31, 2002. SFAS No. 146 did not have an impact on our
consolidated financial position, results of operations or cash flows
as we have initiated no exit or disposal activities subsequent to
December 31, 2002.
In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, except as stated below, and for
hedging relationships designated after June 30, 2003. In addition,
except as stated below, all provisions of SFAS No. 149 should be
applied prospectively. The provisions of SFAS No. 149 relating to
SFAS No. 133 Implementation Issues that have been effective for fiscal
quarters beginning prior to June 15, 2003, should continue to be applied
in accordance with their respective effective dates. Adoption of SFAS No.
149 is not expected to have a material impact on our consolidated
financial position, results of operations or cash flows as we presently
have no derivative instruments or hedging activities.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of these instruments were previously classified as
temporary equity. SFAS No. 150 will be effective for financial instruments
entered into or modified after May 31, 2003, and otherwise shall be effective
at the beginning of the first interim period beginning after June 15, 2003.
For financial instruments created before the issuance date of SFAS No. 150
and still existing at the beginning of the interim period of adoption,
transition shall be achieved by reporting the cumulative effect of a change
in accounting principle by initially measuring the financial instruments at
fair value or other measurement attribute required by SFAS No. 150.
Instruments with characteristics of both liabilities and equity not addressed
in SFAS No. 150 will be addressed in the next phase of the project. Adoption
of SFAS No. 150 is not expected to have a material impact on our
consolidated financial position, results of operations or cash flows.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". This interpretation
elaborates on the disclosures to be made by a guarantor in interim
and annual financial statements about the obligations under certain
guarantees. FASB Interpretation No. 45 also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee.
The initial recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002. We do not currently provide guarantees.
As a result, this interpretation did not have an impact on our financial
statements.
D-16
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities". This interpretation addresses the
consolidation of business enterprises (variable interest entities) to
which the usual condition of consolidation does not apply. This
interpretation focuses on financial interests that indicate control.
It concludes that in the absence of clear control through voting
interests, a company's exposure (variable interest) to the economic risks
and potential rewards from the variable interest entity's assets and
activities are the best evidence of control. Variable interests are
rights
and obligations that convey economic gains or losses from changes in the
values of the variable interest entity's assets and liabilities. Variable
interests may arise from financial instruments, service contracts, nonvoting
ownership interests and other arrangements. If an enterprise holds a
majority of the variable interests of an entity, it would be considered
the primary beneficiary. The primary beneficiary would be required to
include assets, liabilities and the results of operations of the variable
interest entity in its financial statements. This interpretation applies
immediately to variable interest entities that are created, or for which
control is obtained after, January 31, 2003. For variable interest entities
created prior to February 1, 2003, the provisions would be applied
effective July 1, 2003. The Company has no variable interest entities
and therefore the interpretation has no impact on our financial statements.
Item 7A. Market Risk
None
Item 8. Financial Statements And Supplementary Data
The Independent Auditors' Report, 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 Disagreements 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, 2003, 2002 and 2001.
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, 2003,
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 44 2004 Chairman, President, Chief 1983
Executive Officer and Director
_________________________________________________________________________
Frank Rabinovitz 60 2004 Executive Vice President, Chief 1989
Operating Officer, Director and
President of AVES
_________________________________________________________________________
Robert C. Nolt 55 2006 Chief Financial Officer and 1998
Director
_________________________________________________________________________
Arthur G. Cohen 74 2006 Director 1990
_________________________________________________________________________
Jeffrey Koffman 37 2006 Director 1999
_________________________________________________________________________
Richard Ryder 57 2004 Director 2001
_________________________________________________________________________
Paul Garfinkle 62 2004 Director 2001
_________________________________________________________________________
D-17
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 sixteen 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 30 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 twelve years. Mr. Cohen is a Director of Baldwin and The Arlen
Corporation.
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. 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 for the past 25 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.
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
D-18
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)
___________________________________________________________________________
Annual Compensation
Year Salary Bonus
______________________________________
David L. Koffman 2003 $ 81,000 $--
Chairman, President and Chief 2002 $ 81,000 $--
Executive Officer 2001 $ 81,000 $--
Frank Rabinovitz 2003 $187,000 $25,000
Director, Executive Vice President, 2002 $162,000 $50,000
Chief Operating Officer, 2001 $187,000 $62,000
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, 2003
for this insurance coverage were $18,000 and $25,373, respectively. Such
amounts are not included in the above table.
(3) The Company has accrued Mr. Koffman's fiscal 2003, 2002 and 2001
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.
D-19
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 170,000 stock options outstanding at April 30, 2003.
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 July 16, 2003, 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
_________________________________________________________________________
Name and Address of Amount and Nature of Note % of
Beneficial Owner Beneficial Ownership Class
__________________________________________________________________________
J Acquisition Corp
300 Plaza Drive, Vestal, NY 13850 2,059,884 1 74.5%
__________________________________________________________________________
David L. Koffman
300 Plaza Drive, Vestal, NY 13850 1,283,033 2 46.3%
__________________________________________________________________________
Vulcan Properties, Inc.
505 Eighth Avenue, New York, NY 10018 292,189 10.6%
__________________________________________________________________________
Frank Rabinovitz
12610 W. Airport Blvd. Suite 150,
Sugar Land, TX 77478 4,600 0.2%
_________________________________________________________________________
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 1,321,633 47.6%
__________________________________________________________________________
D-20
1. 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
the persons control J Acquisition Corp: Jeffrey Koffman - 148,402, 7.2%,
Frank Rabinovitz 63,826, 3.1%
2. Consists of 1,233,033 owned by J Acquisition Corp. Mr. Koffman is the
Chief Executive Officer and a Director of J Acquisition Corp.
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.
J Acquisition Corp, 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, Frank Rabinovitz, Executive Vice President, Chief
Operating Officer and Director of the Company, and two entities controlled
by members of the Koffman family, beneficially owns 2,059,884 shares of
Common Stock, which represents approximately 75% of the Common Stock
outstanding at April 30, 2003.
The Company has a note receivable from a related party, New Valu, Inc.,
for $161,865. New Valu, Inc. is a company controlled by members of the
Koffman family, of which David Koffman and Robert Nolt are officers. The
note is payable on demand with an annual interest rate of 5.5%.
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
($323,880). The current portion of the related notes aggregated $161,332.
The remaining balance on these related notes matures in December 2004 at
which time the entire remaining unpaid principal balance, aggregating
$1,213,661, plus accrued interest, aggregating $237,936, is due.
PART IV
D-21
Item 14. Controls and Procedures
The Company maintains a system of disclosure controls and procedures that
is designed to ensure information required to be disclosed by the Company
is accumulated and communicated to management in a timely manner.
