UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 19, 1999
NEW GENERATION FOODS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 1-10825 36-2972588
(State or Other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2001 Marcus Ave., W290, Lake Success, NY 11042-1011
Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 327-2400
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements in this Form 8-K, including statements prefaced by
the words "anticipates", "estimates", "believes", "expects" or words of similar
meaning, constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 19, 1999, New Generation Foods, Inc. (the "Company")
completed its purchase of the assets of the CreditRisk Monitor credit
information service ("CRM") from Market Guide Inc. ("MGI"). The purchase price
for the assets of CRM was approximately $2,390,000, of which $1.29 million was
paid at or prior to closing and the balance is represented by two secured
promissory notes, one for approximately $100,000 and the other for $1.0 million
(together the "MGI Notes"). The $1.0 million MGI Note, which bears interest at
8.5% from the closing date, provides for the deferral of principal amortization
until February 2001. The $100,000 MGI Note bears interest at 6% from July 2001
and provides for the deferral of principal amortization until such date. After
the respective deferrals, both MGI Notes are then payable over 24 months. The
MGI Notes are secured by a first priority purchase money security interest on
substantially all of the assets of the Company.
The assets purchased included customer contracts, receivables,
equipment, software and intangibles.
During January 1999, the Company completed a $3.25 million private
placement of its common stock to finance the acquisition and future working
capital needs.
After shareholder approval, the Company, previously a non-operating
entity, will change its name to CreditRiskMonitor.com, Inc. and apply for a new
stock symbol that reflects this new name.
CreditRisk Monitor was formed as a division of Market Guide Inc. in
September 1996 and had no operations or financial statements prior to such date.
Item 7 includes the following financial statements and pro forma
financial information:
(1) Financial Statements of CreditRisk Monitor, a division of Market
Guide Inc. as of and for the fiscal years ended February 28, 1998 and February
28, 1997 together with the Report of Zerbo, McKiernan and Zambito, L.L.C.,
independent auditors;
(2) Balance Sheets of CreditRisk Monitor, a division of Market Guide
Inc. as of November 30, 1998 (Unaudited) and February 28, 1998; Unaudited
Statements of Operations and Accumulated Deficit for the 3 months and 9 months
ended November 30, 1998 and November 30, 1997;
<PAGE>
Unaudited Statements of Cash Flows for the 9 months ended November 30, 1998 and
November 30, 1997.
(3) Pro Forma Consolidated Balance Sheet as of December 31, 1998 and
Pro Forma Consolidated Statement of Operations of the Company for the year then
ended and showing balance sheet and income statement items for New Generation
Foods, Inc. and CreditRisk Monitor both historically and on a Pro-Forma Combined
basis as though the Company had operated as a combined entity for that 12-month
period and incorporating changes due to the Company's 1998 Private Placement
which was actually completed in January 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
------------------------------------------
Financial Statements of CreditRisk Monitor, a division of Market Guide
Inc. as of and for the fiscal years ended February 28, 1998 and February 28,
1997 together with the Report of Zerbo, McKiernan and Zambito, L.L.C.,
independent auditors; Balance Sheets of CreditRisk Monitor, a division of Market
Guide Inc. as of November 30, 1998 (Unaudited) and February 28, 1998; Unaudited
Statements of Operations and Accumulated Deficit for the 3 months and 9 months
ended November 30, 1998 and November 30, 1997; Unaudited Statements of Cash
Flows for the 9 months ended November 30, 1998 and November 30, 1997.
(b) Pro Forma Financial Information.
--------------------------------
Pro Forma Consolidated Balance Sheet as of December 31, 1998 and Pro
Forma Consolidated Statement of Operations of the Company for the year then
ended.
(c) Exhibits.
---------
2. Plan of Acquisition (Asset Purchase Agreement). (1)
20. Press release dated January 19, 1999. (1)
(1) Filed as an Exhibit to Registrant's Report on Form 8-K dated January 19,
1999 (File No. 1-10825) which was filed with the Securities and Exchange
Commission on February 3, 1999 and incorporated herein by reference thereto.
