UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 0R 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended OCTOBER 31, 2000
-----------------------------
[_] TRANSITION REPORT UNDER SECTION 13 0R 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________________ to __________________
Commission file number _____________________
DIPPY FOODS, INC.
--------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Incorporated in the State of Nevada 33-076348
----------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
10554 Progress Way, Unit K, Cypress, California 90630
----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (714) 816-0150
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the last 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 [_]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
CLASS OUTSTANDING AT DECEMBER 12, 2000
----- --------------------------------
Common Stock - $0.001 par value 19,579,266
Transitional Small Business Disclosure Format (Check one): YES [X] NO [_]
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 2 OF 14
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
See unaudited financial statements for the period ended October 31,
2000 attached to this Form 10-QSB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THE FOLLOWING PRESENTATION OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF DIPPY
FOODS, INC. SHOULD BE READ IN CONJUNCTION WITH DIPPY FOODS, INC. CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED HEREIN.
Dippy has targeted the school food-services market, with which it
intends to take advantage of the National School Lunch Program offered by the
United States Department of Agriculture. Dippy is intending to expand into the
National School Breakfast and After School Snack Programs.
Dippy's initial school lunch product "Dippers" consists of four
combinations of corn chips and various dips. Dippers can be eaten without
utensils, are packaged in single-serving, heat-sealed, recyclable trays, are
shelf-stable for sixty days and require no freezing, refrigeration, heating or
preparation. Each lunch meal combined with a single serving of milk meets the
nutritional requirements of the Food and Drug Administration. Dippy has designed
three new types of Dippers to meet the standards of the National School
Breakfast program.
Dippy derives revenue from the sale of lunch Dippers. Dippy currently
makes $0.11 per unit on the Nachos and $0.09 per unit on the fruit Dippers. This
is expected to change to $0.29 per unit for both the Nachos and Fruit Dippers
upon the purchase and installation of new processing equipment. Dippy expects to
make $0.14 per unit on the breakfast Dippers.
Dippy has three full-time employees and does not expect significant
changes in the number of its employees.
Dippy has incurred significant losses since inception, and as of
October 31, 2000 had accumulated net losses of $1,630,341. Included in this
accumulated deficit is $472,000 in non-cash expenses related to recording the
fair value of a director's uncompensated services of $100,000 and a $372,000
settlement payable to a former director. See item 1. Legal Proceedings for more
information.
These conditions raise substantial doubt about Dippy's ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of those
uncertainties.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED OCTOBER 31,
2000 AND 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Actual Results For October 31, 2000 Compared to October 31, 1999
----------------------------------------------------------------------------------------
October 31 October 31 Percentage
2000 1999 change
$ $ %
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 15,289 47,678 (68)
Costs of goods sold 13,760 33,252 (59)
Gross Profit 1,529 14,426 (89)
Selling, general, & administrative expenses 142,340 129,851 10
Interest expense 15,255 9,546 60
Net loss (156,066) (124,971) 18
----------------------------------------------------------------------------------------
</TABLE>
REVENUES
Revenue decreased $32,389 or 68% from $47,678 for the three month
period ended October 31, 1999 to $15,289 for the same period ended October 31,
2000 primarily due to Dippy's preparation for the production of the newly
introduced breakfast meals.
Revenue is expected to increase during fiscal 2001 due to the new
breakfast line and the development of a retail strategy for inventory that is
not sold to schools. The first of the breakfast meals were delivered at the end
of July 2000. However, the Company is still awaiting the delivery of the
horizontal form, fill, and seal tray-line. The installation of the machine has
been delayed as a result of the manufacturer not being able to meet the required
specifications. The machine is necessary to produce large quantities of the
breakfast meals for which there appears to be a great demand. This anticipated
demand would be for large orders that cannot be produced with the current
machine. The manufacturer has indicated that the tray-line will be ready by the
end of December, and Dippy should be able to take orders and produce in January
2001.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 3 OF 14
COST OF SALES
Cost of sales decreased $19,492 or 59% from $33,252 for the three month
period ended October 31, 1999 to $13,760 for the three month period ended
October 31, 2000. As a percent of revenue, the gross margin decreased from 30%
for the three month period ended October 31, 1999 to 10% for the same period
ended October 31, 2000. These changes were attributable to the production of the
breakfast meals on the existing machine, which is inefficient and results in a
larger waste factor because of manual labor.
