SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: June 14, 1999
(Date of earliest event reported)
NEW YORKER MARKETING CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-22431 11-3214529
- --------------------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1122 Southern Boulevard, Bronx, New York 10459
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (718) 893-2500
Mike's Original, Inc.
366 North Broadway, Jericho, New York 11753
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements of Business Acquired. The financial statements of
New Yorker Ice Cream Corp. and Jerry's Ice Cream Inc. are attached hereto.
(b) Pro forma Financial Information. The required pro forma financial
information is attached hereto.
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NEW YORKER MARKETING CORP.
/s/ Ted Ketsoglou
-----------------------------------------
Ted Ketsoglou, President
Dated: August 30, 1999
---------------
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
- - Pro Forma Financial Statements:
New Yorker Marketing Corp.
Introduction to Pro Forma Financial Statements F-2
Pro Forma Balance Sheet as of March 31, 1999 F-3
Pro Forma Statement of Operations Three Months Ended March 31, 1999 F-4
Pro Forma Statement of Operations Year Ended December 31, 1998 F-5
Notes to Pro Forma Financial Statements F-6
New Yorker Ice Cream Corp. Financial Statements - December 31, 1998
Report of Independent Certified Public Accountants F-7
Balance Sheet F-8
Statements of Operations F-9
Statements of Stockholders' Equity F-10
Statements of Cash Flows F-11
Notes to Financial Statements F-12
Jerry's Ice Cream, Inc. Financial Statements - December 31, 1998
Report of Independent Certified Public Accountants F-18
Balance Sheet F-19
Statements of Operations F-20
Statements of Cash Flows F-21
Notes to Financial Statements F-22
<PAGE>
NEW YORKER MARKETING CORP.
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements have been prepared
based upon certain pro forma adjustments to the historical financial statements
of New Yorker Marketing Corp. set forth elsewhere in this prospectus. The pro
forma financial statements should be read in conjunction with the notes thereto
and the historical financial statements of the Company.
The accompanying pro forma balance sheet has been presented as if the
transactions described below occurred at the Company's balance sheet date. The
accompanying pro forma statements of operations have been prepared as if the
transactions occurred at the beginning of the three month period ended March 31,
1999 and the year ended December 31, 1998.
These proforma financial statements do not purport to be indicative of the
results which would actually have been obtained had the pro forma transactions
been completed as of the beginning of the three months ended March 31, 1999 and
the year ended December 31, 1998.
The pro forma transactions (see notes to pro forma financial statements)
are as follows:
- The restructure of certain of the Company's debt
- The issuance of shares in exchange for services rendered
- The sale of 368,000 shares of the Company's Common Stock
- The acquisition of two ice cream distributors using the proceeds from
the sale of the 368,000 shares of the Company's Common Stock
F - 2
<PAGE>
NEW YORKER MARKETING CORP.
PROFORMA BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
SUBSEQUENT
TRANSACTIONS PROFORMA ACQUISITION/OFFERING
AS REPORTED ------------------ ------------------------------
MARCH 31, 1999 NEW YORKER JERRY'S DEBIT CREDIT DEBIT CREDIT
-------------- ---------- -------- ------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash............................ 367 $ 11,935 $85,000(1) $1,780,000(2) $ 11,935(3)
970,000(4)
100,000(4)
101,600(6)
Accounts Receivable............. 325,106 8,931 334,037(3)
Inventories..................... 55,371 171,959 6,228 100,000(4) 178,187(3)
Prepaid expenses and other
current assets................ 78,223 1,500 1,500(3)
------------ -------- --------
Total current assets.............. 133,961 509,000 16,659
Fixed assets...................... 907 104,658 26,214 1,708,657(4)
Intangible assets................. 183 181,705 826,343(4) 181,705(3)
130,872(3)
Other assets...................... 248,154 26,266 26,266(3)
50,000(4)
------------ -------- --------