Management has reviewed this system of disclosure controls and procedures
within 90 days of the date hereof, and has concluded that the current
system of controls and procedures is effective.
The Company maintains a system of internal controls and procedures for
financial reporting. Since the date of management's most recent evaluation,
there were no significant changes in internal controls or in other factors
that could significantly affect internal controls.
Item 15. 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' Report, 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
Item 16. Principal Accountant Fees and Services
The following sets forth fees billed to the Company by KPMG LLP for
services rendered for fiscal 2003 and 2002:
2003 2002
____________________________________
Audit Fees $70,569 $85,274
Audit Related Fees -- --
Tax Fees -- --
All Other Fees -- --
____________________________________
Total $70,569 $85,274
====================================
The Audit Committee recommends the selection of the external auditors
for approval by the board of directors and instructs the external
auditors that they are responsible to the board of directors and
the audit committee as representatives of the shareholders. In that
regard, also confirms that the external auditors will report all relevant
issues to the committee in response to agreed-upon expectations.
The Audit Committee reviews the performance of the external auditors and
obtains a formal written statement from the external auditors consistent
with standards set by the Independence Standards Board. Additionally,
they discuss with the auditors any relationships or non-audit services
that may affect their objectivity or independence.
The Audit Committee considers, in consultation wit the external auditors,
their audit scopes and plans to ensure completeness of coverage, reduction
of redundant efforts and the effective use of audit resources and reviews
and approves requests for any consulting services to be performed by the
external auditors, and is advised of any other study undertaken at the
request of management that is beyond the scope of the audit engagement
letter. All audit and non-audit services are pre-approved by the Audit
Committee pursuant to the Audit Committee's pre-approval policies and
procedures.
D-22
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 28, 2003
____________________
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 28, 2003
____________________
DAVID L. KOFFMAN Chief Executive Officer and Director
/s/ Frank Rabinovitz Executive Vice President, Chief July 28, 2003
_____________________
FRANK RABINOVITZ Operating Officer and Director
/s/ Robert C. Nolt Chief Financial Officer and Director July 28, 2003
______________________
ROBERT C. NOLT
/s/ Arthur G. Cohen Director July 28, 2003
______________________
ARTHUR G. COHEN
/s/ Jeffrey P. Koffman Director July 28, 2003
______________________
JEFFREY P. KOFFMAN
/s/ Richard Ryder Director July 28, 2003
_______________________
RICHARD RYDER
/s/ Paul Garfinkle Director July 28, 2003
_______________________
PAUL GARFINKLE
D-23
JAYARK CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements Page
Independent Auditors' Report 25
Consolidated Balance Sheets as of April 30, 2003 and 2002 26
Consolidated Statements of Operations for the Years Ended
April 30, 2003, 2002 and 2001 27
Consolidated Statements of Stockholders' Deficit for the
Years Ended April 30, 2003, 2002 and 2001 28
Consolidated Statements of Cash Flows for the Years Ended
April 30, 2003, 2002 and 2001 29
Notes to Consolidated Financial Statements 30-44
Certifications 45-47
Exhibit Index 48-52
D-24
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, 2003 and 2002,
and the related consolidated statements of operations, stockholders'
deficit, and cash flows for each of the years in the three-year
period ended April 30, 2003. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated 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, 2003 and 2002, and
the results of their operations and their cash flows for each of the
years in the three-year period ended April 30, 2003 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 20, 2003
Syracuse, New York
D-25
Jayark Corporation and Subsidiaries
Consolidated Balance Sheets
April 30, 2003 and 2002
2003 2002
Assets
Current Assets:
Cash and Cash Equivalents $999,088 $866,971
Accounts Receivable - Trade, less allowance
for doubtful
Accounts of $94,447 and $109,028, respectively 891,964 1,197,823
Inventories 298,040 393,612
Note Receivable - Related Party 161,865 --
Other Current Assets 72,474 40,206
_________ ___________
Total Current Assets 2,423,431 2,498,612
========= ===========
Property, Plant & Equipment, net 141,052 180,783
Goodwill 204,662 204,662
___________ ___________
Total Assets $2,769,145 $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 Expense 448,233 440,589
Accrued Salaries 152,025 187,684
Other Current Liabilities 65,955 85,030
_________ ___________
Total Current Liabilities 1,077,545 1,173,635
Long Term Debt - Related Parties, excluding
current portion 1,213,661 1,213,661
Deferred Compensation 362,665 344,272
Accrued Interest - Related Parties 742,446 636,696
_________ ____________
Total Liabilities 3,396,317 3,368,264
_________ ____________
Concentrations, Commitments, and Contingencies (Notes 1, 12 and 13)
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 (13,514,596) (13,371,631)
Treasury Stock, 7,500 shares at cost (750) (750)
____________ ____________
Total Stockholders' Deficit (627,172) (484,207)
____________ ____________
Total Liabilities & Stockholders' Deficit $2,769,145 $2,884,057
============ ============
See accompanying notes to consolidated financial statements
D-26
Jayark Corporation and Subsidiaries
Consolidated Statements of Operations
Years ended April 30, 2003, 2002 and 2001
__________________________________________
2003 2002 2001
__________________________________________
Net Revenues $9,915,954 $11,415,537 $12,886,491
Cost of Revenues 8,408,958 9,429,755 10,836,632
__________________________________________
Gross Margin 1,506,996 1,985,782 2,049,859
Selling, General & Administrative 1,556,421 1,983,095 2,422,739
__________________________________________
Operating Income (Loss) (49,425) 2,687 (372,880)
Interest Expense, Net (100,229) (115,148) (140,134)
Gain on Sale of Assets 3,384 13,900 1,156
__________________________________________
Loss Before Income Taxes (146,270) (98,561) (511,858)
Income Taxes (3,305) 768 (11,144)
__________________________________________
Net Loss ($142,965) ($99,329) ($500,714)
==========================================
Weighted Average Common Shares 2,766,396 2,766,396 2,766,396
==========================================
Basic and Diluted Loss per
Common Share ($.05) ($.04) ($.18)
==========================================
See accompanying notes to consolidated financial statements
D-27
Jayark Corporation and Subsidiaries
Consolidated Statements of Stockholders' Deficit
Years Ended April 30, 2003, 2002 and 2001
Common Additional Accumulated Treasury Total
Stock Paid-In Deficit Stock Stockholders
Capital Deficit
_______________________________________________________
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 -- 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)
Net Loss -- -- (142,965) -- (142,965)
_______________________________________________________
Balance at April 30, 2003 27,739 12,860,435 ($13,514,596) ($750) ($627,172)
=======================================================
See accompanying notes to consolidated financial statements
D-28
Jayark Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended April 30, 2003, 2002 and 2001
2003 2002 2001
Cash Flows From Operating Activities:
Net Loss ($142,965) ($99,329) ($500,714)
Adjustments to Reconcile Net Loss to
Net Cash Flows Provided By Operating
Activities:
Depreciation and Amortization of
Property, Plant and Equipment 65,445 121,649 182,191
Amortization of Goodwill and Patent -- 1,203 16,739
Gain on Disposition of Asset (3,384) (13,900) (1,156)
Increase (Decrease) in Provision for
Doubtful Accounts (14,581) 8,665 24,363
Inventory Write-Down 100,000 -- --
