FORM 10-QSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended December 31, 1995
_____________________________
Commission File Number 0-16251
GALAXY FOODS COMPANY
(Exact name of registrant as specified in its charter)
Delaware 25-1391475
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2441 Viscount Row
Orlando, Florida 32809
(Address of principal executive offices) (Zip Code)
(407) 855-5500
(Registrant's telephone number, including area code)
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 [ ]
On December 31, 1995, there were 53,144,348 shares of Common Stock, $.01
par value per share, outstanding.
<PAGE>
GALAXY FOODS COMPANY
Index to Form 10-QSB/A
For Quarter Ended December 31, 1995
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Stockholders' Equity 5
Statements of Cash Flows 6-7
Notes to Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14-23
SIGNATURES 24
<PAGE>
PART I. FINANCIAL INFORMATION
GALAXY FOODS COMPANY
Balance Sheet
ASSETS
DECEMBER 31, MARCH 31,
1995 1995
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,465,647 $ 16,205
Trade receivables, net 456,339 120,176
Inventories 1,081,356 528,396
Prepaid expenses 368,434 296,262
Total current assets 3,371,776 961,039
PROPERTY & EQUIPMENT, NET 5,388,472 4,327,426
OTHER ASSETS 109,116 661,496
TOTAL $ 8,869,364 $ 5,949,961
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable $ 63,451 $ 63,451
Notes payable to stockholders -- 2,697,388
Current portion of obligations
under capital leases 62,910 67,331
Accounts payable-trade 342,499 739,601
Accrued liabilities 444,510 318,895
Total current liabilities 913,370 3,886,666
LONG-TERM DEBT, LESS CURRENT PORTION
Obligations under capital leases 51,279 94,134
STOCKHOLDERS' EQUITY:
Common stock 531,443 140,248
Additional paid-in capital 34,763,563 15,530,314
Accumulated deficit (14,594,091) (12,501,401)
20,700,915 3,169,161
Less: Notes receivable arising
from the exercise of stock options 12,796,200 1,200,000
Total stockholders' equity 7,904,715 1,969,161
TOTAL $ 8,869,364 $ 5,949,961
See accompanying notes to financial statements.
<PAGE>
<TABLE>
GALAXY FOODS COMPANY
Statements of Operations
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31. DECEMBER 31,
1995 1994 1995 1994
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 1,029,786 $ 904,642 $ 2,298,666 $ 4,305,174
Cost of goods sold 1,042,090 1,048,434 2,433,200 4,034,584
Gross margin (12,304) (143,792) (134,534) 270,590
EXPENSES:
Selling 313,627 245,506 814,455 892,901
Delivery 3,323 103,777 44,158 339,984
General and administrative 371,643 511,987 921,805 1,184,771
Research and development 36,496 33,595 79,707 105,774
Total Expenses 725,089 894,865 1,860,125 2,523,430
OPERATING LOSS (737,393) (1,038,657) (1,994,659) (2,252,840)
OTHER INCOME (EXPENSE):
Interest expense (44,500) (112,040) (70,822) (336,578)
Interest income 28,551 148 75,021 2,814
Other income (expense) 1,480 94,479 35,747 88,785
Total (14,469) (17,413) 39,946 (244,979)
NET LOSS (751,862) (1,056,070) (1,954,713) (2,497,819)
PREFERRED STOCK DIVIDENDS 0 0 (137,977) 0
NET LOSS APPLICABLE TO
COMMON STOCK $ (751,862) $ (1,056,070) $ (2,092,690) $ (2,497,819)
LOSS PER COMMON SHARE $ (.02) $ (.10) $ (.07) $ (.28)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 47,149,284 10,083,309 30,628,699 8,821,896
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
GALAXY FOODS COMPANY
Statements of Stockholders' Equity
<CAPTION>
Common Stock Preferred Stock Additional Retained Notes Rec &
Par Par Paid-In Earnings Subscriptions for
Shares Value Shares Value Capital (Deficit) Common Stock Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
March 31, 1994 7,770,317 $ 77,703 -- -- $ 9,836,310 $ (7,487,823) $ -- $ 2,426,190
Issuance of common
stock Regulation S
and private offerings 2,220,000 22,200 -- -- 2,045,797 -- -- 2,067,997
Issuance of common
stock in payment of
lock-up agreements 212,125 2,121 -- -- 564,632 -- -- 566,753
Issuance of common
stock in payment of
consulting fees 412,180 4,122 -- -- 793,142 -- -- 797,264
Issuance of common
stock as compensation 25,209 252 -- -- 39,934 -- -- 40,186
Exercise of warrants 890,095 8,901 -- -- 986,846 -- -- 995,747
Exercise of options 2,494,900 24,949 -- -- 1,181,361 -- (1,200,000) 6,310
Issuance of common
stock warrants in
payment of consulting
fees -- -- -- -- 75,000 -- -- 75,000
Issuance of common
stock options as
compensation -- -- -- -- 7,292 -- -- 7,292
Net loss -- -- -- -- -- (5,013,578) -- (5,013,578)
Balance at
March 31, 1995 14,024,826 $ 140,248 -- -- $15,530,314 $(12,501,401) $ (1,200,000) $ 1,969,161
Exercise of options 49,000 490 -- -- 24,010 -- (24,000) 500
Issuance of common stock
Regulation S offering 3,470,372 34,704 -- -- 1,746,939 -- -- 1,781,643
Adjustment shares 508,092 5,081 -- -- (5,081) -- -- 0
Issuance of preferred stock
Regulation S offering -- -- 353,755 3,537 5,998,057 -- -- 6,001,594
Stock dividends paid 135,753 1,358 -- -- 136,619 (137,977) -- 0
Preferred stock
conversions 16,760,458 167,604 (353,755) (3,537) (164,067) -- -- 0
Reversal to unissued
stock (4,153) (42) -- -- (5,928) -- -- (5,970)
Issuance of common
stock per employment
agreement 18,000,000 180,000 -- -- 11,392,200 -- (11,572,200) 0
Issuance of common
stock in payment of
consulting fees 200,000 2,000 -- -- 110,500 -- -- 112,500
Net loss -- -- -- -- -- (1,954,713) -- (1,954,713)
Balance at
December 31, 1995 53,144,348 $ 531,443 -- $ -- $ 34,763,563 $ (14,594,091) $(12,796,200) $ 7,904,715
</TABLE>
See accompanying notes to financial statements.
