SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1999
Commission file number 0-22431
NEW YORKER MARKETING CORP.
(Exact name of Small Business Issuer as Specified in Its Charter)
Delaware 11-3214529
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1122 Southern Boulevard, Bronx, NY 10459
(Address of principal executive offices)
Issuer's telephone number, including area code (718) 893-2500
366 North Broadway, Jericho, NY 11753
(Former Name, Former Address and Formal Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of August 10, 1999: 1,695,782
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
NEW YORKER MARKETING CORP.
- INDEX -
Page(s)
-------
PART I Financial Information
Consolidated Condensed Balance Sheets - June 30, 1999
(unaudited) and December 31, 1998 3
Consolidated Condensed Statements of Operations -
Three and Six Months Ended June 30, 1999 and 1998
(unaudited) 4
Consolidated Condensed Statements of Cash Flows - Six
Months Ended June 30, 1999 and 1998 (unaudited) 5
Notes to Interim Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II Other Information 11
SIGNATURES 12
Exhibit 27 - Financial Data Schedule
<PAGE>
PART I. Financial Information
ITEM 1. Financial Statements
NEW YORKER MARKETING CORP.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 143,128 $ 19,166
Accounts receivable, less allowance for doubtful
accounts of $15,916 for 1998 107,375 13,372
Inventories 266,701 55,371
Prepaid expenses 10,919 22,048
---------- ----------
TOTAL CURRENT ASSETS 528,123 109,957
---------- ----------
FIXED ASSETS - NET 1,900,748 1,210
---------- ----------
OTHER ASSETS:
Costs in excess of assets acquired - net 543,928 -
Restrictive covenant - net 148,750 -
Security deposits and other assets 500 189,269
Deferred offering costs - 11,457
---------- ----------
693,178 200,726
---------- ----------
$3,122,049 $311,893
========== ==========
- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) -
CURRENT LIABILITIES:
Accounts payable - trade $ 667,355 $670,205
Short-term notes payable - acquisition 394,365 -
Other accrued liabilities 321,098 157,473
Notes payable - related parties 165,000 346,586
Notes payable - other 461,000 910,243
--------- ---------
TOTAL CURRENT LIABILITIES 2,008,818 2,084,507
--------- ---------
LONG-TERM DEBT 385,635 -
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY (DEFICIT) (Note 2):
Preferred stock, $.01 par value; 500,000 shares
authorized; none issued or outstanding - -
Common stock, $.001 par value; 20,000,000 shares
authorized; 1,695,782 and 1,030,582 post-split
shares issued and outstanding for 1999 and 1998,
respectively 1,696 1,031
Additional paid-in capital 15,111,254 11,510,758
Deferred financing costs (438,000) (1,029,600)
Accumulated deficit (13,947,354) (12,254,803)
----------- -----------
727,596 (1,772,614)
----------- -----------
$ 3,122,049 $ 311,893
=========== ===========
See accompanying notes
</TABLE>
<PAGE>
NEW YORKER MARKETING CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES - NET $ 321,940 $ 80,613 $ 321,940 $ 129,623
COST OF SALES 270,431 166,864 271,294 220,364
---------- --------- --------- ---------
GROSS PROFIT (LOSS) 51,509 (86,251) 50,646 (90,741)
---------- --------- --------- ---------
OPERATING EXPENSES:
Selling, marketing and shipping 31,206 (7,032) 31,206 99,376
General and administrative 1,529,797 116,656 1,621,905 358,757
Research and development - 6,000 - 13,754
---------- --------- --------- ---------
1,561,003 115,624 1,653,111 471,887
---------- --------- --------- ---------
LOSS FROM OPERATIONS (1,509,494) (201,875) (1,602,465) (562,628)
---------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Forgiveness of debt 548,763 216,882 548,763 216,882
Interest expense (327,620) (10,097) (638,849) (17,176)
---------- --------- --------- ---------
221,143 206,785 (90,086) 199,706
---------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (1,288,351) 4,910 (1,692,551) (362,922)
Provision for income taxes - - - -
----------- --------- ----------- ---------
NET INCOME (LOSS) $(1,288,351) $ 4,910 $(1,692,551) $(362,922)
=========== ========= =========== =========
BASIC INCOME (LOSS) PER SHARE $(1.07) $.01 $(1.51) $(.55)
====== ===== ======= ======
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 1,206,019 659,086 1,118,569 657,086
=========== ========== =========== =========
See accompanying notes
</TABLE>
<PAGE>
NEW YORKER MARKETING CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,692,551) $(362,922)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 104,197 3,010
Allowance for doubtful accounts - 8,233
Imputed interest 591,600 -
Compensation expense attributable to issuance of common
stock for services rendered 1,037,500 88,800
Forgiveness of debt (548,763) (216,882)
Changes in operating assets and liabilities:
(Increase) in accounts receivable (94,003) (61,031)
(Increase) decrease in inventories (157,330) 54,567
Decrease (increase) in prepaid expenses 11,129 (39,382)
Increase in accounts payable and accrued liabilities 570,044 123,822
--------- --------
Net cash used in operating activities (178,177) (401,785)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund of security deposits - 3,068
Payments re: acquisition of assets (1,054,000) (1,513)
Deposits and costs relating to potential acquisition - (62,306)
--------- --------
Net cash (used in) investing activities (1,054,000) (60,751)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 1,743,661 -
Payment of notes payable to related parties (101,586) -
Payment of line of credit - (9,375)
Proceeds from short-term loans - 35,000
Repayment of short-term loans (25,000) -
Repayment of notes payable - trade creditors (260,936) -
--------- --------
Net cash provided by financing activities 1,356,139 25,625
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 123,962 (436,911)
Cash and cash equivalents, at beginning of year 19,166 438,277
--------- --------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 143,128 $ 1,366
========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,224 $ -
Taxes paid - -
See accompanying notes
</TABLE>
<PAGE>
NEW YORKER MARKETING CORP.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
On March 2, 1999, the Company changed its name from Mike's Original, Inc.
