<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to __________
Commission File Number 33-14065-D
----------
DRY DAIRY INTERNATIONAL, INC.
- -----------------------------
(Exact name of registrant as specified in charter)
Utah 87-0476117
- ------------------------------ -------------------------
State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization
10105 Amberwood Road, Ft. Myers, Florida 33913
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (941) 768-3555
---------------
Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
- ------------------ -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:
None
---------------
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 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. (1) Yes
[X] No [ ] (2) Yes [X] No [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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. [X]
State issuer's revenues for its most recent fiscal year: $260,075
--------
<PAGE> 2
State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days:
At March 27, 1997, the aggregate market value of the voting stock held by
nonaffiliates was $1,638,280 (based on 18,203,116 shares held by nonaffiliates
multiplied by a bid price of $0.09 per share).
As of March 27, 1997, the Registrant had 35,295,688 shares of common stock
issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and
the part of the form 10-KSB (e.g., part I, part II, etc.) into which the
document is incorporated: (1) Any annual report to security holders; (2) Any
proxy or other information statement; and (3) Any prospectus filed pursuant to
rule 424(b) or (c) under the Securities Act of 1933:
NONE
PAGE
<PAGE> 3
TABLE OF CONTENTS
PART I PAGE
- ------ ----
ITEM 1. DESCRIPTION OF BUSINESS....................................... 4
ITEM 2. DESCRIPTION OF PROPERTIES..................................... 6
ITEM 3. LEGAL PROCEEDINGS............................................. 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........
6
PART II
- -------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...... 7
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..... 8
ITEM 7. FINANCIAL STATEMENTS.......................................... 9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................... 9
PART III
- --------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT........................................................... 10
ITEM 10. EXECUTIVE COMPENSATION........................................
11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................ 13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................
14
PART IV
- -------
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K........
15
PAGE
<PAGE> 4
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Organization and Corporate History
Dry Dairy International, Inc., (the "Company" or "Registrant"), was
incorporated under the laws of the state of Utah on March 6, 1987. On
February 3, 1995, the Company changed its name from Wonder Capital, Inc., to
its current name, Dry Dairy International, Inc. The Company was originally
formed to be a vehicle for ongoing business entities to become public through
a merger or acquisition with the Company.
On March 6, 1987, in connection with its organization, the Company sold
750,000 shares of its common stock to its founders for $5,000 cash.
Thereafter, the Company engaged in a public offering of its securities
pursuant to a Registration Statement on Form S-18 filed with the Securities
and Exchange Commission. On February 11, 1988, the Company closed its
initial public offering having sold 1,990,000 units at the offering price of
$0.10 per unit. Each unit consisted of one share of common stock, par value
$0.001 per share (the "Common Stock") and one Class A warrant and one Class B
warrant to purchase a like number of shares of Common Stock. The offering
resulted in net offering proceeds to the Company of approximately $171,967.
The Company intended to use the funds received in the offering to facilitate
the merger with an existing company. The Class A and Class B warrants have
since expired pursuant to their terms.
The Company subsequently used the funds received in the public offering
in two transactions. The Company received 1,625,000 shares of American
Technology and Information, Inc. in exchange for 2,437,500 shares of the
Company's Common Stock. The Company also entered into an agreement by which
$100,000 was paid to Penny Stock News Communications, Inc. for 50% of future
stock subscription news letter proceeds. A total of $175,000 was paid out in
these transactions and the Company did not receive any material benefit in
return.
Thereafter, the Company attempted to conduct various businesses, but was
unsuccessful in its efforts until the acquisition of Dry Dairy International,
Inc. On December 4, 1994, the Company purchased all the assets of Dry Dairy
International, Inc., a Florida corporation ("Dry Dairy"), pursuant to the
terms and conditions of an Asset Purchase Agreement dated December 4, 1994,
(the "Original Agreement"). Under the terms of the Original Agreement, the
Company acquired all of the assets of Dry Dairy in exchange for three million
(3,000,000) shares of the Company&WP1-9;s Common Stock. The 3,000,000 shares
of Common Stock were to be subject to certain performance criteria before they
were to be issued. The Company and the principal owner of Dry Dairy
subsequently renegotiated the purchase price for the Dry Dairy assets based on
the inability to substantiate predecessor cost of the formulas and the other
intangible assets to be acquired. Accordingly, on March 27, 1995, the Company
and Dry Dairy amended the Original Agreement to change the purchase price from
3,000,000 shares of Common Stock to one hundred thousand (100,000) shares of
Common Stock. No other changes were made to the Agreement. The amendment to
the purchase price did not change the value of the assets on the
Company&WP1-9;s books, which at December 31, 1994, was recorded at zero value,
but it did reduce the authorized and issued shares of the Company to 9,287,215
from 12,187,215.
<PAGE> 5
Effective February 15, 1995, the Company acquired all of the issued and
outstanding shares of Lombardo&WP1-9;s Pastaria, Inc., a Florida corporation
("Lombardo&WP1-9;s") through the exchange of 195,122 shares of the
Company&WP1-9;s Common Stock, par value $0.001 per share (the "Common Stock"),
for all of the issued and outstanding shares of Lombardo&WP1-9;s capital
stock, all pursuant to the terms of an agreement dated February 2, 1995, (the
Lombardo&WP1-9;s Agreement"). Pursuant to the terms of the Lombardo&WP1-9;s
Agreement, 1,000 shares of Lombardo&WP1-9;s issued and outstanding capital
stock were converted on a pro rata basis into $100,000 of the Company&WP1-9;s
Common Stock, which value was determined by the ten day average closing price
of the Company&WP1-9;s Common Stock, beginning February 1, 1995, and ending
February 14, 1995, the day before the effective date of the exchange. The ten
day average of the bid price was $0.5125, as quoted by the National
Association of Security Dealers' OTC Bulletin Board, resulting in the issuance
of 195,122 shares of the Company&WP1-9;s Common Stock to the principal
shareholders of Lombardo's.
