LIBERTY GROUP HOLDINGS INC
10KSB, 2000-05-17
BLANK CHECKS
Previous: STARMET CORP, 10-Q, 2000-05-17
Next: BARROW HANLEY MEWHINNEY & STRAUSS INC, 13F-HR, 2000-05-17




                      U.S. SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549


                                  Form 10-KSB/A



(Mark One)

[X]  Annual report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934. For the fiscal year ended December 31, 1999

                                       OR

[_]  Transition report under Section 13 or 15(d) of the Securities  Exchange Act
     of 1934 for the transition period from __________ to __________.

                         Commission File Number: 0-9201

                          LIBERTY GROUP HOLDINGS, INC.
                (Name of Small Business Issuer in Its Charter)

                  Delaware                            59-3453151
    (State or Other Jurisdiction of                 (IRS Employer
    Incorporation or Organization)               Identification No.)

            11 52nd Street
            Brooklyn, New York                          11232
    (Address of Principal Executive                   (Zip Code)
               Offices)

      Registrant's telephone number, including area code: (718) 492-1200

       Securities Registered Pursuant to Section 12(b) of the Act: None

         Securities Registered Pursuant to Section 12(g) of the Act:

                                                Name of Each Exchange
         Title of Each Class:                    on which Registered:
         -------------------                     -------------------

    Common Stock, $0.004 par value                       None

      Check  whether the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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  [_]

      Check if there is no disclosure of delinquent  filers pursuant to Item 405
of  Regulation  S-B is  contained  in  this  form,  and no  disclosure  will  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-KSB
or any amendment to this Form 10-KSB. [_]

      The  issuer's  revenues  for its most recent  fiscal year were  $1,660,000
which reflects five weeks of operations of the issuer's primary subsidiary.

      The aggregate  market value of the voting stock of the registrant  held by
non-affiliates of the registrant as of May 15, 2000, was $2,404,063.

      As of May 15, 2000, 6,500,000 shares of the registrant's Common Stock were
outstanding.

      Transitional Small Business Disclosure Format.  Yes [_]  No     [X]




<PAGE>

                                     PART I


      This Form  10-KSB/A  amends  Part I, Item 2 and Item 3 of the Form  10-KSB
(Commission  File Number  0-9201) filed by the Registrant on April 14, 2000 (the
"Form 10-KSB") by deleting said Items in their entirety and replacing said Items
with the following:

Item 2.  Description of Property

      The Company leases  approximately 41,000 square feet of space in Brooklyn,
New York, from a partnership, the partners of whom are related to certain of the
shareholders  of Ferro.  The  warehouse/distribution  and executive  offices are
leased  from said  partnership  pursuant  to a 10-year  lease  which  expires in
January,  2010, for which the Company has paid a base monthly rental of $15,000.
Pursuant to the terms of the lease,  the Company may terminate the lease upon 60
days notice  without  penalty after October 1, 2000.  The Company  believes that
these premises are sufficient for its current needs, however, in connection with
the  Company's  expansion  goals,  the Company may purchase or lease  additional
warehouse space if warranted.



Item 3.  Legal Proceedings

      On February 22, 2000, F&A Dairy Products, Inc. ("F&A") commenced a lawsuit
against Ferro and Liberty in the United States District Court,  Western District
of Wisconsin,  seeking a temporary  restraining order ordering Ferro and Liberty
to escrow  $1,707,310,  or in the alternative,  to enjoin Ferro and Liberty from
removing  the Ferro Shares from escrow.  F&A is  Liberty's  largest  supplier of
cheeses and other dairy products. The parties have agreed to settle the lawsuit,
and  on May  12,  2000  executed  and  delivered  the  definitive  documentation
evidencing the settlement agreement (collectively,  the "Definitive Documents").
The terms of the  settlement  include the  execution of a 14-month note by Ferro
for the amount of $1,063,000 that is payable in varying installments through May
1, 2001, with interest at 0.75% above a bank's "base" rate, a personal guarantee
from the  shareholders of Ferro, a guarantee by Liberty of said note thirty days
and a pledge by Ferro of 500,000 shares of Common Stock.



<PAGE>

                                     PART II

      This Form 10-KSB/A amends Part II, Item 6 and Item 7 of the Form 10-KSB by
deleting  said  Items  in their  entirety  and  replacing  said  Items  with the
following:



Item 6.  Management's  Discussion  and  Analysis of  Financial  Condition  and
         Results of Operations

      The  following  discussion  and  analysis  of  the  Company's  results  of
operations  and  financial  condition  should  be read in  conjunction  with the
Company's  audited  consolidated  financial  statements and notes  thereto.  The
following  discussion  and analysis of the results of  operations  and financial
condition  reflects  results of  operations as though the  acquisition  of Ferro
Foods had been  consummated on January 1, 1998. For the years ended December 31,
1999 and 1998, the results are based on unaudited pro-forma information.


Results of Operations

      From July 1997 until  November  23,  1999,  Bio  Response  was  actively
seeking an  acquisition.  Prior to November  23,  1999,  Bio  Response  had no
assets,  liabilities  or  obligations  and did not engage in any operations or
generate any revenues.  On November 23, 1999 Bio Response was renamed  Liberty
Group Holdings,  Inc. and simultaneously acquired Liberty Food Group, Ltd. and
certain  assets of Ferro Foods Corp.  See Item 1,  "Description  of  Business"
above.

      Sales for the year ended December 31, 1999 decreased by $1,875,521 or 9.8%
to  $17,221,648  compared  to  $19,097,169  of sales of Ferro for the year ended
December  31, 1998.  The primary  reason for the decrease in sales is due to the
reorganization of the operational focus of Ferro and the attention of management
necessary in order to incorporate the business of Ferro into the Company.

      Cost of sales for the year ended December 31, 1999 decreased by $1,490,992
or 9% to $15,081,847  from $16,572,839 for the year ended December 31, 1998. The
decrease is primarily related to the decrease in sales.

      Gross profit  percentage for the year ended December 31, 1999 decreased by
less than one percent to 12.4% from 13.2% for the year ended  December 31, 1998.
The primary  reason for the decrease is the change in price  sensitivity  of the
inventory of the Company.

      Selling expenses for the year ended December 31, 1999 decreased by $59,736
or 6% to $883,756  from  $943,492  for the year ended  December  31,  1998.  The
decrease is  attributable to (1) a change in salesman's  compensation  structure
and (2) a decrease in sales.

      General and  Administrative  expenses for the year ended December 31, 1999
increased by $924,311 or 45.9% to $2,936,007  from $2,011,696 for the year ended
December 31, 1998. The increase is mainly due to the  following:  (1) a non-cash
charge of $550,000  relating to performance stock options granted to officers of
the Company upon achieving  performance  milestones.  (2)  professional  fees of
approximately  $220,000,  as a result of the  Company  being a public  reporting
company and (3) an increase in bad debt expense of $51,000.



Liquidity/Capital Resources

      The Company has losses from operations and negative cash flow, and this is
expected  to  continue  for the  foreseeable  future.  If  revenues  and current
spending  levels are not  adjusted  accordingly,  the Company  may not  generate
sufficient revenues to achieve profitability. Even if profitability is achieved,
the Company may not generate sufficient revenues to achieve profitability.  Even
if  profitability  is  achieved,  the Company  may not sustain or increase  such
profitability  on a  quarterly  or annual  basis in the  future.  The Company is
reviewing  its  options  for  additional  sources  of  capital  and is  offering
securities of the Company to provide for working  capital,  internal  growth and
future  acquisitions.  There  is  no  guarantee  that  the  required  additional
financing  will be available to the Company on acceptable  terms.  If additional
funds are raised by the issuance of our equity  securities,  such as through the
exercise of the redeemable warrants,  then existing  stockholders may experience
dilution of their ownership  interest and such securities may have rights senior
to those of the then existing  holders of common stock. If additional  funds are
raised by the  issuance  of debt  instruments,  the  Company  may be  subject to
certain  limitations on our  operations.  If adequate funds are not available or
not available on acceptable  terms, the Company may be unable to fund expansion,
take  advantage of  acquisition  opportunities,  develop or enhance  services or
respond to competitive pressures.

      In March 2000, the Company received  $100,000 from an accredited  investor
through the issuance of a short term, 9% promissory  note in the same  principal
amount.  On April 25, 2000,  the note was converted into 50,000 shares of common
stock and warrants to purchase  10,000 shares of common stock.  The warrants are
exercisable at $8 per share through April 25, 2003.



Commitments

            Pursuant  to  the  Company's   acquisition  of  a  51%  interest  in
   AskTheRobot,  the Company,  through a wholly-owned  subsidiary,  must provide
   additional  funding to AskTheRobot on a quarterly  basis  commencing June 14,
   2000. The terms of the acquisition agreement require the Company to make five
   quarterly  payments to  AskTheRobot  that are  contingent  upon the number of
   subscribers  to the  services of  AskTheRobot.  If the number of  subscribers
   reaches the specified  level for the quarter:  (i) the Company is required to
   pay  AskTheRobot  $200,000 and (ii) the Company will be required to issue the
   number of common  shares to  AskTheRobot  equal to  $760,000  divided  by the
   greater  of $3.00 per share or the  market  value per share at the end of the
   quarter.


Item 7.  Financial Statements

            The following financial  statements have been prepared in accordance
with the  requirements of Regulation S-B. Such  information  appears on page F-1
through F-22 inclusive of this Form 10-KSB, which pages follow this page.



<PAGE>







                                    PART III

      This Form 10-KSB/A amends Part III, Item 11 of the Form 10-KSB by deleting
said Item in its entirety and replacing said Items with the following:



Item 11. Security Ownership of Certain Beneficial Owners and Management

      The following  table sets forth the beneficial  ownership of the Company's
Common Stock on May 12, 2000 by persons who either (i) are beneficial  owners of
5% of the  Company's  Common  Stock,  or (ii) are  directors  or officers of the
Company.  The  information  contained  in the  table is  based on the  Company's
current information concerning the ownership of its securities.


      As  of  May  12,  2000,  there  were  6,500,000  shares  of  Common  Stock
outstanding.

<TABLE>
<CAPTION>
                                               Beneficial                  Percent
Name and Address of Beneficial Owner(1)        Ownership                  of Class
                                            of Common Stock

<S>                                           <C>                          <C>
Ferro Foods Corporation .................     1,933,000(2)                 29.74%
28 53rd Street
Brooklyn, NY 11232

Haines City Trust .......................     1,088,250(3)                 16.74%
11 52nd Street
Brooklyn, NY 11232

Willow Road Trust .......................       900,000(4)                 13.85%
11 52nd Street
Brooklyn, NY 11232

Steel II Trust ..........................       498,250(4)                  7.67%
11 52nd Street
Brooklyn, NY 11232

Dennis E. Lane ..........................     1,705,750                    26.24%
11 52nd Street
Brooklyn, NY 11232

Barry L. Hawk ...........................     3,420,500(2)(4)(5)(6)        52.62%
11 52nd Street
Brooklyn, NY 11232

All officers and directors of the Company     5,126,250(7)                 78.87%
as a group (two persons)
<FN>


      (1)   Except as noted in these  footnotes  or as otherwise  stated  above,
            each person has sole voting and investment power.

      (2)   2,000,000  shares  were  issued  to Ferro in  consideration  for the
            transfer and sale of all of the assets of Ferro to the Company.  See
            Item 1 "Description of  Business-Overview."  Such shares are subject
            to a Voting Trust and Proxy  Agreement by and among Liberty,  Ferro,
            Frank  Ferro,  Sr.  and  Frank  Gambino  (the  "Voting  Agreement"),
            pursuant to which Mr.  Hawk has full  voting  power over such shares
            until  November  23,  2001.   Moreover,   in  connection   with  the
            acquisition  of the assets from Ferro,  these  shares were placed in
            escrow pursuant to an Escrow Agreement dated as of November 23, 1999
            (the "Escrow Agreement").  Pursuant to Amendment No. 1 to the Escrow
            Agreement  dated as of  February  1, 2000,  67,000  shares of Common
            Stock were  forfeited by Ferro and  released  from escrow to various
            third  parties.  An additional  500,000 shares will be released from
            escrow in connection with the settlement of the lawsuit initiated by
            F&A  (see   "Legal   Proceedings"   above).   Since  the   financial
            accommodation to satisfy debts of Ferro was not  established,  these
            shares  are to  remain  in  escrow  and will not be  released  until
            Liberty determines, in its sole and absolute discretion,  that Ferro
            has entered into a financial accommodation sufficient to satisfy the
            outstanding  debts and  liabilities  connected  with the business of
            Ferro.

      (3)   Each of the trusts was a  stockholder  of Liberty,  and received the
            number of shares of Common Stock set forth  opposite its  respective
            name as a result of the Merger. Dennis Lane and his wife, Diane, are
            the  trustees of both the Haines City Trust and Potomac  River Trust
            (which holds 280,000  shares of Common Stock,  or 4.3% of the issued
            and outstanding  share capital).  Diane Lane and David Lubin,  Esq.,
            are the  trustees  of the Great  Falls Trust  (which  holds  280,000
            shares of Common Stock, or 4.3% of the issued and outstanding  share
            capital).  Each trust  agreed with the Company that it will not sell
            the shares of Common Stock until November 24, 2001. Although each of
            the  trustees  has joint and  several  discretion  on the voting and
            investment  power  of each  of the  respective  trusts,  each of the
            trustees expressly disclaims  beneficial  ownership of the shares of
            Common Stock held by each such trust.

      (4)   Each of the trusts was a  stockholder  of Liberty,  and received the
            number of shares of Common Stock set forth  opposite its  respective
            name as a result of the Merger.  Barry Hawk and his wife,  Lisa, are
            the trustees of both the Willow Road Trust and Crafton  Trust (which
            holds  250,000  shares of Common  Stock,  or 3.85% of the issued and
            outstanding share capital). Lisa Hawk and David Lubin, Esq., are the
            trustees of the Steel II Trust.  Each trust  agreed with the Company
            that it will not sell the shares of Common Stock until  November 24,
            2001. Although each of the trustees has joint and several discretion
            on the voting and investment power of each of the respective trusts,
            each of the trustees expressly disclaims beneficial ownership of the
            shares of Common Stock held by each such trust.

      (5)   Each of  Messrs.  Hawk and Lane are  entitled  to  purchase  275,000
            shares  of  Common  Stock at an  exercise  price of $.004  per share
            pursuant to option  agreements  which were assumed by the Company in
            the Merger.  Said options were  exercisable  if between July 1, 1999
            through  June 30,  2000  Liberty  either  achieved  a 20%  growth in
            revenues or acquired a company with at least $5,000,000 in revenues.

      (6)   The Company  issued 62,500 shares of common stock to each of Messrs.
            Hawk and Lane for a total cash  consideration  of  $202,000  and the
            cancellation of notes in the aggregate amount of $48,000.

      (7)   These shares are attributed to Messrs. Hawk and Lane.

</FN>
</TABLE>


      This Form 10-KSB/A amends Part III, Item 12 of the Form 10-KSB by deleting
the last three  paragraphs  of said Item in their  entirety and  replacing  said
paragraphs with the following:






Item 12. Certain Relationships and Related Transactions.

      Upon the  consummation  of the Asset  Purchase on November 23,  1999,  the
Ferro Shares were placed in escrow,  in  accordance  with the terms of an Escrow
Agreement  dated as of November 23, 1995,  as amended  February 1, 2000,  by and
among Ferro,  the Buyer,  Frank Ferro,  Sr. ("FF") and Frank Gambino  ("FG") and
Herrick,  Feinstein LLP, as escrow agent (the "Escrow Agreement"),  and shall be
released,  at such times and in such amounts, upon written instructions from the
Buyer,  when it, in its sole and  absolute  discretion,  is  satisfied  that all
liabilities  or  obligations  of Ferro,  FF and FG in  connection  with  Ferro's
business  and assets have been  satisfied.  Pursuant to  Amendment  No. 1 to the
Escrow  Agreement  dated as of  February  1,  2000  ("Amendment  No. 1 to Escrow
Agreement"),  67,000 shares of Common Stock were forfeited by Ferro and released
from escrow to various third parties. Since a financial accommodation to satisfy
the debts of the business was not established,  the balance of the shares are to
remain in escrow and are to be released  only upon the written  instructions  of
the Buyer.  It is the  intention of Ferro,  FF and FG that the escrow  shares be
used, to the extent possible,  to satisfy  outstanding  debts and liabilities in
connection  with the business of Ferro.  Accordingly,  additional  shares may be
forfeited by Ferro in the event that such  liabilities  and  obligations are not
satisfied. An additional 500,000 shares are being pledged in connection with the
settlement of the F&A lawsuit. See "Legal Proceedings" above.

      Subsequent  to the  consummation  of the Merger on November 23, 1999,  the
Company  advanced  funds to  Ferro  in the  aggregate  amount  of  approximately
$[1,400,000] to satisfy certain  obligations and liabilities of Ferro.  The loan
is secured by a revolving credit line mortgage,  personal guarantees from FF and
FG and the shares of the Company held in escrow.

