SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For Quarter Ended: September 30, 1996
Commission File No. 1-10825
NEW GENERATION FOODS, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 36-2972588
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(State of Incorporation) (I.R.S. Employer Identification No.)
45 Graham Road
Scarsdale, New York 10583
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(Address of Principal Executive Office)
(Zip Code)
52 Barry Road
Scarsdale, New York 10583
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(Former address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (914) 722-2410
Indicate by check mark whether the issuer (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities and Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Common stock $.01 par value -- 399,830 shares outstanding as of
September 30, 1996.
Page 1 of 12
<PAGE>
PART I - FINANCIAL INFORMATION
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Item 1. Financial statements
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NEW GENERATION FOODS, INC. AND SUBSIDIARIES
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Consolidated Balance Sheets
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<TABLE>
<CAPTION>
Sept. 30, December 31,
1996 1995
Assets (unaudited) (audited)
- ------------------------------------------------------- ----------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,976,751 $ 1,265,756
Marketable investment securities at market value 6,273 27,789
Notes receivable, less deferred gain of $543,158 in 1995 - 223,501
Misc. Receivable 1,185 -
Interest receivable - 6,808
- ------------------------------------------------ ------------ -----------
Total current assets 1,984,209 1,523,854
- ------------------------------------------------ ------------ -----------
Property, plant and equipment, at cost 36,649 30,816
Less accumulated depreciation and amortization 19,227 18,669
- ------------------------------------------------- ------------ ----------
Net property, plant and equipment 17,422 12,147
- ------------------------------------------------- ------------ ----------
Total assets $ 2,001,631 $ 1,536,001
- -------------------------------------------------- =========== ===========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
(Continued)
2
<PAGE>
NEW GENERATION FOOD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
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<TABLE>
<CAPTION>
Sept. 30, December 31,
1996 1995
Liabilities and Stockholders' Equity (unaudited) (audited)
------------------------------------ ----------- -----------
<S> <C> <C>
Current liabilities:
Accrued compensation $ 3,922 $ 11,500
Accrued franchise taxes 45,200 45,200
Accrued expenses 783 4,239
- ------------------------------------------------ ------------- -----------
Total current liabilities 49,905 60,939
- ------------------------------------------------ ------------- -----------
Stockholders' equity:
Cumulative Convertible Voting Preferred Stock, $.01.
par value:
Series A (stated at liquidation value of $.75 per
share). Authorized 2,333,333 shares; issued and
outstanding 2,333,333 1,750,000 1,750,000
Series B (stated at liquidation value of $1.00 per
share). Authorized 350,000 shares; issued and
outstanding 310,000 310,000 310,000
Common stock, $.01 par value. Authorized 25,000,000
shares; issued 399,830 3,998 3,998
Additional paid in capital 22,818,930 22,818,930
Retained deficit (22,931,202) (23,407,866)
- --------------------------------------------------------- ------------- -----------
Total stockholders equity 1,951,726 1,475,062
Commitments and contingencies - -
- ------------------------------------------------------ ------------- -----------
Total liabilities and stockholders' equity $ 2,001,631 $ 1,536,001
- ---------------------------------------------------------- ============= ============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
3
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
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<TABLE>
<CAPTION>
For the three
months ended
Sept. 30,
1996 1995
----------- --------
<S> <C> <C>
Net sales $ - $ -
Cost of sales - -
- --------------------------------------------------- ----------- ---------
Gross profit - -
----------- ---------
Operating expenses:
General and administrative: 42,231 46,888
----------- ---------
Total operating expenses 42,231 46,888
----------- ---------
Operating loss (42,231) (46,888)
- --------------------------------------------------- ----------- ----------
Other income (deductions):
Interest and dividend income 18,594 27,802
Net gain (loss) on marketable investment securities (4,378) (38,330)
Gain on sale of assets - 35,403
----------- ----------
Total other income (deductions) 14,216 24,875
----------- ----------
Net income (loss) before taxes (28,015) (22,013)
Corporate income taxes - -
----------- ----------
Net income (loss) $ (28,015) $ (22,013)
=========== ==========
Net income (loss) per share of common stock $ (.07) $ (.06)
Weighted average number of common shares outstanding 399,830 399,830
</TABLE>
No dividends were paid by the company during the three-month periods
ended September 30, 1996 and 1995.
