Yocream International Inc · 10-K · For 10/31/99

Filed On 1/31/0   ·   SEC File 0-16787   ·   Accession Number 821572-0-4

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SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, DC  20549   
Form 10-K   
(Mark One)                                                                      
[X]     Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 1999.             

[ ]     Transition report pursuant to Section 13 or 15(d) of the Securities     
Exchange Act of 1934.                                               

Commission File Number:  0-16787                                                

   YOCREAM INTERNATIONAL, INC.
  (Exact name of registrant as
   specified in its charter)

Oregon                                          91-0989395
(State or other jurisdiction of                         (I.R.S. Employer        
incorporation or organization)                        Identification Number)    

5858 N.E. 87th Avenue                                      97220        
Portland, Oregon                                       (Zip Code)   
(Address of Principal                                                   
Executive Office)                                                     

(Registrant's telephone number, including area code): (503)256-3754             

Securities registered pursuant to Section 12(b) of the Act:                     

                                                Name of each exchange on
Title of each class                                     which registered        
None                                              Not Applicable  

Securities registered pursuant to Section 12(g) of the Act:                     

  Common Stock
  (Title of Class)

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), and (2) has been subject to such filing         
requirements for the past 90 days.                                              

YES   X        NO     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not 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-K, or any amendment to    
this Form 10-K.  [X ]                                                           

The aggregate market value of voting stock held by non-affiliates of the        
registrant was approximately $5,317,240 at January 19, 2000, based upon the     
average bid and asked prices of the common stock on that date.                  

At January 19, 2000 there were 2,296,393 shares of the registrant's common stock
outstanding.                                                                    

Documents incorporated by reference:                                            

                                      Part of Form 10-K into
Document                                          which Incorporated            

Portions of Proxy Statement for                                                 
2000 Annual Meeting of Shareholders                    Part III                 

TABLE OF CONTENTS                                         

PART I                                                                 Page     

Item 1. BUSINESS.....................................................4          
Item 2. PROPERTIES..................................................12          
Item 3. LEGAL PROCEEDINGS...........................................12          
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY                             
      HOLDERS.....................................................12

PART II                                                                         

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND                               
      RELATED STOCKHOLDERS MATTERS................................13
Item 6.     SELECTED FINANCIAL DATA.....................................14      
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF                                 
FINANCIAL CONDITION AND RESULTS OF                      
      OPERATIONS..................................................15
Item 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY                              
      DATA........................................................19
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS                           
      ON ACCOUNTING AND FINANCIAL DISCLOSURE......................19

PART III                                                                        

Item 10.        DIRECTORS AND EXECUTIVE OFFICERS OF THE                         
      REGISTRANT..................................................19
Item 11.    EXECUTIVE COMPENSATION......................................19      
Item 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                        
      OWNERS AND MANAGEMENT.......................................19
Item 13.        CERTAIN RELATIONSHIPS AND RELATED                               
      TRANSACTIONS................................................19

PART IV                                                                         

Item 14.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES,                        
      AND REPORTS ON FORM 8-K.....................................20

SIGNATURES..............................................................23      

PART I        

Item 1:  BUSINESS                                                               

General                                                                         

YOCREAM INTERNATIONAL, INC.  (the  "Company") is a corporation organized under  
the laws of the state of Oregon in 1977 originally under the name the Yogurt    
Stand, Inc.  The Company changed its name later that year to International      
Yogurt Company, Inc.  In 1999, the Company changed its name to its present name.
The Company makes, markets and sells frozen yogurt, sorbet, smoothie, and ice   
cream products in a variety of premium, low-fat, and nonfat flavors in either   
non-organic or organic formulations.  The Company markets and sells these       
products to and through a variety of businesses and outlets, including super-   
markets, grocery stores, convenience stores, restaurants, hospitals, school     
district food services, military installations, yogurt shops, fast food chains, 
discount club warehouses, and other types of outlets.  The Company's primary    
product is YOCREAM(registered trademark)  frozen yogurt, which is distributed   
and sold nationwide.  The Company also produces YOCREAM BLENDER SMOOTHIES,      
SORBET BY YOCREAM (now packaged as YOCREAM FRUIT BLENDER SMOOTHIES and SORBET   
TOO), YOCREAM DISPENSER SMOOTHIES, BOUNTIFUL HARVEST BOTTLED SMOOTHIES, YOCREAM 
PURE made from 100% organic milk, and premium, lowfat, or nonfat ice creams. The
Company's general marketing strategy is to offer a broad selection of its       
products at a price suitable for the relevant markets.                          

The Industry                                                                    

The YOCREAM brand frozen yogurt and smoothie products produced by the Company   
constitute only a portion of the relevant frozen dessert, snack and beverage    
industry.  The industry produces a diverse range of products, many of which     
compete directly with the Company's YOCREAM frozen yogurt and smoothie products.

Many types of retail outlets make available to the public the Company's YOCREAM 
frozen yogurt and smoothie products as well as other manufacturer's frozen      
yogurt products and frozen dessert and snack items, with many outlets offering  
competing products of several manufacturers. The retail consumer may obtain the 
Company's products or competing products from narrowly oriented outlets such as 
small yogurt shops or stands, many of which provide only a single product, to   
supermarkets and discount club warehouse types of facilities, as well as from   
many medium-sized businesses. Food service outlets or institutions, such as     
restaurants, hospitals, and school districts, typically offer frozen desserts   
and snacks of one manufacturer. Larger institutional businesses with their own  
distribution systems may obtain their products directly from the Company,       
whereas most businesses will obtain their products from national or regional    
food distributors.  Frozen desserts and snacks are often viewed as premium      
products, and are somewhat resistant to finely-tuned price competition.         
However, larger institutional customers for frozen dessert and snack products   
often enter into contracts on the basis of price.  Smaller businesses such as   
restaurants and yogurt shops will often enter into agreements on the basis of   
brand identification, reputation or other preferences.                          

Customers are motivated to purchase frozen desert and snack products on the     
basis of taste, reputation, quality and price.  Premium products tend to be less
sensitive to price.  Some consumers will choose one frozen dessert and snack    
product over another for health related reasons such as ingredients, calories   
and additives.  Manufacturers of frozen dessert and snack products may make     
claims relating to the healthfulness of their products, including soy-based     
frozen dessert products, as well as other non-fat or synthetic fat products.    
Frozen dessert and snack products also compete with many other varieties of food
and dessert items.                                                              

Frozen yogurt and smoothie products have gained wider acceptance and            
identification by a greater variety of demographic groups than when first       
introduced into the frozen yogurt marketplace.  The Company believes that frozen
dessert and snack products appeal to and are purchased by persons of all age    
groups and both sexes.  The claims of certain manufacturers related to the      
healthfulness of their products may also increase the acceptance of those frozen
dessert and snack products.                                                     

The Company                                                                     

Yocream International, Inc. operates within the health oriented frozen dessert, 
snack, and novelty business.  Focus is placed on manufacturing superior quality 
products (e.g. frozen yogurt, organic, smoothies, etc.) for regional, national, 
and worldwide foodservice and retail markets.  Yocream International, Inc.'s    
expertise in nationwide distribution, foodservice sales/marketing, R&D (e.g. new
product development) and manufacturing is enhanced through leveraging strategic 
alliances and/or joint ventures (e.g. Cascadian Farm).  These relationships are 
developed to increase volume growth and profitability within those markets      
served by the Company. Yocream International, Inc.'s foodservice YOCREAM        
branded presence receives emphasis in selected geographic areas of the U.S.     
where sales and marketing resources are focused on branded product expansion.   
Companies for which Yocream International, Inc. manufactures (e.g.Costco,       
Cascadian Farm, SYSCO, etc.), are provided outstanding price/value products that
meet their stringent quality standards.                                         

Marketing Strategy                                                              

The Company's marketing strategy is to build customer brand awareness and       
loyalty, as well as to develop and expand YOCREAM consumer brand identification,
by offering a broad selection of premium frozen yogurt, ice cream and smoothie  
products.  The Company believes it can achieve greater brand identification and 
loyalty through advertising the features and benefits of its products, including
the successes it has enjoyed in certain competitive taste tests.  The Company   
also considers the broad distribution of its product critical to sales growth,  
with its products now available in 37 states and 7 countries.  The Company will 
continue to strive for greater distribution within these markets.               

The Company's management also believes that its ability to respond innovatively 
to take advantage of changes in the retail, foodservice, and packaging          
industries will permit greater availability and acceptance of its products.  For
example, single serving containers are popular with some consumers and sales    
channels and currently smoothie products are in demand.                         

In 1993, the Company began a concerted effort to obtain copacking and private   
label business.  The Company was successful in obtaining a contract to copack   
the organically grown, All Fruit Sorbet produced for Cascadian Farm, a majority 
owned subsidiary of General Mills.  In November 1994, Cascadian Farm added to   
its contract with the Company its organic frozen yogurt and ice cream lines as  
well.                                                                           

In August 1998, the Company also entered into an agreement to copack for Life   
Source Nutrition Solutions.  Their products include a 16 ounce vitamin fortified
smoothie and an 8 ounce vitamin fortified hard pack frozen yogurt cup.          
In January 1996, the Company entered into a signage/sponsorship agreement with  
the Oregon Arena Corporation, owner of the Rose Garden Arena in Portland,       
Oregon.  The Rose Garden Arena is the principal home arena for the National     
Basketball Association franchise for the Portland Trail Blazers professional    
basketball team.  Certain advertising rights are granted under the agreement as 
well as exclusivity regarding the sale of frozen yogurt, sorbet, and soft serve 
ice creams within the Arena.  The Company has developed a special product called
Blazers Swirl, a nonfat combination of non-dairy sorbet and nonfat frozen yogurt
that is being featured in the Arena.                                            

In 1996, the Company began a nationwide introduction of 4 ounce single serve    
cups of nonfat frozen yogurt and non-dairy sorbet products.  These products were
introduced under the Company's own brand of "Soft Scoop by YOCREAM" and under   
SYSCO's nationwide "Cool N' Classy" brand.  The Company is the only supplier to 
SYSCO for this product.                                                         