      The Company leases from a partnership  approximately 41,000 square feet of
warehouse and office space for which it pays $15,000 per month, in a building in
Brooklyn,  New York, for a ten-year term.  The partners of the  partnership  are
related to the  stockholders of Ferro. For the year ended December 31, 1999, the
Company paid $10,000 to the partnership.  See Item 2,  "Description of Property"
above.


      This Form  10-KSB/A  amends Part III, Item 13 of the Form 10-KSB by adding
the following:


Item 13. Exhibits, List and Reports on Form 8-K.

      (a)   Exhibits

Exhibit
 Number                   Description

4.2     Stock Option Plan

10.14     Secured  Revolving  Promissory  Note dated  December 16, 1999 by Ferro
          Foods Corporation in favor of Liberty Group Holdings, Inc.

10.15     Secured  Revolving  Promissory  Note dated May 1, 2000 by Ferro  Foods
          Corporation in favor of Liberty Group Holdings, Inc.

10.16     Settlement  Agreement dated as of May 12, 2000, by and among F&A Dairy
          Products,  Inc., Ferro Foods Corporation,  Frank Gambino, Frank Ferro,
          Sr. and Liberty Food Group, LLC

10.17     Guaranty dated as of May 12, 2000, by Liberty Food Group,  LLC for the
          benefit of F&A Dairy Products, Inc.
<PAGE>

                                     SIGNATURES

      In accordance  with 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.

                                       LIBERTY HOLDINGS GROUP, INC.


                                       By: /s/ Dennis E. Lane
                                           --------------------
                                          Dennis  E.  Lane,  Chairman,   Chief
                                          Executive Officer, Treasurer




                                       By: /s/ Barry L. Hawk
                                           -------------------
                                          Barry  L.  Hawk,  President,   Chief
                                          Operations Officer, Secretary


      In accordance  with the  requirements  of the  Securities  Exchange Act of
1934,  this  report has been  signed by the  following  persons on behalf of the
registrant in the capacities and on the dates indicated.



 By:   /s/ Dennis E. Lane                May 16, 2000
     --------------------------------
     Dennis E. Lane, Director,
     Chairman, Chief Executive
     Officer, Treasurer



 By:   /s/ Barry L. Hawk                 May 16, 2000
     --------------------------------
     Barry L. Hawk, Director,
     President, Chief Operations
     Officer, Secretary

<PAGE>
                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY



                                  I N D E X


 PAGE

REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS                                F-2/4

CONSOLIDATED BALANCE SHEET
   DECEMBER 31, 1999                                                     F-5

CONSOLIDATED STATEMENTS OF OPERATIONS
   PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
   AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
   NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998                    F-6

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
   PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
   AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
   NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998                    F-7

CONSOLIDATED STATEMENTS OF CASH FLOWS
   PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
   AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
   NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998                    F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               F-9/22



                                    * * *


<PAGE>







                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Liberty Group Holdings, Inc. and Subsidiaries


We have audited the  accompanying  consolidated  balance  sheet of LIBERTY GROUP
HOLDINGS,  INC.  AND  SUBSIDIARIES  as of  December  31,  1999,  and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
the period from  November 23, 1999 through  December 31, 1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of Liberty  Group
Holdings,  Inc. and  Subsidiaries  as of December 31, 1999, and their results of
operations and cash flows for the period from November 23, 1999 through December
31, 1999, in conformity with generally accepted accounting principles.

As  further  explained  in  Note  1,  Liberty  Group  Holdings,  Inc.  commenced
operations on November 23, 1999 when it acquired certain assets and the business
of Ferro Foods Corporation (the "Predecessor")  through a series of transactions
accounted  for  as a  purchase  business  combination.  As  a  result  of  those
transactions,  including,  among  other  things,  the  amortization  of goodwill
arising from purchase accounting adjustments, the accompanying  post-acquisition
financial  statements of Liberty Group Holdings,  Inc. and its  subsidiaries are
not comparable to the accompanying  pre-acquisition  financial statements of the
Predecessor.



                                                J.H. Cohn LLP

Roseland, New Jersey
May 1, 2000, except for Note 12
    as to which the date is May 12, 2000


<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders
Ferro Foods Corporation


We have audited the accompanying statements of operations,  stockholders' equity
and cash flows of FERRO FOODS  CORPORATION  (the  "Predecessor")  for the period
from January 1, 1999 through November 22, 1999.  These financial  statements are
the  responsibility of the Predecessor's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of  operations  and  cash  flows  of the
Predecessor  for the period from January 1, 1999 through  November 22, 1999,  in
conformity with generally accepted accounting principles.

As  further  explained  in  Note  1,  Liberty  Group  Holdings,  Inc.  commenced
operations on November 23, 1999 when it acquired certain assets and the business
of the Predecessor through a series of transactions  accounted for as a purchase
business combination. As a result of those transactions,  including, among other
things,   the  amortization  of  goodwill   arising  from  purchase   accounting
adjustments,  the  accompanying  pre-acquisition  financial  statements  of  the
Predecessor are not comparable to the  accompanying  post-acquisition  financial
statements of Liberty Group Holdings, Inc. and its subsidiaries.



                                                J.H. Cohn LLP

Roseland, New Jersey
May 1, 2000


<PAGE>


                         INDEPENDENT AUDITORS' REPORT


To the Stockholders
Ferro Foods Corporation


We have audited the accompanying statements of operations,  stockholders' equity
and cash flows of FERRO FOODS CORPORATION (the "Predecessor") for the year ended
December 31, 1998.  These  financial  statements are the  responsibility  of the
Predecessor's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of  operations  and  cash  flows  of the
Predecessor  for the year ended December 31, 1998, in conformity  with generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Predecessor  will  continue as a going  concern.  As  discussed in Note 2 to the
financial  statements,  certain  conditions  raise  substantial  doubt about its
ability to continue as a going concern. Management's plans and actions taken are
also  described  in  Note  2.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

                                                Friedman Alpren & Green LLP

New York, New York
March 18, 1999







<PAGE>
<TABLE>
<CAPTION>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                          CONSOLIDATED BALANCE SHEET
                              DECEMBER 31, 1999



                               ASSETS

<S>                                                                     <C>
Cash .................................................................   $    15,013
Accounts receivable, net of allowance for doubtful accounts of $22,000       842,443
Inventories
                                                                             771,564
Other current assets .................................................        44,085
                                                                         -----------
        Total current assets .........................................     1,673,105

Equipment and improvements, net of accumulated depreciation
   and amortization of $4,965 ........................................       202,405
Notes and other receivables from stockholders of Predecessor .........     1,494,188
Goodwill, net of accumulated amortization of $1,620 ..................       233,843
Other assets .........................................................         9,122
                                                                         -----------

        Total ........................................................   $ 3,612,663
                                                                         ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of capital lease obligations ......................   $    10,270
   Accounts payable ..................................................     1,000,674
   Accrued salaries and related expenses .............................        60,023
   Other accrued expenses ............................................       202,256
                                                                         -----------
        Total current liabilities ....................................     1,273,223

Long-term capital lease obligations, net of current portion ..........        26,759
                                                                         -----------
        Total liabilities ............................................     1,299,982
                                                                         -----------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, par value $.004 per share; 5,000,000 shares
      authorized; none issued ........................................          --
   Common stock, par value $.004 per share; 25,000,000 shares
      authorized; 6,500,000 shares issued and outstanding ............        26,000
   Additional paid-in capital ........................................     2,999,000
   Accumulated deficit ...............................................      (712,319)
                                                                         -----------
        Total stockholders' equity ...................................     2,312,681
                                                                         -----------

        Total ........................................................   $ 3,612,663
                                                                         ===========
</TABLE>



See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>


                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                    CONSOLIDATED STATEMENTS OF OPERATIONS
           PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
             AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
              NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998





                                         Period From              Period From
                                           November                 January
                                           23, 1999                 1, 1999
                                           through                  through
                                                                                   Year Ended
                                          December                   November       December
                                          31, 1999                   22, 1999       31, 1998

                                                                  (Predecessor)   (Predecessor)

<S>                                    <C>                        <C>             <C>
Sales ..............................   $  1,663,016               $ 15,558,632    $ 19,097,169

Cost of sales ......................      1,361,281                 13,720,206      16,572,839
                                       ------------               ------------    ------------

Gross profit .......................        301,735                  1,838,426       2,524,330
                                       ------------               ------------    ------------

Operating expenses:
   Selling .........................         55,667                    843,959       1,019,440
   General and administrative ......        958,387                  2,053,542       1,826,637
                                       ------------               ------------    ------------
      Totals .......................      1,014,054                  2,897,501       2,846,077
                                       ------------               ------------    ------------

Loss from operations ...............       (712,319)                (1,059,075)       (321,747)

Interest expense ...................                                   103,487         177,925
                                       ------------               ------------    ------------

Net loss ...........................   $   (712,319)              $ (1,162,562)   $   (499,672)
                                       ============               ============    ============

Basic net loss per common share ....   $       (.11)
                                       ============

Basic weighted average common shares
   outstanding .....................     6,375,000
                                       ============
</TABLE>



See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
                                       LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                                                  AND PREDECESSOR COMPANY

                                      CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                  PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
                                    AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
                                    NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998





                                                                                Additional
                                                        Common Stock               Paid-in       Accumulated
                                                  ------------------------
                                                   Shares        Amount           Capital            Deficit     Total

Predecessor:
<S>                                              <C>            <C>            <C>            <C>            <C>
   Balance, January 1, 1998 ..................            30    $        30    $   126,970    $(1,249,303)   $(1,122,303)

   Net loss ..................................      (499,672)      (499,672)
                                                 -----------    -----------    -----------    -----------    -----------

   Balance, December 31, 1998 ................            30             30        126,970     (1,748,975)    (1,621,975)

   Net loss ..................................    (1,162,562)    (1,162,562)
                                                 -----------    -----------    -----------    -----------    -----------

   Balance, November 22, 1999 ................            30    $        30    $   126,970    $(2,911,537)   $(2,784,537)
                                                 ===========    ===========    ===========    ===========    ===========


Liberty Group Holdings, Inc. and Subsidiaries:
   Effects of reverse acquisitions on November
      23, 1999:
      Shares issued in connection with
          purchase of Bio-Response, Inc. .....     4,150,000    $    16,600    $   (16,600)

      Shares issued in connection with
          purchase of Predecessor's business .     2,225,000          8,900      2,216,100                   $ 2,225,000

   Effect of compensatory stock options
      issued to officers .....................                                     550,000                       550,000

   Sale of common stock to officers ..........       101,000            500        201,500                       202,000

   Exchange of common stock for notes
      receivable from stockholders of
      Predecessor ............................        24,000                        48,000                        48,000

   Net loss ..................................                                                $  (712,319)      (712,319)
                                                 -----------    -----------    -----------    -----------    -----------

   Balance, December 31, 1999 ................     6,500,000    $    26,000    $ 2,999,000    $  (712,319)   $ 2,312,681
                                                 ===========    ===========    ===========    ===========    ===========
</TABLE>



See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>

                  LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                             AND PREDECESSOR COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             PERIOD FROM NOVEMBER 23, 1999 THROUGH DECEMBER 31, 1999
               AND PREDECESSOR PERIOD FROM JANUARY 1, 1999 THROUGH
               NOVEMBER 22, 1999 AND YEAR ENDED DECEMBER 31, 1998




                                                                      Period From    Period From
                                                                        November      January
                                                                        23, 1999      1, 1999
                                                                         through      through        Year Ended
                                                                        December      November         December
                                                                        31, 1999      22, 1999        31, 1998
                                                                     --------------  -------------  -----------

                                                                                    (Predecessor)  (Predecessor)
<S>                                                                   <C>            <C>            <C>
Operating activities:
     Net loss .....................................................   $  (712,319)   $(1,162,562)   $  (499,672)
     Adjustments to reconcile net loss to net
        cash provided by (used in) operating
        activities:
        Depreciation and amortization .............................         6,585         77,446        120,918
        Compensation paid through the issuance of stock options
           to officers ............................................       550,000
        Provision for bad debts ...................................        22,000         51,300
        Changes in operating assets and liabilities:
           Accounts receivable ....................................        12,616        522,725       (180,440)
           Inventories ............................................       (52,831)       178,607        250,827
           Other current assets ...................................         9,585         16,755         10,827
           Accounts payable .......................................     1,000,674       (293,063)       298,821
           Accrued salaries and other related expenses ............        60,023
           Other accrued expenses .................................        80,282        496,622         29,012
                                                                      -----------    -----------    -----------
               Net cash provided by (used in) operating activities        976,615       (112,170)        30,293
                                                                      -----------    -----------    -----------

Investing activities:
     Purchases of equipment and improvements ......................      (105,432)       (22,250)
     Loans to stockholders of Predecessor and other related parties    (1,163,602)      (133,148)
     Increase in other assets .....................................      (139,022)          (650)
                                                                      -----------    -----------    -----------
               Net cash used in investing activities ..............    (1,163,602)      (377,602)       (22,900)
                                                                      -----------    -----------    -----------

Financing activities:
     Proceeds from issuance of notes payable to bank, net .........       257,000         87,000
     Repayments of long-term borrowings ...........................       (56,300)       (90,356)
     Advances from stockholders of Predecessor ....................       279,732
     Proceeds from the sale of common stock .......................       202,000
                                                                                                    -----------
               Net cash provided by (used in) financing activities        202,000        480,432         (3,356)
                                                                      -----------    -----------    -----------

Net increase (decrease) in cash ...................................        15,013         (9,340)         4,037
Cash, beginning of period .........................................          --            9,340          5,303
                                                                      -----------    -----------    -----------

Cash, end of period ...............................................   $    15,013    $      --      $     9,340
                                                                      ===========    ===========    ===========

Supplemental disclosures of cash flow data:
     Interest paid ................................................                  $    99,660    $   148,523
                                                                                     ===========    ===========
</TABLE>



See Notes to Consolidated Financial Statements.
<PAGE>


                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and business:
          Bio-Response,  Inc. ("Bio-Response") was incorporated in February 1972
          in Delaware to conduct various research  activities,  primarily in the
          area of immunology.  In September 1989, Bio-Response filed a voluntary
          petition  under  Chapter  11 of the  Bankruptcy  Act.  In  July  1997,
          Bio-Response  was restructured as an inactive public shell company for
          the purpose of effecting a business  combination with a privately-held
          operating  company.   As  of  November  23,  1999,  the  date  of  the
          consummation   of   the   business   combinations   described   below,
          Bio-Response was inactive.

          Ferro Foods Corporation ("Ferro") was incorporated in 1970 in New York
          to market and distribute  restaurant pizzeria food, food related items
          and  supplies.  As of  November  23,  1999,  it  was  conducting  such
          marketing and distribution operations.

          Liberty Food Group, Ltd. ("Liberty Food") was originally  incorporated
          in June 1999 in Delaware to acquire  control of a food  marketing  and
          distribution  business and become a public company. As of November 23,
          1999,  all of Liberty Food's  outstanding  common shares were owned by
          trusts  for  the  benefit  of its two key  executive  officers  and/or
          members  of  their  respective  families.   It  did  not  conduct  any
          commercial operations during the period from its incorporation through
          November 23, 1999.

          As of November 23,  1999,  Bio-Response  had 650,000  shares of common
          stock outstanding with a par value of $.004 per share. On November 23,
          1999, the following  transactions were  consummated:  (i) Bio-Response
          issued, effectively,  3,500,000 shares of common stock in exchange for
          all of the then outstanding  shares of common stock, and it became the
          legal  acquirer,  of Liberty Food; (ii) Liberty Food was merged into a
          wholly-owned  subsidiary of Bio-Response;  (iii) Bio-Response  issued,
          effectively,  2,000,000 shares of common stock in exchange for certain
          assets and the business of Ferro and, accordingly, it became the legal
          acquirer of Ferro; (iv)  Bio-Response  issued 225,000 shares of common
          stock to an  adviser  for  professional  fees in  connection  with the
          acquisitions;  (v) the assets acquired from Ferro were  contributed to
          Liberty  Food Group LLC  ("Liberty  Food  LLC"),  a  Delaware  limited
          liability  company that is a wholly-owned  subsidiary of Bio-Response;
          (vi) the shares of common stock issued to acquire  Ferro's  assets and
          business  were placed in escrow and will not be  released  until Ferro
          and/or its  stockholders  have paid or otherwise  satisfied all of the
          liabilities of Ferro outstanding on that date (see Note 12); and (vii)
          Bio-Response's  name was  changed  to  Liberty  Group  Holdings,  Inc.
          ("Liberty Holdings").

          Upon  consummation  of  the  transactions   described  above,  Liberty
          Holdings had  6,375,000  shares of common stock  outstanding  of which
          3,500,000 shares,  or 54.9%, were owned by the former  stockholders of
          Liberty Food, 2,000,000 shares, or 31.4%, were owned, effectively,  by
          the stockholders of Ferro, 650,000 shares, or 10.2%, were owned by the
          stockholders of  Bio-Response  prior to the  transactions  and 225,000
          shares,  or 3.5%,  were owned by the  adviser.  In  addition,  the two
          former key executive officers of Liberty Food became the key executive
          officers  responsible  for the management of Liberty  Holdings and its
          subsidiaries subsequent to the consummation of the transactions.


