PROSPECTUS
GALAXY FOODS COMPANY
8,240,568 SHARES
COMMON STOCK, $.01 PAR VALUE
All of the shares covered by this Prospectus are being sold for the
account of certain existing stockholders of GALAXY FOODS COMPANY,
a Delaware corporation (the "Company"), who are listed and described on
Appendix A hereto (the "Selling Stockholders"). The Company will
realize no proceeds from the sale of any of these shares. The Company
intends to take all necessary action to allow the distribution pursuant to
this Prospectus to continue for up to two years from the initial effective
date of this Prospectus.
The securities offered hereby involve a high degree of risk, and
should be considered only by persons who can afford the loss of their entire
investment. See "Risk Factors" beginning on page 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds
Common Stock, Price to Discounts and to the
Par Value $.01 Public Commissions (2) Company (3)
___________________________________________________________________________
Prevailing Not Not
Per Share............. Market Value (1) Applicable Applicable
___________________________________________________________________________
(1) The shares are quoted on the electronic inter-dealer quotation system
operated by Nasdaq, Inc., a subsidiary of the National Association of
Securities Dealers, Inc. (the "NASDAQ System"), in the category of Small-
Cap Issues, under the symbol "GALX." The distribution of the shares by
the Selling Stockholders may be effected in one or more transactions that
may take place in the over-the-counter market, including ordinary broker's
transactions, privately negotiated transactions, or through sales to one or
more dealers for the resale of such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, or at negotiated prices. See "Plan of Distribution." On April 29,
1996, the closing bid and asked prices for a share of the Company's
Common Stock as quoted on the NASDAQ System was $1.9375 and
$2.00, respectively.
(2) There is no underwriter with respect to this offering and each Selling
Stockholder will determine the time of sales of shares made pursuant
hereto. The Selling Stockholders will be responsible for any commissions
for the sale of the shares offered by this Prospectus. Usual and customary
or specifically negotiated brokerage commissions or fees may be paid by
the Selling Stockholders in connection with such sales. There is no
minimum required purchase and there generally is no arrangement to have
<PAGE>
funds received by such Selling Stockholders placed in an escrow, trust or
similar account or arrangement. See "Plan of Distribution."
(3) The Company will realize no proceeds from this offering. The
expenses of this offering are being paid by the Company pursuant to its
agreements with certain of the Selling Stockholders. See "Plan of
Distribution."
It is anticipated that the Selling Stockholders may from time to
time sell all or a part of the shares of Common Stock covered by this
Prospectus in ordinary brokerage or principal transactions at prices
prevailing at the time of sale or at negotiated prices. Upon any sale of the
shares of Common Stock offered hereby, Selling Stockholders, brokers
executing sales orders on their behalf, and dealers to whom such persons or
entities may sell such shares may, under certain circumstances, be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "33 Act").
Broker-Dealers effecting sales of shares of Common Stock pursuant to this
Prospectus should carefully review the restrictions on the use hereof as
described in "Plan of Distribution - Restrictions on Use of Prospectus."
The date of this Prospectus is June 21, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "34 Act"), and in
accordance therewith is required to file periodic reports, proxy statements
and other information with the Securities and Exchange Commission (the
"SEC") relating to its business, financial statements and other matters.
Additionally, the Company has filed a certain Registration Statement on
Form S-3 (SEC File No. 333-3415), relating to this offering by Selling
Stockholders. As permitted by the rules and regulations of the SEC, this
Prospectus omits certain information, exhibits, and undertakings contained
in the Registration Statement. Copies of the Registration Statement and
exhibits thereto, as well as such periodic reports, proxy statements and
other information may be inspected and copied, at prescribed rates, at the
public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies also may
be obtained at the Regional Offices of the SEC located at (1) 75 Park Place,
14th Floor, New York, New York 10007; (2) John W. McCormack Post
Office and Courthouse Building, 90 Devonshire Street, Suite 700, Boston,
Massachusetts 02109; (3) 3475 Lennox Road, N.E., Suite 1000, Atlanta,
Georgia 30326-1232; (4) 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; (5) 411 West Seventh Street, 8th Floor, Fort Worth,
