UNITED STATES
Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended: October 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
0-3255
(Commission File Number)
JAYARK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1864519
(State or other jurisdiction of Inc) (I.R.S. Employer Identification No.)
Post Office Box 741528, Houston, Texas 77274
(Address of principal executive offices ) (Zip Code)
(713) 783-9184
(Registrant's telephone number, including area code)
(Former name, former address and fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES [ ] NO [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at October 31, 1997
Common Stock $0.30 Par Value 9,221,197
Part I
Item I.
Jayark Corporation And Subsidiaries
Consolidated Balance Sheets
Unaudited Audited
10/31/97 04/30/97
Assets
Current Assets
Cash and Cash Equivalents $330,776 $67,140
Accounts Receivable-Trade, Less Allowance For 1,033,583 1,838,585
Doubtful Accounts of $36,745 in October 1997
and $42,000 in April 1997
Other Accounts Receivable 5,277 2,277
Inventories 321,038 412,846
Other Current Assets 103,928 20,572
Total Current Assets 1,794,602 2,341,420
Non Current Assets
Property & Equipment, Less Accumulated 116,375 122,550
Depreciation and Amortization
Excess of Cost Over Net Assets of Businesses 279,422 290,102
Acquired, Less Accum Amortization of $453,015
in October 1997 and $442,335 in April 1997
Total Non Current Assets 395,797 412,652
Total Assets $2,190,399 $2,754,072
Liabilities
Current Liabilities
Notes Payable & Lines of Credit $309,700 $500,000
Current Maturities of Long Term Debt - 7,394
Accounts Payable 420,230 905,407
Accrued Salaries and Deferred Compensation 165,349 106,531
Accrual Related to Loss on Discontinued 305,000 305,000
Operations - Rosalco
Accrual Related to LCL Investment 123,068 164,579
Other Current Liabilities 452,359 359,512
Total Current Liabilities 1,775,706 2,348,423
Non Current Liabilities
Long Term Debt, Excluding Current Maturities - 7,207
Notes Payable to Related Parties 2,000,000 2,000,000
Subordinated Debentures 1,400,000 1,400,000
Total Non Current Assets 3,400,000 3,407,207
Total Liabilities 5,175,706 5,755,630
Stockholders' Equity
Common Stock of $.30 Par Value. Authorized 2,766,359 2,766,359
10,000,000 Shares; Issued 9,221,197 Shares in
October 1997 and 9,221,197 Shares in April 1997
Additional Paid-In Capital 8,066,122 8,066,122
Deficit (13,817,788) (13,834,039)
Total Stockholders' Equity (2,985,307) (3,001,558)
Total Liabilities & Stockholders' Equity $2,190,399 $2,754,072
See accompanying notes to consolidated financial statements
Jayark Corporation And Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
10/31/97 10/31/96 10/31/97 10/31/96
Net Revenues $3,148,761 $3,344,626 $7,321,605 $6,415,687
Costs & Expenses:
Cost of Revenues 2,611,785 2,781,376 6,240,400 5,372,163
Selling, General and Admin 435,002 561,918 859,279 1,011,668
Interest 104,436 41,344 205,675 78,231
Other Income - (19,116) - (30,181)
Total Costs & Expenses 3,151,222 3,365,522 7,305,354 6,431,881
Income (Loss) from Cont. Oper. ($2,461) ($20,896) $16,251 ($16,194)
Income (Loss) from Disc. Oper. - 76,415 - (206,337)
Net Income (Loss) (2,461) 55,518 16,251 (222,532)
Primary Earnings (Loss) per
Common Share:
Continuing Operations ($0.00) ($0.00) $0.00 ($0.00)
Discontinued Operations $0.00 $0.01 $0.00 ($0.02)
Net Income (Loss) ($0.00) $0.01 $0.00 ($0.02)
Weighted Average Common Shares 9,221,197 8,802,563 9,221,197 8,390,681
See accompanying notes to consolidated financial statements
Jayark Corporation And Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended
(Unaudited)
10/31/97 10/31/96
Cash Flows From Operating Activities
Net Income (Loss) $16,251 ($222,532)
Adjustments to Reconcile Earnings (Loss)
to Cash From Operating Activities:
Depreciation and Amortization of Property and 29,510 34,045
Equipment
Amortization of Excess of Cost Over Net 10,680 10,680