See accompanying notes to consolidated financial statements.
4
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
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<TABLE>
<CAPTION>
For the nine
months ended
Sept. 30,
1996 1995
---------- ---------
<S> <C> <C>
Net sales $ - $ -
Cost of sales - -
- ------------------------------------ ------------ -----------
Gross profit - -
- ------------------------------------ ------------ -----------
Operating expenses:
- -------------------
General and administrative: 124,525 153,736
- ----------------------------------- ------------ -----------
Total operating expenses 124,525 153,736
- ----------------------------------- ------------ -----------
Operating loss (124,525) (153,736)
- ----------------------------------- ------------ -----------
Other income (deductions):
Interest and dividend income 79,306 84,500
Interest expense - (159)
Prior year overaccrual - -
Miscellaneous income 2,838 -
Realized loss on sale of marketable investment security (6,241) (45,000)
Unrealized gain (loss) on marketable investment securities (15,276) -
Gain on sale of assets 543,302 106,209
- ---------------------------------------------------------------- ------------ -----------
Total other income (deductions) 603,929 145,550
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Net income (loss) before taxes 479,404 (8,186)
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Corporate income taxes 2,741 -
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Net income (loss) $ 476,663 $ (8,186)
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Net income (loss) per share of common stock $ 1.19 $ .(02)
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Weighted average number of common shares outstanding 399,830 399,830
- --------------------------------------------------------------- ------------ ------------
</TABLE>
No dividends were paid by the company during the nine months ended September 30,
1996 and 1995.
See accompanying notes to consolidated financial statements.
5
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
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<TABLE>
<CAPTION>
For the nine
months ended
Sept. 30,
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 476,663 $ (8,186)
- ---------------------------------------------------------- ------------ -----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 3,513 4,431
Gain on sale of assets (543,302) (106,209)
Realized loss on sale of marketable investment securities 6,241 5,358
Unrealized loss on marketable investment securities 15,276 39,642
Change in assets and liabilities:
Decrease (increase) in receivables, net of deferred gain 5,623 1,520
Increase (decrease) in accounts payable and various other
accrued expenses (11,034) (57,724)
- -------------------------------------------------------------------- --------- ------------
Total adjustments (523,683) (112,982)
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Net cash provided by (used in) operating activities (47,020) (121,168)
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Cash flows from investing activities:
Proceeds from sale of marketable securities - 968,566
-------- -----------
Net cash provided by investing activities - 968,566
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Cash used for capital expenditures:
Sale of automobile 5,200 -
Purchase of automobile and equipment (13,954) (244)
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Net cash provided by (used for) capital costs (8,754) (244)
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Cash flows from financing activities:
Collections on note receivable 766,769 150,003
--------- ----------
Net cash provided by (used) in financing activities 766,769 150,003
--------- ----------
Net increase in cash and cash equivalents 710,995 997,157
Cash and cash equivalents at beginning of period 1,265,756 225,127
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Cash and cash equivalents at end of period $1,976,751 $1,222,284
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ - $ 159
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</TABLE>
See accompanying condensed notes to consolidated financial statements.
