<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, 1998
[ ] 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.)
1133 4th Street, Suite 304, Sarasota, FL 33236
----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(941) 362-0470
----------------------------------------------------
(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 [ ] No [x] 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 45,995,688 shares of common stock, par value $0.001, at March 31,
1998.
<PAGE>
<PAGE> 2
PART F/S
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, 1998, and
the related audited balance sheet of the Company as of December 31, 1997, and
the related unaudited statements of operations, and cash flows for the three
month period ended March 31, 1998 and 1997, and the unaudited statement of
stockholders' equity for the period from December 31,1996 through March 31,
1998, are attached hereto and incorporated herein by this reference.
Operating results for the three months ended March 31, 1998, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1998.
<PAGE>
<PAGE> 3
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, DECEMBER 31,
1998 1997
(Unaudited) (Audited)
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 0 $ 0
Accounts receivable, net of allowance.(Note 2) 161,397 120,275
Inventory.(Note 4) 71,730 86,158
Deposits and other receivables 29,437 18,993
------- -------
Total current assets 262,564 225,426
------- -------
Property and Equipment, Net.(Note 5) 608,567 626,170
------- -------
Total Assets $ 871,131 $ 851,596
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Cash overdraft $ 18,489 $ 19,162
Accounts payable 158,309 110,975
Notes payable - current.(Note 7) 4,361 5,886
Taxes payable 18,626 10,743
Payable - related party (Note 10) 133,468 115,839
Line of credit - related party (Note 9) 599,683 520,713
------- -------
Total current liabilities 932,936 783,318
Long Term Debt
Notes payable - (Note 7) 2,107 2,107
------- -------
Total Liabilities 935,043 785,425
------- -------
Stockholders' Equity:
Stock authorized 50,000,000 shares at
$0.001 par value; 45,995,688 shares
issued and outstanding. 45,996 45,996
Additional paid-in capital 2,611,897 2,611,897
Accumulated deficit (2,721,805) (2,591,722)
--------- ---------
Total Stockholders' Equity (63,912) 66,171
--------- --------
Total Liabilities and
Stockholders' Equity $ 871,131 851,596
======= =======
</TABLE>
<PAGE>
<PAGE> 4
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Revenues:
Sales $ 527,628 $ 60,654
Cost of sales 330,006 54,154
------- ------
Gross profit 197,622 6,520
Operating Expenses:
Selling, general, and
administrative 302,349 90,425
Depreciation 21,000 9,962
------- -------
Total operating
Expenses 323,349 100,387
------- -------
Net loss from
operations (125,727) (93,867)
Other income (expenses):
Interest (10,414) ( 2,575)
Gain on sale of assets
Rental Income 11,096 1,899
Return of common stock - -
Other expenses (5,039) (123)
------- -------
Total other income
(expense) (4,357) (799)
------- ------
Net Income (Loss) (130,084) (94,666)
======= ======
Net gain (loss)
per share $ (0.00) $ (0.00)
==== ====
Weighted average
number of shares
outstanding. 43,695,688 35,295,688
========== ==========
</TABLE>
<PAGE>
<PAGE> 5
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional
Common Stock
Paid-in Accumulated
Shares Par Value Capital Development
Stage
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Balances,
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 $0.010
per share 2,800,000 2,800 277,200 -
Common stock issued for
cash at $0.100 per share 1,000,000 1,000 99,000 -
Common stock issued for
cash at $0.050 per share 1,800,000 1,800 89,000 -
Common stock issued for
debt at $0.10 per share 500,000 500 50,500 -
Reverse canceled shares 800,000 800 107,200 -
Net loss for the year
ended December 31, 1997 - - - $(1,055,408)
---------- ------ --------- ---------
Balance,
December 31, 1997 45,995,688 $ 45,996 $2,611,897 $(2,591,722)
========== ====== ========= =========
Net loss for the period
ended March 31, 1998 - - - (130,083)
Balance, March 31, 1998 45,995,688 $ 45,996 $2,611,897 $(2,721,805)
========== ====== ========= =========
</TABLE>
<PAGE>
<PAGE> 6
DRY DAIRY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31
1998 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Operating Activities:
Net gain (loss) $ (130,084) $ (94,666)
Adjustments to reconcile net
gain (loss) to net cash