to New Yorker Marketing Corp. This name change was part of the plan of
operations as described in the Company's Registration Statement filed in
June 1999, on Form SB-2, with the Securities and Exchange Commission for
the sale of common stock. See Notes 2 and 3.
The balance sheet as of June 30, 1999, the related statements of operations
for the three and six month periods ended June 30, 1999 and 1998 and the
statements of cash flows for the six month periods ended June 30, 1999 and
1998, have been prepared by New Yorker Marketing Corp. (the "Company")
without audit. In the opinion of management, the accompanying condensed
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries only, which are
necessary to present fairly, the Company's results for the interim periods
being presented.
The accounting policies followed by the Company are set forth in Note 3 to
the Company's financial statements included in its annual report on Form
10-KSB for the year ended December 31, 1998, which is incorporated herein
by reference. Specific reference is made to this report for a description
of the Company's securities and the notes to financial statements included
therein. The results of operations for the three and six month periods
ended June 30, 1999 and 1998 are not necessarily indicative of the results
to be expected for the full year.
NOTE 2 - SHAREHOLDERS' EQUITY:
In June 1999, the Company completed the sale of 368,000 shares of common
stock at an offering price of $6.25 per share, and realized net proceeds of
$1,743,661. In addition, effective upon the consummation of this offering,
the shareholders authorized a 1 for 5 reverse stock split of common shares
outstanding as of that date. All share and per share amounts have been
retroactively restated for all periods presented.
The Company issued an aggregate of 166,000 shares of common stock to its
Chairman and outside consultants as consideration for services provided
during the previous eighteen months. These shares were valued at $6.25 per
share, the public offering price.
NOTE 3 - ACQUISITION:
On June 14, 1999, the Company acquired certain assets of New Yorker Ice
Cream Corp., and Jerry's Ice Cream, Inc., in exchange for a total price of
$2,535,000. The purchase price was paid as follows: $50,000 was paid in
1998 as a deposit; $885,000 was paid at closing; $200,000 in 8% notes due
in six months; the assumption of $85,000 8% debt due on demand; the
assumption of $495,000 8% debt payable over 4 years and $820,000 through
the issuance of 131,200 shares of the Company's common stock. This
acquisition was accounted for as a purchase and fixed assets were recorded
at fair market appraised value. The purchase price was allocated as
follows:
<PAGE>
NEW YORKER MARKETING CORP.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - ACQUISITION (Continued):
<TABLE>
<CAPTION>
<S> <C>
Fixed assets $1,839,557
Covenant not to compete 150,000
Goodwill 545,443
----------
$2,535,000
==========
</TABLE>
The Company also purchased inventory aggregating $54,000.
The following table presents, on a proforma basis, a condensed balance
sheet at December 31, 1998, giving effect to the acquisition as if it had
occurred on that date:
<TABLE>
<CAPTION>
Unaudited Proforma
December 31, 1998
------------------
<S> <C>
Assets:
Current assets $ 109,957
Net fixed assets 1,840,767
Other assets 896,169
-----------
$2,846,893
===========
Liabilities and Shareholders' Equity
(Deficit):
Current liabilities $ 2,478,872
Long-term debt 2,140,635
Shareholders' equity (deficit) (1,772,614)
------------
$ 2,846,893
============
</TABLE>
The accompanying statements of operations reflect the effects of this
acquisition from June 14, 1999. The following proforma results were developed
assuming the acquisition had occurred at the beginning of the earliest period
presented.
