SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549

                              FORM 10-KSB

                            ANNUAL REPORT
               PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended                                Commission File Number
   December 31, 1997                                            0-10825

        Exact name of small business issuer as specified in its charter

                       NEW GENERATION FOODS, INC.

State or other jurisdiction of                                IRS Employer
incorporation or organization: Nevada            Identification No.: 36-2972588

                     Address of principal executive offices:

                    45 Graham Road, Scarsdale, New York 10583
                          Telephone No.: (914) 722-2410

Securities  registered  pursuant to Section  12(b) of the Act: None
Name of each exchange on which registered: None

           Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $.01 par value

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d)of  the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  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 by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

     The  aggregate  market  value  of the  registrant's  Common  Stock  held by
non-affiliates  as of March 25, 1998 was $25.00 based on the average of the high
and low bid  prices of such  stock on March  25,  1998 as  reported  by the NASD
Electronic Bulletin Board Service.1

     The number of shares  outstanding  of the  registrant's  Common Stock as of
March 25, 1998 was 399,830.

     Registrant's revenues for its most recent fiscal year were $0.


--------

1 Exclusion  of shares held by any person  should not be  construed  to indicate
that such person possesses the power, direct or indirect, to cause the direction
of the  management  or  policies  of the  registrant  or  that  such  person  is
controlled by or under common control with the registrant.




<PAGE>
                                     PART I

ITEM 1.  BUSINESS

     New  Generation  Foods,  Inc.  (the  "Company"  or "NGF") was  organized in
February 1977 under the laws of the State of Nevada and adopted its present name
in  August  1977.  The  Company  was  engaged  in the  development  and  sale of
nutritional food products until October 22, 1993, when  substantially all of its
assets were sold (the "Asset  Sale"),  as  described  below.  As a result of the
Asset Sale, the Company is no longer an operating  company.  During 1994,  1995,
1996 and 1997,  the  Company had no  revenues  and its income was  derived  from
interest and dividends and gains on the sale of its assets. The Company's assets
consist  principally  of  cash,  cash  equivalents  and  marketable   investment
securities.

     During  the  period  1982 - 1992,  the  Company  developed  a family of all
natural,  nutritional  and dietetic  food  products made from high protein whole
wheat utilizing its proprietary  process.  The Company's  principal food product
was Spicer'sR  Hunger  CrunchersTM  snacks,  an expanded protein high fiber food
(hereinafter sometimes called "Spicer'sR"), produced with a crunchy consistency,
presently  in the  form of small  wagon  wheel  shapes  and  available  in eight
flavors.  Spicer'sR is made from high protein whole wheat (protein content of at
least 14%)  utilizing  an  extrusion  process  invented  by Dr.  Arnold  Spicer,
assigned by him to the Company and patented by the Company.

THE ASSET SALE

     As previously reported, on October 22, 1993, the Company sold substantially
all of the Company's assets to American Pacific Financial Corporation ("American
Pacific") for an aggregate  purchase  price of $2,600,000,  payable  $150,000 in
cash at the closing and the balance in secured  notes of the  purchaser  payable
over a 30-month  period.  The remaining note  receivable from the Asset Sale, in
the amount of $716,658,  was paid in full in April 1996, with accrued  interest.
At the closing, the Company also sold its inventory to American Pacific at cost.
The inventory  sale was concluded for an aggregate  price of $130,500,  of which
$25,000  was paid to the  Company at the  Closing and the balance has since been
paid in full.

PAYMENT OF LIQUIDATION PREFERENCES - ISSUANCE OF SENIOR PREFERRED STOCK

     Under the terms of the Company's previously  outstanding Series A Preferred
Stock and Series B Preferred Stock, a sale or transfer of  substantially  all of
the assets of the Company was deemed to be a liquidation, dissolution or winding
up of the Company for  purposes of  determining  the payment of the  liquidation
preferences  on the  Series A  Preferred  Stock and  Series B  Preferred  Stock.
Accordingly,  the Asset Sale  entitled Flum  Partners,  the holder of all of the
outstanding Series A Preferred Stock and Series B Preferred Stock, to payment of
the applicable liquidation preferences and accrued and unpaid dividends.

     In November 1997, Flum Partners delivered a letter to the Company demanding
payment of the  applicable  liquidation  preferences  on the Series A  Preferred
Stock and  Series B  Preferred  Stock  ($1,175,000  in the case of the  Series A
Preferred  Stock and  $310,000 in the case of the Series B Preferred  Stock) and
accrued and unpaid dividends on such shares.  On the date of the delivery of the
demand,  accrued  dividends on the Series A Preferred Stock amounted to $787,500
and accrued  dividends  on the Series B Preferred  Stock  amounted to  $111,600.
Accordingly,  the  aggregate  amount  payable  pursuant  to the  demand  of Flum
Partners was approximately $2,960,000.

     Since Flum  Partners is an  affiliate  of Mr.  Jerome Flum, a member of the
Board, and because of Mr. Flum's interest in Flum Partners and in the

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<PAGE>



transaction, the Board formed an Independent Committee consisting of independent
Board members to consider the letter from Flum Partners.

     The  Independent   Committee  met  and  reviewed  the  Company's  financial
situation at such time. The Company had approximately  $1.89 million of cash and
cash  equivalents,  and it was deemed prudent for the Company to maintain a cash
balance of approximately $90,000 for potential claims and other expenses and for
working  capital to enable the Company to attempt to identify  and  consummate a
transaction which would increase the value of the Company. Thus, $1.8 million of
cash was  available  for  payment of the  liquidation  preferences  and  accrued
dividends on the Series A and Series B Preferred Stock, leaving an unpaid amount
of approximately $1.16 million of cash.

     The  Independent  Committee  then  engaged in  discussions  with Mr.  Flum,
representing Flum Partners.  Pursuant to such discussions,  Flum Partners agreed
to  accept,  in payment of the  unpaid  $1.16  million of cash,  shares of a new
series of convertible senior preferred stock ("Senior Preferred Stock"), with an
aggregate liquidation  preference equal to $1.1 million,  which was $60,000 less
than the unpaid  liquidation  preferences and accrued  dividends on the Series A
Preferred Stock and Series B Preferred Stock. The new series of Senior Preferred
Stock does not accrue  dividends,  but converts into 90% of the Company's Common
Stock  on  a   fully-diluted   basis.   The  new  Senior   Preferred   Stock  is
"participating",  in that, upon a liquidation or sale of the Company,  and after
the Senior  Preferred  Stock  receives its  liquidation  preference,  the Senior
Preferred  Stock will share  ratably with the Common Stock on an "as  converted"
basis.

     After further negotiations with the Independent Committee,  Mr. Flum agreed
to a termination  of his existing  Employment  Agreement  effective  December 1,
1997,  saving the Company  approximately  $190,000 in salary expense through the
end of the  term of such  Agreement,  in  consideration  of  which  the  Company
transferred to Mr. Flum an automobile  and computer  equipment with an aggregate
value not exceeding $10,000. Mr. Flum also agreed to continue as Chairman of the
Board and Chief Executive  Officer of the Company,  without pay, on an "at will"
basis.  Mr. Flum also agreed for a twelve month  period,  to attempt to identify
and consummate a transaction which would increase the value of the Company.

     In its  deliberations  as to the  fairness  of the  transaction,  the Board
considered the following factors:  (i) Mr. Flum agreed to terminate his existing
Employment  Agreement  with the  Company,  saving the  Company an  aggregate  of
approximately  $190,000 in salary expense;  (ii) the Senior Preferred Stock does
not  accrue  dividends,  saving the  Company  approximately  $157,000  in annual
dividends;  (iii) the Senior  Preferred  Stock has a  liquidation  preference of
approximately  $60,000 less than the aggregate  amount payable in respect of the
liquidation  preferences  and accrued  dividends on the Series A Preferred Stock
and  Series B  Preferred  Stock (in this  regard the Board  recognized  that the
Series A and Series B  Preferred  Stock had  aggregate  liquidation  preferences
(plus accrued dividends) of approximately $2.96 million); and (iv) that Mr. Flum
would  attempt  for a period  of twelve  months to  identify  and  consummate  a
transaction  which would  increase the value of the Company.  With regard to the
factor  described in clause (iii) above,  the Independent  Committee  recognized
that in any such  transaction,  the Senior  Preferred Stock would be entitled to
its liquidation preference before any distributions to common stockholders.  The
Independent Committee also noted that, if it did not accept the proposal of Flum
Partners,  the Board would be obligated to pay all of the Company's cash to Flum
Partners in partial  satisfaction  of the liquidation  preferences,  and then to
proceed with the final  liquidation  of the  Company,  which would result in the
holders of Common Stock not receiving anything.

     In accordance  with the  foregoing,  the Company issued to Flum Partners at
the end of 1997 and in the first quarter of 1998 a total of 1,100,000  shares of
Senior Preferred Stock and $1.8 million of cash in payment of the liquidation

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<PAGE>

preferences  and accrued  dividends on the Series A Preferred Stock and Series B
Preferred Stock.


Interest of Certain Persons and
Conflicts of Interest

     As a  consequence  of the  payment of the  liquidation  preferences  of the
Series A Preferred  Stock and Series B Preferred  Stock,  and as described  more
fully in Items 11 and 12 below, Jerome S. Flum, the Chairman of the Board, Chief
Executive  Officer and President of the Company,  individually  and through Flum
Partners,  beneficially  owns  1,100,000  shares  of Senior  Preferred  Stock in
addition to 150,054  shares of Common Stock.  The Senior  Preferred  Stock has a
liquidation preference of $1.00 per share and converts into approximately 90% of
the outstanding Common Stock of the Company.  Therefore, upon liquidation of the
Company,  Flum Partners, of which Mr. Flum is both general partner and a limited
partner, would receive,  directly or indirectly,  approximately $1,100,000 prior
to any distributions to Common Stockholders. Since the Senior Preferred Stock is
"participating",  upon a sale or liquidation of the Company, Flum Partners would
be  entitled to receive in excess of 90% of the  amounts  distributed  to Common
Stockholders.

Employees

     As of March 25, 1998,  the Company and its  subsidiaries  had one full-time
employee who is its Chief  Executive  Officer and one part-time  consultant  who
acts as its controller.  Following the closing of the Asset Sale,  substantially
all of the Company's former employees became employed by American Pacific.  None
of the Company's employees is covered by a collective bargaining agreement.  The
Company  believes its relations  with its employees to be  satisfactory  and had
suffered no interruption in operations.

     The Company has no retirement,  pension,  profit sharing or similar program
in effect for its  employees,  but has adopted  stock option plans  covering its
employees.

Directors and Executive Officers of the Company

     The directors and executive officers of the Company are as follows:

                                Principal Occupation/
Name                    Age     Position Held with Company
----                    ---     ---------------------------
Jerome S. Flum          57      Chairman of the Board and Chief Executive
                                Officer

Richard J. James        58      Director

Leslie Charm            54      Director

     The Company's  By-Laws  provide that (a) directors shall be elected to hold
office until the next annual  meeting of  stockholders  and that each  director,
including  a director  elected to fill a vacancy,  shall hold  office  until the
expiration  of the term for which the director was elected and until a successor
has been elected,  and (b) officers shall hold office until their successors are
chosen by the Board of  Directors,  except that the Board may remove any officer
at any time.

     Jerome  S. Flum has been a  director  of the  Company  since  1983.  He was
appointed  President and Chief Executive  Officer of the Company and Chairman of
the Board of Directors in June 1985.  Effective  December  1989,  he resumed his
position as President. Mr. Flum, an attorney, has been, for more than five

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<PAGE>

years, the sole General Partner of Flum Partners, a New York limited partnership
which was  organized in 1972.  Since 1995,  Mr. Flum has been  Chairman of China
Capital Corp., a privately held consulting and management company  headquartered
in Bethesda, Maryland.

     Richard J. James has been a director of the Company  since April 1992.  Mr.
James has been a Manager of Quality  Control in the Camera  Division of Polaroid
Corporation since 1983.

     Leslie Charm has been a director of the Company since September 1994. Since
1972,  Mr.  Charm has been a partner  in the firm of  Youngman  & Charm,  a firm
specializing  in assisting  companies  that are  experiencing  operating  and/or
financial problems. From 1977 through 1990, he was the Chairman and President of
Doctor Pet Centers,  Inc., a major  distributor and specialty retail chain. From
1989 to the present, he has been a director of Moto Photo, Inc., a publicly-held
international franchisor of imaging centers.

ITEM 2.  PROPERTIES.

     The Company's plant and equipment were sold to American  Pacific as part of
the Asset Sale, and the mortgage which was granted to the Company on such assets
has been discharged upon payment of the purchase price of the Tangible  Property
Promissory Note. The Company conducts its business  operations from an office in
the  residence  of its  Chairman  and does not own,  lease or  occupy  any other
property, plant or equipment.