Changes In Assets and Liabilities,
Net of Divestiture of Fisher
Accounts Receivable 320,440 80,894 41,118
Inventories (4,428) 191,707 (209,693)
Other Current Assets (32,268) (14,138) 47,713
Accounts Payable and Accrued Expenses 7,644 (126,036) 320,067
Accrued Salaries and Deferred
Compensation (17,266) 75,956 187,775
Accrued Interest - Related Parties 105,750 105,748 26,437
Other Liabilities (19,075) 12,306 (10,035)
____________________________________
Net Cash Provided By Operating
Activities 365,312 344,725 124,805
____________________________________
Cash Flows From Investing Activities:
Proceeds from Sale of Assets 3,384 13,900 1,156
Purchases of Plant and Equipment (25,714) (121,646) (270,801)
Note Receivable - Related Party (161,865) -- --
Purchases of Patent -- (4,093) (46,251)
____________________________________
Net Cash Used In Investing Activities(184,195) (111,839) (315,896)
____________________________________
Cash Flows From Financing Activities:
Net Borrowings (Payments) Under Lines
of Credit (49,000) (200,060)
130,106
Payments of Long Term Debt Related
Parties -- -- (64,910)
Proceeds from Issuance of 8%
Cumulative Convertible Preferred
Stock of Subsidiary -- -- 429,500
____________________________________
Net Cash Provided By (Used In)
Financing Activities (49,000) (200,060) 494,696
____________________________________
Net Increase in Cash and Cash
Equivalents 132,117 32,826 303,605
Cash & Cash Equivalents at Beginning
of Year 866,971 834,145 530,540
____________________________________
Cash & Cash Equivalents at End
of Year $999,088 $866,971 $834,145
====================================
Supplemental Disclosures:
Cash Paid During the Year for
Interest $12,820 $26,029 $140,969
====================================
Taxes, net of Refunds ($3,305) $768 $--
====================================
See accompanying notes to consolidated financial statements
D-29
Notes to Consolidated Financial Statements
April 30, 2003, 2002 and 2001
(1) Summary of Significant Accounting Policies
Operations
The Company conducts its operations through three wholly owned
subsidiaries, each of which constituted a separate business segment
for financial reporting purposes. AVES Audio Visual Systems, Inc.
(AVES), Med Services Corporation (Med) and Fisher Medical Corporation
(Fisher). AVES distributes and rents a broad range of audio, video and
presentation equipment. Med historically has engaged various contractors
to design and develop specialty medical equipment for its distribution to
companies that sell and rent durable medical equipment to hospitals,
nursing home and individuals. As discussed in Note 13, the Company
relinquished control of Fisher and 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.
The Company accounts for impairment of long-lived assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets.
SFAS No. 144 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the book value
of the asset may not be recoverable. Implementation of SFAS No. 144 in
fiscal 2003 did not impact the Company's financial position or results of
operations.
D-30
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.
Loss Per Common Share
Basic loss per common share is based on the weighted average
number of common shares outstanding. Diluted 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 8. 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
170,000, 180,000 and 0 at April 30 2003, 2002 and 2001, respectively,
are not included in the calculation of diluted 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 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. Management reviews the allowance
for doubtful accounts on a regular basis and makes adjustments based on
historical experience, current conditions, and future expectations.
Management believes the estimate for the allowance for doubtful accounts
is reasonable; however, actual results could differ from this estimate.
Goodwill
Goodwill, representing the excess consideration over fair value of
assets purchased and liabilities assumed in a purchase business
combination, 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 in fiscal 2003, 2002 or 2001.
D-31
Stock Based Compensation
On December 31, 2002 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure, which provided
alternative methods of transition to the fair value method of accounting
for stock-based compensation of SFAS 123, Accounting for Stock-Based
Compensation. SFAS No. 148, also amended the disclosure provisions of
SFAS 123 to require disclosure in the summary of significant accounting
policies of the effects of an entity's accounting policy with respect to
stock-based compensation on reported net income.
In accordance with the provisions of SFAS 148, the Company has elected
to continue to account for its stock options under APB Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related
interpretations. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized. For the purposes of SFAS 148 pro forma disclosures, the
estimated fair value of the options is amortized to expense over the
option vesting periods. The Company's pro forma information is
summarized as follows:
2003 2002
___________________________
Net Loss as reported ($142,956) ($99,329)
Stock-Based compensation expense if
SFAS 123 was applied -- (56,904)
____________________________
ProForma Net Loss ($142,956) ($156,233)
============================
As no options were issued during fiscal 2003, and all options issued
in fiscal 2002 vested immediately upon date of grant, no pro forma
compensation expense would be recognized in fiscal 2003. The fair
value for each option grant in fiscal 2002 was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted average assumptions: expected option life of 3 years; risk free
interest rate of 4%; no expected dividend yield; expected volatility of
198%.
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, the option
valuation model requires the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's
employee stock options have characteristics significantly different
from those traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate in management's
opinion, the existing model does not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Additionally, the effects of applying SFAS 123 for providing pro forma
disclosures are not likely to be representative of the effects on
reported net income in future years.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Research and development expense was $0, $305,639 and $655,245 in fiscal
2003, 2002 and 2001, respectively, and is recorded within selling,
general and administrative expenses.
Financial Instruments
The Company's financial instruments, which include cash and cash
equivalents, accounts and note receivable, accounts payable, borrowings
under lines of credit, and long term debt are stated at cost which
approximates fair value at April 30, 2003 and 2002.
D-32
Concentrations
For the years ended April 30, 2003, 2002 and 2001 approximately 84%, 84%
and 81% 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 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 June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal
activities and requires that the liabilities associated with these costs
be recorded at their fair value in the period in which the liability
is incurred. SFAS No. 146 is effective for disposal activities initiated
after December 31, 2002. SFAS No. 146 did not have an impact on our
consolidated financial position, results of operations or cash flows
as we have initiated no exit or disposal activities subsequent to
December 31, 2002.
In April 2003, the FASB issued SFAS No. 149 "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, except as stated below, and for
hedging relationships designated after June 30, 2003. In addition,
except as stated below, all provisions of SFAS No. 149 should be
applied prospectively. The provisions of SFAS No. 149 relating to
SFAS No. 133 Implementation Issues that have been effective for fiscal
quarters beginning prior to June 15, 2003, should continue to be applied
in accordance with their respective effective dates. Adoption of SFAS No.