The Company has developed its own marketing, sales and logistical departments.  
A Director of Sales and Marketing teams with Regional Sales Managers, who in    
turn work with 27 independent foodservice broker organizations on a nationwide  
basis.  The Company's traffic department now arranges for all of its product    
shipments.                                                                      

In June 1997, the Company announced a marketing agreement with Pocahontas Foods 
USA, to jointly sell a branded counter-top freezer concept, merchandising both  
SOFT SCOOP and YOCREAM Pure 4 ounce cup products.  Pocahontas, a sales and      
marketing association of 140 independent foodservice distributors nationwide,   
has bundled YOCREAM as the sole dessert/snack concept into an innovative        
branding program.  The branded program is designed to deliver foodservice       
operators a bundle of interchangeable consumer recognized branded food concepts,
including YOCREAM.                                                              

In May 1997, the Company launched YOCREAM, THE SMOOTHIE WAY, a smoothie line    
featuring dairy and non-dairy base mixes, with recipes for blender operation.   
While smoothies have been available for some time, the market in 1997 exploded. 
According to an industry report, the number of juice/smoothie bars increased by 
30% in 1997.  The trend is being driven by the American consumer's interest in  
finding healthy foods that are satisfying and tasty. Key Northwest-based        
foodservice operators like Burgerville, Coffee People, and Taco Del Mar became  
YOCREAM, THE SMOOTHIE WAY customers.                                            

In October, 1997, the Company successfully test marketed YOCREAM, THE COMPLETE  
FRUIT SMOOTHIE, an all natural complete fruit smoothie mix to be dispensed from 
a smoothie machine or beverage dispenser and requiring no additional fruit, ice,
or juice.  This smoothie line has been developed for high-volume operators like 
concession stands, dining halls, and "all you can eat" restaurant operators,    
many of which would have operational difficulties mixing, chopping, and         
measuring ingredients prior to blending the final smoothie product.  YOCREAM,   
THE COMPLETE FRUIT SMOOTHIE can be dispensed in a few seconds, while it may take
minutes to make a smoothie with a blender.                                      

In June 1998, YOCREAM THE SMOOTHIE WAY became YOCREAM BLENDER SMOOTHIES, and    
YOCREAM, THE COMPLETE FRUIT SMOOTHIE became YOCREAM DISPENSER SMOOTHIES. This   
move was made to further clarify the Company's smoothie concepts for customers. 

In the second quarter of fiscal 1999, the Company began distribution of YOCREAM 
SMOOTHIES BOUNTIFUL HARVEST, an extended shelf life, refrigerated, bottled      
smoothie, to the retail grocery market.                                         

International sales are selectively pursued by the Company on the basis of ease 
of distribution and profitability.  Marketing and sales abroad are currently    
occurring in Canada, Mexico, Italy, Australia, and the Pacific Rim.             

The Company, through its research and development efforts and its marketing     
strategies, will continue to make known its ability to produce and distribute   
unique high quality and good-for-you products.                                  

Merchandise                                                                     

The Company makes, markets and sells frozen yogurt in premium, lowfat, and      
nonfat flavors, smoothies in a variety of flavors, and non-dairy sorbet in a    
variety of flavors, bottled smoothies, as well as organic yogurt, organic ice   
cream and other frozen desserts and snacks.  These frozen products are available
in both soft serve liquid mix and hard pack forms.                              

As of January 19, 2000, the Company had available for sale the following        
products and flavors under its own YOCREAM brand name:                          

YOCREAM                    YOCREAM                    YOCREAM                   
Premium Soft Serve         Fruit Blender              Soft Scoop - 4 Ounce      
Mix                        Smoothies                                            
                  (and Sorbet, too)          Very Berry Sorbet
Cheesecake Supreme                                    Very Sorbet/Vanilla       
Dutch Chocolate            Kiwi Strawberry Splash        Frozen Yogurt Swirl    
French Vanilla             Very Berry                 Vanilla Frozen Yogurt     
Milk Chocolate             Lemony Lime                Chocolate Frozen Yogurt   
Peanut Butter              Mango Tango                Strawberry Frozen Yogurt  
Praline 'n Cream           Orange Burst                                         
Vanilla                                                                         
                                        YOCREAM FREE
               YOCREAM                    No Sugar Added
Yogurt Blender            
YOCREAM                    Smoothies                  Blueberry                 
Nonfat Soft Serve                                     Cafe au Lait              
          Vanilla                    Chocolate
Apple Spice                Chai                       Raspberry                 
Blueberry Burst            Coffee                     Strawberry                
Butter Brickle                                        Vanilla                   
Cable Car Chocolate                                                             
Cappuccino                 YOCREAM                                              
Cherry Almond              Fruit Dispenser            YOGURT STAND              
Chocolate Classic          Smoothies                  Nonfat Soft Serve         
Country Vanilla                                                                 
Egg Nog                    Berry Banana               Chocolate                 
Fancy French Vanilla       Island Lime                Strawberry                
Georgia Peach              Mango Sunrise              Vanilla                   
"Holiday" Chocolate Mint   Orange Squeeze                                       
Irish Mint                                                                      
Island Banana                                         YOCREAM                   
Kahlua                     YOCREAM                    Bountiful Harvest         
Luscious Lemon             Yogurt Dispenser           16oz Bottled Smoothie     
New York Cheesecake        Smoothies                                            
Outrageous Orange                                     Berry Banana              
Peanut Butter              Coffee                     Pineapple Orange          
Pecan Praline              Chai                       Strawberry Guava          
Peppermint Stick           Chocolate                  Mango Berry               
Pumpkin -                  French Vanilla Latte                                 
Very Strawberry            Mocha                                                
Very Boysenberry                                                                
Very Raspberry                                                                  
White Chocolate                                                                 
Macadamia                                                           

YOCREAM PURE               YOCREAM PURE                                         
ORGANIC                    ORGANIC                                              
Nonfat Soft Serve          Lowfat Hardpack Ice Cream                            
Chocolate Sensation       4 Ounce                                             
Pure Vanilla Cream -       Pure Vanilla                                         
Strawberry Fields          Pure Strawberry                                      
Pure Chocolate            

The Company sells the soft serve liquid mix to food service customers who       
dispense it through a soft serve frozen dessert machine.  This product is also  
available in an unflavored natural form which permits the customer to add       
desired flavors.  In fiscal years 1999, 1998 and 1997 the soft serve liquid mix 
accounted for approximately 55%, 75% and 63% of the Company's case sales.       

The Company markets and sells its hard pack frozen dessert products in 4 oz.    
containers to food service customers. Hard pack products are also produced in   
4 oz. and pint containers under private label for Cascadian Farm, SYSCO, and    
other companies.  In prior years, hard pack products were also available in 1/2 
gallon containers.  In fiscal years 1999, 1998 and 1997 hard pack products of   
all type containers accounted for approximately 8%, 7%, and 37% of the Company's
case sales.                                                                     

The Company is also selling frozen yogurt products with no sugar added, which   
are sweetened with aspartame.  This product was introduced to the market place  
in the spring of 1991, and in 1999, 1998 and 1997 it accounted for approximately
3%, 4% and 3% of total case sales.                                              

The Company has developed a lower cost line of products under the label Yogurt  
Stand, designed to compete in that part of the institutional market where price 
is the most significant competitive factor.  That line of the Company's products
includes three flavors and a plain mix that can be flavored by the end user with
flavor packets bearing the Yogurt Stand label.                                  

The Company has also developed a product identified by the trademark SOFT SCOOP.
This product, introduced to the market place in fiscal year 1992, can be stored 
and distributed at a higher temperature than standard hard pack frozen desserts.
It is currently being marketed to the food service industry under the brand name
SOFT SCOOP by YOCREAM, and it is packaged in a single serve four ounce size.    

SORBET by YOCREAM is a product developed by the Company in 1995. It is a high   
quality non-dairy product produced in several flavors in hardpack and soft serve
form.  It is now marketed and packaged as YOCREAM BLENDER SMOOTHIES (and SORBET 
too).  (See below.)                                                             

YOCREAM PURE is a product that was developed and introduced by the Company in   
1997.  Made from 100% organic milk, all natural ingredients, and pasteurized,   
YOCREAM PURE is targeted toward health conscious people who believe in the      
benefits of organic foods.  The line includes both nonfat soft serve and lowfat 
hardpack ice creams which are available in the most popular flavors.            

YOCREAM BLENDER SMOOTHIES (formerly YOCREAM THE SMOOTHIE WAY), were introduced  
in May 1997.  These products are in both yogurt and fruit formulations.  The    
base mix may be poured into a blender directly from the carton in liquid state, 
or drawn from a soft serve machine into the blender.  Depending on the recipe,  
ice, fruit and/or juice are then blended with the base mix.                     

YOCREAM DISPENSER SMOOTHIES (formerly THE COMPLETE FRUIT SMOOTHIE), were        
introduced in March 1998. This concept utilizes an innovative, all natural,     
nonfat smoothie mix designed to be dispensed from a smoothie machine or frozen  
beverage dispenser.  The product requires no additions of fruit, ice, or juice  
to make a smoothie. An operator simply pours it directly into a smoothie machine
or beverage dispenser.  DISPENSER SMOOTHIES are available in fruit and yogurt   
flavors, and also Chai and coffee.                                              

Other products manufactured by the Company include organic sorbets and ice      
creams that are packed under a customer's private label brand and a soft serve  
lowfat ice cream mix sold to the Rose Garden Arena in Portland, Oregon.         

Manufacturing Process                                                           

All of the manufacturing and packaging of the Company's products for domestic   
sales occurs at its plant in Portland, Oregon.  The Company utilizes a Canadian 
dairy as a copacker for production of its products for the Canadian market.  All
other products for international sales are produced in Portland and then        
containerized for export.                                                       

While the manufacturing plant is capable of producing a full range of dairy     
products and other fluid items, such as fruit based beverages, it primarily is  
utilized to produce frozen yogurt, ice cream, sorbet and smoothies.  The        
facility is a fully licensed dairy and pasteurizes its products under USDA      
certification and inspection. One unique feature of the facility is its ability 
to produce under Organic Certification, organic ice creams, yogurts, and        
sorbets. Throughout the facility, both organic and non-organic products can be  
processed and packaged simultaneously while maintaining separation.             