ITEM 3.  LEGAL PROCEEDINGS.

     In August  1985,  an action was  commenced  against the Company by a former
employee in the Circuit Court of Cook County,  Illinois County  Department,  Law
Division,  alleging wrongful demotion and wrongful discharge by the Company. The
plaintiff  is  seeking  back pay for the  period  since her  release  as well as
reinstatement  to her  position.  The claim seeks  damages in excess of $15,000,
plus  punitive  damages in excess of $15,000.  While this matter is still in the
preliminary stages and there has been no discovery, the Company believes that it
has  meritorious  defenses  and  that the  ultimate  outcome  should  not have a
material adverse impact on the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.


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<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS.

     Prior  to May  11,  1993,  the  Common  Stock  of the  Company  was  traded
principally on the NASDAQ  Automated  Quotation System under the symbol NGEN and
also on the Boston  Stock  Exchange  under the symbol  NGF.B or NGF.  During the
second  quarter of 1993,  the Company's  Common Stock was delisted from both the
Boston Stock Exchange and the NASDAQ Automated  Quotation System.  The Company's
Common Stock now trades  sporadically in the  over-the-counter  market "Bulletin
Board  Service."  The  following  table sets forth the high and low  closing bid
quotations  for the Common  Stock as  reported  on the  over-the-counter  market
Bulletin Board Service for each calendar  quarter of 1996 and 1997.  Such market
quotations  reflect  inter-dealer  prices  without  retail  markup,  markdown or
commission and do not necessarily represent actual transactions.


                                            High Bid                   Low Bid
                                            ---------                  -------

1996

         First Quarter                      1/32                       1/32
         Second Quarter                     1/32                       1/32
         Third Quarter                      1/32                       1/32
         Fourth Quarter                     1/32                       1/32

1997

         First Quarter                      $0.0001                    $0.0001
         Second Quarter                     $0.0001                    $0.0001
         Third Quarter                      $0.0001                    $0.0001
         Fourth Quarter                     $0.0001                    $0.0001



     On March 25, 1998, there were  approximately 500 registered  holders of the
Company's Common Stock.

     The Company has not paid any cash  dividends  on its Common  Stock and does
not anticipate paying any cash dividends in the foreseeable future.  During 1997
the Series A  Preferred  Stock and Series B  Preferred  Stock of the Company was
retired.  At the retirement date accrued and unpaid  dividends were $787,500 and
$111,600,  respectively,  substantially all of which were subsequently paid. See
"Payment of Liquidation Preferences - Issuance of Senior Preferred Stock."

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION.

        Financial Condition


     As a result of the Asset Sale in October  1993,  previously  reported,  the
Company has ceased its business  operations.  The remaining note receivable from
the Asset Sale,  in the amount of $716,658 was paid in full in April 1996,  with
accrued interest.

     Under the terms of the Company's previously  outstanding Series A Preferred
Stock and Series B Preferred Stock, a sale or transfer of  substantially  all of
the assets of the Company was deemed to be a liquidation, dissolution or winding
up of the Company for  purposes of  determining  the payment of the  liquidation
preferences  on the  Series A  Preferred  Stock and  Series B  Preferred  Stock.
Accordingly, the Asset Sale entitled Flum Partners, the holder of all of

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<PAGE>

the  outstanding  Series A  Preferred  Stock and Series B  Preferred  Stock,  to
payment  of the  applicable  liquidation  preferences  and  accrued  and  unpaid
dividends.

     In November 1997, Flum Partners delivered a letter to the Company demanding
payment of the  applicable  liquidation  preferences  on the Series A  Preferred
Stock and  Series B  Preferred  Stock  ($1,175,000  in the case of the  Series A
Preferred  Stock and  $310,000 in the case of the Series B Preferred  Stock) and
accrued and unpaid dividends on such shares.  On the date of the delivery of the
demand,  accrued  dividends on the Series A Preferred Stock amounted to $787,500
and accrued  dividends  on the Series B Preferred  Stock  amounted to  $111,600.
Accordingly,  the  aggregate  amount  payable  pursuant  to the  demand  of Flum
Partners was approximately $2,960,000.

     Since Flum  Partners is an  affiliate  of Mr.  Jerome Flum, a member of the
Board,  and  because  of  Mr.  Flum's  interest  in  Flum  Partners  and  in the
transaction, the Board formed an Independent Committee consisting of independent
Board members to consider the letter from Flum Partners.

     The  Independent   Committee  met  and  reviewed  the  Company's  financial
situation at such time. The Company had approximately  $1.89 million of cash and
cash  equivalents,  and it was deemed prudent for the Company to maintain a cash
balance of approximately $90,000 for potential claims and other expenses and for
working  capital to enable the Company to attempt to identify  and  consummate a
transaction which would increase the value of the Company. Thus, $1.8 million of
cash was  available  for  payment of the  liquidation  preferences  and  accrued
dividends on the Series A and Series B Preferred Stock, leaving an unpaid amount
of approximately $1.16 million of cash.

     The  Independent  Committee  then  engaged in  discussions  with Mr.  Flum,
representing Flum Partners.  Pursuant to such discussions,  Flum Partners agreed
to  accept,  in payment of the  unpaid  $1.16  million of cash,  shares of a new
series of convertible senior preferred stock ("Senior Preferred Stock"), with an
aggregate liquidation  preference equal to $1.1 million,  which was $60,000 less
than the unpaid  liquidation  preferences and accrued  dividends on the Series A
Preferred Stock and Series B Preferred Stock. The new series of Senior Preferred
Stock does not accrue  dividends,  but converts into 90% of the Company's Common
Stock  on  a   fully-diluted   basis.   The  new  Senior   Preferred   Stock  is
"participating",  in that, upon a liquidation or sale of the Company,  and after
the Senior  Preferred  Stock  receives its  liquidation  preference,  the Senior
Preferred  Stock will share  ratably with the Common Stock on an "as  converted"
basis.

     After further negotiations with the Independent Committee,  Mr. Flum agreed
to a termination  of his existing  Employment  Agreement  effective  December 1,
1997,  saving the Company  approximately  $190,000 in salary expense through the
end of the  term of such  Agreement,  in  consideration  of  which  the  Company
transferred to Mr. Flum an automobile  and computer  equipment with an aggregate
value not exceeding $10,000. Mr. Flum also agreed to continue as Chairman of the
Board and Chief Executive  Officer of the Company,  without pay, on an "at will"
basis.  Mr. Flum also agreed for a twelve month  period,  to attempt to identify
and consummate a transaction which would increase the value of the Company.

     In its  deliberations  as to the  fairness  of the  transaction,  the Board
considered the following factors:  (i) Mr. Flum agreed to terminate his existing
Employment  Agreement  with the  Company,  saving the  Company an  aggregate  of
approximately  $190,000 in salary expense;  (ii) the Senior Preferred Stock does
not  accrue  dividends,  saving the  Company  approximately  $157,000  in annual
dividends;  (iii) the Senior  Preferred  Stock has a  liquidation  preference of
approximately  $60,000 less than the aggregate  amount payable in respect of the
liquidation  preferences  and accrued  dividends on the Series A Preferred Stock
and  Series B  Preferred  Stock (in this  regard the Board  recognized  that the
Series A and Series B  Preferred  Stock had  aggregate  liquidation  preferences
(plus accrued

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<PAGE>

dividends) of approximately $2.96 million); and (iv) that Mr. Flum would attempt
for a period of twelve  months to identify and  consummate a  transaction  which
would increase the value of the Company.  With regard to the factor described in
clause  (iii)  above,  the  Independent  Committee  recognized  that in any such
transaction,  the Senior  Preferred  Stock would be entitled to its  liquidation
preference  before any  distributions  to common  stockholders.  The Independent
Committee  also noted that, if it did not accept the proposal of Flum  Partners,
the Board would be obligated to pay all of the  Company's  cash to Flum Partners
in partial satisfaction of the liquidation preferences, and then to proceed with
the final  liquidation  of the  Company,  which  would  result in the holders of
Common Stock not receiving anything.

     In accordance  with the  foregoing,  the Company issued to Flum Partners at
the end of 1997 and in the first quarter of 1998 a total of 1,100,000  shares of
the  Senior  Preferred  Stock  and  $1.8  million  of  cash  in  payment  of the
liquidation  preferences  and accrued  dividends on the Series A Preferred Stock
and Series B Preferred Stock.


     At December  31, 1997,  the Company had cash,  cash  equivalents  and other
liquid assets of $1,400,051, compared to $1,968,823 of liquid assets at December
31, 1996,  and had working  capital of $54,067,  compared to working  capital of
$1,929,786  at December 31, 1996.  The decline in working  capital  reflects the
recording  of  $1,300,000  as a  current  liability  to  Flum  Partners  for the
liquidation  preferences  and accrued  dividends on the Series A Preferred Stock
and Series B Preferred  Stock.  The Company has no bank lines of credit or other
currently available credit sources.

Operations

     1997 vs. 1996 and 1995

     As a result of the Asset Sale and the operation by American  Pacific of the
Company's business from October 22, 1993, the Company's business operations as a
food manufacturer were terminated on that date. Accordingly,  no operations were
conducted  in the fiscal years ended  December  31, 1995,  December 31, 1996 and
December 31, 1997.

     In the years ending  December  31, 1995 and December 31, 1996,  the Company
recognized $141,722 and $543,158, respectively,  representing the balance of the
total gain of $1,849,736 on the Asset Sale.

     Net income for the 1996 year was $471,385,  or $0.72 per share,  reflecting
interest and dividend  income on the Company's  liquid assets and the portion of
the gain on the Asset  Sale  which  was  recognized  in the  year,  in excess of
selling,   general  and  administrative   expenses,   including  the  Chairman's
compensation expense.

     Net loss for the year ended  December 31, 1997 was  ($81,049) or ($.67) per
share, reflecting selling,  general and administrative  expenses,  including the
Chairman's  compensation  expense,  and a loss  on  investments,  in  excess  of
interest and dividend income.

Statement of Financial Accounting Standards No. 115

     The marketable investment securities at December 31, 1994 must be accounted
for in  accordance  with the  provisions  of Statement  of Financial  Accounting
Standards  No.  115,  "Accounting  for  Certain  Investments  in Debt and Equity
Securities"  (SFAS  115),  effective  January 1,  1994.  SFAS 115  requires  the
classification  of debt  and  equity  securities  into  one of  three  following
categories:


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<PAGE>

                  Held-to-Maturity-includes  investments  which the  Company has
                  the positive intent and ability to hold until  maturity.  Such
                  investments are measured at amortized cost.

                  Trading  Securities  -  includes   investments  in  securities
                  purchased and held principally for the purpose of selling them
                  in the near  term.  Unrealized  holding  gains and  losses are
                  included in income.

                  Available-for-Sale  - includes  investments  in securities not
                  classified as held-to-maturity or trading.  Unrealized holding
                  gains and  losses are  reported  as a net amount as a separate
                  component of stockholders' equity until realized.

                  Marketable investment securities, which consist of options and
warrants, are all classified as trading securities.

Federal Tax Considerations

     The Company has available net operating loss carry-forwards  ("NOLs") which
may be used to reduce its  Federal  income tax  liability.  However,  provisions
contained in the Internal  Revenue Code of 1986,  as amended (the  "Code"),  may
impose  substantial  limitations upon the Company's ability to utilize its NOLs.
For example,  the Company may be subject to the so-called  "alternative  minimum
tax" which does not always permit full utilization of NOLs otherwise  available.
In connection  with the sale of assets to American  Pacific,  the Company's NOLs
may only be used to  offset a  maximum  of 90% of  alternative  minimum  taxable
income,  which  resulted in a Federal tax liability of  approximately  $6,600 in
1994, which was recorded in 1995.

     In  addition,  limitations  imposed  by  Section  382 of the Code  upon the
availability  of NOLs would apply if certain  changes were to occur in ownership
of the Company.  Thus, the Company's  utilization of its  carry-forwards  in the
future may be deferred and/or reduced if the Company  undertakes  further equity
financings  or if certain  other  changes  occur in the  ownership of the Common
Stock.  Finally,  if the Company  becomes an investment  company  subject to the
Investment Company Act of 1940, it will no longer be entitled to a deduction for
NOLs.  For  information  regarding  the  amounts  and  expiration  dates  of the
Company's NOLs, see Note 4 to the Company's Consolidated Financial Statements.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial  statements and financial  statement schedules of the Company
as of and for the years  ended  December  31, 1997 and 1996,  together  with the
report of Clifton Gunderson L.L.C.  independent auditors, are set forth at pages
F-1 to F-17 of this Report on Form 10-KSB.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

     None.


