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, 1998
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.)
9 Dunham Avenue
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,
1998.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Sept. 30, 1998 Dec. 31, 1997
Unaudited Audited
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $12,295 $1,399,274
Marketable investment security at market value 792 777
Purshase option 115,000 -
------- ---------
TOTAL ASSETS $128,087 $1,400,051
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable-shareholder $- $460,000
Dividends payable - 840,000
Accrued franchise taxes 45,200 45,200
Accrued expenses 40,784 784
------ ---
Total current liabilities 85,984 1,345,984
------ ---------
Redeemable Convertible Voting Senior Preferred Stock, $.01 par value (stated at
liquidation value of $1.00 per share). Authorized 2,333,333 shares;
issued and outstanding 1,100,000 shares 1,100,000 1,100,000
--------- ---------
Stockholders' Equity (Deficit)
Common stock, $.01 par value. Authorized
25,000,000 shares; issued and outstanding 399,830 3,998 3,998
Additional paid-in capital 22,818,930 22,818,930
Retained deficit (23,880,825) (23,868,861)
----------- ------------
Total stockholders' equity (deficit) (1,057,897) (1,045,933)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $128,087 $1,400,051
======== ==========
</TABLE>
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
for the three months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Sept. 30, 1998 Sept. 30, 1997
Unaudited Unaudited
<S> <C> <C>
OPERATING EXPENSES
Selling, general and administrative 1,136 45,053
----- ------
Capitalization of prior quarter's legal
fee to purchase option (10,000) -
-------- ------
Total Operating Expenses (8,864) 45,053
------- ------
Operating income (loss) 8,864 (45,053)
OTHER INCOME (DEDUCTIONS)
Income and dividend income 906 26,576
Net loss on investments - 39
----- --
Total other income (deductions) 906 26,615
----- ------
Income (loss) before income taxes 9,770 (18,438)
INCOME TAXES (BENEFIT) 2,170 (575)
----- -----
NET EARNINGS (LOSS) $7,600 $(17,863)
====== =========
Net income (loss) per share of common
stock:
Basic $0.02 $(0.16)
====== =======
Diluted $0.00 $(0.16)
====== =======
Weighted average number of common
shares outstanding:
Basic 399,830 399,830
======== =======
Diluted 3,998,128 399,830
========= =======
</TABLE>
No dividends were paid by the company during the three month periods ended
September 30, 1998 and 1997.
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Sept. 30, 1998 Sept. 30, 1997
Unaudited Unaudited
<S> <C> <C>
OPERATING EXPENSES
Selling, general and administrative $16,829 $132,328
------- --------
Total operating expenses 16,829 132,328
------ -------
Operating loss (16,829) (132,328)
-------- ---------
OTHER INCOME (DEDUCTIONS)
Interest and dividend income 7,410 73,539
Net (loss) on investments - (15,580)
------ --------
Total other income (deductions) 7,410 57,959
----- ------
Income (loss) before income tax (9,419) (74,369)
INCOME TAXES (BENEFIT) 2,545 (202)
----- -----
NET LOSS $(11,964) $(74,167)
========= =========
Net loss per share of common $(0.03) $(0.53)
stock - basic and diluted ======== =======
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, 1998 and 1997.
See accompanying condensed notes to consolidated financial statements.
<PAGE>
NEW GENERATION FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1998 and 1997
<TABLE>
<CAPTION>
Sept. 30, 1998 Sept. 30, 1997
Unaudited Unaudited
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(11,964) $(74,167)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation - 3,946
Loss (gain) on marketable investment securities (15) 4,628
Change in assets and liabilities:
Decrease in receivables - 13,478
Decrease in accounts payable and
accrued expenses (1,260,000) (9,340)
----------- -------
Net Cash used in operating
activities (1,271,979) (61,455)
----------- --------
Cash flows used for investing activities.
Purchase of option (115,000) -
--------- --------
Net cash used by investing activities (115,000) -
--------- --------
Net decrease in cash and cash
equivalents (1,386,979) (61,455)
Cash and cash equivalents - beginning of period 1,399,274 1,963,394
--------- ---------
Cash and cash equivalents- end of period $12,295 $1,901,939
========= ==========
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<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 1997 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, 1997 has been
derived from, and does not include, all the disclosures contained in the
audited financial statements for the year ended December 31, 1997.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities 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 nine month periods ended September 30, 1998 and
1997 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, 1997 Form 10-KSB
Report. Management believes that the disclosures are adequate to make the
information presented herein not misleading.
(2) Net income (loss) per share
Net income (loss) per share - basic is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding during each
period. The 1997 computation of diluted net income (loss) per share excludes the
convertible preferred stock and stock options because their inclusion would have
had an antidilutive effect. In the fourth quarter of 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net
loss per share for the three months and nine months ended September 30, 1997 has
been restated to comply with Statement of Financial Accounting Standards No.
128.
