SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------------------
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended: September 30, 1997
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)
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, 1997.
Page 1 of 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
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<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
Assets (unaudited) (audited)
------ ----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,901,939 $1,963,394
Marketable investment securities at
market value 801 5,429
Due from Internal Revenue Service 1,184 1,184
Interest Receivable 2,612 16,090
------------------- ----- ------
Total Current Assets 1,906,536 1,986,097
-------------------- ========= =========
Property, plant and equipment, at cost 36,649 36,649
Less accumulated depreciation and
amortization 23,934 19,988
------------ ------ ------
Net property, plant and equipment 12,715 16,661
--------------------------------- ------ ------
Total assets $ 1,919,251 $ 2,002,758
</TABLE>
See accompanying condensed notes to consolidated financial statements.
(Continued)
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
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<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
Liabilities and Stockholders' Equity (unaudited) (audited)
- ------------------------------------ ----------- ---------
<S> <C> <C>
Current liabilities:
Accrued compensation $ 988 $ 10,125
Accrued franchise taxes 45,200 45,200
Accrued expenses 783 986
---------------- --- ---
Total current liabilities 46,971 56,311
------------------------- ------ ------
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 (23,010,648) (22,936,481)
------------ -----------
Total stockholders' equity 1,872,280 1,946,447
------------------------- --------- ---------
Commitments and contingencies - -
Total liabilities and
stockholders' equity $ 1,919,251 $ 2,002,758
-------------------- ============ ============
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
For the three
months ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Net sales $ - $ -
Cost of Sales - -
- ------------- ----- ----
Gross profit - -
------------ ----- ----
Operating expenses:
General and administrative: 45,053 42,231
Total operating expenses 45,053 42,231
------------------------ ------ ------
Operating loss (45,053) (42,231)
-------------- -------- --------
Other income (deductions):
Interest and dividends 26,576 18,594
Net gain (loss) on marketable
investment securities 39 (4,378)
------ ------
Total other income (deductions) 26,615 14,216
------------------------------- ------ ------
Net income (loss) before taxes (18,438) (28,015)
------------------------------ -------- --------
Corporate income taxes (benefit) (575) -
-------- --------
Net Income (loss) $ (17,863) $(28,015)
-------- ========= ========
Net income (loss) per share of common stock $ (0.04) $ (0.07)
- ------------------------------------------- ========= ========
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
September 30, 1997 and 1996.
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
For the nine
months ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Net sales $ - $ -
Cost of Sales - -
------ -------
Gross profit - -
------------ ------ -------
Operating expenses:
General and administrative 132,328 124,525
------ ------
Total operating expenses 132,328 124,525
------ ------
Operating loss (132,328) (124,525)
------- -------
Other income (deductions):
Interest and dividend income 73,539 79,306
Miscellaneous income - 2,838
Unrealized gain (loss) on marketable
investment securities (4,599) (15,276)
Realized loss on sale of marketable
securities (10,981) (6,241)
Gain on sale of assets - 543,302
------- -------
Total other income (deductions) 57,959 603,929
------ -------
Net income (loss) before income taxes (74,369) 479,404
------- -------
Corporate income taxes (refund) (202) 2,741
------- -----
Net income (loss) $(74,167) $ 476,663
======== ========
Net income (loss) per share of common stock $ (0.19) $ 1.19
========= ========
Weighted average number of common shares
outstanding 399,830 399,830
======= =======
</TABLE>
No dividends were paid by the company during the nine month periods ended
September 30, 1997 and 1996.