<PAGE>
CREDITRISK MONITOR
- A DIVISION OF MARKET GUIDE INC. -
FINANCIAL STATEMENTS
AND
REPORT OF INDEPENDENT AUDITORS'
FOR THE YEARS ENDED FEBRUARY 28, 1998
AND FEBRUARY 28, 1997
F-1
<PAGE>
Table of Contents
Financial Statements
- --------------------
Report of Independent Auditors'
Balance Sheets for the Fiscal Years Ended February 28, 1998 and February 28,
1997...................................................................... F-4-5
Statements of Operation and Accumulated Deficit for the Fiscal Years Ended
February 28, 1998, February 28, 1997, and February 29, 1996................. F-6
Statements of Cash Flows for the Fiscal Years Ended February 29, 1998, February
28, 1997, and February 29, 1996............................................. F-7
Statements of Stockholders' Equity for the Fiscal Years Ended February 28, 1998,
February 28, 1997, and February 29, 1996.................................... F-8
Notes to Financial Statements February 28, 1998, February 28, 1997, and February
29, 1996................................................................. F-9-18
F-2
<PAGE>
[Zerbo, McKiernan & Zambito Letterhead]
REPORT OF INDEPENDENT AUDITORS'
To the Board of Directors and Stockholders of
Market Guide Inc.
2001 Marcus Avenue, Suite S200
Lake Success, NY 11042-1011
We have audited the accompanying Balance Sheets of Market Guide Inc. as of
February 28, 1998 and February 28, 1997 and the related Statements of Operation
and Accumulated Deficit, Cash Flows and Stockholders' Equity for the years
February 28, 1998, February 28, 1997 and February 29, 1996 then ended. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Market Guide Inc. as of
February 28, 1998 and February 28, 1997 and the results of its operations and
its cash flows for the years February 28, 1998, February 28, 1997 and February
29, 1996 then ended in conformity with generally accepted accounting principles.
/s/ Zerbo, McKiernan & Zambito, L.L.C
- -------------------------------------
Zerbo, McKiernan & Zambito, L.L.C
Fairfield, New Jersey
May 18, 1998
F-3
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
February 28, February 28,
1998 1997
---- ----
ASSETS
Current assets:
Cash $ 809,618 $ 1,230,893
Accounts receivable (net of allowance
for doubtful accounts) 1,047,449 557,415
Prepaid expenses and other current assets 114,985 263,630
------- -------
Total current assets 1,972,052 2,051,938
Property, plant and equipment:
Furniture and equipment 1,623,206 936,097
Equipment held under capital leases 942,950 942,949
Leasehold improvements 80,990 72,509
------ ------
2,647,146 1,951,555
Less: Accumulated depreciation and amortization
(including amortization of $367,610 and $189,234
in 1998 and 1997, respectively, on capital leases) 1,117,876 744,551
---- ----- --------- -------
Net property, plant and equipment 1,529,270 1,207,004
Other assets:
Computer software and database expansion
(net of accumulated amortization) 2,780,128 1,891,621
Deposits and other assets 78,084 78,084
------ ------
Total other assets 2,858,212 1,969,705
Total assets $ 6,359,534 $ 5,228,647
============ ============
</TABLE>
The accompanying notes are integral part of these financial statements.