Assets of Businesses Acquired
Net Assets of Discontinued Operations - 886,672
(Gain) Loss on Disposition of Assets - (11,065)
Change In Assets and Liabilities Net of Effects
From Acquisitions of Subs:
(Increase) Decrease in Accounts Receivable Net 802,002 415,904
(Increase) Decrease in Inventories 91,808 101,883
(Increase) Decrease in Other Current Assets (83,355) (21,667)
Increase (Decrease) in Accounts Payable (485,177) 53,857
Increase (Decrease) in Accrued Salaries and 58,818 (82,064)
Deferred Compensation
Increase (Decrease) in Other Liabilities 51,335 (73,716)
Net Cash Provided By (Used In)Operating Act. 491,871 1,091,997
Cash Flows From Investing Activies:
Capital Expenditures for Property and (23,335) (56,520)
Equipment
Net Cash Provided By (Used In)Investing Act. (23,335) (56,520)
Cash Flows From Financing Activies:
Payment of Notes Payable (190,300) (252,000)
Payment of Long Term Debt (14,601) (24,671)
Purchase (Repayment) of Subordinated Debentures - (940,000)
Proceeds From Issuance of Common Stock - 472,112
Net Cash Provided By (Used In)Financing Act. (204,901) (744,559)
Net Increase (Decrease) in Cash and Cash Equiv. 263,636 290,918
Cash & Cash Equivalents at Begining of Year 67,140 350,928
Cash & Cash Equivalents at End of Year $330,776 $641,846
Supplemental Disclosures of Cash Flow Information:
Cash Paid For:
Interest $75,842 $107,590
Non-Cash Transactions:
Common Stock Issued in Connection With LCL - 472,112
Investment
See accompanying notes to consolidated financial statements
Notes to Consolidated Financial Statements
(Unaudited)
1. Jayark Corporation ("Jayark" or "the Company") conducts its
operations through AVES Audiovisual Systems, Inc. ("AVES"), a wholly
owned subsidiary. The consolidated balance sheet of Jayark
Corporation and subsidiaries (the "Company"), as of October 31, 1997,
and the related consolidated statements of operations and cash flows
for the periods ended October 31, 1997 and 1996 are unaudited. The
consolidated balance sheet as of April 30, 1997 has been derived from
audited financial statements. The consolidated financial statements
should be read in conjunction with the audited financial statements
and footnotes for the year ended April 30, 1997, included in the
Company's report on Form 10-K.
2.The interim financial statements reflect all adjustments (consisting of
only normal and recurring accruals and adjustments) which are, in the
opinion of management, necessary to a fair statement of the results for
the interim periods presented. The Company's operating results for any
particular interim period may not be indicative of results for the full
year.
3. Certain reclassifications have been made in the 1996 financial
statements to conform them to and make them consistent with the
presentation used in the 1997 financial statements.
Item 2.
Management's Discussion & Analysis of Results of Operations
Three Months Ended October 31, 1997 as compared to October 31, 1996
NET REVENUES
Consolidated Revenues of $3,149,000 for the period ended October
31, 1997 decreased $196,000, or 5.9%, as compared to the same period
in 1996. The decrease is the result of a $199,000 decrease in direct
sales, and an increase of $3,000 in contract and rental sales.
COST OF REVENUES
Consolidated Cost of Revenues of $2,612,000 decreased $170,000,
or 6.1% in 1997, as compared to the same period last year. The
decrease reflects a $182,000 decrease in direct sale cost, which was
offset by a $3,000 increase in contract and rental sale cost, and a
$9,000 decrease in purchase discounts.
GROSS MARGIN
Consolidated Gross Margin of $537,000 was 17.1% of revenues, as
compared to $563,000 16.8% for the same period last year. AVES gross
margin percentage increased as a result of a .3% increase in direct
sale margin, which was offset by a 6.8% decrease in contract and
rental sale margin and a .2% decrease in purchase discounts taken.