                                        8

<PAGE>

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     Pursuant  to General  Instruction  E(3) for Form  10-KSB,  the  information
required by this Item 9 is contained in Part I above and incorporated  herein by
reference, except that the information required by Item 405 of Regulation S-B is
set forth below.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors  and  executive  officers,  and  persons  who own  more  than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission,  initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company.  Officers,
directors and greater than 10%  shareholders  are required by SEC  regulation to
furnish the Company with copies of all Section 16(a) forms they file.

     To the Company's knowledge,  based solely on representations  received from
the officers and directors and greater than 10% shareholders,  all Section 16(a)
filing requirement reports were made on a timely basis.

ITEM 10. EXECUTIVE COMPENSATION.

Cash Compensation of Executive Officers

     The table set forth below shows the cash  compensation paid for services in
all capacities to the Company's Chief  Executive  Officer during the three years
indicated.

                                                        Annual Compensation
Name and Principal Position                 Year              Salary
---------------------------                 ----        -------------------
Jerome S. Flum                              1997              $113,859
  President and Chief                       1996              $121,506
  Executive Officer                         1995              $119,856(2)
------------------

(2) Excludes  $34,622 of salary for 1994 which had been  deferred by the Company
and paid in 1995.


Directors' Fees

     Directors  and   committee   members   generally   serve  as  such  without
compensation,  except that  commencing  September 1994,  non-employee  directors
receive  $450 for each  Board of  Directors  meeting  attended,  up to a maximum
payment of $1,800 per  Director per calendar  year.  In addition,  non-qualified
stock options or stock  appreciation  rights have been granted from time to time
to  current  and former  directors  pursuant  to the 1985 SAR and  Non-Qualified
Option Plan, as amended (the "1985  Plan"),  of the Company.  See  "Compensation
Pursuant to Stock Option Plans".

Compensation Pursuant to Stock Option Plans

     During the period  January 1, 1996 through  December  31, 1997,  no options
were  granted to  executive  officers or employees of the Company and no options
held by executive officers or employees were exercised.

     No options  were  granted to all  current  directors  other than  executive
officers as a group (two persons) or to Dr. Spicer, who died in 1995.

                                        9

<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  table sets forth  information  concerning  the only persons
known to the  Company to own  beneficially  more than 5% of the Common  Stock or
more  than 5% of the  Senior  Preferred  Stock as of March 25,  1998.  Except as
indicated in the  following  notes,  the owners have sole voting and  investment
power with respect to the shares.

<TABLE>
<CAPTION>

                                             Amount and Nature of
                                            Beneficial Ownership of                      Percent of
                                            -----------------------                      ----------
                                                                 Senior                                    Senior
                                            Common               Preferred                Common           Preferred
Beneficial Owners                           Stock                Stock                    Stock(1)         Stock
-----------------                           -----                -----                    --------         -----
   
<S>                                         <C>                  <C>                      <C>              <C>  
Flum Partners (2)                           3,635,128           1,100,000(3)              90.9%            100%
c/o Jerome S. Flum                          (3)(4)
45 Graham Road
Scarsdale, New York 10583


Jerome S. Flum                              3,748,353           1,100,000(4)              93.6%            100%
45 Graham Road                              (2)(3)(4)
Scarsdale, New York 10583


All officers and                            3,751,603 (2)                                 93.8%            100%
directors as a group                        (3)(4)(5)
(3 persons)

----------------
<FN>
(1)      Percent of class is based on 399,830 shares of Common Stock outstanding
         as of March 25, 1998,  plus the number of shares  described in note (4)
         below  in  the  case  of  Flum  Partners,   Jerome  S.  Flum  and  Flum
         Partners/Jerome  S. Flum, as a group, and such total plus the number of
         shares  described  in note (5)  below in the case of all  officers  and
         directors as a group.

(2)      The sole general partner of Flum Partners is Jerome S.Flum, Chairman of
         the Board, President and Chief Executive Officer of the Company.

(3)      Because  the  shares  of  Senior   Preferred   Stock  are   immediately
         convertible by the record owner at its option into 3,598,299  shares of
         Common  Stock,  and pending such  conversion  are entitled to 3,598,299
         votes,  the  shares  of Senior  Preferred  Stock  are also  counted  as
         3,598,299 shares of Common Stock.

(4)      Includes  3,635,125  shares of Common  Stock  (36,829  shares of Common
         Stock and 1,100,000 shares of Senior  Preferred Stock  convertible into
         3,598,299  shares of Common Stock) owned  beneficially by Flum Partners
         which are also deemed to be owned  beneficially  by Mr. Flum because of
         his power,  as sole  general  partner of Flum  Partners,  to direct the
         voting of such  shares  held by the  partnership.  Mr.  Flum  disclaims
         beneficial  ownership  of  the  shares  owned  by  Flum  Partners.  The
         3,748,353 shares of Common Stock, or 93.6% of the outstanding shares of
         Common Stock (giving effect to the  conversion of the Senior  Preferred
         Stock),  and all of the 1,100,000  shares of Senior Preferred Stock may
         also be deemed  to be owned,  beneficially  and  collectively,  by Flum
         Partners  and Mr.  Flum,  as a "group",  within the  meaning of Section
         13(d)(3)  of the  Securities  Exchange  Act of 1934,  as  amended  (the
         "Act").

(5)      Includes non-qualified stock options to purchase 3,250 shares held by two
         directors.
</FN>
</TABLE>
                                        10

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Certain Transactions

     On December 27, 1988, Flum Partners purchased  2,333,333 shares of Series A
Preferred Stock of the Company and on August 21, 1989,  Flum Partners  purchased
310,000 shares of Series B Preferred Stock from the Company.

     As more fully described in "Payment of the Liquidation Preferences Issuance
of Senior Preferred Stock" above, the Company issued to Flum Partners  1,100,000
shares of Senior  Preferred  Stock and $1.8  million  of cash as  payment of the
liquidation  preferences  and  accrued  and  unpaid  dividends  on the  Series A
Preferred Stock and the Series B Preferred Stock.

Related Party Transactions

     The Company entered into an employment  agreement with Mr. Flum,  effective
as of July 1, 1992. The employment  agreement  provided for Mr. Flum to serve as
the Chairman  and Chief  Executive  Officer of the Company  until June 30, 1999,
unless sooner  terminated  by the Company for cause,  or upon death or permanent
disability. As more fully described in "Payment of the Liquidation Preferences -
Issuance of Senior  Preferred  Stock" above, Mr. Flum agreed to a termination of
his Employment Agreement effective December 1, 1997.


                                       11

<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

  (a)      Exhibits

   3-A      -     Copy of the Company's Restated Articles of Incorporation. (1)
   3-B      -     Copy of the Company's Certificate of Amendment to the Articles
                  of Incorporation, dated August 31, 1987. (2)
   3-C      -     Copy of the Company's By-Laws as amended April 27, 1987. (2)
   3-D      -     Certificate of Designations for Series A Preferred Stock,
                  together with Certificate of Amendment thereto and Second
                  Certificate of Amendment thereto. (3)
   3-E      -     Certificate of Designations for Series B Preferred Stock. (4)
   3-F      -     Third Certificate of Amendment of The Certificate of
                  Designations of Series A Preferred Stock
   3-G      -     Certificate of Amendment of The Certificate of Designations of
                  Series B Preferred Stock
   3-H      -     Certificate of Designations of Senior Preferred Stock
   10-A     -     Copy of Company's 1992 Stock Option Plan.(7)
   10-B     -     Copy of Company's 1985 SAR and Non-Qualified Stock Option
                  Plan. (3)
   10-C     -     Copy of Employment Agreement dated as of July 1, 1992 between
                  the Company and Jerome Flum.(7)
   10-D     -     Copy of 1988 Amendments to Company's 1985 SAR and Non-
                  qualified Stock Option Plan. (5)
   10-E     -     Letter Agreement dated November 12, 1990 by and between New
                  Generation Foods, Inc. and Jerome S. Flum. (6)
   10-F     -     Letter Agreement dated November 27, 1990 by and between New
                  Generation Foods, Inc. and Jerome S. Flum. (6)
   10-G     -     Registration Rights Agreement dated November 12, 1990 by and
                  between New Generation Foods, Inc. and Jerome S. Flum. (6)
   10-H     -     Letter Agreement dated November 18, 1997 between New
                  Generation Foods, Inc., Flum Partners and Jerome Flum
   11       -     Statements regarding computation of per share earnings.
   21       -     Subsidiaries of the Company.
   27       -     Financial Data Schedule

     Exhibits  3-F,  3-G,  3-H,  10-H,  11, 21 and 27 are  filed  with this Form
10-KSB.  All other  exhibits as indicated  above are not included  with the Form
10-KSB.  They are  available  upon  request  and  payment  of a  reasonable  fee
approximating  the  Registrant's  cost of  providing  and mailing the  exhibits.
Inquiries should be directed to:

                           New Generation Foods, Inc.
                    Office of the President (10-KSB Exhibits)
                                 45 Graham Road
                            Scarsdale, New York 10583


   (b)      Reports on Form 8-K

     No Reports on Form 8-K were filed during 1997.


                                       12

<PAGE>

(1)      Filed as an Exhibit to Registrant's Registration Statement on Form S-18
         (File No. 1-67055C) and incorporated herein by reference thereto.
(2)      Filed as an Exhibit to Registrant's  Annual Report on Form 10-K for the
         fiscal  year  ending   December   31,  1988  (File  No.   0-10825)  and
         incorporated herein by reference thereto.
(3)      Filed as an Exhibit to Registrant's  Registration Statement on Form S-2
         (File No. 33-17446) and incorporated herein by reference.
(4)      Filed as an Exhibit to Registrant's Registration Statement on Form S-8
         (File No. 33-17446) filed October 25, 1989 and incorporated herein by
         reference.
(5)      Filed as an Exhibit to Registrant's  Annual Report on Form 10-K for the
         fiscal  year  ending   December   31,  1989  (File  No.   0-10825)  and
         incorporated herein by reference thereto.
(6)      Filed as an Exhibit to Registrant's  Post-Effective  Amendment No. 3 to
         Registration  Statement  on Form S-3 filed  November 15, 1991 (File No.
         33- 17446) and incorporated herein by reference thereto.
(7)      Filed as an Exhibit to  Registrant's  Annual  Report on Form 10-KSB for
         the  fiscal  year  ending  December  31,  1992 (File No.  0-10825)  and
         incorporated herein by reference thereto.

                                       13

<PAGE>

                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                           PAGE

INDEPENDENT AUDITOR'S REPORT................................................F-2


FINANCIAL STATEMENTS

   Consolidated Balance Sheets - December 31, 1997 and 1996.................F-3

   Consolidated Statements of Operations - Years Ended
     December 31, 1997 and 1996.............................................F-5

   Consolidated Statements of Stockholders' Equity - Years Ended
     December 31, 1997 and 1996.............................................F-6

   Consolidated Statements of Cash Flows - Years Ended
     December 31, 1997 and 1996.............................................F-8

   Notes to Consolidated Financial Statements -
     December 31, 1997 and 1996.............................................F-9


                                       F-1

<PAGE>

                          Independent Auditor's Report


The Board of Directors and Stockholders
New Generation Foods, Inc.

We have audited the accompanying  consolidated  balance sheets of New Generation
Foods,  Inc. and  Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the  years  then  ended.  These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of New  Generation
Foods,  Inc. and  Subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.


CLIFTON GUNDERSON L.L.C.


