<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number: 33-14065-D
DRY DAIRY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0476117
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10105 AMBERWOOD ROAD, FT. MYERS, FL 33913
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip
Code)
(941) 768-3555
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- ------------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report.)
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), Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, was 35,629,021 shares of common stock, par value $0.001, as of
March 31, 1997.
PAGE
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of March 31, 1997, and the
related audited balance sheet of the Company as of December 31, 1996, and the
related unaudited statements of operations, and cash flows for the three month
periods ended March 31, 1997 and 1996, and the unaudited statement of
stockholders' equity for the period from December 31, 1995 through March 31,
1997, are attached hereto and incorporated herein by this reference.
Operating results for the quarter ended March 31, 1997, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1997.
PAGE
<PAGE> 3
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1997 1996
(Unaudited) (Audited)
------------ ------------
ASSETS
Current Assets:
Cash....................................... $ 4,032 $
9,605 Accounts receivable, net of allowance.(Note 2) 73,661
73,448
Inventory.(Note 4)......................... 84,540
88,110 Deposits and other current assets.(Note 13)
78,349 8,954
---------- ----------
Total current assets.................. 240,582 180,117
---------- ----------
Property and Equipment, Net.(Note 5)........... 88,284 98,246
---------- ----------
Total Assets.......................... $ 328,867 $ 278,363
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable .......................... $ 84,552 $ 27,137
Line of credit (Note 9).................... 70,268 -
Notes payable - current.(Note 7)........... 12,809 16,889
Taxes payable.............................. 4,674 4,952
Payable - related party (Note 10).......... 13,835 15,128
---------- ----------
Total current liabilities............. 186,138 64,106
---------- ----------
Notes payable - long term.................. 5,616 7,478
---------- ----------
Total Liabilities..................... 191,754 71,584
---------- ----------
Stockholders' Equity:
Stock authorized 50,000,000 shares at
$0.001 par value; 35,295,688 and
35,629,021 shares issued and
outstanding, respectively................ 35,630 35,296
Additional paid-in capital................. 1,732,463 1,707,797
Accumulated deficit.......... ............. (1,630,980) (1,536,314)
---------- ----------
Total Stockholders' Equity............. 137,113 206,779
---------- ----------
Total Liabilities and
Stockholders' Equity.................. $ 328,867 $ 278,363
========== ==========
PAGE
<PAGE> 4
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH
31,
1997 1996
(Unaudited)
(Unaudited)
- ----------- -----------
Revenues:
Sales.................................... $ 60,654 $
69,110
Cost of sales............................ 54,154
46,002 ----------
- ---------- Gross profit........................
6,520 23,108
Operating Expenses:
Selling, general, and administrative..... 90,425
86,582 Depreciation.............................
9,962 9,224
- --------- ----------
Total operating expenses............ 100,387
95,806 ----------
- -----------
Net loss from operations...................... (93,867) ( 72,698)
Other income (expenses):
Interest.................................. (2,575)
(2,395) Rental Income.............................
1,899 -
Return of common stock.................... - -
Other expenses................................ (123) (356)
---------- -----------
Total other income (expense)........ (799) (2,751)
----------
- ----------- Net Income (Loss)............................. $
(94,666) $ (75,449)
========== ===========
Net gain (loss) per share..................... $ (0.00) $ (0.00)
========== ===========
Weighted average number of
shares outstanding........................ 35,295,688 30,173,791
========== ==========
PAGE
<PAGE> 5
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, 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 $0.03 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)
Common Stock issued for cash at $0.075 per share 333,333
334 24,666 -
Net loss for the three month period ended
March 31, 1997 -
- - - (94,666)
---------- ---------
- --------- ----------
35,629,021 $ 35,603
$1,732,463 $(1,630,576)
========== =========
========= ==========
</TABLE>
PAGE
<PAGE> 6
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS
ENDED MARCH 31,
1997
1996
(Unaudited)
(Unaudited)
-----------
- -----------
Operating Activities:
Net gain (loss)............................... $ (94,666) $
(75,449)
Adjustments to reconcile net gain (loss) to
net cash provided by operating activities:
Depreciation................................ 9,962
9,224
(Increase) decrease in accounts receivable.. (213)
(2,350)
(Increase) decrease in inventory............ 3,570
(2,978)
(Increase) decrease in other current assets. (69,395)
1,834
Increase (decrease) in accounts payable..... 56,123
(5,027)
Increase (decrease) in accrued taxes........ (278)
215
----------
- ---------
Net cash used by operating activities.... (94,897)
(74,531)
----------
- ---------
Investing Activities:
Purchase of property and equipment........... -
(9,511)
----------
- ---------
Net cash used by investing activities.... -
(9,511)
----------
- ---------
Financing Activities:
Repayment of notes payable................... (5,944)
(5,384)
Increase (decrease) in Loan from shareholder. 70,268
90,685
Issuance of common stock for cash............ 25,000
- -
----------
- ---------
Net cash provided by financing activities 89,324
85,301
----------
- ---------
(Decrease) Increase in Cash................... (5,573)
1,259
Cash at beginning of period................... 9,605
14,021
----------
- ---------
Cash at end of period......................... $ 4,032 $
15,280
==========
=========
Supplemental cash flows information:
Cash paid for:
Interest..................................... $ 2,580 $
2,398
Taxes........................................ $ - $
- -
PAGE
<PAGE> 7
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996
NOTE 1 - ORGANIZATION
Dry Dairy International, Inc. (The Company) was incorporated under the laws of
the state of Utah on March 6, 1987. The Company was organized 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 foods.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method: The Company's financial statements are prepared using the
accrual method of accounting. The Company has a calendar fiscal year end.