<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and business (concluded):
          As used  herein,  the  "Company"  refers to Liberty  Holdings  and its
          subsidiaries subsequent to the acquisitions and the other transactions
          described  above that were  consummated  on November 23, 1999, and the
          "Predecessor" refers to Ferro prior to its acquisition by the Company.

          Since the former  stockholders  of Liberty Food became the owners of a
          majority of the  outstanding  shares of common stock and the principal
          executive  officers  of  the  Company  as of  November  23,  1999  and
          Bio-Response  had no  significant  operating  activities or assets and
          liabilities  prior to that date, the  acquisitions  of the outstanding
          shares of Liberty Food and the assets and business of the  Predecessor
          by  Bio-Response  have been  accounted  for by the Company as purchase
          business  combinations  and  "reverse  acquisitions"  effective  as of
          November  23, 1999 in which  Bio-Response  was the legal  acquirer and
          Liberty  Food  was  the  accounting   acquirer.   Generally   accepted
          accounting  principles  require the accounting  acquirer in a purchase
          business  combination  to record  the  assets  and  liabilities  of an
          acquired  business on the basis of their fair values as of the date of
          acquisition  and record  the  results of  operations  of the  acquired
          business commencing from the date of acquisition.

          The  Company  did not  record  any of the  assets  or  liabilities  of
          Bio-Response  as of  the  date  of its  acquisition  since  they  were
          insignificant;  however,  it did record the  650,000  shares of common
          stock owned by the  stockholders  of  Bio-Response  and the  3,500,000
          shares  of  common  stock  issued  by   Bio-Response   to  the  former
          stockholders  of Liberty Food as of that date at their  aggregate  par
          value of $16,600 and it  decreased  additional  paid-in  capital by an
          equivalent amount. The Company recorded the assets and certain accrued
          expenses and capital  lease  obligations  of the  Predecessor  that it
          acquired or assumed at their fair values as of the date of acquisition
          as further  explained in Note 3. Since  Liberty Food,  the  accounting
          acquirer,  had no significant  operating  activities prior to November
          23, 1999, the accompanying  consolidated  financial  statements do not
          contain any historical  statements of operations or cash flows for the
          Company prior to that date; instead,  the statements of operations and
          cash flows of the  Predecessor  for the period from January 1, 1999 to
          November  22, 1999 and for the year ended  December 31, 1998 have been
          included  herein in accordance  with the rules and  regulations of the
          Securities and Exchange Commission.  However, as a result, among other
          things, of the transactions that were consummated on November 23, 1999
          and the  related  accounting  adjustments  described  in  Note 3,  the
          accompanying  pre-acquisition  financial statements of the Predecessor
          are not comparable to the accompanying  post-acquisition  consolidated
          financial statements of the Company.


<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary  of  significant  accounting  policies:
          Principles of consolidation:

            The accompanying consolidated financial statements of the Company as
            of  December  31,  1999 and for the period  from  November  23, 1999
            through  December 31, 1999 include the accounts of Liberty  Holdings
            and its subsidiaries, all of which are wholly-owned. All significant
            intercompany  accounts  and  transactions  have been  eliminated  in
            consolidation.

          Use of estimates:
            The preparation of financial statements in conformity with generally
            accepted accounting principles requires management to make estimates
            and   assumptions   that  affect   certain   reported   amounts  and
            disclosures.  Accordingly,  actual  results  could differ from those
            estimates.

          Inventories:
            Inventories  are  stated  at the  lower of cost or  market.  Cost is
            determined using the first-in, first-out ("FIFO") method.

          Equipment and improvements:
            Equipment and  improvements  are stated at cost,  net of accumulated
            depreciation  and  amortization.  Depreciation  and amortization are
            computed  by the  Company  using the  straight-line  method over the
            estimated useful lives of the related assets which range from two to
            ten  years  (depreciation  and  amortization  were  computed  by the
            Predecessor using accelerated methods).

          Goodwill:
            Goodwill,  which represents the excess of the costs of acquiring the
            Predecessor's  business  over the fair value of its net assets as of
            the date of acquisition,  is being amortized using the straight-line
            method over a period of ten years.

          Impairment of long-lived assets:
            The Company has adopted the  provisions  of  Statement  of Financial
            Accounting  Standards  No. 121,  "Accounting  for the  Impairment of
            Long-Lived  Assets  and for  Long-Lived  Assets to be  Disposed  of"
            ("SFAS  121").  Under  SFAS 121,  impairment  losses  on  long-lived
            assets,  such  as  equipment  and  improvements  and  goodwill,  are
            recognized when events or changes in circumstances indicate that the
            undis-counted  cash flows  estimated  to be generated by such assets
            are less  than  their  carrying  value  and,  accordingly,  all or a
            portion of such carrying  value may not be  recoverable.  Impairment
            losses are then  measured by  comparing  the fair value of assets to
            their carrying amounts.

          Revenue recognition:
            Sales are recorded at the time products are shipped.



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 2 - Summary of significant accounting policies (continued):
          Advertising:
            The Company  expenses  the cost of  advertising  and  promotions  as
            incurred.  Advertising  costs  charged  to  operations  amounted  to
            $1,998,  $13,238 and $15,475 for the period from  November  23, 1999
            through December 31, 1999 and the Predecessor period from January 1,
            1999 through November 22, 1999 and year ended December 31, 1998.

          Income taxes:
            The Company and the  Predecessor  have  accounted  for income  taxes
            pursuant to the asset and liability  method which requires  deferred
            income  tax assets  and  liabilities  to be  computed  annually  for
            temporary  differences between the financial statement and tax bases
            of assets and liabilities  that will result in taxable or deductible
            amounts in the future based on enacted tax laws and rates applicable
            to the  periods  in which the  differences  are  expected  to affect
            taxable income.  Valuation allowances are established when necessary
            to reduce deferred tax assets to the amount expected to be realized.
            The income tax  provision or credit is the tax payable or refundable
            for the  period  plus or minus  the  change  during  the  period  in
            deferred tax assets and liabilities.

            The Predecessor,  with the consent of its stockholders,  had elected
            to be treated as an "S" Corporation under the Internal Revenue Code.
            Accordingly, the Predecessor's income or loss prior to that date was
            allocated to the  Predecessor's  stockholders for inclusion in their
            personal Federal income tax returns.  Therefore, the Predecessor was
            not  required  to record  any  historical  provision  or credit  for
            Federal income taxes. The Predecessor had also elected to be treated
            as an "S"  Corporation  for New  York  state  income  tax  purposes.
            However,  New York  imposes  a tax on "S"  Corporation  income  at a
            reduced rate and New York City does not recognize "S"  Corporations.
            Therefore, the Company was required to record appropriate historical
            provisions and credits for state and local income taxes.

            The  Company,  which  is  not  eligible  to be  treated  as  an  "S"
            Corporation, will file a consolidated Federal income tax return with
            its subsidiaries.

          Net earnings (loss) per share:
            The  Company  presents  "basic"  earnings  (loss) per share and,  if
            applicable,  "diluted" earnings per share pursuant to the provisions
            of Statement of Financial  Accounting  Standards No. 128,  "Earnings
            per  Share"  ("SFAS  128").  Basic  earnings  (loss)  per  share  is
            calculated  by dividing net income or loss by the  weighted  average
            number of shares  outstanding during each period. The calculation of
            diluted  earnings per share is similar to that of basic earnings per
            share,  except  that the  denominator  is  increased  to include the
            number of additional  common shares that would have been outstanding
            if all potentially  dilutive  common shares,  such as those issuable
            upon the exercise of stock options, were issued during the period.



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 -  Summary  of  significant  accounting  policies  (concluded):
           Net earnings (loss) per share (concluded):
            Since the Company had a loss for the period from  November  23, 1999
            through  December  31, 1999,  the assumed  effect of the exercise of
            options   outstanding   at   December   31,  1999  would  have  been
            anti-dilutive  and,  therefore,  a diluted per share  amount has not
            been  presented  in  the  accompanying   consolidated  statement  of
            operations for that period.

          Stock options:
            In accordance  with the  provisions of Accounting  Principles  Board
            Opinion No. 25,  "Accounting  for Stock Issued to  Employees"  ("APB
            25"), the Company will recognize  compensation  costs as a result of
            the issuance of stock options to employees  based on the excess,  if
            any, of the fair value of the underlying  stock at the date of grant
            or award (or at an appropriate  subsequent  measurement  date), over
            the amount the  employee  must pay to acquire the stock.  Therefore,
            the Company will not be required to recognize  compensation  expense
            as a result  of any  grants  of stock  options  to  employees  at an
            exercise price that is equivalent to or greater than fair value. The
            Company  will  also  make pro  forma  disclosures,  as  required  by
            Statement of Financial Accounting Standards No. 123, "Accounting for
            Stock-Based  Compensation" ("SFAS 123"), of net income or loss as if
            a fair value based method of  accounting  for stock options had been
            applied   instead  if  such  amounts  differ   materially  from  the
            historical amounts.

          Recent accounting pronouncements:
            The  Financial   Accounting   Standards  Board  and  the  Accounting
            Standards Executive Committee of the American Institute of Certified
            Public Accountants had issued certain  accounting  pronouncements as
            of  December  31,  1999 that will  become  effective  in  subsequent
            periods;  however,  management  of the Company does not believe that
            any of those  pronouncements  would have significantly  affected the
            Company's financial accounting  measurements or disclosures had they
            been in effect  during the period from  November  23,  1999  through
            December 31, 1999.

          Basis of Predecessor financial statements:
            The accompanying  financial  statements of the Predecessor have been
            prepared assuming the Predecessor would continue as a going concern.
            The  Predecessor  incurred a net loss of $499,672 for the year ended
            December  31,  1998 and it had  working  capital  and  stockholders'
            deficiencies  at December  31, 1998 of  $1,683,244  and  $1,621,975,
            respectively. These matters raised substantial doubt at December 31,
            1998 as to the ability of the  Predecessor to continue to operate as
            a going concern.  The Predecessor  financial statements for the year
            ended  December 31, 1998 do not include any  adjustments  that might
            have  resulted from the outcome of this  uncertainty.  Subsequently,
            the  Predecessor  continued  its  commercial  operations  until  its
            business was acquired by the Company on November 23, 1999.

            Certain  accounts in the  Predecessor  financial  statements for the
            year ended  December 31, 1998 have been  reclassified  to conform to
            the  presentations  used for the period from January 1, 1999 through
            November 22, 1999.


<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 3 - Purchase of the Predecessor:
          As explained in Note 1, on November 23, 1999, the Company acquired the
          business and certain assets of the  Predecessor and assumed certain of
          its liabilities, as shown below, by issuing 2,000,000 shares of common
          stock to, effectively, the Predecessor's stockholders. The Company was
          required  to account  for the  acquisition  pursuant  to the  purchase
          method of accounting and, accordingly,  the accompanying  consolidated
          financial   statements  include  the  results  of  operations  of  the
          Predecessor from the date of acquisition.

          The total cost of the  acquisition of the  Predecessor was $2,295,000,
          of which  $2,000,000 was  attributable  to the estimated fair value of
          the 2,000,000 shares of common stock issued to the stockholders of the
          Predecessor,  $225,000 was attributable to the estimated fair value of
          225,000  shares of  common  stock  issued  for  professional  services
          related to the purchase and the balance of $70,000 was attributable to
          cash  payments  for  legal  and  accounting  services  related  to the
          purchase.

          Pursuant to the  purchase  method of  accounting,  the initial cost of
          acquiring the  Predecessor,  which  exceeded the fair value of the net
          assets acquired by $235,462, was allocated as follows:
<TABLE>
<S>                                                                          <C>
                    Accounts receivable ..................................   $   877,070
                    Inventories ..........................................       718,733
                    Other current and noncurrent assets ..................        62,781
                    Goodwill .............................................       235,462
                    Receivables from stockholders of Predecessor .........       282,586
                    Property and equipment ...............................       207,371
                    Accrued expenses and capital lease obligations assumed       (89,003)
                                                                             -----------

                      Total ..............................................   $ 2,295,000
                                                                             ===========
</TABLE>

          In connection with the acquisition, the 2,000,000 shares issued to the
          stockholders of the Predecessor  were placed in escrow and will not be
          released  to the  Predecessor's  stockholders  until  the  Predecessor
          and/or its  stockholders  have paid or otherwise  satisfied all of the
          liabilities of the Predecessor outstanding on the date of acquisition.
          Accordingly, shares may be forfeited by the Predecessor's stockholders
          and  used  for the  payment  of  creditors  in the  event  that  other
          financial arrangements are not consummated (see Notes 5 and 12). A key
          executive officer of the Company holds the voting rights of the shares
          of common stock that are subject to escrow.



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3 - Purchase of the Predecessor (concluded):
          The  following  unaudited pro forma  information  shows the results of
          operations  of the Company for the years ended  December  31, 1999 and
          1998 as though the acquisition of the Predecessor had been consummated
          on January 1, 1998:


<TABLE>
                                                                            1999            1998
                                                                       ------------    ------------

<S>                                                                    <C>             <C>
                    Sales ..........................................   $ 17,221,648    $ 19,097,169
                    Costs of sales .................................     15,081,487      16,572,839
                                                                       ------------    ------------

                    Gross profit ...................................      2,140,161       2,524,330
                                                                       ------------    ------------

                    Operating expenses:
                       Selling .....................................        883,756         943,492
                       General and administrative ..................      2,936,007       2,011,696
                                                                       ------------    ------------
                           Totals ..................................      3,819,763       2,955,188
                                                                       ------------    ------------

                    Net loss .......................................   $ (1,679,602)   $   (430,858)
                                                                       ============    ============

                    Basic net loss per common share ................        $ .(26)    $       (.07)
                                                                       ============    ============

                    Basic weighted average common shares outstanding      6,375,000       6,375,000
                                                                       ============    ============
</TABLE>


          In addition to combining the  historical  results of operations of the
          Company and the  Predecessor  for all of 1999, the unaudited pro forma
          results of operations  include  adjustments  to reflect for the entire
          period (i) the  amortization  of the goodwill  recorded in  connection
          with the acquisition of the Predecessor  based on an estimated  useful
          life of ten years, (ii) executive officers'  compensation based on the
          terms of employment  contracts  that became  effective on November 23,
          1999  (see Note  11);  (iii)  depreciation  and  amortization  expense
          computed  based on the  straight-line  method  (instead of accelerated
          depreciation methods used by the Predecessor); and (iv) elimination of
          interest expense on notes payable not assumed in the acquisition.

          The unaudited  pro forma results of operations  set forth above do not
          purport to represent what the combined results of operations  actually
          would  have  been  if the  acquisition  of the  Predecessor  had  been
          consummated  on January 1, 1998  instead of November  23, 1999 or what
          the results of operations would be for any future periods.


Note 4 - Equipment and improvements:
          At December  31, 1999,  equipment  and  improvements  consisted of the
          following:


<TABLE>
<S>                                                                         <C>
                    Delivery equipment (including $15,865 for equipment
                      under capital leases) .............................   $ 66,131
                    Office and warehouse equipment ......................     73,782
                    Leasehold improvements ..............................     67,457
                                                                            --------
                         Total ..........................................    207,370
                    Less accumulated depreciation and amortization
                      (including $661 for equipment under capital leases)      4,965
                                                                            --------

                         Total ..........................................   $202,405
                                                                            ========
</TABLE>



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 4 - Equipment and improvements (concluded):
          Depreciation  expense for the period from  November  23, 1999  through
          December  31, 1999 and the  Predecessor  period  from  January 1, 1999
          through November 22, 1999 and year ended December 31, 1998 was $4,965,
          $77,446 and $120,918, respectively.


Note 5 - Notes and other receivables from  stockholders of Predecessor:  At
          December 31, 1999,  the Company had notes and other  receivables  from
          related  parties  aggregating  $1,494,188,  including  receivables  of
          $282,586  acquired from the Predecessor on November 23, 1999 (see Note
          3) that arose from loans to the  stockholders  of the  Predecessor who
          are also  stockholders  of the Company.  The  receivable  balance also
          included  $1,211,602 that arose,  primarily,  from payments to vendors
          made  subsequent  to  November  23,  1999 by the  Company  and certain
          stockholders of the Company (see Note 8) on behalf of the stockholders
          of the  Predecessor  for amounts owed by the Predecessor for purchases
          prior to its acquisition by the Company.

          On  December  16,  1999,  a portion of the loans  receivable  from the
          stockholders  of the  Predecessor  was converted to a note  receivable
          through the  issuance of a promissory  note (the "First  Note") to the
          Company with a principal balance of $1,000,000. The First Note matures
          on  November  23, 2000 and bears  interest at 10%. As of December  31,
          1999, the principal balance of the First Note and the remainder of the
          receivable from the  stockholders  of the Predecessor  were secured by
          the personal assets of the stockholders of the Predecessor,  including
          a  first  lien  on  real  estate  owned  by  the  stockholders  of the
          Predecessor with a fair value of approximately  $1,050,000 based on an
          appraisal  received  by the  Company in January  2000.  They were also
          secured by an interest in the 2,000,000 shares of the Company's common
          stock issued to the stockholders of the Predecessor in connection with
          the  acquisition  of the  Predecessor  that  were held in escrow as of
          December  31,  1999  (see  Notes  1, 3 and  12).  However,  due to the
          uncertainties  related to collectibility,  the Company has not accrued
          any interest on the First Note. As a result of the relationship of the
          Company and its related parties, there is no practical method that can
          be used to  determine  the  fair  values  of  these  notes  and  other
          receivables at December 31, 1999.