provided by operating activities:
Depreciation 21,000 9,962
(Increase) decrease in
accounts receivable (41,122) (213)
(Increase) decrease in
inventory 14,428 3,570
(Increase) decrease in
other current assets (10,444) (69,395)
Increase (decrease) in
cash Overdraft (673) -
Increase (decrease) in
accounts payable 47,335 56,123
Increase (decrease) in
accrued taxes 7,883 (278)
-------- -------
Net cash used by
operating activities (91,677) (94,897)
------ ------
Investing Activities:
Purchase of property and equipment (3,397) -
----- ------
Net cash used by
investing Activities (3,397) -
----- ------
Financing Activities:
Increase in notes payable (1,526) (5,944)
Increase (decrease) in Loan
from shareholder 96,600 70,268
Issuance of common stock - 25,000
------ ------
Net cash provided by
financing activities 95,074 89,324
------ ------
(Decrease) Increase in Cash 0 (5,573)
Cash at beginning of period 0 9,605
------ -----
Cash at end of period $ (0) $ 4,032
====== =====
Supplemental cash flows information:
Cash paid for:
Interest $ 10,414 $ 2,580
Taxes $ - $ -
</TABLE>
<PAGE> 7
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 AND DECEMBER 31, 1997
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 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.
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.
Provision for taxes on income: At December 31, 1997, the Company had net
operating loss carry forwards totaling 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 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.
Principles of consolidation: The accompanying financial statements
include the accounts of Dry Dairy International, Inc. and its wholly owned
subsidiaries Lombardo's Pastaria, Inc., Tulip Bakery, Inc. and NGU
Distribution, Inc. All significant intercompany transactions have been
eliminated.
Inventories: Inventories 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.
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.
<PAGE>
<PAGE> 8
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 AND DECEMBER 31, 1997
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
Loss from Discontinued Operations: The Company has discontinued all
yogurt operations and is now focusing on the pasta and bakery 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.
Accounts Receivable: Accounts receivable are shown net of the allowance
for doubtful accounts of $2,390 and $2,390 at March 31, 1998 and December 31,
1997.
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 Philip Lacerte
of Dallas, Texas. The terms of the purchase agreement provided that the
Company issued 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 needs.
NOTE 4 - INVENTORIES
- --------------------
Inventories are comprised of the following at March 31, 1998 and December
31, 1997 respectively:
Raw materials $13,921 $12,341
Packaging & other 31,157 32,941
Finished goods 26,652 40,876
------ ------
$ 71,730 $86,158
====== ======
NOTE 5 - PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment consisted of the following at March 31, 1998 and
December 31, 1997 respectively:
Machinery and equipment $624,070 $620,673
Vehicle 27,715 27,715
Furniture and fixtures 35,234 35,234
Leasehold improvements 151,215 151,215
838,234 834,837
------- -------
Less accumulated depreciation (229,667) (208,667)
Property and equipment, net $608,567 $626,170
========= =========
<PAGE>
<PAGE> 9
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 AND DECEMBER 31, 1997
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, 1998 and
December 31, 1997 respectively are:
1998 48,206 48,206
1999 49,732 49,732
2000 8,331 8,331
------- -------
$106,269 $106,269
======= =======
NOTE 7 - NOTES PAYABLE
- -----------------------
Long-term debt is comprised of the following at March 31, 1998 and
December 31, 1997 respectively:
March 31 December 31
1998 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. $ 6,468 7,993
Total notes payable 6,468 7,993
----- -----
Less current maturities (4,361) (5,886)
Long-term debt $ 2,107 2,107
===== =====
The scheduled maturities
of long-term debt at March 31, 1998
and December 31, 1997 are as follows:
1998 $ 4,361 5,886
1999 2,107 2,107
----- -----
Total long-term debt $ 6,468 7,993
===== =====
NOTE 8 - STOCK TRANSACTIONS
- ----------------------------
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 $475,000. The
Company also issued 500,000 shares for the payment of rent valued at $51,000.
