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Yocream International Inc · 10-K · For 10/31/96

Filed On 1/29/97 · SEC File 0-16787 · Accession Number 821572-97-2

  As Of               Filer                 Filing     On/For/As Docs:Pgs

 1/29/97  Yocream International Inc         10-K       10/31/96    2:37

Annual Report · Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         36±   163K 
 2: EX-27       Financial Data Schedule                                1      5K

10-K · Annual Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Business Certain Relationships and Related Transactions Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Directors and Executive Officers of the Registrant Executive Compensation Exhibits, Financial Statement Schedules, and Reports on Form 8-K Financial Statements and Supplementary Data Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Market for Registrant's Common Equity and Related Stockholders Matters Marketing Strategy Properties Security Ownership of Certain Beneficial Owners and Management Selected Financial Data Signatures Submission of Matters to a Vote of Security Holders
1	1st Page
4	Item 1:. Business
"	Marketing Strategy
5	Item 2:. Properties
"	Item 3:. Legal Proceedings
"	Item 4:. Submission of Matters to a Vote of Security Holders
"	Item 5:. Market for Registrant's Common Equity and Related Stockholders Matters
6	Item 6:. Selected Financial Data
"	Item 7:. Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Item 8:. Financial Statements and Supplementary Data
"	Item 9:. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
7	Item 10:. Directors and Executive Officers of the Registrant
"	Item 11:. Executive Compensation
"	Item 12:. Security Ownership of Certain Beneficial Owners and Management
"	Item 13:. Certain Relationships and Related Transactions
"	Item 14:. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
9	Signatures

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SECURITIES AND EXCHANGE COMMISSION        
WASHINGTON, D.C.  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, 1996.               

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

Commission File Number:  0-16787                                                

INTERNATIONAL YOGURT COMPANY          
(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                                       
Portland, Oregon                97220                 
(Address of Principal           (Zip Code)                  
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 ]                                              

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The aggregate market value of voting stock held by non-affiliates of the        
registrant was approximately $3,647,437 at January 22, 1997, based upon the     
average bid and asked prices of the common stock on that date.                  

At January 22, 1997 there were 2,233,793 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                                                 
1997 Annual Meeting of Shareholders          Part III                           

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TABLE OF CONTENTS     

PART I                                                      Page                

Item 1.  BUSINESS......................................4          
Item 2.  PROPERTIES...................................14          
Item 3.  LEGAL PROCEEDINGS............................14          
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY              
HOLDERS......................................14 

PART II                                                                         

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND                
RELATED STOCKHOLDERS MATTERS.................15 
Item 6.  SELECTED FINANCIAL DATA......................16          
Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF                  
FINANCIAL CONDITION AND RESULTS OF              
   OPERATIONS...............................17
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......................19 

SIGNATURES...................................................22                 

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PART I        

Item 1:  BUSINESS.                                                              

General.                                                                        

International  Yogurt  Company  (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    
its present name.  The Company makes, markets and sells frozen yogurt,          
sorbet, 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 YO CREAM  frozen yogurt, which is    
distributed and sold nationwide.  The Company also produces SORBET by YO        
CREAM , 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 YO CREAM brand frozen yogurt and sorbet products produced by the  
Company constitute only a portion of the relevant frozen dessert industry.      
The industry produces a diverse range of products, many of which compete        
directly with the Company's YO CREAM  frozen yogurt and sorbet products.        
Many types of retail outlets make available to the public the Company's Yo      
Cream frozen yogurt and sorbet products as well as other manufacturers'         
frozen yogurt products and frozen dessert 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 yogurt or frozen desserts 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 yogurt and        
certain other frozen desserts are often viewed as premium products, and are     
somewhat resistant to finely-tuned price competition.  However, larger          
institutional customers for frozen dessert 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 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 product      
over another for health related reasons such as ingredients, calories and       
additives.  Manufacturers of frozen dessert 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   
products also compete with many other varieties of food and dessert items.      

Frozen yogurt products have gained wider acceptance and identification
by a greater variety of demographic groups than when first introduced into      
the frozen dessert marketplace.  The Company believes that frozen dessert       
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         
products.                                                                       

Overall Company Mission.                                                        

 International Yogurt Company operates within the health oriented frozen
dessert, snack, and novelty business.  Focus is placed on manufacturing         
superior quality soft serve and hardpack products (e.g. frozen yogurt,          
organic, sorbet, etc.) for regional, national, and worldwide foodservice and    
retail markets.  International Yogurt Company'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. combined efforts with Norpac's nationwide distribution     
system, Cascadian Farm, etc.).  These relationships are developed to increase   
volume growth and profitability within those markets served by the company.     
International Yogurt Company's foodservice YO CREAM  branded presence           
receives emphasis in selected geographic areas of the U.S. where sales and      
marketing resources are focused on branded product expansion.  For companies    
for which International Yogurt Company manufactures (e.g. Price Costco,         
Cascadian Farm, Western Family, SYSCO, Weight Watchers, etc.), International    
Yogurt Company is committed to providing 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 developing and expanding YO CREAM consumer brand        
identification, by offering a broad selection of premium frozen yogurt and      
sorbet 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 of its frozen yogurt products.  The Company also considers the      
broad distribution of its product critical to sales growth, with its products   
now available in 49 states.  The Company will continue to strive for greater    
distribution penetration within each of those states.                           