<PAGE>
GALAXY FOODS COMPANY
Statements of Cash Flows
NINE MONTHS ENDED
DECEMBER 31,
1995 1994
(unaudited)
CASH FLOWS FROM/(USED IN)
OPERATING ACTIVITIES:
Cash received from customers $ 1,962,503 $ 4,488,890
Cash paid to suppliers and employees (4,832,751) (5,589,988)
Interest paid (70,822) (336,578)
Interest received 75,021 2,814
Other income 35,747 88,785
NET CASH USED IN OPERATING
ACTIVITIES (2,830,302) (1,346,077)
CASH FLOWS FROM/(USED IN) INVESTING
ACTIVITIES:
Proceeds from sale of land -- 45,823
Capital expenditures (1,295,087) (59,447)
(Increase) decrease in other assets 149,216 (279,291)
Increase in other liabilities -- 24,287
NET CASH USED IN INVESTING
ACTIVITIES (1,145,871) (268,628)
CASH FLOWS FROM/(USED IN) FINANCING
ACTIVITIES:
Increase (decrease) in short-term borrowings -- 283,335
Repayment of long-term debt -- (354,369)
Issuance of common stock 1,775,673 306,250
Issuance of preferred stock 6,001,594 --
Proceeds from exercise of common
stock options 500 2,950
Proceeds from exercise of common
stock warrants -- 995,747
Principal payments on stockholder notes (2,697,388) --
Principal payments on capital
lease obligations (57,928) --
Deferred public offering costs 403,164 --
NET CASH FROM FINANCING
ACTIVITIES 5,425,615 1,233,913
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,449,442 (380,792)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 16,205 383,773
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,465,647 $ 2,981
See accompanying notes to financial statements.
<PAGE>
GALAXY FOODS COMPANY
Statements of Cash Flows (continued)
NINE MONTHS ENDED
DECEMBER 31,
1995 1994
(unaudited)
RECONCILIATION OF NET LOSS
TO NET CASH USED IN
OPERATING ACTIVITIES:
NET LOSS $ (1,954,713) $ (2,497,819)
ADJUSTMENTS TO RECONCILE NET
LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
Depreciation and amortization 256,840 222,359
Gain on assets (12,147) --
Issuance of common stock in payment
of consulting fees and compensation 112,500 301,838
Issuance of common stock in payment
of lockup agreements -- 566,753
(Increase) decrease in:
Trade receivables, net (336,163) 183,716
Receivables officer -- (100)
Inventories (552,960) 622,355
Prepaid expenses (72,172) (1,170,592)
Increase (decrease) in:
Accounts payable and accrued liabilities (271,487) 425,413
NET CASH USED IN OPERATING
ACTIVITIES $ (2,830,302) $ (1,346,077)
See accompanying notes to financial statements.
<PAGE>
GALAXY FOODS COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) Management representation
The interim financial statements of Galaxy Foods Company (the "Company")
included herein are unaudited. In the opinion of management, the financial
statements include all adjustments that are necessary for a fair
presentation of such information for the periods presented. The results of
operations for the interim periods shown in this report are not necessarily
indicative of the results expected for the fiscal year.
(2) Inventories DECEMBER 31, MARCH 31,
1995 1995
(unaudited)
Raw materials $ 763,780 $ 363,971
Finished goods 317,576 164,425
Total $ 1,081,356 $ 528,396
(3) Properties and Equipment DECEMBER 31, MARCH 31,
1995 1995
(unaudited)
Leasehold improvements $ 2,676,643 $ 2,586,528
Machinery and equipment 3,445,645 2,231,461
Delivery equipment and autos 15,652 226,539
Equipment under capital leases 307,686 306,245
6,445,626 5,350,773
Less accumulated depreciation and
amortization 1,057,154 1,023,347
Property and equipment, net $ 5,388,472 $ 4,327,426
Accumulated depreciation on equipment under capital leases was $116,909 and
$93,010 on December 31, 1995 and March 31, 1995, respectively.
(4) Notes Payable to Stockholders
On May 18, 1995, the Company repaid its $2.5 million debt plus accrued
interest owed to J&C Resources, Inc. ("J&C"). J&C subsequently released
its security interest in all of the collateral pledged by the Company to
secure the loan.
(5) Per share data
Loss per share is computed based on the weighted average number of shares
outstanding during the year. Common Stock equivalents have not been
included since the effect would be antidilutive.