Cost of sales as a percent of sales is expected to decrease due to the
installation of the new horizontal form, fill and seal tray-line machine. The
new tray line will produce 80 units per minute or approximately 1.5 million
units a month assuming a 16-hour production day. This should reduce production
costs, particularly the cost of trays and labels, by $0.07, and labor costs from
between $0.06 and $0.10 per unit, depending upon production levels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased during the three
month period ended October 31, 2000 from three month period ended October 31,
1999 by $12,489 or 10%.
With the exception of an increase in advertising expense for the launch
of the new breakfast program, management believes that its selling, general and
administrative costs can remain fairly static and will decrease as a percentage
of revenue as its sales volume grows.
INTEREST EXPENSE
Interest expense increased from the three month period ended October
31, 1999 to the same period ended October 31, 2000 by $5,709 or 60% due
primarily to interest accrued on notes payable.
CONSOLIDATED RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED OCTOBER 31,
2000 AND 1999
<TABLE>
<CAPTION>
Actual Results For October 31, 2000 Compared to October 31, 1999
----------------------------------------------------------------------------------------
October 31 October 31 Percentage
2000 1999 change
$ $ %
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues 51,437 139,848 (63)
Costs of goods sold 41,146 116,587 (65)
Gross Profit 10,291 23,261 (56)
Selling, general, & administrative expenses 253,468 221,344 15
Interest expense 33,390 14,665 128
Net loss (276,567) (212,748) 30
----------------------------------------------------------------------------------------
</TABLE>
REVENUES
Revenue decreased $88,411 or 63% from $139,848 for the six month period
ended October 31, 1999 to $51,437 for the same period ended October 31, 2000
primarily due to Dippy's preparation for the production of the newly introduced
breakfast meals.
Revenue is expected to increase during fiscal 2001 due to the new
breakfast line and the development of a retail strategy for inventory that is
not sold to schools. The first of the breakfast meals were delivered at the end
of July 2000. However, the Company is still awaiting the delivery of the
horizontal form, fill, and seal tray-line. The installation of the machine has
been delayed as a result of the manufacturer not being able to meet the required
specifications. The machine is necessary to produce large quantities of the
breakfast meals for which there appears to be a great demand. This anticipated
demand would be for large orders that cannot be produced with the current
machine. The manufacturer has indicated that the tray-line will be ready by the
end of December, and Dippy should be able to take orders and produce in January
2001.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 4 OF 14
COST OF SALES
Cost of sales decreased $75,441 or 65% from $116,587 for the six month
period ended October 31, 1999 to $41,146 for the six month period ended October
31, 2000. As a percent of revenue, the gross margin increased from 17% for the
six month period ended October 31, 1999 to 20% for the same period ended October
31, 2000. These changes were primarily due to the decrease in sales, which
required the purchase of fewer ingredients. Dippy also retained a new co-packer
that is more efficient and has reduced the waste of ingredients, therefore
reducing the cost of sales and increasing the gross margin.