TOTAL ASSETS...................... $ 383,205 $639,924 $224,578
============ ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable -- related
parties....................... $ 299,497 101,600(6)
75,000(6)
Notes payable -- other.......... 100,000 43,465 143,465(3)
Accounts payable and accrued
liabilities................... 610,591 387,064 31,064 350,000(1) 418,128(3)
10,000(1)
Other accrued liabilities....... 239,691
Current portion long-term
debt.......................... 1,129,440 140,000(1) 95,000(1) 323,750(4)
------------ -------- --------
Total current liabilities......... 2,279,219 487,064 74,529
Notes payable -- acquisition...... 371,250(4)
Long-term debt.................... 235,443 81,501 316,944(3)
------------ -------- --------
Total liabilities................. 2,279,219 722,507 156,030
------------ -------- --------
Stockholders' equity (deficit):
Common stock.................... 5,153 26,750 138,890 165,640(3) 368(2)
4,122(2) 131(4)
300(4)
166(5)
Additional paid-in capital...... 11,506,636 117,897 117,897(3) 1,779,632(2)
4,122(2)
819,869(4)
1,874,700(4)
1,037,334(5)
Deferred financing costs........ (748,800)
Treasury stock.................. (147,808) 147,808(3)
Accumulated deficit............. (12,659,003) (79,422) (70,342) 490,000(1) 1,875,000(4) 149,764(3)
1,037,500(5) 75,000(6)
------------ -------- --------
Total stockholders' equity
(deficit)....................... (1,896,014) (82,583) 68,548
------------ -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)....................... $ 383,205 $639,924 $224,578
============ ======== ========
<CAPTION>
PROFORMA
--------------
MARCH 31, 1999
--------------
<S> <C>
ASSETS
Current Assets:
Cash............................ $ 693,767
Accounts Receivable.............
Inventories..................... 155,371
Prepaid expenses and other
current assets................ 78,223
------------
Total current assets.............. 927,361
Fixed assets...................... 1,840,43
Intangible assets................. 695,654
Other assets...................... 198,154
------------
TOTAL ASSETS...................... $ 3,661,605
============
LIABILITIES
AND
STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable -- related
parties....................... 122,897
Notes payable -- other..........
Accounts payable and accrued
liabilities................... 250,591
Other accrued liabilities....... 239,691
Current portion long-term
debt.......................... 1,408,190
------------
Total current liabilities......... 2,021,369
Notes payable -- acquisition...... 371,250
Long-term debt....................
------------
Total liabilities................. 2,392,619
------------
Stockholders' equity (deficit):
Common stock.................... 1,996
Additional paid-in capital...... 17,022,293
Deferred financing costs........ (748,800)
Treasury stock..................
Accumulated deficit............. (15,006,503)
------------
Total stockholders' equity
(deficit)....................... 1,268,986
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)....................... $ 3,661,605
============
</TABLE>
F - 3
<PAGE>
New Yorker Marketing Corp.
Pro Forma Statement of Operations
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
As Reported Adjustment Pro Forma
March 31, 1999 New Yorker Jerry's Eliminations Debit Credit March 31, 1999
-------------- ---------- ------- ------------ ----- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales, net 0 $763,293 $157,028 $78,514 $841,807
Cost of sales 863 612,586 132,104 78,514 46,000 (6) 713,039
-------- -------- -------- --------
Gross profit (863) 150,707 24,924 128,768
-------- -------- -------- --------
Operating expenses
Selling, marketing
and shipping
Research & development
General and administrative 92,108 213,242 34,290 23,350 (6) 39,000 (6) 323,990
-------- -------- -------- ---------
Total operating expenses 92,108 213,242 34,290 323,990
-------- -------- -------- ---------
Loss from operation (92,971) (62,535) (9,366) (195,222)
Interest expense (net) 311,229 2,250 313,479
-------- -------- -------- ---------
Net loss ($404,200) ($64,785) ($9,366) ($508,701)
======== ======== ======== =========
Weighted average common
shares outstanding 5,152,908 1,995,782
========= =========
Basic loss per share ($0.08) ($0.25)
========= =========
</TABLE>
F - 4
<PAGE>
New Yorker Marketing Corp.