The Company&WP1-9;s Products
The Company is in the specialty food manufacturing and distribution
business. The Company made the decision during 1996 to discontinue operations
related to the production and distribution of specialty dry mixes for drinks
and yogurt products which it had marketed under the brand names "Yum Yum
Yogurt", "Yogurt Lovers Yogurt" and "Tradewind Cocktail Mixes."
Through its subsidiary Lombardo&WP1-9;s, the Company manufactures and
markets fat free and traditional pasta products and dishes to restaurants and
wholesale food service distributors. Lombardo&WP1-9;s was initially
established in 1984, and offers a variety of pasta products including
specialty packs of stuffed shells and raviolis, fancy pasta shapes and cuts,
selected linguini flavors, deli packs and dinners, seafood pasta, a 98% fat
free pasta line and a variety of other pasta cuts including tortellinis,
gnocchi, manicotti and fettuccini.
In 1996, Lombardo's developed and began marketing a line of specialty
frozen dinner entrees featuring its pasta. This line is being marketed to
retail supermarkets and wholesale clubs in the United States. There were no
revenues recognized during 1996 from the sale of these products.
The Company manufactures its pasta products at its 7,200 square foot
facility in Fort Myers, Florida. The Company has experienced food service
personnel in all its production and development positions who have created and
produced these and similar products over many years. The Company has
developed proprietary formulas and recipes that are used in the manufacturing
of its products.
The Company purchases its basic raw materials, consisting principally of
flour, flavorings, spices, cheeses and other proprietary ingredients for use
in its products from various local and national sources and does not
anticipate any difficulty in obtaining such raw materials in the time frames
and quantities required to meet the Company&WP1-9;s manufacturing commitments.
All product is inspected, packaged, and labeled by experienced Company
personnel prior to shipment. The Company has a reputation for producing
high-quality products.
During 1996, the Company's largest distributor, Stevie's Italian Foods,
located in Charlotte, North Carolina, accounted for 47% of the Company total
sales. No other customer or distributor accounted for more than 20% of sales
in 1996.
<PAGE> 6
Proprietary Formulas and Copyrights
The Company believes that although copyright protection is important,
such factors as product formulation is equally important. The Company
attempts to preserve its product formulations through trade secrets and
non-disclosure agreements with significant employees. All formulations owned
by the Company are proprietary in nature. However, because of changing
market needs, the Company may choose not to utilize copyright or other
protections for each formulation.
Competition
The pasta food segments of the food service and retail food industry are
very competitive. The Company competes directly with a number of
manufacturers of varying size and financial capacity. Many of these companies
have established product lines and a more competitive position within the
industry than that of the Company.
Government Regulation
The Company sells its pasta to wholesale distributors and therefore is
not subject to any federal or state regulations with respect to its products
other than truth in labeling requirements relating to product composition.
The Lombardo&WP1-9;s specialty pasta food lines are subject to state of
Florida, Department of Health regulations regarding labeling and product
composition. If Lombardo&WP1-9;s were to utilize "meat" (as defined by the
United States Department of Agriculture) in any of its specialty pastas, its
plant must meet certain labeling and inspection requirements specified and
administered by the United States Department of Agriculture. The Company does
not at this time intend to manufacture products which would cause it to be
subject to such requirements. The Company is currently in compliance with any
applicable federal and state regulations.
Employees
The Company currently employs eight persons (one executive, a controller,
two supervisor-chefs and four full-time direct labor employees).
ITEM 2. DESCRIPTION OF PROPERTIES
Offices
Beginning March 1, 1995, the Company leased 7,200 sq. ft. of office and
manufacturing space at 10105 Amberwood Road, Airport Woods Commerce Center,
Ft. Myers, Florida. The Company will be leasing this property until February
28, 2000. The terms of the lease are triple net with rent at $4.44 sq. ft or
$31,968 for the first year with a four percent increase in each succeeding
year, during the term of the lease.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the fiscal year ended December 31, 1996.
<PAGE> 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From inception and until December 1994, there was no "established trading
market" for shares of the Company's common stock. The table on the following
page sets forth, for the respective periods indicated, the prices for the
Company's common stock in the over-the-counter market as reported by the
NASD's OTC Bulletin Board. The bid prices represent inter-dealer quotations,
without adjustments for retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
At March 27, 1997, the Company's Common Stock was quoted on the OTC
Bulletin Board at a bid and asked price of $0.09 and $0.105, respectively.
Fiscal Year Ended December 31, 1994 High Bid Low Bid
First, Second, and Third Quarter N/A N/A
Fourth Quarter $1.50 $1.00
Fiscal Year Ended December 31, 1995
First Quarter $1.25 $0.50
Second Quarter $0.50 $0.15
Third Quarter $0.15 $0.03
Fourth Quarter $0.08 $0.03
Fiscal Year Ending December 31, 1996
First Quarter $0.08 $0.03
Second Quarter $0.37 $0.05
Third Quarter $0.21 $0.08
Fourth Quarter $0.12 $0.08
Fiscal Year Ending December 31, 1997
First Quarter $0.12 $0.08
Since its inception, the Company has not paid any dividends on its Common
Stock, and the Company does not anticipate that it will pay dividends in the
foreseeable future. At March 27, 1997, the Company had approximately 332
shareholders of record based on information provided by the Company's transfer
agent.