Texas 76102; (6) 410 Seventeenth Street, Suite 700, Denver, Colorado
80202; (7) 5757 Wilshire Boulevard, Suite 500 East, Los Angeles,
California 90036-3648; (8) 3040 Jackson Federal Building, 915 Second
Avenue, Seattle, Washington 98174; and (9) Curtis Center, Independence
<PAGE>
Square West, 601 Walnut Street, Suite 1005E, Philadelphia, Pennsylvania
19106-3322. Copies of such material also can be obtained at prescribed
rates through The National Association of Securities Dealers Association at
1735 K Street, N.W., Washington, D.C. 20006-1506.
Statements contained in this Prospectus relating to the contents of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to, or incorporated by reference in, the Registration
Statement, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-KSB for the year
ended March 31, 1995, Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1995, Quarterly Report on Form 10-QSB/A for the quarter
ended September 30, 1995, Quarterly Report on Form 10-QSB/A for the
quarter ended December 31, 1995, Current Report on Form 8-K dated
October 10, 1995, Current Report on Form 8-K dated May 26, 1995, and
Current Report on Form 8-K dated April 16, 1996, are incorporated by
reference herein and made a part hereof. The Company's Proxy Statements
dated July 11, 1995, and December 5, 1995, also are incorporated by
reference herein and made a part hereof. All documents filed by the
Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
34 Act subsequent to the date of this Prospectus and prior to the termination of
the offering represented hereby shall be deemed to be incorporated by
reference and to be a part of this Prospectus from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such a
statement. A statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person who
receives a Prospectus, upon written or oral request, a copy of any and all of
the information that has been incorporated by reference in this Prospectus
(not including exhibits to the information that is incorporated by reference
unless the exhibits are themselves specifically incorporated by reference).
Such a request should be directed to Galaxy Foods Company, 2441
Viscount Row, Orlando, Florida 32809, Attention: Investor Relations, or if
by telephone, (407) 855-5500.
<PAGE>
RISK FACTORS
An investment in the Shares offered hereby involves a high degree
of risk and should not be purchased by persons who cannot afford the loss
of their entire investment. In addition to the factors set forth elsewhere
in this prospectus, the following risk factors with respect to the Company
should be carefully considered:
Operating History. The Company reported net losses of
$1,954,713 for the nine-month period ended December 31, 1995
(unaudited) and $2,497,819 for the nine-month period ended December 31,
1994 (unaudited), $5,013,578 for the fiscal year ended March 31, 1995,
and $3,811,226 for the fiscal year ended March 31, 1994, or $.07, $.28,
$.54, and $.69 per share, respectively (based on the weighted average
number of shares of Common Stock outstanding during each period).
Additionally, for the nine-month periods ended December 31, 1995 and
1994 (unaudited), and for the fiscal years ended March 31, 1995 and 1994,
the Company's operating loss was $1,994,659, $2,252,840, $4,060,978,
and $2,817,268, respectively. Further, until fiscal 1996, the Company
operated since its inception with a negative working capital position. As of
December 31, 1995 (unaudited) and March 31, 1995, the Company had
$3,371,776 and $961,039, respectively in current assets, and $913,370 and
$3,886,666, respectively, in current liabilities. The future success of the
Company will depend, among other factors, upon management's ability to
increase sales, restore and maintain profitable operations, and obtain
favorable financing arrangements. There can be no assurance that the
Company will be able to increase sales, become profitable, attain improved
operating results or obtain favorable financing arrangements.
Possible Need for Additional Financing. The Company will not
receive any proceeds from this offering. In the event that the Company
does not generate cash flow sufficient to satisfy future cash requirements,
the Company will be required to seek additional financing in the near
future. If additional financing is required, there is no assurance that
financing will be available, or if available, that it can be obtained on terms
favorable to the Company. Additional financing may require the Company
to issue additional debt or equity securities which may rank senior to the
shares of Common Stock and which could dilute any investment made in
the Company. In addition, absent the Company's ability to obtain additional
funding, there could be a material adverse effect on the Company's business
and prospects.
Lack of Dividends. It is the present policy of the Company to
retain any future earnings to finance growth and development. Accordingly,
it is unlikely that dividends will be paid by the Company in the foreseeable
future.
Extensive Shareholdings by Management. As of April 29, 1996,
Angelo S. Morini, the Company's founder, President, and Chief Executive
Officer, owned approximately 44.4% of the issued and outstanding shares
<PAGE>
of the Company's Common Stock, and held certain rights and options to
acquire an additional 141,500 shares of Common Stock. In the event Mr.