<TABLE>
<CAPTION>
Unaudited Proforma
Six Months Ended June 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 2,153,728 $3,386,953
Net loss (1,693,933) (352,358)
Loss per share (1.51) (.54)
</TABLE>
This unaudited proforma information is not necessarily indicative of the
results that would have occurred had the acquisition taken place on January 1,
1998 (the beginning of the earliest period presented) nor are they necessarily
indicative of results that may occur in the future.
<PAGE>
NEW YORKER MARKETING CORP.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
Legal Proceedings:
The Company is subject to various legal proceedings, claims and liabilities
which arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to these actions
will not have a material adverse effect on the Company's results of
operations, cash flow or financial position.
The following reflects changes to matters disclosed in the Company's annual
report filed on Form 10-KSB for the year ended December 31, 1998.
J.W. Messner, Inc. v. New Yorker Marketing Corp.
The Company has settled this matter with the payment of $97,688 plus
interest accrued of $3,224.
Universal Folding Box Co., Inc. v. New Yorker Marketing Corp., et al
The Company has settled this matter with the payment of $34,000.
Lee's Marketing Services, Inc. v. New Yorker Marketing Corp.
The Company has received correspondence from plaintiff's attorney
indicating that after further review, the alleged liability to Lee's
Marketing Services, Inc. is between $5,000 and $6,000 (reduced from
$128,354) and that he believes that payment of such an amount will resolve
this matter. The Company intends to continue its defense of this claim.
In the opinion of management, the amount of any additional liability in
connection with the aforementioned matters, in excess of amounts provided
for in the normal course of business, will not materially affect the
Company.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
New Yorker Marketing Corp., formerly Mike's Original, Inc., (the "Company")
was incorporated in Delaware in May 1994 as successor to Melanie Lane
Farms, Inc. ("Melanie Farms"), a New York corporation formed in 1993. In
June 1994, Melanie Farms was merged into the Company. As both entities were
under common control, the merger was accounted for in a manner similar to a
pooling of interests. On December 18, 1997, a new entity, New Yorker Frozen
Desserts, Inc., was incorporated in New York, as a wholly-owned subsidiary
of the Company, for the purpose of making acquisitions. On March 4, 1998,
the Company formed NATCO Brands Inc. for the purpose of operating licensing
agreements for the manufacture and distribution of branded desserts. Both
of these subsidiaries are currently inactive. In February 1999, the Company
changed its name to New Yorker Marketing Corp., approved by a shareholder
vote in December 1998.
Since April 1, 1993, the Company has been engaged in the marketing and
distribution of super- premium ice cream products and licensed frozen
desserts. The Company initially marketed, sold and distributed Mike's
Original Cheesecake Ice Cream, a blend of ice cream and cheesecake
ingredients. This product line was offered in a variety of flavors mainly
to supermarkets and grocery stores and also, to a lesser extent, to
convenience stores, food service outlets and warehouse clubs. Since March
1998, sales of Mike's ice cream have been nominal.
On June 14, 1999, the Company acquired certain assets of New Yorker Ice
Cream Corp., and Jerry's Ice Cream, Inc., in exchange for a total price of
$2,535,000. These two entities distribute and market ice cream and frozen
novelties including Haagen-Dazs, Good Humor and Edy's. The purchase price
was paid as follows: $50,000 was paid in 1998 as a deposit; $885,000 paid
at closing; $200,000 in 8% notes due in six months; the assumption of
$85,000 8% debt due on demand; the assumption of $495,000 8% debt payable
over 4 years and $820,000 through the issuance of 131,200 shares of the
Company's common stock. This acquisition was accounted for as a purchase
and fixed assets were recorded at fair market appraised value.
The consolidated financial information presented herein includes: (I)
condensed balance sheets as of June 30, 1999 and December 31, 1998; (ii)
condensed statements of operations for the three and six month periods
ended June 30, 1999 and 1998 and (iii) condensed statements of cash flows
for the six month periods ended June 30, 1999 and 1998.
Results of Operations:
Sales for the three months ended June 30, 1999 and 1998, were $321,940 and
$80,613, respectively. Sales for the six months ended June 30, 1999 and
1998, were $321,940 and $129,623, respectively. The Company had no revenues
during 1999 prior to the acquisition as described above. Inventory of
frozen juice bars was being held awaiting the warmer weather and the
completion of the pending acquisitions. Gross profit for the three and six
month periods ended June 30, 1999, was approximately 16%.
<PAGE>
General and administrative expenses for the three and six month periods
ended June 30, 1999 amounted to $1,529,797 and $1,621,905, respectively.
Major components were: fees of $1,037,500 for which the Company issued
shares of its common stock; professional fees aggregating $121,000 which
were incurred in connection with the acquisition and other consulting fees
of approximately $185,000. The Company expects that certain of these
expenses are non-recurring.