PAGE
<PAGE> 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
The Company develops, manufactures and markets specialty pastas to
gourmet restaurants and wholesale food service distributors. Although the
Company is producing product for sale, it does not at this time have
sufficient assets to support any substantial future development, manufacturing
or marketing of these products without additional working capital. Due to the
lack of assets and available funds, the Company&WP1-9;s audited financial
statements contain a "going concern" disclosure which places into question the
Company&WP1-9;s ability to continue without substantial increases in revenue
or financing.
On October 20, 1995, the Company completed the sale of a controlling
interest in the Company to Mr. Philip R. Lacerte of Dallas, Texas. Mr.
Lacerte is a principal owner and Executive Vice President of Lacerte Software
Corporation, located in Dallas, Texas, a manufacturer of computer software for
tax professionals. The terms of the purchase agreement provided that the
Company issue to Mr. Lacerte, 13,827,500 shares of the Company&WP1-9;s
restricted common stock, constituting 50.5% of the Company&WP1-9;s total
issued and outstanding shares, in exchange for a cash payment of $110,000 and
the extension of a line of credit for up to $250,000, to meet the
Company&WP1-9;s current operational needs. Interest on the line of credit is
eight percent (8%) per annum. During the fiscal year ended December 31, 1996,
$190,363 of credit and interest was extended to the Company under the terms of
the line of credit agreement, however, the entire amount was converted into
2,590,900 shares of the Company's common stock at a conversion value of $0.07
per share. Therefore, no amount was owed by the Company against the line of
credit at December 31, 1996. The Company believes that the line of credit
provided by Mr. Lacerte will be sufficient to meet its working capital
requirements for the immediate future.
Liquidity and Capital Resources
At December 31, 1996, the Company had total current assets of $180,117
and total current liabilities of $64,106, resulting in a working capital
surplus of $116,011, as opposed to current assets of $56,082 and total current
liabilities of $85,487 at December 31, 1995, resulting in a working capital
deficit of $29,405.
During 1996, the Company issued an additional 8,589,580 shares of its
common stock for net proceeds of $479,165 from the sales of restricted shares
and the exercise of outstanding options and warrants at an average of $0.06
per share. While during 1995, the Company raised a total of $312,269 in cash
from the sale of private placement shares, ranging in price from $0.05 to
$1.00 per share, plus an additional $110,000 received from Mr. Lacerte, for a
total of $422,269 cash raised during 1995. In addition, the Company has a
line of credit for up to $250,000 with Mr. Lacerte, which it may draw against
for working capital needs. Most additional working capital received by the
Company will be utilized to develop additional markets and expand sales of the
Company&WP1-9;s products. Management believes that additional acquisitions of
equipment or capital expenditures, to develop additional markets and expand
sales, can be successfully financed by third parties. An increase in demand
for the Company&WP1-9;s products would in turn require hiring a limited number
of additional hourly employees to meet production requirements.
<PAGE> 9
The Company will continue to seek other sources of financing in addition
to its existing arrangements with Mr. Lacerte. Due to the Company&WP1-9;s
financial condition it does not anticipate receiving substantial, if any, debt
financing.
Results of Operations
The Company experienced a net loss of $193,142 during fiscal year 1996,
down from a loss of $532,914 during fiscal year 1995. At December 31, 1996,
the Company had an accumulated deficit of $1,536,314, in large part attributed
to bad investments prior to the acquisitions of Dry Dairy and Lombardo&WP1-9;s
Pastaria, plus the operating losses incurred by the Company during fiscal
year 1995. The Company is attempting to increase the market base for its
pasta products in the southwestern Florida area as well as continue its
expansion efforts into the southern and eastern United States.
During 1996, the Company announced that it had received a contract to
manufacture and deliver 24,000 cases of vanilla flavored yogurt mix with an
expected sales value of $570,000 to the U.S. Department of Defense. The
product was blended, packaged and shipped from an off-site facility under a
joint venture agreement with Custom Blending and Packaging located in Little
Rock, Arkansas. The Company had estimated that it would net approximately
$2.00 per case, or an aggregate of $48,000 on completion of the contract,
after deducting costs of sales, and before deducting operating expenses.
The Department of Defense later notified the Company that it desired to
cancel the contract based on a "convenience" clause in the contract. The
cancellation of the contract resulted in the recognition of $51,919 of
additional revenue to the Company which has been accounted for in the accounts
receivable of the Company's financial statements at December 31, 1996. As a
result of the canceled contract with the Department of Defense, the Company's
management elected to discontinue all yogurt operations and is now focusing on
the pasta operations. The loss from discontinued operations for the years
ended December 31, 1996 and 1995, respectively, includes sales of $116,131 and
$36,306, as well as costs of $160,136 and $118,216, resulting in a net loss
from discontinued operations of $44,005 and $81,912 for the years ended
December 31, 1996 and 1995, respectively.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth immediately
following the signature page to this form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no disagreements with its certified public
accountants with respect to accounting practices or procedures or
financial disclosure.
PAGE
<PAGE> 10
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following table sets forth as of December 31, 1996, the name, age,
and position of each executive officer and director and the term of office of
each director of the Company.