F-4
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Balance Sheets - continued
<TABLE>
<CAPTION>
<S> <C> <C>
February 28, February 28,
1998 1997
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and capital
Leases $ 274,031 $ 176,012
Unearned revenues 999,949 248,679
Accounts payable and other accrued expenses 218,618 179,493
------- -------
Total current liabilities 1,492,598 604,184
Non-current liabilities:
Long-term debt and capital lease obligations,
less current maturities 761,981 564,262
------- -------
Total non-current liabilities 761,981 564,262
Total liabilities 2,254,579 1,168,446
Stockholders' equity:
Common stock - $.001 par value; 20,000,000 shares
authorized, 4,723,594 and 4,708,186 shares
issued and outstanding in 1998 and 1997,
respectively 4,723 4,708
Capital in excess of par value 5,010,134 4,972,032
Retained earnings (deficit) (909,902) (916,539)
-------- --------
Total stockholders' equity 4,104,955 4,060,201
Total liabilities and stockholders' equity $ 6,359,534 $5,228,647
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Statements of Operation and Accumulated Deficit
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Years Ended
-------------------
February 28, February 28, February 29,
1998 1997 1996
---- ---- ----
Revenues:
Database vendors $ 5,079,380 $ 4,150,777 $ 3,674,830
Market Guide products 1,769,605 563,788 257,001
Print product 50,992 61,853 67,928
------ ------ ------
Total revenues 6,899,977 4,776,418 3,999,759
Expenses:
Salaries, payroll taxes & employee benefits 4,151,529 2,692,063 2,121,109
Database and product costs 460,919 395,217 322,670
General and administrative 1,078,237 733,087 574,740
Depreciation 373,325 228,576 149,666
Amortization 429,798 288,072 199,233
Advertising and promotion 327,554 138,961 87,702
------- ------- ------
Total expenses 6,821,362 4,475,976 3,455,120
Income from operations 78,615 300,442 544,639
Interest income 21,173 31,128 24,641
Interest expense 85,877 75,592 60,974
------ ------ ------
Income before income taxes 13,911 255,978 508,306
Provision for income taxes 7,274 (2,351) 1,127
----- ------ -----
Net income $ 6,637 $ 258,329 $ 507,179
============ ============ ===========
Accumulated deficit, beginning of year (916,539) (1,174,868) (1,682,047)
-------- ---------- ----------
Accumulated deficit, end of year $ (909,902) $ (916,539) $(1,174,868)
============ ============ ===========
Earnings per share:
Basic $ 0.00 $ 0.06 $ 0.12
Diluted $ 0.00 $ 0.06 $ 0.12
Weighted average number of shares outstanding:
Basic 4,712,503 4,250,124 4,165,457
Diluted 4,755,905 4,408,378 4,401,135
</TABLE>
The accompanying notes are integral part of these financial statements
F-6
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Years Ended
-------------------
February 28, February 28, February 29,
1998 1997 1996
---- ---- ----
(restated)
Cash Flows From Operating Activities:
Net income $ 6,637 $ 258,329 $ 507,179
---------- ---------- ---------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 803,123 516,648 348,899
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (490,034) 203,765 (202,367)
(Increase)/Decrease in prepaid assets 148,645 781 (199,540)
(Increase)/Decrease in deposits and other assets -0- (14,858) (6,750)
Increase/(Decrease) in accounts payable 39,125 (222,053) 185,548
Increase/(Decrease) in unearned revenues 751,270 85,308 (39,494)
------- ------ -------
Total adjustments 1,252,129 569,591 86,296
--------- ------- ------
Net cash provided by operating activities 1,258,766 827,920 593,475
--------- ------- -------
Cash Flows From Investing Activities:
Payments for purchase of fixed assets (687,111) (695,447) (372,475)
Payments for leasehold improvements (8,481) (72,509) -0-
Development of computer software and
database expansion (1,318,305) (1,145,213) (519,488)
---------- ---------- --------
Net cash used by investing activities (2,013,897) (1,913,169) (891,963)
---------- ---------- --------
Cash Flows From Financing Activities:
Payments for long term debt and capital leases (176,011) (250,392) (60,428)
Proceeds from capital leases and equipment line of credit 471,750 532,110 246,984
Proceeds from issuance of employee's and director's
stock plan 38,117 51,869 64,129
Proceeds from private placement of common stock -0- 1,201,771 -0-
Proceeds from stock options exercised -0- 100,001 33,451
- ------- ------
Net cash provided by financing activities 333,856 1,635,359 284,136
------- --------- -------
Net increase/(decrease) in cash (421,275) 550,110 (14,352)
Cash at beginning of year 1,230,893 680,783 695,135
--------- ------- -------
Cash at end of year $ 809,618 $1,230,893 $ 680,783
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 85,877 $ 137,578 $ 60,974
Corporate taxes 6,000 4,200 5,250