In April of 1997 the Company issued 2,800,000 shares of its restricted common
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.
<PAGE> 10
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 AND DECEMBER 31, 1997
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 $600,000 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 $599,683 at March 31, 1998 and $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 March 31, 1998 and
December 31, 1997 respectively the balance due to the shareholders was $10,343
and $10,343.
NOTE 11 - 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 31,1998 785,000 1,500,000 2,500,000 5,050,000
========= ========= ========= =========
<PAGE> 11
DRY DAIRY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 AND DECEMBER 31, 1997
NOTE 12 - ASSET PURCHASE
- -------------------------
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.
The agreement to purchase the equipment line calls for the Company to pay
$165,000 and 1,600,000 shares of it's 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 will assume up to $45,000 of existing Tulip debt.
<PAGE>
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Plan of Operation
- ------------------
The Company is in the specialty food manufacturing and distribution
business in the East and Southeast United States. The Company develops,
manufactures and markets a line of specialty frozen pasta items and fresh
baked pita and specialty bread items. In addition, the Company distributes
fresh baked goods in the Southeastern United States.
Although the Company is producing product for sale, it does not at this
time have substantial assets to support future development, manufacturing and
marketing of these products without additional working capital. Due to the
lack of assets and working capital, the Company's 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.
The Company has entered the specialty bread business as a manufacturer
and distributor with its purchase of certain assets and distribution routes of
the Florida based Tulip Pita Bread Center II.
In November of 1997, the Company purchased the exclusive distribution
rights for all fresh baked products produced by A&C Italian Bakery of Miami,
FL. With distribution routes already in place, the addition of the A&C line on
the Company's trucks it was felt would increase the profitability of each of
the routes.
The Company paid $250,000 cash for the exclusive rights to the A&C line.
In February of 1998, A&C terminated the agreement with the Company without
cause. The Company is at this time exploring it's options for legal remedies
concerning this matter.
Liquidity and Capital Resources
- --------------------------------
At March 31, 1998, the Company had current assets of $262,564 and
current liabilities of $932,936 resulting in working capital deficit
of $ 670,372.
During the first quarter of 1998, the Company increased the borrowing
against its line of credit, including interest, by $78,970.
Management anticipates the Company will continue to rely on both debt and
equity financing of the Company's operations. The adverse situation with A&C
Bakery has put additional cash flow pressure on the Company's operations. The
Company is hopeful that the extension of the line of credit with Mr. Lacerte,
will allow the Company to continue building revenues in hopes of future
profitability.
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
- ----------------------
During the three months ended March 31, 1998, the Company recorded
sales of $527,628, compared to sales of $ 60,654 for the same three month
period ended March 31, 1997. The increases in sales are due to the expansion of
the Company's business into the pita bread and sweet bread bakery business.
<PAGE> 13
Despite the increases in sales during the period, the Company had increased
operating expenses, $323,349 for the three month period ended March 31,1997,
a majority of which was associated with the Company's expansion into the
bakery products line and expenses currently being incurred on sales and
marketing efforts and programs in an attempt to attract new buyers for the
Company's products.
PART II
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.
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: July 28, 1999
/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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 190,834
<ALLOWANCES> 0
<INVENTORY> 71,730
<CURRENT-ASSETS> 262,564
<PP&E> 608,567
<DEPRECIATION> 0
<TOTAL-ASSETS> 871,131
<CURRENT-LIABILITIES> 932,936
<BONDS> 0
0
0
<COMMON> 2,657,893
<OTHER-SE> (2,721,805)
<TOTAL-LIABILITY-AND-EQUITY> 871,131
<SALES> 527,628
<TOTAL-REVENUES> 538,724
<CGS> 330,006
<TOTAL-COSTS> 323,349
<OTHER-EXPENSES> 5,039
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,414
<INCOME-PRETAX> (130,084)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (130,084)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