Name Age Position Director or Officer Since
---- --- -------- -------------------------
Philip R. Lacerte 51 Chairman of the Board October 1995
Robert L. Matzig 39 President & CEO December 1995
Rosemarie Drygala 41 Secretary/Director &
V.P., Lombardo's July 1995
Rainer M. Drygala 52 Director & President
Lombardo's July 1995
M.S. "Chuck" Oberting 47 Director March 1955
Biographical Information
Set forth below is certain biographical information for each of the
Company's Officers and Directors:
Philip R. Lacerte is Executive Vice President and a principal owner of
Lacerte Software Corporation of Dallas, Texas, a manufacturer of computer
software for tax professionals. The privately held company posted revenues of
$60,000,000 in its past fiscal year. Mr. Lacerte also holds the position of
Chairman of the Board of publicly held Crystallex International, Inc.,
(trading symbol KRY: Vancouver Stock Exchange). In addition, Mr. Lacerte owns
two privately held companies in California; Lexington Homes, a home builder,
and Command Delivery, a trucking company. Mr. Lacerte graduated from Long
Beach City College, Long Beach, California, and served four years in the U.S.
Air Force.
Rosemarie A. Drygala, a Certified Chef de Cuisine, is a 1975 graduate of
Bauder College, Miami, Florida, with degrees in Merchandising and Interior
Design. Mrs. Drygala has been a Chef-owner of Lombardo&WP1-9;s Pastaria,
Inc., located in Cape Coral, Florida, since 1984. From 1982 to 1984, she and
her husband, Rainer M. Drygala, also a director of the Company, operated the
Drygala Haus Restaurant in Bedford, New Hampshire. Prior to 1982 Mrs. Drygala
was an employee in her family business, Lombardo&WP1-9;s Villaggio Italia, Deli
and Bakery, in Cape Coral, Florida. Mrs. Drygala is the Chapter Secretary and
a Board Member of the American Culinary Federation, and is a National Culinary
Arts Competition medalist on three occasions.
Rainer M. Drygala, a Certified Executive Chef, is a 1971 graduate of the
University of New Hampshire. After serving in the U.S. Air Force from 1964 to
1968, Mr. Drygala began his professional career in New Hampshire as a Chef and
General Manager with a division of the Howard Johnson chain of restaurants.
He started the Drygala Haus Restaurant in 1972. Rosemarie Lombardo joined Mr.
Drygala in 1982 and they continued to operate the restaurant until they sold
it in 1984 and opened Lombardo&WP1-9;s Pastaria, Inc. in Cape Coral,
Florida. Mr. Drygala is the National Sergeant-of-Arms and Chapter Chairman
of the Board of the American Culinary Federation.
<PAGE> 11
Robert L. Matzig graduated from Texas Christian University, Fort Worth,
Texas, in 1979. Mr. Matzig began his professional career with Lacerte
Software Corporation, the same company that Chairman of the Board Mr. Philip
R. Lacerte is a principal owner, in direct sales of software products. He
worked for three years with Arthur Andersen & Co. managing a direct sales
force selling software products to nationwide tax professionals. He held
similar positions with Accountants Micro Systems, Inc. and SCS/Compute before
joining Rosenthal Collins Group in 1993 to work with client development and
marketing programs for commodity traders and managed accounts. Mr. Matzig
joined the Company in September 1995, and was appointed to the vacated
position of President and C.E.O. in December 1995.
M. S. "Chuck" Oberting, has since 1985 been the Eastern United States
sale manager for O.K. Foods, Inc., Fort Smith Arkansas, a major poultry
producer. Prior to 1985, Mr. Oberting owned and operated his own restaurant and
is a Certified Executive Chef.
Each director of the Company serves for a term of one year and until his
successor is elected at the Company's annual shareholders' meeting and is
qualified, subject to removal by the Company's shareholders. Each officer
serves, at the pleasure of the board of directors, for a term of one year and
until his successor is elected at the annual meeting of the board of directors
and is qualified.
Compliance with Section 16(a) of the Exchange Act
The Company is not subject to the requirements of Section 16(a) of the
Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last three completed
fiscal years to the Company's or its principal subsidiaries chief executive
officer and each of its other executive officers that received compensation in
excess of $100,000 during such period (as determined at December 31, 1996, the
end of the Company's last completed fiscal year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
- ----------------------
Annual Compensation Awards Payouts
Other Restricted
Name and Annual Stock Options
LTIP All other
Principal Position Year Salary Bonus($) Compensation Awards /SARs
Payout Compensation
- ------------------ ---- ------ -------- ------------ ------ -------
- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
William Thome 1996 $-0- -0- -0- -0- -0-
- -0- -0-
President & CEO 1995 $30,000 -0- $12,700 $16,000 -0-
- -0- -0-
(through August 1994 -0- -0- -0- -0- -0-
- -0- -0-
1995)
Robert L. Matzig 1996 $60,000 -0- -0- -0- -0-
- -0- -0-
President & CEO 1995 $13,197 -0- -0- -0- -0-
- -0- -0-
(from September 1994 -0- -0- -0- -0- -0-
- -0- -0-
1995)
</TABLE>
<PAGE> 12
Employment Contracts and Termination of Employment and Changes in Control
Arrangements
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named as a director,
executive officer, promoter or control person above which would in any way
result in payments to any such person because of his resignation, retirement,
or other termination of such person's employment with the Company or its
subsidiaries, or any change in control of the Company, or a change in the
person's responsibilities following a changing in control of the Company,
except as noted below:
Robert L. Matzig, President and Chief Executive Officer, has a twelve
month employment agreement with the Company, beginning September 1, 1995,
renewable annually by the Company's board of directors, wherein his initial
salary is $60,000 per year and would continue for a period of three months if
he is terminated by the Company without cause.