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.
Cash and cash equivalents: Cash equivalents include short-term, highly liquid
investments with maturities of three months or less at the time of
acquisition.
Gain or 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.
Inventories: Inventory are stated at the lower of cost or market.
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.
Provision for taxes on income: At December 31, 1996, the Company had 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.
Estimates: 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.
Loss from Discontinued Operations: The Company has discontinued all yogurt
operations and is now focusing on the pasta operations. The loss from
discontinued operations for the year ended December 31, 1996, including sales
of $116,131 as well as costs of $160,136 resulting in a net loss from
discontinued operations of $44,005 for the year ended December 31, 1996.
<PAGE> 8
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable: Accounts receivable are shown net of the allowance for
doubtful accounts of $500 and $500 at March 31, 1997 and December 31, 1996.
Concentrations 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
issue to 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 for up to $250,000 to
meet the Company's current operating needs.
NOTE 4 - INVENTORIES
Inventories are comprised of the following at March 31, 1997 and December 31,
1996 respectively:
Raw materials $14,713 $16,157
Packaging & other 56,556 41,189
Finished goods 13,271 30,764
------- -------
$84,540 $88,110
======= =======
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at March 31, 1997 and
December 31, 1996 respectively:
Machinery and equipment $ 167,045 $ 167,045
Vehicle 27,715 27,715
Furniture and fixtures 27,100 27,100
Leasehold improvements 13,908 13,908
--------- ---------
235,768 235,768
Less accumulated depreciation (147,485) (137,522)
--------- ---------
Property and equipment, net $ 88,283 $ 98,246
========= =========
PAGE
<PAGE> 9
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 March 31, 1997 and
December 31, 1996 respectively are:
1997 $ 35,019 $ 46,692
1998 48,206 48,206
1999 49,732 49,732
2000 8,331 8,331
-------- --------
$141,288 $152,961
======== ========
NOTE 7 - NOTES PAYABLE
Long-term debt is comprised of the following:
March 31, 1997 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 $ 7,279 $ 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 $11,146 $ 12,862
------- --------
Total notes payable $18,425 $ 24,367
Less current maturities 12,809 16,889
------- --------
Total Long-term debt $ 5,616 $ 7,478
======= ========
The scheduled maturities of long-term debt at March 31, 1997 and December 31,
1996 are as follows:
1997 $10,947 $16,889
1998 5,992 5,992
1999 1,486 1,486
------- -------
Total long-term debt $18,425 $24,367
======= =======
NOTE 8 - STOCK TRANSACTIONS
On March 15,1997 the Company issued 333,333 shares of stock valued at $0.075
per share for cash.
<PAGE> 10
NOTE 9 - LINE OF CREDIT - RELATED PARTY
A shareholder of the Company has agreed to provide a line of credit to the
Company of up to $250,000 for the purpose of purchasing raw material inventory
and the direct costs related thereto. The line of credit bears interest a 8%
per annum on the average monthly balance. The balance owed on the line of
credit is $70,268 at March 31, 1997 and $-0- at December 31, 1996.
NOTE 10 - RELATED PARTY TRANSACTIONS
In addition to the shares issued to acquire Lombardo's the Company assumed a
payable to the former shareholders of Lombardo's. The payable is unsecured,
and is properly classified as a current liability. At March 31, 1997 and
December 31, 1996 respectively the balance due to the shareholders was $13,835
and $15,128.
NOTE 11 - SUBSEQUENT EVENT
The Company has made the decision to enter into the specialty breads market.
The Company has signed an intent to purchase the specialty bread making
equipment and the distribution rights of an existing specialty bread making
company. The Company expects the terms of the purchase to be finalized in the
first half of 1997. In conjunction with this purchase, the Company has created
two new subsidiaries: Tulip Bakery, Inc. and NGU Distribution, Inc.
PAGE
<PAGE> 11
NOTE 12 - STOCK OPTION PLANS
The Company has granted stock options pursuant to the various stock options
plans referred to in the table below:
1995 1996
------------------------- ---------------------------
Non-Qualified Incentive Non-Qualified Incentive
Stock Option Stock Option Stock Option Stock Option
Plan Plan Plan Plan
------------- ------------ ------------- ------------
Outstanding, December
31, 1994 - - - -
Options Authorized 1,500,000 1,500,000 - -
Options Issued During
Fiscal Year 1995 955,000 - - -
--------- --------- --------- ---------
Unissued at December
31, 1995 545,000 1,500,000 - -
Options Canceled
April 1996 (800,000) - - -
Options Issued April
1996 net of non-
performance
cancellations 560,000 - 2,500,000 5,050,000
Options Exercised
July, August and
September 1996 (250,000) - -
- -
Options Exercised
October through
December, 1996 (300,000) - - -
--------- ---------- --------- ---------
Unissued at March 31,
1997 785,000 1,500,000 - -
========= ========= ========= =========
NOTE 13 - DEPOSITS
The company incurred expenses in regard to the purchase of certain assets and
distribution routes of the Florida based Tulip Pita Bread Center. The purchase
will be completed in the second quarter of 1997.
March 31, 1997 December 31, 1996
-------------- -----------------
Rent Deposit $ 7,291 $ 7,291
Florida Power & Light Deposit 1,420 1,420
Deposit on purchase of sealing machine 242 242
Deposit on Pita Bread Equipment 69,395 -
-------- --------
$ 78,349 $ 8,953
======== ========
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The Company develops, manufactures, and markets specialty pasta products
to gourmet restaurants and wholesale food service distributors. Although the
Company is producing product for sale, it does not at this time have
substantial assets to support significant future development, manufacturing,
and marketing of these products without additional working capital. Due to
the lack of assets and working capital, the Company financial statements
contain a "going concern" modification that places into question the Company's
ability to continue without substantial increases in revenue or additional
equity capital.
In October 1995, the Company completed the sale of a controlling interest
in the Company to Mr. Phil Lacerte of Dallas, Texas. Mr. Lacerte is a
principal owner and executive vice president of Lacerte Software Corporation,
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's restricted common stock, constituting 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 operational needs. Interest on the line of
credit is eight percent (8%) per annum. A total of $70,268, including accrued
interest, has been advanced to the Company against this line of credit as of
March 31, 1997.
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.
The Company has plans to enter the specialty bread business with its
purchase of certain assets and distribution routes of the Florida based Tulip
Pita Bread Center. This purchase should be completed in the second quarter of
1997. (Also see Note 13)
The Company has received its initial purchase order on its new 98% Fat
Free microwavable pasta "Ultimate Dinners for Two". The order was from BJ's
Wholesale Club and was sold by U.S. Marketing, a national sales-marketing
organization with business contacts with major food retail outlets
throughout the United States. The Company's Fat Free "Ultimate Dinners for
Two" program consists of five different dinners, including: Cheese Ravioli,
Seafood Ravioli, Vegetable Ravioli, Seafood Jumbo Shells, and Cheese Jumbo
Shells.
Liquidity and Capital Resources
At March 31, 1997, the Company had current assets of $240,583, and
current liabilities of $186,138, resulting in working capital of $54,445.
During the first quarter of 1997, the Company increased the borrowing against
its line of credit, including interest, by $70,268. interest. The company
also received $25,000 from the issue of 333,000 shares of its' common stock.
PAGE
<PAGE> 13
Although management anticipates improvement in revenue during the
remainder of the year, the Company will continue to rely on both debt and
equity financing of the Company's operations. The Company is hopeful that the
extension of the line of credit with Mr. Lacerte, will allow the Company to
increase marketing efforts, thus resulting in increased sales revenues.
The Company will continue to seek other sources of financing in addition
to its existing arrangements. However, due to the Company's overall financial
condition, the Company does not anticipate substantial, if any, additional
debt financing.
Results of Operations
In the first quarter of 1997, the Company recorded sales of $60,653,
compared to sales of $69,110 for the same prior year period, a decrease of
12%.
The Company continues to show reductions of its operating expenses
during the first quarter of 1997. The operating expenses currently being
incurred are focused primarily on sales and marketing efforts and programs in
an attempt to attract new buyers for the Company's food service products and
its new 98% Fat Free microwavable "Ultimate Dinners for Two" program.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
PAGE
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DRY DAIRY INTERNATIONAL, INC.
[Registrant]
Dated: May 7, 1997
/S/ Robert L. Matzig, President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814070
<NAME> DRY DAIRY INTERNATIONAL INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,032
<SECURITIES> 0
<RECEIVABLES> 73,661
<ALLOWANCES> 0
<INVENTORY> 84,540
<CURRENT-ASSETS> 240,582
<PP&E> 235,768
<DEPRECIATION> (147,485)
<TOTAL-ASSETS> 328,867
<CURRENT-LIABILITIES> 186,138
<BONDS> 0
0
0
<COMMON> 1,768,093
<OTHER-SE> (1,630,980)
<TOTAL-LIABILITY-AND-EQUITY> 328,867
<SALES> 60,654
<TOTAL-REVENUES> 62,553
<CGS> 54,154
<TOTAL-COSTS> 100,387
<OTHER-EXPENSES> 123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,575
<INCOME-PRETAX> (94,666)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,666)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