Note 6 - Capital lease obligations:
          The Company uses delivery equipment under lease agreements  classified
          as capital leases.  The Company's  obligations under capital leases as
          of December 31, 1999 are set forth below:




<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 6 - Capital lease obligations (concluded):

<TABLE>
<S>                                                                                <C>
                       Capital lease obligations payable in monthly
                         installments of $1,230, including interest
                         at 49%, through June 2002; collateralized
                         by delivery equipment .................................   $66,030
                       Less amounts representing interest ......................    29,001
                                                                                   -------
                                 Total .........................................    37,029
                       Less current portion ....................................    10,270
                                                                                   -------

                       Long-term portion .......................................   $26,759
                                                                                   =======

                    Principal payment requirements under capital leases in years
                    subsequent to December 31, 1999 are as follows:

                        Year Ending
                       December 31, ............................................    Amount

                              2000                                                 $10,270
                              2001                                                  15,628
                              2002                                                  11,131
                                                                                   -------

                                Total ..........................................   $37,029
                                                                                   =======
</TABLE>


Note 7 - Income taxes:
          As  of  December  31,  1999,   the  Company  had  net  operating  loss
          carryforwards  of  approximately  $140,000  available to reduce future
          Federal taxable income which will expire in 2019.

          The Company's deferred tax assets as of December 31, 1999 consisted of
          the effects of temporary differences attributable to the following:

                    Compensation paid through the issuance of
                       stock options ........................   $ 220,000
                    Allowance for doubtful accounts .........       9,000
                    Net operating loss carryforwards ........      56,000
                                                                ---------
                                                                  285,000
                    Less valuation allowance ................    (285,000)
                                                                ---------

                               Total ........................   $    --
                                                                =========



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 7 - Income taxes (concluded):
          Due to the  uncertainties  related to, among other things,  the extent
          and  timing of its  future  taxable  income,  the  Company  offset the
          deferred  tax  assets  by  an  equivalent  valuation  allowance  as of
          December 31, 1999. As a result of the  establishment  of the valuation
          allowance as of December 31, 1999, there is no credit for income taxes
          reflected in the accompanying consolidated statement of operations for
          the period from November 23, 1999 through  December 31, 1999 to offset
          the Company's pre-tax loss.

          Due to the  uncertainties  related to, among other things,  the extent
          and timing of its future taxable income,  the Predecessor  also offset
          its  deferred  state  and local tax  assets  by  equivalent  valuation
          allowances.  As a result  of such  offset  and the  Predecessor's  "S"
          Corporation status, there are no credits for income taxes reflected in
          the accompanying  statements of operations for the Predecessor  period
          from January 1, 1999 through November 22, 1999 and year ended December
          31, 1998 to offset the Predecessor's pre-tax losses.


Note 8 - Stockholders' equity:
          Preferred stock authorized:
            The Company's Articles of Incorporation authorize the issuance of up
            to 5,000,000 shares of preferred stock with a par value of $.004 per
            share. The preferred stock may be issued in one or more series, with
            terms and  preferences  to be determined  by the Company's  board of
            directors.  No  shares  of  preferred  stock  had been  issued as of
            December 31, 1999.

          Issuances of common stock:
            As explained  in Note 1, as of November 23, 1999,  the date on which
            it consummated the business combinations and, effectively, commenced
            operations,  the  Company  had  6,375,000  shares  of  common  stock
            outstanding  of which  3,500,000  shares  were  owned by the  former
            stockholders  of Liberty  Food,  2,000,000  shares were owned by the
            stockholders  of the  Predecessor,  650,000 shares were owned by the
            stockholders  of  Bio-Response  and 225,000  shares were owned by an
            adviser.  During the period from November 23, 1999 through  December
            31,  1999,  the Company  sold  101,000  shares to its key  executive
            officers for total cash  consideration  of $202,000.  It also issued
            24,000 shares to the its two key executive  officers in exchange for
            notes  receivable  from  stockholders  of  the  Predecessor  with  a
            principal  balance of $48,000 (see Note 5). The  issuances of shares
            in connection with the business  combinations and the acquisition of
            the  notes  receivable  were  noncash   transactions  that  are  not
            reflected in the accompanying  consolidated  statement of cash flows
            for the period from November 23, 1999 through December 31, 1999.




<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 9 - Stock options:
          The Company has granted  options to two of its key executives  whereby
          they may purchase, in the aggregate,  up to 4,350,000 shares of common
          stock at specified prices if the Company achieves specified  increases
          in  revenues  or it  acquires  businesses  with  specified  levels  of
          revenues.  Options to purchase  550,000 shares at an exercise price of
          $.004 per share  vested on November 23, 1999 upon the  acquisition  of
          the Predecessor. The remaining options will vest as follows:

o            Options to purchase 800,000 shares will become exercisable at $1.00
             per  share (i) on July 1,  2001 if for the 12 month  period  ending
             June 30, 2001 the  Company's  revenues  increase by 20% compared to
             revenues  for the 12 month  period  ending  June  30,  2000 or (ii)
             during  the 12  month  period  ending  June 30,  2001  the  Company
             acquires a business  with  annual  revenues  during its most recent
             fiscal year of at least $5,000,000.
o            Options to purchase 900,000 shares will become exercisable at $1.50
             per  share (i) on July 1,  2002 if for the 12 month  period  ending
             June 30, 2002 the  Company's  revenues  increase by 20% compared to
             revenues  for the 12 month  period  ending  June  30,  2001 or (ii)
             during  the 12  month  period  ending  June 30,  2002  the  Company
             acquires a business  with  annual  revenues  during its most recent
             fiscal year of at least $5,000,000.
o            Options to purchase  1,000,000  shares will become  exercisable  at
             $2.00  per  share  (i) on July 1,  2003 if for the 12 month  period
             ending  June  30,  2003  the  Company's  revenues  increase  by 20%
             compared to revenues for the 12 month  period  ending June 30, 2002
             or (ii) during the 12 month period ending June 30, 2003 the Company
             acquires a business  with  annual  revenues  during its most recent
             fiscal year of at least $5,000,000.
o            Options to purchase  1,100,000  shares will become  exercisable  at
             $2.50  per  share  (i) on July 1,  2004 if for the 12 month  period
             ending  June  30,  2004  the  Company's  revenues  increase  by 20%
             compared to revenues for the 12 month  period  ending June 30, 2003
             or (ii) during the 12 month period ending June 30, 2004 the Company
             acquires a business  with  annual  revenues  during its most recent
             fiscal year of at least $5,000,000.

          The options for each  tranche set forth above will also vest if either
          the revenue  growth or the  acquisition  benchmark  occurs  within the
          following 12 month period.

          Options will be exercisable  for a period of seven years from the date
          they  vest.  Since the  Company  has  elected to  continue  to use the
          provisions of APB 25 in accounting stock options granted to employees,
          the Company will recognize  compensation  expense based on the excess,
          if any,  of the market  price over the  exercise  price for the shares
          subject  to option on the date on which the  options  vest.  Since the
          market price of the Company's shares was approximately $1.00 per share
          on November 23, 1999 and the exercise price of the 550,000 shares that
          became  exercisable on that date was nominal,  the Company  recorded a
          charge to compensation expense of $550,000 on that date.



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 9 - Stock options (concluded):
          In the  opinion  of  management,  if  compensation  cost for the stock
          options granted by the Company during 1999 had been  determined  based
          on the  fair  value  of  the  options  at the  grant  date  under  the
          provisions of SFAS 123 using the  Black-Scholes  option-pricing  model
          and assuming a risk-free  interest rate of 6%,  expected  dividends of
          0%,  expected  option lives of five years and expected  volatility  of
          144%,  the  Company's  pro forma net loss and pro forma basic net loss
          per share  arising  from  such  computation  would  not have  differed
          materially from the corresponding  historical amounts presented in the
          accompanying  consolidated statement of operations for the period from
          November 23, 1999 through December 31, 1999.


Note 10- Employee benefit plan:
          The Company maintains a 401(k) and profit sharing plan for the benefit
          of all eligible employees. The Company makes contributions to the plan
          on a discretionary  basis.  The Company made no  contributions  to the
          plan for the period from November 23, 1999 through December 31, 1999.


Note 11- Other commitments and contingencies:
          Concentrations of credit risk and major suppliers:
            Financial  instruments  that  potentially  subject  the  Company  to
            concentrations of credit risk consist  principally of cash and trade
            receivables.  The Company  maintains  its cash  balances  with major
            financial institutions that have high credit ratings. At times, such
            balances may exceed  Federal  insurance  limits.  Concentrations  of
            credit risk with respect to trade receivables are limited due to the
            large number of customers comprising the Company's customer base.

          Employment agreements:
            The Company has entered into  employment  agreements with two of its
            key  executives  which  became  effective  on November  23, 1999 and
            obligate  the Company to make  aggregate  payments of  approximately
            $336,000 in 2000;  $370,000 in 2001;  $407,000 in 2002;  $447,000 in
            2003;  and $234,000 in 2004.  The key  executives  will also receive
            bonuses to be  determined  by the board of directors of the Company;
            however,  such bonuses may not be paid unless the Company's revenues
            and income  reach  certain  specified  levels;  if these  levels are
            reached,  such  bonuses  may not be less  than  10% of  annual  base
            compensation.



<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11- Other commitments and contingencies (concluded):
          Lease for office facilities:
            The  Predecessor  leased office  facilities  from a partnership on a
            month-to-month  basis  through  November 22,  1999,  and the Company
            continued  to  lease  those  facilities  on the same  basis  through
            December 31, 1999.  The partners of the  partnership  are related to
            the stockholders of the Predecessor.  The Company has entered into a
            operating  lease for the office  facilities with a term of ten years
            that becomes  effective on January 1, 2000 pursuant to which it will
            be required to pay aggregate annual rentals of $180,000.  Such lease
            is cancelable at the option of the Company at any time subsequent to
            October 1, 2000 upon sixty days notice to the lessor.

            Rent  expense   under  the   month-to-month   operating   lease  was
            approximately  $12,500,  $82,600  and  $94,500  for the period  from
            November  23, 1999  through  December  31, 1999 and the  Predecessor
            period from January 1, 1999 through November 22, 1999 and year ended
            December 31, 1998, respectively.

          Litigation:
            The Company is involved in various claims and lawsuits incidental to
            its business  (see Note 12).  Management  believes that the probable
            resolution  of such  contingencies  will not  materially  affect the
            consolidated  financial  position  or results of  operations  of the
            Company.


Note 12- Subsequent events:
          Stock option plan:
            The  board of  directors  approved  the  adoption,  effective  as of
            January 1, 2000, of a stock option plan (the "Option  Plan") whereby
            it may grant  options for the  purchase  of up to 300,000  shares of
            common  stock to  employees,  consultants  and  other  agents of the
            Company.  Under the Option  Plan,  the maximum term of an option may
            not exceed five years. The actual term of each option,  the exercise
            price, the vesting period and the manner of exercise for each option
            will be determined by the board of directors.

            During the period from  January 1, 2000  through May 12,  2000,  the
            board of  directors  granted  options to  employees  pursuant to the
            Option Plan for the  purchase of 93,900  shares of common stock that
            are  exercisable  at $3.00 per  share  during  the five year  period
            subsequent to the date of grant.

          Issuance of shares and warrants:
            On March 10, 2000, the Company received $100,000 from an "accredited
            investor"  through the issuance of a short-term,  9% promissory note
            in the same  principal  amount.  On  April  25,  2000,  the note was
            converted  into  50,000  shares of  common  stock  and  warrants  to
            purchase  10,000 shares of common stock through a private  placement
            intended to be exempt from  registration  pursuant to the provisions
            of Regulation D of the  Securities Act of 1933. The warrants will be
            exercisable at $8.00 per share through April 25, 2003.


<PAGE>



                LIBERTY GROUP HOLDINGS, INC. AND SUBSIDIARIES
                           AND PREDECESSOR COMPANY

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12- Subsequent events (concluded):
          Acquisition:
            On March 14,  2000,  Liberty  Group  Services,  Inc., a newly formed
            subsidiary  of  the  Company,  acquired  a 51%  equity  interest  in
            AskTheRobot,   LLC  ("TheRobot"),   a  subscription-based,   on-line
            personnel  recruiting  and placement  services  company that targets
            Internet   and   e-commerce    companies    through   its   website,
            "AskTheRobot.com."  The total  consideration  initially  paid by the
            Company  for its 51%  interest in TheRobot  was  $200,000,  of which
            $175,000  was  paid  in  cash  and  $25,000  was  paid  through  the
            cancellation  of a  receivable  that  arose  from  loans made by the
            Company to TheRobot  subsequent  to December 31, 1999.  The terms of
            the acquisition agreement require the Company to make four quarterly
            payments to the sellers  through  June 13, 2001 that are  contingent
            upon the growth of the  revenues  of TheRobot  to  specified  levels
            during each quarter. If the revenues of TheRobot reach the specified
            level for the  quarter:  (i) the  Company  will  have the  option of
            paying  $200,000  to the  sellers in cash or  issuing  the number of
            common  shares  to the  sellers  equal to  $200,000  divided  by the
            greater of $3.00 per share or the market  value per share at the end
            of the  quarter,  and (ii) the Company will be required to issue the
            number of common shares to the sellers equal to $760,000  divided by
            the greater of $3.00 per share or the market  value per share at the
            end of the quarter.

          Settlement of litigation:
            On February  22,  2000,  one of the  Company's  major  vendors  (the
            "Vendor")  commenced  litigation against the Predecessor and Liberty
            Food LLC,  a  subsidiary  of the  Company,  in  connection  with the
            collection of  approximately  $1,063,000  owed by the Predecessor to
            the Vendor.  On May 12, 2000, the Vendor,  the Predecessor,  certain
            stockholders  of the Predecessor and Liberty Food LLC entered into a
            settlement   agreement   whereby,   among  other  things:   (i)  the
            Predecessor  agreed  to  issue  a term  note  to the  Vendor  in the
            principal   amount  of   $1,063,000   that  is  payable  in  varying
            installments  through  May 1, 2001  with  interest  at .75%  above a
            specified  bank's  "base"  rate;  (ii) certain  stockholders  of the
            Predecessor  personally  guaranteed the payment of the term note and
            the  interest  thereon and pledged a total of 500,000  shares of the
            Company's  common stock owned by them, but held in escrow (see Notes
            1 and 3), as  additional  collateral  for the term  note;  and (iii)
            Liberty  Food LLC  guaranteed  the  payment of the term note and the
            interest thereon.

          Loans to stockholders of the Predecessor:
            During the period  from  January 1, 2000  through  May 1, 2000,  the
            Company made  additional  payments on behalf of the  stockholders of
            the  Predecessor  that increased the total balance  receivable  from
            related parties to approximately $2,000,000. In addition, a total of
            67,000 shares of the Company's  common stock were  transferred  from
            escrow during that period to satisfy obligations to creditors of the
            Predecessor  (see  Notes 1 and 3).  On May 1,  2000,  an  additional
            portion  of  the  loans  receivable  from  the  stockholders  of the
            Predecessor was converted to a note receivable  through the issuance
            of a  promissory  note (the  "Second  Note") to the  Company  with a
            principal balance of $1,000,000.  The Second Note matures on May 31,
            2001,  bears  interest  at 10% and is secured by the same assets and
            interests as the First Note (see Note 5).



                          LIBERTY GROUP HOLDINGS, INC.
                                   OPTION PLAN


Section 1.        Establishment and Purpose.
                  -------------------------

         The name of the plan is the Liberty Group  Holdings,  Inc.  Option Plan
(the "Plan") which became effective as of January 1, 2000.

         The purpose of the Plan is to offer selected individuals an opportunity
to acquire a  proprietary  interest  in the success of Liberty  Group  Holdings,
Inc., a Delaware  corporation  (the  "Company").  The judgment,  initiative  and
efforts  of valued  employees  and  other  individuals  upon whom the  financial
success  and growth of the Company  largely  depend will be entitled to purchase
proprietary interests in the Company.

Section 2.        Stock Subject to the Plan.
                  -------------------------

         The  total  number  of  shares  of stock  reserved  and  available  for
distribution  under the Plan  shall be  300,000  shares  of common  stock of the
Company. The number of shares reserved hereunder may consist in whole or in part
of authorized and unissued shares or treasury shares.

         Upon exercise of the option in  accordance  with the terms of this Plan
and the Option  Agreement  (described  in Section 5 below),  the  grantee  shall
receive  such  shares of stock of the  Company set forth in the Notice of Option
Grant  delivered to the grantee.  A grantee to whom shares have been issued upon
proper exercise of an option granted hereunder shall be entitled all rights of a
stockholder,  including,  without limitation,  dividends, voting and liquidation
rights.