(6) Sale of Securities
On March 3, 1995, the Company began to offer certain of its securities to
non-U.S. persons under Regulation S promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The
sales of securities continued through the beginning of June 1995 with sales
totaling 5,590,372 shares of Common Stock at the average price of $0.92 per
share. Additionally, the Company sold 353,755 shares of the Company's
Convertible Preferred Stock at an average price of $20.0563 per share for
total gross proceeds of $7,095,700. The resulting proceeds from all
securities sold during the offering were approximately $12.2 million,
$2,672,408 of which were paid in investment brokerage commissions and
related offering fees. By September 30, 1995, all of the shares of
Convertible Preferred Stock had been converted into 16,760,458 shares of
Common Stock in accordance with the designations, preferences, and limiations
applicable to each respective series of Preferred Stock. The average
conversion rate was $0.42.
The holders of Convertible Preferred Stock mentioned above were entitled
to receive cash dividends on each share from any surplus or net profits at
a rate of 10% per annum based upon the respective purchase price paid
by each investor, or at the Company's sole discretion, shares of the
Company's Common Stock at a rate of 11% per annum. This dividend was
cumulative and payable before any dividends on the Common Stock could be
paid or set apart. The Preferred dividends paid for the nine months ended
December 31, 1995 totaled $137,977. These dividends were paid in the form
of Common Stock for a total of 135,753 shares which were issued in July
1995 and October 1995. The Company has never paid dividends to the holders
of its Common Stock.
Under the selling agreement entered into with Sands Brothers & Co., Ltd.
("Sands"), the Company's agent in connection with the aforementioned
offering, Sands and its designee received warrants to purchase a total of
1,353,281 shares of Common Stock, with an exercise price of $0.95 per share.
Additionally, Sands received a commission of 10% and an expense allowance
of 3% on the gross proceeds resulting from the sales of the Company's
securities in the offering.
(7) Related Parties
On August 28, 1995, the Company entered into a one year agreement with a
now current Director on the Board of Directors for the Company for him to
serve in the capacity of Senior Vice President of Marketing. This Director
will oversee the marketing of the Company's product, as well as identify
new markets and products. Under the terms of this contract, the Director
received the right to purchase 50,000 shares of the Company's Common Stock
at $0.6407 per share. The closing price of the Company's Common Stock as
quoted on the NASDAQ System on August 28, 1995 was $0.6407 per share. The
Company has also agreed to pay a standard broker commission for any sales
generated by him.
On October 10, 1995, the Company entered into an Employment Agreement (the
"Agreement") with Angelo S. Morini, the Company's President and Chief
Executive Officer. The Agreement has a term of five years and provides for
an annual base salary of $250,000. Additionally, Mr. Morini will
receive an annual bonus in an amount equal to five percent of the Company's
pre-tax net income for book purposes, as determined by the Company's
independent certified public accounting firm. Other material provisions of
the Agreement are as follows:
Mr. Morini was granted the right to purchase (the "Purchase Rights") up to
18,000,000 shares of the Company's Common Stock, $.01 par value. On
October 11, 1995, Mr. Morini exercised the Purchase Rights with respect to
all 18,000,000 shares of Common Stock subject thereto (the "Purchase Right
Shares"). In connection with the exercise of such Purchase Rights, Mr.
Morini executed in favor of the Company a balloon promissory note (the
"Note") in the principal amount of $11,572,200. The Note bears interest
at seven percent per annum and is due and payable in full on October 11,
2000, subject to Mr. Morini's option to extend the Note for up to five
additional years provided that he pays at least one-third of the then
accrued but unpaid interest, with any remaining unpaid interest to be added
to principal. In order to secure the Note, Mr. Morini executed a stock
pledge and security agreement pursuant to which Mr. Morini granted the
Company a first priority security interest in all of the Purchase Right
Shares.
Under the Agreement, Mr. Morini was also granted certain options to
purchase Common Stock upon the Company's achievement of each of the
following milestone events:
Milestone Event Number of Options Granted
Reaching break-even for a 1,000,000
calendar quarter
Annual net operating income 1,000,000
of $1,000,000 or more
Each increment of $1,000,000 1,000,000
of annual net operating income
in excess of $1,000,000
The Company also extended the maturity date of a Promissory Note dated as
of November 4, 1994, executed by Mr. Morini in favor of the Company in the
principal amount of $1,200,000 in conjunction with his exercise of options
previously granted by the Company, for two additional years until November
4, 2001.
(8) Consulting Agreements
On October 6, 1995, the Company issued 200,000 shares and 100,000 warrants
of Common Stock at $0.5625 under a single-purpose plan to a consultant. These
shares were issued as payment for financial consulting and public relations
services from October 6, 1995 to December 31, 1996. The fair market value of
these shares at the time of this transaction was $0.5625 per share. The
shares under this agreement were subsequently registered with the SEC on
October 19, 1995 through the filing of Form S-8 under the Securities Act of
1933, as amended.
On November 6, 1995, the Company entered into a consulting agreement whereby
the Company issued 50,000 stock purchase warrants at $0.59 per share. These
warrants were issued as full payment for financial consulting and public
relations services. The closing price of the Company's Common Stock as quoted
on the NASDAQ System on November 6, 1995 was $0.59 per share. This agreement
was amended on December 29, 1995 to issue an additional 50,000 stock purchase
warrants at a price of $0.53 per share for every $10 million up to $200
million in sales that the consultant secures for the Company. The closing
price of the Company's Common Stock as quoted on the NASDAQ System on December
29, 1995 was $0.53 per share.