Peoria, Illinois
March 20, 1998


                                       F-2

<PAGE>

<TABLE>
<CAPTION>


                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1997 and 1996


                                     ASSETS

                                                                      1997                    1996
                                                                      ----                    ----
<S>                                                                   <C>                     <C>
CURRENT ASSETS
      Cash and cash equivalents ..........................            $1,400,051              $1,963,394
      Marketable investment securities, at market value ..                  --                     5,429
      Interest receivable ................................                  --                    16,090
      Other receivables ..................................                  --                     1,184
                                                                      ----------              ----------

         Total current assets ............................             1,400,051               1,986,097
                                                                      ----------              ----------


EQUIPMENT, at cost (Note 3) ..............................                  --                    36,649
      Less accumulated depreciation ......................                  --                    19,988
                                                                      ----------              ----------

         Net equipment ...................................                  --                    16,661
                                                                      ----------              ----------

TOTAL ASSETS .............................................            $1,400,051              $2,002,758
                                                                      ==========              ==========

</TABLE>

                                       F-3

<PAGE>

<TABLE>
<CAPTION>

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                                              1997                     1996
                                                                                              ----                     ----
<S>                                                                                           <C>                      <C>
CURRENT LIABILITIES
   Accounts payable - shareholder                                                             $    460,000             $       --
   Dividends payable                                                                               840,000                     --
   Accrued franchise taxes                                                                          45,200                   45,200
   Accrued compensation                                                                               --                     10,125
   Accrued expenses                                                                                    784                      986
                                                                                              ------------             ------------

         Total current liabilities                                                               1,345,984                   56,311
                                                                                              ------------             ------------


REDEEMABLE CONVERTIBLE VOTING
   SENIOR PREFERRED STOCK, $.01 par
   value (stated at liquidation value of $1.00 per
   share).  Authorized 1,100,000 shares; issued
   and outstanding 1,100,000 shares (Note 5)                                                     1,100,000                     --
                                                                                              ------------             ------------


STOCKHOLDERS' EQUITY (DEFICIT)
   (Notes 5 and 6)
   Cumulative Convertible Voting Preferred Stock, $.01
      par value:
      Series A (stated at liquidation value of $.75 per
         share).  Authorized 2,333,333 shares; issued
         and outstanding no shares in 1997 and
         2,333,333 in 1996                                                                            --                  1,750,000
      Series B (stated at liquidation value of $1.00 per
         share).  Authorized 350,000 shares; issued and
         outstanding no shares in 1997 and 310,000
         in 1996                                                                                      --                    310,000
   Common stock, $.01 par value. Authorized 25,000,000
      shares; issued and outstanding 399,830                                                         3,998                    3,998
   Additional paid-in capital                                                                   22,818,930               22,818,930
   Retained deficit                                                                            (23,868,861)             (22,936,481)
                                                                                              ------------             ------------

         Total stockholders' equity (deficit)                                                   (1,045,933)               1,946,447
                                                                                              ------------             ------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                    $  1,400,051             $  2,002,758
                                                                                              ============             ============
</TABLE>


             These consolidated financial statements should be read
                only in connection with the accompanying notes to
                       consolidated financial statements.

                                       F-4

<PAGE>


<TABLE>
<CAPTION>

                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     Years Ended December 31, 1997 and 1996


                                                          1997             1996
                                                          ----             ----
<S>                                                   <C>              <C>
OPERATING EXPENSES
   Selling, general, and administrative               $ 48,347         $ 36,583
   Chairman's compensation expense                     113,859          121,506
                                                      --------         --------

         Total operating expenses                      162,206          158,089
                                                      --------         --------

         Operating loss                              (162,206)        (158,089)
                                                      --------         --------


OTHER INCOME (DEDUCTIONS)
   Interest and dividend income                         96,790          105,972
   Gain on sale of assets (Note 1)                            -         543,158
   Loss on investments                               ( 15,633)        ( 22,373)
   Miscellaneous                                           -              2,982
                                                      --------         --------

                                                        81,157          629,739
                                                      --------         --------

         Income (loss) before income taxes            ( 81,049)         471,650


INCOME TAXES (Note 4)                                         -             265
                                                      ---------        --------


NET EARNINGS (LOSS)                                   $(81,049)        $471,385
                                                      =========        ========


NET EARNINGS (LOSS) PER SHARE (Note 8)
   Basic                                              $  (0.67)        $   0.72
                                                      =========        ========

   Dilutive                                           $  (0.67)        $   0.72
                                                      =========        ========

</TABLE>

             These consolidated financial statements should be read
                only in connection with the accompanying notes to
                       consolidated financial statements.

                                       F-5

<PAGE>

<TABLE>
<CAPTION>
                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years Ended December 31, 1997 and 1996


                                                         Preferred Stock
                                                             Series A
                                                      Shares           Amount
                                                      ------           ------
<S>                                                <C>              <C>
BALANCE AT DECEMBER 31,1995                         2,333,333       $ 1,750,000

     Net income for year ended
         December 31, 1996                              -                 -
                                                     ---------        ---------

BALANCE AT DECEMBER 31,1996                         2,333,333         1,750,000

     Redemption and conversion
         of preferred stock (Note 5)              (2,333,333)       (1,750,000)
Preferred stock dividends
         (Note 5)                                        -                 -
     Net loss for year ended
         December 31, 1997                               -                 -
                                                     ---------          -------


BALANCE AT DECEMBER 31,1997                              -          $     -
                                                     =========      ===========

</TABLE>

                                       F-6


<PAGE>

<TABLE>
<CAPTION>
<S>
        Preferred Stock                                       Additional           Retained              Total
           Series B                   Common Stock              Paid-in     Earnings Stockholders'
     Shares        Amount          Shares       Amount          Capital            (Deficit)            Equity
     ------        ------          ------       ------          -------            ---------            ------

     <C>        <C>              <C>           <C>            <C>                <C>                   <C>
     310,000    $    310,000         399,830   $      3,998   $ 22,818,930       $(23,407,866)         $ 1,475,062


        --              --              --             --             --              471,385               471,385
                ------------    ------------   ------------   ------------       ------------          ------------


     310,000         310,000         399,830          3,998     22,818,930        (22,936,481)           1,946,447


    (310,000)       (310,000)           --             --             --             --                 (2,060,000)

        --              --              --             --             --             (851,331)            (851,331)

        --              --              --             --             --              (81,049)            (81,049)
                ------------    ------------   ------------   ------------       ------------          -----------


        --      $       --           399,830   $      3,998   $ 22,818,930       $(23,868,861)         $(1,045,933)
   =========    ============    ============   ============   ============       ============           ============


</TABLE>

           These consolidated financial statements should be read only
                  in connection with the accompanying notes to
                       consolidated financial statements.

                                       F-7

<PAGE>

<TABLE>
<CAPTION>
                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 1997 and 1996


                                                                                                     1997                 1996
                                                                                                     ----                 ----
<S>                                                                                               <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                                                            $   (81,049)          $   471,385
                                                                                                  -----------           -----------
     Adjustments to reconcile net income (loss) to net cash
         provided by (used in) operating activities:
         Depreciation                                                                                   5,330                 4,274
         Loss on sale or maturity of marketable investment securities                                   5,429                61,077
         Unrealized holding gains on marketable investment securities                                    --                 (38,704)
         Proceeds from sale of marketable investment securities                                          --                     (13)
         Gain on sale of assets                                                                          --                (543,158)
         Gain (loss) on sale of fixed assets                                                             --                     (34)
         Change in assets and liabilities:
              Decrease (increase) in receivables                                                       17,274               (10,466)
              Decrease in accounts payable (trade), accrued
                  compensation, and accrued expenses                                                  (10,327)               (4,628)
                                                                                                  -----------           -----------
                  Total adjustments                                                                    17,706              (531,652)
                                                                                                  -----------           -----------

                  Net cash used in operating activities                                               (63,343)              (60,267)
                                                                                                  -----------           -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                                                                --                 (13,954)
     Proceeds from notes receivable                                                                      --                 766,659
     Proceeds from sale of fixed assets                                                                  --                   5,200
                                                                                                  -----------           -----------
                  Net cash provided by investing activities                                              --                 757,905
                                                                                                  -----------           -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Redemption of preferred stock                                                                   (500,000)                 --
                                                                                                  -----------           -----------
                  Net cash used in financing activities                                              (500,000)                 --
                                                                                                  -----------           -----------

NET INCREASE (DECREASE) IN CASH AND
     CASH EQUIVALENTS                                                                                (563,343)              697,638

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                                      1,963,394             1,265,756
                                                                                                  -----------           -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                                          $ 1,400,051           $ 1,963,394
                                                                                                  ===========           ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION
     Cash paid during the year for taxes                                                          $      --             $       265
                                                                                                  ===========           ===========

SUPPLEMENTAL DISCLOSURE OF NONCASH
     FINANCING ACTIVITIES
     Partial conversion of Preferred Stock, Series A, to
         Senior Preferred Stock                                                                   $ 1,100,000           $      --
                                                                                                  ===========           ===========

REDEMPTION OF PREFERRED STOCK, SERIES B,
     AND REMAINING SERIES A THROUGH
     ACCOUNTS PAYABLE - SHAREHOLDER                                                               $   460,000           $      --
                                                                                                  ===========           ===========

</TABLE>

           These consolidated financial statements should be read only
                  in connection with the accompanying notes to
                       consolidated financial statements.

                                       F-8

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 1 - BASIS OF PRESENTATION AND SALE OF OPERATING ASSETS

The  consolidated  financial  statements  include the accounts of New Generation
Foods, Inc. and its wholly owned subsidiaries,  Spicers International,  Inc. and
NGF Services,  Inc. All significant  intercompany balances and transactions have
been eliminated in consolidation.  The Company  manufactured a food product from
expanded  whole wheat,  which was its only line of business,  until  October 22,
1993 when  substantially all of the operating assets of the Company were sold as
described below. As a result, the Company is no longer an operating company.

On October 22, 1993, the Company sold  substantially all of the Company's assets
(Asset Sale) to American Pacific Financial Corporation (American Pacific) for an
aggregate  purchase price of $2,600,000  payable $150,000 at the closing and the
balance in secured notes of the purchaser as described  below.  The Company also
sold its inventory to American Pacific at its cost of $130,509.

The total gain on the Asset Sale was  $1,849,736  of which  $1,306,578  had been
recognized  at December 31, 1995.  The deferred gain of $543,158 at December 31,
1995 was offset against the notes  receivable and was recognized  during 1996 as
the remaining balance of the notes receivable was collected.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)      Use of Estimates in Preparing Financial Statements

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

(b)      Equipment

Equipment is stated at cost.  Depreciation  on equipment  is  calculated  on the
straight-line method over the estimated useful lives of the assets.

(c)      Net Earnings (Loss) Per Share

In 1997,  the Financial  Accounting  Standards  Board issued  Statement No. 128,
Earnings Per Share.  Statement 128 replaced the calculation of primary and fully
diluted  earnings  (loss) per share with basic and diluted  earnings  (loss) per
share. Unlike primary earnings (loss) per share, basic earnings (loss) per share
excludes any dilutive effects of options,  warrants, and convertible securities.
Diluted  earnings  (loss)  per share is very  similar  to the  previously  fully
diluted earnings (loss) per share. All earnings (loss) per share amounts for all
periods have been presented,  and where appropriate,  restated to conform to the
Statement 128 requirements.

(d)      Cash Equivalents

The  Company   considers  all  highly  liquid  debt  instruments  with  original
maturities of three months or less to be cash equivalents.


                                       F-9

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e)      Marketable Investment Securities

The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards  No.  115,  Accounting  for  Certain  Investments  in Debt and  Equity
Securities,  (SFAS  115)  effective  January  1,  1994.  SFAS 115  requires  the
classification  of debt and equity  securities  into one of the three  following
categories:

         Held-to-maturity  -  includes  investments  which the  Company  has the
         positive  intent and ability to hold until maturity.  Such  investments
         are measured at amortized cost.

          Trading securities - includes  investments in securities purchased and
          held  principally  for the  purpose of selling  them in the near term.
          Unrealized holding gains and losses are included in income.

         Available-for-sale  - includes investments in securities not classified
         as held-to-maturity or trading. Unrealized holding gains and losses are
         reported  as a net  amount as a  separate  component  of  stockholders'
         equity until realized.

Marketable investment securities, which consist of options and warrants, are all
classified as trading securities.

(f)      Income Taxes

Deferred income taxes are provided on temporary  differences  between  financial
statement  and income  tax  reporting.  Temporary  differences  are  differences
between the amounts of assets and liabilities  reported for financial  statement
purposes  and their tax bases.  Deferred  tax  liabilities  are  recognized  for
temporary  differences  that will be  taxable  in  future  years'  tax  returns.
Deferred  tax assets  are  recognized  for  temporary  differences  that will be
deductible in future  years' tax returns and for  operating  loss and tax credit
carryforwards. Deferred tax assets are reduced by a valuation allowance if it is
deemed more likely than not that some or all of the deferred tax assets will not
be realized.


NOTE 3 - EQUIPMENT

A summary of equipment at December 31, 1996 follows:

Office furniture and equipment                                          $22,695
Automobile                                                               13,954
                                                                        -------
                                                                        $36,649
                                                                        =======

Useful  lives  of  assets  for  financial  statement  purposes  are 3 years  for
automobile and 5 years for office furniture and equipment.