On September 8, 1987 the Company entered into a 10-year exclusive     
marketing agreement with Norpac Foods, Inc. ("Norpac") based in Stayton,        
Oregon.  Under this agreement, as amended, Norpac is the Company's exclusive    
sales agent, subject to certain exceptions, for the sale of the Company's       
frozen yogurt and sorbet products to the restaurant and foodservice             
institutional industry.  Norpac is a large food processing and agricultural     
marketing organization with 40 owned and contractually related plants, a        
distribution system using 22 warehouses, a private truck fleet and a network    
of 75 independent food brokers across the United States.  The Company expects   
the contract with Norpac to be renewed, with modifications, during the          
current fiscal year.                                                            

By August, 1989, the Company ceased the direct sale of its products   
through Company-owned restaurants.  The management of the Company decided       
that the capital and other resources of the Company should be devoted           
exclusively to the manufacturing and wholesale business.                        

The Company's management also believes that its ability to respond    
innovatively to and 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.                                                   

In 1993, the Company began a concerted effort to obtain copacking and 
private label business.  As a result, in July, 1993 the Company announced       
that it had been approved as a copacker of frozen dairy products for Weight     
Watchers Food Company, an affiliate of H. J. Heinz Company.  Production of      
the products began in December 1993.  The Company was also successful in        
obtaining a contract to copack the organically grown, All Fruit Sorbet          
produced for Cascadian Farm, a majority owned subsidiary of Trefoil Natural     
Foods.  In November 1994, Cascadian Farm added to its contract with the         
Company its organic frozen yogurt and ice cream lines as well.  The Company     
continues to enjoy the above alliances and is currently pursuing additional     
strategic alliance opportunities for expanding sales and profits.               

In February, 1994, the Company contracted with Western Family Foods,  
Inc. to distribute and market International Yogurt products in the              
retail-grocery trade, with products being sold under a Western Family/Yo        
Cream  cobrand.  Management believes this entry into the retail grocery trade   
was a strategic event for the Company.  In September 1996, the Company          
entered into a new agreement with Western Family for co-packing Western         
Family's own brand of nonfat frozen yogurt hardpack in 1/2 gallon containers.   

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 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, and will be marketed elsewhere in conjunction with the Company's Yo      
Cream  branded sales through independent retailers.                             

In 1996, the Company began a nationwide introduction of 4 oz. 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 Yo    
Cream" and under SYSCO's nationwide "Cool N' Classy " brand.  The Company is    
the only supplier to SYSCO for this product.                                    

In order to further leverage its distinction as the "Frozen yogurt    
choice of the Portland Trail Blazers," the Company developed the Blazer Swirl   
by YO CREAM , a unique hard pack swirl of nonfat vanilla frozen yogurt and      
sorbet.  Packaged in an 8 oz. single-serve cup, sales began in January 1997,    
and the product is slated for launch in January of 1997 both at the Rose        
Garden Arena and Texaco Star Marts.  Advertising support will include a radio   
campaign.                                                                       

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

Merchandise.                                                                    

The Company makes, markets and sells frozen yogurt in premium, lowfat,
and nonfat flavors, and non-dairy sorbet in a variety of flavors, as well as    
ice cream and other frozen desserts.  These frozen products are available in    
both  soft serve liquid  mix and  hard  pack forms.  As of January 22, 1997,    
the Company had available for sale the following products and flavors under     
its own YO CREAM  brand name:                                                   

10-K 5th "Page" of 18 TOC 1st Previous Next Bottom Just 5th

YO CREAM                   YO CREAM                    YO CREAM                 
Premium Soft Serve Mix     Low-fat Soft Serve          Hard Pack Single Serve   
                                          5 ounce cups

Cheesecake Supreme         Chocolate                   Boysenberry              
Dutch Chocolate            Strawberry                  Strawberry               
French Vanilla             Vanilla                     Praline                  
Milk Chocolate                                         French Vanilla           
Peanut Butter              YO CREAM  Free              Milk Chocolate           
Praline 'n Cream           Sugar Free                  Chocolate                
Strawberry                                             Peach                    
Vanilla                    Chocolate    Raspberry                               
Strawberry   Blueberry    
Vanilla      Cafe' au Lait

YO CREAM                   YOGURT STAND                SORBET . . .             
Nonfat Soft Serve Mix      Nonfat Soft Serve           BY YO CREAM              

Apple Spice                Chocolate                   Very Berry               
Blueberry Burst            Strawberry                  Kiwi Strawberry Splash   
Butter Brickle             Vanilla                     Lemony Lime              
Cable Car Chocolate                                    Mango Tango              
Cappuccino                 Specialty Products          Orange Burst             
Cherry Almond                                                                   
Chocolate Classic          Ice Milk Soft Serve                                  
Country Vanilla            Vanilla Shake Base                                   
Egg Nog                                                                         
French Vanilla             YO CREAM                                             
Georgia Peach              SOFT SCOOP - 4 Ounce        YO CREAM                 
"Holiday" Chocolate Mint                               3 Gal SOFT SCOOP         
Irish Mint                 Chocolate Nonfat              -Premium               
Island Banana              Strawberry Nonfat            (with condiments)       
Kahlua                     Vanilla Nonfat                                       
Luscious Lemon             Very Berry Sorbet           Chunky Cherry Almond     
New York Cheesecake        Very Berry Sorbet/          Choc. Chip Chocolate     
Outrageous Orange            Nonfat Vanilla Frozen     Chocolate Java Swirl     
Peanut Butter                Yogurt Swirl              Peaches 'n Cream         
Pecan Praline                                          Rocky Road               
Peppermint Stick                                       Pecan Praline            
Pumpkin                    WESTERN FAMILY                                       
Very Strawberry            half gallon                                          
Very Boysenberry                                       YO CREAM                 
Very Raspberry             Chocolate                   3 Gal SOFT SCOOP         
White Chocolate Macadamia  Vanilla                       - Standard             
                        Raspberry                     (without condiments)
Cherry Cheesecake         
                      Strawberry                  Mountain Boysenberry
Yo Caffe Latte             Peach                       Raspberry Royal          
                      Cappuccino                  Strawberry Sensation
Regular                    Vanilla/Chocolate           Swiss Chocolate          
Decaffeinated              Strawberry/Banana           Alpine Vanilla           