149 is not expected to have a material impact on our consolidated
financial position, results of operations or cash flows as we presently
have no derivative instruments or hedging activities.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of these instruments were previously classified as
temporary equity. SFAS No. 150 will be effective for financial instruments
entered into or modified after May 31, 2003, and otherwise shall be effective
at the beginning of the first interim period beginning after June 15, 2003.
For financial instruments created before the issuance date of SFAS No. 150
and still existing at the beginning of the interim period of adoption,
transition shall be achieved by reporting the cumulative effect of a change
in accounting principle by initially measuring the financial instruments at
fair value or other measurement attribute required by SFAS No. 150.
Instruments with characteristics of both liabilities and equity not addressed
in SFAS No. 150 will be addressed
D-33
in the next phase of the project. Adoption
of SFAS No. 150 is not expected to have a material impact on our
consolidated financial position, results of operations or cash flows.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". This interpretation
elaborates on the disclosures to be made by a guarantor in interim
and annual financial statements about the obligations under certain
guarantees. FASB Interpretation No. 45 also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee.
The initial recognition and initial measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002. We do not currently provide guarantees.
As a result, this interpretation did not have an impact on our financial
statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities". This interpretation addresses the
consolidation of business enterprises (variable interest entities) to
which the usual condition of consolidation does not apply. This
interpretation focuses on financial interests that indicate control.
It concludes that in the absence of clear control through voting
interests, a company's exposure (variable interest) to the economic risks
and potential rewards from the variable interest entity's assets and
activities are the best evidence of control. Variable interests are rights
and obligations that convey economic gains or losses from changes in the
values of the variable interest entity's assets and liabilities. Variable
interests may arise from financial instruments, service contracts, nonvoting
ownership interests and other arrangements. If an enterprise holds a
majority of the variable interests of an entity, it would be considered
the primary beneficiary. The primary beneficiary would be required to
include assets, liabilities and the results of operations of the variable
interest entity in its financial statements. This interpretation applies
immediately to variable interest entities that are created, or for which
control is obtained after, January 31, 2003. For variable interest entities
created prior to February 1, 2003, the provisions would be applied
effective July 1, 2003. The Company has no variable interest entities
and therefore the interpretation has no impact on our 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 prior year amounts have been reclassified to conform with the
fiscal 2003 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.
D-34
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 loss and net loss per common
share for the fiscal years ending April 30:
2003 2002 2001
_______________________________________
Net Loss ($142,965) ($99,329) ($500,714)
Add Back: Goodwill Amortization -- -- $26,068
_______________________________________
Adjusted Net Loss ($142,965) ($99,329) ($474,646)
=======================================
Net Loss per Common Share -
Basic and Diluted ($.05) ($.04) ($.18)
Goodwill Amortization $-- $-- $.01
________________________________________
Adjusted Net Loss ($.05) ($.04) ($.17)
========================================
(3) Inventories
Inventories are summarized as follows:
April 30, 2003 April 30, 2002
______________________________________________________________________
Raw Materials $74,113 $174,113
Finished Goods 223,927 219,499
_________________________________________
$298,040 $393,612
=========================================
In fiscal 2003, the Company recognized an inventory write-down charge
of $100,000 related to Med raw materials. The charge to reflect the
estimated net realizable value of inventories is reflected within the
cost of revenues.
(4) Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
April 30, 2003 April 30, 2002
Machinery and equipment $28,048 $46,438
Furniture and fixtures 76,294 76,571
Leasehold improvements 18,215 18,215
Automobiles and trucks 208,353 197,615
Rental and demonstration equipment 200,989 222,652
_________________________________
Total property and equipment 531,899 561,491
Less accumulated depreciation and
amortization 390,847 380,708
_________________________________
Net property and equipment $141,052 $180,783
=================================
(5) Note Receivable - Related Party
On December 31, 2002, the Company advanced $161,865 pursuant to a note
receivable to New Valu, Inc., a related party controlled by members of
the Koffman family, of which David Koffman and Robert Nolt are officers
D-35
of. The note is payable on demand with an annual interest rate of 5.5%.
(6) 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, 2003. The Med line
of credit is guaranteed by AVES, and provides for borrowing up to
$500,000 through September 30, 2003. The borrowings under the lines
of credit bear interest at prime, which was 4.25% and 4.75% at
April 30, 2003 and 2002, respectively. The Company had $1,000,000
and $951,000 available under the lines of credit at April 30, 2003
and 2002, respectively.
There are no financial covenants associated with the lines of credit.
(7) Long-term Debt - Related Parties
Long-term debt with related parties is summarized as follows:
2003 2002
_______________________
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
$250,000 has been waived until the maturity date of the note. Interest
expense on the note payable aggregated $63,750, $63,750 and $67,852 in
fiscal 2003, 2002 and 2001, respectively. Cash paid for interest on the
note was $0, $0 and $51,915 in fiscal 2003, 2002 and 2001, 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 $157,056, has been waived until
the maturity date of the notes. Interest expense on the subordinated
notes aggregated $41,998, $41,998 and $43,142 in fiscal 2003, 2002 and
2001, respectively. Cash paid for interest on the subordinated notes
was $0, $0 and $32,642 in fiscal 2003, 2002 and 2001, 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, 2003 are summarized as follows:
D-36
2004 $161,332
2005 $1,213,661
__________
$1,374,993
==========
(8) Stock Options
The Company's Stock Option Plan (Plan) 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 10%
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 Company 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
Issued -- -- -- -- --
Cancelled -- (10,000) (10,000) -- --
______________________________________________________
Outstanding at
April 30, 2003 100,000 70,000 170,000 $.50 $.50
======================================================
Shares Exercisable at
April 30, 2003 100,000 70,000 170,000 $.50 $.50
======================================================
Shares available for
Grant at April 30, 2003 80,000
===============================
(9) 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
D-37
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 13, the Company relinquished
control of Fisher and has deconsolidated Fisher effective October 1, 2001.