Pro Forma Statement of Operations
Year Ended December 31,1998
<TABLE>
<CAPTION>
Adjustment
As Reported December 31, Pro Forma
December 31, 1998 New Yorker Jerry's Eliminations Debit Credit 1998
----------------- ---------- ------- ------------ ----- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales, net $103,410 $6,145,418 $809,117 $410,654 $6,647,291
Cost of sales 436,457 5,637,062 690,799 410,654 184,000 (7) 6,537,664
--------- ----------- -------- ---------
Gross profit (333,047) 508,356 118,318 109,627
--------- ----------- -------- ---------
Operating expenses
Selling, marketing and shipping 31,878 31,878
Research & development 7,754 7,754
General and administrative 759,928 487,066 117,797 93,400(7) 234,000(7) 1,224,191
--------- ----------- -------- ---------
Total operating expenses 799,560 487,066 117,797 1,263,823
--------- ----------- -------- ---------
Loss from operation (1,132,607) 21,290 521 (1,154,196)
Interest expense (net) 166,769 16,553 6,391 189,713
--------- ----------- -------- ---------
Net loss ($1,299,376) $4,737 ($5,870) ($1,343,909)
========== =========== ======== ==========
Weighted average common shares
outstanding 725,427 1,995,782
========== ==========
Basic loss per share ($1.79) ($0.67)
========== ==========
</TABLE>
F - 5
<PAGE>
NEW YORKER MARKETING CORP.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
(1) The Company has entered into agreements to restructure certain debt
which includes (i) forgiveness of trade notes payable of $140,000, (ii)
forgiveness and reduction of accounts payable in the amount of $350,000, and
(iii) obtain additional bridge financing until the offering contemplated herein
is completed.
(2) The Company is offering 368,000 shares of its Common Stock at an
assumed price of $6.25 per share with estimated net proceeds of $1,780,000 and
giving effect to the 1 for 5 reverse split.
(3) This adjustment eliminates all assets and liabilities of New Yorker Ice
Cream Corp. and Jerry's Ice Cream, Inc. (see Note 4) not being acquired by the
Company.
(4) The Company has acquired the rights to acquire assets of New Yorker Ice
Cream Corp. and Jerry's Ice Cream, Inc. in exchange for $935,000 in cash (of
which $50,000 was paid prior to March 31, 1999), assumption of $95,000 8% debt
due on demand, $200,000 8% notes payable in six months, assumption of debt of
$495,000 payable at 8% over four years and $820,000 in the Company's Common
Stock. In addition, inventory will be purchased currently estimated at $100,000.
The acquisition has been accounted for as a purchase and therefore fixed
assets have been recorded at fair market appraisal value resulting in the
recording of additional equity and reducing goodwill.
The purchase price is summarized as follows:
<TABLE>
<S> <C>
Cash $ 935,000
Notes payable 780,000
Common stock 820,000
-----------
Total purchase price 2,535,000
Less: Book value of fixed assets acquired 130,900
-----------
Excess purchase price $ 2,404,100
===========
Allocation of total purchase price
Fixed Assets $ 1,708,657
Covenant Not to Compete 150,000
Goodwill 676,343
-----------
2,535,000
===========
</TABLE>
Fixed assets have been written up to fair market value (of $1,839,557)
based upon an appraisal performed for purposes of establishing the purchase
price of the entities to be acquired. In addition, inventory estimated to be
approximately $100,000 will be acquired.
(5) The Company will issue 166,000 of its common shares in exchange for
services rendered. Arthur Rosenberg, President, and David Lieberman, outside
counsel, will be issued 95,000 and 70,000 shares respectively at the closing of
the acquisitions for management services provided for the last eighteen months.
The remaining 1,000 shares will be issued to the Company's financial consultant.
These shares have been valued at $6.25 per share.
(6) This entry reflects the payment of notes to related parties and a
forgiveness of $75,000 has been recorded associated with the settlement of a
related party debt.
(7) Preparation of the pro forma statements of operations gives effect to
the depreciation of fixed assets and amortization of goodwill as if they were
acquired at the beginning of the period. In addition, a management fee payable
by New Yorker Ice Cream Corp., to a party not being acquired has been eliminated
since it will not coninue to be paid after closing.
F - 6
<PAGE>
Report of Independent Accountant
To The Stockholders of
New Yorker Ice Cream Corp.