BLAZER SWIRL . . . BY YO CREAM                                                  
8 ounce cup                                                   
Very Berry Sorbet/Vanilla Frozen Yogurt                                         

The Company sells the soft serve liquid mix form to food service      
customers who dispense it through a soft serve frozen dessert machine.  This    
form is also available in an unflavored natural form which permits the          
customer to add desired flavors.  In fiscal year 1996, the soft serve liquid    
mix product accounted for approximately 62% of the Company's case sales.        

Hard pack products are available in pint and 1/2 gallon containers to 
supermarkets, which price them competitively with ice cream and other related   
products.  The Company also markets and sells its hard pack frozen dessert      
products in 4 oz., 8 oz., and three gallon containers to food service           
customers.  Such hard pack products are also produced under private label for   
Western Family , Weight Watchers , and Cascadian Farm.  In fiscal year 1996,    
hard pack products of all type containers accounted for approximately 38% of    
the Company's case sales.                                                       

Two new lines of hard pack frozen yogurt products were introduced in  
late 1994, a premium pint line and a half gallon line.  Presently, half         
gallon hard pack products are being produced for Western Family in the          
following flavors:  Chocolate, Vanilla, Raspberry, Cherry Cheesecake,           
Strawberry, Peach, Cappuccino, Vanilla/Chocolate, and Strawberry/Banana.        

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 1996 it accounted for                
approximately 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 ten 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 YO CREAM, and it is         
packaged in single serve four ounce and three gallon containers.                

In May of 1993, the Company introduced a yogurt-coffee beverage called
YO CREAM Caffe' Latte' .  It is a ready to serve product that is being sold     
nationally.                                                                     

SORBET by YO CREAM  is a new 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.                                                   

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 ice milk 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 to be shipped out of the Port of Portland.      

While the manufacturing plant is capable of producing a full range of 
dairy products and other fluid items, it primarily is utilized to produce       
yogurt, ice cream, and sorbet.  The facility is a fully licensed dairy and      
pasteurizes its products under U.S.D.A. 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 in addition to a      
full range of condiments that can be added to the finished products.            

Fiscal 1996 has seen both a leveling out of production fluctuation and
an increase in overall plant utilization.  Plant utilization has risen from     
approximately 30% to approximately 40%.  Management expects to see plant        
utilization increase further in the 1997 fiscal year, primarily from the        
Company's specialty products in individual serving sizes and through            
copacking and private label business.                                           

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 and work-in-process inventory.  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 49 states.  Distributors ship
the Company's product on refrigerated trucks to all domestic locations.         

On September 8, 1987, the Company entered into a 10-year exclusive    
marketing agreement with Norpac Foods, Inc. ("Norpac") based in Stayton,        
Oregon.  Under this agreement, as amended, Norpac is the Company's exclusive    
sales agent, subject to certain exceptions, for the sale of the Company's       
frozen yogurt and sorbet products to the restaurant and foodservice             
institutional industry (see page 5, "Marketing Strategy").  Norpac sold and     
arranged distribution of approximately 53% (based on revenues)of the            
Company's products in fiscal year 1996, which is lower by approximately 33%     
compared to 1995, as the Company began selling the warehouse club business      
direct (outside Norpac) in September, 1995.  The Company expects the contract   
with Norpac to be renewed, with modifications, within the current fiscal        
year.                                                                           

  Norpac does not have the responsibility for foreign markets or warehouse
clubs.  Presently, the Company makes its own arrangements for shipments by      
truck to Canada and by ship to European and Pacific Rim countries.              

In 1996, the Company became an approved manufacturer of SYSCO         
Corporation's Cool N'Classy brand for 4 oz. cups of nonfat frozen yogurt and    
non-dairy sorbet.  Norpac is responsible for selling the cups to SYSCO's 60     
nationwide foodservice distributor locations.                                   

The portion of the Company's sales to U.S. Government agencies or     
institutions, such as sales to the Army, would not be material to the Company   
in the event of a cancellation of those contracts.                              

 During the year ended October 31, 1996 case volume to the Company's two
largest customers were 33% (Cascadian Farm) and 23% (Price Costco, Inc.) of     
total case volume for the year.                                                 

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.  This process   
has also occurred 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 frozen products and various     
novelty items.  The Company has also developed a line of yogurt beverages       
including yogurt-juice and yogurt-coffee combinations.  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 years ended October 31, 1996,     
to have been $104,000, compared with $82,000 and $302,000 for the years ended   
October 31, 1995 and 1994.                                                      

Advertising and Promotion.                                                      

During the year ended October 31, 1996 such expenses totalled         
approximately $452,000 representing 5.7% of net sales.  This compares to        
$231,000, or 3.1% of net sales for the year ended in October 1995 and           
$307,000, or 4.4% of net sales in the year ended October 31, 1994.              