                                      F-10

<PAGE>

                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 4 - INCOME TAXES

Components of income tax expense for 1996 are as follows:

                                                 Federal          State    Total
                                                 -------          -----    -----
Current                                          $   -            $265     $265
Deferred                                             -               -        -
                                                  ------           ----     ---

Total                                            $  -             $265     $265
                                                 ======           ====     ====

The actual tax expense for 1997 and 1996 differs from the "expected" tax expense
for those years  (computed  by applying the  applicable  United  States  federal
corporate tax rate to income (loss) before income taxes) as follows:

                                                         1997              1996
                                                         ----              ----

Computed "expected" tax expense (benefit)            $  (27,557)  $     160,361
Expiration of net operating loss carryforward           652,937         457,161
Expiration of investment tax carryforward                 8,877          12,147
Underaccrual of prior year taxes                             -              265
Decrease in valuation allowance                        (633,605)       (629,669)
Other                                                      (652)             -
                                                      ----------      ---------

Income tax expense                                   $      -       $       265
                                                     ==========     ===========

The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets at December 31, 1997 and 1996 are as follows:

                                                        1997               1996
                                                        ----               ----
Deferred tax assets:
     Net operating loss carryforwards                   $5,478,012   $6,092,344
     Investment tax credit carryforwards                    55,771       64,648
     Unrealized loss on marketable investment securities     -           11,049
     Alternative minimum tax carryforward                    6,655        6,002
                                                          -----           -----

          Total gross deferred tax assets             5,540,438       6,174,043

Less valuation allowance                             (5,540,438)     (6,174,043)
                                                     ----------      ----------

Net deferred tax assets                              $     -         $   -
                                                     ==========      ==========

A valuation  allowance  is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized.  The net deferred assets reflects
management's  estimate  of  the  amount  which  will  be  realized  from  future
profitability which can be predicted with reasonable certainty.

The net change in the total valuation allowance for the years ended December 31,
1997 and 1996 was a decrease of $633,605 and $629,669, respectively.


                                      F-11

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 4 - INCOME TAXES (CONTINUED)

At December  31,  1997,  the Company has net  operating  loss  carryforwards  as
follows which are available to offset future  federal  taxable  income,  if any,
through  2017.  The Company  also has  investment  tax credit  carryforwards  as
follows  which are  available to reduce future  federal  income  taxes,  if any,
through 2000.

<TABLE>
<CAPTION>
<S>
                     Net                                 Investment                                 Year of
               Operating Loss                            Tax Credit                               Expiration
               --------------                            ----------                               ----------
              <C>                                      <C>                                       <C>

              $     2,238,000                           $    21,000                                1998
                    2,332,000                                16,000                                1999
                    3,436,000                                19,000                                2000
                    1,750,000                                    -                                 2001
                    1,434,000                                    -                                 2002
                    1,512,000                                    -                                 2003
                    1,131,000                                    -                                 2004
                      805,000                                    -                                 2005
                      547,000                                    -                                 2006
                      574,000                                    -                                 2007
                      238,000                                    -                                 2008
                      114,000                                    -                                 2017
              ---------------                           -----------

              $    16,111,000                           $    56,000
              ===============                           ===========

</TABLE>


NOTE 5 - PREFERRED STOCK

During 1987, 5,000,000 shares of preferred stock $.01 par value, were authorized
by the stockholders.

The sale or transfer of substantially all of the assets of the Company is deemed
to be a  liquidation,  dissolution or winding-up of the Company for the purposes
of determining  when the  liquidation  preference of the holders of the Series A
and Series B Preferred Stock is to be paid.  Accordingly,  upon  consummation of
the Asset Sale,  the  holders of the Series A and Series B Preferred  Stock were
entitled to receive  preference in liquidation  before any  distribution  to the
holders of the common stock.

(a)    Senior Preferred Stock

On November  17, 1997,  the Company  received a letter from the holder of all of
the  shares of the  Series A and  Series B  Preferred  Stock,  a related  party,
demanding payment of the liquidation  preference and accrued dividends  relative
to  those  shares.  The  total  amount  payable  pursuant  to  this  demand  was
approximately $2,959,000. On November 18, 1997, the Company's Board of Directors
approved  settlement of this demand by issuing  $1,100,000  of Senior  Preferred
Stock,  agreeing  to pay  $1,800,000  in cash,  and  agreeing  to give  computer
equipment and a Company car to the shareholder. Also, as part of the settlement,
the Chief Executive Officer of the Company, who was also a representative of the
shareholder,  agreed to terminate his existing  employment  agreement  effective
December 1, 1997. At December 31, 1997, there was $1,300,000 of cash owed to the
shareholder for this settlement which was paid subsequent to year end.

                                      F-12

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 5 - PREFERRED STOCK (CONTINUED)

During 1997,  1,100,000  shares of Senior  Preferred  Stock were  authorized and
issued.  Each share of the Senior  Preferred Stock is convertible into 3.2711808
common  shares  based upon a ratio  utilizing a  conversion  price of $.3057 per
share.  The ratio is determined  by dividing  $1.00 by the  conversion  price in
effect at the time of conversion.  The conversion price is subject to adjustment
in  certain  events,  including  the  issue  or  sale  of  common  stock  or any
convertible securities,  rights, or related rights for a consideration per share
of common stock less than the conversion  price in effect  immediately  prior to
the issuance of such common stock or convertible securities,  rights, or related
rights. In such event the conversion price shall be reduced to the consideration
per share of common stock paid in  connection  with the issuance of common stock
or any convertible securities,  rights, or related rights. At December 31, 1997,
the Senior  Preferred  Stock is  convertible  in the  aggregate  into  3,598,298
shares.  The Senior  Preferred  Stock has a liquidation  preference of $1.00 per
share.

Each holder of shares of Senior  Preferred Stock shall be entitled to the number
of votes equal to the number of shares of common stock into which such shares of
Senior  Preferred  Stock may be converted  and shall have voting rights equal in
all respects to those of the common stock into which the Senior  Preferred Stock
is convertible on the record date for the vote in question.

The holders of the Senior Preferred Stock shall be entitled to receive dividends
at the same rate as dividends (other than dividends paid in additional shares of
common stock) are paid with respect to the common stock  (treating each share of
Senior  Preferred  Stock as being equal to the number of shares of common  stock
into which each share of Senior Preferred Stock is then convertible).

The Senior  Preferred  Stock is  redeemable  at the  option of the  holders of a
minimum of one-half of the  aggregate  number of shares  then  outstanding.  The
redemption  price of the Senior Preferred Stock shall be equal to the sum of (i)
$1.00 per share (as adjusted  for any stock  dividends,  combination,  or splits
with respect to such shares) and (ii) any  accumulated  and unpaid  dividends on
any such share of Senior  Preferred  Stock. The redemption value at December 31,
1997 was $1,100,000.

(b)    Series A Preferred Stock

During  1988,  2,333,333  shares  of  Series  A  Cumulative  Convertible  Voting
Preferred  Stock (Series A Preferred  Stock) were  authorized  and issued.  Each
share of the Series A  Preferred  Stock was  convertible  into  .0297625  common
shares based upon a ratio  utilizing a conversion  price of $25.20 per share, as
adjusted,  plus an amount of Special Conversion  Shares,  calculated each June 1
through June 1, 1992,  based on an amount per share of Series A Preferred  Stock
of $0.0675 per annum, divided by the then conversion price. The conversion price
was  $25.20 at June 1, 1997 and  1996.  The  conversion  price  was  subject  to
adjustment in certain events,  including the issue or sale of common stock for a
consideration  per share  less than the  lesser  of the  conversion  price or 80
percent of the market price  immediately prior to such issue or sale (except for
Series A Preferred Stock conversion,  exercise of warrants,  options, or similar
rights outstanding on the date the Series A Preferred Stock was issued).


                                      F-13

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 5 - PREFERRED STOCK (CONTINUED)

(b)    Series A Preferred Stock (Continued)

Each share of Series A Preferred  Stock had voting  rights equal in all respects
to those of the  common  stock  into  which  the  Series A  Preferred  Stock was
convertible on the record date for the vote in question.

Dividends  on the Series A Preferred  Stock were payable  annually  each June 1,
commencing  June 1,  1993,  to holders  of record on the May 1st  preceding  the
dividend  payment  date.  Dividends  were to be paid upon the  discretion of the
Board;  however,  if not paid, the dividends were  cumulative from June 1, 1992.
Dividends  were to be paid at the rate of  $0.0675  per  share per year and were
payable in cash.

During 1997, the Series A Preferred  Stock was retired.  At the retirement  date
unpaid dividends were $787,500, a majority of which were subsequently paid.

(c)    Series B Preferred Stock

During 1989,  350,000 shares of Series B Preferred Stock,  $.01 par value,  were
authorized by the Board of Directors.  During 1989,  310,000  shares of Series B
Cumulative  Convertible  Voting  Preferred Stock (Series B Preferred Stock) were
issued. Each share of the Series B Preferred Stock was convertible into .0294125
common  shares  based upon a ratio  utilizing a  conversion  price of $34.00 per
share, as adjusted,  plus an amount of Special Conversion Shares,  calculated on
June 1, 1990 and on each June 1  thereafter  through  June 1, 1993,  based on an
amount per share of Series B Preferred  Stock of $.09 per annum,  divided by the
then conversion price. The conversion price was $34.00 at June 1, 1997 and 1996.
The conversion price was subject to adjustment in certain events,  including the
issue or sale of  common  stock  for a  consideration  per  share  less than the
conversion  price or less than an amount equal to 80 percent of the market price
immediately  prior to such  issue or sale  (except  for  conversion  of Series B
Preferred Stock,  any other series of preferred stock of the Corporation  issued
prior to the  issuance of the Series B Preferred  Stock;  exercise of  warrants,
options or similar rights  outstanding on the date the Series B Preferred  Stock
was issued).

Each share of Series B Preferred  Stock had voting  rights equal in all respects
to those of the  common  stock  into  which  the  Series B  Preferred  Stock was
convertible on the record date for the vote in question.

Dividends  on the Series B Preferred  Stock were payable  annually  each June 1,
commencing  June 1,  1994,  to holders  of record on the May 1st  preceding  the
dividend  payment  date.  Dividends  were to be paid upon the  discretion of the
Board;  however,  if not paid, the dividends were  cumulative from June 1, 1993.
Dividends  were to be paid at the  rate of $.09  per  share  per  year  and were
payable in cash,  provided  that  during the period  ended  December 1, 1996 the
holders of a majority of the Series B Preferred  Stock could  elect,  in lieu of
entitlement to a cash  dividend,  to cause the Company to increase the number of
Special  Conversion  Shares in the annual amounts described above. This election
was not exercised.

During 1997, the Series B Preferred  Stock was retired.  At the retirement  date
unpaid dividends were $111,600, a majority of which were subsequently paid.

                                      F-14

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 6 - COMMON STOCK, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS

(a)    Common Stock

At December 31, 1997,  3,601,548 shares of the Company's authorized common stock
were reserved for issuance under stock option plans and Senior  Preferred  Stock
(convertible) outstanding.

(b)    Stock Options and Stock Appreciation Rights

The Company has two stock option plans, the 1992 Incentive Stock Option Plan and
the 1985 SAR and  Nonqualified  Stock Option Plan.  The Company's 1992 Incentive
Stock Option Plan  authorizes the grant of incentive  stock options to employees
of the Company.  The total number of the Company's  shares that may be issued or
transferred  pursuant to options  granted under the Incentive Stock Option Plan,
as amended,  is 150,000 shares of common stock. At December 31, 1997, there were
no options  outstanding for shares of common stock under this plan. The exercise
price of each option  shall not be less than the fair market value of the common
stock at the date of grant. Options expire on the date determined,  but not more
than ten years  from the date of grant.  No option may be  exercised  unless the
holder is then an employee of the Company,  provided  that such  exercise may be
made for no more than three months  following  termination  of employment or one
year after death while being employed. No options may be granted under this plan
after June 12, 2002.

The Company's 1985 SAR and  Nonqualified  Stock Option Plan authorizes the grant
of stock incentives in the form of stock options and stock  appreciation  rights
to key service  personnel  of the  Company.  The total  number of the  Company's
shares that may be issued or transferred  pursuant to stock  incentives  granted
under the plan, as amended,  is 62,500  shares of common stock.  At December 31,
1997, there were options outstanding for 3,250 shares of common stock under this
plan. The plan authorizes the grant of two categories of stock incentives:

(1)    Stock  Options.  The exercise  price of each option is  determined by the
       Board of Directors.  Options expire on the date determined,  but not more
       than ten years from the date of grant.

(2)    Stock  Appreciation  Rights.  Stock  appreciation  rights  (SARs)  may be
       granted in one of three forms:

              i) In combination with any option granted under the plan, in which
              event the  exercise  of the SAR has the  effect of  canceling  the
              related option,  and exercise of the related option has the effect
              of canceling the related SAR;

              ii) Independently of a stock option; or

              iii) In  addition to a stock  option,  entitling  the  optionee to
              exercise the SAR and, in addition,  either to exercise the related
              stock  option or  surrender  it and  receive in return a number of
              shares  equal to the excess of the fair market value of the option
              shares on the date of exercise over the option price.


                                      F-15

<PAGE>

                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 6 - COMMON STOCK, STOCK OPTIONS, AND STOCK APPRECIATION RIGHTS (CONTINUED)

(b)      Stock Options and Stock Appreciation Rights (Continued)

         No stock  incentives may be granted under this Plan after September 20,
         1995.

         There have been no  transactions  with respect to the  Company's  stock
         appreciation  rights during the years ended December 31, 1997 and 1996,
         nor are there any stock appreciation rights outstanding at December 31,
         1997 and 1996.