On December 29, 1995, the Company entered into a consulting and sales broker
agreement whereby the Company issued 50,000 stock purchase warrants at $0.53
per share, which was the same as the closing market price on that date. These
warrants were issued as full payment for financial consulting and public
relations services. For every $10 million up to $200 million in sales brought
in by the consultant, an additional 50,000 stock purchase warrants will be
issued to the consultant at $0.53 per share.
<PAGE>
GALAXY FOODS COMPANY
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Results of Operations
Sales for the quarter ended December 31, 1995 increased by 13.8% over the
same period in 1994. This increase in sales in the third quarter of Fiscal
1996 was primarily a result of a substantially improved cash flow position
from financing activities which allowed the Company to build inventory
levels and fill customer orders. Also, the Company introduced new key
products to the retail market.
Sales decreased 46.6% during the first nine months ended December 31, 1995
compared to the same period last year, as a result of a reduction in sales
in the first six months of Fiscal 1996. During the first six months of
Fiscal 1996, the Company was unable to fulfill some of its orders due to a
lack of working capital. This, in turn, resulted in the loss of repeat
sales from some of its customers. Additionally, the Company voluntarily
stopped the distribution of certain products that were previously being
produced by third party manufacturers to improve formulations and to
decrease costs. All these factors made it difficult for the Company to
supply its then existing customer base with complete orders on a timely
basis.
Cost of goods sold as a percentage of sales was 105.9% for the nine months
ended December 31, 1995 compared with 93.7% for the same period in Fiscal
1995. The erosion in gross margin was primarily due to the lack of
ingredients and other raw materials required to maintain efficient
production runs in the first six months of Fiscal 1996. Additionally, lack
of credit terms with most of its vendors forced the Company to purchase
ingredients at unfavorable prices. Also, 6.7% of this increase can be
attributed to increased taxes paid by the Company with respect to the real
property which it owns and leases for its plant. Part of the increase in
cost of goods sold as a percentage of sales is attributed to the
reallocation of delivery expenses from the Operating Expense section of the
Financial Statement. These costs were reallocated after the Company
replaced its own fleet of refrigerated trucks with common carriers. (See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" - Delivery). The Company believes that the cost of
manufacturing will decrease as a percentage of sales as economies of scale
are achieved with larger production runs and the Company regains its
previous sales levels.
Cost of goods sold decreased 14.7% for the three months ended December 31,
1995 compared with the same period in Fiscal 1995. The decrease in cost of
sales is attributed to significant reductions of indirect labor costs
effectuated during the third quarter of Fiscal 1996. The Company still
showed a slight negative gross margin due to the inability to maintain
sufficient sales volume to cover some of its fixed manufacturing costs.
Selling expenses increased 27.8% in the quarter ended December 31, 1995
compared with the same period ended December 31, 1994. This increase was
mainly the result of increases in consulting services, travel and salaries
expenses. This considerable increase in marketing-related expenses was
considered necessary to develop new distributors for the Company's products.
This increase in marketing did not result in a proportionate increase in
sales because of the lack of product availability and the relatively long
time it takes to develop new distributors. Management believes that
increases in sales from these expenditures will be realized in the following
quarters. For the nine months ended December 31, 1995, there was an 8.8%
decrease in marketing costs over the same period in 1994. This decrease was
due to reduced marketing efforts from October 1994 through September 1995
due to a lack of working capital.
Delivery expenses decreased 96.8% for the quarter ended December 31, 1995
compared with the same period in 1994. For the nine months ended December
31, 1995, delivery expenses decreased 87% over the same period in the
previous year. On April 1, 1995, the Company started using refrigerated
common carriers as its main method of distribution instead of relying on its
own fleet of trucks. As a result, the Company is now able to track the
cost of transporting goods more accurately and efficiently. By utilizing
common carriers, the Company has been able to realize significant cost
savings while improving its deliveries to customers. Most of the costs
associated with the transportation and delivery of products are now
allocated to the Cost of Goods Sold section of the Income Statement.
General and administrative costs decreased 27.4% during the three month
period ended December 31, 1995 compared to the same period in 1994. For the
nine month period ended December 31, 1995, general and administrative
expenses decreased 22.2% from the same period in 1994. During much of
Fiscal 1995, the Company was forced to devote a large amount of resources
and expenses in preparing for a public offering. With this preparation, the
Company incurred a number of expenses that substantially increased general
and administrative costs. These expenses were not necessary during Fiscal
1996, nor does the Company anticipate the need to incur these costs in the
near future.
Research and development expenses increased 8.6% for the third quarter of
Fiscal 1996 compared with the same period in Fiscal 1995. This increase is
the result of increases in developmental costs related to the Light Bakery
Line TM and new products for the retail and Soyco TM Divisions.
Expenses in research and development decreased 24.6% for the nine months
ended December 31, 1995 compared with the same period in Fiscal 1995. In
Fiscal 1995, the Company paid out moving allowances and bonuses which it did
not pay during Fiscal 1996; thus resulting in an overall decrease for the
nine months ended December 31, 1995.
Other Income for the nine months ended December 31, 1995 increased 116.3%
due to the Company paying $265,756 less in interest in Fiscal 1996 since
all of the Company's debt was paid in May 1995. In addition, the Company
experienced an increase in interest income earned on the proceeds from the
sale of securities during Fiscal 1996.