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.           

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 78% of the Company's needs in fiscal year 1996 and      
the second largest supplier provided approximately 22%.                         
  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 both 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.  In addition, increased competition from the   
established manufacturers and distributors of frozen desserts and ice cream     
products can be expected in the future as a result of their increased           
involvement in the frozen yogurt and sorbet business.                           

  The Company competes against different manufacturers with its soft serve
products and with its hard pack products.  The Company's principal              
competitors for soft serve products are Colombo, acquired by General Mills      
Inc. in 1993, The Dannon Company, Inc., and Honey Hill Farms, recently          
acquired by Greater Pacific Food Holdings.  The Company's competitors for       
hard pack frozen yogurt products include Dryers, Haagen Dazs, and Ben and       
Jerry's Homemade, Inc.  In addition to the large primary competitors            
identified, the Company competes against numerous small local and regional      
competitors.                                                                    

 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 YO CREAM  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 Norpac 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 YO CREAM 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,
YO CREAM, 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 YO CREAM  LITE.  In addition, the Company uses the        
trademarks "JUST SAY YO ," "PURE PLEASURE ," "YOGURT STAND", "THE GOURMET       
YOGURT FOR ICE CREAM LOVERS ," "SOFT SCOOP " and "YO CAFFE' ".  The Company     
has registered or intends to register those trademarks in the United States     
and may register the trademark YO CREAM in other foreign countries.             

Employees.                                                                      

The Company employed 40 persons at October 31, 1996, 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 of            
approximately 250 persons are mostly independent 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 30,000 square foot facility at 5858 NE 87th
Avenue, Portland, Oregon 97220.  Of this total space, the Company uses          
approximately 6,800 square feet for production, approximately 9,000 square      
feet for freezer and refrigeration purposes, and approximately 2,300 for        
office space.  The Company has designated the remaining 11,900 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.  The new lease is for a 15 year term and         
provides for a base rent of $8,600 per month for the first three years and      
then increasing approximately 3% per year thereafter.                           

Other materially important property of the Company includes certain   
equipment which it utilizes to manufacture its frozen yogurt products,          
including standard dairy equipment, holding tanks and refrigeration units.      
In addition, the company leases trucks and other equipment under capital        
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 1996.                                   

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 22, 1997,     
there were 2,233,793 shares of the common stock outstanding and there were      
217 shareholders of record estimated to represent approximately 800             
beneficial holders based on the number of individual participants in security   
position listings.  On January 22, 1997 the closing bid and asked prices were   
$1-1/2 and $1-7/8, 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, 1996    
and October 31, 1995.  Such over-the-counter market quotations reflect          
inter-dealer prices, without retail mark-up, mark-down or commission and may    
not necessarily represent actual transactions.                                  

                                                                · Download Table

Twelve months Ended October 31, 1996              High         Low    
                                                                      
     August 1, 1996   - October 31, 1996        $ 2 1/4        $2     
     May 1, 1996      - July 31, 1996             2 1/4         2     
     February 1, 1996 - April 30, 1996            1 15/16       1 9/16
     November 1, 1995 - January 31, 1996          2             1 3/8 

Twelve months Ended October 31, 1995              High         Low    
                                                                      
     August 1, 1995   - October 31, 1995        $ 2 1/4       $ 1 1/2 
     May 1, 1995      - July 31, 1995             2 3/8         2 1/4 
     February 1, 1995 - April 30, 1995            2 13/16       2 3/4 
     November 1, 1994 - January 31, 1995          3 1/4         3 1/8 

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.                                      

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Item 6:  SELECTED FINANCIAL DATA.                                               

  The following selected financial data set forth below as of, and for the
fiscal years ended October 31, 1996, 1995 and 1994 are derived from the         
audited financial statements included elsewhere in this report and are          
qualified by reference to such financial statements.  The balance sheet data    
as of October 31, 1994, 1993, and 1992 as well as the Statement of Operations   
data for the fiscal years ended October 31, 1993 and 1992, are derived from     
financial statements not included herein.                                       

                                                        · Enlarge/Download Table

                                         October 31                                              

Balance Sheets                  1996         1995         1994         1993      1992            
                                                                                                 
Total Current Assets         $3,067,744    $2,876,583   $2,924,075 $2,333,968  $2,294,887        

Total Assets                  5,353,622     5,036,716    4,953,187  4,076,507   4,022,658        
Long-term Debt                  286,481       278,498      294,822    273,466     730,966        

Shareholder's Equity          2,758,972     2,679,443    2,315,075   1,882,739  1,238,986        


Statements of                 For the Years Ended October 31,                                    
Operations                                                                                       
                                1996         1995         1994         1993      1992            
                                                                                                 
Yogurt Sales                  $7,922,144   $7,348,531   6,911,252  $6,387,989  $6,526,893        

Income from                                                                                      
Operations (1)                   104,729      312,820     187,952     292,718     234,396        

Net Income                         6,773      304,884      61,888     175,101     105,017        

Net Income per                                                                                   
Common Share                       -            .14          .03          .07        .06         
<FN>                                                                                             
<F1>                                                                                             
(1)  Income from operations in 1996 is after deduction of unusual expenses amounting to $143,527.
</FN>                                                                                            

Item 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        
RESULTS OF OPERATIONS.                                        