Rosemarie A. Drygala is the Vice President of the Company&WP1-9;s
subsidiary, Lombardo&WP1-9;s Pastaria. Mrs. Drygala has a five year
management contract with the Company with an annual salary of $30,000 per
year. Her salary would continue for the duration of her contract if she is
terminated by the Company without cause.
Rainer M. Drygala is the President of the Company&WP1-9;s subsidiary,
Lombardo&WP1-9;s Pastaria. Mr. Drygala has a five year management contract
with the Company with an annual salary of $45,000 per year. His salary would
continue for the duration of his contract if he is terminated by the Company
without cause.
Board Compensation
The Company's directors receive no compensation or cost reimbursement for
attendance at board meetings.
Termination of Employment and Change of Control Arrangement
There are no compensatory plans or arrangements, including payments to be
received from the Company, with respect to any person named in Cash
Compensation set out above which would in any way result in payments to any
such person because of his resignation, retirement, or other termination of
such person's employment with the Company or its subsidiaries, or any change
in control of the Company, or a change in the person's responsibilities
following a changing in control of the Company.
PAGE
<PAGE> 13
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 27, 1997, the name and the
number of shares of the Company's Common Stock, par value $0.001 per share,
held of record or beneficially by each person who held of record, or was known
by the Company to own beneficially, more than 5% of the 35,295,688 issued and
outstanding shares of the Company's Common Stock, and the name and
shareholdings of each director and of all officers and directors as a group.
Security Ownership of Certain Beneficial Owners
Title
of Name and Address Amount and Nature of Percentage
Class Beneficial Owner Beneficial Ownership(1) of Class
- ----- ---------------- -------------------- ----------
Common Philip R. Lacerte D 16,718,400 47.36
13155 Noel Road, Suite 2200
Dallas, Texas 75240
Security Ownership of Management of the Company
Title
of Name and Position of Amount and Nature of Percentage
Class Officer and/or Director Beneficial Ownership(1) of Class
- ----- ----------------------- -------------------- ----------
Common Philip R. Lacerte, Chairman ---See Table Above---
Common Rosemarie Drygala, Director
& Sec./Officer Lombardo's (2) D 102,561 .29
Common Ranier Drygala, Director and
Officer Lombardo's (2) D 102,561 .29
Common M.S. "Chuck" Oberting,
Director D - -
Common Robert L. Matzig, Pres. & CEO D 169,050 .48
All Officers and Directors
as a Group (5 person) D 17,092,572 48.42
(1) Indirect and Direct ownership are referenced by an "I" or "D",
respectively. All shares owned directly are owned beneficially and of record
and such shareholder has sole voting, investment, and dispositive power,
unless otherwise noted.
(2) Rainer and Rosemarie Drygala are husband and wife and each may be deemed
to be the indirect beneficial owner of shares held by the other although each
explicitly disclaims beneficial ownership of the others.
PAGE
<PAGE> 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.
On October 20, 1995, the Company completed the sale of a controlling
interest in the Company to Mr. Philip R. Lacerte of Dallas, Texas. The terms
of the purchase agreement provided that the Company issue to Mr. Lacerte,
13,827,500 shares of the Company&WP1-9;s restricted common stock, constituting
50.5% of the Company&WP1-9;s total issued and outstanding shares, in exchange
for a cash payment of $110,000 and the extension of a line of credit for up to
$250,000, to meet the Company&WP1-9;s current operational needs. Interest on
the line of credit is eight percent (8%) per annum.
Other than the transaction described above, for the periods indicted,
there were no material transactions, or series of similar transactions, since
the beginning of the Company's last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which the Company was or
is to be party, in which the amount involved exceeds $60,000, and in which any
director or executive officer, or any security holder who is known by the
Company to own of record or beneficially more than 5% of any class of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, has an interest.
Indebtedness of Management
There were no material transactions, or series of similar transactions,
since the beginning of the Company's last fiscal year, or any currently
proposed transactions, or series of similar transactions, to which the Company
was or is to be a party, in which the amount involved exceeds $60,000 and in
which any director or executive officer, or any security holder who is known
to the Company to own of record or beneficially more than 5% of any class of
the Company's common stock, or any member of the immediate family of any of
the foregoing persons, has an interest.
Transactions with Promoters
The Company was organized more than five years ago; hence transactions
between the Company and its promoters or founders are not deemed to be
material.
PAGE
<PAGE> 15
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1)FINANCIAL STATEMENTS. The following financial statements are included
in this report:
Title of Document Page
- ----------------- ----
Independent Auditor's Report of Jones, Jensen & Company.................. 17
Consolidated Balance Sheets as of December 31, 1996 and 1995............. 18
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995, and 1994...................................... 19
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995, and 1994................................. 20
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995, and 1994....................................... 21
Notes to Consolidated Financial Statements............................... 22
(a)(2)FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules are included as part of this report:
None.
(a)(3)EXHIBITS. The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
- ------- --------- ----------------- ------------
27 27 Financial Data Schedule This Filing
(b) Reports on Form 8-K. There were no reports on Form 8-K filed with the
Commission during the quarter ended December 31, 1996.
PAGE
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
DRY DAIRY INTERNATIONAL, INC.