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Capital in Total
Excess of Accumulated Stockholders'
Shares Par Value Par Value Deficit Equity
------ --------- --------- ------- ------
Balance at February 28, 1995 4,112,697 $ 4,113 $ 3,521,405 $ (1,682,047) $ 1,843,471
Stock Options Exercised 45,717 45 33,406 -0- 33,451
Issuance of common stock
pursuant to employee stock plan 29,831 30 64,099 -0- 64,129
Net income for the year -0- -0- -0- 507,179 507,179
- - - ------- -------
Balance at February 29, 1996 4,188,245 4,188 3,618,910 (1,174,868) 2,448,230
--------- ----- --------- ---------- ---------
Issuance of common stock in a
private placement for cash 343,363 344 1,201,428 -0- 1,201,772
Stock options exercised 158,334 158 99,843 -0- 100,001
Issuance of common stock
pursuant to employee's and
director's stock plans 18,244 18 51,851 -0- 51,869
Net income for the year -0- -0- -0- 258,329 258,329
- - - ------- -------
Balance at February 28, 1997 4,708,186 4,708 4,972,032 (916,539) 4,060,201
--------- ----- --------- -------- ---------
Issuance of common stock
pursuant to employee's and
director's stock plans 15,408 15 38,102 -0- 38,117
Net income for the year -0- -0- -0- 6,637 6,637
- - - ----- -----
Balance at February 28, 1998 4,723,594 $ 4,723 $ 5,010,134 $ (909,902) $ 4,104,955
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Notes to Financial Statements
February 28, 1998 and February 28, 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
1. Nature of Business
------------------
CreditRisk Monitor (CRM) a division of Market Guide Inc., formed in
September 1996, is an online information and news service that follows more
than 575 U.S. publicly held domestic retail chains and wholesalers. This
online service is accessible through the Internet
(www.creditriskmonitor.com) and has been designed to provide corporate
credit managers with the analytical tools necessary to analyze and follow,
on a daily basis, all the public companies they do business with.
CRM was formed specifically to leverage Market Guide's comprehensive
database and state-of-the-art technology through sales to a new market. CRM
provides the credit community with a cost efficient, online credit and
financial information service.
The CRM information service consists of: CRM Company Reports, the CRM Alert
Notification Service and the CRM Real-Time News Service. The CRM web site
became operational in April 1997.
All of the Company's revenue is derived from annual subscription sales of
its CreditRisk Monitor service.
2. Revenue Recognition
--------------------
CreditRisk Monitor subscriptions are deferred at the time of sale and
recognized ratably as revenues over the terms of their subscriptions. Costs
associated with procurement of these revenues are expensed as incurred.
Bad debts are recorded under the allowance method of accounting. For the
fiscal years ended February 28, 1998 and February 28, 1997, $0, and $0 were
charged to bad debt expense, respectively. As of February 28, 1998 and
February 28, 1997, the allowance for doubtful accounts remained at $.
3. Property and Equipment
----------------------
Depreciation and amortization are provided for in amounts sufficient to
relate the cost of depreciable assets to their estimated useful service
lives.
The straight-line method of depreciation is followed for substantially all
assets for both financial and tax reporting purposes. For the fiscal years
ended February 28, 1998 and February 28, 1997, $5,734 and $35,747,
respectively, were charged to depreciation expense.
F-9
<PAGE>
4. Capitalization of Computer Software
-----------------------------------
Management has elected, pursuant to SFAS No. 86, to capitalize certain
computer software costs incurred for new product development. These costs
are reported at the lower of unamortized cost or net realizable value. The
amortization of these costs are included in database and product cost. All
research and development, database maintenance and customer support costs
are expensed as incurred.
The straight-line method of amortization is used over the estimated
economic life of the asset. For the years ended February 28, 1998 and
February 28, 1997, capitalization of computer software and database
expansion totaled $391,976 and $588,199, respectively. For the fiscal years
ended February 28, 1998 and February 28, 1997, $0 and $71,938,
respectively, were charged to amortization expense. As of February 28, 1998
and February 28, 1997, accumulated amortization was $0 and $71,938,
respectively.
5. Earnings Per Share
------------------
Basic and diluted earnings per share are computed based on the weighted
average number of shares of Common Stock outstanding.
6. Fair Value of Financial Instruments
-----------------------------------
??