Results of Operations.                                                          

The Company's revenues from yogurt sales were $7,922,144, $7,348,531, 
and $6,911,252 for the years ended October 31, 1996, 1995 and 1994,             
respectively.  The 7.8% increase in revenues in 1996 was primarily due to       
increased sales from private label, and copacking business, as well as          
increased revenues from certain new products and expanded business activity     
in Canada.                                                                      

 The increase in revenues primarily occurred during the last five months
of the year.  During this period the Company realized a steadily increasing     
gain in revenues.  This culminated in a fourth quarter increase of 26.4%,       
compared to the same period in 1995.  Early in the fiscal year, revenues were   
adversely impacted by the unusually severe weather conditions experienced       
throughout most of the United States resulting in a temporary decrease in       
demand for frozen yogurt products.                                              

     With an established national distribution system, the Company and
its management believe that future increases in sales will occur from the       
competitive success of the Company's products rather than enlargement of the    
national system of distributors.  Furthermore, management expects the trend     
of increased sales to continue as it executes its aggressive growth plan,       
which includes expanded alliances with other national companies, intensified    
direct sales activity, and the introduction of new products.  The new           
products include a 4 oz single serve hard pack cup branded as Soft Scoop by     
YO CREAM containing nonfat yogurt and a high quality non-dairy sorbet.          
Another new product is a unique swirl of nonfat vanilla frozen yogurt and       
sorbet packed in an 8 oz single serve cup which has been developed by the       
Company and branded as Blazer  Swirl by YO CREAM .  Customers for this          
product include the Rose Garden Arena, home of the Portland Trail Blazers and   
Texaco Star Marts.                                                              

  The cost of yogurt sales, as a percentage of revenues, were 71.1%, 69.3%
and 69.2% in 1996, 1995 and 1994 respectively, with corresponding gross         
profit margins of 28.9%, 30.7% and 30.8% for the same periods.  During fiscal   
1996 margins decreased as a result of aggressive pricing earlier in the year    
to gain market share, and additional costs associated with business             
expansion.  Increases were also experienced in the cost of ingredients,         
transportation, and warehousing.  However, as a result of the Company's         
analysis of both market conditions and its costs, the Company increased         
prices during the fourth quarter in the food service and certain other          
segments of its business.  The increase in the gross margin for 1995, as        
compared to 1994, was primarily the result of increased production              
efficiencies.                                                                   

Production is below plant capacity.  Therefore, in the absence of     
increases in direct costs, management expects that the economies of scale       
from increased sales and production should result in improvements in gross      
profit margin and net income in the future.                                     

Selling and marketing expenses, as a percentage of revenues, for the  
years ended October  31, 1996, 1995 and 1994 were 14.1%, 12.4% and 13.6%        
respectively.  While such expenses are a direct function of sales and will      
vary in dollar amount in relation to the level of sales, management has         
exercised care in controlling these costs.  The increase in such expenses in    
1996 reflects the Company's expanded marketing and sales activity.  As a        
result, for example, the Company in June was approved by the SYSCO              
Corporation of Houston, Texas to begin producing single serve four ounce cups   
of non-fat frozen yogurt and non-dairy sorbet products under SYSCO's Cool N'    
Classy label.  These products, in five flavors, are available through SYSCO     
nationwide.  The Company is the only supplier of this product for SYSCO.  The   
arrangement does not commit SYSCO to specific quantities.  International        
Yogurt Company began making shipments to SYSCO late in the third quarter.       

General and administrative expenses for the years ended October 31,   
1996, 1995 and 1994, as a percentage of revenues, were 11.6%, 14.0%, and        
14.4% respectively.  Management has exercised careful control over these        
costs.  Furthermore, management believes that the relatively fixed nature of    
these costs are such that net income will be favorably effected as expected     
higher sales levels are achieved.                                               

During 1996, the Company made a provision for certain unusual expenses
aggregating $143,527.  The provision was primarily for a reserve against        
receivables recognized in prior years for recovery of certain marketing         
costs, and a reserve for disputed packaging and freight costs related to        
prior years. The provision has been reported separately in order to readily     
identify amounts.  The provision reduced net earnings by $143,527, or $.07      
per share.                                                                      

Income from operations for the years ended October 31, 1996, 1995 and 
1994 was $104,729, $312,820 and $187,952 respectively.  As a percentage of      
revenues, income from operations was 1.3%, 4.2% and 2,7% respectively.  The     
results for 1996 decreased in comparison to 1995 primarily due to the           
decrease in gross profit, and the provision for unusual expenses described      
above.  Were it not for the provision for unusual expenses, the income from     
operations in 1996 would have been 3.1%.  The results for 1995 were up over     
1994 due to the improved gross profit margins in 1995.  Expenses in 1994 also   
included additional costs associated with the introduction of certain retail    
hard pack products and the exercise of employee stock options which resulted    
in additional expense for payroll taxes.                                        

The Company accounts for income taxes in accordance with Statement of 
Financial Accounting Standards No. 109 - Accounting for Income Taxes (FAS       
109).  This standard requires, among other things, the recognition of future    
tax benefits for net operating loss carryforwards (NOL's), to the extent that   
realization of such benefits is more likely than not.  During 1995, as a        
result of an evaluation of the future benefit of the Company's NOL's, the       
Company increased the carrying value of its net noncurrent deferred tax asset   
by $125,000, which resulted in a corresponding increase in net income.  At      
October 31, 1996, the Company had NOL's aggregating approximately $3,300,000    
which may be used to offset taxable income in future years.  The Company has    
not recognized the full expected benefit of these NOL's.  In  future years,     
as earnings are realized, the Company will be recognizing the remaining tax     
benefit of such NOL's.                                                          