6
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Unaudited)
(1)Basis of Presentation
The financial information is prepared in conformity with generally
accepted accounting principles and such principles are applied on a basis
consistent with those reflected in the 1994 annual report filed with the
Securities and Exchange Commission. The financial information included herein
has been prepared by management. The consolidated balance sheet as of December
31, 1995 has been derived from, and does not include, all the disclosures
contained in the audited consolidated financial statements for the year ended
December 31, 1995.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities (Statement 115) at January 1, 1994. Under Statement 115, the Company
classifies its securities in one of three categories: trading,
available-forsale, or held-to-maturity. Trading securities are bought and held
principally for the purpose of selling them in the near future. Held-to-maturity
securities are those securities in which the Company has the ability and intent
to hold the security until maturity. All other securities not included in
trading or held-to-maturity are classified as available-for-sale.
The information furnished includes all adjustments and accruals
consisting only of normal recurring accrual adjustments which are, in the
opinion of management, necessary for a fair statement of results for the interim
periods.
Results of operations for the three-month periods ended September 30,
1996 and 1995 and the nine-month periods ended September 30, 1996 and 1995
are not necessarily indicative of the results of a full year.
These financial statements should be read in conjunction with the
Company's consolidated financial statements included in the December 31, 1995
Form 10-KSB Report. Mangement believes that the disclosures are adequate to make
the information presented herein not misleading.
7
<PAGE>
(2) Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period. The computation excludes the common
stock equivalents consisting of warrants and stock options because
their inclusion would have had an antidilutive effect. The cumulative
convertible voting preferred stock is not considered common stock
equivalents.
Income (Loss) Per Share Computation
-----------------------------------
For the nine months ended September 30, 1996
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$ 476,663 / 399,830= 1.19
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For the nine months ended September 30, 1995
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$ (8,186) / 399,830= (.02)
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8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
As a result of the Asset Sale in October 1993, previously
reported, the Company has ceased its business operations. The
remaining note receivable from the Asset Sale, in the amount of
$716,658, was paid in full in April 1996, with accrued interest.
The Company intends to use a portion of its present cash and
investment holdings (approximately $1,983,000 as of September 30, 1996,
to repay certain accounts payable and to satisfy other liabilities
of the Company (aggregating approximately $49,900 at September 30,
1996). The Company has no current intentions with regard to use of
the remaining proceeds of the Asset Sale. The Company will
consider the options it currently has available to it; namely, (i)
to reinvest the proceeds, (ii) to make acquisitions of or merge
with an operating business, or (iii) to liquidate the Company and
distribute such proceeds.
In the event that the Company proposes to engage primarily in
the business of investing, reinvesting or trading in securities, or
otherwise reinvests the proceeds of the Asset Sale in investment
securities having a value in excess of 40% of its total assets
(exclusive of Government Securities, certificates of deposit and
other cash items), the Company may be deemed an investment company
and therefore may be required to register under and become subject
to the Investment Company Act of 1940.
In addition to considering the reinvestment of the proceeds of
the Asset Sale, the Company may also consider seeking a merger,
exchange of capital stock, asset acquisition or other similar
business combination with an operating business. In addition to
having some funds available for such an acquisition or similar
transaction, the Company's potential attraction to someone seeking
an acquisition or merger is that the Company will be a publicly
held corporation. Thus, a merger or acquisition could enable the
other entity to become a publicly traded corporation without
experiencing the time requirements and financial expenditures
usually associated with going public. If the Company decides to
pursue such a transaction it will encounter intense competition
from other entities having similar objectives. Further, there is
a large number of established and well financed entities, including
venture capital firms, that have increased their merger and
acquisition activities. Nearly all such entities will have
significantly greater financial resources and management
capabilities than the Company, and consequently the Company will be
at a competitive disadvantage in identifying suitable merger or
acquisition candidates and successfully concluding a proposed
merger, acquisition or similar transaction. To date, the Company
has given limited consideration to the types of entities that it
9
<PAGE>
may seek to merge with or acquire in the event it decides to merge
with or acquire an operating company, but has not identified a
suitable candidate.
To the extent the Preferred Stockholders demand payment of all
or a part of the amounts due them, as previously reported, the
Company's ability to invest the proceeds of the Asset Sale, engage
in a merger, exchange of capital stock, asset acquisition or other
similar business combination will be limited, if at all possible.