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of cash and cash
equivalents approximate their fair values.
Capital lease obligations: The carrying amounts of capital lease
obligations approximate their fair value.
7. Employee Benefit Plan
---------------------
The Company established a 401(k) plan effective January 1, 1997 for all
employees with over six months of service. On an annual basis, the
employees may contribute the lesser of 15% of gross salary or $10,000. The
Company matched 50% of the first 6% of the employees' contributions in
calendar 1997, and matched 20% of the first 6% of the employees'
contributions in calendar 1998. Future Company matches will depend on
Company profitability. Participants are vested 20% for each year of service
and are fully vested after 5 service years. For the fiscal years ended
February 28, 1998 and February 28, 1997, the Company contributed $71,041
and $16,791 to the plan, respectively.
8. 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.
F-10
<PAGE>
NOTE C - LEGAL PROCEEDINGS
- --------------------------
The Company is currently involved in a pending lawsuit. The ultimate outcome of
this litigation is unknown at the present time. Accordingly, no provision for
any liability has been made to the accompanying financial statements. Management
does not believe that pending actions will have a material effect on the
business activities of the Company.
NOTE D - INCOME TAXES
- ---------------------
The Company has adopted SFAS 109 and as of February 28, 1998 has net operating
loss and investment tax credit carryforwards in the amount of $873,877 and
$10,524, respectively. Pursuant to SFAS 109, management believes that it does
not have a greater than 50% probability of realization of such loss
carryforwards and credits and has decided to provide for a full valuation
allowance. The investment tax credits will begin to expire, if unused, in the
fiscal year ending February 28, 1999. Annual fiscal year expirations total
$3,588 in 1999; $5,470 in 2000; $1,466 in 2001. Net operating losses will begin
to expire, if unused, in the fiscal year ending February 29, 2002. Annual fiscal
year expirations total $585,394 in 2002 and $288,483 in 2003. The Company has
recorded deferred tax assets related to the allowance for doubtful accounts in
deposits and other assets. As of February 28, 1998 and February 28, 1997 the
deferred tax assets remained at $11,116.
The components of the provisions for income taxes (credits) are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Years Ended
---------------------------------------------------------------
02/28/98 02/28/97 02/29/96
----------------------------------------------------------------
Current
Federal $ -0- $ -0- $ 2,900
State and Local 7,274 (4,734) 4,977
Deferred
Federal -0- 1,801 (5,100)
State and Local -0- 582 (1,650)
TOTALS $ 7,274 $(2,351) $ 1,127
======== ======= ======
</TABLE>
F-11
<PAGE>
NOTE D - INCOME TAXES (continued)
------------
Total income tax expense differs from the expected tax expense (computed by
applying the U.S. Federal statutory income tax rate of 34% to income before
income taxes) as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
2/28/98 % 2/28/97 % 2/29/96 %
------- - ------- - ------- -
Tax at Federal statutory rate $ 4,730 34.0 $ 87,033 34.0 $ 172,824 34.0
Federal alternative minimum tax -0- 0.0 -0- 0.0 2,900 0.6
State income taxes, net of
Federal tax benefit 4,801 34.5 (2,542) (1.0) 1,636 0.3
Net operating loss
carryforwards, utilized (2,283) (16.3) (88,324) (34.5) (179,716) (35.4)
Other 26 0.0 1,482 0.6 3,483 0.7
TOTALS $ 7,274 52.2 $ (2,351) (0.9) $ 1,127 0.2
======= ==== ========= ===== ========= ===
</TABLE>
Income taxes payable as of February 28, 1998, February 28, 1997 and February 29,
1996 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2/28/98 2/28/97 2/29/96
------- ------- -------
Federal $ -0- $ -0- $ 2,900
State and Local 2,803 929 -0-
TOTALS $ 2,803 $ 929 $ 2,900
========== ========= ==========
</TABLE>
NOTE G - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
- ---------------------------------------------------------
For the fiscal year ending February 28, 1998, the Company had two major
customers accounting for sales of $1,087,409 and $851,882, respectively.
As of February 28, 1998, the Company had $579,318 on deposit at First National
Bank of Long Island and $180,596 on deposit at Fleet Bank.