The manufacturing plant has two distinct packaging operations that are operated 
simultaneously.  One operation is for the filling of packages for soft serve    
products and the other operation is for the production of ready to serve frozen 
products.  Within these two operations are a multitude of packaging sizes,      
styles, and finished casing capabilities along with a full range of condiments  
that can be added to the finished products.                                     

Fiscal 1999 saw the addition of a second high speed filler machine to the wetmix
production line as well as improvements to the hardpack lines.  These additions 
resulted in a significant increase in production capacity and an increase in    
overall plant utilization.  Management estimates that plant utilization remains 
at approximately 65% of capacity, based on the increased production capacity and
production output.  Management expects to see plant utilization increase further
in the 2000 fiscal year, primarily from the Company's new specialty products and
through co-packing and private label business.  At the present time, the Company
continues to fill and package product on only one shift and space is available  
on the existing premises for low cost additions when increased capacity becomes 
necessary.                                                                      

Inventory and Backlog                                                           

The Company does not have a significant production backlog.  Because of the     
relatively short time period required to produce a finished product from the    
receipt of an order by the Company, the Company strives to maintain a low level 
of raw materials inventory.  At October 31, 1999, raw material inventory levels 
were higher than normal.  Subsequent to year end, the Company is in the process 
of implementing a new purchasing and inventory system which is expected to      
enable the Company to reduce inventory levels.  Inventory of finished goods is  
maintained at levels to accommodate wide distribution of the Company's products 
throughout the United States.  Although the Company tries to estimate demand and
production schedules for its products, its customers generally place orders when
they require the Company's products, and customers expect delivery within a     
short period of time.                                                           

Distribution and Significant Customers                                          

The Company's products are distributed in 37 states and 7 countries.            
Distribution is facilitated by buyer pick up or by transportation arranged by   
the Company. The Company's products are generally shipped on refrigerated trucks
to all domestic locations.                                                      

While the Company experienced growth in all customer classifications, revenues  
derived from it's largest customer, Costco Wholesale, represented 61%, 50%, and 
41% of total revenues in the years ended October 31, 1999, 1998, and 1997.  In  
fiscal year 1989, the Company began selling soft serve frozen yogurt to Price   
Club.  Then after the merger between Costco and Price Club, Costco chose the    
Company's soft serve frozen yogurt, over that of competitors, for its food      
courts.  During 1998, Costco selected Yocream to develop a very berry smoothie  
to be offered in its food courts.  Due to the consistently high-level of quality
and customer acceptance of these products and the efficient operation of        
Costco's food courts, there has been a significant increase in its sales.       
Furthermore, the longevity of this relationship is due to various factors,      
including Yocream's distribution system and responsiveness to Costco's          
operational and logistical requirements.  Another significant factor is the     
field support program that has been implemented in cooperation with an          
independent broker.  The support program includes an intensive sampling of      
yogurt and smoothie products at all new warehouse openings.  Management is      
determined to maintain the quality of service that supports the longevity of    
this relationship and expects that its business with Costco will continue to    
grow.                                                                           

Research and Development                                                        

The Company's research and development related activities include the           
development of new flavors, the improvement of existing flavors, refinement of  
manufacturing processes and the development of new products. Research also      
occurs on a regular basis with respect to ingredients such as stabilizers and   
emulsifiers.  Furthermore, the Company has conducted activities regarding non-  
fat and no sugar added products and various novelty items.  The Company has also
developed a line of yogurt beverages including yogurt-juice and yogurt-coffee   
combinations. New products include a line of smoothie products for blending or  
automated operation. The most recent development of a new product is an all-    
natural, ready to serve bottled fruit smoothie with an extended shelf life. The 
Company's development activities occur at the Portland, Oregon facility.        
Although a precise separation of accounts is not available, the Company         
estimates total research and development expenditures for the year ended October
31, 1999, to have been $393,000, compared with $335,000 and $262,000 for the    
years ended October 31, 1998 and 1997.                                          

Advertising and Promotion                                                       

During the year ended October 31, 1999 such expenses totaled approximately      
$310,000 representing 2.1% of net sales.  These compare to $349,000, or 3.4% of 
net sales in 1998; and $269,000, or 3.1% of net sales in 1997.                  

Seasonality                                                                     

The Company's sales and earnings are somewhat seasonal with a greater percentage
occurring in the second and third calendar quarters or spring and summer months 
and, to some extent, holiday periods.  Management expects that the seasonality  
of sales will continue to become less significant as a result of the copacking  
and private brand business the Company has obtained and because of purchases    
from new customers concentrated in the warmer climate areas.                    

Suppliers                                                                       

Suppliers of the primary ingredient of the Company's products, raw milk, are    
mostly based in the Pacific Northwest and obtain that raw milk from dairy farms 
in northern Oregon and southern Washington.  Because freshness and timeliness of
delivery are critical to the Company's products, the Company prefers local      
suppliers.  The Company's largest supplier of raw milk supplied approximately   
94.7% of the Company's needs in fiscal year 1998 and the second largest supplier
provided approximately 5.3%.  All supplies used by the Company are readily      
available from a variety of suppliers.  The Company has never experienced any   
form of supply shortage.                                                        

Competition                                                                     

The Company's products constitute a portion of a greater market which includes  
all forms of yogurt-based frozen desserts, ice cream products and non-dairy     
frozen desserts.  The market for the Company's products is very competitive     
because of the number of alternative products available and because of the      
number of businesses producing competitive products. Competition in the frozen  
dessert and ice cream industry has increased over the last several years as a   
result of substantial increases in the number and kind of frozen dessert        
products.  Many of the companies that produce products which compete with those 
of the Company are substantially larger and have significantly greater          
resources.  Increased competition from the established manufacturers and        
distributors of frozen desserts, snacks and beverages can be expected in the    
future.                                                                         

The Company competes against different sets of manufacturers for each product it
markets.  The Company's principal competitors for soft serve products include   
Colombo (General Mills), Dannon, Eskimo Pie, and Honey Hill Farms.  Key         
competitors for the Company's hard pack frozen yogurt products include Ben and  
Jerry's, Dryers, Haagen Dazs, and Wells Blue Bunny.  Chief smoothie product     
competitors include Colombo, Freshens, Miss Karen's, and Skigo (Quaker Oats).   
In addition to the large primary competitors identified, the Company competes   
with numerous small local and regional companies.                               

The Company's products are recognized in the marketplace for their high quality 
and  have  competed well in this regard.  For example, on July 27, 1989, the    
Chicago Tribune listed YOCREAM as the best tasting of 13 national brands of     
frozen yogurt on the basis of a test by seven independent judges. Through the   
Company's national system of brokers and distributors the Company believes it   
can compete effectively from the standpoint of service. Price competition,      
however, has become intense in certain geographical areas as regional dairies   
endeavor to introduce a limited line of frozen yogurt. The Company has responded
to price competition from regional dairies with its lower-priced products under 
the Yogurt Stand label and to competition on quality with its YOCREAM brand     
products.  While the Company has experienced competitive success in the past, no
assurance can be given that the Company will continue to compete successfully   
against other available products.                                               

Other than direct competition for specific soft serve or hard pack frozen yogurt
products, the Company's products compete against certain other frozen dessert   
items, such as ice cream.  Specific competition comes from premium ice cream    
makers such as Haagen-Dazs, Ben and Jerry's Homemade, Inc., Steve's Ice Cream   
and other national and regional ice cream brands.                               

Trademarks and Trade Names                                                      

The Company registered as a trademark the name of its primary product, YOCREAM, 
with the United States Patent and Trademark Office.  This trademark is renewable
and, therefore, is of an indefinite term.  That trademark is also registered in 
Canada and may be renewed there upon expiration.  Some of the Company's products
use that basic trade name with other words or designations, such as YOCREAM     
LITE.  In addition, the Company uses the trademarks "JUST SAY YO," "PURE        
PLEASURE," "YOGURT STAND," "PURE PLEASURE, PURE FOOD, PURE ENVIRONMENT," "IT'S A
BELIEF, IT'S A LIFESTYLE," "SOFT SCOOP" and "YO CAFFE'".  The Company has       
registered or intends to register these trademarks in the United States and may 
register the trademark YOCREAM in other foreign countries.                      
Employees                                                                       

The Company employed 48 persons at October 31, 1999, all of whom were full-time 
(35 hours per week or more.)  None of the Company's employees are covered by    
collective bargaining agreements, and management believes its employee relations
are good.  The Company's sales representatives manage a network of national and 
regional foodservice brokers.  These are independent brokers and paid by        
commissions on sales.  The Company has never experienced a labor strike or work 
stoppage.                                                                       

Item 2:  PROPERTIES                                                             

The Company is located in a 34,200 square foot facility at 5858 NE 87th Avenue, 
Portland, Oregon 97220.  Of this total space, the Company uses approximately    
8,700 square feet for production, approximately 9,000 square feet for freezer   
and refrigeration purposes, and approximately 4,500 for office space.  The      
Company has designated the remaining 12,000 square feet for warehouse purposes  
and expansion of the Company's freezer and production facilities.               

The lease of the Company's production and office facilities expired on May 14,  
1994 and the Company exercised its option to purchase the property.  In order to
preserve capital, the Board of Directors decided that the Corporation should    
allow certain of its officers and directors to purchase the property, with the  
Corporation then leasing it from them.  Thereafter, John N. Hanna, David J.     
Hanna and James S. Hanna, together with others, formed Pente Investments for the
purpose of purchasing the property and leasing it to the Corporation.  In fiscal
year 1998, Pente Investments agreed to fund a 4,200 square foot facility to     
provide for needed office space.  The current lease as amended has a remaining  
term of approximately 13 years and provides for a base rent of $14,335 per month
for the next two years and then increasing at approximately 3% per year         
thereafter.                                                                     

During 1999, the Company leased approximately 5,500 square feet of additional   
dry warehouse space in a nearby facility.  This lease expires in April 2001.    

Other materially important property of the Company includes certain equipment   
which it utilizes to manufacture and distribute its frozen yogurt products,     
including standard dairy equipment, holding tanks and refrigeration units. In   
addition, the Company leases other equipment under capital and operating leases.