-------------------------
I have audited the accompanying balance sheets of New Yorker Ice Cream Corp.,
as of December 1998 and December 31, 1997, and the related statements of
operations, stockholder's equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Yorker Ice Cream Corp.,
as of December 31, 1998 and December 31, 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Sidney Neuhof
------------------------
Sidney Neuhof
Certified Public Accountant
February 15, 1999
F - 7
<PAGE>
NEW YORKER ICE CREAM CORP. PAGE (2)
BALANCE SHEETS
AS AT: DECEMBER 31, 1998 AND DECEMBER 31, 1997
-----------------------------------------------
<TABLE>
<CAPTION>
ASSETS
------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash in banks $ 20,697 $ --
Accounts receivable - net 295,259 251,964
Merchandise inventory - Note 1 197,100 184,612
Other current assets -- 10,979
-------- --------
Total current assets 513,056 447,555
FIXED ASSETS
Furniture and fixtures
Net of accumulated depreciation
of $520,157 for 1998 and
$494,915 for 1997 - Note 1 109,658 111,187
OTHER ASSETS
Intercompanies - Note 2 42,705 1,394
-------- --------
TOTAL ASSETS $665,419 $560,136
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Bank overdraft $ - $ 28,979
Loans payable - bank - Note 3 100,000 100,000
Accounts payable and accrued expenses 347,774 347,692
-------- --------
Total current liabilities 447,774 476,671
OTHER LIABILITIES
Loans payable - long term Note 4 112,000 106,000
Officer Loan Note 5 123,443 -
-------- -------
235,443 106,000
STOCKHOLDER'S EQUITY
Capital stock
83.25 shares authorized, issued
and outstanding 26,750 26,750
Additional Paid-In-Capital 117,897 117,897
Treasury Stock (147,808) (147,808)
Retained Earnings (deficit) (14,637) (19,374)
-------- --------
Total stockholder's equity (deficit) (17,798) (22,535)
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $665,419 $560,136
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 8
<PAGE>
NEW YORKER ICE CREAM CORP. PAGE (3)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED: DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
NET SALES - Note 8 $6,145,418 $6,498,430
COST OF GOODS SOLD 5,130,871 5,412,912
---------- ----------
GROSS PROFIT 1,014,547 1,085,518
---------- ----------
OPERATING EXPENSES 993,257 975,571
---------- ----------
INCOME BEFORE OTHER EXPENSES 21,290 109,947
OTHER EXPENSES:
Interest expense 16,553 15,852
---------- ----------
NET INCOME $ 4,737 $ 94,095
========== =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 9
<PAGE>
NEW YORKER ICE CREAM CORP. PAGE (4)
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED: DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
Additional Retained
Capital Paid In Treasury Earnings
Stock Capital Stock (Deficit) Total
------- ---------- -------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance January 1, 1997 $26,750 $117,897 (147,808) (113,469) (116,630)
Net Income - - - 94,095 94,095
------- ------- ------- ------- -------
Balance - December 31, 1997 26,750 117,897 (147,808) (19,374) (22,535)
Net Income 4,737
------- -------- -------- -------- --------
Balance December 31, 1998 $26,750 $117,897 ($147,808) ($14,637) ($17,798)
======= ======== ========= ======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 10
<PAGE>
NEW YORKER ICE CREAM CORP. PAGE (5)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED: DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,737 $ 94,095
Adjustments to reconcile net income to net
Cash provided by operating activities
Depreciation and Amortization 25,242 33,506
(Increase) in accounts receivable (43,295) (39,770)
(Increase) Decrease in inventory (12,488) 52,350
Decrease (Increase) in other current assets 10,979 (10,979)
(Increase) Decrease in bank overdraft (28,979) 28,979
Increase (Decrease) in accounts payable and
accrued expenses 82 (85,551)
Net cash used by operating activities -------- --------
(43,722) 72,630
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed assets (23,713) (10,336)
Other assets - -
-------- --------
Net cash used in investing activities (23,713) (10,336)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Intercompany net (41,311) (107,425)
Loans Net 6,000 41,000
Shareholder's Loans 123,443 -
-------- --------
Net cash provided by (used in) financing activities 88,132 (66,425)
-------- --------
NET INCREASE (DECREASE) IN CASH 20,697 (4,131)
CASH AT BEGINNING OF YEAR - 4,131
-------- --------
CASH AT END OF YEAR $ 20,697 $ 0
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 11
<PAGE>
PAGE (6)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
NOTE 1
------
HISTORY AND BUSINESS DESCRIPTION
--------------------------------
New Yorker Ice Cream Corp., was incorporated under the laws of the state of
New York on December 1, 1996.