NOTE I - SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
- ------------------------------------------------------
Selected quarterly financial data for the years ended February 28, 1998 and
February 28, 1997 are presented in the following table:
F-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended May 31, 1997 August 31, 1997 November 30, 1997 February 28, 1998
Total revenues $ 1,446,013 $ 1,679,313 $ 1,743,295 $2,031,356
Operating income (61,952) (33,078) 35,095 138,550
Income before taxes (74,529) (47,189) 17,493 118,136
Net income (74,529) (49,189) 17,493 112,862
Basic earnings per share $ (0.02) $ (0.01) $ 0.00 $ 0.02
Basic weighted average
number of shares outstanding 4,708,203 4,709,801 4,713,709 4,718,440
Diluted earnings per share $ (0.02) $ (0.01) $ 0.00 $ 0.02
Diluted weighted average
number of shares outstanding 4,733,203 4,737,084 4,753,709 4,800,573
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
May 31, 1996 August 31, 1996 November 30, 1996 February 28, 1997
------------ --------------- ----------------- -----------------
Total revenues $ 1,131,106 $ 1,117,148 $ 1,256,688 $ 1,271,476
Operating income 150,374 45,068 124,052 (19,052)
Income before taxes 139,032 38,092 108,874 (30,020)
Net income 137,712 37,442 107,341 (24,166)
Basic earnings per share $ 0.03 $ 0.01 $ 0.03 $ (0.01)
Basic weighted average
number of shares outstanding 4,188,272 4,192,088 4,195,172 4,428,238
Diluted earnings per share $ 0.03 $ 0.01 $ 0.02 $ 0.00
Diluted weighted average
number of shares outstanding 4,371,701 4,375,517 4,378,601 4,509,568
</TABLE>
F-13
<PAGE>
CREDITRISK MONITOR
- A DIVISION OF MARKET GUIDE INC. -
FINANCIAL STATEMENTS
FOR THE PERIODS ENDED NOVEMBER 30,1998
AND NOVEMBER 30, 1997
<PAGE>
Table of Contents
Financial Statements
- --------------------
Balance Sheets as of November 30, 1998 (Unaudited) and
February 28, 1998.......................................................F-3
Statements of Operations and Accumulated Deficit for the 3 months and 9
months ended November 30, 1998 (Unaudited) and
November 30, 1997 (Unaudited)...........................................F-4
Statement of Cash Flows for the 9 months ended November 30, 1998
(Unaudited) and November 30, 1997 (Unaudited)...........................F-5
Notes to Financial Statements...........................................F-6
F-2
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
November 30, February 28,
1998 1998
---- ----
ASSETS (Unaudited)
Current assets:
Cash $ -0- $ -0-
Accounts receivable (net of allowance
for doubtful accounts) 255,368 220,040
------- -------
Total current assets 255,368 220,040
Property, plant and equipment at cost:
Furniture and equipment 338,901 220,271
Software 19,961 15,063
------ ------
358,862 235,334
Less: Accumulated depreciation 83,915 41,481
------ ------
Net property, plant and equipment 274,947 193,853
Other assets:
Capitalized projects (net of
accumulated amortization) 457,402 516,260
------- -------
Total other assets 457,402 516,260
------- -------
Total assets $ 987,717 $ 930,153
========= ==========
LIABILITIES AND EQUITY
Current liabilities:
Unearned revenues $ 549,894 $ 444,279
--------- ----------
Total current liabilities 549,894 444,279
Total liabilities 549,894 444,279
Equity
Advances from Market Guide Inc. 1,601,753 1,199,857
Accumulated deficit (1,163,930) (713,983)
---------- --------
Total equity 437,823 485,874
------- -------
Total liabilities and equity $ 987,717 $ 930,153
========= ==========
</TABLE>
F-3
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Unaudited Statements of Operation and Accumulated Deficit
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the 3 Months Ended For the 9 Months Ended
---------------------- ----------------------
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Earned Revenues $ 245,812 $ 97,168 $ 667,440 $155,121
--------- --------- ---------- --------
Total revenues 245,812 97,168 667,440 155,121
Expenses:
Salaries, payroll taxes and
employee benefits 279,306 244,793 835,959 520,893
Database and product costs 32,003 19,420 101,832 42,891
General and administrative 95,691 72,735 274,220 152,545
Depreciation 16,871 10,256 42,434 24,397
Amortization 19,620 19,620 58,859 52,319
Advertising and promotion 36,131 27,514 111,583 118,647
------ ------ ------- -------
Total expenses 479,622 394,338 1,424,887 911,692
------- ------- --------- -------