Morini exercises his rights and options, and acquires all of the 141,500
shares, and assuming that no other options or warrants are exercised or
granted, Mr. Morini will own approximately 44.6% of the outstanding
Common Stock. In the event all unexercised rights, options, and warrants
become vested and are exercised (including Mr. Morini's), as adjusted to
reflect such issuance and assuming no other options or warrants are granted,
Mr. Morini will own approximately 42.2% of the outstanding Common Stock.
Since no provision exists for cumulative voting, investors who purchase
Common Stock may be unable to elect any members of the Board of Directors or
exercise significant control over the Company or its business. See
"Description of Capital Stock."
Potential Sales and Issuances of Additional Stock. As of April 29,
1996, there were outstanding options and warrants to acquire up to
3,314,062 shares of Common Stock, including the 141,500 shares subject
to options held by Mr. Morini, in addition to the 54,759,372 shares of
Common Stock of the Company issued and outstanding as of that date. As
of April 29, 1996, a total of 30,240,628 shares are authorized but not yet
issued and outstanding, including 3,314,062 shares which have been
reserved for issuance upon exercise of options and warrants that have been
granted by the Company. A substantial portion of such options and
warrants are "in the money" and are currently exercisable. "In the
money" generally means that the current market price is above the
purchase price of the shares subject to the warrant or option. The issuance
of additional Common Stock upon the exercise of options and warrants
will dilute the proportionate ownership of the then current shareholders of
the Company.
As of April 29, 1996, 4,000 shares of the Company's Series A
Convertible Preferred Stock, $.01 par value (the "Series A Preferred
Stock"), were issued and outstanding. The terms of the Series A Preferred
Stock provide that the holder thereof shall have the right to convert such
shares into shares of Common Stock at any time after June 30, 1996 at a
conversion price (the "Conversion Price") equal to 71.5%, which
percentage is subject to adjustment upon the occurrence of certain events
(the "Conversion Percentage"), multiplied by the Average Market Price (as
defined below) of the Common Stock for the five consecutive trading days
ending one trading day prior to the date the notice of conversion is received
from the holder by the Company; provided, however, that in no case shall
the holder be permitted to hold, in the aggregate, such number of shares of
Common Stock which would exceed 4.9% of the aggregate outstanding
shares of Common Stock. The "Average Market Price" of the Common
Stock is the arithmetic average of the closing bid prices for the Common
Stock for each trading day as quoted on the NASDAQ System or, if the
NASDAQ System is not the principal trading market for the Common
Stock, on the principal trading market for the Common Stock, or, if market
value cannot be so calculated, the average fair market value during such
period as reasonably determined in good faith by the Company's Board of
Directors (all as appropriately adjusted for any stock dividend, stock split,
or other similar transaction during such period or between the end of such
<PAGE>
period and the date of conversion). The number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock is
determined by dividing the stated value of the Series A Preferred Stock,
which is equal to $1,000 (the "Stated Value"), by the Conversion Price
then in effect. See "Description of Capital Stock-Preferred Stock-Series A
Convertible Preferred Stock." The Company has estimated that 3,500,000
shares of Common Stock will be issuable to the holder of the Series A
Preferred Stock upon conversion and is registering such number of shares
pursuant to the Registration Statement of which this Prospectus is a part.
In the event that the Series A Preferred Stock is convertible into a greater
number of shares of Common Stock, additional Common Stock will be
registered by the Company on behalf of the holder of the Series A Preferred
Stock.
Additionally, the Company may offer additional securities in
private and/or public offerings in order to raise working capital and retire
or refinance its indebtedness. Any such issuance could adversely affect the
market price of the Common Stock or result in substantial dilution to
existing holders of Common Stock.
Broker-Dealer Sales of Company Common Stock. The
Company's Common Stock is covered by an SEC rule that imposes
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited
investors (generally, institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with their spouses). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the
rule may affect the ability of broker-dealers to sell the Company's
securities, and also may affect the ability of purchasers in this offering to
sell their shares in the secondary market.
Market Overhang. As of April 29, 1996, approximately
28,287,783 shares of the 54,759,372 shares of issued and outstanding
Common Stock of the Company were freely tradable (unless acquired by an
"affiliate" of the Company) under the 33 Act or issued without restrictive
legend in a series of transactions exempt from the registration
requirements of the 33 Act in accordance with the requirements of
Regulation S promulgated thereunder. The Company has been advised by
its transfer agent that all of the 22,350,830 shares issued under Regulation
S have been transferred by the original purchasers and have been put in the
nominee names of United States' securities brokerage firms, banks, and
trust companies. The Company is unaware of the circumstances of the
transfers. Of the remaining 26,471,589 shares of Common Stock issued
and outstanding, and 3,314,062 additional shares of Common Stock which
the Company is obligated to issue pursuant to outstanding options and
warrants, 853,044 shares so issued or issuable are included for sale
pursuant to this Prospectus.