The company distributes various types of ice cream products such as Haagen
Dazs and Baskin Robbins to retail stores and for food servicing. They also
sell to sub-distributors who work out of the company's facility. The company
adds 7% to 10% to the cost of the merchandise which is included in sales.
All of the shares of the company were purchased by Theodore Ketsoglou on May
13, 1991 from the estate of Joseph K. Ketsoglou.
In 1993 Mr. Theodore Ketsoglou sold all his stock to the The Kerry Group,
Inc., with The Kerry Group, Inc., assuming the outstanding note obligation due
to the estate in return for the ownership of New Yorker Ice Cream Corp.
The Kerry Group, Inc., is a management consulting company whose primary client
is New Yorker Ice Cream Corp. These financials do not include the financial
information of The Kerry Group, Inc. Mr. Theodore Ketsoglou is the 100%
shareholder of The Kerry Group, Inc.
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions
that affect the amounts reported in the financial statement and accompanying
notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENT
------------------------
All highly liquid investments with original maturities of three months or less
are considered to be cash equivalents.
F - 12
<PAGE>
PAGE (7)
NOTE 1 (Continued)
-----------------
INVENTORIES
-----------
Inventories are valued at the lower of cost or market, cost being determined
using the first in, first out (FIFO) method. All inventory are prepackaged
units which are available for sale.
PROPERTIES, RENTAL EQUIPMENT, AND DEPRECIATION
----------------------------------------------
Properties and rental equipment are carried at cost and are depreciated over
the estimated lives of such assets using the straight-line method. Leasehold
improvements are amortized over the shorter of the asset lives or the terms of
the respective leases.
Properties, Rental Equipment And Depreciation Schedule
------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
Asset Accumulated Asset Accumulated
Value Depreciation Value Depreciation
----- ------------ ----- ------------
<S> <C> <C> <C> <C>
Freezer Cabinets $317,765 $263,198 $294,052 $244,988
Machinery 61,481 61,481 61,481 61,481
Office Equipment 8,997 8,901 8,997 8,901
Vehicles 55,122 53,740 55,122 52,765
Improvements 186,450 132,837 186,450 126,780
-------- -------- -------- --------
$629,815 $520,157 $606,102 $494,915
======== ======== ======== ========
</TABLE>
F - 13
<PAGE>
PAGE (8)
NOTE 2
------
INTERCOMPANIES - PARENT AND RELATED COMPANIES
---------------------------------------------
All intercompany loans are non-interest bearing and have no specified
repayment date. The outstanding balances are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- -------------------
Due From Due To Due From Due To
-------- ------ -------- ------
<S> <C> <C> <C> <C>
(1) The Kerry Group, Inc. $100,224 - $104,483 -
(2) American Classic Inc. 150,893 - 105,323 -
(3) Tri K Realty Inc. - $100,000 - $100,000
(4) Silver Crown Ice Cream Inc. - 108,412 - 108,412
-------- -------- -------- --------
$251,117 $208,412 $209,806 $208,412
======== ======== ======== ========
</TABLE>
NOTE 3
------
LOANS PAYABLE BANK OF NEW YORK
--------------------------------
The company has a $100,000 line of credit with interest of 1% over existing
prime. The bank has taken through a UCC filing collateral on all New Yorker
Ice Cream Corp.'s receivables and fixed assets. There is no due date on the
loan as the bank makes a business evaluation each year on the credit
worthiness of the loan. Mr. Theodore Ketsoglou is a personal guarantor. The
interest rate at 12/31/98 was 9%.
NOTE 4
------
LOANS PAYABLE LONG TERM
-------------------------
The company owes $100,000 to Smaragda Tragellis (Mr. Ketsoglou's mother) with
interest accruing at 6% per annum.
F - 14
<PAGE>
PAGE (9)
NOTE 5
- ------
During 1998, Theodore Ketsoglou loaned the corporation $123,443. Mr. Ketsoglou
has indicated that the loan will not be repaid until all other liabilities are
satisfied. Accordingly, the loans have been classified at long-term.
NOTE 6
- ------
PROVISION FOR INCOME TAXES
- --------------------------
No provision for income taxes were made due to carry over tax losses.