Liquidity and Capital Resources
Operating Activities
The Company increased cash used in operating activities by approximately
110% to $2,830,302 for the nine months ended December 31, 1995 from
$1,346,077 for the same period last year. This net increase in the use of
funds is due primarily to a 56.3% decrease in cash received from customers
from the same period last year. The decrease in the rate of collection is
attributable to a significant reduction in sales. Also, the Company stopped
factoring its receivables during the first nine months of Fiscal 1996
offering discount terms to customers rather than paying fees to the
factoring agent. Additionally, the Company substantially reduced all of its
past due debt with vendors, and increased its inventory to fill sales orders.
Investing
The Company spent $1,145,871 in investing activities for the nine months
ended December 31, 1995 compared with $268,628 for the same period last
year. During Fiscal 1996, the Company made $1,055,468 in payments for a new,
state of the art individually wrapped slice machine and its related
equipment and labor. Management viewed this purchase as necessary in order
to increase the Company's presence in the retail market, as well as to make
the Company's products more competitive.
Financing
The Company realized a net inflow of $5,425,615 from financing activities
for the nine months ended December 31, 1995 compared with $1,233,913 during
the same period last year. This increase is the result of an offshore
offering of Common and Preferred Stock to raise needed capital. On March
3, 1995, the Company began to offer certain of its securities to non-U.S.
persons under Regulation S promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended. These sales of
securities continued through the beginning of June 1995 with sales totaling
5,590,372 shares of Common Stock at the average price of $0.92 per share.
Additionally, the Company sold 353,755 shares of the Company's Convertible
Preferred Stock at an average price of $20.0563 per share for total gross
proceeds of $7,095,700. The resulting proceeds from all securities sold
during the offering were approximately $12.2 million, $2,672,408 of which
was paid in investment brokerage commissions and related fees.
The management of the Company has developed and implemented the following
strategies to meet future liquidity needs: (1) obtained gross proceeds of
$6 million on April 16, 1996 through a private placement of 1,337,524 shares
of the Company's Common Stock and 4,000 shares of the Company's Series
A Convertible Preferred Stock; (2) seeking a traditional bank line of credit;
(3) obtaining letters of credit to establish favorable terms with vendors.
The management believes that these actions will allow the Company to meet its
future liquidity needs until the Company establishes a positive cash flow.
<PAGE>
PART II. OTHER INFORMATION
GALAXY FOODS COMPANY
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.86 Consulting Agreement
(b) Reports on Form 8-K
One report on Form 8-K was filed by Galaxy Foods Company during the quarter
ended December 31, 1995.
<PAGE>
EXHIBIT INDEX
The following Exhibits are filed as part of this Form 10-QSB/A.
Exhibit No Exhibit Description
*3.1 Certificate of Incorporation of the Company, as amended (Filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-18, No.
33-15893-NY, incorporated herein by reference.)
*3.2 Amendment to Certificate of Incorporation of the Company, filed on
February 24, 1992 (Filed as Exhibit 4(b) to the Company's
Registration Statement on Form S-8, No. 33-46167, incorporated
herein by reference.)
*3.3 By-laws of the Company, as amended (Filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-18, No. 33-15893-NY,
incorporated herein by reference.)
*3.4 Amendment to Certificate of Incorporation of the Company, filed on
January 19, 1994 (Filed as Exhibit 3.4 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.1 1987 Stock Plan of the Company, as amended (Filed as Exhibit 4(d) to
the Company's Registration Statement on Form S-8, No. 33-46167,
incorporated herein by reference.)
*10.2 Form of Non-Qualified Stock Option Agreement between the Company and
certain directors (Filed as Exhibit 10 (n) to the Company's Report
on Form 10-K for Fiscal year ended March 31, 1988, and incorporated
herein by reference.)
*10.3 Form of Incentive Stock Option Agreement issued pursuant to the
Company's 1987 Stock Plan (Filed as Exhibit 10 (o) to the Company's
Report on Form 10-K for Fiscal year ended March 31, 1988, and
incorporated herein by reference.)
*10.4 1991 Non-Employee Director Stock Option Plan of the Company (Filed
as Exhibit 4 (g) to the Company's Registration Statement on Form
S-8, No. 33-46167, incorporated herein by reference.)
*10.5 1991 Employee Stock Purchase Plan of the Company (Filed as Exhibit
4 (h) to the Company's Registration Statement on Form S-8, No.
33-46167, incorporated herein by reference.)
*10.6 Lease Agreement between ANCO Company and Company dated as of
November 13, 1991 (Filed as Exhibit 10 (bb) to the Company's Report
on Form 10-K for Fiscal year ended March 31, 1992, and incorporated
herein by reference.)
*10.7 Factoring Agreement, Assignment and Repurchase Agreement, Security
Agreement and Power of Attorney, dated as of June 1, 1993, between
the Company and J.T.A. Factors, Inc. (Filed as Exhibit 10 (nn) to
the Company's Report on Form 10-QSB for the quarterly period ended
June 30, 1993.)
*10.8 Company's Registration Statement on Form S-8, Number 33-69546, date
filed September 28, 1993 (Filed as Exhibit 10.40 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.9 Post-Effective Amendment No. 1 to Company's Registration Statement
on Form S-8, Number 33-69546, date filed October 28, 1993 (Filed as
Exhibit 10.41 to the Company's Registration Statement on Form SB-2,
Number 33-80418, and incorporated herein by reference.)
*10.10 Company's Registration Statement on Form S-8, Number 33-78684,
date filed May 6, 1994 (Filed as Exhibit 10.42 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.11 Supplemental Letter Agreement dated February 9, 1994, by and between
Agora Marketing Ltd. and the Company (Filed as Exhibit 10.44 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.12 Non-Qualified Stock Option Agreement dated as of September 24, 1987,
by and between William E. Rawlings and the Company (Filed as
Exhibit 10.51 to the Company's Registration Statement on Form SB-2,
Number 33-80418, and incorporated herein by reference.)