Item 3: LEGAL PROCEEDINGS                                                       

As of the date of this Annual Report on Form 10-K, the Company had no material  
litigation pending against it.                                                  

Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                    

The Company did not submit any matters to a vote of security holders during the 
final quarter of fiscal year 1999.                                              

PART II       

Item 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                       
STOCKHOLDERS MATTERS.                                           

The common stock of the Company is traded in the over-the-counter market and is 
quoted on the National Association of Securities Dealers Automated Quotation    
System ("NASDAQ") under the symbol YOCM.  As of January 19, 2000, there were    
2,296,393 shares of the common stock outstanding and there were 199 shareholders
of record estimated to represent approximately 900 beneficial holders based on  
the number of individual participants in security position listings.  On January
19, 2000 the closing bid and asked prices were $3-5/8 and $4, respectively.     

The following table sets forth the high and low closing bid quotations for      
quarterly periods in the two twelve month periods ended October 31, 1999 and    
October 31, 1998.  Such over-the-counter market quotations reflect inter-dealer 
prices, without retail mark-up, markdown or commission and may not necessarily  
represent actual transactions.                                                  

     Twelve months Ended October 31, 1999                       High         Low

August 1, 1999   -  October 31, 1999       $ 5 5/16   $4    
May 1, 1999      -  July 31, 1999            5 1/8     4 3/8
February 1, 1999 -  April 30, 1999           5 1/4     3 3/4
November 1, 1998 -  January 31, 1999         5 3/4     4 1/4

     Twelve months Ended October 31, 1998                       High         Low

August 1, 1998   -  October 31, 1998       $ 5 1/2    $3 3/4
May 1, 1998      -  July 31, 1998            6 5/8     5 1/2
February 1, 1998 -  April 30, 1998           5 7/8     4    
November 1, 1997 -  January 31, 1998         3 3/8     2 3/4

The Company has not paid dividends on its common stock since the stock began    
public trading on November 17, 1987.  The Company does not expect to pay cash   
dividends on its common stock in the foreseeable future.  The Company intends to
invest funds otherwise available for dividends, if any, on improving the        
Company's capital resources.                                                    

Item 6: SELECTED FINANCIAL DATA.                                                

The following selected financial data set forth below as of October 31, 1999,   
1998 and for each of the three years in the period ended October 31, 1999 are   
derived from the audited financial statements included elsewhere in this report 
and are qualified by reference to such financial statements.  The selected      
financial data as of October 31, 1997, 1996, and 1995 and for each the two years
in the period ended October 31, 1996, are derived from financial statements not 
included herein.                                                                

    October 31

Balance Sheets             1999       1998       1997       1996       1995     

Total Current Assets   $4,637,304 $3,356,445 $3,380,607 $3,067,744 $2,876,583   

Total Assets            7,356,915  6,555,657  5,810,593  5,353,622  5,036,716   

Long-Term Debt            201,238    162,605    222,975    286,481    278,498   

Shareholders' Equity    5,351,730  4,451,320  3,185,918  2,758,972  2,679,443   

     For the Years Ended October 31,

Statements of Income     1999        1998       1997       1996       1995      

Sales                $14,628,967 $10,206,524 $8,677,547 $7,922,144 $7,348,531   

Income from                                                                     
Operations(1)       1,468,445     616,079    386,318    104,729    312,820

Income before Taxes    1,424,066     502,703    274,546      6,733    183,118   

Income Tax Provision                                                            
 (Benefit)             406,000    (200,000)  (159,000)       -     (121,766)

Net Income             1,018,066     702,703    433,546      6,773    304,884   

Earnings per Common                                                             
Share-Basic               .44         .31        .20        .00        .14

Earnings per Common                                                             
Share-Diluted             .43         .30        .19        .00        .14

(1) Income from operations in 1996 is after deduction of unusual expenses       
amounting to $143,527.                                                  

Item 7                                                                          

Management's Discussion and Analysis of Financial Condition and                 
Results of Operations.                                                          

The following discussion includes forward-looking statements within the meaning 
of the "safe-harbor" provisions of the Private Securities Litigation Reform Act 
of 1995.  Such forward-looking statements are based on the beliefs of the       
Company's management and on assumptions made by and information currently       
available to management.  All statements other than statements of historical    
fact, regarding the Company's financial position, business strategy and plans   
and objectives of management for future operations of the Company are forward-  
looking statements.  When used herein, the words "anticipate," "believe,"       
"estimate," "expect," and "intend" and words or phrases of similar meaning, as  
they relate to the Company or management, are intended to identify forward-     
looking statements. Although the Company believes that the expectations         
reflected in such forward-looking statements are reasonable, it can give no     
assurance that such expectations will prove to have been correct. Forward-      
looking statements are subject to certain risks and uncertainties, which could  
cause actual results to differ materially from those indicated by the forward-  
looking statements.  These risks and uncertainties include the Company's ability
to maintain or expand its distribution abilities, including the risk of         
disruptions in the transportation system and relationships with brokers and     
distributors. Further, actual results may be affected by the Company's ability  
to compete on price and other factors with other manufacturers and distributors 
of frozen dessert products; customer acceptance of new products; general trends 
in the food business as they relate to customer preferences for the Company's   
products; and the Company's ability to obtain raw materials and produce finished
products in a timely manner, as well as its ability to develop and maintain its 
co-packing relationships and strategic alliances. In addition, there are risks  
inherent in dependence on key customers, the loss of which could materially     
adversely affect the Company's operations. The reader is advised that this list 
of risks is not exhaustive and should not be construed as any prediction by the 
Company as to which risks would cause actual results to differ materially from  
those indicated by the forward-looking statements.                              

Results of Operations                                                           

Sales                                                                           

The Company's revenues were $14,628,967, $10,206,524, and $8,677,547, for the   
years ended October 31, 1999, 1998, and 1997, respectively.  Over the last three
years revenues have increased 43.3% in 1999, 17.6% in 1998, and 9.5% in 1997.   
This continuing trend of year to year revenue gains is primarily due to the     
success of the Company's smoothie products introduced in 1998.  Sales gains have
also been achieved in fiscal 1999 due to the recent penetration into the        
convenience store market with the Company's soft serve frozen yogurt.           

The successes are also due to long-term customer alliances, such as that with   
Costco Wholesale, an established national distribution system including a       
network of brokers and distributors, and expanded direct sales activity.        
Management expects this trend to continue due to the success of its products,   
expanded alliances with other national companies, intensified direct sales      
activity, and the introduction of new products.                                 

From a broader perspective, the driving forces behind the year-to-year revenue  
trends continue to be due to the competitive success of the Company's products, 
new product development capabilities, and long-term customer alliances.  The    
successes are also due to an established national distribution system including 
a network of brokers and distributors, and expanded direct sales activity.  The 
strategy implemented in 1997 to intensify direct sales activity through its own 
regional sales managers has enabled the Company to better support its brokers   
and distributors, and recently to penetrate the convenience store market        
segment.                                                                        

The Company has a history of developing innovative products.  A year ago the    
Company had just developed its YOCREAM line of fruit smoothies, which are       
adaptable to both blender and dispenser operation. Since this product was       
introduced, it has accounted for much of the revenue increases, and is expected 
to continue to drive the growth in fiscal 2000. In March 1999, the Company      
announced its new "Bountiful Harvest" all-natural bottled fruit smoothie        
beverage developed for direct consumer purchase.  This new beverage introduction
reflects the Company's strategy of building on its strengths.  Management       
believes that this product offers a unique beverage for the health conscious    
consumer, at a competitive price.  This product is currently being offered in   
approximately 200 Wal-Mart superstores.  The Company is also exploring          
opportunities for the sale of this, or similar products in the foodservice and  
convenience store segments, and is continuing to work on the development of new 
products.                                                                       

Gross Profit                                                                    

The cost of sales, as a percentage of revenues, were 69.6%, 69.8%, and 69.3% in 
1999, 1998, and 1997 respectively, with corresponding gross profit margins of   
30.4%, 30.2%, and 30.7% for the same periods.  During fiscal 1999 margins       
improved slightly.  Improvements from the significantly increased volume were   
enough to offset the impact of a change in product mix.  During fiscal 1998     
margins decreased slightly, compared to 1997, due to a change in product mix.   

Selling and Marketing Expenses                                                  

Selling and marketing expenses, as a percentage of revenues, for the years ended
October 31, 1999, 1998, and 1997 were 11.5%, 12.9%, and 14.8%, respectively.    
Such expenses are generally related to the level of revenues, and marketing     
activities. However, the decrease in expenses, as a percentage of sales over the
last two years, is primarily due to the stability of expenses for the Company's 
in-house sales and marketing staff.                                             

In October 1997, the Company assumed responsibility for certain food service    
selling and marketing functions.  This included responsibility for all credit,  
collections, sales service, transportation coordination, and selling and        
marketing activities.  The development of its own regional sales                
managers/product specialists has given the Company an increased level of direct 
contact with brokers and distributors, and enabled the Company to effectively   
assume the role of exclusive sales agent previously performed by an outside     
organization.                                                                   

General and Administrative Expenses                                             

General and administrative expenses for the years ended October 31, 1999, 1998, 
and 1997, as a percentage of revenues, were 8.9%, 11.3%, and 11.4%,             
respectively.  Overall general and administrative expenses decreased over the   
three-year period, as a percentage of sales, primarily due to the growth in     
sales.  The dollar increase in 1999 over 1998 primarily relates to personnel    
costs and the increase in rent and depreciation associated with the office      
addition completed at the end of 1998.  The dollar increase in 1998 over 1997   
was primarily due to increases in professional fees, rent, and payroll related  
expenses, including payroll taxes associated with stock options exercised.  A   
portion of the increase relates to the costs associated with the Company        
assuming the additional administrative functions described under sales and      
marketing.                                                                      

Income from Operations                                                          

Income from operations for the years ended October 31, 1999, 1998, and 1997 was 
$1,468,445, $616,079, and $386,318 respectively.  As a percentage of revenues,  
income from operations was 10.0%, 6.0%, and 4.5% respectively.  The results for 
1999 reflected a 138.4% increase over 1998, and was due to the increase in sales
activity described above, and the net savings in selling, marketing and         
administrative expenses, as a percentage of sales.                              