(10) Income Taxes
Income tax expense (benefit) consist of the following:
Current Deferred Total
________________________________
Year Ended April 30, 2003
Federal ($5,048) $-- ($5,048)
State $1,743 -- $1,743
_________________________________
($3,305) $-- ($3,305)
=================================
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)
==================================
A reconciliation of the expected consolidated income tax expense
(benefit), computed by applying the U.S. Federal corporate income tax
rate of 34% to loss before income taxes, to income tax expense (benefit),
is as follows:
2003 2002 2001
_______________________________________
Expected tax benefit ($49,732) ($33,551) ($174,032)
State income taxes net of
Federal Benefit 1,150 507 --
Change in valuation allowance 9,000 20,000 166,754
Non-deductible expenses 26,180 1,746 7,271
Over Accrual of Prior Year Taxes -- -- (11,144)
Effect of graduated Federal
income tax rates 11,750 11,750 --
Other, net (1,653) 276 7
_________________________________________
($3,305) $768 ($11,144)
=========================================
The tax effects of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities at April 30, are as follows:
D-38
2003 2002
Deferred tax assets:
Allowance for doubtful accounts $32,000 $37,000
Allowance for obsolete inventories/unicap costs 42,000 12,000
Property, plant and equipment, principally due
to differences in depreciation 26,000 41,000
Accrued compensation 151,000 147,000
Net operating loss carryforwards and tax
credits 3,829,000 3,834,000
_____________________
Total gross deferred tax assets 4,080,000 4,071,000
Less valuation allowance (4,080,000)(4,071,000)
_____________________
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, 2003 and 2002.
At April 30, 2003, the Company has net operating loss carryforwards for
Federal tax purposes of approximately $11,247,000, which are available to
offset future taxable income, if any, through 2021.
(11) Related Party Transactions
At April 30, 2003 and 2002, the Company had accrued unpaid wages aggregating
$443,665 and $431,469, 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 written intent of the parties, the Company
has reflected $81,000 as a current liability within accrued salaries in the
consolidated balance sheet at April 30, 2003 and 2002, respectively, and
reflected $362,665 and $344,272 as a long-term liability (deferred
compensation) in the consolidated balance sheet at April 30, 2003 and 2002,
respectively.
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, 2003, 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.
(12) 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:
2004 90,000
2005 90,000
2006 90,000
2007 90,000
2008 and thereafter 397,500
_______
$757,500
=======
D-39
Rental expense for operating leases was $90,000, $105,547 and $101,185
for the years ended April 30, 2003, 2002, and 2001, respectively.
(13) 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.
D-40
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.
2003 2002 2001
________________________________________
Net Revenues $9,915,954 $11,381,126 $12,857,841
Net Income (Loss) ($142,965) $260,380 $304,061
========================================
Net Income (Loss) per Common
Share - Basic and Diluted: ($.05) $.09 $.11
========================================
D-41
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.
(14) Segment and Related Information
The Company operated in three 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") historically has engaged various contractors
to design and develop specialty medical equipment for its distribution.
Its customer base in 2002 included companies that sell and rent durable
medical equipment to hospitals, nursing homes and individuals. The
decision was made by management in January 2003, due to continued economic
decline through the third quarter of fiscal 2003, coupled with continued
curtailments in healthcare spending, and due to the lack of any firm
purchase commitments for finished beds, to cease any further development
of the NetSafe Enclosure Bed. As the Company is not posturing to convert
the existing component parts portion of the inventory into saleable items
in the future, the Company wrote down 100 percent of the component parts
inventory value at January 31, 2003. Med's marketing approach with respect
to the remaining inventory ($102,000) is to continue to pursue those parties
who have previously expressed an interest in the product.
D-42
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.
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, 2003
Net Revenues $9,915,954 $-- $-- $-- $9,915,954
Inventory Write-Down -- -- $100,000 -- $100,000
Depreciation and
Amortization 59,460 -- 5,985 -- 65,446
Operating Income (Loss) 431,746 -- (114,474) (366,697) (49,425)
Interest (Expense) Income 63,517 -- (10,670) (153,076) (100,229)
Net Income (Loss) 318,646 -- (125,877) (335,734) (142,965)
Year Ended April 30, 2002
Net Revenues $11,372,588 $34,411 $8,538 $-- $11,415,537
Depreciation and
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) 634,030 (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)
Total Identifiable Assets
at April 30, 2003 2,460,810 -- 113,063 195,272 2,769,145
Goodwill at
April 30, 2003 204,662 -- -- -- 204,662
Total Identifiable Assets
at April 30, 2002 2,355,952 -- 227,764 300,341 2,884,057
Goodwill at
April 30, 2002 204,662 -- -- -- 204,662
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, 2003 and 2002:
D-43
2003 Quarter Ended
July 31 October 31 January 31 April 30
_______________________________________________________
Net Revenues $2,888,525 $2,730,974 $2,310,476 $1,985,979
=======================================================
Cost of Revenues 2,462,559 2,306,982 2,051,193 1,588,224
=======================================================
41
Net Income (Loss) (7,126) 39,551 (128,087) (47,303)
=======================================================
Basic and Diluted Net
Income (Loss) per
Common Share: ($.00) $.01 ($.05) ($.02)
=======================================================
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
======================================================
(16) Going Private Transaction
In February 2003, the Company filed a Preliminary Proxy Statement
regarding a Special Meeting of Stockholders. In June 2003, the Company
filed an Amended Preliminary Proxy Statement in response to SEC comment
letters. At this special meeting, the shareholders 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.
("Merger Corp"), a newly formed Delaware corporation, 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.
In accordance with the merger, each outstanding share of 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.
The merger will not be complete without the affirmative vote of holders of
a majority of the outstanding shares of common stock to adopt the merger
agreement. The Parent has agreed to vote all shares of common stock owned
by it in favor of the adoption of the merger agreement. The Parent
currently owns approximately 75% of the outstanding common stock. The
Board of Directors of Jayark Corporation has unanimously approved the
merger agreement.
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.
D-44
Certifications
I, David L. Koffman, certify that:
1. I have reviewed this annual report on Form 10K of Jayark Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual report
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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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 July 28, 2003
___________________________
David L. Koffman, President
Chief Executive Officer
D-45
I, Robert C. Nolt, certify that:
1. I have reviewed this annual report on Form 10K of Jayark Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual report
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 annual report (the "Evaluation Date"); and
(c) presented in this annual 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
annual 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 July 28, 2003
________________________________
Robert C. Nolt
Chief Financial Officer
D-46
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 Annual Report of Jayark Corporation (the
"Company") on Form 10-K for the fiscal year ended April 30, 2003 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 July 28, 2003
______________________________
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 Annual Report of Jayark Corporation (the
"Company") on Form 10-K for the fiscal year ended April 30, 2003 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 July 28, 2003
_______________________
Robert C. Nolt
Chief Financial Officer
D-47
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.
D-48
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.
D-49
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.
D-50
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
D-51
10(53) Agreement and Plan of Merger of Fisher Medical LLC with and
into Fisher Medical Corporation effective October 1, 2001.
D-52
APPENDIX E
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 2003
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 or jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 Plaza Drive, Vestal, New York 13850
(Address of principal executive office) (Zip Code)
Telephone number, including area code: (607) 729-9331
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01 per share
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K (section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant is $81,281 as of July 16, 2003.
The number of shares outstanding of Registrant's Common Stock is
2,766,396 as of July 16, 2003.
