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: March 31, 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.)
52 Barry Road
Scarsdale, New York 10583
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(Address of Principal Executive Office)
(Zip Code)
One South Columbia Avenue, Oglesby, Illinois 61348
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(Former address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (914) 722-2410
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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 March 31, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial statements
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
Assets (unaudited) (audited)
------ ------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,288,238 $ 1,265,756
Marketable investment securities at market 26,286 27,789
Notes receivable, less deferred gain of $543,158
in 1995 716,658 223,501
Interest receivable 6,653 6,808
----------- ----------
Total current assets 2,037,835 1,523,854
----------- ----------
Property, plant and equipment, at cost 44,770 30,816
Less accumulated depreciation and amortization 19,693 18,669
----------- ----------
Net property, plant and equipment 25,077 12,147
----------- ----------
Total assets $ 2,062,912 $ 1,536,001
=========== ===========
See accompanying condensed notes to consolidated financial statements.
</TABLE>
(Continued)
2
<PAGE>
NEW GENERATION FOOD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
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<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
Liabilities and Stockholders' Equity (unaudited) (audited)
------------------------------------ ------------ -------------
<S> <C> <C>
Current liabilities:
Accrued compensation $ -- $ 11,500
Accrued franchise taxes 45,200 45,200
Accrued expenses 12,780 4,239
------------- ------------
Total current liabilities 57,980 60,939
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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 (22,877,996) (23,407,866)
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Total stockholders equity 2,004,932 1,475,062
Commitments and contingencies -- --
------------- ------------
Total liabilities and stockholders' equity $ 2,062,912 $ 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
March 31,
1996 1995
--------- ----------
<S> <C> <C>
Net sales $ -- $ --
Cost of sales -- --
----------- -----------
Gross profit -- --
----------- -----------
Operating expenses:
General and administrative: 40,175 81,527
----------- -----------
Total operating expenses 40,175 81,527
----------- -----------
Operating loss (40,175) (81,527)
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Other income (deductions):
Interest and dividend income 31,029 31,911
Interest expense - (159)
Loss on sale of marketable investment securities (1,511) (7,332)
----------- -----------
Gain on sale of assets 543,268 35,013
----------- -----------
Total other income (deductions) 572,786 59,433
----------- -----------
Net income (loss) before taxes 532,611 (22,094)
----------- -----------
Corporate income taxes 2,741 7,021
----------- -----------
Net income (loss) $ 529,870 $ (29,115)
=========== ===========
Net income (loss) per share of common stock $ 1.33 $ (.07)
----------- -----------
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 March
31, 1996 and 1995.
See accompanying notes to consolidated financial statements.
4
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the three
months ended
March 31,
1996 1995
------ -----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 529,870 $ (29,115)
---------- ----------
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation 1,024 1,477
Gain on sale of assets (543,268) (35,013)
Realized loss on sale of marketable investment securities -- 5,358
Unrealized loss on marketable investment securities 1,511 6,225
Change in assets and liabilities:
Decrease in notes payable -- (23,828)
Decrease in receivables 50,001 49,122
Increase in accounts payable and various other
accrued expenses (2,702) 324
---------- ----------
Total adjustments (493,434) 3,665
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Net cash provided by (used in) operating activities 36,436 (25,450)
---------- ----------
Cash flows from investing activities:
Proceeds from sale of marketable securities -- 467,373
---------- ----------
Net cash provided by investing activities -- 467,373
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Cash flows from capital expenditures:
Purchase of automobile 13,954 --
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Net cash provided by (used for) capital costs (13,954) --
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Net increase in cash and cash equivalents 22,482 --
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Cash and cash equivalents at beginning of period 1,265,756 225,127
---------- ----------
Cash and cash equivalents at end of period (note A) $1,288,238 $ 667,050
========== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ -- $ 159
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</TABLE>
(Note A) At March 31, 1995, the Company, in addition to its cash and cash
equivalents of $667,050 had $492,776, of U.S. Treasury notes which do not
qualify as cash equivalents for purposes of the Statement of Cash Flows.
See accompanying condensed notes to consolidated financial statements.
5
<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-for-sale, 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 March 31, 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.
6
<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.
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Income (Loss) Per Share Computation
-----------------------------------
For the three months ended March 31, 1996
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$ 529,870 divided by 399,830 1.33
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For the three months ended March 31, 1995
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$ (29,115) divided by 399,830 = (.07)
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7
<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 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 $1,314,000 as of March 31, 1996, before giving effect to
the collection of the final note receivable balance) to repay certain accounts
payable and to satisfy other liabilities of the Company (aggregating $57,980 at
March 31, 1995). 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 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.
8
<PAGE>
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 general
and administrative expenses, as well as costs relating to compliance with
securities laws and regulations.
9
<PAGE>
At March 31, 1996, the Company had cash, cash equivalents and
other liquid assets of approximately $1,314,000, compared to $1,293,000 of
liquid assets at December 31, 1995, and had working capital of $1,979,855,
compared to working capital of $1,224,038 at December 31, 1995. The Company had
no commitments to acquire additional capital assets at March 31, 1995 and
currently has no such commitments. The Company has no bank lines of credit or
other currently available credit sources. The increase in working capital is due
to the recording of the 1995 deferred gain of $543,158 as a current asset 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 March 31, 1996 and March 31,
1995.
In the quarter the Company recognized the balance of the total
gain of $1,842,470 on the Asset Sale.
Net income was $529,870, or $1.33 per share, in the 1996 first
quarter compared to a net loss of $(29,115), or $(.07) per share, in the 1995
first quarter, reflecting principally the remaining gain on the Asset Sale which
was recognized in the quarter, as well as a reduction in general and
administrative expenses (which are now the only expenses being incurred by the
Company). General and administrative expenses in the 1995 first quarter included
approximately $34,000 of wages paid to the President in 1995 that were deferred
from the prior year.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter.
10
<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: May 14, 1996
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000315958
<NAME> NEW GENERATION FOODS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 1,288,238
<SECURITIES> 26,286
<RECEIVABLES> 723,311
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,037,835
<PP&E> 44,770
<DEPRECIATION> 19,693
<TOTAL-ASSETS> 2,062,912
<CURRENT-LIABILITIES> 57,980
<BONDS> 0
0
2,643,333
<COMMON> 399,830
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,062,912
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 40,175
<LOSS-PROVISION> (40,175)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 532,611
<INCOME-TAX> 2,741
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529,870
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