<PAGE>
All of the shares which are not freely tradable are "restricted
securities" within the meaning of Rule 144 promulgated by the SEC under
the 33 Act ("Rule 144"), and may be sold in open market transactions after
the holding period under Rule 144 with respect thereto has been met. As
to shares subject to outstanding options and warrants, the two-year holding
period generally will not begin until the shares underlying such options or
warrants actually have been acquired. After the two-year holding period
has been met, each holder generally may sell, every three months in
brokerage transactions, an amount equal to the greater of one percent of
the Company's outstanding Common Stock or the amount of the average
weekly trading volume during the four weeks preceding the sale. After
three years, unless any such holder is an "affiliate" of the Company, such
sales can be made without restriction. See also, "Plan of Distribution -
Manner of Distribution."
As of April 29, 1996, 4,000 shares of the Company's Series A
Preferred Stock were issued and outstanding. The terms of the Series A
Preferred Stock provide that the holder thereof shall have the right to
convert such shares into shares of Common Stock at any time after June
30, 1996 at a Conversion Price equal to the Conversion Percentage, which
percentage is subject to adjustment upon the occurrence of certain events,
multiplied by the Average Market Price of the Common Stock for the five
consecutive trading days ending one trading day prior to the date the notice
of conversion is received from the holder by the Company. Under certain
circumstances, the Company may require the holder of the Series A
Preferred Stock to convert some or all of its shares of Series A Preferred
Stock into Common Stock. In no case, however, shall the holder be
permitted to hold, in the aggregate, such number of shares of Common
Stock which would exceed 4.9% of the aggregate outstanding shares of
Common Stock. The number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock is determined by dividing the
Stated Value of the Series A Preferred Stock by the Conversion Price then
in effect. See "Description of Capital Stock-Preferred Stock-Series A
Convertible Preferred Stock." The Company has estimated that 3,500,000
shares of Common Stock will be issuable to the holder of the Series A
Preferred Stock upon conversion and is registering such number of shares
pursuant to the Registration Statement of which this Prospectus is a part.
In the event that the Series A Preferred Stock is convertible into a greater
number of shares of Common Stock, additional Common Stock will be
registered by the Company on behalf of the holder of the Series A Preferred
Stock. Upon registration, all such shares of Common Stock shall be freely
tradable. The Company has agreed with the holder of the Series A
Preferred Stock to maintain the effectiveness of the registration of the
Common Stock into which the Series A Preferred Stock is convertible until
the earlier of (a) the date that all of such Common Stock may be sold
pursuant to Rule 144(k) under the 33 Act, or (b) the date on which (i) all of
such Common Stock have been sold and (ii) none of the Series A Preferred
Stock issued and outstanding as of the date hereof are outstanding.
<PAGE>
Because the sales pursuant to this Prospectus will not, and the
resale of any additional shares which may be attempted under Rule 144 or
Regulation S may not, be effected through an underwriter pursuant to a
firm commitment agreement, there will be a substantial number of
additional shares which may be available for sale on the market at one time
without any control over the timing or volume of sales thereof by the
Company or any third party. The Company cannot foresee the impact of
such potential sales on the market, but it is possible that if a significant
percentage of such available shares are attempted to be sold within a short
period of time, the effect on the market may be negative. It is also unclear
as to whether or not the market for the Company's Common Stock could
absorb a large number of attempted sales in a short period of time,
regardless of the price at which the same might be offered. It is noted that
even if a substantial number of sales are not effected within a short period
of time, the mere existence of this "market overhang" could have a
negative effect on the market for the Company's Common Stock and the
Company's ability to raise additional capital or refinance its indebtedness.
Reliance Upon Key Personnel. The success of the Company will
be largely dependent upon the personal efforts and abilities of Angelo S.
Morini, its Chief Executive Officer. Should Mr. Morini cease to be
affiliated with the Company before a qualified replacement is found, there
could be a material adverse effect on the Company's business and
prospects. Mr. Morini entered into an employment agreement with the
Company on October 10, 1995. The term of such employment agreement
is five years but is terminable by Mr. Morini in the event of a change of
control. In the event of a change in control, or in the event that Mr.