<TABLE>
<CAPTION>
NET INCOME (LOSS) PER SHARE COMPUTATION
Three Months Ended September 30:
<S> <C> <C>
1998 1997
---- ----
Net income (loss) $ 7,600 $ (17,863)
Dividends on cumulative preferred stock - (46,350)
------- --------
Net income (loss) applicable to common stock $ (7,600) $ (64,213)
========= =========
Net income (loss) per share:
Basic $ 0.02 $ (0.16)
======== =========
Dilutive $ 0.00 $ (0.16)
======== =========
Weighted average number of common shares
outstanding:
Basic 399,830 399,830
======= =======
Diluted 3,998,128 399,830
========= =======
Nine Months Ended September 30:
1998 1997
---- ----
Net Loss $(11,964) $(74,167)
Dividends on cumulative preferred stock - (139,050)
-------- ---------
Net loss applicable to common stock $(11,964) $(213,217)
========= ========
Basic average common shares outstanding 399,830 399,830
======== ========
Loss per share - basic and diluted $ (0.03) $ (0.53)
=========== ==========
</TABLE>
The redeemable convertible voting senior preferred stock is convertible into
3,598,298 shares of common stock at September 30, 1998 and is anti-dilutive for
the nine months ended September 30, 1998, and the effect of dilutive securities
(convertible preferred stock and options) is anti-dilutive for 1997, therefore,
basic and dilutive earnings (loss) per share are the same for the nine months
ended September 30, 1998 and 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
---------------------
of Operations
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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.
Under the terms of the Company's previously outstanding Series A Preferred Stock
and Series B Preferred Stock, a sale or transfer of substantially all of the
assets of the Company was deemed to be a liquidation, dissolution or winding up
of the Company for purposes of determining the payment of the liquidation
preferences on the Series A Preferred Stock and Series B Preferred Stock.
Accordingly, the Asset Sale entitled Flum Partners, the holder of all of the
outstanding Series A Preferred Stock and Series B Preferred Stock, to payment of
the applicable liquidation preferences and accrued and unpaid dividends.
As previously reported, the Company issued to Flum Partners at the end of 1997
and in the first quarter of 1998 a total of 1,100,000 shares of the Senior
Preferred Stock and $1.8 million of cash in payment of the liquidation
preferences and accrued dividends on the Series A Preferred Stock and Series B
Preferred Stock. In addition, Mr. Flum's employment contract was terminated
effective December 1, 1997, and he agreed, for a twelve-month period, to attempt
to identify and consummate a transaction which would increase the value of the
Company.
Also as previously reported, the Company has acquired an option (the "Option")
to purchase the assets of the Credit Risk Monitor credit information service
("CRM") from Market Guide Inc. ("MGI"). Exercise of the Option, which expires
November 30, 1998 unless extended to no later than January 31, 1999 (the "Option
Period"), is at the sole discretion of the Company and is conditioned on, among
other things, the Company's ability to raise financing of approximately $2.5
million to fund the initial payment and CRM's working capital requirements.
There can be no assurance that said financing will be obtained and/or that the
Option will be exercised.
During the Option Period, Jerome S. Flum, Chairman and President of the Company,
will act as an unpaid, part-time consultant to MGI, assisting in the management
of CRM.
If the Option is exercised, the purchase price for the CRM assets will be
approximately $2.5 Million, less the amount of $60,000 paid by the Company for
the Option (subject to increase, up to $70,000, if the Option Period is extended
until January 31, 1998), and subject to certain other adjustments. Of this
price, approximately $1.5 Million is payable in cash at the closing and the
balance will be evidenced by a promissory note, payable with interest at the
rate of 6% per annum which shall accrue commencing July 1, 2001, in 24 equal
monthly installments of principal and interest commencing July 30, 2001 and
ending June 30, 2003. Certain other costs and expenses to be paid by the
Company, in an amount to be determined at closing, will be evidenced by a
separate promissory note, payable with interest at the rate of 8.5% per annum,
which shall accrue from the closing date until January 30, 2001, whereupon all
principal and accrued interest will be payable in 24 equal monthly installments
of principal and interest commencing January 31, 2001 and ending December 31,
2003. The notes will be secured by a first priority purchase money security
interest on substantially all of the assets of the Company.
At September 30, 1998, the Company had cash, cash equivalents and other liquid
assets of $13,087, compared to $1,400,051 of liquid assets at December 31, 1997,
and had no working capital, compared to working capital of $54,067 at December
31, 1997. The Company has no bank lines of credit or other currently available
credit sources.
The decrease in liquid assets and working capital reflects the payment in the
1998 first quarter to Flum Partners described above as well as the payment of
$60,000 for the option.
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, 1998 and September 30, 1997.
Net income was $7,600, or $.02 per share, in the 1998 third quarter, compared to
a net loss of $17,863, or $.16 per share, in the 1997 third quarter, reflecting
principally the termination of Mr. Flum's employment contract effective December
1, 1997, offsetting a decrease in interest and dividend income, as well as the
capitalization of a $10,000 legal fee relative to the option which was charged
to expense in the second quarter.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on September 9, 1998.
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, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 12,295
<SECURITIES> 115,792
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 128,087
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 128,087
<CURRENT-LIABILITIES> 85,984
<BONDS> 0
1,100,000
0
<COMMON> 3,998
<OTHER-SE> (1,061,895)
<TOTAL-LIABILITY-AND-EQUITY> 128,087
<SALES> 0
<TOTAL-REVENUES> 906
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,506
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,770
<INCOME-TAX> 2,170
<INCOME-CONTINUING> 7,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,600
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.00)
</TABLE>