E-1
PRELIMINARY NOTE
This amendment to the Registrant's Annual Report on Form 10-K for the
fiscal year ended April 30, 2003 is being filed to amend Item 14 in its
entirety to read as set out below. No revisions have been made to the
Registrant's financial statements or any other disclosure contained in
such Annual Report.
PART IV
Item 14. Controls and Procedures
Based on our management's evaluation (with the participation of our
principal executive officer and principal financial officer), as of
the end of the period covered by this report, our principal executive
officer and principal financial officer have concluded that our
disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act")) are effective to ensure that information required to
be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms.
There was no change in our internal control over financial reporting
during our fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
E-2
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 September 24, 2003
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, September 24, 2003
DAVID L. KOFFMAN Chief Executive Officer and Director
/s/Frank Rabinovitz Executive Vice President, Chief September 24, 2003
FRANK RABINOVITZ Operating Officer and Director
/s/Robert C. Nolt Chief Financial Officer and September 24, 2003
ROBERT C. NOLT Director
/s/Arthur G. Cohen Director September 24, 2003
ARTHUR G. COHEN
/s/Jeffrey P. Koffman Director September 24, 2003
JEFFREY P. KOFFMAN
/s/Richard Ryder Director September 24, 2003
RICHARD RYDER
/s/Paul Garfinkle Director September 24, 2003
PAUL GARFINKLE
E-3
Certifications
I, David L. Koffman, certify that:
1. I have reviewed this annual report on Form 10K of Jayark Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual
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 annual report
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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual 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 September 24, 2003
David L. Koffman, President
Chief Executive Officer
E-4
I, Robert C. Nolt, certify that:
1. I have reviewed this annual report on Form 10K of Jayark Corporation;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual report 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
annual report (the "Evaluation Date"); and
(c) presented in this annual 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
annual 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 September 24, 2003
Robert C. Nolt
Chief Financial Officer
E-5
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 Annual Report of Jayark Corporation (the
"Company") on Form 10-K for the fiscal year ended April 30, 2003 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 September 24, 2003
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 Annual Report of Jayark Corporation (the
"Company") on Form 10-K for the fiscal year ended April 30, 2003
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 September 24, 2003
Robert C. Nolt
Chief Financial Officer
E-6
APPENDIX F
UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: July 31, 2003
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
(State or other jurisdiction of incorporation)
13-1864519
(IRS Employer Identification No.)
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 September 2, 2003
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 - July 31, 2003
and April 30, 2003 Unaudited)...................................3
Consolidated Condensed Statements of Operations -
Three Months
Ended July 31, 2003 and 2002 (Unaudited)........................4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended July 31, 2003 and 2002(Unaudited)............5
Notes to Consolidated Condensed Financial Statements
(Unaudited).....................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................8-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk......13
Item 4. Controls and Procedures.........................................13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................13-14
Signatures......................................................15
Certifications...................................................16-17
Exhibits.................................................................18
F-2
PART I.
ITEM 1. Consolidated Condensed Financial Statements
Jayark Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Unaudited)
July 31, 2003 April 30, 2003
Assets
Current Assets:
Cash and Cash Equivalents $699,480 $999,088
Accounts Receivable - Trade, less allowance
for doubtful Accounts of $96,268 and $94,447,
respectively 1,055,506 891,964
Inventories 440,200 298,040
Note Receivable - Related Party 161,865 161,865
Other Current Assets 103,021 72,474
__________ __________
Total Current Assets 2,460,072 2,423,431
Property, Plant & Equipment, net 128,427 141,052
Goodwill 204,662 204,662
__________ __________
Total Assets $2,793,161 $2,769,145
=========== ==========
Liabilities
Current Liabilities:
Borrowings Under Lines of Credit $250,000 $250,000
Current Portion of Long Term Debt -
Related Parties 161,332 161,332
Accounts Payable and Accrued Expenses 424,440 448,233
Accrued Salaries 177,309 152,025
Other Current Liabilities 75,226 65,955
_________ _________
Total Current Liabilities 1,088,307 1,077,545
Long Term Debt - Related Parties, excluding
current portion 1,213,661 1,213,661
Deferred Compensation 384,464 362,665
Accrued Interest - Related Parties 768,883 742,446
_________ _________
Total Liabilities 3,455,315 3,396,317
__________ _________
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 (13,549,578) (13,514,596)
Treasury Stock, 7,500 shares at cost (750) (750)
____________ ____________
Total Stockholders' Deficit (662,154) (627,172)
____________ ____________
Total Liabilities & Stockholders' Deficit $2,793,161 $2,769,145
============ ============
See accompanying notes to consolidated condensed financial statements
F-3
Jayark Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended
____________________________
July 31, 2003 July 31, 2002
____________________________
Net Revenues $2,889,498 $2,888,525
Cost of Revenues 2,509,999 2,462,559
_________ _________
Gross Margin 379,499 425,966
Selling, General and Administrative 392,521 405,631
_________ _________
Operating Income (Loss) (13,022) 20,335
__________ _________
Interest Income 21,027 13,417
Interest Expense (42,737) (39,138)
_________ __________
Net Interest Expense (21,710) (25,721)
Loss Before Income Taxes (34,732) (5,386)
Income Taxes 250 1,740
__________ _________
Net Loss ($34,982) ($7,126)
========== =========
Weighted Average Common Shares 2,766,396 2,766,396
========== =========
Basic and Diluted Loss per Common Share ($.01) ($.00)
========== ==========
See accompanying notes to consolidated condensed financial statements
F-4
Jayark Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
______________________________
July 31, 2003 July 31, 2002
______________________________
Cash Flows From Operating Activities:
Net Loss ($34,982) ($7,126)
Adjustments to Reconcile Net Loss to Net
Cash Flows Used By Operating Activities:
Depreciation and Amortization 12,625 16,406
Provision for Doubtful Accounts 1,821 1,886
Changes In Assets and Liabilities,
Net of Divestiture of Fisher:
Accounts Receivable (165,363) (248,334)
Inventories (142,160) 11,689
Other Current Assets (30,547) (44,075)
Accounts Payable and Accrued Expenses (23,793) 26,584
Accrued Salaries and Deferred
Compensation 47,083 11,489
Accrued Interest - Related Parties 26,437 26,437
Other Liabilities 9,271 (25,415)
__________________________
Net Cash Used By Operating Activities (299,608) (230,459)
__________________________
Net Decrease in Cash and Cash Equivalents (299,608) (230,459)
Cash & Cash Equivalents at Beginning of
Period 999,088 866,971
_________________________
Cash & Cash Equivalents at End of Period $699,480 $636,512
=========================
Supplemental Disclosures:
Cash Paid During the Period for
Interest $2,651 $3,696
=========================
Taxes $250 $1,740
=========================
See accompanying notes to consolidated financial statements
F-5
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, 2003, 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. Recent Accounting Pronouncements
In December 2002, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 148, "Accounting for Stock
Based Compensation - Transition and Disclosure", which provided alternative
methods of transition to the fair value method of accounting for stock-based
compensation of SFAS 123, "Accounting for Stock-Based Compensation". SFAS
No. 148, also amended the disclosure provisions of SFAS 123 to require
expanded and more prominent disclosure in both annual and interim financial
statements about the method of accounting with respect to stock-based
compensation and the effect of the method on reported net income. The
disclosure provisions of SFAS No. 148 were effective for the Company at
April 30, 2003.