Income before Income Taxes                                                      

Income before taxes for the years ended October 31, 1999, 1998 and 1997 was     
$1,424,066, $502,703, and $274,546.  The results for 1999 reflect a 183.3%      
improvement over the prior year.  Due to the change in income taxes, from       
recording a tax benefit in 1997 and 1998 to recording a tax provision in 1999,  
management regards the substantial increase in income before taxes, as a more   
significant measure of the comparative improvement in operating performance,    
than the change in net income.                                                  

Provision for Income Taxes                                                      

Prior to 1995, the Company experienced losses in several years for income tax   
purposes that resulted in net operating loss carryforwards (NOLs) which are     
available to offset future taxable income.  In accordance with generally        
accepted accounting principles, the Company  recorded the benefit of such NOLs  
as a deferred tax asset.  In prior years, an offsetting valuation allowance was 
provided to the extent that management believed that it was more likely than not
that the deferred tax asset would not be realized.                              

In 1998 and 1997, as a result of evaluations at that time of the future benefit 
of the Company's NOLs, the Company reduced the valuation allowance and          
recognized a tax benefit of $200,000 and $159,000, respectively.  As of October 
31, 1998, the Company had recognized all of the expected benefit of these NOLs  
in the financial statements, except for $106,000.                               

In 1999, as a result of the substantial increase in operating results, the      
Company has recognized the remaining benefit of the NOL's and, for the first    
time, recorded a tax provision of $406,000, net of the above benefit.  The tax  
provision primarily represents a reduction in the deferred tax asset for the    
NOL's that have been utilized to offset taxes that would otherwise be payable.  
At October 31, 1999, the Company had federal and state net operating loss       
carryforwards aggregating approximately $1,116,000 and $321,000, respectively.  
It is expected that these NOL's will be fully utilized during the next fiscal   
year, at which time; the Company will begin paying income taxes.                

The effective tax rate in 1999 was 28.5% which was less than the expected rate  
of 38.4% primarily due to the recognition of the remaining NOL benefit described
above.  In the future, the Company expects that its provision for income taxes  
will be at or near the applicable federal and state statutory rates.            

Net Income                                                                      

Net income for the years ended October 31, 1999, 1998, and 1997 was $1,018,066, 
$702,703, and $433,546, respectively.  The results for 1999 reflect a 44.9%     
improvement over 1998, even after recording a tax provision in 1999, compared to
a tax benefit in 1998.  The improved results are primarily due to the gross     
profit contribution from the substantial increase in sales, without a           
corresponding increase in selling, general and administrative expenses.  Net    
income, as a percentage of sales, was 7.0%, 6.9%, and 5.0% in each of the three 
years.                                                                          

Liquidity and Capital Resources                                                 

In recent years, the Company has financed its operations and expansion from bank
loans, operating leases, capital leases, stock sales, and internally generated  
funds.                                                                          

During the three years ended October 31, 1999, the Company entered into         
operating leases relating to certain assets utilized in its production process. 
(See Note M of the Notes to Financial Statements for a description of these     
lease commitments.)                                                             

As a result of the significant increase in sales and operating results, the     
Company has experienced a corresponding increase in cash flow.  EBITD (earnings 
before interest, taxes and depreciation) was $1,833,180 in 1999, compared with  
$922,573 in 1998.  As a result the Company has been able to payoff its bank line
of credit and increase cash and cash equivalents.                               

At October 31, 1999, the Company has an unutilitized bank line of credit of     
$2,000,000.  At October 31, 1998 borrowings under a similar line were $782,800. 
Under the terms of the line of credit agreement, as renewed in July 1999, the   
bank increased the line limit to $2,000,000, subject to the Company being in    
compliance with certain ratios and negative covenants, released its security    
interest in the Company's receivables, inventories, and equipment, and reduced  
the interest rate to prime.  The agreement also provides the option to lock in  
sub-prime rates on blocks of funds up to 90 days.  The bank also extended the   
agreement for two years until July 1, 2001.                                     

Accounts receivable at October 31, 1999 and 1998 were $1,061,618 and $907,749,  
respectively. This increase of approximately 17% is primarily attributable to   
the increase in sales compared to the fourth quarter of last year.  The increase
in sales is due to the substantial increases related to smoothie products and   
the penetration of the convenience store segment.                               

Inventories at October 31, 1999 and 1998 were $2,626,162 and $1,917,125,        
respectively.  This increase of approximately 37% is primarily in raw materials 
related to the growth in YOCREAM fruit smoothie sales.                          

At October 31, 1999, the Company had working capital of $2,833,357, which       
represents a 100% increase over October 1998.  The improvement is primarily due 
to increases in cash, receivables and inventory, and the reduction in bank      
borrowings which more than offset the increase in trade payables.  This has     
resulted from an increase in cash provided from operating activities over the   
prior year.                                                                     

The Company believes its existing assets, bank lines, and revenues from         
operations will be sufficient to fund the Company's operations for at least the 
next twelve months.                                                             

The Company leases its offices and production facilities.  The lease has a      
remaining term of approximately 13 years with renewal provisions and provides   
for a base rent of $172,000 annually for the next nine months and then increases
at approximately 3% per year thereafter.  (See Note M of Notes to Financial     
Statements for a description of the terms).                                     

The Company's capital expenditures for 1999, 1998, and 1997 were approximately  
$216,000, $502,000, and $250,000.  The Company is in the process of evaluating  
its capital expenditure plans for fiscal 2000, which are not expected to exceed 
$500,000.  The Company believes that adequate financing can be arranged,        
including an equipment financing facility with its lender.                      

During 1998 and 1999, the Company assessed its Year 2000 issues.  In late fiscal
1998 the Company completed a planned upgrade to its network operating system,   
and replaced certain computers and supporting software. In early 1999, a        
management committee was formed to monitor the project, evaluate risks, make    
contact with certain business partners, and formulate contingency plans, as     
deemed appropriate.  Subsequent to January 1, 2000 the Company has not          
experienced any problems related to the rollover.                               

Item 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

The response to this Item 8 is submitted as Appendix A to this report.          

Item 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                       
ACCOUNTING AND FINANCIAL DISCLOSURE.                          

None.                                                                           

PART III    

Item 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                   

The response to this item is incorporated herein by reference from the          
sections entitled "ELECTION OF DIRECTORS" and "INFORMATION REGARDING MANAGEMENT 
AND DIRECTORS" in the Company's Proxy Statement for its 2000 Annual Meeting of  
Shareholders.                                                                   

Item 11:  EXECUTIVE COMPENSATION.                                               

The response to this item is incorporated herein by reference from the          
section entitled "EXECUTIVE COMPENSATION" in the Company's Proxy Statement for  
its 2000 Annual Meeting of Shareholders.                                        

Item 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS                       
AND MANAGEMENT.                                             

The response to this item is incorporated herein by reference from the          
section entitled "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND           
MANAGEMENT" in the Company's Proxy Statement for its 2000 Annual Meeting of     
Shareholders.                                                                   

Item 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                       

The response to this item is incorporated herein by reference from the          
section entitled "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in the        
Company's Proxy Statement for its 2000 Annual Meeting of Shareholders.          

PART IV       

Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.      

   (a) (1) Financial Statements.  The response to this portion of Item 14 is
submitted as Appendix A to this report.                                         

 (a) (2) Financial Statement Schedules.  The response to this portion of
Item 14 is submitted as Appendix A to this report.                              

(a) (3) Exhibits.  The following exhibits are filed as part of this   
annual Report on Form 10-K and this list constitutes the Exhibit Index.         

Exhibit                                                     Filing              
Number                    Exhibit                          Reference            

3.1       Restated Articles of Incorporation              i           
of the Company.                                   

3.2A      Articles of Amendment, dated                   ii           
October 29, 1991.                                 

3.2B      Articles of Amendment, dated                 viii           
March 24, 1999, changing name                     
to Yocream International, Inc.                    

3.3       Amended Bylaws of Company.                      i           

3.4       Amendment to Amended Bylaws, dated            iii           
March 14, 1990.                                   

3.5       Amendment to Amended Bylaws, dated            iii           
April 10, 1991.                                   

10.1       1990 Non-Discretionary Stock Option            iv            
Plan for Non-Employee Directors.                  

10.2       1990 Non-Qualified Employee Stock              iv            
Option Plan                                       

10.3       1994 Combined Incentive and Non-qualified      vi            
Stock Option Plan                                 

10.4       Commercial lease and by and between             v            
John N. Hanna, David J. Hanna,                    
James S. Hanna, Harry M. Hanna                    
and Joseph J. Hanna Jr; landlord and              
Yocream International, Inc., dated                
July 5, 1994.  Assignment of the lease            
To Pente Investments L.L.C.,                      
dated July 5, 1994                                

10.5       Amendment No.1 to commercial lease            vii            
between Pente Investments L.L.C. and              
Yocream International, Inc., dated                
June 4, 1998.                                     

23.1       Consent of Independent Accountants                           
filed herewith                                    

27.1       Financial Data Schedule is filed herewith                    

i          Incorporated herein by reference from the                    
Company's Registration Statement on Form          
S-18, dated November 17, 1987.                    

ii         Incorporated herein by reference from the Company's          
Annual Report on Form 10-K for fiscal year ended  
October 31, 1991.                                 

iii        Incorporated herein by reference from the Company's          
  Annual Report on Form 10-K for the fiscal year ended
December 31, 1990.                                

iv         Incorporated herein by reference from the Company's          
Report on Form 8-K, dated as of December 6, 1990. 

v          Incorporated herein by reference from the Company's          
Quarterly report form 10-Q for the quarter ended  
July 31, 1994.                                    

vi         Incorporated by reference from the Company's Registration    
statement on Form S-8, dated August 7, 1996       

vii        Incorporated herein by reference from the Company's          
Annual Report form 10-K for the fiscal year ended 
October 31, 1998.                                 

viii       Incorporated herein by reference from the Company's          
Quarterly report form 10-Q for the quarter ended  
April 30, 1999.                                   

(b)        Reports on Form 8-K:                                         
None                                              

(c)        See (a)(3) above for all exhibits filed herewith and         
the Exhibit Index above.                          

(d)        No financial statements required by Regulation S-X           
    were excluded from materials delivered to shareholder.