<TABLE>
<CAPTION>
Schedule Of Federal Net Operating Loss
--------------------------------------
<S> <C> <C>
Net Operating Loss 1/1/97 ($159,042)
Loss Used 1997 $94,095
Loss Used 1998 4,737 98,832
---------
Carry Forward $ (60,210)
=========
</TABLE>
The value of the net operating loss carry forward at a federal tax rate of 34%
would be $20,471.
NOTE 7
- ------
LEASES
- ------
The company has no lease at their current premises. The company occupies
premises from a related corporation Tri-K Realty, Inc. As no fair market value
rental has been arrived at, this would be considered a non-arm's-length
transaction.
NOTE 8
- ------
LITIGATION
- ----------
There is one lawsuit that was brought against the company in 1997 and stopped in
1998. Corporate attorney and management indicate that there are currently no
lawsuits against the company.
F - 15
<PAGE>
PAGE (10)
NOTE 9
------
SALES BREAK AND CONCENTRATION
-----------------------------
The company has two sources of sales (1) routes and food service and (2)
sub-distributors.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
1. Routes and food service $3,511,259 $3,267,188
2. Sub-distributors 2,634,159 3,231,242
---------- ----------
$6,145,418 $6,498,430
========== ==========
</TABLE>
Sub-distributors are other distributors who buy products directly from New
Yorker Ice Cream Corp. at a 7% - 10% up-charge (gross margin) for storage, rent
and loading products onto sub-distributors' trucks. The two largest
sub-distributors are (A) Bartolini Ice Cream Co., Inc. and (B) Jerry's Ice Cream
Inc.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
A. Bartolini Ice Cream Co., Inc. $1,830,879 $1,997,244
B. Jerry's Ice Cream Inc. 410,654 515,100
</TABLE>
A. Bartolini Ice Cream Co., Inc. would be considered a high concentration
customer given the percentage of sales. Bartolini Ice Cream Co., Inc. pays
a 7% fee on all purchases from New Yorker Ice Cream Corp. Currently,
management feels there is is no reason expect that Bartolini Ice Cream Co.,
Inc. will not continue its purchase from New Yorker Ice Cream Corp.
B. Jerry's Ice Cream Inc. As mentioned in footnote number 9, regarding sale of
assets, Jerry's Ice Cream Inc. is also selling their assets to the same
parties at that same time.
F-16
<PAGE>
PAGE (11)
NOTE 10
-------
The company signed a contract on July 20, 1998 to sell all of its assets to
Mike's Original Inc. for $2,045,000. The contract calls for the assets (not
including inventory which will be purchased separately, cash and accounts
receivable) to be paid for as follows:
<TABLE>
<S> <C> <C>
1. Down payment (already paid) $ 35,000
2. At closing in cash 515,000
3. Due in 6 months with 8% interest 150,000
4. Promissory Notes to be paid by the issuance
of shares of Mike's Original Inc. stock 650,000
5. Assumption of indebtedness of a liability to
the estate of Joseph Ketsoglou to be paid:
A. At closing $200,000
B. Over 4 years with
interest at 8% 495,000
--------
695,000
----------
$2,045,000
==========
</TABLE>
The contract is subject to Mike's Original Inc. raising the necessary funds
through a public offering and final approval by the SEC.
Assuming that the sale of assets takes place, the company will cease to be a
going concern entity.
F - 17
<PAGE>
Report of Independent Accountant
To The Stockholders of
Jerry's Ice Cream, Inc.