Accordingly, cost of sales as a percent of sales is expected to
decrease due to the installation of the new horizontal form, fill and seal
tray-line machine. The new tray line will produce 80 units per minute or
approximately 1.5 million units a month assuming a 16-hour production day. This
should reduce production costs, particularly the cost of trays and labels, by
$0.07, and labor costs from between $0.06 and $0.10 per unit, depending upon
production levels.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased during the six
month period ended October 31, 2000 from six month period ended October 31, 1999
by $32,124 or 15% due primarily to an increase of (1) $12,683 in equipment
rental charges, (2) $4,840 in receivable discounts, (3) $3,454 in office
supplies, (4) $1,500 in consulting fees, (5) $29,609 in accounting fees, (5)
$2,740 in public relations, (6) $6,440 in commissions, (7) $4,048 in the
purchase of small tools and equipment, and (8) $6,039 in repairs and maintenance
offset by a decrease in (i) rent of $15, 947, (ii) marketing of $9,264, (iii)
product development of $8,160, and printing and production of $3,289.
With the exception of an increase in advertising expense for the launch
of the new breakfast program, management believes that its selling, general and
administrative costs can remain fairly static and will decrease as a percentage
of revenue as its sales volume grows.
INTEREST EXPENSE
Interest expense increased from the six month period ended October 31,
1999 to the same period ended October 31, 2000 by $18,725 or 128% due primarily
to interest accrued on notes payable.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 2000, Dippy had $0 cash, $3,233 bank overdraft, and a
working capital deficit of $957,977. During the six-month period ended October
31, 2000, cash decreased by $4,635 and Dippy used $162,167 in operations,
primarily due to the operating loss of Dippy of $276,567 and an increase in
accounts payable and accruals of $116,025. A decrease in working capital of
$28,446 was primarily due to a $50,000 reduction in restricted cash, a $44,500
decrease in the line of credit, $4,019 decrease in inventory, a $116,025
increase in accounts payable and accruals, a $157,465 increase in convertible
notes payable and a non cash decrease in convertible notes payable and accrued
interest of $355,001. Dippy used $7,479 in investing activities to purchase
equipment. Dippy generated $165,011 in financing activities, primarily due to
net proceeds from issuance of convertible notes payable of $157,465, repayment
of the line of credit of $44,500 offset by a decrease in restricted cash that
was used to repay the line of credit. Dippy has accumulated a deficit of
$1,630,341 since inception and has a stockholders' deficit of $829,207 at
October 31, 2000.
Dippy anticipates funding its working capital needs for the next twelve
months through (1) the equity capital markets, (2) increased sales particularly
with the addition of the breakfast line, (3) further reductions in overhead and
cost of sales.
Although the foregoing actions are expected to cover Dippy's
anticipated cash needs for working capital and capital expenditures for at least
the next twelve months, no assurance can be given that Dippy will be able to
raise sufficient cash to meet these cash requirements.
Management plans to improve its cash flow and operating results by
raising additional capital through private placements of stock and by increasing
sales to a number of new school districts. Dippy cannot ensure, however, that
these plans will be successful.
The new horizontal form, seal and fill tray-line will be purchased for
a price of $166,000. Dippy has $81,322 on deposit, and expects to raise the
balance in capital markets. Dippy will install the machine at the Global Food
Management Group's "Global" facility. Global is Dippy's co-packer. The estimated
cost of delivery and installation is $15,000 and it is anticipated that
installation will be completed by the end of December 2000. Management believes
that the new machine will enable it to produce more efficiently.
Dippy is involved in two separate matters of litigation or potential
litigation. Dippy believes that it will prevail in these matters. Dippy's
lawyers estimate the potential costs associated with the litigation to be
$35,000. Included in the cost of litigation is the settlement agreement with a
former director. If Dippy does not prevail in this matter, cash flow will be
immediately impaired by $100,000. See item 1. Legal Proceedings for more
information.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 5 OF 14
DEFERRED TAX ASSETS
Dippy has deferred tax assets of approximately $472,000 at October 31,
2000 and $361,000 at April 30, 2000. Management has established a valuation
allowance equal to the full amount of the deferred tax assets because Dippy's
ability to use these losses is uncertain.
Depreciation is expected to increase in future periods primarily due to
the acquisition of new processing equipment.