Section 3.        Administration of the Plan.
                  --------------------------

         The Plan shall be  administered by a Committee (the  "Committee").  The
decision of the Committee as to all questions of interpretation  and application
of the Plan shall be final, binding and conclusive on all persons. The Committee
may, in its sole discretion,  grant options for shares of the Company's stock to
such eligible  individuals as it deems appropriate and issue stock upon exercise
of such options.  The  Committee  shall have  authority,  subject to the express
provisions  of the Plan,  to construe  the Option  Agreements  and the Plan,  to
prescribe,  amend and rescind  rules and  regulations  relating to the Plan,  to
determine the terms and provisions of the Option Agreements, which may, but need
not be identical,  and to make all other  determinations  in the judgment of the
Committee  necessary  or  desirable  for the  administration  of the  Plan.  The
Committee  may  correct  any  defect or supply any  omission  or  reconcile  any
inconsistency  in the Plan or in any Option  Agreement  in the manner and to the
extent it shall deem  expedient  to carry the Plan into  effect and shall be the
sole and final judge of such  expediency.  All  decisions,  interpretations  and
other actions of the Committee  shall be final and binding.  The Committee shall
not be liable for any action or determination  made in good faith. The functions
of the Committee shall be exercised by the Board of Directors of the Company, if
and to the  extent  that no  Committee  exists  which  has the  authority  to so
administer the Plan.

Section 4.        Eligibility.
                  -----------

         Options may be granted to officers and  employees  of the  Company,  as
well  as  agents  and  consultants  to the  Company,  whether  or not  otherwise
employees of the Company.  In determining the eligibility of an individual to be
granted an option under the Plan, as well as in determining the number of shares
to be optioned to any  individual,  the  Committee  shall take into  account the
position and responsibilities of the individual being considered, the nature and
value to the  Company of his or her  services  and  accomplishments,  his or her
present and potential contribution to the success of the Company, and such other
factors as the Committee may deem relevant.

Section 5.        Option Agreement.
                  ----------------

         Each option  shall be governed by Notice of Option  Grant and an option
agreement (the "Option Agreement") duly executed on behalf of the Company and by
the  grantee  to whom such  option is  granted.  The Option  Agreement  shall be
subject to the terms and  conditions of the Plan and may be subject to any other
terms  and  conditions  which are not  inconsistent  with the Plan and which the
Committee  deems  appropriate  for  inclusion  in  the  Option  Agreement.   The
provisions of the various Option Agreements entered into under the Plan need not
be identical.

Section 6.        Option Price and Exercise of Option.
                  -----------------------------------

         The exercise  price shall be determined by the  Committee,  except that
the exercise price of any outstanding options granted under the Prior Plan shall
remain  unchanged.  Each option shall be  exercisable  at such time or times and
during  such period as shall be set forth in the Notice of Option  Grant  and/or
Option Agreement.  To the extent that an option is not exercised when it becomes
initially exercisable,  it shall be carried forward and shall be exercisable, on
a cumulative basis, until the expiration of the exercise period.

Section 7.        Term of Option; Exercisability.
                  ------------------------------

         (a)      Term.
                  ----

                  (i) Each option  shall  expire five (5) years from the date of
the granting thereof, except as (y) otherwise provided pursuant to the provision
of Section 7(b) hereof and (z) earlier termination as herein provided.

                  (ii) Except as otherwise provided in this Section 7, an option
granted to any grantee  who ceases to perform  services  for the  Company  shall
terminate  three  (3)  months  after  the date such  grantee  ceases to  perform
services for the Company.

                  (iii)  If the  grantee  ceases  to  perform  services  for the
Company  because of  dismissal  for cause or because the grantee is in breach of
any  agreement  with the Company,  such option  shall  terminate on the date the
grantee ceases to perform services for the Company.

                  (iv) If the grantee ceases to perform services for the Company
because the grantee has become disabled (as determined in the sole discretion of
Committee),  such option shall terminate on the next immediate  anniversary date
of the  option  grant date  following  the date such  grantee  ceases to perform
services  for the  Company,  or on the date on which the  option  expires by its
terms, whichever occurs first. For example, if the option was granted on January
1st and the grantee became  disabled on July 1st, the option would  terminate on
the following January 1st.

                  (v) In the event of the death of a grantee, any option granted
to such grantee shall  terminate on the next immediate  anniversary  date of the
option  grant date  after the date of death,  or on the date on which the option
expires by its terms, whichever occurs first.

         (b)      Exercisability.
                  --------------

                  (i) Each Option  Agreement  shall specify the date when all or
any  installment  of  the  option  is  first  exercisable.   The  exercisability
provisions  contained  in  any  Option  Agreement  shall  be  determined  by the
Committee in its sole discretion.

                  (ii) Except as otherwise  provided below, an option granted to
any grantee who ceases to perform  services for the Company shall be exercisable
only to the extent that such option has vested and is in effect on the date such
grantee ceases to perform services for the Company.

                  (iii) An option  granted  to a grantee  who  ceases to perform
services  for the  Company  because he or she has become  disabled  (as  defined
above) may be exercised by the grantee or his or her legal  representative,  but
only to the extent  that such option has become  exercisable  on or prior to the
termination  date of the  option  (as  determined  in  accordance  with  Section
7(a)(iv)).

                  (iv) In the  event of the  death of any  grantee,  the  option
granted to such grantee may be exercised by the estate of such grantee or by any
person or persons who acquired  the right to exercise  such option by bequest or
inheritance,  but only to the extent that such option has become  exercisable on
or prior to the termination date of the option (as determined in accordance with
Section 7(a)(v)).

Section 8.        Options and Shares Not Transferable.
                  -----------------------------------

         The option,  the right of any  grantee to  exercise  any option and the
shares  issuable  upon  exercise  of  the  option  shall  not  be,  directly  or
indirectly, disposed, assigned or transferred by such grantee other than by will
or the  laws  of  descent  and  distribution,  and  any  such  option  shall  be
exercisable  during the  lifetime of such  grantee  only by the grantee  (unless
disabled).  Any  attempted  disposition  or other  transfer of the option and/or
shares of stock  granted  pursuant to the  exercise of an option under the Plan,
including without limitation, any gift, purported assignment,  whether voluntary
or by operation of law, pledge, hypothecation or other disposition,  attachment,
trustee process or similar  process,  whether legal or equitable,  shall be null
and void and without effect.

Section 9.        Right of Repurchase and Right of First Refusal.
                  ----------------------------------------------

         (a) Shares of stock issued upon  exercise of an option shall be subject
to a right of repurchase by the Company.  Such restriction shall be set forth in
the applicable Notice of Option Grant and Option Agreement.  Any such repurchase
right  may be  exercised  only  within  90 days  after  the  termination  of the
grantee's employment with the Company. The purchase price for repurchased shares
shall be determined  by the Committee  based upon the average bid price from the
immediate prior twenty trading days.

         (b) Shares of stock issued upon  exercise of an option shall be subject
to a right of first refusal by the Company.  Such restriction shall be set forth
in the applicable Option Agreement.

Section 10.       Recapitalization, Reorganization and Change of Control.
                  ------------------------------------------------------

         In the event that the  outstanding  shares in the  Company  are changed
into or exchanged for a different  number or kind of shares or securities of the
Company  or  another   company   by  reason  of  any   reorganization,   merger,
consolidation,  recapitalization,  reclassification,  combination  or  dividends
payable in capital stock, appropriate adjustment shall be made in the number and
kind of  securities  as to which options may be granted under the Plan and as to
which  outstanding  options  or  portions  thereof  then  unexercised  shall  be
exercised,  to the end that the  proportionate  interest  of  grantees  shall be
maintained as before the occurrence of such event.

         In addition,  unless otherwise  determined by the Committee in its sole
discretion,  in the  case of any (i)  sale,  transfer  or other  disposition  to
another  entity of all or  substantially  all of the  property and assets of the
Company  or (ii)  Change of  Control  (as  defined  below) of the  Company,  the
purchaser(s)  of the Company's  assets or stock may, in its (their)  discretion,
deliver to the grantee the same kind of consideration that is delivered to other
stockholders  of the Company as a result of such sale,  conveyance  or Change of
Control.  Alternatively,  the  Committee may cancel all  outstanding  options in
exchange for consideration in cash or in kind which  consideration in both cases
shall be equal in value to the value the  grantee  would have  received  had the
option been exercised (to the extent so  exercisable)  and no disposition of the
shares  acquired upon such exercise been made prior to such sale,  conveyance or
Change of  Control,  less the  exercise  price  therefor.  Upon  receipt of such
consideration,  the  options  shall  terminate  and be of no  further  force and
effect.  The value of the  stock or other  securities  the  grantee  would  have
received if the option had been  exercised  shall be determined in good faith by
the Committee.

         The  Committee  shall also have the power and right to  accelerate  the
exercisability of any options,  notwithstanding  any limitations in this Plan or
in the Option Agreement upon such a sale, conveyance or Change of Control.

         A  "Change  of  Control"  shall be  deemed  to have  occurred  upon the
consummation  of a  merger,  consolidation  or  other  transaction  with or into
another  entity or any  other  reorganization  if more than 50% of the  combined
voting power of the  continuing  or surviving  entity's  securities  outstanding
immediately   after  such  merger,   consolidation,   reorganization   or  other
transaction  is  owned  by  persons  who  did  not  possess  such  voting  power
immediately  prior  to  such  merger,  consolidation,  reorganization  or  other
transaction.

Section 11.       No Special Employment Rights.
                  ----------------------------

         Nothing contained in the Plan, the Notice of Option Grant or the Option
Agreement or in any option granted  thereunder shall confer upon any grantee any
right with respect to the  continuation  of his or her employment by the Company
or interfere  in any way with the right of the Company,  subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the  compensation  of the grantee from the
rate in existence at the time of the grant of an option.

Section 12.       Withholding.
                  -----------

         The  Company's  obligation  to deliver  shares upon the  exercise of an
option  granted  under the Plan  shall be  subject  to the  satisfaction  by the
grantee,  as determined in the sole discretion of the Company, of all applicable
Federal, state and local income and employment tax withholding requirements.

Section 13.       Purchase for Investment.
                  -----------------------

         Unless the shares to be issued upon exercise of an option granted under
the Plan have been  effectively  registered under the Securities Act of 1933, as
amended (the  "Securities  Act"),  the Company  shall be under no  obligation to
issue any shares of stock  covered by any option unless the person who exercises
such  option,  in whole or in part,  shall  give a  written  representation  and
undertaking to the Company which is satisfactory in form and scope to counsel to
the  Company and upon which,  in the  opinion of such  counsel,  the Company may
reasonably  rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment  and not with
a view  to,  or for  sale in  connection  with,  the  distribution  of any  such
interests,  and that he or she will  make no  transfer  of the  same  except  in
compliance  with any rules and regulations in force at the time of such transfer
under the Securities Act, or any other applicable law.

Section 14.       Modification of Outstanding Options.
                  -----------------------------------

         Subject  to  the  limitations   contained  herein,  the  Committee  may
authorize  the  amendment  of any  outstanding  option  with the  consent of the
grantee  when and  subject  to such  conditions  as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
Section 15.       Termination and Amendment of the Plan.
                  -------------------------------------

         The Plan shall terminate on December 31, 2007. The Committee may at any
time  terminate the Plan or make such  modification  or amendment  thereof as it
deems  appropriate.  Termination  or any  modification  or amendment of the Plan
shall not,  without the consent of a grantee,  affect his or her rights under an
option granted to him or her prior to the date of such amendment.

Section 16.       Notices.
                  -------

         Any communication or notice required or permitted to be given under the
Plan shall be in writing and mailed by registered or certified mail or delivered
to the Company, to its principal place of business,  attention:  Committee, and,
if to the holder of an option,  to the address  appearing  on the records of the
Company.





                          SECURED REVOLVING CREDIT GRID
                                 PROMISSORY NOTE


$1,000,000.00                                                 Brooklyn, New York
                                                               December 16, 1999


                  FOR  VALUE  RECEIVED,  FERRO  FOODS  CORPORATION,  a New  York
corporation  (the "Maker"),  having its principal office c/o Liberty Food Group,
LLC, 25 53rd Street,  Brooklyn,  New York 11232  promises to pay to the order of
LIBERTY GROUP HOLDINGS,  INC. (the "Payee"),  having its principal  office at 11
52nd Street,  Brooklyn,  New York 11232,  the  principal  sum of ONE MILLION and
00/100 DOLLARS ($1,000,000.00) or so much thereof as shall have been advanced by
the Payee to the Maker as a result  of the  Maker not  satisfying  its debts and
obligations  in accordance  with the terms and  provisions of the Asset Purchase
Agreement  dated as of November  23,  1999,  by and among the Maker,  the Payee,
Frank Ferro, Sr. and Frank Gambino,  together with interest thereon,  calculated
from the date hereof,  at a rate of 10% per annum (the  "Interest  Rate") on the
unpaid principal balance hereof as follows:

1. Commencing on January 15, 2000 and on the first day of each month  thereafter
through and until November 23, 2001 (the "Maturity  Date"),  the Maker shall pay
to the Payee  interest only in arrears at the Interest  Rate on the  outstanding
principal  balance  of this Note for the  preceding  period.  Interest  shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.  All
amounts due hereunder,  including without limitation,  all outstanding principal
and all accrued and unpaid  interest,  shall be due and payable on the  Maturity
Date.

2. All  payments  due in  respect of this Note shall be made by the Maker to the
Payee in lawful  currency  of the United  States of America and shall be paid to
the Payee by bank wire transfer,  certified check or bank cashier's  check.  All
payments hereon on account of principal, late payment charges and interest shall
be made to the  Payee,  at the office of the Payee  first  above set forth or at
such  other  office as may be  specified  by the Payee,  for the  account of the
holder  hereof,  unless  otherwise  specified in this Note,  all  payments  made
hereunder  shall  first be applied  to  interest  and the  balance to the unpaid
principal  amount.  If any  payment  of  principal  or  interest  falls due on a
Saturday,  Sunday or public holiday at the place of payment,  then such due date
shall be  extended  to the next  succeeding  full  business  day at the place of
payment and interest shall be payable during such extension.

3.  Payments  under this Note may be prepaid at any time or times in whole or in
part without premium or penalty.  Any such  prepayment(s)  under this Note shall
not be in an amount of less than TEN THOUSAND DOLLARS ($10,000.00).

4. Maker shall pay all expenses,  including reasonable attorney's fees and legal
expenses,  incurred by the Payee in connection with this transaction and be paid
in full on the  Maturity  Date and such  expenses  shall be added to the  unpaid
principal hereof

5. As  collateral  security for the repayment of the  principal  balance  hereof
together  with  accrued and unpaid  interest  thereon and any other  amounts due
hereunder,  the Maker  hereby  pledges  and  grants  to the  Payee a  continuing
security interest (a) in Two Million  (2,000,000)  shares common stock issued by
the Payee (f/k/a Bio-Response, Inc.) held in the name of the Maker (the "Pledged
Shares") and all options and other rights,  contractual or otherwise, in respect
thereof and all  dividends,  cash,  instruments,  investment  property and other
property  (including but not limited to, any stock dividend and any distribution
in  connection  with a stock split) from time to time  received,  receivable  or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares  pursuant  to the Pledge  Agreement  and (b) the real  estate  (the "Real
Estate")  described in the Mortgage and Security Agreement dated the date hereof
(the  "Mortgage")  by and between the Payee and FDG, a real estate  partnership,
the Maker, and Guarantors.

6.  Notwithstanding  anything contained herein for the contrary,  on the date of
sale of the Pledged  Shares and the Real Estate,  Maker shall pay to the Payee a
prepayment  in an amount  equal to 100% of any and all  proceeds  received  as a
result of such sale,  subject only to the payment due to Asia Bank in connection
with the Real Estate (each, a "Mandatory Prepayment"). Each Mandatory Prepayment
shall be applied by Payee  against the amounts due  hereunder  in such manner as
Payee shall, in its sole discretion, elect.

7. If the entire  principal sum  hereunder is not paid when due,  whether on the
Maturity Date or earlier by reason of acceleration  of the payment hereof,  then
from and after such due date,  interest shall accrue on the unpaid principal sum
at the rate of 5% in excess of the Interest  Rate then in effect but in no event
shall such rate be in excess of the highest  legal rate  permitted by applicable
law.

8. This Note evidences  revolving  credit loans made by the Payee to Maker.  The
date and amount of each such  revolving  credit loan and each payment on account
of  principal  thereon  may be  endorsed  by the Payee  (and the Payee is hereby
authorized to endorse) on the grid attached to and made a part of this Note, and
when so endorsed shall represent  evidence thereof binding upon the Maker in the
absence of manifest  error.  Any failure by the Payee to so endorse  shall in no
way mitigate or discharge  the  obligation  of the Maker to repay any  revolving
credit loan actually made. Revolving credit loans shall be made as the Maker may
request  (in the  manner  hereinafter  set forth) up to an  aggregate  principal
amount outstanding at any one time of One Million Dollars ($1,000,000).