The direct sale margin for the period ended October 31, 1997
increased to 13.3% from 13.0% in 1996. The contract and rental sale
gross margin for the period ended October 31, 1997 decreased to 49.5%
from 56.3% in 1996 due to competitive pressures in the market and a
change in product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $435,000 decreased $127,000 or 22.6% as
compared to the same period last year. Corporate decreased legal and
professional fees by $96,000, insurance premiums by $17,000, and meals
& entertainment by $5,000 as a result of the Company's overall cost
reduction and the discontinued operations of Rosalco, Inc., a wholly
owned subsidiary of Jayark. AVES decreased freight out by $2,000 and
insurance premiums by $7,000.
INTEREST EXPENSE
Consolidated Interest Expense of $104,000 increased $63,000, or
152.61%. Corporate interest increased $42,000 as a result of the
discontinued operations of Rosalco, Inc., a wholly owned subsidiary of
Jayark. This interest was previously charged to Rosalco, Inc. through
an intercompany account. Additionally, $21,000 of the increase is
based on an increase in the borrowing.
OTHER INCOME
Consolidated Other Income of $0 decreased $19,000, or 100.0% from
the same period last year. The decrease is a result of a $19,000 tax
refund in 1996.
INCOME (LOSS) FROM CONTINUING OPERATIONS
Consolidated Loss from Continuing Operations of ($2,000) was
incurred as compared to a loss of ($21,000) for the same period last
year. This $19,000 improvement is primarily the result of a $127,000
decrease in Selling, General, and Administrative expenses as a result
of the Company's overall cost reduction and the discontinued
operations of Rosalco, Inc., a wholly owned subsidiary of Jayark.,
which was offset by a decrease of $26,000 in gross margin, a $63,000
increase in interest expense, and a $19,000 decrease in other income.
(LOSS) INCOME FROM DISCONTINUED OPERATIONS
Consolidated Income from Discontinued Operations reflects income
earned by the discontinued operation of Rosalco, Inc., a wholly owned
subsidiary of Jayark. The $76,000 decrease in 1997 is a result of the
operations of Rosalco as a discontinued operation.
NET INCOME (LOSS)
Consolidated Net Loss of ($2,000) as compared to a net income of
$55,000 during the same period last year. The $57,000 decrease is a
result of a $76,000 reduction in income from the discontinued
operations of Rosalco offset by a $19,000 reduction in the loss from
continuing operations.
Six Months Ended October 31, 1997 as compared to October 31, 1996
NET REVENUES
Consolidated Revenues of $7,322,000 for the period ended October
31, 1997 increased $906,000, or 14.1%, as compared to the same period
in 1996. The increase is the result of a $912,000 increase in direct
sales, which was offset by a $6,000 decrease of contract and rental
sales.
COST OF REVENUES
Consolidated Cost of Revenues of $6,240,000 increased $868,000 or
16.2% in 1997, as compared to the same period last year. The increase
reflects a $842,000 increase in direct sale costs and a $31,000
increase in contract and rental sale costs, which was offset by a
$5,000 increase in purchase discounts.
GROSS MARGIN
Consolidated Gross Margin of $1,081,000 was 14.8% of revenues, as
compared to $1,044,000 or 16.3% for the same period last year. AVES
gross margin percentage decreased as a result of a .7% decrease in
direct sale margin, and a 13.2% decrease in contract and rental sale
margin.
The direct sale gross margin for the period ended October 31,
1997 decreased to 11.9% from 12.6% in 1996 due to competitive
pressures in the market. The contract and rental sale gross margin
for the period ended October 31, 1997 decreased to 43.7% from 56.9% in
1996 due to competitive pressures in the market and a change in
product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated Expenses of $859,000 decreased $152,000, or 15.1%,
as compared to the same period last year. Corporate decreased
professional fees by $146,000, travel expense by $10,000 as a result
of the Company's overall cost reduction and the discontinued
operations of Rosalco, Inc., a wholly owned subsidiary of Jayark.
AVES increased office supplies by $4,000 as compared to the same
period in 1996.