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
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<TABLE>
<CAPTION>
For the nine
months ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Cash Flows from operating activities:
Net income (loss) $ (74,167) $ 476,663
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation 3,946 3,513
Gain on sale of assets - (543,302)
Net loss on marketable
investment securities 4,628 21,517
Change in assets and liabilities:
Decrease in receivables 13,478 5,623
Decrease in accounts payable and
various other accured expenses (9,340) (11,034)
-------- -----
Total adjustments 12,712 (523,683)
----------------- ------ ---------
Net cash provided by (used in)
operating activities (61,455) (47,020)
Net cash used for capital expenditures:
Sale of automobile - 5,200
Purchase of automobile - (13,954)
------ -------
Net cash provided by (used for)
capital costs - (8,754)
------ ------
Cash flows from financing activities:
Collections on note receivable - 766,769
------ -------
Net increase (decrease) in cash and
cash equivalents (61,455) 710,995
Cash and cash equivalents at beginning of period 1,963,394 1,265,756
--------- ---------
Cash and cash equivalents at end of period $1,901,939 $1,976,751
(Note A) ========== ==========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Condensed Notes to Consolidated Financial Statements
(Unaudited)
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(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 1996 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, 1996 has been derived from, and does not include, all the disclosures
contained in the audited consolidated financial statements for the year ended
December 31, 1996.
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 arc 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 nine-month periods ended September 30, 1997
and 1996 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, 1996
Form 10-KSB Report. Management believes that the disclosures are adequate to
make the information presented herein not misleading.
(2) NET INCOME PER SHARE
Net income (loss) per share is computed by dividing net income
(loss) 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 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, 1997:
$(74,167) / 399,830 = $(0.19)
For the nine months ended September 30, 1996:
$476,663 / 399,830 $ 1.19
<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 $1,902,740 as of September 30, 1997) to satisfy
liabilities of the Company (aggregating $46,971 at September 30, 1997). The
Company has made no determination 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 is considering seeking a merger, exchange of capital
stock, asset acquisition or other similar business combination with an operating
business. 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. Moreover, under certain
circumstances it may be possible for an entity acquiring less than the
controlling shareholding in the Company to utilize some or all of the remaining
tax loss carry forwards of the Company in connection with the business
operations of such other entity. See "Federal Tax Considerations." 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 the extent the Preferred Stockholders, with respect to their
liquidation preference, including accrued dividends, on the Series A and Series
B Preferred
<PAGE>
Stock owned by them, as previously reported, demand payment of all or a portion
of the amounts due them, 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 of the proceeds received from the Asset Sale will be
used to satisfy required payments to the Preferred Stockholders, 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, although
it has had preliminary discussions with several entities relative to a potential
business combination. The Company 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 another company, 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. Such approval may not
be necessary in the case of certain other business combinations, including an
acquisition of stock or assets of another company.
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, stock, 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.
At September 30, 1997, the Company had cash, cash equivalents and other
liquid assets of $1,902,740 compared to $1,968,823 of liquid assets at December
31, 1996, and had working capital of $1,859,565, compared to working capital of
$1,929,786 at December 31, 1996. The Company has no bank lines of credit or
other currently available credit sources. The decrease in liquid assets and
working capital is due principally to continuing general and administrative
costs which exceed the Company's investment income.
<PAGE>
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, 1997 and September 30, 1996.
In the 1996 first quarter the Company recognized the balance of the
total gain of $1,842,470 on the Asset Sale.
Net loss was $17,863, or $.04 per share, in the 1997 third quarter,
compared to a net loss of $28,015, or $.07 per share, in the 1996 third
quarter, reflecting principally a decrease
in interest and dividend income.
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.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW GENERATION FOODS, INC.
By: /s/ Jerome S. Flum
Jerome S. Flum
Chairman of the Board and
Principal Financial Officer
Dated: September 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,901,939
<SECURITIES> 801
<RECEIVABLES> 3796
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,906,536
<PP&E> 36,649
<DEPRECIATION> 23,934
<TOTAL-ASSETS> 1,919,251
<CURRENT-LIABILITIES> 46,971
<BONDS> 0
0
2,643,333
<COMMON> 399,830
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,919,251
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 45,053
<LOSS-PROVISION> (45,053)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,438)
<INCOME-TAX> (575)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,863)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