No such demand has as yet been received.
Another alternative that may be considered by the Company may
be the liquidation of the Company with a distribution to its then
holders of Common Stock of all assets remaining available for
distribution after payment of liabilities and after having made
appropriate provisions for the payment of liquidating distributions
upon each class of stock having preference over the Common Stock.
Since most, if not all, of the proceeds received from the Asset
Sale will be used to satisfy required payments to the Preferred
Stockholders in the event of liquidation, it is not likely that the
Company will have significant assets, if any, available for
distribution to minority Stockholders following such required
payments.
The Company has made no decision to do any of the foregoing
and, over the next several months, will evaluate the course of
action it will take with regard to the best interests of the
Company and the Company's stockholders. In the event the Company
chooses to merge with or acquire another company, its assets or
capital stock, or liquidate the Company, it will have to obtain the
approval of a majority of the voting power of the Company prior to
taking such action.
Proceeds received from the Asset Sale not immediately required
for the purposes set forth above are being invested as management
of the Company deems prudent, which may include, but will not be
limited to, certificates of deposit, mutual funds, money-market
accounts, stocks, options, bonds or United States Government or
municipal securities, provided, however, that the Company will
attempt to invest the net proceeds in a manner which will not
result in the Company being deemed to be an investment company
under the Investment Company Act of 1940. In this regard, while
the foregoing investments are intended to be temporary (i.e. for
the period during which the Company is determining its future
course of action with regard to the business or liquidation of the
Company), any such investments deemed by the Securities and
Exchange Commission not to be temporary, may result in the Company
being required to register as an investment company. The Company
believes that to the extent a significant portion of such proceeds
is not used in evaluating prospective business options, the
interest income thereon should be sufficient to defray continuing
10
<PAGE>
general and administrative expenses, as well as costs relating to
compliance with securities laws and regulations.
At September 30, 1996, the Company had cash and cash
equivalents of approximately $1,983,000, compared to $1,293,000 of
liquid assets at December 31, 1995, and had working capital of
$1,934,304, compared to working capital of $1,462,195 at December
31, 1995. The Company had no commitments to acquire additional
capital assets at September 30, 1996 and currently has no such
commitments. The Company has no bank lines of credit or other
currently available credit sources. The increase in liquid assets
and working capital is attributable to the collection of the
remaining note receivable from the Asset Sale, in 1996.
Operations
As a result of the Asset Sale and the operation by
American Pacific of the Company's business from October 22, 1993,
the Company's business operations as a food manufacturer were
terminated on that date. Accordingly, no operations were conducted
in the quarters ending September 30, 1996 and September 30, 1995.
Net loss was $(28,015), or $(.07) per share, in the 1996
third quarter compared to a net loss of $22,013, or $.06 per
share, in the 1995 third quarter, reflecting principally a decline in
interest and dividend income in the 1996 third quarter and a gain on the Asset
Sale which was recorded in the 1995 third quarter, offset in part by a reduced
loss on marketable investment securities in the 1996 third quarter.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
A. Exhibits
Exhibit 27. Financial Data Schedule
B. No reports on Form 8-K have been filed during the
quarter.
11
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NEW GENERATION FOODS, INC.
By: /s/ Jerome S. Flum
Jerome S. Flum
Chairman of the Board and
Principal Financial Officer
Dated: November 13, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,976,751
<SECURITIES> 6,273
<RECEIVABLES> 1,185
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,984,209
<PP&E> 36,649
<DEPRECIATION> 19,227
<TOTAL-ASSETS> 2,001,631
<CURRENT-LIABILITIES> 49,905
<BONDS> 0
0
2,643,333
<COMMON> 399,830
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,001,631
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 42,231
<LOSS-PROVISION> (42,231)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (28,015)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,015)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