-----------------------
I have audited the accompanying balance sheets of Jerry's Ice Cream, Inc., as
of December 31, 1998 and December 31, 1997, and the related statements of
operations, retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Jerry's Ice Cream, Inc., as
of December 31, 1998 and December 31, 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/ Sidney Neuhof
------------------------
Sidney Neuhof
Certified Public Accountant
February 16, 1999
F - 18
<PAGE>
JERRY'S ICE CREAM INC. PAGE (2)
BALANCE SHEETS
AS AT: DECEMBER 31, 1998 AND DECEMBER 31, 1997
-----------------------------------------------
<TABLE>
<CAPTION>
ASSETS
------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash in banks $ - $ 5,585
Accounts receivable - net 4,520 5,468
Merchandise inventory 10,761 4,177
Other current assets 1,500 --
-------- --------
Total current assets 16,781 15,230
FIXED ASSETS
Furniture and fixtures
Net of accumulated depreciation 30,214 40,798
of $67,218 for 1998
and $50,147 for 1997
INTANGIBLE ASSETS - Goodwill
Net of accumulated amortization 186,445 205,403
of $74,257 for 1998
and $55,299 for 1997 -------- --------
TOTAL ASSETS $233,440 $261,431
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Bank overdraft $ 6,453 $ -
Accounts payable and accrued expenses 28,593 23,825
Notes payable - Note 2 31,716 31,716
-------- --------
Total current liabilities 66,762 55,541
OTHER LIABILITIES
Loans payable stockholder 43,926 58,873
Notes payable - Note 2 44,838 63,233
-------- --------
88,764 122,106
STOCKHOLDER'S EQUITY
Capital stock 10 shares authorized, 138,890 138,890
Issued and outstanding no par value
Deficit (60,976) (55,106)
-------- --------
Total stockholder's equity 77,914 83,784
$233,440 $261,431
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 19
<PAGE>
JERRY'S ICE CREAM, INC. PAGE (3)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
FOR THE YEARS ENDED: DECEMER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
NET SALES $ 809,117 $ 807,310
COST OF GOODS SOLD 690,799 656,922
--------- ---------
GROSS PROFIT 118,318 150,388
OPERATING EXPENSES 117,797 157,121
--------- ---------
INCOME (LOSS) BEFORE
OTHER EXPENSES 521 (6,733)
OTHER EXPENSES:
Interest Expense 6,391 9,232
--------- ---------
NET (LOSS) $ (5,870) $ (15,965)
========= =========
RETAINED EARNINGS (DEFICIT)
Beginning of year $ (55,106) $ (39,141)
NET (LOSS) (5,870) (15,965)
--------- ---------
RETAINED EARNINGS (DEFICIT)
End of year $ (60,976) $ (55,106)
========= =========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 20
<PAGE>
JERRY'S ICE CREAM INC. PAGE (4)
STATEMENTS OF CASH FLOWS
FOR YEARS ENDED: December 31, 1998 AND December 31, 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (5,870) $(15,965)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and Amortization 36,031 33,649
Decrease in accounts receivable 948 3,032
(Increase) in inventory (6,584) (1,627)
(Increase) Decrease in other current assets (1,500) 8,052
Increase in accounts payable and
accrued expenses 4,768 11,316
-------- -------
Net cash provided by operating activities 27,793 38,457
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Fixed Assets (6,488) (8,492)
-------- -------
Net cash used in investing activities (6,488) (8,492)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans - Shareholder (14,947) (12,481)
Loans - Net (18,396) (7,485)
-------- -------
Net cash (used in) financing activities (33,343) (19,966)
-------- -------
NET (DECREASE) INCREASE IN CASH (12,038) 9,999
CASH AT BEGINNING OF YEAR 5,585 (4,414)
-------- -------
CASH AT END OF YEAR $ (6,453) $ 5,585
======== =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
F - 21
<PAGE>
PAGE (5)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
NOTE 1
------
HISTORY AND BUSINESS DESCRIPTION
--------------------------------
Jerry's Ice cream Inc., was incorporated under the laws of the state of New
York on September 1, 1994. The company is owned 100% by Gerald Schneider.
On January 20, 1995, Mr. Schneider through a stock redemption agreement sold
all of his stock interest back to the Ennis Ice Cream Co., Inc., and received
certain fixed and intangible assets in exchange. Mr. Schneider transferred his
share (28.57%) of the assets and liabilities of Ennis Ice Cream to Jerry's Ice
Cream, Inc., pursuant to a tax free exchange.
The estate of Ron Ennis sold stock of Ennis Ice Cream, Inc., to three
stockholders. The remaining stockholders after the stock redemption were Ron
Kissel and Michael Chase (both non-related to Mr. Schneider). Mr. Schneider
agreed not to sell certain accounts of Ennis Ice Cream, Inc., and Ennis Ice
Cream, Inc., agreed not to sell accounts of Gerald Schneider or Jerry's Ice
Cream, Inc.
USE OF ESTIMATES
---------------
The preparation of financial statements in conformity with generally accepted
accounting principles require management to make estimates and assumptions
that affect the amounts reported in the financial statement and accompanying
notes.