Loss before income taxes (233,810) (297,170) (757,447) (756,571)
Provision for income taxes (94,926) (120,650) (307,501) (307,168)
------- -------- -------- --------
Net loss (138,884) (176,520) (449,946) (449,403)
Accumulated deficit, beginning of quarter (1,025,045) (341,177) (713,983) (68,294)
Accumulated deficit, end of quarter $(1,163,929) $ (517,697) $ (1,163,929) $(517,697)
</TABLE>
F-4
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Unaudited Statements of Cash Flows
<TABLE>
<CAPTION>
<S> <C> <C>
For the 9 Months Ended
----------------------
November 30, November 30,
1998 1997
---- ----
Cash Flows From Operating Activities:
Net loss $ (449,946) $ (449,403)
----------- ----------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 101,292 76,716
Changes in assets and liabilities
(Increase)/Decrease in accounts receivable (35,328) (358,513)
Increase/(Decrease) in unearned revenues 105,615 419,416
------- -------
Total adjustments 171,579 137,619
------- -------
Cash used by operating activities (278,367) (311,784)
-------- --------
Cash Flows From Investing Activities:
Payments for fixed assets (123,529) (111,246)
Payments for capitalized projects -0- (196,223)
- --------
Cash used by investing activities (123,529) (307,469)
-------- --------
Cash Flows From Financing Activities:
Proceeds from Market Guide Inc. 1,127,318 835,277
Proceeds to Market Guide Inc. (725,423) (216,024)
-------- --------
Cash provided by financing activities 401,895 619,253
------- -------
Net change in cash -0- -0-
Cash at beginning of year -0- -0-
- -
Cash at end of year $ 0 $ 0
</TABLE>
F-5
<PAGE>
CREDITRISK MONITOR - A DIVISION OF MARKET GUIDE INC.
Notes to Financial Statements November 30, 1998
Note 1 INTERIM FINANCIAL STATEMENTS
----------------------------
The accompanying financial statements of Market Guide Inc. have been prepared
without audit, except for the balance sheet as of February 28, 1998. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended November 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
February 28, 1999.
Note 2 DEPRECIATION AND AMORTIZATION
- ------ -----------------------------
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives.
The straight-line method of depreciation is followed for substantially all
assets for both financial and tax reporting purposes.
F-6
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Historical
----------
New
Generation CreditRisk Pro Forma
Foods, Inc. Monitor Adjustments Combined
----------- ------- ----------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 13,400 $ - $ 3,250,000 (a) $2,030,213
(1,233,187) (c)
Purchase option 115,000 - (115,000) (c) -
Accounts receivable - 408,478 - 408,478
------- ------- ---------- ---------
Total current assets 128,400 408,478 1,901,813 2,438,691
GOODWILL - - 2,433,524 (c) 2,316,487
17,039 (d)
(134,076) (f)
FIXED ASSETS - 215,690 - 215,690
-------- ------- --------- --------
TOTAL ASSETS $ 128,400 $ 624,168 $ 4,218,300 $4,970,868
========== ========== =========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 5,908 $ 4,945 $ 25,000 (a) $ 58,268
22,415 (c)
Accrued franchise taxes 45,580 - - 45,580
Accrued expenses 46,284 - 26,948 (b) 90,271
17,039 (d)
----------- -------- ------ --------
Total current liabilities 97,772 4,945 91,402 194,119
SENIOR SECURED NOTE - - 787,630 (c) 787,630
EXPENSE PROMISSORY NOTE - - 98,162 (c) 98,162
UNEARNED INCOME - 796,353 - 796,353
------------- ----------- ----------- --------
Total liabilities 97,772 801,298 977,194 1,876,264
------------- ----------- ----------- ---------
REDEEMABLE CONVERTIBLE VOTING
SENIOR PREFERRED STOCK 1,100,000 - (1,100,000) (e) -
-------------- ----------- ------------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 3,998 - 13,000 (a) 52,981
35,983 (e)
Additional paid-in capital 22,818,930 - 3,212,000 (a) 27,067,999
1,064,017 (e)
(26,948) (b)
Accumulated deficit (23,892,300) (177,130)(g) (134,076) (f) (24,026,376)
177,130 (c)
-------------- ----------- ------------- ------------
Total stockholders' equity (deficit) (1,069,372) (177,130) 4,341,106 3,094,604
-------------- ------------ ------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 128,400 $ 624,168 $ 4,218,300 $ 4,970,868
============= =========== =========== ===========
</TABLE>
(a) Represents net proceeds from private placement of 1,300,000 shares of common
stock.