Date: March 31, 1997 By /S/ Philip R. Lacerte, Chairman
Date: March 31, 1997 By /S/ Robert L. Matzig, President and CEO
Date: March 31, 1997 By /S/ Rosemarie Drygala, Director
Date: March 31, 1997 By /S/ Rainer Drygala, Director
Date: March 31, 1997 By /S/ M.S. "Chuck" Oberting, Director
PAGE
<PAGE> 17
[Jones, Jensen & Company Letterhead]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Dry Dairy International, Inc. and subsidiary
Ft. Myers, Florida
We have audited the accompanying consolidated balance sheets of Dry Diary
International, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years ended December 31, 1996, 1995, and 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our 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 Dry Dairy
International, Inc. and subsidiary as of December 31, 1996 and 1995, and the
results of its operations and their cash flows for the years ended December
31, 1996, 1995, and 1994 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has suffered recurring losses from operations and has
limited operating capital which together raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard t these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/S/ JONES, JENSEN & COMPANY
February 6, 1997
PAGE
<PAGE> 18
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31,
- ----------------------
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 9,605 $ 14,021
Accounts receivable, net of allowance (Note 2) 73,448 17,959
Inventory (Note 4) 88,110 11,259
Deposits and other receivables 8,954 12,843
--------- ---------
Total Current Assets 180,117 56,082
--------- ---------
PROPERTY, PLANT AND EQUIPMENT (Note 5) 98,246 72,101
--------- ---------
TOTAL ASSETS $ 278,363 $ 128,183
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 27,137 $ 41,404
Notes payable - current portion (Note 7) 16,889 21,054
Taxes payable 4,952 673
Payable - related party (Note 10) 15,128 22,356
--------- ---------
Total Current Liabilities 64,106 85,487
--------- ---------
LONG-TERM DEBT
Notes payble (Note 7) 7,478 23,944
--------- ---------
TOTAL LIABILITIES 71,584 109,431
--------- ---------
STOCKHOLDERS' EQUITY:
Stock authorized 50,000,000 shares at $0.001
par value; 35,295,688 and 27,381,058 shares
issued and outstanding, respectively 35,296 27,381
Additional paid-in capital 1,707,797 1,334,543
Accumulated deficit (1,536,314) (1,343,172)
--------- ---------
Total Stockholders' Equity 206,779 18,752
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 278,363 $ 128,183
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 19
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years
Ended December 31,
- -------------------------------------------
1996
1995 1994
------------
- ------------ ------------
<S> <C>
<C> <C>
REVENUES
Sales $ 260,075 $
179,712 $ -
Cost of Sales 188,368
201,217 -
------------ -----------
- - ------------
Gross Profit (Loss) 71,707
(21,505) -
------------
- ------------ ------------
EXPENSES:
General and Administrative 170,072
383,827 -
Depreciation 35,622
33,989 -
------------
- ------------ ------------
Total Expenses 205,694
417,725 -
------------
- ------------ ------------
(Loss) from Operations (133,987)
(439,230) -
OTHER INCOME (EXPENSES)
Other income 3,939
192 -
Interest expense (17,989)
(9,496) -
Other expense (1,100)
(2,468) -
------------
- ------------ ------------
Total Other Income (Expenses) (15,150)
(11,772) -
------------
- ------------ ------------
LOSS FROM DISCONTINUED OPERATIONS (44,005)
(81,912) (44,992)
------------
- ------------ ------------
NET INCOME (LOSS) $ (193,142) $
(532,914) $ (44,992)
============
============ ============
NET INCOME (LOSS) PER SHARE $ (0.01) $
(0.04) $ (0.00)
============
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 30,173,791
14,502,496 9,081,659
============
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 20
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumulated
Common Stock
Paid-in Development
Shares Amount
Capital Stage
---------- ---------
- --------- -----------
<S> <C> <C>
<C> <C>
BALANCE, December 31, 1993 8,892,465 $ 8,892 $
756,099 $ (765,266)
Expenses paid on behalf of the Company by Shareholders -
- - 6,500 -
Common stock issued for cash at $0.10 per share 267,750
268 26,507 -
Common stock issued for 100% ownership of Dry Dairy
International, Inc. on December 4, 1994 100,000
100 (10,100) -
Common stock issued for cash in private placement at
$1.00 per share in December 1994 27,000
27 26,973 -
Net loss for the year ended December 31, 1994 -
- - - (44,992)
---------- ---------
- --------- ---------- Balance, December 31, 1994
9,287,215 9,287 805,979 (810,258)
Common stock issued for 100% of the issued and
outstanding shares of Lombardo's Pastaria, Inc. 195,122
195 (20,731) -
Common stock issued for cash in private placement
at an average of $1.00 per share 76,384
76 76,308 -
Common stock issued for services at $1.00 per share 16,000
16 15,984 -
Common stock issued for services at $0.135 per share 955,000
955 127,970 -
Common stock issued for cash and warrants at
$0.10 per share 1,693,837
1,694 167,690 -
Common stock issued for cash and warrants at
$0.05 per share 1,330,000
1,330 65,170 -
Common stock issued for cash of $110,000 and the
extension of a line of credit for up to $250,000 13,827,500
13,828 96,173 -
Net loss for the year ended December 31, 1995 -
- - - (44,992)
---------- ---------
- --------- ---------- Balance, December 31, 1995
27,381,058 27,381 1,334,543 (1,343,172)
Common stock returned from former president (800,000) (800)
(107,200) -
Common stock issued for cash at $0.05 per share 5,000,000
5,000 245,000 -
Common stock issued for the exercise of warrants
at $0.15 per share 148,680
149 22,153 -
Common stock issued for cash at $0.03 per share 550,000
550 15,950 -
Common stock issued for cash at $0.07 per share 300,000
300 8,700 -
Common stock issued for cash at $0.07 per share 2,590,900
2,591 178,772 -
Common stock issued for equipment at $0.08 per share 125,050