The net operating losses incurred by the parent Dippy Foods, Inc.
(Dippy Nevada), before the reverse merger on September 17, 1998, are limited
annually due to the change of ownership (as defined in Section 382 of the
Internal Revenue Code) that resulted from the reverse merger.
Dippy's unused annual limitations may be carried over to future years
until the net operating losses expire.
INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY
Dippy has funded its operations principally from borrowings secured by
notes payable.
DEBT INSTRUMENTS
Dippy borrowed $425,846 from the lenders set out in the table below.
Promissory Notes
Payee Date Principal Sum
------------------------------------------------------------------------
Silverado Farms Inc. November 8, 1999 10,000
Silverado Farms Inc. November 9, 1999 10,000
Silverado Farms Inc. November 18, 1999 10,000
Silverado Farms Inc. November 19, 1999 13,381
Silverado Farms Inc. November 29, 1999 25,000
Silverado Farms Inc. December 1, 1999 100,000
Money Layer Ltd February 26, 2000 100,000
Money Layer Ltd. May 18, 2000 35,000
Money Layer Ltd. June 5, 2000 15,000
Money Layer Ltd. June 22, 2000 60,000
LeafPro Technology, Inc. August 17, 2000 12,500
LeafPro Technology, Inc. September 19, 2000 14,965
LeafPro Technology, Inc. October 2, 2000 20,000
---------------
$425,846
------------------------------------------------------------------------
Dippy gave a promissory note to each of the payees as evidence of the
debt. The principal sum is due in 12 months from the date of the loan together
with interest accrued on the outstanding principal balance at the rate of 12%
per annum, with the exception of the notes to LeafPro Technology, Inc., which
bear interest at a rate of 10% per annum. Dippy may pay the interest on the
first day of the following month or may accrue the interest and pay it with the
principal sum on the maturity date. Dippy may repay the principal sum and any
accrued interest in whole or in part at any time without penalty. With any
payment made, the funds will be applied first to unpaid interest. If Dippy
becomes bankrupt or insolvent, or sells all its assets, or if a corporate event
occurs (as defined in the promissory note) the debt is due and payable without
demand. The lender may convert any portion of the outstanding debt or any
portion of accrued interest into shares of Dippy at a price per share that is
equal to the average closing price of Dippy's common stock from the date of the
promissory note to the date of conversion.
On August 4, 2000, Bellevue Investments Ltd. elected to convert a
$200,000 due on its June 2, 1999 note plus $25,385 of accrued interest into
360,615 shares of Dippy's common stock. The shares have not been issued as of
the date of this filing. Subsequent to October 31, 2000, Silverado Farms, Inc.
also advised Dippy that it will convert into 324,253 shares the following notes
plus accrued interest:
Date Amount Accrued Interest Maturity
-------------------------------------------------------------------------
08/20/99 $ 15,000.00 $ 1,904.17 08/20/00
09/09/99 $ 50,000.00 $ 6,346.99 09/06/00
10/12/99 $ 50,000.00 $ 6,365.72 10/12/00
11/08/99 $ 10,000.00 $ 1,273.08 11/08/00
11/09/99 $ 10,000.00 $ 1,273.09 11/09/00
11/18/99 $ 10,000.00 $ 1,273.13 11/18/00
11/19/99 $ 13,380.95 $ 1,703.59 11/19/00
Accordingly, the Company recorded $355,001 as common stock subscribed as of
October 31, 2000.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 6 OF 14
INFLATION
Dippy does not believe that inflation will have a material impact on
its future operations.
UNCERTAINTIES RELATING TO FORWARD-LOOKING STATEMENTS
This Form 10-QSB - Quarterly Report contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements may be identified by their use of words like "plans",
"expect", "aim", "believe", "projects", "anticipate", "intend", "estimate",
"will", "should", "could" and other expressions that indicate future events and
trends. All statements that address expectations or projections about the
future, including statements about Dippy's strategy for growth, product
development, market position, expenditures and financial results are
forward-looking statements.