Net income for the years ended October 31, 1996, 1995 and 1994 was    
$6,773, $304,884 and $61,888 respectively.  Net income for 1996 was less than   
1995 due to the provision for unusual expenses in 1996, as well as the          
decrease in gross profit margin and increase in selling and marketing           
expenses in 1996, and the tax benefit of NOL's recognized in 1995.  The         
increase in net income in 1995, compared to 1994, primarily resulted from the   
improved margins in 1995 and recognition of the NOL tax benefit, and the        
additional production costs and expenses associated with employee stock         
options in 1994.                                                                

Capital Resources and Liquidity.                                                

  During the past three years, the Company has financed its operations and
expansion with stock sales, bank loans, capital leases, and internally          
generated funds.                                                                

  During 1996, the Company received $105,500 from subscriptions for 52,750
shares of unregistered common stock through a private placement.  The related   
expenses were $11,526.                                                          

 At October 31, 1996, the Company's total borrowings under its bank line
of credit were $939,000, while the total amount available under the line was    
$1,316,000.  Interest is at 1 percent over that bank's basic commercial         
lending rate.  Total borrowings under this line are payable upon demand and     
limited to 65 percent of eligible accounts receivable and 30 percent of         
eligible inventory, plus loan insurance provided by a governmental agency, up   
to an aggregate maximum of $1,500,000.  The line of credit is subject to        
renewal by April 1, 1997.  Although management expects the bank to renew its    
line of credit, there can be no guarantee of that renewal.                      

Accounts receivable at October 31, 1996 and 1995 were $748,683 and    
$873,191, respectively, which management considers to be in the normal course   
of business.                                                                    

At October 31, 1996, the Company had working capital of $759,575. The 
Company believes its existing assets, bank lines of credit, along with          
revenues from operations, will be sufficient to fund the Company's operations   
through the end of fiscal year 1997.  The Company believes that the impact of   
inflation on net income has been minimal for fiscal years 1996, 1995 and        
1994.                                                                           

  The Company leases its offices and production facilities.  The lease has
a remaining term of 13 years with renewal provisions and provides for a base    
rent of $8,600 per month for the first three years and then increasing at       
approximately 3% per year thereafter.                                           

The Company is in the process of evaluating its capital expenditure   
plans for fiscal 1997.  The Company's current plans calls for expenditures of   
approximately $300,000.  The major portion of this consists of the              
construction of a freeze tunnel that is expected to result in significant       
cost savings.  The Company expects to finance the capital expenditures under    
an existing equipment financing facility with its lender.                       

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.                          

 The response to this item is incorporated herein by reference from Form
8-K, filed on October 24, 1995.                                                 

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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 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 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 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 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.                              

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(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.         

                                                                · Download Table

Exhibit                                                          
Number                    Exhibit                            Page
                                                                 
     3.1       Restated Articles of Incorporation              i 
               of the Company.                                   

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

     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       Agreement, dated as of September 8, 1987,       i 
               between the Company, Norpac Foods,                
               Inc., and Robert Arneson, Sales                   
               Agent, Inc., dba Norpac Food Sales                
               and related Stock purchase Agreements.            

    10.20      1990 Non-Discretionary Stock Option            iv 
               Plan for Non-Employee Directors.                  

    10.21      Agreement, dated as of April 1, 1991,         iii 
               by and between Norpac Foods, Inc. and             
               International Yogurt Company, Inc.                

    10.22      Amendment to Marketing Agreement,             iii 
               dated as of April 1, 1991, by and                 
               among the company, Norpac foods, Inc.             
               and Robert Arneson, Sales Agent Inc.,             
               dba Norpac Foods Sales.                           

    10.23      Commercial lease and assignment lease           v 
               by and between John N. Hanna, David J.            
               Hanna, James S. Hanna, Harry M. Hanna             
               and Joseph J. Hanna Jr; landlord and              
               International Yogurt.                             

    27.1       Financial Data Schedule                           


____________________________________________  

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.                                    

(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.

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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.                    

INTERNATIONAL YOGURT COMPANY         Dated:  January __, 1997                   

By:                                                                             
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:  ____________________             Dated:  January __, 1997                  
John N. Hanna                                                         
Chief Executive Officer and                                           
Chairman of the Board of Directors                                    

By:  ____________________             Dated:  January __, 1997                  
David J. Hanna                                                        
Director                                                              

By:  ____________________             Dated:  January __, 1997                  
James S. Hanna                                                        
Director                                                              

By:  ____________________             Dated:  January __, 1997                  
Carl G. Behnke                                                        
Director                                                              

By:  ____________________             Dated:  January __, 1997                  
William J. Rush                                                       
Director                                                              

By:  ____________________             Dated:  January __, 1997                  
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.                                        

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International Yogurt Company            
APPENDIX A              
INDEX TO FINANCIAL STATEMENTS           

The following financial statements of International Yogurt Company and          
related reports of independent accountants are included as Item 8 and Item      
14(a)(1):                                                                       

                                                      Page

Report of Independent Accountants - Grant Thornton LLP            A-1           

Report of Independent Accountants - Price Waterhouse LLP          A-2           

Balance Sheets at October 31, 1996 and 1995                       A-3           

Statements of Operations for the years ended October 31, 1996,                  
1995 and 1994                                                  A-4        