SIGNATURES                                                                      

Pursuant to the requirements of Section 13 or 15(d) 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.                    

YOCREAM INTERNATIONAL, INC.                            Dated:  January 28, 2000 

By:  /s/ John N. Hanna                                                          
John N. Hanna                                                         
Chief Executive Officer and                                           
Chairman of the Board of Directors                                    

Pursuant to the requirements of the Securities Exchange Act of 1934, this       
report has been signed below by the following person on behalf of the           
registrant and in the capacities and on the dates indicated.                    

By:  /s/ John N. Hanna                                   Dated: January 28, 2000
John N. Hanna                                                         
Chief Executive Officer and                                           
Chairman of the Board of Directors                                    

By:  /s/ David J. Hanna                                  Dated: January 28, 2000
David J. Hanna                                                        
President and Director                                                

By:  /s/ James S. Hanna                                  Dated: January 28, 2000
James S. Hanna                                                        
Director                                                              

By:  /s/Carl G. Behnke                                   Dated: January 28, 2000
Carl G. Behnke                                                        
Director                                                              

By:  /s/ William J. Rush                                 Dated: January 28, 2000
William J. Rush                                                       
Director                                                              

By:  /s/ W. Douglas Caudell                              Dated: January 28, 2000
W. Douglas Caudell                                                    
Chief Financial Officer                                               

No annual report or proxy material has been sent to security holders as of      
the date hereof.  Such annual report and proxy material will be furnished to    
security holders subsequent to the filing of this report on Form 10-K. Copies   
of the definitive version of such materials shall be furnished to the           
Commission when they are sent to security holders.                              

Insofar as indemnification for liabilities arising under the Securities Act of  
1933 may be permitted to directors, officers and controlling persons of the     
Registrant pursuant to the Registrant's articles of incorporation, or           
otherwise, the Registrant has been advised that in opinion of the Securities    
and Exchange Commission such indemnification is against public policy as        
expressed in the Securities Act of 1933 and is, therefore, unenforceable.  In   
the event that a claim for indemnification against such liabilities (other than 
the payment by the Registrant of expenses incurred or paid by a director,       
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) as asserted by such director, officer or controlling
person in connection with securities being registered, the Registrant will,     
unless in the opinion of its counsel the matter has been settled by controlling 
precedent, submit to a court of appropriate jurisdiction the question whether   
such indemnification by it is against public policy as expressed in the         
Securities Act of 1993 and will be governed by the final adjudication of such   
issue.                                                                          

EXHIBIT 23.1                                                                    

  CONSENT OF INDEPENDENT ACCOUNTANTS

We have issued our reports dated January 10, 2000, accompanying the consolidated
financial statements included in the annual report of Yocream International,    
Inc. on form 10-K for the year ended October 31, 1999.  We hereby consent to    
the incorporation by reference of said reports in the Registration statement of 
International Yogurt Company on Form S-8 ( File No. 333-09695, effective August 
26, 1996).                                                                      

    GRANT THORNTON LLP
Portland, Oregon                                                                
January, 10, 2000                                                               

Yocream International, Inc. 

APPENDIX A  

 INDEX TO FINANCIAL STATEMENTS

The following financial statements of Yocream International, Inc. and           
related reports of independent accountants are included as Item 8 and           
Item 14 (a) (1):                                                                

                                                                            Page

Report of Independent Accountants                                               
- Grant Thornton, LLP                                                     1     

Balance Sheets at October 31, 1999 and 1998                       2             

Statements of Earnings for the years ended                                      
October 31, 1999, 1998, and 1997                                          3     

Statements of Shareholders' Equity for the years                                
Ended October 31, 1999, 1998, and 1997                            4             

Statements of Cash Flows for the years ended                                    
October 31, 1999, 1998, and 1997                                          5     

Notes to the Financial Statements                                    6-16       

No financial statement schedules are included in Item 14(a)(2) as no            
required schedules are applicable to Yocream International, Inc. for            
the years ended October 31, 1999, 1998, and 1997.                               

Report of Independent Certified Public Accountants                              

Board of Directors and Shareholders                                             
YoCream International, Inc.                                                     

We have audited the balance sheets of YoCream International, Inc. as of October 
31, 1999 and 1998, and the related statements of income, shareholders' equity   
and cash flows for each of the three years in the period ended October 31, 1999.
These financial statements are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements based 
on our audits.                                                                  

We conducted our audits in accordance with generally accepted auditing          
standards.  Those standards require that we plan and perform the audit 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 financial statements referred to above present fairly, in   
all material respects, the financial position of YoCream International, Inc. as 
of October 31, 1999 and 1998, and the results of its operations and its cash    
flows for each of the three years in the period ended October 31, 1999, in      
conformity with generally accepted accounting principles.                       

                                                              GRANT THORNTON LLP
Portland, Oregon                                                                
January 10, 2000                                                                

Yocream International, Inc. 

BALANCE SHEETS  

October 31, 
                                                         1999           1998
ASSETS          

Current assets                                                                  
  Cash and cash equivalents                          $  737,408     $  277,246
Trade accounts receivable, net of allowance                               
for doubtful accounts of $25,827 in 1999 and                        
     $14,189 in 1998                                  1,061,618        907,749
  Inventories                                         2,626,162      1,917,125
  Other current assets                                  212,116        254,325

     Total current assets                             4,637,304      3,356,445

  Fixed assets, net                                   1,983,669      2,130,607
  Deferred income taxes                                 467,000        818,000
  Intangible and other long-term assets, net            268,942        250,605

                                                     $7,356,915     $6,555,657

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities                                                             
  Note payable to bank                               $       -      $  782,800
  Current portion of long-term debt                      96,227         49,869
  Current obligations under capital leases               16,383         48,105
  Accounts payable                                    1,529,732        933,826
  Other accrued liabilities                             161,605        127,132

     Total current liabilities                        1,803,947      1,941,732

Long-term debt, less current portion                     201,238        147,284 
Long-term obligations under capital leases,                                     
  less current portion                                        -         15,321

     Total liabilities                                2,005,185      2,104,337

Shareholders' equity                                                            
Preferred stock, no par value, 5,000,000                                  
  shares authorized, none issued or outstanding          -             -
Common stock, no par value, 30,000,000                                    
     shares authorized                                5,108,697      5,226,353
   Retained Earnings (deficit)                           243,033       (775,033)

     Total shareholders' equity                       5,351,730      4,451,320

                                                     $7,356,915     $6,555,657

The accompanying notes are an integral part of these statements.                

Yocream International, Inc. 

STATEMENTS OF INCOME

For the year ended October 31,

                                          1999           1998           1997

Sales                              $  14,628,967   $ 10,206,524   $  8,677,547  

Cost of goods sold                    10,183,947      7,125,487        6,016,891

   Gross profit                      4,445,020      3,081,037      2,660,656

Selling and marketing expenses         1,677,435      1,315,708      1,284,587  
General and administrative expenses    1,299,140      1,149,250        989,751  

    Income from operations           1,468,445        616,079        386,318

Other income (expense)                                                          
 Interest income                         9,795         13,048         16,499
  Interest expense                      (70,375)      (134,452)      (147,955)
 Other, net                             16,201          8,028         19,684

    Income before income taxes       1,424,066        502,703        274,546

Income tax provision (benefit)           406,000       (200,000)      (159,000) 

    NET INCOME                      $1,018,066     $  702,703      $ 433,546

Earnings per common share - basic     $     0.44     $     0.31      $    0.20  

Earnings per common share - diluted   $     0.43     $     0.30      $    0.19  

Shares used in basic                                                            
 earnings per share                  2,314,861      2,292,375      2,230,410

Shares used in diluted                                                          
 earnings per share                  2,371,351      2,358,668      2,260,963

The accompanying notes are an integral part of these statements.                

Yocream International, Inc.     

STATEMENT OF SHAREHOLDERS' EQUITY     

                                                                           Total
                              Common Stock       Retained Earnings Shareholders'
                         Shares     Amounts               (Deficit)       Equity

Balance,                                                                        
 October 31, 1996        $  2,233,793  $  4,670,254    $(1,911,282)  $ 2,758,972

Net Income                   -              -        433,546          433,546   
Stock options                                                                   
 exercised            10,000        15,400              -           15,400
Repurchase of                                                                   
    common stock               (8,000)      (22,000)             -      (22,000)

Balance,                                                                        
October 31, 1997     2,235,793      4,663,654    (1,477,736)       3,185,918  

Net Income                    -              -       702,703          702,703   
Stock options                                                                   
exercised             106,800        316,091             -          316,091 
Repurchase of                                                                   
common stock        (21,000)       (87,392)            -          (87,392)  
Tax benefit of                                                                  
options exercised           -        334,000             -          334,000 

Balance,                                                                        
October 31, 1998     2,321,593      5,226,353      (775,033)       4,451,320  

Net Income                    -              -     1,018,066        1,018,066   
Stock options                                                                   
exercised              60,500        221,750             -          221,750 
Repurchase of                                                                   
common stock        (72,800)      (370,830)            -         (370,830)  
Tax benefit of                                                                  
options exercised           -         31,424             -           31,424 

Balance,                                                                        
October 31, 1999   $  2,309,293   $  5,108,697   $  243,033     $  5,351,730  

The accompanying notes are an integral part of these statements.                

   Yocream International, Inc.