125 9,879 -
Net loss for the year ended
December 31, 1996 -
- - - (193,142)
---------- ---------
- --------- ---------- Balance, December 31, 1996
35,295,688 $ 35,296 $1,707,797 $(1,536,314)
========== =========
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE> 21
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years
Ended December 31,
- -------------------------------------------
1996
1995 1994
------------
- ------------ ------------
<S> <C>
<C> <C>
OPERATING ACTIVITIES:
Net loss $ (193,142) $
(532,914) $ (44,992)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Common stock issued for services -
144,925 6,500
Cancellation of stock options (108,000)
- - -
Depreciation 35,622
33,898 -
(Increase) in accounts receivable (58,490)
(10,465) -
(Increase) in inventory (76,851)
(6,307) -
(Increase) decrease in deposits and other
receivables 3,889
(12,493) -
Increase (decrease) in accounts payable and
other current payables (9,988)
25,314 9,954
------------
- ------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (406,980)
(358,042) (28,538)
------------
- ------------ ------------
IN INVESTING ACTIVITIES:
Purchase of property and equipment (48,762)
(50,988) -
Investment in subsidiary -
268 (10,000)
------------
- ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (48,762)
(50,720) (10,000)
FINANCING ACTIVITIES:
Repayment of notes payable (27,859)
(16,488) -
Issuance of common stock for cash 479,165
422,269 53,775
------------
- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 451,306
405,781 53,775
------------
- ------------ ------------
INCREASE (DECREASE) IN CASH (4,416)
(2,981) 15,237
CASH AT BEGINNING OF YEAR 14,021
17,002 1,765
------------
- ---------- ------------
CASH AT END OF YEAR $ 9,605 $
14,021 $ 17,002
============
========== ============
Supplemental Cash Flows Information:
Cash paid for:
Interest $ 17,990 $
9,496 $ -
Taxes $ - $
- - $ -
NON CASH FINANCING ACTIVITIES:
Expenses paid on behalf of the Company
By Shareholders $ - $
- - $ 6,500
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 22
DRY DAIRY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - ORGANIZATION
The Company was incorporated under the laws of the state of Utah on March 6,
1987. The Company was incorporated for the purpose of providing a vehicle
which could be used to raise capital and seek business opportunities believed
to hold a potential for profit. The Company has decided to focus on specialty
gourmet and low-fat pasta foods.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method:
The Company's financial statements are prepared using the accrual method of
accounting. The Company has a calendar fiscal year end.
b. Cash and cash equivalents:
Cash equivalents include short-term, highly liquid investments with maturities
of three months or less at the time of acquisition.
c. Loss per share:
The computations of gain or loss per share of common stock are based on the
weighted average number of shares outstanding at the date of the financial
statements.
d. Provision for taxes on income:
At December 31, 1996, the Company has net operating loss carry forwards
totaling approximately $1,500,000 that may be offset against future taxable
income through the year 2011. No tax benefit has been reported in the
financial statements, as the Company believes there is a 50% or greater chance
the carry forwards will expire unused. Accordingly, the potential tax benefits
of the loss carry forwards are offset by a valuation account of the same
amount.
e. Principles of consolidation:
The accompanying financial statements include the accounts of Dry Dairy
International, Inc. and its wholly owned subsidiary Lombardo's Pastaria, Inc.
All significant intercompany transactions have been eliminated.
f. Inventories:
Inventory are stated at the lower of cost of market.
g. Property and Equipment:
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided on the straight-line basis over the estimated useful
lives of the related assets.
Major improvements and betterments of property are capitalized. Maintenance,
repairs and minor improvements are charged to expense in the period incurred.
Upon the sale or other disposition of property, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss is
reflected in income.
<PAGE> 23
DRY DAIRY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
h. Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affected 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.
i. Loss from Discontinue Operations:
The Company has discontinued all yogurt operations and is now focusing on the
pasta operations. The loss from discontinued operations for the years ended
December 31, 1996 and 1995, respectively, includes sales of $116,131 and
$36,306 as well as costs of $160,136 and $118,216 resulting in a net loss from
discontinued operations of $44,005 and $81,912 for the years ended December
31, 1996 and 1995 respectively.
j. Accounts Receivable:
Accounts receivable are shown net of allowance for doubtful accounts of $500
and $500 at December 31, 1996 and 1995.
k. Concentration of Risk:
The Company had a contract with the United States Government which was
canceled for the convenience of the Government. This cancellation has
resulted in the recognition of $51,919 of additional revenue which is
reflected in accounts receivable and in the sales from discontinued operations
at December 31, 1996.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has little cash and has experienced losses
from inception. On October 20, 1995, the Company announced that it had
completed the sale of a controlling interest in the Company to Phillip Lacerte
of Dallas, Texas. The terms of the purchase agreement provided that the
Company issued to Mr. Lacerte, 13,827,500 shares of the Company's restricted
common stock, which constitute 50.5% of the Company's outstanding shares, in
exchange for cash of $110,000 and the extension of a line of credit of up to
$250,000 to meet the Company's current operating needs.