INTEREST EXPENSE
Consolidated Interest Expense of $206,000 increased $127,000, or
162.9%. Corporate interest increased $84,000 as a result of the
discontinued operations of Rosalco, Inc., a wholly owned subsidiary of
Jayark. This interest was previously charged to Rosalco, Inc. through
an intercompany account. Additionally, $43,000 of the increase is
based on an increase in borrowing.
OTHER INCOME
Consolidated Other Income of $0 decreased $30,000 from the same
period last year. The decrease is a result of a $11,000 gain in 1996
on the sale of a vehicle and a $19,000 tax refund in 1996.
INCOME FROM CONTINUING OPERATIONS
Consolidated Income from Continuing Operations $16,000 increased
$32,000, or 200.3%. This $32,000 improvement is comprised of a
$152,000 decrease in Selling, General, and Administrative expenses,
and a $37,000 increase in gross margin which was offset by a $127,000
increase in interest expense and a $30,000 decrease in other income.
(LOSS) FROM DISCONTINUED OPERATIONS
Consolidated (Loss) from Discontinued Operations reflects losses
incurred by the discontinued operation of Rosalco, Inc., a wholly
owned subsidiary of Jayark. The ($206,000) decrease in 1997 is a
result of the operations of Rosalco, Inc. as a discontinued operation.
NET INCOME (LOSS)
Consolidated Net Income of $16,251 as compared to a net loss of
($222,532) during the same period last year occurred primarily as a
result of the write off of the assets of Rosalco, Inc.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1997, consolidated open lines of credit available to
the Company for borrowing, were $950,000 as compared to $750,000 at
April 30, 1997. It is the opinion of the Company's management that
operating expenses, as well as obligations coming due during the next
fiscal year, will be met primarily by cash flow generated from
operations and from available borrowing levels.
Working capital amounted to $18,896 at October 31, 1997, compared to a
deficit of $7,003 at April 30, 1997. The increase is principally due
to the operating income generated in the current year.
Net cash provided by operating activities was $492,000 in 1997,
compared $1,091,000 net cash provided in 1996. The change was due the
increase in net income, accrued salaries and other liabilities.
However, this was offset by decreases in the net assets of
discontinued operations, accounts receivable, and accounts payable.
Net cash used in investing activities was $23,000 in 1997, compared to
$57,000 in 1996.
Net cash used in financing activities was $205,000 in 1997, compared
to $745,000 net cash used in 1996. The change was principally due to
the repayment of subordinated debentures in 1996.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Report on Form 8-K - None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
JAYARK CORPORATION
Registrant
/s/ David L. Koffman March 13, 1998
David L. Koffman, President
Chief Executive Officer
/s/ Robert C. Nolt March 13, 1998
Robert C. Nolt
Chief Financial Officer
Financial Data Schedule
[ARTICLE] 5
[LEGEND]
[RESTATED]
[CIK] 0000053260
[NAME] Jayark Corporation
<MULIPLIER> 1000.0
[CURRENCY] USD
[FISCAL-YEAR-END] 04/30/98
[PERIOD-START] 08/01/97
[PERIOD-END] 10/31/97
[PERIOD-TYPE] 6-mos
[EXCHANGE-RATE]
[CASH] 331
[SECURITIES] -
[RECEIVABLES] 1,039
[ALLOWANCES] -
[INVENTORY] 321
[OTHER] 104
[CURRENT-ASSETS] 1,795
[PP&E] 116
[DEPRECIATION] -
[TOTAL-ASSETS] 2,190
[CURRENT-LIABILITIES] 1,776
[BONDS] -
[COMMON] 2,766
[PREFERRED-MANDATORY] -
[PREFERRED] -
[OTHER-SE] -
[TOTAL-LIABILITY-AND-EQUITY] 2,190
[SALES] 7,322
[TOTAL-REVENUES] 7,322
[CGS] 6,240
[TOTAL-COSTS] 7,100
[OTHER-EXPENSES] -
[LOSS-PROVISION] -
[INTEREST-EXPENSE] 206
[INCOME-PRETAX] 16
[INCOME-TAX] -
[INCOME-CONTINUING] 16
[DISCONTINUED] -
[EXTRAORDINARY] -
[CHANGES] -
[NET-INCOME] 16
[EPS-PRIMARY] 0.00