CASH AND CASH EQUIVALENTS
-------------------------
All highly liquid investments with original maturities of three months or less
are considered to be cash equivalents.
INVENTORIES
-----------
Inventories are valued at the lower of cost or market, cost being determined
using the first in, first out (FIFO) method. All inventory are prepackaged
merchandise available for sale.
F - 22
<PAGE>
PAGE (6)
NOTE 1 (Continued)
------------------
PROPERTY, RENTAL EQUIPMENT, AND DEPRECIATION
--------------------------------------------
Properties and rental equipment are carried at cost and are depreciated over
the estimated lives of such assets using the straight-line method.
<TABLE>
<CAPTION>
Properties, Rental Equipment And Depreciation Schedule
------------------------------------------------------
1998 1997
--------------------- ----------------------
Asset Accumulated Asset Accumulated
Value Depreciation Value Depreciation
----- ------------ ----- ------------
<S> <C> <C> <C> <C>
Computers $ 5,144 $ 2,381 $ 4,644 $ 1,328
Auto and Truck 15,190 14,539 15,190 13,939
Freezer Cabinets 76,261 49,963 70,274 34,712
Furniture Fixtures 837 335 837 168
------- ------- ------- -------
$97,432 $67,218 $90,945 $50,147
======= ======= ======= =======
</TABLE>
NOTE 2
------
<TABLE>
<CAPTION>
1998 1997
--------------------- --------------------
Short Term Long Term Short Term Long Term
<S> <C> <C> <C> <C>
1) Note Payable - Schneider
Management - Long term
Note 7% interest -- $15,000 -- $15,000
2) Note Payable - Estate of
Ron Ennis
Self Amortizing Loan
Interest Rate 10% $31,716 29,838 $31,716 48,233
------- ------- ------- -------
$31,716 $44,838 $31,176 $63,233
======= ======= ======= =======
</TABLE>
F - 23
<PAGE>
PAGE (7)
NOTE 2 (Continued)
-----------------
1) Schneider Management is a corporation owned by Gerald Schneider's brother.
Gerald Schneider has no interest in Schneider Management. The loan is
unsecured and Mr. Gerald Schneider is a personal guarantor. The loan was
made on December 17, 1997 and repayment date is January 1, 1999 with
interest at 7% per annum. There is no prepayment penalty.
2) Notes Payable Estate of Ron Ennis Represent portion of loan that Mr.
Gerald Schneider and two other original stockholders of Ennis Ice Cream,
Inc., Agreed to, upon purchasing Ennis Ice Cream, Inc. Jerry's Ice Cream,
Inc., assumed 28.57% of the loan in which the monthly payments are
$2,643.00. Mr. Gerald Schneider is a personal guarantor on this
obligation.
NOTE 3
------
AMORTIZATION OF INTANGIBLE ASSETS
---------------------------------
The company is amortizing route values (goodwill) acquired as part of a stock
redemption (see Note 1) of $248,057.00 over 15 years.
NOTE 4
------
PROVISION FOR INCOME TAXES
--------------------------
Provision for income taxes Jerry's Ice Cream Inc., has elected to be taxed
under the provision of Subchapter S of the Internal Revenue Code and New York
State tax laws. Accordingly, there is only a provision for minimum taxes of
$625 which is included in operating expenses.
NOTE 5
------
LEASES
------
The company has no leases.
NOTE 6
-------
LITIGATION
----------
Management and Counsel has indicated that as of report date there are no
lawsuits pending.
F - 24
<PAGE>
PAGE (8)
NOTE 7
------
SALE OF CORPORATE ASSETS
------------------------
The company signed a contract on July 20, 1998 to sell all of its assets to
Mike's Original Inc., for $490,000. The contract calls for an asset sale (not
including inventory which will be purchased separately, cash and accounts
receivable) to be paid for as follows:
<TABLE>
<S> <C>
1. Down payment (already paid) $ 15,000
2. At closing in cash 255,000
3. Due in 6 months with 8 % interest 50,000
4. Promissory Notes to be paid by the
issuance of shares of Mike's
Original Inc. stock 170,000
--------
$490,000
========
</TABLE>
The contract is subject to the raising of funds by Mike's Original Inc.,
through a public offering and approval by the SEC.
Assuming that the sale of assets takes place, the company will cease to be a
going concern entity.
` F - 25