Transactions  with  respect to the  Company's  stock  option plans for the years
ended December 31, 1997 and 1996 are as follows:

                                        Range of                  Number of
                                       Price Per                Shares Under
                                        Share                     Options
                                       ---------                ------------

Outstanding at December 31, 1995                                   5,750
     Expired                            $10.64                    (2,500)
                                                                  -------

Outstanding at December 31, 1996                                   3,250
     Expired                            $  -                         -
                                                                  -------

Exercisable at December 31, 1997        $.102-$2.1875              3,250
                                                                  ========


NOTE 7 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  methods  were  used to  estimate  the fair  value  of  financial
instruments at December 31, 1997 and 1996:

Cash and Cash Equivalents and Interest Receivable

Because  of  their  short  maturity,   the  carrying  amounts  reported  in  the
consolidated balance sheet approximates fair value.

Marketable Investment Securities

Estimates of the fair values of marketable  investment  securities  are based on
quoted market  prices.  As the Company  classifies  its  investments  as trading
securities,  the carrying  amount  reported in the  consolidated  balance sheets
approximates fair value.


                                      F-16

<PAGE>



                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1997 and 1996


NOTE 8 - EARNINGS (LOSS) PER SHARE

The following  table sets forth the  computation  of basic and diluted  earnings
(loss) per share:

                                                    1997              1996
                                                    ----              ----

Net earnings (loss)                               $(81,049)        $471,385
Dividends on cumulative preferred stock           (185,400)        (185,400)
                                                 --------          --------

Net earnings (loss) applicable to common stock   $(266,449)        $285,985
                                                 =========         ========

Basic average common shares outstanding            399,830          399,830
                                                 =========         ========

Earnings (loss) per share - basic                $(0.67)            $0.72
                                                 ======             =====

Earnings (loss) per share - dilutive             $(0.67)            $0.72
                                                 ======             =====

The effect of dilutive securities  (convertible  preferred stock and options) is
anti-dilutive for 1997 and 1996,  therefore,  basic and dilutive earnings (loss)
per share are the same for those years.


                                      F-17

<PAGE>


                                            SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.



                                            NEW GENERATION FOODS, INC.



                                            By: /s/ Jerome S. Flum
                                                -----------------------
                                                Jerome Flum
                                                Chairman of the Board, Chief
                                                Executive Officer and Principal
                                                Financial Officer
                                                April 15, 1998


<PAGE>



                                POWER OF ATTORNEY


     KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Jerome S. Flum and David I. Schaffer his true and
lawful attorney-in-fact,  with full power of substitution and resubstitution, to
act for him and in his name,  place and stead, in any and all capacities to sign
any and all  amendments  to this Annual  Report on Form 10-KSB,  and to file the
same with all exhibits  thereto,  and other  documents in connection  therewith,
with  the  Securities  and  Exchange  Commission,  granting  unto  each  of said
attorneys-in-fact  and agents,  full power and  authority to do and perform each
and every  act and  thing  requisite  or  necessary  to be done in and about the
premises,  and  fully to all  intents  and  purposes  as he might or could do in
person, hereby ratifying and confirming all that each of such  attorneys-in-fact
and agents,  or his  substitute or  substitutes,  may lawfully do or cause to be
done by virtue thereof.

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the registrant and
in the capacities and on the dates indicated.

         Name                   Position                              Date
         ----                   --------                              ----
/s/ Jerome S. Flum              Chairman of the Board,           April 15, 1998
------------------
Jerome S. Flum                  Chief Executive Officer,
                                Principal Financial Officer


/s/ Leslie Charm                Director                         April 15, 1998
------------------
Leslie Charm


/s/ Richard J. James            Director                         April 15, 1998
--------------------
Richard J. James


/s/ Janice Page                 Controller                       April 15, 1998
Janice Page


<PAGE>


Exhibits
--------

3-F  Third Certificate of Amendment of The Certificate of Designations of Series
     A Preferred Stock

3-G  Certificate of Amendment of The Certificate of Designations of Series B
     Preferred Stock

3-H  Certificate of Designations of Senior Preferred Stock

10-H Letter Agreement dated November 18, 1997 between New Generation Foods,
     Inc., Flum Partners and Jerome Flum

11   Statements regarding computation of per share earnings

21   Subsidiaries of the Company

27   Financial Data Schedule

<PAGE>


Exhibit 3-F

                        THIRD CERTIFICATE OF AMENDMENT OF
                         THE CERTIFICATE OF DESIGNATIONS
                           OF SERIES A PREFERRED STOCK
                                       OF
                           NEW GENERATION FOODS, INC.

         New Generation Foods, Inc. (the "Corporation"), a corporation organized
and existing under the Nevada Corporation Law,

         DOES HEREBY CERTIFY:

         That pursuant to the authority conferred upon the Board of Directors of
the Corporation by its Articles of  Incorporation,  as amended,  and pursuant to
Section 7.1 of the  Certificate of  Designations of the Series A Preferred Stock
of the Corporation,  as previously  amended (the "Certificate of Designations"),
on November 18, 1997, said Board of Directors adopted a resolution providing for
the further amendment of the Certificate of Designations, subject to the consent
of the holder of all of the  outstanding  shares of Series A Preferred  Stock of
the  Corporation,  which consent has been duly obtained,  which resolution is as
follows:

         RESOLVED, that pursuant to ARTICLE FOURTH of the Corporation's Articles
of  Incorporation,  as amended,  relating to the shares of the Corporation,  and
Section 7.1 of the Certificate of Designations of the Series A Preferred  Stock,
as amended  to date (the  "Certificate  of  Designations"),  and  subject to the
written  consent  of the  holder  of all of the  outstanding  shares of Series A
Preferred Stock of the Corporation, the Board of Directors hereby amends Section
5.2 of the Certificate of Designations to read in its entirety as follows:

         "5.2 Ratable Distribution.  If after payment or provision for corporate
debts, the assets available for distribution  upon liquidation to the holders of
Series A Preferred  Stock and other capital stock ranking on a parity  therewith
upon  liquidation  are not sufficient to pay such holders in full the amounts to
which they are entitled,  the holders of Series A Preferred  Stock and any other
stock  ranking on a parity  therewith  upon  liquidation  shall be entitled to a
distribution of assets ratably,  in proportion to the sums that would be payable
to such  holders of all such sums were paid in full,  and any  remaining  unpaid
amount may be paid,  at the  discretion  of the Board of Directors  and with the
written  consent  of the  holders  of all the  outstanding  shares  of  Series A
Preferred  Stock and  subject  to  applicable  law,  by the  issuance  of equity
securities of the  Corporation  (including  without  limitation  shares of a new
series of  Preferred  Stock)  having a fair  market  value (as  determined  by a
majority of the members of the Board of Directors  who are  independent  and not
affiliated  with any holder of shares of Series A Preferred  Stock) equal to the
unpaid  amount  payable  to  the  holders  of  Series  A  Preferred  Stock  upon
liquidation  of the  Corporation  and which shall  include  such other terms and
conditions  as the Board and the  holders  of all of the  outstanding  shares of
Series A Preferred Stock may otherwise agree."

      IN WITNESS WHEREOF, New Generation Foods, Inc. has caused this Certificate
to be signed by its duly authorized officers this ____ day of November, 1997.

                                            NEW GENERATION FOODS, INC.

                                            By: /s/ Jerome S. Flum
                                               -------------------------
                                               Jerome S. Flum, Chairman and
                                               Chief Executive Officer
ATTEST:
By:____________________________
   Title:

<PAGE>

Exhibit 3-G


                           CERTIFICATE OF AMENDMENT OF
                         THE CERTIFICATE OF DESIGNATIONS
                           OF SERIES B PREFERRED STOCK
                                       OF
                           NEW GENERATION FOODS, INC.

         New Generation Foods, Inc. (the "Corporation"), a corporation organized
and existing under the Nevada Corporation Law,

         DOES HEREBY CERTIFY:

         That pursuant to the authority conferred upon the Board of Directors of
the Corporation by its Articles of  Incorporation,  as amended,  and pursuant to
Section 7.1 of the  Certificate of  Designations of the Series B Preferred Stock
of the Corporation (the  "Certificate of  Designations"),  on November 18, 1997,
said Board of Directors adopted a resolution providing for the further amendment
of the Certificate of Designations,  subject to the consent of the holder of all
of the outstanding shares of Series B Preferred Stock of the Corporation,  which
consent has been duly obtained, which resolution is as follows:

         RESOLVED, that pursuant to ARTICLE FOURTH of the Corporation's Articles
of  Incorporation,  as amended,  relating to the shares of the Corporation,  and
Section 7.1 of the Certificate of Designations of the Series B Preferred  Stock,
as amended  to date (the  "Certificate  of  Designations"),  and  subject to the
written  consent  of the  holder  of all of the  outstanding  shares of Series B
Preferred Stock of the Corporation, the Board of Directors hereby amends Section
5.2 of the Certificate of Designations to read in its entirety as follows:

         "5.2 Ratable Distribution.  If after payment or provision for corporate
debts, the assets available for distribution  upon liquidation to the holders of
Series B Preferred  Stock and other capital stock ranking on a parity  therewith
upon  liquidation  are not sufficient to pay such holders in full the amounts to
which they are entitled,  the holders of Series B Preferred  Stock and any other
stock  ranking on a parity  therewith  upon  liquidation  shall be entitled to a
distribution of assets ratably,  in proportion to the sums that would be payable
to such  holders of all such sums were paid in full,  and any  remaining  unpaid
amount may be paid,  at the  discretion  of the Board of Directors  and with the
written  consent  of the  holders  of all the  outstanding  shares  of  Series B
Preferred  Stock and  subject  to  applicable  law,  by the  issuance  of equity
securities of the  Corporation  (including  without  limitation  shares of a new
series of  Preferred  Stock)  having a fair  market  value (as  determined  by a
majority of the members of the Board of Directors  who are  independent  and not
affiliated  with any holder of shares of Series B Preferred  Stock) equal to the
unpaid  amount  payable  to  the  holders  of  Series  B  Preferred  Stock  upon
liquidation  of the  Corporation  and which shall  include  such other terms and
conditions  as the Board and the  holders  of all of the  outstanding  shares of
Series B Preferred Stock may otherwise agree."

      IN WITNESS WHEREOF, New Generation Foods, Inc. has caused this Certificate
to be signed by its duly authorized officers this ____ day of November, 1997.

                                            NEW GENERATION FOODS, INC.

                                            By: /s/ Jermone Flum
                                               -------------------------
                                                Jerome Flum, Chairman and
                                                Chief Executive Officer
ATTEST:

By:____________________________
   Title:

<PAGE>

Exhibit 3-H

                           CERTIFICATE OF DESIGNATIONS
                                       OF
                             SENIOR PREFERRED STOCK
                                       OF
                           NEW GENERATION FOODS, INC.

     New Generation Foods, Inc. (the "Corporation"), a corporation organized and
existing under the Nevada Corporation Law;

     DOES HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors of the
Corporation by its Articles of  Incorporation,  as amended,  and pursuant to the
Nevada  Corporation Law, on November 18, 1997, said Board of Directors adopted a
resolution  providing for the issuance of a series of shares of preferred stock,
par value $.01 per share, which resolution is as follows:

     RESOLVED,  that pursuant to Article FOURTH of the Corporation's Articles of
Incorporation,  as amended, relating to the shares of the corporation, the Board
of Directors  hereby  authorizes,  fixes and creates a series of preferred stock
having  the  following  powers,  preferences,  designations,  rights  and  other
characteristics.

     The designation of the series of preferred stock created by this resolution
shall be "Senior Preferred Stock" (hereinafter  referred to as "Senior Preferred
Stock") and shall consist of 1,100,000 shares. The powers, preferences,  rights,
restrictions  of, and other matters  relating to, the Senior Preferred Stock are
as follows:

     1. Dividends.

     The holders of the Senior Preferred Stock shall be entitled to receive, out
of funds  legally  available  therefor,  dividends at the same rate as dividends
(other than dividends  paid in additional  shares of Common Stock) are paid with
respect to the Common Stock  (treating each share of Senior  Preferred  Stock as
being  equal to the  number of shares of Common  Stock  into which each share of
Senior Preferred Stock is then convertible).