*10.13 Non-Qualified Stock Option Agreement dated as of September 24, 1987,
by and between Stanley M. Turk and the Company (Filed as Exhibit
10.52 to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.14 Settlement Agreement dated as of May 31, 1994, by and between
Company and George J. Torggler (Filed as Exhibit 10.53 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.15 Non-Qualified Stock Option Agreement dated as of May 31, 1994, by
and between George J. Torggler and the Company (Filed as Exhibit
10.54 to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.16 Promissory Note dated as of May 31, 1994, by George J. Torggler in
favor of the Company (Filed as Exhibit 10.55 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.17 Stock Pledge and Security Agreement dated as of May 31, 1994, by and
between George J. Torggler and the Company (Filed as Exhibit 10.56
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.18 Escrow Agreement dated as of May 31, 1994, by and among George J.
Torggler, the Company and Baker & Hostetler (Filed as Exhibit 10.57
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.19 Registration Rights Agreement dated as of May 31, 1994, by and
between George J. Torggler and the Company (Filed as Exhibit 10.58
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.20 General Released dated as of May 31, 1994, by George J. Torggler in
favor of the Company (Filed as Exhibit 10.59 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by referent.)
*10.21 Settlement Agreement dated as of May 31, 1994, by and between
Company and Robert J. Redar (Filed as Exhibit 10.60 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.22 Non-Qualified Stock Option Agreement dated as of May 31, 1994, by
and between Robert J. Redar and the Company (Filed as Exhibit 10.61
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by referent.)
*10.23 Promissory Note dated as of May 31, 1994, by Robert J. Redar in
favor of the Company (Filed as Exhibit 10.62 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.24 Stock Pledge and Security Agreement dated as of May 31, 1994, by and
between Robert J. Redar and the Company (Filed as Exhibit 10.64 to
the Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.25 Escrow Agreement dated as of May 31, 1994, by and among Robert J.
Redar, the Company and Baker & Hostetler (Filed as Exhibit 10.64 to
the Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.26 Registration Rights Agreement dated as of May 31, 1994, by and
between Robert J. Redar and the Company (Filed as Exhibit 10.65 to
the Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.27 General Release dated as of May 31, 1994, by Robert J. Redar in
favor of the Company.
*10.28 Common Stock Purchase Warrant dated August 3, 1993, issued to
Allenstown Investment, Co., by the Company (Filed as Exhibit 10.66
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.29 Registration Rights Agreement, dated as of June, 1994, by and
between Company and Carrafiello Diehl & Associates (Filed as
Exhibit 10.78 to the Company's Registration Statement on Form SB-2,
Number 33-80418, and incorporated herein by reference.)
*10.30 Registration Rights Agreement, dated May 31, 1994, by and between
James Farnsworth and the Company (Filed as Exhibit 10.79 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.31 Registration Rights Agreement, dated as of May, 1994, by and between
Company and Harris Trust & Savings Bank, as Trustee for the CSC
Industries, Inc. and Affiliated Companies Pension Plans Trust
(Filed as Exhibit 10.80 to the Company's Registration Statement on
Form SB-2, Number 33-80418, and incorporated herein by reference.)
*10.32 Registration Rights Agreement, dated May 31, 1994, by and between
Yale Hirsch and the Company (Filed as Exhibit 10.81 to the Company's
Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.33 Registration Rights Agreement, dated May 31, 1994, by and between
James C. Jackson and the Company (Filed as Exhibit 10.82 to the
Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.34 Registration Rights Agreement, dated May 31, 1994, by and between
Kennedy Defined Benefit Plan and the Company (Filed as Exhibit 10.83
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.35 Registration Rights Agreement, dated May 19, 1994, by and between
Robert Kowalski and the Company (Filed as Exhibit 10.84 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.36 Registration Rights Agreement, dated May 31, 1994, by and between
Jack Lampert and the Company (Filed as Exhibit 10.85 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.37 Registration Rights Agreement, dated May 24, 1994, by and between
Andrea McWilliams and the Company (Filed as Exhibit 10.89 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.38 Registration Rights Agreement, dated May 31, 1994, by and between
Company and Mesa Consulting Group, Inc. (Filed as Exhibit 10.90 to
the Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.39 Registration Rights Agreement, dated May, 1994, by and between
Thomas Morgan Trust and the Company (Filed as Exhibit 10.91 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.40 Registration Rights Agreement, dated May 31, 1994, by and between
Marsha H. Musto and the Company (Filed as Exhibit 10.92 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.41 Registration Rights Agreement, dated May 31, 1994, by and between
Alex J. Pollock and the Company (Filed as Exhibit 10.93 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.42 Registration Rights Agreement, dated May 31, 1994, by and between
William Rawlings and the Company (Filed as Exhibit 10.94 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.43 Registration Rights Agreement, dated May 31, 1994, by and between
Thomas Singer and the Company (Filed as Exhibit 10.95 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.44 Registration Rights Agreement, dated May 31, 1994, by and between
Philip Sklar and the Company (Filed as Exhibit 10.96 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.45 Registration Rights Agreement, dated May 19, 1994, by and between
Sheldon Tannen and the Company (Filed as Exhibit 10.97 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.46 Registration Rights Agreement, dated May 31, 1994, by and between
Stanley Turk and the Company (Filed as Exhibit 10.98 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.47 Registration Rights Agreement, dated May 30, 1994, by and between
Conrad von Bibra and the Company (Filed as Exhibit 10.99 to the
Company's Registration Statement on Form SB-2, Number 33-80418, and
incorporated herein by reference.)