9. Should the indebtedness  evidenced hereby or any part thereof be collected at
law or in equity,  or in bankruptcy,  receivership or any other court proceeding
(whether at the trial or appellate  level), or should this Note be placed in the
hands of attorneys  for  collection  upon  default,  the Maker agrees to pay, in
addition to the principal,  any late payment charge and interest due and payable
hereunder,   and  all  costs  of   collecting  or  attempting  to  collect  such
indebtedness, including reasonable attorneys' fees and expenses.

10. All parties hereto, whether Maker, principal, surety, guarantor or indorser,
hereby  waive  demand,  notice of demand,  presentment,  notice of  presentment,
notice of dishonor, protest and notice of protest.

11. If any  payment  hereunder  shall not be made by Maker on the date when due,
including any mandatory  payment other than the payment of the principal balance
outstanding  and due on the Maturity Date, the Payee may impose a late charge of
five cents ($0.05) cents for each dollar  ($1.00) paid late to cover the Payee's
additional  costs to  administer  the loan  represented  hereby due to such late
payment.

12. At the option of the Payee,  this Note and the  entire  unpaid  indebtedness
represented  hereby shall become immediately due and payable upon the occurrence
of any one of the following events of default (each an "Event of Default"):

(i)       The Maker fails to make any payment due hereunder when the same is due
          and owing pursuant to the terms and conditions of this Note;

(ii) If the Maker or either of the guarantors hereof makes an assignment for the
benefit of its or his, as the case may be, creditors,  or commences a case under
the federal bankruptcy laws, or any state insolvency laws, or files any petition
or answer  seeking  for itself  any  reorganization,  arrangement,  composition,
readjustment,  liquidation,  dissolution  or similar relief under any present or
future  statute,  law  or  regulation,  or  files  an  answer  admitting  or not
contesting the material  allegations of a petition  against , or his as the case
may be, in any such proceeding, or seeks or acquiesces in the appointment of any
trustee, custodian,  receiver or liquidator over its or his, as the case may be,
assets;  if, within sixty (60) days after the  commencement of an action against
the Maker or any guarantor seeking any bankruptcy, reorganization,  arrangement,
composition, readjustment,  liquidation, dissolution or similar relief under any
present or future  statute,  such action is not dismissed or all orders  entered
therein or  proceedings  thereunder  affecting  its or his,  as the case may be,
assets have not been vacated;  (iii) A trustee,  receiver,  custodian or similar
official or agent is appointed for the Maker or either of the guarantors for any
substantial part of the Maker's or either of the guarantor's property, or all or
any substantial part of the property of the Maker or either of the guarantors is
condemned, seized or otherwise appropriated by any governmental authority; or

(iv) The Maker or either of the  guarantors  has  failed to  perform  any of the
Maker's  obligations  set forth in the Note or shall  have  breached  any of the
Maker's representations, warranties or covenants set forth in this Note.

13. THE MAKER AND THE  GUARANTORS  AGREE THAT ANY ACTION,  SUIT OR PROCEEDING IN
RESPECT OF OR ARISING OUT OF THIS NOTE MAY BE INITIATED  AND  PROSECUTED  IN THE
STATE OR FEDERAL  COURTS,  AS THE CASE MAY BE,  LOCATED IN NEW YORK COUNTY,  NEW
YORK.  THE MAKER AND THE  GUARANTORS  CONSENT  AND  SUBMIT  TO THE  EXERCISE  OF
JURISDICTION  OVER ITS PERSON BY ANY SUCH  COURT  HAVING  JURISDICTION  OVER THE
SUBJECT  MATTER,  WAIVES  PERSONAL  SERVICE OF ANY AND ALL  PROCESS  UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE MAKER AT ITS ADDRESS  SET FORTH ABOVE OR TO ANY OTHER  ADDRESS AS MAY APPEAR
IN THE PAYEE'S RECORDS AS THE ADDRESS OF THE MAKER.

14. IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE,
THE PAYEE, THE GUARANTORS,  AND THE MAKER WAIVE TRIAL BY JURY, AND THE MAKER AND
THE GUARANTORS ALSO WAIVE (I) THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM
OF ANY NATURE OR  DESCRIPTION,  (II) ANY OBJECTION BASED ON FORUM NON CONVENIENS
OR VENUE, AND (III) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.

15.  After the  occurrence  of a default  hereunder,  the Payee may  accept  any
payments  from the Maker  without  prejudice  to the rights and  remedies of the
Payee provided herein or in the Pledge or Mortgage; and further, the designation
or allocation by the Maker of the disposition or allocation of any payments made
will not be binding upon the Payee which may allocate any and all such  payments
to interest, principal and other fees and charges due hereunder or to any one or
more of them,  in such  amounts,  priorities  and  proportions  as the Payee may
determine in its sole discretion.

16.  Notwithstanding  anything heretofore set forth to the contrary, in no event
shall any  interest  payable  under this Note exceed the maximum  interest  rate
permitted under law and any interest collected  hereunder which may be in excess
of such rate shall be applied to the reduction of principal.

17. The liability of any Maker or guarantor hereunder shall be unconditional and
shall not be in any manner  affected  by any  indulgence  whatsoever  granted or
consented to by the holder hereof,  including, but not limited to, any extension
of time,  renewal,  waiver or other  modification.  Any failure of the holder to
exercise any right  hereunder shall not be construed as a waiver of the right to
exercise  the  same  or any  other  right  at any  time  and  from  time to time
thereafter.  The Payee or any  holder  may  accept  late  payments,  or  partial
payments,  even though marked  "payment in full" or containing  words of similar
import or other  conditions,  without  waiving any of its rights.  No amendment,
modification  or  waiver  of any  provision  of this  Note  nor  consent  to any
departure by the Maker therefrom shall be effective,  irrespective of any course
of  dealing,  unless the same shall be in writing  and signed by the Payee,  and
then such waiver or consent shall be effective only in the specific instance and
for the  specific  purpose  for which  given.  This Note  cannot be  changed  or
terminated  orally or by estoppel or waiver or by any alleged oral  modification
regardless of any claimed partial performance referable thereto.

18. This Note shall be governed by and guarantor in accordance  with the laws of
the State of New York without regard to conflicts of laws principles.
                  IN WITNESS WHEREOF, the undersigned has executed the foregoing
instrument as of the day and year first above written.


WITNESS/ATTEST                                 FERRO FOODS CORPORATION




______________________________                 By: /s/
Print Name: __________________                 Name: Frank Ferro, Sr.
                                               Title:



                                               By: /s/
                                               Name: Frank Gambino
                                               Title:


Each of the undersigned  hereby jointly and severally agrees to  unconditionally
guarantee  the  payment  of all the  obligations  of the Maker  pursuant  to the
Secured Revolving Credit Grid Promissory Note and all amendments, extensions and
modifications hereof.


                                               /s/___________________________
                                               Frank Ferro, Sr.


                                               /s/___________________________
                                               Frank Gambino


<PAGE>



                                 ACKNOWLEDGMENT


                           STATE OF NEW YORK)
                                    )SS.:
                           COUNTY OF NEW YORK        )


                  On the ___ day of  October  in the year 1999  before  me,  the
undersigned,  personally  appeared Frank Ferro,  Sr.,  personally known to me or
proved to me on the basis of  satisfactory  evidence to be the individual  whose
name is  subscribed  to the within  instrument  and  acknowledged  to me that he
executed the same in his capacity,  and that by his signature on the instrument,
the individual or the person upon behalf of which the individual acted, executed
the instrument.



                                            --------------------------
                                                  Notary Public


                           STATE OF NEW YORK)
                                    )SS.:
                           COUNTY OF NEW YORK        )


                  On the ___ day of  October  in the year 1999  before  me,  the
undersigned, personally appeared Frank Gambino, personally known to me or proved
to me on the basis of satisfactory  evidence to be the individual  whose name is
subscribed to the within  instrument and acknowledged to me that he executed the
same  in his  capacity,  and  that  by his  signature  on  the  instrument,  the
individual or the person upon behalf of which the individual acted, executed the
instrument.



                                            --------------------------
                                                  Notary Public



<PAGE>
                                   Schedule A

                         LOANS AND PAYMENTS OF PRINCIPAL


<TABLE>
<CAPTION>


                                         Amount             Unpaid            Amount of
                       Loan                of             Principal           Principal           Notation
     Date              No.                Loan               Paid              Balance            Made By
     ----              ----         -     -----       --     -----        -    --------           -------
<S>             <C>                 <C>               <C>                 <C>                 <C>
- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------
</TABLE>



                          SECURED REVOLVING CREDIT GRID
                                 PROMISSORY NOTE


$1,000,000.00                                                 Brooklyn, New York
                                                                    May  1, 2000


                  FOR  VALUE  RECEIVED,  FERRO  FOODS  CORPORATION,  a New  York
corporation  (the "Maker"),  having its principal office c/o Liberty Food Group,
LLC, 25 53rd Street,  Brooklyn,  New York 11232  promises to pay to the order of
LIBERTY GROUP HOLDINGS,  INC. (the "Payee"),  having its principal  office at 11
52nd Street,  Brooklyn,  New York 11232,  the  principal  sum of ONE MILLION and
00/100 DOLLARS ($1,000,000.00) or so much thereof as shall have been advanced by
the Payee to the Maker as a result  of the  Maker not  satisfying  its debts and
obligations  in accordance  with the terms and  provisions of the Asset Purchase
Agreement  dated as of November  23,  1999,  by and among the Maker,  the Payee,
Frank Ferro, Sr. and Frank Gambino,  together with interest thereon,  calculated
from the date hereof,  at a rate of 10% per annum (the  "Interest  Rate") on the
unpaid principal balance hereof as follows:

1.  Commencing  on June 1, 2000 and on the first  day of each  month  thereafter
through and until May 31, 2001 (the "Maturity Date"), the Maker shall pay to the
Payee interest only in arrears at the Interest Rate on the outstanding principal
balance of this Note for the preceding period. Interest shall be computed on the
basis of a 360-day year  consisting  of twelve  30-day  months.  All amounts due
hereunder,  including  without  limitation,  all  outstanding  principal and all
accrued and unpaid interest, shall be due and payable on the Maturity Date.

2. All  payments  due in  respect of this Note shall be made by the Maker to the
Payee in lawful  currency  of the United  States of America and shall be paid to
the Payee by bank wire transfer,  certified check or bank cashier's  check.  All
payments hereon on account of principal, late payment charges and interest shall
be made to the  Payee,  at the office of the Payee  first  above set forth or at
such  other  office as may be  specified  by the Payee,  for the  account of the
holder  hereof,  unless  otherwise  specified in this Note,  all  payments  made
hereunder  shall  first be applied  to  interest  and the  balance to the unpaid
principal  amount.  If any  payment  of  principal  or  interest  falls due on a
Saturday,  Sunday or public holiday at the place of payment,  then such due date
shall be  extended  to the next  succeeding  full  business  day at the place of
payment and interest shall be payable during such extension.

3.  Payments  under this Note may be prepaid at any time or times in whole or in
part without premium or penalty.  Any such  prepayment(s)  under this Note shall
not be in an amount of less than TEN THOUSAND DOLLARS ($10,000.00).

4. Maker shall pay all expenses,  including reasonable attorney's fees and legal
expenses,  incurred by the Payee in connection with this transaction and be paid
in full on the  Maturity  Date and such  expenses  shall be added to the  unpaid
principal hereof.

5. As  collateral  security for the repayment of the  principal  balance  hereof
together  with  accrued and unpaid  interest  thereon and any other  amounts due
hereunder,  the Maker  hereby  pledges  and  grants  to the  Payee a  continuing
security interest the real estate (the "Real Estate")  described in the Mortgage
and Security  Agreement dated December 16, 1999 (the  "Mortgage") by and between
the Payee and Maker.

6.  Notwithstanding  anything contained herein for the contrary,  on the date of
sale of the Real Estate,  Maker shall pay to the Payee a prepayment in an amount
equal to 100% of any and all proceeds received as a result of such sale, subject
only to the payment due to Asia Bank in connection with the Real Estate (each, a
"Mandatory  Prepayment").  Each Mandatory  Prepayment  shall be applied by Payee
against the amounts due  hereunder  in such manner as Payee  shall,  in its sole
discretion, elect.

7. If the entire  principal sum  hereunder is not paid when due,  whether on the
Maturity Date or earlier by reason of acceleration  of the payment hereof,  then
from and after such due date,  interest shall accrue on the unpaid principal sum
at the rate of 5% in excess of the Interest  Rate then in effect but in no event
shall such rate be in excess of the highest  legal rate  permitted by applicable
law.

8. This Note evidences  revolving  credit loans made by the Payee to Maker.  The
date and amount of each such  revolving  credit loan and each payment on account
of  principal  thereon  may be  endorsed  by the Payee  (and the Payee is hereby
authorized to endorse) on the grid attached to and made a part of this Note, and
when so endorsed shall represent  evidence thereof binding upon the Maker in the
absence of manifest  error.  Any failure by the Payee to so endorse  shall in no
way mitigate or discharge  the  obligation  of the Maker to repay any  revolving
credit loan actually made. Revolving credit loans shall be made as the Maker may
request  (in the  manner  hereinafter  set forth) up to an  aggregate  principal
amount outstanding at any one time of One Million Dollars ($1,000,000).

9. Should the indebtedness  evidenced hereby or any part thereof be collected at
law or in equity,  or in bankruptcy,  receivership or any other court proceeding
(whether at the trial or appellate  level), or should this Note be placed in the
hands of attorneys  for  collection  upon  default,  the Maker agrees to pay, in
addition to the principal,  any late payment charge and interest due and payable
hereunder,   and  all  costs  of   collecting  or  attempting  to  collect  such
indebtedness, including reasonable attorneys' fees and expenses.

10. All parties hereto, whether Maker, principal, surety, guarantor or indorser,
hereby  waive  demand,  notice of demand,  presentment,  notice of  presentment,
notice of dishonor, protest and notice of protest.

11. If any  payment  hereunder  shall not be made by Maker on the date when due,
including any mandatory  payment other than the payment of the principal balance
outstanding  and due on the Maturity Date, the Payee may impose a late charge of
five cents ($0.05) cents for each dollar  ($1.00) paid late to cover the Payee's
additional  costs to  administer  the loan  represented  hereby due to such late
payment.

12. At the option of the Payee,  this Note and the  entire  unpaid  indebtedness
represented  hereby shall become immediately due and payable upon the occurrence
of any one of the following events of default (each an "Event of Default"):

(i)       The Maker fails to make any payment due hereunder when the same is due
          and owing pursuant to the terms and conditions of this Note;

(ii) If the Maker or either of the guarantors hereof makes an assignment for the
benefit of its or his, as the case may be, creditors,  or commences a case under
the federal bankruptcy laws, or any state insolvency laws, or files any petition
or answer  seeking  for itself  any  reorganization,  arrangement,  composition,
readjustment,  liquidation,  dissolution  or similar relief under any present or
future  statute,  law  or  regulation,  or  files  an  answer  admitting  or not
contesting the material  allegations of a petition  against , or his as the case
may be, in any such proceeding, or seeks or acquiesces in the appointment of any
trustee, custodian,  receiver or liquidator over its or his, as the case may be,
assets;  if, within sixty (60) days after the  commencement of an action against
the Maker or any guarantor seeking any bankruptcy, reorganization,  arrangement,
composition, readjustment,  liquidation, dissolution or similar relief under any
present or future  statute,  such action is not dismissed or all orders  entered
therein or  proceedings  thereunder  affecting  its or his,  as the case may be,
assets have not been vacated;  (iii) A trustee,  receiver,  custodian or similar
official or agent is appointed for the Maker or either of the guarantors for any
substantial part of the Maker's or either of the guarantor's property, or all or
any substantial part of the property of the Maker or either of the guarantors is
condemned, seized or otherwise appropriated by any governmental authority; or

(iv) The Maker or either of the  guarantors  has  failed to  perform  any of the
Maker's  obligations  set forth in the Note or shall  have  breached  any of the
Maker's representations, warranties or covenants set forth in this Note.

13. THE MAKER AND THE  GUARANTORS  AGREE THAT ANY ACTION,  SUIT OR PROCEEDING IN
RESPECT OF OR ARISING OUT OF THIS NOTE MAY BE INITIATED  AND  PROSECUTED  IN THE
STATE OR FEDERAL  COURTS,  AS THE CASE MAY BE,  LOCATED IN NEW YORK COUNTY,  NEW
YORK.  THE MAKER AND THE  GUARANTORS  CONSENT  AND  SUBMIT  TO THE  EXERCISE  OF
JURISDICTION  OVER ITS PERSON BY ANY SUCH  COURT  HAVING  JURISDICTION  OVER THE
SUBJECT  MATTER,  WAIVES  PERSONAL  SERVICE OF ANY AND ALL  PROCESS  UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO
THE MAKER AT ITS ADDRESS  SET FORTH ABOVE OR TO ANY OTHER  ADDRESS AS MAY APPEAR
IN THE PAYEE'S RECORDS AS THE ADDRESS OF THE MAKER.

14. IN ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS NOTE,
THE PAYEE, THE GUARANTORS,  AND THE MAKER WAIVE TRIAL BY JURY, AND THE MAKER AND
THE GUARANTORS ALSO WAIVE (I) THE RIGHT TO INTERPOSE ANY SET-OFF OR COUNTERCLAIM
OF ANY NATURE OR  DESCRIPTION,  (II) ANY OBJECTION BASED ON FORUM NON CONVENIENS
OR VENUE, AND (III) ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.