Statement of Shareholders' Equity for the years ended October 31,               
1996, 1995 and 1994                                            A-5        

Statements of Cash Flows for the years ended October 31, 1996,                  
1995 and 1994                                                  A-6        

Notes to the Financial Statements                          A-7 - A-17           

No financial statement schedules are included in Item 14(a)(2) as no required   
schedules are applicable to International Yogurt Company for the years ended    
October 31, 1996, 1995 and 1994.                                                

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Report of Independent Certified Public Accountants        

Board of Directors and Shareholders                                             
International Yogurt Company                                                    

We have audited the balance sheets of International Yogurt Company as of        
October 31, 1996 and 1995, and the related statements of operations,            
shareholders' equity and cash flows for the years then ended.  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 audit.                                                                   

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 International Yogurt Company   
as of October 31, 1996 and 1995, and the results of its operations and its      
cash flows for the years then ended, in conformity with generally accepted      
accounting principles.                                                          

Grant Thornton LLP                                                              
Portland, Oregon                                                                
January 23, 1997                                                                

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Report of Independent Accountants             

To the Board of Directors and Shareholders of                                   
International Yogurt Company                                                    

In our opinion, the financial statements listed in the accompanying index       
present fairly, in all material respects, the results of operations and cash    
flows of International Yogurt Company for the year ended October 31, 1994, in   
conformity with generally accepted accounting principles.  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 audit.  We conducted our audit of these statements in accordance with    
generally accepted auditing standards which 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, assessing the accounting principles used and              
significant estimates made by management, and evaluating the overall            
financial statement presentation.  We believe that our audit provides a         
reasonable basis for the opinion expressed above.                               

Price Waterhouse LLP                                                            
Portland, Oregon                                                                
January 13, 1995                                                                

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International Yogurt Company              
BALANCE SHEETS              
October 31,             
                                        1996            1995
ASSETS                                                                          
Current assets                                                                  
Cash and cash equivalents                    $  511,787     $ 318,535       
Trade accounts receivable,                                                  
net of allowance for doubtful accounts                                  
of $106,238 in 1996 and $14,237 in 1995       748,683       873,191     
Inventories                                   1,569,273     1,554,625       
Equipment held for resale                        28,083        28,220       
Other current assets                            209,918       102,012       

      Total current assets             3,067,744     2,876,583

Fixed assets, net                               1,970,558     1,839,860         
Deferred tax asset                                125,000       125,000         
Intangible and other long-term assets, net        190,320       195,273         

                                      $5,353,622    $5,036,716
LIABILITIES AND SHAREHOLDERS' EQUITY                                            
Current liabilities                                                             
Note payable to bank                         $  939,000    $1,089,920       
Current portion of long-term debt               108,717        68,879       
Current obligations under capital leases         33,825        30,715       
Accounts payable                              1,095,399       813,309       
Other accrued liabilities                       131,228        75,952       

      Total current liabilities        2,308,169     2,078,775

Long-term debt payable to related parties                                       
and others, less current portion                186,104       144,385       
Long-term obligations under capital leases,                                     
less current portion                            100,377       134,113       

      Total liabilities                2,594,650     2,357,273

Commitments                                          -             -            

Shareholders' equity                                                            
Preferred stock, no par value,                                              
5,000,000 shares authorized,                                            
none issued and outstanding                      -             -        
Common stock, no par value,                                                 
30,000,000 shares authorized                4,695,450     4,601,476     
Accumulated deficit                          (1,911,282)   (1,918,055)      

                                       2,784,168     2,683,421
Less common stock in treasury - at cost         (25,196)       (3,978)      

Net shareholders' equity                        2,758,972      2,679,443        

                                       $5,353,622     $5,036,716
The accompanying notes are an integral part of these statements.                

International Yogurt Company      

STATEMENTS OF OPERATIONS      

For the year ended October 31,      

                                                                · Download Table

                                    1996           1995           1994    
                                                                          
Yogurt sales                     $7,922,144     $7,348,531     $6,911,252 

Cost of sales                     5,630,037      5,095,080      4,785,253 

      Gross profit                2,292,107      2,253,451      2,125,999 

Selling and marketing expenses    1,120,942        913,873        940,279 
General and                                                               
  administrative expenses           922,909      1,026,758        997,768 
Unusual expenses                    143,527           -              -    

      Income from operations        104,729        312,820        187,952 

Other income (expense)                                                    
  Interest income                    12,605          8,769          7,918 
  Interest expense                 (131,573)      (134,724)      (119,901)
  Other, net                         21,012         (3,747)       (14,081)

      Income before income taxes      6,773        183,118         61,888 

Provision for income taxes                                                
  Current expense                        -          (3,234)            -  
  Deferred benefit                       -         125,000             -  

                                         -         121,766             -  

      Net income                      $6,773      $304,884       $ 61,888 

      Net income per share              $.00         $.14            $.03 

Weighted average number                                                   
  of shares outstanding           2,194,681      2,177,349      2,290,667 


The accompanying notes are an integral part of these statements.                