    STATEMENTS OF CASH FLOWS

      For the year ended October 31,

                                                1999        1998        1997
Cash flows from operating activities                                            
  Net income                              $ 1,018,066  $   702,703  $  433,546
Adjustments to reconcile net                                              
income to net cash provided                                           
by (used in) operating activities                                     
      Depreciation and amortization          338,739     285,418     307,703
       Gain on disposal of equipment          (16,201)     (8,028)    (19,684)
       Deferred income taxes                  351,000    (200,000)   (159,000)
Change in assets and liabilities                                
          Accounts receivable                (153,869)    (78,889)    (80,177)
          Inventories                        (709,037)   (108,924)   (238,928)
          Other assets                         11,727      40,782    (143,571)
          Accounts payable                    595,906       4,884    (166,457)
          Other accrued liabilities            65,897      66,565     (70,661)

Net cash provided by (used in)                      
               operating activities        1,502,228     704,511   (137,229)

Cash flows from investing activities                                            
 Proceeds from disposal of equipment          52,116      23,885      29,000
  Expenditures for fixed assets              (215,571)   (502,256)   (249,907)

Net cash used in investing                          
                activities                   (163,455)   (478,371)   (220,907)

Cash flows from financing activities                                            
Net increase (decrease) in note payable                                   
    to bank                                 (782,800)   (554,200)    398,000
 Proceeds from issuance of long-term debt    150,000      42,241      15,175
Principal payments on long-term debt                                      
     and capital lease obligations            (96,731)    (79,828)   (146,032)
  Repurchase of common stock                 (370,830)    (87,392)    (22,000)
 Proceeds from issuance of common stock      221,750     316,091      15,400

Net cash provided by (used in)                      
               financing activities         (878,611)   (363,088)    260,543

Net increase (decrease) in                          
                cash and cash equivalents     460,162   (136,948)     (97,593)

Cash and cash equivalents, beginning of year   277,246     414,194     511,787  

Cash and cash equivalents, end of year      $  737,408  $  277,246  $  414,194  

The accompanying notes are an integral part of these statements.                

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS   

NOTE A - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES              

Yocream International, Inc. (the Company) was incorporated on January 14,       
1977 in the state of Oregon. The Company manufactures and wholesales frozen     
yogurt deserts, snacks and beverages primarily under the name "YO CREAM". Sales 
are made primarily throughout the United States to and through a variety of     
outlets, including distributors, discount club warehouses, supermarkets,        
grocery stores, convenience stores, restaurants, hospitals, schools, military   
installations, yogurt shops and fast food chains.                               

1.    Cash and cash equivalents                                                 

Cash and cash equivalents include money market and other short-term investments 
with a remaining maturity of three months or less when purchased.               

2.    Inventories                                                               

Inventories are stated at the lower of cost or market.  The Company             
determines cost based on the first-in, first-out (FIFO) method for raw          
materials, packaging materials and supplies, and based on standard costs for    
finished goods.                                                                 

3.    Fixed Assets                                                              

Fixed assets are stated at cost.  Expenditures for replacements and             
improvements are capitalized, and expenditures for repairs and maintenance and  
routine replacements are charged to operating expense as incurred.  When assets 
are sold or otherwise disposed of, the cost and related accumulated depreciation
are eliminated from the accounts and any resulting gain or loss is included in  
operations.  Depreciation is provided for on a straight-line basis in amounts   
sufficient to relate the cost of depreciable assets to operations over their    
estimated service lives.  Leasehold improvements are amortized over the life of 
the lease or the service life of the improvement, whichever is shorter.  The    
estimated lives used in calculating depreciation and amortization are:          

Plant equipment                         10-25 years           
Office equipment and furnishings         3-10 years           
Leasehold improvements                   5-14 years           

4.    Supplemental Cash Flow Information                                        

The Company made cash interest payments of $76,761, $138,288 and $154,418       
for the years ended October 31, 1999, 1998, and 1997, respectively.  No income  
taxes have been paid during these periods.                                      

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS - Continued   

NOTE A - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued  

5.    Significant Estimates                                                     

In preparing financial statements in conformity with generally accepted         
accounting principles, management is required to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and the disclosure   
of contingent assets and liabilities at the date of the financial statements    
and revenues and expenses during the reporting period.  Actual results could    
differ from those estimates.                                                    

6. Financial Instruments                                                        

The carrying values of the Company's financial instruments consisting of cash   
and cash equivalents, accounts receivable and payable approximates fair value   
because of the relatively short maturity of these instruments.  The carrying    
value of notes payable and long-term debt approximate fair values base upon the 
interest rates available to the Company for similar instruments.                

7. Net Income Per Share                                                         

Basic EPS is computed using the weighted average number of shares of common     
stock outstanding for the period.  Diluted EPS is computed using the weighted   
average number of shares of common stock and dilutive common stock equivalents  
outstanding during the period.  Common equivalent shares from stock options are 
excluded from the computation when their effect is antidilutive.                

NOTE B - INVENTORIES                                                            

Inventories consist of the following at October 31,:                            
                                                         1999         1998

      Finished goods                               $1,454,865   $1,462,681
      Raw materials                                   988,219      336,821
      Packaging material and supplies                 183,078      117,623

                                                   $2,626,162   $1,917,125

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE C - FIXED ASSETS                                                           

Fixed assets consist of the following at October 31,:                 

                                         1999                 1998

 Machinery and equipment          $ 3,145,479          $ 3,045,141
 Office equipment and furnishings     226,242              207,805
 Leasehold improvements               838,392              804,045
 Construction in process               49,970               28,847
                                    4,260,083            4,085,838
Less accumulated depreciation                                   
     and amortization               (2,276,414)          (1,955,231)

                                  $ 1,983,669          $ 2,130,607

Fixed assets at October 31, 1999 and 1998 include assets under leases           
capitalized at amounts aggregating approximately $168,000, with related         
accumulated amortization of approximately $83,000 and $67,000, respectively.    
Depreciation and amortization expense related to the Company's fixed assets     
aggregated $326,594, $274,748, and $292,193, for the years ended October 31,    
1999, 1998, and 1997.                                                           

NOTE D - INTANGIBLE AND OTHER LONG-TERM ASSETS                                  

Intangible assets consist of the following at October 31,:            

                 Period of
                                         Amortization       1999        1998

       Trademarks (principally "YO CREAM")  25 years    $ 257,774    $ 257,774
        Less accumulated amortization                     (131,002)    (118,857)

                                                        $ 126,772    $ 138,917

As of October 31, 1999 and 1998, the Company had made deposits totaling         
$60,057 and $56,521 related to the leases of various equipment                  
and its production and office facility and had investments in insurance         
policies of $82,113 and $55,167, respectively.  These items are included in     
intangible and other long-term assets in the accompanying balance sheet.        

NOTE E - NOTE PAYABLE TO BANK                                                   

The Company has a uncollateralized bank line of credit which permits borrowing  
of up to $2,000,000.  The line bears interest at the bank's commercial lending  
rate, 8.25% at October 31, 1999.  The line is subject to renewal by July 1,     
2001.                                                                           

The line of credit contains certain financial covenants including covenants     
related to the ratio of senior liability (as defined) to adjusted tangible      
capital, current ratio and operating cash flow to fixed charge as well as limits
the amount of common stock which can be repurchased by the Company.  At October 
31, 1999, the Company was in compliance with all of these ratios and covenants. 

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE F - LONG-TERM DEBT                                                         

Long-term debt consists of the following at October 31,:                        
                                                       1999           1998
Industrial development loan, payable in monthly                     
installments of $1,202 through April 2002,                      
including interest at 8%, collateralized by                     
      certain equipment                              $  34,291     $  45,477

Notes payable to banks in monthly installments                      
totaling $4,229 through September 2003,                         
including interest at 8.5% to 12.9%,                            
      collateralized by certain equipment              113,174       151,676

Note payable to a bank in monthly installments                      
of $4,709 through October 2000, including                       
interest at prime less .25%                                     
    (8.0% at October 31, 1999) without collateral    150,000           -

                                                       297,465       197,153

     Less portion due within one year                   (96,277)      (49,869)

                                                    $  201,238    $  147,284

The principal portion of long-term debt is payable as follows:                  

Year ending                                                     
October 31,                                                     

2000                                        $   96,227      
2001                                            99,081      
2002                                            87,149      
2003                                            15,008      

                                      $  297,465

NOTE G - EMPLOYEE BENEFIT PLANS                                                 

The Company has a 401(k) Employee Savings Plan and Trust which, effective       
January 1, 1999, requires the Company to make contributions to the Plan in the  
amount of 3% of eligible employee compensation.  The Plan allows that the       
required contribution may be invested in common stock of the Company.  The      
Company's required contributions to the Plan were approximately $36,000 for the 
year ended October 31, 1999.  During the year, the Company made additional      
discretionary contributions in the amount of $22,000.  The Company made         
contributions to the Plan of approximately $41,600 and $24,800 during the years 
ended October 31, 1998 and 1997, respectively.  Additionally, the Company has a 
profit-sharing plan for eligible employees.  Under the provisions of the Plan,  
the Company may, at its discretion, make contributions of a sum not in excess of
the amount permitted under the Internal Revenue Code as a deductible expense.   
The Company has not made any contributions to this Plan.                        

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE H - STOCK OPTION PLANS                                                     

In September 1987, the Company established a nonqualified Stock Option Plan     
(the Plan) for key employees.  The Plan provided for the granting of options to 
purchase shares of common stock at a price not less then 85% or more than 100%  
of the fair market value per share as of the date of the grant.  Options were   
exercisable in such amounts and at such times as authorized by a Stock Option   
Agreement applicable to each option. All options have been granted with an      
exercise price equal to the fair market value of the Company's common stock on  
the grant date. This plan terminated prior to October 31, 1998.  Options granted
under the plan continue to be exercisable up to their expiration date.          

A summary of option transactions relating to the Stock Option Plan for key      
employees is as follows:                                                        

                                   Shares           Weighted
                                   Under             Average
                                      Option        Exercise Price

Balance, October 31, 1996                 172,800             $  3.60     
Exercised                                  -                    -   
Expired                                (12,000)               3.37  

Balance, October 31, 1997                 160,800                3.61     
Exercised                              (84,800)               3.22  
Expired                                (38,500)               4.11  

Balance, October 31, 1998 (exercisable)    37,500                4.00     
Exercised                              (37,000)               4.00  

Balance, October 31, 1999                     -                           

In October 1990, the Company's Board of Directors adopted a nonqualified        
Stock Option Plan for nonemployee directors.  Based on the terms of the         
Plan, options are to be granted to each director at the fair market value of    
common stock on the grant date in October of each year.  Options are exercisable
in such amounts and at such times as authorized by a Stock Option Agreement     
applicable to each option.  At October 31, 1999 these options had exercise      
prices ranging from $1.88 to $2.31 and a weighted average remaining contractual 
life of approximately 1 year.  This plan terminated prior to October 31, 1998.  
Options granted under the plan continue to be exercisable up to their           
established expiration date.                                                    

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE H - STOCK OPTION PLANS - Continued                                         

A summary of option transactions relating to the Stock Option Plan for          
nonemployee directors is as follows:                                            

                                   Shares           Weighted
                                   Under             Average
                                      Option        Exercise Price

Balance, October 31, 1996                  65,000             $  3.30     
Exercised                              (10,000)               1.54  

Balance, October 31, 1997                  55,000                3.62     
Expired                                (10,000)               8.00  

Balance, October 31, 1998                  45,000                2.65     
Exercised                              (15,000)               3.75  

Balance, October 31, 1999 (exercisable)    30,000                2.09     

In January 1994, the Company's Board of Directors adopted a Combined            
Incentive and Nonqualified Stock Option Plan and reserved 200,000 shares of     
common stock for issuance pursuant to this Plan.  At October 31, 1999, there    
were 53,000 shares available under the plan for future grants.  Options are     
exercisable in such amounts and at such times as authorized by a Stock Option   
Agreement applicable to each option.  At October 31, 1999 these options had     
exercise prices ranging from $1.75 to $4.00 and a weighted average remaining    
contractual life of approximately 2.1 years.                                    