*10.48 Registration Rights Agreement, dated June 16, 1994, by and between
Company and Whale Securities, Co., L.P. (Filed as Exhibit 10.100 to
the Company's Registration Statement on Form SB-2, Number 33-80418,
and incorporated herein by reference.)
*10.49 Registration Rights Agreement, dated May 31, 1994, by and between
Wharton Capital Corporation and the Company (Filed as Exhibit 10.101
to the Company's Registration Statement on Form SB-2, Number
33-80418, and incorporated herein by reference.)
*10.50 Post-Effective Amendment No. 1 to Company's Registration Statement
on Form S-8, Number 33-78684, date filed June 6, 1994 (Incorporated
herein by reference.)
*10.51 Company's Registration Statement on Form S-8, Number 33-81636, date
filed July 18, 1994 (Incorporated herein by reference.)
*10.52 Consulting Agreement, dated July 30, 1994, between the Company and
J&C Resources, Inc. (Incorporated herein by reference.)
*10.53 Post-Effective Amendment No. 1 to Company's Registration Statement
on Form S-8, Number 33-81636, date filed August 10, 1994
(Incorporated herein by reference.)
*10.54 Agency Agreement, dated February 28, 1994, between the Company,
Agora Marketing and Stan Teeple, Inc. (Incorporated herein by
reference.)
*10.55 Warrant Agreement, dated June 21, 1994 between the Company and
Stanley Teeple (Incorporated herein by reference.)
*10.56 Letter Agreement agreeing to lock-up of shares, executed as of
September 8, 1994, between the Company and Mesa Consulting, Inc.
(Filed as Exhibit 10.108 to the Company's Registration Statement
No. 33-80418, filed on September 23, 1994 and incorporated herein by
reference.)
*10.57 Letter Agreement agreeing to lock-up of shares, dated August 9, 1994,
between the Company and Wharton Capital (Filed as Exhibit 10.109 to
the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.58 Letter Agreement agreeing to lock-up of shares, dated August 9, 1994,
between the Company and Sheldon Tannen (Filed as Exhibit 10.110 to
the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.59 Letter Agreement agreeing to lock-up of shares, dated August 12,
1994, between the Company and Marcia Musto (Filed as Exhibit 10.111
to the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.60 Letter Agreement agreeing to lock-up of shares, dated September 8,
1994, between the Company and Whale Securities Co., L.P. (Filed as
Exhibit 10.112 to the Company's Registration Statement No. 33-80418,
filed on September 23, 1994 and incorporated herein by reference.)
*10.61 Letter Agreement agreeing to lock-up of shares, dated as of
September 8, 1994, between the Company and Kennedy Capital
Management, Inc. (Filed as Exhibit 10.113 to the Company's
Registration Statement No. 33-80418, filed on September 23, 1994
and incorporated herein by reference.)
*10.62 Lock-Up Agreement, dated September 8, 1994, between the Company and
Lifesciences Technology Partners, L.P. (Filed as Exhibit 10.114 to
the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.63 Settlement Agreement, dated September 8, 1994, between the Company
and Lifesciences Technology Partners, L.P. (Filed as Exhibit 10.115
to the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.64 Release, dated September 8, 1994, between the Company and
Lifesciences Technology Partners, L.P. (Filed as Exhibit 10.116 to
the Company's Registration Statement No. 33-80418, filed on
September 23, 1994 and incorporated herein by reference.)
*10.65 Letter Agreement, dated June 1, 1994, between the Company and
Allenstown Investment Co. and J&C Resources, Inc. (Filed as Exhibit
10.117 to the Company's Registration Statement No. 33-80418, filed
on September 23, 1994 and incorporated herein by reference.)
*10.66 Letter Agreement, dated September 8, 1994, between the Company and
Allenstown Investment Co. and J&C Resources, Inc. (Filed as Exhibit
10.118 to the Company's Registration Statement No. 33-80418, filed
on September 23, 1994 and incorporated herein by reference.)
*10.67 Letter Agreement, dated August 9, 1994, between the Company and Yale
Hirsch (Filed as Exhibit 10.119 to the Company's Registration
Statement No. 33 80418, filed on September 23, 1994 and incorporated
herein by reference.)
*10.68 Extension agreement between the Company and J&C Resources, Inc.
dated October 28, 1994 (Filed as Exhibit 10.120 on report for 10-QSB,
for the quarterly period ended September 30, 1994 and incorporated
herein by reference.)
*10.69 Notice of default from J&C Resources, Inc., dated October 28, 1994
(Filed as Exhibit 10.121 on report for 10-QSB, for the quarterly
period ended September 31, 1994 and incorporated herein by
reference.)
*10.70 Subscription for shares and investment letter, dated November 4,
1994, between the Company and Angelo S. Morini (Filed as Exhibit
10.122 on report 10-QSB, for the quarterly period ended December 31,
1994 and incorporated herein by reference.)
*10.71 Balloon promissory note, dated November 4, 1994 (Filed as Exhibit
10.123 on report 10-QSB, for the quarterly period ended December 31,
1994 and incorporated herein by reference.)
*10.72 Stock pledge and security agreement dated November 4, 1994 (Filed as
Exhibit 10.124 on report 10-QSB, for the quarterly period ended
December 31, 1994 and incorporated herein by reference.)