Interest expense, for the three and six months ended June 30, 1999 was
$327,620 and $638,849, respectively. These amounts were due to the shares
issued in connection with the sale of private placement units which was
completed in 1998, and recorded as interest expense which is being
amortized over the term of the related debt.
Net loss for the three months ended June 30, 1999 was $1,288,351 or $1.07
per share. The Company realized net income of $4,910 ($.01 per share) for
the three month period ended June 30, 1998. Net loss for the six month
periods ended June 30, 1999 and 1998, were $1,692,551 ($1.51 per share) and
$362,922 ($.55 per share), respectively.
Liquidity and Capital Resources
The Company has incurred losses from operations since its inception in 1993
and, at December 31, 1998, had a stockholders' deficit and a working
capital deficit of $1,772,614 and $1,974,550, respectively.
In June 1999, the Company completed the sale of 368,000 shares of common
stock at an offering price of $6.25 per share, and realized net proceeds of
$1,743,661. Proceeds from this offering were used primarily to repay debt
and to acquire certain operating assets of New Yorker Ice Cream Corp., and
Jerry's Ice Cream Company, Inc., as discussed above. In addition, the
Company was able to restructure certain liabilities which resulted in a
forgiveness of debt amounting to $549,000.
As of June 30, 1999, the Company had improved shareholders' equity to
reflect a positive $727,596 but still had a working capital deficit of
$1,480,695.
The Company's cash requirements have been, and continue to be,
significantly exceeding its resources due to the limited operations of the
Company prior to the acquisitions, and the cost of such acquisitions. The
proceeds remaining from the recently completed offering need to be
augmented by cash flow from operations and it is uncertain that the Company
will be successful in this regard. The continued failure to do so would
require the Company to seek other financing in order to continue as a going
concern. While the Company is seeking additional financing it currently has
no alternative plans for financing.
Impact of the Year 2000 on Information Systems
The Year 2000 ("Y2K") issue arises as the result of computer programs
having been written, and systems having been designed, using two digits
rather than four to define the applicable year. Consequently, such software
has the potential to recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
<PAGE>
The Company is not expected to be affected by Y2K as it does not rely on
date-sensitive software or affected hardware. The Company intends to timely
update its current accounting and other systems, which were purchased
"off-the-shelf" and which are determined to be affected by Year 2000, by
purchasing Y2K compliant software and hardware available from retail
vendors at reasonable cost.
The Company has not yet contacted other companies on whose services it
depends to determine whether such companies' systems are Y2K compliant. If
the systems of New Yorker, its vendors or its customers are not Y2K
compliant, there could be a material adverse effect on the Company's
financial condition or results of operations.
Forward Looking Statements
All statements other than statements of historical fact included in this
report regarding the Company's financial position, business strategy and
plans and objectives of management of the Company for future operations,
are forward-looking statements. When used in this report, words such as
"anticipate", "believe", "estimate", "expect", "intend" and similar
expressions, as they relate to the Company or its management, identify
forward-looking statements. Such forward- looking statements are based on
the beliefs of the Company's management, as well as assumptions made by and
information currently available to the Company's management. Actual results
could differ materially from those contemplated by the forward-looking
statements as a result of certain factors, including but not limited to
competitive factors and pricing pressures, relationships with its
manufacturers, distributors and vendors, legal and regulatory requirements
and general economic conditions. Such statements reflect the current views
of the Company with respect to future events and are subject to these and
other risks, uncertainties and assumptions relating to the operations,
results of operations, growth strategy and liquidity of the Company. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by this paragraph.
<PAGE>
NEW YORKER MARKETING CORP.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS OF FORM 8-K
Exhibits
Exhibit 27 - Financial Data Schedule
Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NEW YORKER MARKETING CORP.
By: /s/ Arthur G. Rosenberg
Arthur G. Rosenberg
Chairman of the Board and CEO
(Chief Executive Officer)
Date: August 13,1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial inofrmation extracted from the financial
statements for the six months ended June 30, 1999 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 143,128
<SECURITIES> 0
<RECEIVABLES> 107,375
<ALLOWANCES> 0
<INVENTORY> 266,701
<CURRENT-ASSETS> 528,123
<PP&E> 2,036,815
<DEPRECIATION> 136,067
<TOTAL-ASSETS> 3,122,049
<CURRENT-LIABILITIES> 2,008,818
<BONDS> 385,635
0
0
<COMMON> 1,696
<OTHER-SE> 425,900
<TOTAL-LIABILITY-AND-EQUITY> 3,122,049
<SALES> 321,940
<TOTAL-REVENUES> 321,940
<CGS> 271,294
<TOTAL-COSTS> 1,621,905
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 638,849
<INCOME-PRETAX> (1,692,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,692,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,692,551)
<EPS-BASIC> (1.51)
<EPS-DILUTED> (1.51)
</TABLE>