Morini is terminated for "cause" (as defined in the employment
agreement), Mr. Morini has agreed that, for a period of one year following
the date that his employment with the Company terminates, he shall not
engage himself, directly or indirectly, in any business substantially similar
or provide service or products to the Company's customers. The Company
currently is the beneficiary of a key man life insurance policy on Mr.
Morini's life in the amount of $250,000, and a term life policy in the
amount of $750,000. This sum would likely not be sufficient to
compensate the Company for the loss of Mr. Morini's services until a
suitable replacement can be engaged.
Intense Competition. The food industry is highly competitive. In
particular, the Company competes with major companies such as Kraft
(which produces products under the Kraft Free label), Borden's, and
ConAgra (which produces products under the Healthy Choice label),
each of which has substantially greater research and development,
marketing, financial and human resources than the Company. In addition,
competitors may succeed in developing new or enhanced products which
are better than any that may be sold or developed by the Company, and
such companies may also prove to be more successful than the Company in
marketing and selling such products. There can be no assurance that the
Company will be able to compete successfully with any of these companies
or achieve a greater market share than it currently possesses.
<PAGE>
Uncertainties Regarding Trademark Protection; No Patent
Protection. The Company owns the trademark formagg, which is
registered in the United States, Australia, Canada, France, Ireland, Israel
and the United Kingdom, and the trademarks Lite Bakery, Galaxy,
Labella's, Soyco, and Soymage, each of which is registered in the
United States, and has applied for registration of the trademarks formagg in
Japan, and Lite "&" Less and Pretzel Nuts in the United States. The
Company believes these trademarks are important means of establishing
consumer recognition of its products. However, there can be no assurance
as to the breadth or degree of protection that these trademarks may afford
the Company, or that the Company will have the financial resources to
engage in litigation against any infringement of its trademarks, or as to the
eventual outcome of any litigation if brought. In addition, although the
Company owns the trademark for the name Galaxy, it has applied for but
has not yet received registration of its current design.
While the Company believes that its formulas, processes and
manufacturing equipment are proprietary, the Company has not sought,
and does not intend to seek, patent protection for such technology. In not
seeking patent protection, the Company is instead relying on the
complexity of its technology, on trade secrecy laws, and employee
confidentiality agreements. However, there can be no assurance that other
companies will not acquire information which the Company considers to
be proprietary or will not independently develop equivalent or superior
products or technology and obtain patent or similar rights with respect
thereto. Although the Company believes that its technology has been
independently developed and does not infringe the patents of others,
certain components of the Company's manufacturing equipment and
processes could infringe existing or future patents, in which event the
Company may be required to modify its equipment designs or processes or
obtain a license. No assurance can be given that the Company will be able
to do so in a timely manner or upon acceptable terms and conditions and
the failure to do either of the foregoing could have a material adverse effect
on the Company.
Uninsured Losses. The Company has acquired comprehensive
insurance for the Company's property, including liability, fire and extended
coverage, which is customary for similar property. However, there are
certain types of losses which are either uninsurable or not economically
insurable within the Company's budget. Should an uninsured event occur
with respect to its property, the Company could suffer additional losses.
Reliance on Key Customers. For the nine-month periods ended
December 31, 1995 and 1994 (unaudited) and fiscal years ended March 31,
1995 and 1994, the Company had net sales of $2,298,666, $4,305,174,
$4,748,283, and $6,011,819, respectively. Sysco Food Service and Texas
Smokehouse Foods, Inc. each represented more than 5% of the Company's
gross sales for fiscal 1995, and Sysco Foods Service, Multi-Foods
Corporation, Perry County Foods, Ameriserv, and Stow Mills each
represented more than 5% of the Company's gross sales for the nine-month
period ended December 31, 1995 (unaudited). The Company does not
have any contractual arrangements with any of its customers which require
<PAGE>
any minimum level of purchases. In the event any of these customers were
to cease to distribute or purchase the Company's products, the Company
would have to seek additional distribution channels, and its business could
be materially adversely affected.