15.  After the  occurrence  of a default  hereunder,  the Payee may  accept  any
payments  from the Maker  without  prejudice  to the rights and  remedies of the
Payee provided herein or in the Pledge or Mortgage; and further, the designation
or allocation by the Maker of the disposition or allocation of any payments made
will not be binding upon the Payee which may allocate any and all such  payments
to interest, principal and other fees and charges due hereunder or to any one or
more of them,  in such  amounts,  priorities  and  proportions  as the Payee may
determine in its sole discretion.

16.  Notwithstanding  anything heretofore set forth to the contrary, in no event
shall any  interest  payable  under this Note exceed the maximum  interest  rate
permitted under law and any interest collected  hereunder which may be in excess
of such rate shall be applied to the reduction of principal.

17. The liability of any Maker or guarantor hereunder shall be unconditional and
shall not be in any manner  affected  by any  indulgence  whatsoever  granted or
consented to by the holder hereof,  including, but not limited to, any extension
of time,  renewal,  waiver or other  modification.  Any failure of the holder to
exercise any right  hereunder shall not be construed as a waiver of the right to
exercise  the  same  or any  other  right  at any  time  and  from  time to time
thereafter.  The Payee or any  holder  may  accept  late  payments,  or  partial
payments,  even though marked  "payment in full" or containing  words of similar
import or other  conditions,  without  waiving any of its rights.  No amendment,
modification  or  waiver  of any  provision  of this  Note  nor  consent  to any
departure by the Maker therefrom shall be effective,  irrespective of any course
of  dealing,  unless the same shall be in writing  and signed by the Payee,  and
then such waiver or consent shall be effective only in the specific instance and
for the  specific  purpose  for which  given.  This Note  cannot be  changed  or
terminated  orally or by estoppel or waiver or by any alleged oral  modification
regardless of any claimed partial performance referable thereto.

18. This Note shall be governed by and guarantor in accordance  with the laws of
the State of New York without regard to conflicts of laws principles.
                  IN WITNESS WHEREOF, the undersigned has executed the foregoing
instrument as of the day and year first above written.





WITNESS/ATTEST                                 FERRO FOODS CORPORATION




______________________________                 By: /s/
Print Name: __________________                 Name: Frank Ferro, Sr.
                                               Title:



                                               By:/s/
                                               Name: Frank Gambino
                                               Title:


Each of the undersigned  hereby jointly and severally agrees to  unconditionally
guarantee  the  payment  of all the  obligations  of the Maker  pursuant  to the
Secured Revolving Credit Grid Promissory Note and all amendments, extensions and
modifications hereof.


                                               /s/___________________________
                                               Frank Ferro, Sr.


                                               /s/___________________________
                                               Frank Gambino


<PAGE>




                                 ACKNOWLEDGMENT


                               STATE OF NEW YORK)
                                      )SS.:
                              COUNTY OF NEW YORK )


                  On the ___ day of  October  in the year 1999  before  me,  the
undersigned,  personally  appeared Frank Ferro,  Sr.,  personally known to me or
proved to me on the basis of  satisfactory  evidence to be the individual  whose
name is  subscribed  to the within  instrument  and  acknowledged  to me that he
executed the same in his capacity,  and that by his signature on the instrument,
the individual or the person upon behalf of which the individual acted, executed
the instrument.



                                            --------------------------
                                                  Notary Public


                           STATE OF NEW YORK)
                                    )SS.:
                           COUNTY OF NEW YORK        )


                  On the ___ day of  October  in the year 1999  before  me,  the
undersigned, personally appeared Frank Gambino, personally known to me or proved
to me on the basis of satisfactory  evidence to be the individual  whose name is
subscribed to the within  instrument and acknowledged to me that he executed the
same  in his  capacity,  and  that  by his  signature  on  the  instrument,  the
individual or the person upon behalf of which the individual acted, executed the
instrument.



                                            --------------------------
                                                  Notary Public



<PAGE>
                                   Schedule A

                         LOANS AND PAYMENTS OF PRINCIPAL


<TABLE>
<CAPTION>


                                         Amount             Unpaid            Amount of
                       Loan                of             Principal           Principal           Notation
     Date              No.                Loan               Paid              Balance            Made By
     ----              ----         -     -----       --     -----        -    --------           -------
<S>             <C>                 <C>               <C>                 <C>                 <C>
- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------

- - --------------- ------------------- ----------------- ------------------- ------------------- -----------------
</TABLE>


                              SETTLEMENT AGREEMENT

         AGREEMENT  dated as of May 12,  2000 by and among  F&A Dairy  Products,
Inc.,  a Wisconsin  corporation  ("F&A"),  Ferro Foods  Corporation,  a New York
corporation ("Ferro"), Frank Gambino ("FG"), Frank Ferro, Sr. ("FF") and Liberty
Food Group, LLC, a Delaware limited liability company ("Liberty").

                              W I T N E S S E T H :

         WHEREAS,  a motion for a temporary  restraining  order was filed by F&A
against Ferro and Liberty in the United States District Court,  Western District
of Wisconsin on February  22, 2000 (the  "Action"),  a copy of which is attached
thereto as Exhibit A;

         WHEREAS, the parties hereto agreed to settle the Action pursuant to the
terms and provisions of a letter agreement dated February 25, 2000 from Herrick,
Feinstein LLP, counsel to Liberty, to Winthrop & Weinstine, P.A., counsel to F&A
(the "Letter  Agreement"),  a copy of which is attached hereto as Exhibit B, and
to incorporate the terms and provisions of the Letter  Agreement into definitive
settlement documentation;

         WHEREAS, the parties acknowledge that prior to the date hereof, the sum
of  $100,000  has  been  paid  to  F&A to be  credited  towards  payment  of the
outstanding balance owed by Ferro to F&A (the "Prior Payment");

         WHEREAS,  Liberty,  Ferro, FG, FF and F&A desire to settle, and resolve
the pending  Action and any  outstanding  claims and disputes and other  matters
related to the dealings  among them,  and to confirm the terms and provisions of
the Letter  Agreement in this  Agreement  and the  agreements  attached  hereto,
subject to the terms and conditions hereinafter set forth.

         NOW,  THEREFORE,  in  consideration  of the mutual  promises  contained
herein and other good and valuable  consideration the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

1.        Settlement.

          Simultaneously upon the execution of this Agreement (the "Closing"):

          1.        Ferro shall  execute and  deliver a  promissory  note in the
                    principal amount of  $1,063,123.09  (taking into account the
                    Prior  Payment  and the  payment  being made  simultaneously
                    herewith  under  Section  A.1.  above)  in favor of F&A (the
                    "Note"), in the form attached hereto as Exhibit C;

          2.        Liberty shall execute and deliver to F&A a Limited Guaranty,
                    in the form attached hereto as Exhibit D;



<PAGE>

          3.        FG and FF, as  principals  of Ferro,  shall each execute and
                    deliver to F&A,  a Personal  Guaranty  of all  payments  due
                    under the Note,  in the form  attached  hereto as Exhibit E.
                    Additionally, FG and FF shall pay to F&A upon the earlier to
                    occur of (i) the expiration of the term of the Note or, (ii)
                    the closing of the Real Estate  Transactions  (as defined in
                    Section C.1. below), the amount of $__________, representing
                    interest on the  $1,717,310 at the rate of 9% per annum from
                    January 1, 2000 until the date hereof;

          4.        Ferro shall execute and deliver a Stock Pledge  Agreement in
                    favor of F&A,  securing  the  Note by a  pledge  of stock of
                    Liberty  Group  Holdings,  Inc.  ("Holdings"),  in the  form
                    attached hereto as Exhibit F;

          5.        F&A and Liberty shall execute and deliver a Label Repurchase
                    Agreement, in the form attached hereto as Exhibit G;

          6.        F&A will cause their counsel to execute and immediately file
                    a stipulation  dismissing  and  withdrawing  the Action with
                    prejudice, in the form attached hereto as Exhibit H.

2.        Business Dealings.

          1.        During  the  four  (4) week  period  commencing  on the date
                    hereof, F&A shall be entitled to receive from Liberty,  on a
                    weekly basis,  a payment to be credited  against the Note in
                    the amount of the greater of (i) $100,000 or (ii) the amount
                    owed for the  actual  order  delivered  and  shipped  by F&A
                    during each such week.

          2.        From and after the date hereof until May 1, 2000,  F&A shall
                    supply  Liberty for all orders placed by Liberty to F&A on a
                    30-day credit basis. From and after May 1, 2000, such credit
                    terms shall be reduced to a 21-day payment term.

          3.        Commencing  on May 1,  2000 and  continuing  for all  orders
                    placed  until May 31,  2000,  Liberty  shall be  entitled to
                    receive  from F&A a $.02 per pound  discount  on all  orders
                    placed  with F&A other  than with  respect to orders for the
                    Dan Palo label;  provided,  however,  that if at the time of
                    placing  the order,  Liberty is not  current in its  payment
                    obligations  to  F&A,  no  discount  will  be  available  to
                    Liberty.

3.        Available Proceeds; Collateral

          1.        Upon the financing of any Real Estate  Transactions (as such
                    term is defined below), the available proceeds from any such
                    Transaction  shall  be used  first to pay the  creditors  of
                    Ferro,  including Liberty and F&A, pro ratably in proportion
                    to their respective debts,  which shall not be less than 50%
                    of the  proceeds to F&A.  "Real Estate  Transactions"  shall
                    mean  the  re-financing  of  real  properties  owned  by the
                    principals  of Ferro  and  their  affiliates  and/or  family
                    members ("Ferro  Principals") in Brooklyn,  New York and New
                    Jersey, after the second Medallion financing transaction.

          2.        Upon the financing and/or  hypothecation of any transactions
                    with  respect  to the  stock of  Holdings  which was paid to
                    Ferro  as  consideration  for  its  assets,   the  available
                    proceeds shall be used to pay creditors of Ferro,  including
                    Liberty  and  F&A,  pro  ratably  in   proportion  to  their
                    respective debts. 1.

<PAGE>

          3.        F&A shall become a mortgagee on the real estate owned by the
                    Ferro Principals,  including  without  limitation the Queens
                    and Brooklyn parcels, as set forth on Schedule 1 hereto. F&A
                    acknowledges  that Liberty has a $1,000,000  unfiled  credit
                    line  mortgage  which may be filed at anytime  against  said
                    real estate.

4.        Confidentiality.

                    The  parties  acknowledge  and agree  that the terms of this
          settlement and all documents  relating  thereto are  confidential  and
          hereby covenant and agree that they, or any entity which they control,
          shall not  disclose,  directly or  indirectly,  to any third party the
          terms of this  Agreement or any matter or  information  relating to or
          concerning this Agreement and all discussions and information provided
          in connection  herewith and said matters and information shall be kept
          strictly  confidential,  except as required by applicable law, rule or
          regulation.

5.        Representations and Warranties.

          1.        Each party hereto  represents  and warrants  that (i) it has
                    the full power and  authority  to enter into this  Agreement
                    and to execute and deliver all other documents in connection
                    herewith,  and the  execution,  delivery and  performance of
                    this  Agreement and such other  documents by such party will
                    not  violate  the  certificate  of  incorporation,  by-laws,
                    limited  liability  agreement or certificate of formation of
                    any such  party or any other  agreement  affecting  any such
                    party or any law, rule,  order,  ordinance or statute of any
                    governmental  authority having jurisdiction over such party;
                    and (ii) the  person  signing  below on behalf of such party
                    represents  that he is an officer of such entity and that he
                    has been  authorized  to enter into this  Agreement,  and to
                    execute all documents in connection herewith, and to do such
                    other acts and things as may be necessary or appropriate for
                    and consistent  with carrying out the intent and purposes of
                    this Agreement.

          2.        Liberty  represents and warrants that during the term of the
                    Note,  it will  not  sell,  assign,  transfer  or  otherwise
                    dispose of all or  substantially  all of its  assets,  other
                    than in the ordinary course of its business.

6.        Further Assurances

                    Each  of the  parties  hereto  agree  to do such  other  and
          further acts and things,  and to execute and deliver such  instruments
          and  documents  at any time after the date hereof as any party  hereto
          may  reasonably  request to effect the purposes and provisions of this
          Agreement.

7.        General

          1.        This Agreement may be executed in two or more  counterparts,
                    each of which shall constitute on original, but all of which
                    when  taken  together  shall  constitute  one and  the  same
                    instrument.
<PAGE>
          2.        This  Agreement  shall be construed in  accordance  with and
                    governed by the laws of the State of New York without regard
                    to conflict of law principles.

          3.        This  Agreement  shall  be  binding  upon  and  inure to the
                    benefit  of  the  parties,   and  their  respective   heirs,
                    successors, personal representatives, and assigns.

          4.        This Agreement and the Letter Agreement  contains the entire
                    agreement  between  the parties  hereto with  respect to the
                    matters   contemplated   herein  and  supercedes  all  prior
                    agreements or  understandings  among the parties  related to
                    the subject matter herein.

          5.        No change or  modification of this Agreement shall be valid,
                    binding or  enforceable  as a party  hereto  unless the same
                    shall be in writing and signed by the parties hereto.

          6.        If any  provision  of  this  Agreement  or  the  application
                    thereof to any party or  circumstance  shall be held invalid
                    or  unenforceable  to any  extent,  the  remainder  of  this
                    Agreement  and the  application  of such  provisions  to the
                    other parties or circumstances shall not be effected thereby
                    and shall be enforced to the  greatest  extent  permitted by
                    applicable law.



<PAGE>

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement as of the date first written above.


                                                     FERRO FOODS CORPORATION



                                              By:  /s/______________________
                                            Name:  Frank Ferro, Sr.,
                                           Title:  President


                                                     LIBERTY FOOD GROUP, LLC


                                              By:  LIBERTY GROUP HOLDINGS, INC.,
                                                   Managing Member


                                              By:  /s/______________________
                                            Name:  Barry L. Hawk,
                                           Title:  President


                                                   F&A DAIRY PRODUCTS, INC.


                                              By:  /s/______________________
                                            Name:
                                           Title:


                                                   /s/
                                                  -----------------------------
                                                  Frank Ferro, Sr., Individually


                                                   /s/
                                                  -----------------------------
                                                  Frank Gambino, Individually


<PAGE>



                            INDIVIDUAL ACKNOWLEDGMENT


                                   STATE OF )
                                     ) ss.:
                                  COUNTY OF )

           On this day of March, 2000, before me, a Notary Public in and for the
jurisdiction  aforesaid,  personally appeared Frank Ferro, Sr., personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within  agreement and acknowledged to me that by
his signature on the agreement, the individual executed the instrument.


- - ------------------------------
Signature and Office of individual
taking acknowledgment

[SEAL]



                            INDIVIDUAL ACKNOWLEDGMENT


                                   STATE OF )
                                     ) ss.:
                                  COUNTY OF )


           On this day of March, 2000, before me, a Notary Public in and for the
jurisdiction aforesaid,  personally appeared Frank Gambino,  personally known to
me or proved to me on the basis of  satisfactory  evidence to be the  individual
whose name is subscribed to the within  agreement and acknowledged to me that by
his signature on the agreement, the individual executed the agreement.


- - ------------------------------
Signature and Office of individual
taking acknowledgment

[SEAL]


<PAGE>



                                 ACKNOWLEDGMENT


                                   STATE OF )
                                     : ss.:
                                  COUNTY OF )


           On this day of March, 2000, before me, a Notary Public in and for the
jurisdiction  aforesaid,  personally appeared Frank Ferro, Sr., personally known
to me or proved to me on the basis of satisfactory evidence to be the individual
whose name is subscribed to the within  agreement and acknowledged to me that he
executed the same in his capacity,  on behalf of Ferro Foods Corporation,  a New
York  corporation  as the  President  thereof,  and that by his signature on the
agreement,  the  person or entity  upon  behalf of which the  individual  acted,
executed the agreement.


- - ------------------------------
Signature and Office of individual
taking acknowledgment

[SEAL]


<PAGE>




                                 ACKNOWLEDGMENT


                                   STATE OF )
                                     : ss.:
                                  COUNTY OF )


           On this day of March, 2000, before me, a Notary Public in and for the
jurisdiction  aforesaid,  personally appeared Barry L. Hawk, personally known to
me or proved to me on the basis of  satisfactory  evidence to be the  individual
whose name is subscribed to the within  agreement and acknowledged to me that he
executed the same in his capacity, on behalf of Liberty Group Holdings,  Inc., a
Delaware  corporation,  and the managing  member of Liberty  Food Group,  LLC, a
Delaware limited liability company,  as the President  thereof,  and that by his
signature  on the  agreement,  the  person  or entity  upon  behalf of which the
individual acted, executed the agreement.