Forward-looking statements in this Form 10-QSB include statements
regarding (1) expansion into the National School Breakfast and After School
Snack Programs; (2) an expectation that revenue will increase during fiscal
2001; (3) the purchase, installation and operation of the new processing
equipment; (4) a reduction in cost of sales expected in the fourth quarter; (5)
an expectation that selling, general and administrative costs will remain fairly
static or decrease, with the exception of an expected increase in advertising;
(6) the uncertainty of utilizing deferred tax assets; (7) an increase in
depreciation is expected in the third quarter; (8) the outcome of pending
litigation; and (9) inflation is not expected to have a material impact on
future operations. All forward-looking statements are made as of the date of
filing of this Form 10-QSB and Dippy disclaims any duty to update such
statements.
Forward-looking statements are based on certain assumptions and
expectations of future events that are subject to risks and uncertainties.
Actual future results and trends may differ materially from historical results
or those projected in any such forward-looking statements depending on a variety
of factors, including, but not limited to, failure to obtain new processing
equipment; general economic conditions particularly related to demand for
Dippy's services; changes in business strategy; competitive factors (including
the introduction or enhancement of competitive services); pricing pressures;
changes in operating expenses; inability to attract or retain consulting, sales
and/or development talent; changes in customer requirements; and/or evolving
industry standards. Additional information concerning factors that could cause
actual results to differ materially from those in the forward-looking statements
is contained from time to time in Dippy's annual report on Form 10-KSB for the
1999 fiscal year, Dippy's quarterly report on Form 10-QSB for the first quarter
of 2000 and other SEC filings. Copies of these filings may be obtained by
contacting Dippy or the SEC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Dippy is not a party to any pending legal proceedings, and to the best
of Dippy's knowledge, none of Dippy's property or assets are the subject of any
pending legal proceedings, except for the following:
(a) Feedback Foundation, Inc.
A dispute has arisen between Dippy and its former co-packer, Feedback
Foundation, Inc., regarding two invoices totalling $49,620. The dispute arises
from the spoilage of salsa used in the production of Nacho Dippers. Dippy's
investigation revealed that the spoilage occurred while the salsa was being
prepared for production. As a result of the quality control standards of Dippy,
there was no consumption of the defective product. In the opinion of management,
the preparation of the ingredients and the production of product are within the
scope of the co-packer's control and responsibility. Dippy and Feedback have not
been able to reach an amicable agreement. On March 6, 2000, Feedback filed a
lawsuit claiming breach of contract, fraud and non-payment of invoices. Feedback
is suing for not less than $149,620. Dippy has filed a cross compliant in the
amount of $60,000. On December 1, 2000, Feedback contacted Dippy in an effort to
settle the matter. Management has instructed legal counsel to prepare a
settlement offer to be presented to Feedback.
(b) Al Diamond
Dippy believes Mr. Diamond failed to perform his obligations under the
Settlement Agreement and has taken the position that the Settlement Agreement
with Mr. Diamond is null and void. Management has advised Mr. Diamond that no
further payments will be forthcoming. Management is awaiting a response from Mr.
Diamond.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 7 OF 14
ITEM 2. CHANGES IN SECURITIES.
During the second quarter of the fiscal year covered by this report,
(i) Dippy did not modify the instruments defining the rights of its
shareholders, (ii) no rights of any shareholders were limited or qualified by
any other class of securities, and (iii) Dippy did not sell any unregistered
equity securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
During the second quarter of the fiscal year covered by this report, no
material default has occurred with respect to any indebtedness of Dippy. Also
during this quarter, there are no material dividend payments in arrears.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the second quarter of the fiscal
year covered by this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
All Exhibits required to be filed with the Form 10-QSB are incorporated
by reference to Dippy's previously filed Form 10-SB and Form 10-KSB.