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International Yogurt Company              

STATEMENT OF SHAREHOLDERS' EQUITY               

                                                                · Download Table

                             Common Stock           Accumulated      Treasury
Stock        Net Shareholders'                                               
                            Shares      Amount         Deficit        Shares 
 Amount         Equity                                                       

                                                                             
                                                                             
Balance, October 31, 1993   2,020,347   $4,137,794    $(2,284,827)     3,000 
 $ (3,978)    $1,882,739                                                     

Net Income                     -            -              61,888        -   
     -            61,888                                                     
Stock options exercised       128,700      309,714           -           -   
     -           309,714                                                     
Debentures converted to                                                      
  common stock                 11,996       60,734           -           -   
     -            60,734                                                     
Preferred stock converted to                                                 
  common stock                  9,000       33,750           -           -   
     -              -                                                        

Balance, October 31, 1994   2,170,043    4,541,992     (2,222,939)     3,000 
   (3,978)     2,315,075                                                     

Net income                       -            -           304,884        -   
     -           304,884                                                     
Stock options exercised        25,000       59,484           -               
                  59,484                                                     

Balance, October 31, 1995   2,195,043    4,601,476     (1,918,055)     3,000 
   (3,978)     2,679,443                                                     

Net income                       -            -             6,773        -   
     -             6,773                                                     
Stock sold                     52,750       93,974           -           -   
     -            93,974                                                     
Treasury stock purchased                                              11,000 
  (21,218)       (21,218)                                                    

Balance, October 31, 1996   2,247,793   $4,695,450    $(1,911,282)    14,000 
 $(25,196)    $2,758,972                                                     


The accompanying notes are an integral part of these statements.                

International Yogurt Company              
STATEMENTS OF CASH FLOWS              
For the year ended October 31,            

                                        1996        1995        1994

Increase (Decrease) in Cash and Cash Equivalents                                
Cash flows from operating activities                                            
Net income                                 $  6,773   $304,884   $ 61,888   
Adjustments to reconcile net income to net cash                             
provided by (used in) operating activities                              
 Depreciation and amortization           262,405    246,382    208,799
Loss on sale of equipment                  -         3,747       -  
Deferred income taxes                      -      (125,000)      -  
Change in assets and liabilities                                
      Accounts receivable                 124,508     35,112   (291,288)
      Inventories                         (14,648)  (120,291)  (248,388)
      Other current assets               (107,770)    96,692    (23,615)
      Other long-term assets               (5,371)      -       (32,600)
     Accounts payable                    282,090   (120,730)   288,279
     Other accrued liabilities            55,276    (43,778)    24,052

Net cash provided by (used in)                              
         operating activities             603,263    277,018    (12,873)

Cash flows from investing activities                                            
Proceeds from sale of equipment                -         1,530     16,000   
Expenditures for plant and equipment       (382,780)  (175,310)  (332,871)  

      Net cash used in                   (382,780)  (173,780)  (316,871)
investing activities                                

Cash flows from financing activities                                            
Net increase (decrease) in note                                             
payable to bank                          (150,920)   (56,617)   218,537 
Proceeds from issuance of long-term debt    152,529       -        85,000   
Principal payments on long-term debt                                        
and capital lease obligations            (101,596)  (121,230)  (238,071)
Treasury stock purchased                    (21,218)      -          -      
Proceeds from issuance of stock              93,974       -          -      
Stock options exercised                        -        56,250    309,714   

Net cash provided by (used in)                              
         financing activities            (27,231)  (121,597)   375,180

Net increase (decrease) in                                  
          cash and cash equivalents      193,252    (18,359)    45,436

Cash and cash equivalents, beginning of year  318,535    336,894    291,458     

Cash and cash equivalents, end of year       $511,787   $318,535   $336,894     

The accompanying notes are an integral part of these statements.                

International Yogurt Company              

NOTES TO FINANCIAL STATEMENTS             

NOTE A - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES              

International Yogurt Company (the Company) was incorporated on January 14,      
1977 in the state of Oregon.  The Company produces frozen yogurt products and   
markets them primarily under the name "YO CREAM".  The Company's products are   
also marketed by Norpac Foods, Inc. and Norpac Foods Sales under the terms of   
a marketing agreement.  Sales are made 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 short-term investments with an original       
maturity of less than ninety days.                                              

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 asset 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 in amounts to relate   
the cost of depreciable assets to operations over their estimated service       
lives, principally on a straight-line basis.  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                                25 years     
Office equipment and furnishings               10 years     
Leasehold improvements                       5-10 years     

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International Yogurt Company              

NOTES TO FINANCIAL STATEMENTS             

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

4.   Statement of Cash Flows                                                    

The Company made cash interest payments of $125,025, $124,802, and $138,269     
for the years ended October 31, 1996, 1995 and 1994, respectively.  No income   
taxes have been paid during these periods.                                      

During 1994, debentures aggregating $60,734, net of related deferred bond       
costs, and preferred stock aggregating $33,750 were converted into common       
stock.  In 1995, the Company acquired $61,516, of plant and improvements by     
entering into additional capital lease obligations.  All of these noncash       
transactions have been excluded from the accompanying statement of cash         
flows.                                                                          

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.   Income Per Share                                                           

Income per share is computed based on the weighted average number of shares     
of common stock outstanding, including common stock equivalents, during the     
period of computation.                                                          

7.   Reclassifications                                                          

Certain balances in the 1995 financial statements have been reclassified to     
conform with the current year presentation.  These reclassifications do not     
affect the previously reported results of operations or shareholders' equity.   

NOTE B - INVENTORIES

Yocream International Inc · 10-K · For 10/31/96

Filed On 1/29/97 · SEC File 0-16787 · Accession Number 821572-97-2

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