(b) Represents legal and state filing fees incurred in connection with
the private placement.
(c) Represents purchase of the assets of the CreditRisk
Monitor credit information service.
(d) Represents legal, state filing fees, and
taxes incurred in connection with the acquisition of the CreditRisk Monitor
assets.
(e) Represents conversion of 1,100,000 shares to senior preferred stock
into 3,598,299 shares of common stock.
(f) Represents write-off of capitalized
in-process research and development projects that have not reached technological
feasibility.
(g) Represents accumulated deficit net of advances from Market
Guide Inc.
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Historical
New
Generation CreditRisk Pro Forma
Foods, Inc. Monitor (f) Adjustments Combined
REVENUES
Earned revenues $ - $ 809,563 $ - $ 809,563
----------- -------------- ------------ ---------
EXPENSES
Salaries and employee benefits - 1,117,194 - 1,117,194
Database and product costs - 150,898 - 150,898
General and administrative 28,216 336,920 - 365,136
Depreciation and amortization - 132,262 37,344 (a) 169,606
Advertising and promotion - 160,186 - 160,186
Interest expense - - 7,925 (b) 81,895
73,970 (c)
----------- ------------- ------------- -----------
28,216 1,897,460 119,239 2,044,915
----------- -------------- ------------ ----------
Loss from operations (28,216) (1,087,897) (119,239) (1,235,352)
----------- -------------- ------------ -----------
OTHER INCOME AND EXPENSES
Interest and dividend income 7,700 - - 7,700
Gain on investments 2 - - 2
Write-off of intangible assets - - (134,076) (e) (134,076)
----------- -------------- ------------- ----------
7,702 - (134,076) (126,374)
----------- -------------- ------------- ----------
Loss before income taxes (20,514) (1,087,897) (253,315) (1,361,726)
PROVISION (BENEFIT) FOR
INCOME TAXES 2,925 (441,664) 441,664 (d) 2,925
----------- -------------- ------------ ---------
NET LOSS $ (23,439) $ (646,233) $ (694,979) $(1,364,651)
============= ============= ============== ============
NET LOSS PER SHARE
Basic $ (0.06) $ (0.26)
============== ============
Diluted $ (0.06) $ (0.26)
============== ============
WEIGHTED AVERAGE NUMBER
OF SHARES
Basic 399,830 5,300,129
============= ============
Diluted 399,830 5,300,129
============= ============
</TABLE>
(a) Represents goodwill amortization in excess of capitalized costs written-off.
(b) Represents deferred interest expense on Expense Promissory Note.
(c)Represents amortization of debt discount on Senior Secured Note.
(d) Represents NGNF's inability to take advantage of net operating loss.
(e) Represents write-off of capitalized in-process research and development
projects that have not reached technological feasibility.
(f) Amounts for CreditRisk Monitor were determined by adding results for the
year ended February 28, 1998 and the results from the nine months ended November
30, 1998 and subtracting the results for the nine months ended November 30,
1997.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
NEW GENERATION FOODS, INC.
By:/s/Jerome S. Flum
Name: Jerome S. Flum
Title: Chairman of the Board
and Principal Financial Officer
DATE: March 31, 1999