(B) REPORTS ON FORM 8-K.
There were no reports on Form 8-K filed by Dippy during the quarter
ended October 31, 2000.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
Dippy has caused this report to be signed on its behalf by the undersigned, who
are duly authorized.
DIPPY FOODS, INC.
By: /s/ JON STEVENSON
-------------------------------------
Name: JON STEVENSON
-----------------------------------
Title: DIRECTOR AND PRESIDENT
----------------------------------
Dated: DECEMBER 12, 2000
----------------------------------
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 8 OF 14
DIPPY FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------- --------------------------------------
(Unaudited) (Unaudited)
October 31, 2000 October 31, 1999 October 31, 2000 October 31, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 15,289 $ 47,678 $ 51,437 $ 139,848
Cost of Goods Sold 13,760 33,252 41,146 116,587
------------ ------------ ------------ ------------
Gross Profit 1,529 14,426 10,291 23,261
Selling, General and Administrative Expenses 142,340 129,851 253,468 221,344
------------ ------------ ------------ ------------
Loss from Operations (140,811) (115,425) (243,177) (198,083)
Interest Expense (15,255) (9,546) (33,390) (14,665)
------------ ------------ ------------ ------------
Net Loss $ (156,066) $ (124,971) $ (276,567) $ (212,748)
============ ============ ============ ============
Basic and diluted weighted average
shares outstanding 19,579,266 19,579,266 19,579,266 19,579,266
============ ============ ============ ============
Basic and diluted loss per share $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
</TABLE>
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 9 OF 14
DIPPY FOODS, INC.
CONSOLIDATED BALANCE SHEETS
AS AT
<TABLE>
<CAPTION>
ASSETS October 31, 2000 April 30, 2000
---------------- --------------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ -- $ 4,635
Restricted Cash 10,000 60,000
Accounts Receivable 9,646 9,280
Inventory 52,375 56,394
Prepaid Expenses 3,789 2,353
----------- -----------
Total Current Assets 75,810 132,662
Fixed Assets, Net (Note 4) 27,713 24,385
Deposits 116,418 102,111
----------- -----------
Total Assets $ 219,941 $ 259,158
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Bank Overdraft $ 3,233 $ --
Bank Line of Credit -- 44,500
Accounts Payable 165,770 124,508
Accrued Expenses 107,530 72,768
Convertible Notes Payable (Notes 2) 425,846 583,381
Current portion notes payable 3,408 3,036
Current portion settlement payable 328,000 234,000
----------- -----------
Total Current Liabilities 1,033,787 1,062,193
Security Deposit, Sublease 6,314 --
Note payable bank, less current 9,047 10,606
Settlement payable, net current portion -- 94,000
----------- -----------
Total Liabilities 1,049,148 1,166,799
Stockholders' Deficit:
Common stock authorized 200,000,000
shares, at $0.001 par value, 19,579,266
common shares issued and outstanding 19,579 19,579
Additional paid-in capital 426,554 426,554
Common stock subscribed (Notes 2) 355,001 --
Accumulated deficit (1,630,341) (1,353,774)
----------- -----------
Total stockholders' deficit (829,207) (907,641)
----------- -----------
Total liabilities & total stockholders' deficit $ 219,941 $ 259,158
=========== ===========
</TABLE>
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 10 OF 14
DIPPY FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
October 31, 2000 October 31, 1999
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net Loss $(276,567) $(212,748)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation 4,151 3,615
Increase (decrease) from changes in:
Accounts receivable (366) (33,165)
Inventory 4,019 (55,201)
Prepaid expenses (1,436) 1,222
Deposits (14,307) (20,000)
Accounts payable and accruals 116,025 16,536
Due to related parties -- 28,161
Security deposit 6,314 --
--------- ---------
Net cash used in operating activities (162,167) (271,580)
--------- ---------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment (7,479) (2,523)
--------- ---------
Net cash used in investing activities (7,479) (2,523)
--------- ---------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Restricted cash 50,000 (50,000)
Bank Overdraft 3,233 (9,229)
Line of credit (44,500) 44,500