NOTE 4 - INVENTORIES
Inventories are comprised of the following at December 31, 1996:
Raw Materials $16,157
Packaging and other 41,189
Finished Goods 30,764
-------
Total Inventory $88,110
=======
<PAGE> 24
DRY DAIRY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1996:
Machinery and equipment $ 167,045
Vehicle 27,715
Furniture and fixtures 27,100
Leasehold improvements 13,908
---------
235,768
Less accumulated depreciation (137,522)
---------
Property and equipment, net $ 98,246
=========
NOTE 6 - LEASES
The Company has a five year lease on the 7,200 square foot facility where it
produces its products, with two one-year options after that period. The lease
requires the Company to maintain normal wear and tear maintenance on the
premises. The Company will also pay for its pro-rated share of any and all
increases in real estate taxes and building insurance.
Future minimum lease payments under this lease as of December 31, are:
1997 $ 46,692
1998 48,206
1999 49,732
2000 8,331
2001 -
--------
Total $152,961
========
PAGE
<PAGE> 25
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1996
NOTE 7 - NOTES PAYABLE
Long-term debt is comprised of the following at December 31, 1996:
Installment note payable to a financial institution,
collateralized by equipment, interest at 11.00%, monthly
payments of $1,500.43 including interest, final payment
due August 1997. $ 11,505
Installment note payable to a financial institution,
collateralized by vehicle, interest at 10.75%, monthly
payments of $538 including interest; final payment due
February 1999. 12,862
---------
Total notes payable 24,367
Less current maturities (16,889)
---------
Long-term debt $ 7,478
=========
The scheduled maturities of long-term debt as of December 31, 1996 are as
follows:
1997 $ 16,889
1998 5,992
1999 1,486
---------
Total long-term debt $ 24,367
=========
NOTE 8 - STOCK TRANSACTIONS
On February 15, 1995 the Company acquired all of the issued and outstanding
shares of common stock of Lombardo's Pastaria, Inc. (Lombardo's), a Florida
corporation. The purchase price was 195,122 shares of the Company's common
stock. Since its inception, Lombardo's has been involved in the development
and marketing of food products. The purchase was recorded at the predecessor
cost of the assets acquired which is approximately the same as the fair market
value.
During the year ended December 31, 1995, the Company issued 3,023,837 shares
for cash and warrnts at $0.05 and $0.10 per share for net proceeds of
$235,884.
On July 14, 1995, the Company filed a Form S-8 with the Securities and
Exchange Commission to register 3,000,000 shares of stock under a 1995
Nonqualified Stock Option Plan. On August 1, 1995, the Company issued 955,000
shares of common stock to members of the Board of Directors under these plans,
the majority, 900,000 shares, going to the then President and Chairman of the
Board, William J. Thome. Mr. Thome has subsequently resigned as President and
Chairman of the Board.
On April 15, 1996, the Company canceled approximately 800,000 shares of stock
which were returned to the Company by the former President.
<PAGE> 26
DRY DAIRY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 8 - STOCK TRANSACTIONS (Continued)
On October 20, 1995, the Company announced that it has completed the sale of a
controlling interest in the Company to Philip Lacerte of Dallas, TX. The
terms of the purchase agreement, provided that the Company issue to Lacerte
13,827,500 shares of the Company's restricted, which shares constitute 50.5%
of the Company's total issued and outstanding shares in exchange for a cash
payment of $110,000 and the extension of a line of credit for up to $250,000,
to meet the Company's current operating needs.
During the year ended 1996, the Company issued 8,589,580 shares for cash,
options and warrants at an average price per share of $0.06, for net proceeds
of $479,165.
In March 1996, the Company approved a stock option plan wherein 4,500,000
shares of common stock may be issue in accordance with the terms of the plan.
On November 13, 1996, the Company issued 125,050 shares of stock valued at
$0.08 per share for the acquisition of equipment.
NOTE 10 - RELATED PARTY TRANSACTIONS
In addition to the shares issued to acquire Lombardo's, Company assumed a
payable of the former shareholders of Lombardo's. The payable is unsecured,
and is properly classified as a current liability. At December 31, 1996, the
balance due to the shareholder was $15,128.
NOTE 11 - SUBSEQUENT EVENT
The Company has made the decision to enter into the specialty breads market.
The Company has signed a letter of intent to purchase the specialty bread
making equipment and the distribution rights of an existing specialty bready
company. The Company expects the terms of the purchase to be finalized in the
later part of the first quarter of 1997. In conjunction with this purchase,
the Company has created two new subsidiaries; Tulip Bakery, Inc. and NGU
Distribution, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814070
<NAME> DRY DAIRY INTERNATIONAL INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,605
<SECURITIES> 0
<RECEIVABLES> 73,948
<ALLOWANCES> (500)
<INVENTORY> 88,110
<CURRENT-ASSETS> 180,117
<PP&E> 235,768
<DEPRECIATION> (137,522)
<TOTAL-ASSETS> 278,363
<CURRENT-LIABILITIES> 64,106
<BONDS> 0
0
0
<COMMON> 1,743,093
<OTHER-SE> (1,536,314)
<TOTAL-LIABILITY-AND-EQUITY> 278,363
<SALES> 260,075
<TOTAL-REVENUES> 260,075
<CGS> 188,368
<TOTAL-COSTS> 205,694
<OTHER-EXPENSES> 2,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,989
<INCOME-PRETAX> (15,150)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (44,005)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,142)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