All options were issued in Fiscal 2002 (year ending April 31, 2002) and
vested immediately. Accordingly, there is no pro forma compensation
expense recognizable in the three months ended July 31, 2003 or 2002.
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of these instruments
were previously classified as temporary equity. SFAS No. 150 was
effective for financial instruments entered into or modified
after May 31, 2003, and otherwise shall be effective at the beginning of
the first interim period beginning after June 15, 2003. Adoption of SFAS
No. 150 is not expected to have an impact on our consolidated financial
position, results of operations or cash flows.
3. Reclassifications
Certain reclassifications have been made in the fiscal 2003 consolidated
condensed financial statements to conform to the presentation used in the
fiscal 2004 consolidated condensed financial statements.
5. Segment Data
F-6
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") historically has engaged various contractors
to design and develop specialty medical equipment for its distribution.
Its customer base in 2002 included companies that sell and rent durable
medical equipment to hospitals, nursing homes and individuals. The
decision was made by management in January 2003, due to continued economic
decline through the third quarter of fiscal 2003, coupled with continued
curtailments in healthcare spending, and due to the lack of any firm
purchase commitments for finished beds, to cease any further development
of the NetSafe Enclosure Bed. Med's marketing approach with respect to
the remaining inventory ($102,000) is to continue to pursue those parties
who have previously expressed an interest in the product.
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 Med Unallocated Consolidated
_________________________________________________
Three Months Ended July 31, 2003
Net Revenues $2,889,498 -- -- $2,889,498
Depreciation and
Amortization 11,128 1,497 -- 12,625
Operating Income (Loss) 92,302 (1,971) (103,353) (13,022)
Interest Expense (Income) (18,730) 2,651 37,789 21,710
Net Income (Loss) 66,032 (4,621) (96,393) (34,982)
Three Months Ended July 31, 2002
Net Revenues 2,888,525 -- -- 2,888,525
Depreciation and
Amortization 14,910 1,496 -- 16,406
Operating Income (Loss) 102,189 (4,259) (77,595) 20,335
Interest Expense (Income) (13,205) 1,545 37,381 25,721
Net Income (Loss) 70,394 (6,535) (70,987) (7,126)
Total Assets at
July 31, 2003 2,433,637 111,092 248,432 2,793,161
Goodwill at
July 31, 2003 204,662 -- -- 204,662
Total Assets at
April 30, 2003 2,460,810 113,063 195,272 2,769,145
Goodwill at
April 30, 2003 204,662 -- -- 204,662
6. Inventories
Inventories are summarized as follows:
July 31, 2003 April 30, 2003
________________________________
Raw Materials $74,113 $74,113
Finished Goods 366,087 223,927
_________________________________
$440,200 $298,040
=================================
F-7
7. Loss Per Common Share
Basic loss per common share is based upon the weighted average number
of common shares outstanding. Diluted 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 170,000 shares, had no impact on the loss per common share
calculation in any periods presented as their impact was antidilutive.
8. Note Receivable Related Party
On December 31, 2002, the Company advanced $161,865 pursuant to a note
receivable to New Valu, Inc., a related party controlled by members of
the Koffman family, of which David Koffman and Robert Nolt are officers
of. The note is payable on demand with an annual interest rate of 5.5%.
9. Going Private Transaction
In February 2003, the Company filed a Preliminary Proxy Statement
regarding a Special Meeting of Stockholders. In August 2003, the
Company filed an Amended Preliminary Proxy Statement in response to
SEC comment letters. At this special meeting, the shareholders 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. ("Merger Corp"), a newly formed Delaware corporation,
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.
In accordance with the merger, each outstanding share of 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.
The merger will not be complete without the affirmative vote of holders
of a majority of the outstanding shares of common stock to adopt the
merger agreement. The Parent has agreed to vote all shares of common
stock owned by it in favor of the adoption of the merger agreement. The
Parent currently owns approximately 75% of the outstanding common stock.
The Board of Directors of Jayark Corporation has unanimously approved the
merger agreement.
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.
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
In February 2003, the Company filed a Preliminary Proxy Statement regarding
a Special Meeting of Stockholders. In August 2003, the Company filed an
Amended Preliminary Proxy Statement in response to SEC comment letters. At
this special meeting, the shareholders 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. ("Merger Corp"), a newly
formed Delaware corporation, 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.
F-8
In accordance with the merger, each outstanding share of 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.
The merger will not be complete without the affirmative vote of holders
of a majority of the outstanding shares of common stock to adopt the merger
agreement. The Parent has agreed to vote all shares of common stock owned
by it in favor of the adoption of the merger agreement. The Parent
currently owns approximately 75% of the outstanding common stock. The
Board of Directors of Jayark Corporation has unanimously approved the
merger agreement.
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.
Three Months Ended July 31, 2003 as compared to July 31, 2002
NET REVENUES
Net Revenues of $2,889,000 for the three months ended July 31, 2003,
increased $1,000 as compared to the same period in 2002 due to an
increase in sales at AVES.
COST OF REVENUES
Cost of Revenues of $2,510,000 increased $47,000, or 1.9%, as compared
to the same period last year. This was a result of a change in the
product mix resulting in higher unit costs.
GROSS MARGIN
Gross Margin of $379,000, or 13.1% of revenues, decreased $46,000, or
10.9%, as compared to a gross margin of $426,000, or 14.7% of revenues,
for the same period last year. This decrease was due to lower profit
margins at AVES as compared to the prior year resulting from a change
in the product mix resulting in higher unit costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, General and Administrative Expenses of $393,000 decreased
$13,000 or 3.2% as compared to the same period last year. AVES'
expenses decreased $37,000 primarily due to decreased payroll expenses
and Med's expenses decreased $2,000 due to decreased bad debt expense.
These reductions were partially offset by a $26,000 increase in
Corporate's expenses resulting from increased accounting fees and
travel and insurance expenses.
OPERATING INCOME (LOSS)
F-9
Operating Loss of $13,000 decreased $33,000 as compared to consolidated
operating income of $20,000 for the same period last year. The decrease
in operating income was primarily the result of the decrease in gross
margins only partially offset by lower expenses discussed above.