A summary of option transactions relating to the Combined Incentive and         
Nonqualified Stock Option Plan is as follows:                                   

                                   Shares           Weighted
                                   Under             Average
                                      Option        Exercise Price

Balance, October 31, 1996                133,000              $  3.36     
Granted                                 4,000                 2.13  
Expired                               (21,000)                6.41  

Balance, October 31, 1997                116,000                 2.76     
Granted                                50,000                 4.00  
Exercised                             (22,000)                1.97  
Expired                               (19,000)                6.78  

Balance, October 31, 1998                125,000                 2.79     
Exercised                              (8,000)                1.94  

Balance, October 31, 1999                                                 
(87,000 exercisable)                  117,000                 2.84  

At October 31, 1999, there were 200,000 shares of common stock reserved for     
issuance under the Company's stock option plans.                                

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE H - STOCK OPTION PLANS - Continued                                         

The Company has adopted the disclosure only provisions of Financial             
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS     
123).  It applies APB Opinion No. 25, "Accounting for Stock Issued to           
Employees," in accounting for its Plans.                                        

Had the Company used the fair value methodology of FAS 123 for determining      
compensation expense, the Company's net income and net income per share would   
approximate the pro forma amounts below:                                        

                                          1999         1998         1997

Net income, as reported                 $1,018,066   $  702,703   $  433,546    
Net income, pro forma                   $  967,466   $  697,263   $  416,446    
Diluted net income per common                                                   
share as reported                    $     0.43   $     0.30   $     0.19 
Diluted net income                                                              
per common share, pro forma         $      0.41   $     0.30   $     0.18 

The weighted-average fair value of options granted during the years ended       
October 31, 1998 and 1997 were $2.53 and $1.36, respectively.  There were no    
options issued during 1999.  The fair value of each option grant is estimated on
the date of grant using the Black-Scholes options-pricing model with the        
following weighted-average assumptions: no dividends; expected volatility of    
73%; risk-free interest rate of 5.03% in 1998 and 5.6% in 1997 and an expected  
life of 5 years.                                                                

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE I - EARNINGS PER SHARE                                                     

The following table is a reconciliation of the numerators and denominators      
of the basic and diluted per share computations for each of the three years     
ended October 31:                                                               
                              Weighted
                                            Average         Per-
                             Income         Shares         Share
1997                               (Numerator)   (Denominator)     Amount       
Basic earnings per share                                                  
Income available to                                                 
  common stockholders         $433,546      2,230,410       $ 0.20

Effect of dilutive securities                                             
Stock options                       -           30,553              

Diluted earnings per share                                                
Income available to                                                 
  common stockholders         $433,546      2,260,963       $ 0.19

1998                                                                            
Basic earnings per share                                                  
Income available to                                                 
  common stockholders         $702,703      2,292,375       $ 0.31

Effect of dilutive securities                                             
Stock options                       -          66,293               

Diluted earnings per share                                                
Income available to                                                 
  common stockholders         $702,703      2,358,668       $ 0.30

1999                                                                            
Basic earnings per share                                                        
Income available to                                                 
  common stockholders       $1,018,066      2,314,861       $ 0.44

Effect of dilutive securities                                             
Stock options                       -           56,490              

Diluted earnings per share                                                
Income available to                                                 
  common stockholders       $1,018,066      2,371,351       $ 0.43

During 1998 and 1997 options to purchase 57,325 and 209,550 shares of common    
stock at various prices were outstanding but were not included in the           
calculation of diluted EPS because their effect would have been antidilutive.   

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE J - MAJOR CUSTOMERS                                                        

Revenues derived from the Company's largest customer represents 61%, 50% and 41%
of total revenues in the years ended October 31, 1999, 1998 and 1997.           

NOTE K - ADVERTISING COSTS                                                      

Advertising costs are charged to operations in the year incurred.  For the years
ended October 31, 1999, 1998 and 1997 advertising costs aggregated approximately
$310,000, $349,000 and $269,000, respectively.                                  

NOTE L - INCOME TAXES                                                           

The provision (benefit) for income taxes for the years ended October 31,        
consists of the following:                                                      

                                      1999        1998        1997

Current                                $   55,000  $       -    $      -        

Deferred                                  351,000    (200,000)    (159,000)     

                                  $  406,000  $ (200,000)  $ (159,000)

The effective tax rate differed from the statutory federal tax rate due to the  
following:                                                                      

                                          Year ended October 31,
                                          1999      1998      1997

Statutory federal tax rate (graduated)         34.0%    34.0%     32.9%   
State taxes, net of federal benefit             3.8      4.4       4.4    
Change in valuation allowance                  (9.3)   (78.2)    (95.2)   

                                             28.5%   (39.8)%   (57.9%)

Yocream International, Inc.   

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE L - INCOME TAXES - Continued                                               

    Deferred tax assets (liabilities) consist of the following at October 31,:

                                                  1999          1998

Net operating loss carryforwards            $  393,700    $  942,000
Accrued expenses                                54,400            - 
Allowance for doubtful accounts                  9,900         5,500
Inventory                                       18,700        15,500
Federal tax credits                             24,400            - 
Gross deferred tax assets                      501,100       963,000
 Deferred tax asset valuation allowance              -       (106,000)

Net deferred tax asset                         501,100       857,000

 Deferred tax liabilities                       (34,100)      (39,000)

Net noncurrent deferred tax asset           $  467,000    $  818,000

At October 31, 1999, the Company had federal and state net operating loss       
carryforwards aggregating approximately $1,116,000 and $321,000, respectively,  
which may be used to offset taxable income, if any, in future years.  The net   
operating loss carryforwards expire through 2008.                               

The Company has established a valuation allowance against a portion of          
deferred tax assets due to the uncertainty surrounding the realization of such  
assets.  Management evaluates on a quarterly basis the recoverability of the    
deferred tax assets and the level of the valuation allowance.  As of October 31,
1999, the Company has not recorded an allowance against deferred tax assets.    
The net change in the valuation allowance for the years ended October 31, 1999  
and 1998 was a decrease of $106,000 and $659,000, respectively.  The decrease in
the valuation allowance resulted primarily from the utilization of net operating
loss carryforwards and management's evaluation of the future recoverability of  
net deferred tax assets due to the likelihood of future taxable income.         
Approximately $150,000 of the decrease in the valuation allowance for the year  
ended October 31, 1998 resulted from the operating loss carryforwards utilized  
in such year.                                                                   

NOTE M - OPERATING LEASE COMMITMENTS INCLUDING THOSE WITH RELATED PARTIES       

During fiscal year 1998, the Company restructured its operating lease           
agreement for its production and office facilities.  The lease restructuring    
was caused by the construction of new office facilities attached to the         
existing building.  In addition to an increase in the monthly lease payments    
and an extension of the lease term, the Company incurred approximately $150,000 
of additional tenant improvement costs which have been capitalized as leasehold 
improvements.  The building is owned by a company whose owners are the          
Company's chief executive officer and its president (both of whom are also      
shareholders of the Company) and certain other shareholders of the Company.     

Yocream International, Inc.     

NOTES TO FINANCIAL STATEMENTS -  Continued    

NOTE M - OPERATING LEASE COMMITMENTS INCLUDING THOSE WITH RELATED PARTIES -     
Continued                                     

In addition, the Company leases equipment under noncancelable operating         
leases with unrelated third parties.                                            

Minimum lease payments required under these operating leases are as follows:    

Year ending                                                               
October 31,                                                               

2000                                                 $    355,248     
2001                                                      351,987     
2002                                                      337,023     
2003                                                      322,205     
2004                                                      321,203     
Thereafter                                                 1,830,769        

                                                 $ 3,518,435

Operating lease expense under the related party lease for the years ended       
October 31, 1999, 1998, and 1997 approximated $172,000, $140,000, $109,000,     
respectively.  Lease expense, exclusive of related parties, was approximately   
$83,000, $68,500 and $13,600 for the years ended October 31, 1999, 1998, and    
1997. Operating lease expenses are allocated between manufacturing costs and    
general and administrative expenses in the accompanying statement of operations.

During 1998, the Company entered into a lease arrangement providing up to       
$500,000 of available lease funding for equipment.  This funding is available   
to be utilized through December 31, 1999.  Equipment leased under this          
arrangement was approximately $279,000 in 1999 and $107,000 in 1998.            

13                                                                              

- 24 -                                                          

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing		Date		Other Filings
		5/14/94
		7/5/94
		7/31/94
		10/31/95		10-K, DEF 14A
		8/7/96		S-8
		8/26/96		S-8
		10/31/96		10-K, DEF 14A
		10/31/97		10-K
		11/1/97
		2/1/98
		5/1/98
		6/4/98
		8/1/98
		10/31/98		10-K
		11/1/98
		1/1/99
		2/1/99		10-K
		3/24/99		PRE 14A
		4/30/99		10-Q
		5/1/99
		8/1/99
For The Period Ended		10/31/99
		12/31/99
		1/1/0
		1/10/0
		1/19/0
		1/28/0
Filed On / Filed As Of		1/31/0		10-Q
		10/31/0		10-K, DEF 14A
		7/1/1
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