Convertible notes payable 157,465 315,000
Principal payments on notes payable (1,187) (1,170)
Settlement payments -- (24,000)
--------- ---------
Net cash provided by financing activities 165,011 275,101
(Decrease) increase in cash (4,635) 998
Cash, beginning of period 4,635 --
--------- ---------
Cash, end of period $ -- 998
========= =========
Supplemental disclosure for statement of cash flows;
Cash paid during the period for:
Interest $ 33,390 $ 14,665
Noncash investing and financing activities:
Convertible notes payable and accrued interest
converted to common stock subscribed $ 355,001 $ --
</TABLE>
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 11 OF 14
DIPPY FOODS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - General Matters
Principles of Consolidation
The accompanying financial statements include accounts of the parent company
Dippy Navada subsequent to September 17, 1998, and the subsidiary Dippy
California for all periods presented. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Going Concern
The accompanying consolidated financial statements have been prepared assuming
Dippy will continue as a going concern, which contemplates the realization of
the assets and the satisfaction of liabilities in the normal course of business.
The carrying amounts of assets and liabilities presented in the financial
statements do not purport to present realizable or settlement values. However,
Dippy has limited operating history resulting in an accumulated deficit of
$1,630,341 since inception, negative working capital of $957,977 and a
stockholders' deficit of $829,207 at October 31, 2000. These conditions raise
substantial doubt about Dippy's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of those uncertainties.
Interim Financial Statements
The financial statements for the six-months ended October 31, 2000 and October
31, 1999 are unaudited and, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial condition and results of operation for this
interim period. The results of operations for the six-month period ended October
31, 2000 are not necessarily indicative of the results to be expected for any
other interim period or the entire year.
NOTE 2 - Convertible Notes Payable
Convertible debt consists of $425,846 in notes payable bearing interest at rates
between 10% and 12%, payable monthly, unsecured, due at various dates between
November 8, 2000 and October 2, 2001, and convertible at the option of the payee
into shares of Dippy's common stock at a per share price equal to the average
closing price of Dippy's stock from the date of the note to the date of
conversion.
During the period the payees agreed to convert $200,000 in notes payable and
$25,385 accrued interest into 360,515 shares of Dippy's common stock. Subsequent
to October 31, 2000, the payees agreed to convert an additional $115,000 in
matured notes payable and $14,617 of accrued interest into 228,047 shares of
Dippy's common stock. The shares have not been issued and have been recorded as
shares subscribed in stockholders' equity. Additionally, the payees agreed to
convert $43,381 in notes payable that matured subsequent to October 31, 2000,
and $5,523 in accrued interest into 96,306 shares of Dippy's common stock.
<PAGE>
DIPPY FOODS, INC. FORM 10-QSB PAGE 12 OF 14
DIPPY FOODS INC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000 AND 1999
(UNAUDITED)
NOTE 3 - Major Customers and Suppliers
The following table is a listing of all customers with sales exceeding 10% of
total revenue.
Six Months Ended Six Months Ended
Customer October 31, 2000 October 31, 1999
----------------------------------------------------------------------
A - 22%
B 17% 16%
C - 14%
D 19% -
The following table is a listing of all vendors with purchases exceeding 10% of
total cost of goods sold.
Six Months Ended Six Months Ended
Vendor October 31, 2000 October 31, 1999
--------------------------------------------------------------------
A 18% 36%
B 42% 23%
C 30% 19%
NOTE 4 - Related Party Transactions
Dippy has reflected as a fixed asset the financed purchase of a vehicle and as
an operating lease, the lease of another vehicle that are not held in Dippy's
name. Dippy has agreed with the owner/leaseholder to assume the obligations
therewith.