     2. Liquidation Preference.

     (a) In the  event of any  liquidation,  dissolution  or  winding  up of the
Corporation,  whether  voluntary  or  involuntary,  the  holders  of the  Senior
Preferred  Stock shall be entitled to receive,  prior and in  preference  to any
distribution of the assets or surplus funds of the Corporation to the holders of
the  Common  Stock,  the  amount of $1.00 per share (as  adjusted  for any stock
dividends,  combinations  or  splits  with  respect  to such  shares),  plus all
accumulated  and  unpaid  dividends  on such  share  for each  share  of  Senior
Preferred  Stock  held by  them  (the  "Liquidation  Preference").  If upon  the
occurrence  of any of the  events  described  in this  Section 2, the assets and
funds thus distributed  among the holders of the Senior Preferred Stock shall be
insufficient  to  permit  the  payment  to such  holders  of the full  aforesaid
preferential amount, than the entire assets and funds of the Corporation legally
available  for  distribution  shall be  distributed  ratably  among  the  Senior
Preferred  Stock in  proportion to the  preferential  amount each such holder is
otherwise entitled to receive.

     (b) For purposes of this Section 2, (i) any  acquisition of the Corporation
by  means  of  merger  or  other  form  of  corporate  reorganization  in  which
outstanding  shares of the  Corporation  are exchanged  for  securities or other
consideration  issued, or caused to be issued,  by the acquiring  corporation or
its subsidiary (other than a mere reincorporation transaction) or (ii) a sale of
all or substantially all of the assets of the Corporation, shall be treated as a
liquidation,  dissolution or winding up of the Corporation.  Upon the occurrence
of any of the events described in paragraph (b),  immediately  after the holders
of  Senior  Preferred  Stock  shall  have  been  paid  in full  the  Liquidation
Preference,   the  remaining  net  assets  of  the  Corporation   available  for
distribution shall be distributed ratably among the holders of Senior Preferred


<PAGE>



Stock and Common Stock (with each share of Senior  Preferred Stock being deemed,
for such purpose, to be equal to the number of shares of Common Stock into which
such share of Senior  Preferred  Stock is convertible  immediately  prior to the
close of business on the business day fixed for such distribution).

     3. Redemption. (a) At the option of the holders of a minimum of one-half of
the  aggregate  number  of shares of Senior  Preferred  Stock  then  outstanding
delivered in writing to the  Corporation  at any time, the  Corporation,  on the
thirtieth  (30th) day after  delivery of such notice  (the  "Redemption  Date"),
shall redeem the outstanding  shares of the Senior  Preferred  Stock  originally
issued.  The redemption  price of the Senior  Preferred  Stock (the  "Redemption
Price"),  shall be equal to the sum of (i) $1.00 per share (as  adjusted for any
stock  dividends,  combinations  or splits with respect to such shares) and (ii)
any  accumulated  and unpaid  dividends  on any such  share of Senior  Preferred
Stock.

     (b) If the funds of the  Corporation  legally  available for  redemption of
shares of the Senior Preferred Stock are insufficient to redeem the total number
of shares of Senior Preferred Stock to be redeemed on the Redemption Date, those
funds which are legally  available  will be used to redeem the maximum  possible
number of such  shares  ratably  among the holders of such shares to be redeemed
based upon their holdings of Senior Preferred Stock. At any time thereafter when
additional funds of the Corporation are legally  available for the redemption of
shares of Senior Preferred Stock,  such funds will immediately be used to redeem
the balance of the shares which the  Corporation has become obliged to redeem on
the Redemption Date, but which it has not redeemed.

     (c) In the event the  Corporation  shall be  required  to redeem  shares of
Senior Preferred Stock,  notice of such redemption shall be given by first class
mail,  postage  prepaid,  mailed not less than 20 days  prior to the  Redemption
Date,  to each holder of record of the shares to be  redeemed  at such  holder's
address as the same appears on the share register of the Corporation.  Each such
notice shall state (i) the Redemption Date, (ii) the Redemption Price, (iii) the
place or places where  certificates  for such shares are to be  surrendered  for
payment  of the  Redemption  Price and (iv) that  dividends  on the shares to be
redeemed will cease to accrue on the Redemption Date.

     (d) Notice having been mailed as aforesaid,  from and after the  Redemption
Date (unless default shall be made by the Corporation in providing money for the
payment of the Redemption Price of the shares called for redemption),  dividends
on the shares of Senior  Preferred Stock so called for redemption shall cease to
accrue,  and said shares shall no longer be deemed to be  outstanding  and shall
have the status of authorized but unissued shares of Preferred  Stock, and shall
not be  reissued  as shares of Senior  Preferred  Stock,  and all  rights of the
holders thereof as  stockholders of the Corporation  with respect to said shares
(except  the right to receive  from the  Corporation  the  Redemption  Price and
accrued but unpaid  dividends)  shall cease.  Upon surrender in accordance  with
said notice of the certificates for any shares so redeemed (properly endorsed or
assigned for  transfer,  if the Board of Directors of the  Corporation  shall so
require and the notice  shall so state),  such  shares  shall be redeemed by the
Corporation at the Redemption Price as aforesaid. In the event less than all the
shares  represented  by any  certificate  for such  shares are  redeemed,  a new
certificate shall be issued representing the unredeemed shares.

     (e) Anything in this Section 3 to the contrary notwithstanding,  the holder
of shares of Senior  Preferred  Stock to be  redeemed  in  accordance  with this
Section  3 shall  have the  right,  exercisable  at any time up to the  close of
business on the Redemption  Date (unless the  Corporation is legally  prohibited
from  redeeming  such  shares on such date,  in which  event such right shall be
exercisable until the removal of such legal  disability),  to convert all or any
part of such  shares to be  redeemed  as herein  provided  into shares of Common
Stock pursuant to Section 5 hereof.

<PAGE>

     4. Voting Rights.

     Each  holder of shares of Senior  Preferred  Stock shall be entitled to the
number of votes  equal to the  number of shares of Common  Stock into which such
shares of Senior  Preferred  Stock may be converted and shall have voting rights
and powers equal to the voting  rights and powers of the Common Stock (except as
otherwise  expressly provided herein or as required by law, voting together with
the  Common  Stock as a single  class)  and shall be  entitled  to notice of any
stockholders'  meeting  in  accordance  with  the  By-Laws  of the  Corporation.
Fractional  votes shall not,  however,  be permitted and any  fractional  voting
rights resulting from the above formula (after aggregating all shares into which
shares of Senior  Preferred Stock held by each holder may be converted) shall be
rounded upward to the nearest whole number. Each holder of Common Stock shall be
entitled to one (1) vote for each whole share of Common Stock held.

     5.  Conversion.  The  holders  of the  Senior  Preferred  Stock  shall have
conversion rights as follows:

     (a) Each  share of Senior  Preferred  Stock  shall be  convertible,  at the
option of the holder thereof,  at any time and from time to time into the number
of fully paid and non-assessable shares of Common Stock of the Corporation as is
determined by dividing $1.00 by the Conversion Price (as hereinafter defined) in
effect at the time of conversion. The Conversion Price at which shares of Common
Stock shall be deliverable  upon conversion of the Senior  Preferred Stock shall
initially be $0.3057 per share.

     (b) In order for a holder of Senior  Preferred Stock to convert such shares
into shares of Common  Stock,  such holder shall  surrender the  certificate  or
certificates  representing  such shares of Senior Preferred Stock, at the office
of the transfer  agent for the Senior  Preferred  Stock,  together  with written
notice that such holder elects to convert all or any number of the shares of the
Senior Preferred Stock  represented by such  certificate or  certificates.  Such
notice shall state such holder's name or the names of the nominees in which such
holder wishes the certificate or  certificates  for shares of Common Stock to be
issued. If required by the Corporation,  certificates surrendered for conversion
shall be endorsed or  accompanied  by a written  instrument  or  instruments  of
transfer,  in  form  satisfactory  to  the  Corporation,  duly  executed  by the
registered  holder or its  attorney  duly  authorized  in  writing.  The date of
receipt of such  certificates  and notice by the  transfer  agent is referred to
herein as the "Conversion  Date". The Corporation  shall, as soon as practicable
after the Conversion Date, issue and deliver to such holder,  or to its nominee,
at  such  holder's  address  as  shown  in the  records  of the  Corporation,  a
certificate or certificates  for the number of whole shares of Common Stock (and
any shares of Senior Preferred Stock represented by the certificate delivered to
the transfer  agent by the holder  thereof which are not  converted  into Common
Stock) issuable upon such  conversion in accordance with the provisions  hereof,
together with cash in lieu of fractional  shares  calculated in accordance  with
paragraph  (c) of this  Section  5. If less  than all of the  shares  of  Senior
Preferred Stock  represented by a stock certificate are converted into shares of
Common Stock, the Corporation  shall issue a new stock certificate in the amount
of the shares not so converted.

     (c) No fractional shares of Common Stock shall be issued upon conversion of
shares of Senior  Preferred  Stock and any fractional  share to which the holder
would otherwise be entitled shall be rounded up to the nearest whole number.

     (d) The  Corporation  shall at all times  when the Senior  Preferred  Stock
shall be  outstanding,  reserve and keep  available  out of its  authorized  but
unissued  stock,  for the  purpose of  effecting  the  conversion  of the Senior
Preferred  Stock,  such number of its duly authorized  shares of Common Stock as
shall  from  time  to  time  be  sufficient  to  effect  the  conversion  of all
outstanding shares of Senior Preferred Stock.

<PAGE>

     (e) All shares of Senior  Preferred Stock which shall have been surrendered
for conversion as herein  provided shall no longer be deemed to be  outstanding,
and all rights with respect to such shares shall immediately cease and terminate
on the Conversion Date,  except only the right of the holders thereof to receive
shares of Common Stock in exchange  therefor and the payment of any declared and
unpaid  dividends  thereon.  On the Conversion  Date, the shares of Common Stock
issuable upon such conversion shall be deemed to be outstanding,  and the holder
thereof  shall be entitled to exercise and enjoy all rights with respect to such
shares of Common  Stock.  All  shares of Senior  Preferred  Stock  tendered  for
conversion  shall,  from and after the  Conversion  Date, be deemed to have been
retired and cancelled and shall not be reissued as Senior  Preferred  Stock, and
the Corporation may thereafter take such appropriate  action as may be necessary
to reduce accordingly the authorized number of shares of Senior Preferred Stock.

     (f) The initial conversion price as stated in paragraph (a) of this Section
5 shall be subject to adjustment from time to time and such conversion  price as
adjusted shall likewise be subject to further adjustment, all as hereinafter set
forth.  The term  "Conversion  Price" shall mean, as of any time, the conversion
price of the Senior  Preferred Stock at that time, as specified in paragraph (a)
of this  Section  5 in case no  adjustment  shall  have been  required,  or such
conversion  price as adjusted  pursuant to this paragraph (f) of this Section 5,
as the case may be:

          (i)  If at any time the  Corporation  shall issue any shares of Common
               Stock or any Convertible Securities, Rights or Related Rights (as
               herein defined) (such Convertible  Securities,  Rights or Related
               Rights   being   hereinafter    referred   to   collectively   as
               "Securities")  (other  than  a  dividend  or  other  distribution
               payable in Common Stock or such  Securities)  for a consideration
               per share of Common Stock (the  consideration  in each case to be
               determined in the manner provided in (E) and (F) below) less than
               the Conversion Price in effect  immediately prior to the issuance
               of such Common Stock or Securities,  then the Conversion Price in
               effect immediately prior to each such issuance shall forthwith be
               reduced to the  consideration  per share of Common  Stock paid in
               connection with such issuance of Common Stock or Securities.

          (ii) For  the  purpose  of  any  adjustment  of the  Conversion  Price
               pursuant to this  paragraph  (f) of this Section 5, the following
               provisions shall be applicable:

               (A)  In the  case of the  issuance  of  options  or  warrants  to
                    purchase   or  rights  to   subscribe   for   Common   Stock
                    (collectively,  such "Rights"), the ------ aggregate maximum
                    number of shares of Common Stock  deliverable  upon exercise
                    of such  Rights  shall be deemed to have been  issued at the
                    time such Rights were issued,  for a consideration  equal to
                    the consideration  (determined in the manner provided in (E)
                    and (F) below), if any, received by the Corporation upon the
                    issuance of such  Rights,  plus the minimum  purchase  price
                    provided  in  such  Rights  for  the  Common  Stock  covered
                    thereby.

               (B)  In the case of the  issuance  of  securities  by their terms
                    convertible   into  or   exchangeable   for   Common   Stock
                    (collectively, such "Convertible Securities"), or options or



<PAGE>



                    warrants to purchase or rights to subscribe  for  securities
                    by their terms  convertible or exchangeable for Common Stock
                    (collectively,  such "Related Rights") the aggregate maximum
                    number  of  shares  of   Common   Stock   deliverable   upon
                    conversion,  exchange or  exercise  of any such  Convertible
                    Securities  or such  Related  Rights shall be deemed to have
                    been issued at the time such Convertible  Securities or such
                    Related Rights were issued and for a consideration  equal to
                    the consideration  received by the Corporation upon issuance
                    of  such  Convertible  Securities  or  such  Related  Rights
                    (excluding any cash received on account of accrued  interest
                    or accrued dividends), plus the additional consideration, if
                    any, to be received by the Corporation  upon the conversion,
                    exchange  or  exercise  of such  Convertible  Securities  or
                    Related  Rights  (the  consideration  in  each  case  to  be
                    determined in the manner provided in (E) and (F) below).

               (C)  On any  change in the  number  of  shares  of  Common  Stock
                    deliverable  upon the  exercise  of such  Rights or  Related
                    Rights or upon the conversion,  exchange or exercise of such
                    Convertible  Securities  or on any  change  in  the  minimum
                    purchase price of such Rights, Related Rights or Convertible
                    Securities  other than any change  resulting  from the anti-
                    dilution  provisions  of  such  Rights,  Related  Rights  or
                    Convertible Securities, the Conversion Price shall forthwith
                    be readjusted to such Conversion Price as would have been in
                    effect had the adjustment that was made upon the issuance of
                    such Rights,  Related Rights or  Convertible  Securities not
                    converted,  exchanged or exercised prior to such change been
                    made on the basis of such change,  but no further adjustment
                    shall be made for the actual  issuance of Common  Stock upon
                    the exercise or conversion of any such Right,  Related Right
                    or Convertible Security.

               (D)  On the  expiration  of any such  Rights,  Related  Rights or
                    Convertible Securities, the Conversion Price shall forthwith
                    be  readjusted  to the  Conversion  Price as would have been
                    obtained had the  adjustment  made upon the issuance of such
                    Rights  or  Related  Rights  or the  issuance  of  any  such
                    Convertible  Securities  been  made  upon  the  basis of the
                    issuance  of only the  number  of  shares  of  Common  Stock
                    actually  issued upon the exercise of such Rights or Related
                    Rights or the  conversion,  exchange or exercise of any such
                    Convertible Securities.

               (E)  In  the  case  of the  issuance  of  such  Common  Stock  or
                    Securities for cash, the consideration shall be deemed to be
                    the amount of cash paid therefor.

               (F)  In  the  case  of the  issuance  of  such  Common  Stock  or
                    Securities  for a  consideration  in whole or in part  other
                    than cash, the consideration other than cash shall be deemed
                    to be the fair value  thereof as determined in good faith by
                    the Board of Directors of the Corporation.

               (G)  In the  event  of any  adjustment  to the  Conversion  Price
                    resulting  from the issuance of any  Securities,  no further
                    adjustment  shall be made for the actual  issuance of Common
                    Stock  upon  the   exercise  or   conversion   of  any  such
                    Securities.

(iii)Anything  to the  contrary  contained  in this  paragraph  f) of  Section 5
     notwithstanding,  no adjustment  shall be made in the Conversion Price as a
     result of or pursuant to (1) the granting of any Right or Related Right, or
     the issuance of Common Stock to,  officers,  employees or directors  of, or
     consultants  to,  the  Corporation,  pursuant  to any  agreement,  plan  or
     arrangement  approved by the Board of Directors of the  Corporation;  (2) a
     dividend or distribution on Senior Preferred Stock or (3) the conversion of
     shares of Senior Preferred Stock.

                    (g)  In case the Corporation  shall effect a reorganization,
                         shall   merge   with  or   consolidate   into   another
                         corporation,  or  shall  sell,  transfer  or  otherwise
                         dispose of all or  substantially  all of its  property,
                         assets or business  and,  pursuant to the terms of such
                         reorganization,  merger  (other than a  reincorporation
                         transaction),  consolidation  or disposition of assets,
                         shares of stock or other securities, property or assets
                         of  the  Corporation,  successor  or  transferee  or an
                         affiliate  thereof are to be received by or distributed
                         to the  holders of Common  Stock,  then each  holder of
                         Senior  Preferred  Stock shall be provided with written
                         notice from the  Corporation  informing  each holder of
                         Senior   Preferred   Stock   of  the   terms   of  such
                         reorganization, merger, consolidation or disposition of
                         assets  and  of  the  record   date   thereof  for  any
                         distribution  pursuant  thereto,  at  least  30 days in
                         advance of such record date,  and each holder of Senior
                         Preferred  Stock shall have,  in addition to the rights
                         provided for herein, the right to receive,  in addition
                         to payment of the  Liquidation  Preference  pursuant to
                         Section 2 hereof, at the holder's election,  either (i)
                         upon  conversion of such Senior  Preferred  Stock,  the
                         number of shares of stock or other securities, property
                         or assets of the  Corporation,  successor or transferee
                         or affiliate  thereof or cash receivable by the holders
                         of  the  Common  Stock  upon  or as a  result  of  such
                         reorganization, merger, consolidation or disposition of
                         assets or (ii) the securities  into which the shares of
                         Senior  Preferred  Stock are  converted,  upon, or as a
                         result of such reorganization, merger, consolidation or
                         disposition of assets. The provisions of this paragraph
                         (g)  of  this  Section  5  shall   similarly  apply  to

<PAGE>

                         succesive reorganizations, mergers, consolidations or
                         dispositions of assets.

                    (h)  If the  Corporation  shall effect a subdivision  of the
                         outstanding  Common Stock, the Conversion Price then in
                         effect  immediately  before such  subdivision  shall be
                         proportionately  decreased.  If the  Corporation  shall
                         combine the  outstanding  shares of Common  Stock,  the
                         Conversion Price then in effect  immediately before the
                         combination shall be proportionately  increased. If the
                         Corporation  shall  make or issue a  dividend  or other
                         distribution  payable in  securities,  then and in each
                         such event  provision shall be made so that the holders
                         of shares of the Senior  Preferred  Stock shall receive
                         upon  conversion  thereof in  addition to the number of
                         shares of Common Stock receivable thereupon, the amount
                         of  securities  that they would have received had their
                         Senior Preferred Stock been converted into Common Stock
                         on the  date of such  event  and  had  they  thereafter
                         during  the  period  from the date of such event to and
                         including the Conversion Date, retained such securities
                         receivable  by them as  aforesaid  during  such  period
                         giving effect to all adjustments called for during such
                         period under this paragraph, with respect to the rights
                         of the holders of the Senior Preferred Stock.

                    (i)  Whenever  the  Conversion  Price  shall be  adjusted as
                         provided  in this  Section  5,  the  Corporation  shall
                         forthwith file, at the office of the transfer agent for
                         the Senior  Preferred  Stock a statement,  certified by
                         the chief financial officer of the Corporation, showing
                         in detail the facts  requiring such  adjustment and the
                         Conversion  Price  that  shall be in effect  after such
                         adjustment.  The Corporation shall also cause a copy of
                         such statement to be sent by first class mail,  postage
                         prepaid,  to each holder of record of Senior  Preferred
                         Stock at such holder's  address as shown in the records
                         of the Corporation.

                    (j)  If a state of facts shall occur  which,  without  being
                         specifically  controlled  by  the  provisions  of  this
                         Section  5,  would not fairly  protect  the  conversion
                         rights of the holders of the Senior  Preferred Stock in
                         accordance with the essential  intent and principles of
                         such  provisions,  then the Board of  Directors  of the
                         Corporation shall make an adjustment in the application
                         of such  provisions,  in accordance with such essential
                         intent and principles, so as to protect such conversion
                         rights.




<PAGE>



         IN WITNESS  WHEREOF,  the Corporation has caused this Certificate to be
executed by its duly  authorized  officers this ___ day of November,  1997,  who
affirms under penalties of perjury that this  Certificate is the act and deed of
the Corporation and that the facts stated herein are true.



                                            NEW GENERATION FOODS, INC.



                                         By: /s/ Jermone Flum
                                            -------------------------------
                                            Jerome Flum, Chairman and Chief
                                            Executive Officer


ATTEST:

By:________________________


<PAGE>

Exhibit 10-H

                           NEW GENERATION FOODS, INC.
                                 45 Graham Road
                            Scarsdale, New York 10583


                                            November 18, 1997



Flum Partners
45 Graham Road
Scarsdale, New York  10583

Mr. Jerome Flum
45 Graham Road
Scarsdale, New York 11583


Gentlemen:

         An  Independent  Committee of the Board of Directors of New  Generation
Foods,  Inc., a Nevada  corporation (the  "Company"),  has considered the letter
from Flum  Partners of November 17, 1997.  Based on the current cash position of
the Company,  and the requirement that a minor cash balance be maintained by the
Company to pay potential  creditors'  claims and other  expenses and for working
capital,  the cash amount of $1.8  million is  available to pay a portion of the
liquidation preferences (and accrued dividends) on all of the shares of Series A
Convertible  Preferred  Stock and Series B Convertible  Preferred Stock owned by
Flum   Partners  and  tendered  for  payment,   leaving  an  unpaid   amount  of
approximately $1.16 million.

         This  letter  will  constitute  the  agreement  of the Company and Flum
Partners that the unpaid amount of  approximately  $1.16 million  referred to in
the preceding  paragraph shall be paid by the issuance of 1,100,000  shares of a
new series of "Senior  Preferred  Stock" of the Company (the  "Senior  Preferred
Shares") having the rights, powers,  privileges and preferences specified in the
attached form of "Certificate of Designations  for Senior Preferred  Stock".  By
its execution below,  Flum Partners also consents to the amendments  effected by
the attached  forms of "Third  Certificate  of Amendment of Series A Convertible
Preferred Stock" and "Certificate of Amendment of Series B Convertible Preferred
Stock,"  which are  required in order to  implement  the  issuance of the Senior
Preferred Stock.

                  In  consideration  for the  issuance  of the Senior  Preferred
Shares to Flum  Partners as provided in this  letter  agreement,  Flum  Partners
agrees to cause its affiliate, Mr. Jerome Flum, to agree to a termination of Mr.
Flum's existing  Employment  Agreement with the Company  (effective  December 1,
1997), with no further obligation of either party thereunder,  provided that, in
consideration  therefor,  the  Company  transfer  and  assign  to  Mr.  Flum  an
automobile and certain computer  equipment with an aggregate value not exceeding
$10,000,  and  provided  further  that Mr.  Flum  agrees to continue to serve as
Chairman of the Board and Chief Executive  Officer of the Company,  without pay,
on an "at will" basis.

                  As  additional  consideration  for the  issuance of the Senior
Preferred Shares to Flum Partners as provided in this letter agreement, Mr. Flum
and Flum  Partners  agree,  for a period  of one year from the date  hereof,  to
attempt to identify and  consummate a  transaction  involving  the Company which
would increase the value of the Company.




<PAGE>



                  By his execution  below,  Mr. Flum agrees to the provisions of
the two preceding paragraphs.

                  This letter  agreement  shall be governed by and  construed in
accordance  with the laws of the State of New York (other  than with  respect to
matters  solely  involving  Nevada  corporate  law)  without  giving  effect  to
principles of conflicts of law applicable thereto.  This letter agreement may be
executed in  counterparts,  each of which shall be deemed an original and all of
which shall constitute one and the same instrument.

                  Please  execute this letter where  indicated  below to signify
your agreement with the foregoing.

                                            NEW GENERATION FOODS, INC.


                                            By: /s/ Jermone Flum
                                               --------------------------------
                                             Name: Jerome Flum, Chairman of the
                                              Board and Chief Executive Officer

ACCEPTED AND AGREED
  AS OF THIS ____ DAY OF
  NOVEMBER, 1997

FLUM PARTNERS

By:/s/ Jerome Flum
----------------------------
Jerome Flum, General Partner



/s/ Jerome Flum
-------------------------
Jerome Flum


<PAGE>

Exhibit 11


                   NEW GENERATION FOODS, INC. AND SUBSIDIARIES


Net Loss Per Share

Net loss per share - basic is computed by dividing  net loss less  dividends  on
preferred  stock by the  weighted  average  number of  shares  of  common  stock
outstanding  during  each  year.  Net loss per share - diluted  is  computed  by
dividing net income by the weighted average number of shares of common stock and
the number of additional  common shares that would have been  outstanding if the
dilutive potential common shares had been issued.  The computation  excludes the
effect  of  dilutive  potential  securities  (convertible  preferred  stock  and
options) because their inclusion would have had an antidilutive effect.

                           Loss Per Share Computation
                      For the Year Ended December 31, 1997

Net loss                                                 $       81,049

Dividends on cumulative preferred stock                         185,400
                                                         --------------

Net loss applicable to common stock                      $      266,449
                                                         ==============

Basic average common shares outstanding                         399,830
                                                         ==============
Loss per share - basic and dilutive                      $         0.67
                                                         ==============


<PAGE>

Exhibit 21

                                 SUBSIDIARIES OF
                           NEW GENERATION FOODS, INC.




                                                              % of Ownership
                                            State of          By New Generation
Name                                        Incorporation     Foods, Inc.
----                                        -------------     -----------------

Spicer's International, Inc.                Nevada            100%

NGF Services, Inc.                          New York          100%