*10.73 J&C Second Amendment Loan Agreement and Second Amendment Security
Agreement, dated February 23, 1995, between J&C and the Company
(filed as exhibit to Form 8-K under Commission file number 0-16251,
dated February 23, 1995)
*10.74 Renewal Promissory Note dated as of May 26, 1995, by the Company in
favor of J&C (filed as exhibit 10.126 to Form 8-K under Commission
file number 0-16251, dated May 26, 1995)
*10.75 Renewal Promissory Note dated as of May 26, 1995, by the Company in
favor of J&C (filed as exhibit 10.128 to Form 8-K under Commission
file number 0-16251, dated May 26, 1995)
*10.76 First Amendment to Lease Agreement between ANCO Company and the
Company dated as of April 1, 1994 (filed as exhibit 10.76 on report
10-KSB for the year ended March 31, 1995 and incorporated herein by
reference)
*10.77 Consulting Agreement, dated March 15, 1995, between Lee Chira and
the Company (filed as exhibit 10.77 on report 10-KSB for the year
ended March 31, 1995 and incorporated herein by reference)
*10.78 Consulting Agreement, dated March 15, 1995, between Martin
Consulting, Inc. and the Company (filed as exhibit 10.78 on report
10-KSB for the year ended March 31, 1995 and incorporated herein by
reference)
*10.79 Selling Agreement, dated February 6, 1995, between Sands Brothers &
Co., Ltd. and the Company (filed as exhibit 10.79 on report 10-KSB
for the year ended March 31, 1995 and incorporated herein by
reference)
*10.80 Amendment Number 1 to Selling Agreement, dated February 14, 1995,
between Sands Brothers & Co., Ltd. and the Company (filed as exhibit
10.80 on report 10-KSB for the year ended March 31, 1995 and
incorporated herein by reference)
*10.81 Amendment Number 2 to Selling Agreement, dated March 8, 1995,
between Sands Brothers & Co., Ltd. and the Company (filed as exhibit
10.81 on report 10-KSB for the year ended March 31, 1995 and
incorporated herein by reference)
*10.82 Consulting agreement between the Company and Koi Communications
Corporation, dated June 1, 1995. (Filed as exhibit 10.82 on report
10-QSB for the quarterly period ended June 30, 1995 and incorporated
herein by reference)
*10.83 Employment Agreement dated as of October 10, 1995, by and between
the Company and Angelo S. Morini (filed as exhibit 10.83 on report
8-K and incorporated herein by reference)
*10.84 Balloon Promissory Note dated as of October 11, 1995, by Angelo S.
Morini in favor of the Company (filed as exhibit 10.84 on report 8-K
and incorporated herein by reference)
*10.85 Stock Pledge and Security Agreement dated as of October 11, 1995, by
and between the Company and Angelo S. Morini (filed as exhibit 10.85
on report 8-K and incorporated herein by reference)
10.86 Consulting agreement between the Company and Marshall K. Luther
dated August 28, 1995.
*10.87 Securities Purchase Agreement dated April 16, 1996, by and among
Galaxy Foods Company and the buyers party thereto (filed as exhibit
10.74 on report 8-K and incorporated herein by reference)
*10.88 Registration Rights Agreement, dated April 16, 1996, by and among
Galaxy Foods Company and the buyers party thereto (filed as exhibit
10.75 on report 8-K and incorporated herein by reference)
<PAGE>
GALAXY FOODS COMPANY
ITEM 6(a)
Exhibit 10.86 Consulting Agreement
August 28, 1995
Mr. Marshall K. Luther
867 Sweetwater Island Circle
Longwood, FL 32779
Dear Marshall:
It is a pleasure for Galaxy Foods Company ("Galaxy") to finalize our various
discussions regarding your consulting arrangement with Galaxy and present
the following terms and conditions:
1) Term. This consulting arrangement shall be for a period of one year.
2) Compensation. There is to be no cash compensation; however, this will
be reviewed when Galaxy is in a positive cash flow position. The
Company is not making a commitment to change but should the Company's
current situation improve a cash base would be considered in the future.
3) Stock Warrants. You will receive a Stock Purchase Warrant Agreement to
purchase 50,000 shares of Galaxy Foods Company common stock at a
purchase price of $0.6407 (the closing price as listed on the NASDAQ
Quotation System on August 28, 1995). These warrants will expire ten
years from the date issued.
4) Commissions. On all new business that you are responsible for bringing
to Galaxy you will be paid a commission. The commission rate will be
decided on when the business begins. This commission will continue
indefinitely as long as the business remains with Galaxy.
5) Expenses. All reasonable out of pocket expenses will be reimbursed by
Galaxy. Any significant expenditures (e.g. airline tickets) will be
approved in advance by Galaxy.
We understand that your presence at Galaxy will be less than full time and
your schedule variable. Your efforts will focus on a broad range of
activities including but not limited to bringing new business/customers to
Galaxy and helping with the overall direction of the business.
On behalf of all of us at Galaxy Foods Company, we look forward to a long
and mutually beneficial relationship. Please sign where indicated below
your approval of these terms and conditions.
Sincerely,
Angelo S. Morini
Agreed to this 28th day of August, 1995
/s/ Marshall K. Luther
Marshall K. Luther
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GALAXY FOODS COMPANY
Date: February 16, 1996 /s/ Angelo S. Morini
Angelo S. Morini
Chairman and President
(Principal Executive Officer)
Date: February 16, 1996 /s/ LeAnn Davis
LeAnn Davis
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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