- - ------------------------------
Signature and Office of individual
taking acknowledgment

[SEAL]


<PAGE>
                                 ACKNOWLEDGMENT


                                   STATE OF )
                                     : ss.:
                                  COUNTY OF )


           On this day of March, 2000, before me, a Notary Public in and for the
jurisdiction  aforesaid,  personally appeared , personally known to me or proved
to me on the basis of satisfactory  evidence to be the individual  whose name is
subscribed to the within  agreement and  acknowledged to me that he executed the
same  in  his  capacity,   on  behalf  of  F&A  Dairy  Products,   Inc.  as  the
____________________  [fill in capacity in which signing]  thereof,  and that by
his  signature on the  agreement,  the person or entity upon behalf of which the
individual acted, executed the agreement.


- - ------------------------------
Signature and Office of individual
taking acknowledgment

[SEAL]




                      GUARANTY BY LIMITED LIABILITY COMPANY


                                                              Brooklyn, New York
                                                                    May 12, 2000

This  Guaranty,  dated  effective  as of May 12,  2000,  is made by Liberty Food
Group,  LLC, a Delaware limited  liability  company (the  "Guarantor"),  for the
benefit  of  F&A  Dairy  Products,  Inc.,  a  Wisconsin  corporation  (with  its
successors and assigns, the "Lender").

Ferro Foods Corporation,  a New York corporation (the "Borrower"),  has executed
and delivered a certain Term Note  effective as of April 1, 2000 in the original
principal  amount of  $1,063,123.09  and payable to the order of the Lender (the
"Note").

As a condition to accepting the Note,  the Lender has required the execution and
delivery of this Guaranty.

ACCORDINGLY,  the Guarantor, in consideration of the premises and other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,   hereby  agrees  as  follows:

1. Indebtedness Guaranteed.  The Guarantor hereby absolutely and unconditionally
guarantees  to the  Lender  the full and  prompt  payment  when due,  whether at
maturity or earlier by reason of acceleration  or otherwise,  of the obligations
of the Borrower  under and pursuant to the Note (all of said  obligations  being
hereinafter called the "Indebtedness").

2.  Guarantor's  Representations  and Warranties.  The Guarantor  represents and
warrants to the Lender that (i) the  Guarantor is a limited  liability  company,
duly organized and existing in good standing and has full power and authority to
make and deliver this Guaranty; (ii) the execution,  delivery and performance of
this Guaranty by the Guarantor have been duly authorized by all necessary action
of its governors and members and do not and will not violate the  provisions of,
or constitute a default under,  any presently  applicable law or its articles of
organization  or operating  agreement or any member  control or other  agreement
presently  binding  on it;  (iii)  this  Guaranty  has been  duly  executed  and
delivered  by  the  authorized   managers  or  officers  of  the  Guarantor  and
constitutes its lawful, binding and legally enforceable obligation; and (iv) the
authorization,  execution,  delivery  and  performance  of this  Guaranty do not
require  notification  to,  registration  with,  or consent or approval  by, any
federal,  state or local regulatory body or administrative agency. The Guarantor
represents  and  warrants  to the  Lender  that the  Guarantor  has a direct and
substantial  economic interest in the Borrower's  affairs and that this Guaranty
is given for a company purpose. The Lender may rely conclusively on a continuing
warranty,  hereby  made,  that the  Guarantor  continues to be benefited by this
Guaranty  and the  Lender  shall have no duty to  inquire  into or  confirm  the
receipt  of any  such  benefits,  and  this  Guaranty  shall  be  effective  and
enforceable by the Lender without regard to the receipt,  nature or value of any
such benefits.

3. Unconditional Nature. No act or thing need occur to establish the Guarantor's
liability  hereunder,  and no act or thing, except full payment and discharge of
all of the Indebtedness,  shall in any way exonerate the Guarantor  hereunder or
modify, reduce, limit or release the Guarantor's liability hereunder. This is an
absolute,  unconditional and continuing  guaranty of payment of the Indebtedness
and shall continue to be in force and be binding upon the Guarantor,  whether or
not all of the  Indebtedness  is paid in full,  until this  Guaranty  is revoked
prospectively as to future transactions,  by written notice actually received by
the  Lender,  and such  revocation  shall not be  effective  as to the amount of
Indebtedness  existing or  committed  for at the time of actual  receipt of such
notice  by  the  Lender,  or as to any  renewals,  extensions,  refinancings  or
refundings thereof.

4.  Dissolution or Insolvency of Guarantor.  The  dissolution or adjudication of
bankruptcy of the Guarantor  shall not revoke this Guaranty,  except upon actual
receipt of written  notice thereof by the Lender and only  prospectively,  as to
future transactions, as herein set forth. If the Guarantor shall be dissolved or
shall be or become insolvent (however  defined),  then the Lender shall have the
right to declare  immediately due and payable,  and the Guarantor will forthwith
pay to the Lender,  the full amount of all of the  Indebtedness  whether due and
payable  or  unmatured.  If the  Guarantor  voluntarily  commences  or  there is
commenced  involuntarily  against the  Guarantor a case under the United  States
Bankruptcy Code, the full amount of all Indebtedness, whether due and payable or
unmatured,  shall be  immediately  due and  payable  without  demand  or  notice
thereof.

5. Limited  Guaranty.  Notwithstanding  the aggregate amount of the Indebtedness
which may from time to time be outstanding,  the Guarantor's liability hereunder
shall be limited to a  principal  amount  equal to the  principal  amount of the
Note, as reduced by the payments  described in the last sentence of Section 3 of
the Note,  plus accrued  interest  thereon and all attorneys'  fees,  collection
costs  and  enforcement   expenses  referable  thereto.   The  Indebtedness  may
thereafter be created and  continued in any amount,  whether or not in excess of
such principal amount,  without affecting or impairing the Guarantor's liability
hereunder,  and the Lender may pay (or allow for the  payment of) the excess out
of  any  sums  received  by or  available  to  the  Lender  on  account  of  the
Indebtedness from the Borrower or any other person (except the Guarantor),  from
their properties,  out of any collateral  security or from any other source, and
such payment (or allowance)  shall not reduce,  affect or impair the Guarantor's
liability hereunder.

6.  Subrogation.  The  Guarantor  will not  exercise  or  enforce  any  right of
contribution,  reimbursement, recourse or subrogation available to the Guarantor
as to any of the Indebtedness,  or against any person liable therefor,  or as to
any collateral security therefor, unless and until all of the Indebtedness shall
have been fully paid and discharged.

7. Enforcement Expenses.  The Guarantor will pay or reimburse the Lender for all
costs, expenses and reasonable attorneys' fees paid or incurred by the Lender in
endeavoring  to collect and  enforce  the  Indebtedness  and in  enforcing  this
Guaranty.

8.  Lender's  Rights.  The  Lender  shall  not be  obligated  by  reason  of its
acceptance  of this  Guaranty  to  engage  in any  transactions  with or for the
Borrower. Whether or not any existing relationship between the Guarantor and the
Borrower  has been  changed or ended and whether or not this  Guaranty  has been
revoked,  the Lender may enter into  transactions  resulting  in the creation or
continuance of the Indebtedness  and may otherwise  agree,  consent to or suffer
the creation or continuance of any of the  Indebtedness,  without any consent or
approval by the  Guarantor  and without  any prior or  subsequent  notice to the
Guarantor. The Guarantor's liability shall not be affected or impaired by any of
the following  acts or things  (which the Lender is expressly  authorized to do,
omit or suffer  from time to time,  both  before  and after  revocation  of this
Guaranty,  without consent or approval by or notice to the  Guarantor):  (i) any
acceptance of collateral security, guarantors, accommodation parties or sureties
for any or all of the  Indebtedness;  (ii) one or more extensions or renewals of
the  Indebtedness  (whether or not for longer than the  original  period) or any
modification of the maturities, if any, or other contractual terms applicable to
any of the  Indebtedness or any amendment or modification of any of the terms or
provisions of any loan agreement or other agreement under which the Indebtedness
or any part  thereof  arose;  (iii) any  waiver  or  indulgence  granted  to the
Borrower,  any delay or lack of diligence in the enforcement of the Indebtedness
or any failure to institute proceedings, file a claim, give any required notices
or otherwise protect any of the  Indebtedness;  (iv) any full or partial release
of,  compromise or settlement with, or agreement not to sue, the Borrower or any
guarantor or other person liable in respect of any of the Indebtedness;  (v) any
release,  surrender,  cancellation  or other  discharge  of any  evidence of the
Indebtedness  or the  acceptance of any  instrument  in renewal or  substitution
therefor;  (vi) any failure to obtain collateral  security  (including rights of
setoff) for the Indebtedness, or to see to the proper or sufficient creation and
perfection  thereof,  or to  establish  the  priority  thereof,  or to preserve,
protect,  insure, care for, exercise or enforce any collateral security;  or any
modification,   alteration,  substitution,  exchange,  surrender,  cancellation,
termination, release or other change, impairment,  limitation, loss or discharge
of any collateral security; (vii) any collection, sale, lease or disposition of,
or any other  foreclosure or  enforcement  of or realization  on, any collateral
security;  (viii)  any  assignment,  pledge  or  other  transfer  of  any of the
Indebtedness  or any  evidence  thereof;  (ix) any  manner,  order or  method of
application  of any  payments  or  credits  upon the  Indebtedness;  and (x) any
election by the Lender under  Section  1111(b) of the United  States  Bankruptcy
Code. The Guarantor  waives any and all defenses and  discharges  available to a
surety, guarantor or accommodation co-obligor.

9. Waivers by  Guarantor.  The Guarantor  waives any and all  defenses,  claims,
setoffs and discharges of the Borrower, or any other obligor,  pertaining to the
Indebtedness,  except the  defense  of  discharge  by  payment in full.  Without
limiting the generality of the foregoing,  the Guarantor will not assert,  plead
or enforce  against  the Lender any  defense of waiver,  release,  discharge  or
disallowance  in bankruptcy,  statute of limitations,  res judicata,  statute of
frauds, anti-deficiency statute, fraud, incapacity,  minority, usury, illegality
or  unenforceability  which may be available to the Borrower or any other person
liable in respect of any of the  Indebtedness,  or any setoff available  against
the Lender to the Borrower or any other such  person,  whether or not on account
of a related  transaction.  The  Guarantor  expressly  agrees that the Guarantor
shall be and remain liable for any deficiency remaining after foreclosure of any
mortgage or security  interest  securing  the  Indebtedness,  whether or not the
liability of the Borrower or any other obligor for such deficiency is discharged
pursuant to statute or judicial  decision.  The liability of the Guarantor shall
not be  affected  or  impaired  by any  voluntary  or  involuntary  liquidation,
dissolution,  sale  or  other  disposition  of all or  substantially  all of the
assets,  marshalling  of  assets  and  liabilities,   receivership,  insolvency,
bankruptcy,   assignment   for  the   benefit  of   creditors,   reorganization,
arrangement,   composition  or  readjustment  of,  or  other  similar  event  or
proceeding affecting,  the Borrower or any of its assets. The Guarantor will not
assert,  plead or  enforce  against  the  Lender  any  claim,  defense or setoff
available  to  the  Guarantor   against  the  Borrower.   The  Guarantor  waives
presentment, demand for payment, notice of dishonor or nonpayment and protest of
any  instrument  evidencing the  Indebtedness.  The Lender shall not be required
first to  resort  for  payment  of the  Indebtedness  to the  Borrower  or other
persons, or their properties,  or first to enforce,  realize upon or exhaust any
collateral  security  for the  Indebtedness,  before  enforcing  this  Guaranty.
Nothing  herein shall  constitute a waiver of any defense or claim  available to
the Guarantor against the Lender pursuant to that certain  Settlement  Agreement
of even date  herewith by and among the Lender,  the  Borrower,  the  Guarantor,
Frank Gambino and Frank Ferro, Sr. (the "Settlement  Agreement") or that certain
Label  Repurchase  Agreement of even date herewith by and between the Lender and
the Borrower (the "Repurchase Agreement").

10. If Payments  Set Aside,  etc.  If any  payment  applied by the Lender to the
Indebtedness  is thereafter  set aside,  recovered,  rescinded or required to be
returned  for  any  reason  (including,   without  limitation,  the  bankruptcy,
insolvency  or  reorganization  of the  Borrower  or  any  other  obligor),  the
Indebtedness  to which such  payment was  applied  shall for the purpose of this
Guaranty  be  deemed  to  have  continued  in  existence,  notwithstanding  such
application,  and this Guaranty shall be enforceable as to such  Indebtedness as
fully as if such application had never been made.

11.  Additional  Obligation of Guarantor.  The Guarantor's  liability under this
Guaranty is in addition to and shall be cumulative with all other liabilities of
the  Guarantor  to the  Lender as  guarantor,  surety,  endorser,  accommodation
co-obligor  or  otherwise  of any  of  the  Indebtedness  or  obligation  of the
Borrower,  without  any  limitation  as to  amount,  unless  the  instrument  or
agreement evidencing or creating such other liability  specifically  provides to
the contrary.

12. No Duties Owed by Lender.  The  Guarantor  acknowledges  and agrees that the
Lender (i) has not made any  representations or warranties with respect to, (ii)
does not assume any  responsibility  to the Guarantor for, and (iii) has no duty
to provide information to the Guarantor regarding,  the enforceability of any of
the  Indebtedness  or the financial  condition of the Borrower or any guarantor.
The Guarantor has independently  determined the creditworthiness of the Borrower
and the enforceability of the Indebtedness and until the Indebtedness is paid in
full will independently and without reliance on the Lender continue to make such
determinations.

13. Miscellaneous. This Guaranty shall be effective upon delivery to the Lender,
without  further act,  condition or acceptance  by the Lender,  shall be binding
upon the  Guarantor  and the  successors  and assigns of the Guarantor and shall
inure  to the  benefit  of the  Lender  and  its  successors  and  assigns.  Any
invalidity or  unenforceability of any provision or application of this Guaranty
shall not affect other lawful  provisions and application  thereof,  and to this
end the provisions of this Guaranty are declared to be severable.  This Guaranty
may not be waived, modified, amended, terminated,  released or otherwise changed
except by a writing signed by the Guarantor and the Lender.  This Guaranty shall
be governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Minnesota.  The Guarantor  hereby (i) consents to
the personal  jurisdiction  of the state and federal courts located in the State
of Minnesota in connection with any controversy  related to this Guaranty;  (ii)
waives any argument that venue in any such forum is not convenient, (iii) agrees
that any litigation  initiated by the Lender or the Guarantor in connection with
this Guaranty shall be venued in either the District  Court of Hennepin  County,
Minnesota,  or the United States District Court,  District of Minnesota,  Fourth
Division;  and (iv)  agrees that a final  judgment  in any such suit,  action or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the judgment or in any other manner provided by law.

14. Waiver of Jury Trial. THE GUARANTOR HEREBY  IRREVOCABLY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED ON
OR PERTAINING TO THIS GUARANTY.

IN WITNESS  WHEREOF,  this  Guaranty has been duly executed by the Guarantor the
date first written above.


                                        LIBERTY FOOD GROUP, LLC


                                        By /s/
                                           ----------------------------------
                                            Its
                                                -----------------------------

                             Address:
                                     -------------------------------
                                     -------------------------------
                                     -------------------------------
                                     -------------------------------



STATE OF __________        )
                           )
COUNTY OF _________        )

The foregoing instrument was acknowledged before me this ____ day of April, 2000
by _____________  _____________________,  the _______________________ of Liberty
Food Group, LLC, a ______________  limited liability  company,  on behalf of the
limited liability company.


                                                __________________________
                                                Notary Public


MPL1: 333776-4


<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
     (Replace this text with the legend)
</LEGEND>
<CIK>                         000311927
<NAME>                        LIBERTY GROUP HOLDINGS, INC
<MULTIPLIER>                                     1
<CURRENCY>                                     USD

<S>                            <C>
<FISCAL-YEAR-END>                      Dec-31-1999
<PERIOD-START>                         Nov-23-1999
<PERIOD-END>                           Dec-31-1999
<PERIOD-TYPE>                                 YEAR
<EXCHANGE-RATE>                                  1
<CASH>                                      15,013
<SECURITIES>                                     0
<RECEIVABLES>                              864,443
<ALLOWANCES>                                22,000
<INVENTORY>                                771,564
<CURRENT-ASSETS>                         1,673,105
<PP&E>                                     207,370
<DEPRECIATION>                               4,965
<TOTAL-ASSETS>                           3,612,663
<CURRENT-LIABILITIES>                    1,273,223
<BONDS>                                          0
                            0
                                      0
<COMMON>                                    26,000
<OTHER-SE>                               2,286,681
<TOTAL-LIABILITY-AND-EQUITY>             3,612,663
<SALES>                                  1,663,016
<TOTAL-REVENUES>                         1,633,016
<CGS>                                    1,361,281
<TOTAL-COSTS>                            1,361,281
<OTHER-EXPENSES>                         1,014,054
<LOSS-PROVISION>                            22,000
<INTEREST-EXPENSE>                               0
<INCOME-PRETAX>                          (712,319)
<INCOME-TAX>                                     0
<INCOME-CONTINUING>                      (712,319)
<DISCONTINUED>                                   0
<EXTRAORDINARY>                                  0
<CHANGES>                                        0
<NET-INCOME>                             (712,319)
<EPS-BASIC>                                  (.11)
<EPS-DILUTED>                                (.11)



</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission