<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, 1997
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[ ] 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
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DRY DAIRY INTERNATIONAL, INC.
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(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
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (941) 768-3555
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Securities registered pursuant to section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
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Securities registered pursuant to section 12(g) of the Act:
None
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(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: $1,426,482
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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 May 1, 1998, the aggregate market value of the voting stock held by
nonaffiliates was $745,609 (based on 21,303,116 shares held by nonaffiliates
multiplied by a bid price of $0.035 per share).
As of May 1, 1998, the Registrant had 45,995,688 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.
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TABLE OF CONTENTS
PART I PAGE
- ------ ----
ITEM 1. DESCRIPTION OF BUSINESS....................................... 4
ITEM 2. DESCRIPTION OF PROPERTIES..................................... 7
ITEM 3. LEGAL PROCEEDINGS............................................. 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 7
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS...... 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION..... 9
ITEM 7. FINANCIAL STATEMENTS.......................................... 11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................... 11
PART III
- --------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT........................................................... 11
ITEM 10. EXECUTIVE COMPENSATION........................................ 12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................ 14
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 15
PART IV
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ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K........ 16
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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 3,000,000
shares of the Company'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 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'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.
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Effective February 15, 1995, the Company acquired all of the issued and
outstanding shares of Lombardo's Pastaria, Inc., a Florida corporation
("Lombardo's") through the exchange of 195,122 shares of the Company's Common
Stock, par value $0.001 per share (the "Common Stock"), for all of the issued
and outstanding shares of Lombardo's capital stock, all pursuant to the terms
of an agreement dated February 2, 1995 (the Lombardo's Agreement"). Pursuant
to the terms of the Lombardo's Agreement, 1,000 shares of Lombardo's issued
and outstanding capital stock were converted on a pro rata basis into $100,000
of the Company's Common Stock, which value was determined by the ten day
average closing price of the Company'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's Common Stock to the principal
shareholders of Lombardo's.
On March 15, 1997, the company purchased the assets of Tulip Pita Bread
Center, a Florida corporation in the business of producing specialty breads
and distributing these fresh-baked products to supermarkets and institutions.
Pursuant to the terms of the purchase the Company issued 2,800,000 shares of
restricted Common Stock and $165,000 cash to be paid over 15 months. The
company formed two operating subsidiaries, Tulip bakery, Inc. and NGU
Distribution, Inc., to manage the new business.
In November 1997, the Company paid $250,000 cash to A&C Bakeries, Inc. of
Miami, Florida for the exclusive distribution rights for all fresh-baked
products for the Florida and Georgia markets. Management estimated the annual
sales to be in excess of $7,000,000 from the deal. In January of 1998, A&C
terminated the contract without cause. The Company is currently pursuing it's
legal remedies for the return of funds invested and damages from A&C.
The Company'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's, the Company manufactures and markets
fat free and traditional pasta products and dishes to restaurants and
wholesale food service distributors. Lombardo'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 tortellini, 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. In 1997, the
Company received one order on the dinner line from a wholesale club and booked
approximately $60,000 in gross revenue. There was no reorder and management
does not feel there is a viable opportunity for the Company with these
products.
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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'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.
As for finished products distributed by NGU, there are instances whereby
a supplier can terminate it's relationship with the distributor and NGU would
be forced to find another manufacturer for finished product.
During 1997, the Publix Supermarket chain was the Company's largest bread
customer and accounted for approximately 75% of the Company total sales. No
other customer or distributor accounted for more than 20% of sales in 1997.
Proprietary Formulas and Copyrights
The Company believes that although copyright protection is important,
such factors as product formulation are equally important. The Company
attempts to preserve its product formulations through trade secrets and
nondisclosure 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 and specialty bread 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's specialty pasta and Tulip Bakery specialty bread food lines are
subject to state of Florida, Department of Health regulations regarding
labeling and product composition. If Lombardo'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.
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Employees
The Company currently employs approximately 24 persons (one executive, an
accountant, two supervisor-chefs, one production manager, four administrative
workers and 15 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 4% increase in each succeeding year, during
the term of the lease.
In 1997, the Company successfully renegotiated the lease to eliminate the
4% annual increases. In November 1997, the Company issued 500,000 shares to
its landlord to eliminate $51,000 of back rent and leasehold improvements owed
by Tulip Bakery to the landlord.
ITEM 3. LEGAL PROCEEDINGS
The Company is preparing to file an arbitration suit in accordance with
the terms of it's purchase agreement with A&C Bakeries, Inc. The Company is
seeking to have it's $250,000 up-front purchase price returned as well as
other start-up costs and damages from the termination of the agreement without
cause by A&C.
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, 1997. In the first
quarter of 1998, two items were submitted for approval and accordingly
approved, 1) an increase in the Company's authorized shares to 150,000,000
from 50,000,000 and 2) the authorization to effect a name change from Dry
Dairy International, Inc. to Dryden Industries, Inc.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 May 1, 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, 1995 High Bid Low Bid
- ----------------------------------- -------- -------
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
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First Quarter $0.12 $0.08
Second Quarter $0.16 $0.08
Third Quarter $0.14 $0.08
Fourth Quarter $0.12 $0.07
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 May 1, 1998, the Company had approximately 351
shareholders of record based on information provided by the Company's transfer
agent.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operation
The Company develops, manufactures and markets specialty pastas and
breads to gourmet restaurants and wholesale food service distributors and
supermarkets. 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 s
audited financial statements contain a "going concern" disclosure which
places into question the Company 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 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. During the
fiscal year ended December 31, 1996, $187,363 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.
During the fiscal year ended December 31, 1997, the line of credit was
increased to $550,000 and $520,713 of credit and interest was extended under
the terms of the line of credit agreement. This balance is due and owing at
the end of the fiscal year.
Liquidity and Capital Resources
At December 31, 1997, the Company had total current assets of $206,433
and total current liabilities of $783,318, resulting in a working capital
deficit of $(576,885), as opposed to current assets of $180,117 and total
current liabilities of $64,106 at December 31, 1996, resulting in a working
capital surplus of $116,011.
During 1997, the Company issued 6,600,000 shares of its common stock for
net proceeds of $475,000 from the sales of restricted shares and the exercise
of outstanding options and warrants at an average of $0.07 per share. In
addition, the Company issued 2,800,000 restricted shares for the purchase of
equipment at an average price of $0.10 and also issued 500,000 shares under an
S-8 registration for the retirement of debt at an average price of $0.10 per
share. While during 1996, the Company raised a total of $479,165 in cash from
the sale of private placement shares, ranging in price from $0.03 to $0.07 per
share, plus the issuance of 125,050 shares for the purchase of equipment at a
price of $0.08. Most additional working capital received by the Company will
be utilized to develop additional markets and expand sales of the Company's
products.
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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's products would in turn require hiring a limited number of additional
hourly employees to meet production requirements.
The Company will continue to seek other sources of financing. Due to the
Company's financial condition it does not anticipate receiving substantial, if
any, debt financing.
Results of Operations
The Company experienced a net loss of $1,055,408 during fiscal year 1997,
up from a loss of $193,142 during fiscal year 1996. At December 31, 1997, the
Company had an accumulated deficit of $2,591,722, in large part attributed to
bad investments prior to the acquisitions of Dry Dairy and Lombardo's
Pastaria, plus the operating losses incurred by the Company during fiscal
year 1995 and 1996. 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 $118,218, resulting in a net loss
from discontinued operations of $44,005 and $81,912 for the years ended
December 31, 1996 and 1995, respectively.
In April of 1997, the Company closed an asset purchase transaction with
privately held Tulip Pita Bread Center II to purchase a production line for
the manufacturing of pita bread and sweet bread loaves. The equipment is
located in Ft. Myers, FL. In addition, the Company has purchased the
distribution rights and assumed control of the direct store distribution
system in place for "Tulip" bakery products. The Company has created two new
subsidiaries, Tulip Bakery, Inc. to produce fresh baked goods for distribution
and NGU Distribution, Inc. to manage the distribution of Tulip Bakery
products.
Currently, the Tulip products are distributed via direct store delivery
to approximately 300 supermarkets in Florida with plans to expand into Georgia
in 1998.
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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.
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
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'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'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 medallist on three occasions.
<PAGE> 12
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'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.
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.
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 $100,000 during such period (as determined at December 31, 1997, the
end of the Company's last completed fiscal year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restricted
Name and Annual Stock Options LTIP All other
Principal Position Year Salary Bonus($) Compensation Awards /SARs Payout Compensation
- ------------------ ---- ------ -------- ------------ ------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Matzig 1997 $51,000 -0- -0- -0- -0- -0- -0-
President & CEO 1996 $60,000 -0- -0- -0- -0- -0- -0-
(from September 1995 $13,197 -0- -0- -0- -0- -0- -0-
1995)
</TABLE>
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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's subsidiary,
Lombardo'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's subsidiary,
Lombardo'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.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of May 1, 1998, 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 45,995,688 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 36.34
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 - -
Common Ranier Drygala, Director and
Officer Lombardo's (2) D - -
Common Robert L. Matzig, Pres. & CEO D 169,050 0.37
Common Amikan Grosman, Manager D 2,500,000 5.44
All Officers and Directors
as a Group (5 person) D 19,387,400 42.15
(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> 15
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'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 8% per annum.
In April of 1997, the Company purchased equipment and distribution routes
from Tulip Pita Bread II ("Tulip"). The agreement to purchase the equipment
line calls for the Company to pay $165,000 and 1,600,000 shares of its
restricted common stock to the owners of the equipment line. In a separate
purchase agreement, Tulip's distribution rights and delivery system were
purchased for 1,200,000 restricted shares. In addition, the Company assumed
up to $45,000 of existing Tulip debt. The owners of Tulip are now employees
of the Company.
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> 16
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 Sheet as of December 31, 1997....................... 18
Consolidated Statements of Operations for the years ended
December 31, 1997 and 1996............................................. 19
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997 and 1996........................................ 20
Consolidated Statements of Cash Flows for the years ended
December 31, 1997 and 1996.............................................. 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, 1997.
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: May 24, 1999 By /S/Philip R. Lacerte, Chairman
Date: May 24, 1999 By /S/ Robert L. Matzig, President and CEO
<PAGE>
<PAGE> 17
[Jones, Jensen & Company Letterhead]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Dry Dairy International, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Dry Diary
International, Inc. and Subsidiaries as of December 31, 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years ended December 31, 1997 and 1996. 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 consolidated financial position
of Dry Dairy International, Inc. and Subsidiaries as of December 31, 1997 and
the consolidated results of their operations and their cash flows for the
years ended December 31, 1997 and 1996 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 to 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
Salt Lake City, Utah
May 27, 1998
<PAGE>
<PAGE> 18
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31,
1997
------------
[S] [C]
CURRENT ASSETS:
Cash $ -
Accounts receivable, net of allowance (Note 2) 120,275
Inventory (Note 4) 86,158
---------
Total Current Assets 206,433
---------
PROPERTY, PLANT AND EQUIPMENT (Note 5) 626,170
---------
TOTAL ASSETS $ 851,596
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 19,162
Accounts payable 110,975
Notes payable - current portion (Note 7) 5,886
Taxes payable 10,743
Payable - related party (Note 10) 115,839
Line of credit - related party (Note 9) 520,713
---------
Total Current Liabilities 783,318
---------
LONG-TERM DEBT
Notes payable (Note 7) 2,107
---------
TOTAL LIABILITIES 785,425
---------
STOCKHOLDERS' EQUITY:
Stock authorized 50,000,000 shares at $0.001
par value; 45,995,688 shares issued and
outstanding 45,996
Additional paid-in capital 2,611,897
Accumulated deficit (2,591,722)
---------
Total Stockholders' Equity 66,171
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 851,596
=========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 19
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
------------------------------
1997 1996
----------- ------------
REVENUES
Sales $ 1,426,482 $ 260,075
Cost of Sales 1,114,573 188,368
------------ ------------
Gross Profit 311,909 71,707
------------ ------------
EXPENSES:
General and Administrative 1,013,425 170,072
Depreciation 71,145 35,622
------------ ------------
Total Expenses 1,084,570 205,694
------------ ------------
(Loss) from Operations (772,661) (133,987)
------------ ------------
OTHER INCOME (EXPENSES)
Bad debt expense (252,021) -
Other income 4,148 3,939
Interest expense (13,534) (17,989)
Other expense (21,340) (1,100)
------------ ------------
Total Other Income (Expenses) (282,747) (15,150)
------------ ------------
LOSS FROM CONTINUING OPERATIONS (1,055,408) (149,137)
------------ ------------
LOSS FROM DISCONTINUED OPERATIONS - (44,005)
------------ ------------
NET (LOSS) $ (1,055,408) $ (193,142)
============ ============
NET (LOSS) PER SHARE $ (0.02) $ (0.01)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 42,903,270 30,173,791
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<PAGE> 20
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
---------- --------- --------- -----------
<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 3,800,000 3,800 281,200 -
Common stock issued for equipment
at $0.075 per share 2,800,000 2,800 277,200 -
Common stock issued for cash at $0.10 per share 1,000,000 1,000 99,000 -
Common stock issued for cash at $0.05 per share 1,800,000 1,800 89,000 -
Common stock issued for debt payment
at $0.10 per share 500,000 500 50,500 -
Reverse cancelled shares 800,000 800 107,200 -
Net loss for year ended December 31, 1997 - - - (1,055,048)
---------- --------- --------- ----------
Balance, December 31, 1997 45,995,688 $ 45,996 $2,611,897 $(2,591,722)
========== ======== ========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
<PAGE> 21
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
---------------------------
1997 1996
----------- -----------
OPERATING ACTIVITIES:
Net loss $(1,055,408) $ (193,142)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Common stock issued for rent 51,000 -
Common stock issued for services 108,000 -
Loss on deposit allowance 250,000 -
Cancellation of stock options - (108,000)
Depreciation 71,145 35,622
Changes in operating assets and liabilities:
(Increase) in accounts receivable (46,828) (58,490)
(Increase) in inventory (63,048) (76,851)
(Increase) decrease in deposits and other
receivables (260,039) 3,889
Increase (decrease) in accounts payable and
other current payables 108,790 (9,988)
------------ -----------
NET CASH USED BY OPERATING ACTIVITIES (836,388) (406,960)
------------ -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (153,356) (48,762)
Investment in subsidiary - -
------------ -----------
NET CASH USED BY INVESTING ACTIVITIES (153,356) (48,762)
------------ -----------
FINANCING ACTIVITIES:
Proceeds from notes payable - related party 520,713 -
Repayment of Line-of-credit - related party (16,374) -
Repayment of notes payable - (27,859)
Issuance of common stock for cash 475,800 479,165
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 980,139 451,306
------------ -----------
INCREASE (DECREASE) IN CASH (9,605) (4,416)
CASH AT BEGINNING OF YEAR 9,605 14,021
------------ -----------
CASH AT END OF YEAR $ - $ 9,605
============ ===========
Supplemental Cash Flows Information:
Cash paid for:
Interest $ 13,534 $ 17,990
Taxes $ - $ -
NON CASH FINANCING ACTIVITIES:
Expenses paid on behalf of the Company
By Shareholders $ - $ -
Common stock issued for equipment $ 280,000 $ -
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, 1997 and 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 and low-fat pasta foods as well as
specialty baking products.
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 elected a calendar 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 loss per share of common stock are based on the weighted
average number of shares outstanding during the period of the financial
statements.
d. Provision for Taxes on Income
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $2,590,000 that may be offset against future taxable income
through the year 2012. No tax benefit has been reported in the financial
statements, as the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of
the loss carryforwards 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 subsidiaries Lombardo's Pastaria,
Inc., NGU Distribution, Inc. and Tulip Bakery, Inc. All significant
intercompany transactions have been eliminated.
f. Inventories
Inventories are stated at the lower of cost or market.
g. Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided on a straight-line basis over the estimated useful
lives of the related assets.
<PAGE>
<PAGE>23
DRY DAIRY INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Property and Equipment (Continued)
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.
h. 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.
i. Loss from Discontinued Operations
The Company has discontinued all yogurt operations and is now focusing on the
pasta and bread operations. The loss from discontinued operations for the
year ended December 31, 1996 includes 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.
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.
j. Accounts Receivable
Accounts receivable are shown net of the allowance for doubtful accounts of
$2,140 and $500 at December 31, 1997 and 1996.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using 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 Philip 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. The line-of-credit has since
been extended to meet current needs.
<PAGE>24
DRY DAIRY INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 4 - INVENTORIES
Inventories are comprised of the following at December 31, 1997:
Raw materials $ 12,341
Packaging and other supplies 32,941
Finished goods 40,876
------
Total inventory $ 86,158
======
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 1997:
Machinery and equipment $620,673
Vehicle 27,715
Furniture and fixtures 35,234
Leasehold improvements 151,215
-------
Sub-Total property and equipment 834,837
-------
Less accumulated depreciation (208,667)
-------
Property and equipment, net $626,170
=======
NOTE 6 - LEASE COMMITMENT
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:
1998 $ 48,206
1999 49,732
2000 8,331
2001 -
-------
Total $106,269
=======
<PAGE>
<PAGE>25
DRY DAIRY INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 7 - NOTE PAYABLE
Long-term debt is comprised of the following at December 31, 1997:
Installment note payable to a financial institution,
collateralized by vehicle, interest at 10.75%,
monthly payments of $538 including interest;
final payment due May 1999. $ 7,993
-----
Total note payable 7,993
Less current maturities (5,886)
-----
Long-term debt $ 2,107
=====
The scheduled maturities of long-term debt at December 31, 1997 are as
follows:
1998 $ 5,886
1999 2,107
-----
Total long-term debt $ 7,993
=====
NOTE 8 - STOCK TRANSACTIONS
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 Non
Qualified Stock Option Plan and a 1995 Incentive 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 800,000 shares of stock which were to
be returned to the Company by the former president. The cancellation was
reversed in 1997 when the shares were not returned and the Company recorded
the loss.
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 issued according to 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.
During the year ended 1997, the Company issued 6,600,000 shares for cash at
the average price of $0.07 per share for net proceeds of $475,800. The
Company also issued 500,000 shares for the payment of rent valued at $51,000.
<PAGE>
<PAGE> 26
DRY DAIRY INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 1997 and 1996
NOTE 8 - STOCK TRANSACTIONS (Continued)
In April 1997, the Company issued 2,800,000 shares of stock to acquire the
assets of Tulip Pita Bread Center II. The net assets were valued at $250,000,
which approximates the predecessor cost to the seller.
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 $550,000 for the purpose of purchasing raw material inventory
and the direct costs related thereto. The line of credit bears interest at 8%
per annum on the average monthly balance. The balance owed on the line of
credit is $520,713 at December 31, 1997.
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 December 31, 1997 the
balance due to the shareholders was $115,839.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000814070
<NAME> DRY DAIRY INTERNATIONAL INC
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 120,275
<ALLOWANCES> 0
<INVENTORY> 86,158
<CURRENT-ASSETS> 206,433
<PP&E> 834,837
<DEPRECIATION> (208,667)
<TOTAL-ASSETS> 851,596
<CURRENT-LIABILITIES> 783,318
<BONDS> 0
0
0
<COMMON> 2,657,893
<OTHER-SE> (2,591,722)
<TOTAL-LIABILITY-AND-EQUITY> 851,596
<SALES> 1,426,482
<TOTAL-REVENUES> 1,430,630
<CGS> 1,114,573
<TOTAL-COSTS> 1,084,570
<OTHER-EXPENSES> 273,361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,534
<INCOME-PRETAX> (1,055,408)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,055,408)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