Corporate's operating loss increased $26,000 due to an increase in
expenses discussed above, AVES' operating income decreased $9,000 due
to a decrease in gross margins only partially offset by lower expenses
discussed above and Med's operating loss decreased $2,000 as a result of
decreased expenses discussed above.
NET INTEREST EXPENSE
Net Interest Expense of $22,000 decreased $4,000, or 15.6%. This
decrease is due to decreased debt combined with lower interest rates
as compared to the prior year along with an increase in interest income.
LOSS BEFORE INCOME TAXES
Loss Before Income Taxes of $35,000 increased $30,000, or 544.8%, as
compared a net loss of $5,000 during 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 $250 decreased $1,490, or 85.6%, as compared to $1,740
during the same period last year. This is a result of lower state
income tax expense.
NET LOSS
Net Loss of $35,000 increased $28,000, or 390.9%, as compared a net
loss of $7,000 during the same period last year. This increased loss
is principally due to decreased gross margins only partially offset by
lower expenses discussed above. Corporate's loss increased $26,000,
AVES' income decreased $4,000 and Med's loss decreased $2,000 due to
the fluctuations noted above.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make decisions based upon estimates,
assumptions, and factors it considers as relevant to the circumstances.
Such decisions include the selection of applicable accounting principles
and the use of judgment in their application, the results of which could
differ from those anticipated.
A summary of significant accounting policies used in the preparation
of the consolidated financial statements is contained in Note 1, in the
Company's Report on Form 10K. 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.
F-10
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.
The Company values 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. During fiscal 2003, the Company
recorded an inventory write down in the amount of $100,000, related to
Med's NetSafe Enclosure Bed components. The write down relates to the
slow movement of the inventory over the past twelve months, the continued
decline in the overall economy, lack of any purchase commitments for
finished product, as well as management's estimate of future demand and
selling price of the current levels of inventory related to the NetSafe
Enclosure Beds.
In the event that actual results differ from these estimates or the
Company adjusts these estimates in future periods, the Company may need
to write down the inventory further which could materially impact the
financial position and results of operations of the Company.
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
anticipated 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
F-11
At July 31, 2003 and April 30, 2003, consolidated open lines of credit
available to the Company for borrowing were $1,000,000. It is the
opinion of the Company's management that operating expenses, as well
as obligations coming due during the next fiscal year, will be met
primarily by existing cash balances, cash flow generated from
operations, and from available borrowing levels.
Working capital was $1,372,000 at July 31, 2003, compared with
$1,346,000 at April 30, 2003.
Net cash used by operating activities was $300,000 in 2003 as compared
with $230,000 in 2002. This increase is primarily due to the increased
loss, an increase in inventory levels, offset by a reduction in
receivables.
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 ($323,880). The current portion of the related notes aggregated
$161,332. The remaining balance on these related notes matures in
December 2004 at which time the entire remaining unpaid principal
balance, aggregating $1,213,661, plus accrued interest, aggregating
$261,374, is due.
The Company has a note receivable from a related party, New Valu,
Inc., for $161,865. New Valu, Inc. is a company controlled by
members of the Koffman family, of which David Koffman and Robert
Nolt are officers. The note is payable on demand with annual
interest rate of 5.5%.
At July 31, 2003, the Company continues to have accrued unpaid wages
aggregating $465,464. 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 balance sheet, and reflected $384,464 as deferred
compensation in the consolidated balance sheet at July 31, 2003.
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 After
Total 1 Year 2-3 Years 4-5 Years 5 Years
__________________________________________________________________________
Contractual Obligations Payments Due by Period
__________________________________________________________________________
Long Term Debt -
Related Parties $1,374,993 $161,332 $1,213,661 $-- $--
Operating Leases $735,000 $90,000 $180,000 $180,000 $285,000
Accrued Interest -
Related Parties $768,883 $-- $768,883 $-- $--
___________________________________________________________________________
Other Commercial
Commitments Amount of Commitment Expiration Per Period
___________________________________________________________________________
F-12
Lines of Credit $250,000 $250,000 $-- $-- $--
Recent Accounting Pronouncements
In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity." SFAS No. 150 establishes standards for how an issuer classifies
and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of these instruments were previously classified as
temporary equity. SFAS No. 150 was effective for financial instruments
entered into or modified after May 31, 2003, and otherwise shall be
effective at the beginning of the first interim period beginning after
June 15, 2003. Adoption of SFAS No. 150 is not expected to have an impact
on our consolidated financial position, results of operations or cash
flows.
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 July 31, 2003, 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
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness
of the Company's disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures, as of the end of the period covered by
this report, were designed and are functioning effectively to provide
reasonable assurance that the information required to be disclosed by the
Company in reports filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. The Company believes that a
controls system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the controls system
are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company
have been detected.
No change in the Company's internal control over financial reporting
occurred during the Company's most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
Company's internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
F-13
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
F-14
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
JAYARK CORPORATION
Registrant
/s/ David L. Koffman September 10, 2003
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt September 10, 2003
Robert C. Nolt
Chief Financial Officer
F-15
Certifications
I, David L. Koffman, Chief Executive Officer of Jayark Corporation,
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
such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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, and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
/s/ David L. Koffman September 10, 2003
David L. Koffman, President
Chief Executive Officer
F-16
I, Robert C. Nolt, Chief Financial Officer of Jayark Corporation,
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 such
term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
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, and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of
the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of the registrant's
board of directors:
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
/s/ Robert C. Nolt September 10, 2003
Robert C. Nolt
Chief Financial Officer
F-17
Exhibit 99.1
CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER RELATING TO A PERIODIC
REPORT CONTAINING FINANCIAL STATEMENTS
I, David L. Koffman, Chief Executive Officer of Jayark Corporation,
a Delaware Corporation (the "Company"), hereby certify that, to my
knowledge,
(1) The Company's periodic report on Form 10-Q for the period ended
July 31, 2003 (the "Form 10-Q") fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
/s/ David L. Koffman September 10, 2003
David L. Koffman, President
Chief Executive Officer
Exhibit 99.2
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC
REPORT CONTAINING FINANCIAL STATEMENTS
I, Robert C. Nolt, Chief Financial Officer of Jayark Corporation, a
Delaware Corporation (the "Company"), hereby certify that, to my
knowledge,
(1) The Company's periodic report on Form 10-Q for the period ended
July 31, 2003 (the "Form 10-Q") fully complies with the requirements
of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of
the Company.
/s/ Robert C. Nolt September 10, 2003
Robert C. Nolt
Chief Financial Officer
F-18
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 _______________, 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, including the exchange of $.40 per share for
each share of Jayark common stock.
/ / 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.