Reliance on Foreign/Key Suppliers. Due to the export supports
and subsidies provided by such countries as New Zealand and members of
the European Economic Community, suppliers from such countries are
often able to supply raw materials to the Company at prices lower than
domestic suppliers. Accordingly, the Company purchases its major
ingredient, casein (a milk protein), from foreign suppliers. Although the
Company believes that it could obtain casein from domestic sources if a
foreign supply of casein were reduced or terminated, no assurance can be
given that it would be able to do so and, in any event, the interruption in
the Company's production could have an adverse effect on the Company's
business. Because casein is purchased by the Company from foreign
suppliers, its availability is subject to a variety of factors, including
federal import regulations. In the event the relevant export supports or
subsidies are reduced or eliminated or the United States takes retaliatory
action or otherwise establishes trade barriers with any of the countries which
supplies casein to the Company, such an event could have a material
adverse affect on the Company and its operations. Moreover, exchange
rate fluctuations and/or the imposition of import quotas or tariffs could,
have an adverse effect on the Company's business and its ability to compete
with conventional cheese companies that do not rely on foreign suppliers.
For the nine-month periods ended December 31, 1995 and 1994
(unaudited) and for the fiscal years ended March 31, 1995 and 1994, the
Company purchased $1,091,683, $1,646,683, $1,802,476, and $2,177,958,
respectively, of casein, canola and other oils, and other ingredients, which
are the principal raw materials used to manufacture the Company's
products. Principal suppliers of the Company's raw materials are Besnier-
Scerma U.S.A., Ashland Chemical Company, Fugi Vegetable Oil, Inc.,
Wilsey Foods, Industrial Commodities, Inc., Systems-Bio Industries, Inc.,
Food Ingredient Sales, Inc., and Grain Processing Corp. Generally, the
Company does not have any contractual arrangements with any of these
entities, except for short-term agreements for periods of less than six
months. If any of these entities were to cease to supply casein, canola oil,
enzymes, or chemicals to the Company, the Company would have to seek
additional sources of its major raw materials, and its business could be
materially adversely affected.
Government Regulation. The Company is subject to extensive
regulation by federal, state, and local governmental authorities regarding
the quality, purity, manufacturing, distribution, and labeling of food
products. The Company's manufacturing facility is subject to regulation
and inspection by the United States Department of Agriculture, the United
States Food and Drug Administration, the Florida Department of
Agriculture and Consumer Services, and the Orange County, Florida,
Department of Health. A finding of a failure to comply with one or more
regulatory requirements can result in the imposition of sanctions including
closing of all or a portion of a facility for a period during which the
<PAGE>
manufacturer is permitted to attempt to remedy the alleged violations. In
addition to licensing requirements, a regulatory agency could declare a
product hazardous or limit its use or require a recall of a product.
The Company believes that it is currently in substantial
compliance with all applicable governmental regulations regarding its
current products and has all material government permits, licenses,
qualifications, and approvals required for its operations. However, there
can be no assurance that the Company will be able to continue to comply
with such regulations, or comply with future regulations, without
inordinate cost or interruption of the Company's operations.
Authorized Preferred Stock. Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is authorized to
determine the rights, privileges, and restrictions granted to and imposed
upon any series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series. The Board
of Directors is thus authorized to permit the Company to issue one or more
series of Preferred Stock with voting and conversion rights which could
adversely affect the interests or voting rights of the holders of Common
Stock, without obtaining the approval of the holders of Common Stock.
As of April 16, 1996, the Company authorized and thereafter
issued 4,000 shares of its Series A Preferred Stock. The terms of the Series
A Preferred Stock provide that the holder thereof shall have the right to
convert such shares into shares of Common Stock at any time after June
30, 1996 at the Conversion Price equal to the Conversion Percentage,
which percentage is subject to adjustment upon the occurrence of certain
events, multiplied by the Average Market Price of the Common Stock for
the five consecutive trading days ending one trading day prior to the date
the notice of conversion is received from the holder by the Company.
Under certain circumstances, the Company may require the holder of the
Series A Preferred Stock to convert some or all of its shares of Series A
Preferred Stock into Common Stock. In no case, however, shall the holder
be permitted to hold, in the aggregate, such number of shares of Common
Stock which would exceed 4.9% of the aggregate outstanding shares of
Common Stock. The number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock is determined by dividing the
Stated Value of the Series A Preferred Stock by the Conversion Price then
in effect.
The holders of the Series A Preferred Stock are not entitled to
receive any dividends with respect to the Series A Preferred Stock. The
holders of the Series A Preferred Stock are entitled to a liquidation
preference, prior to the payment of any amounts payable to the holders of
the Common Stock, equal to the Stated Value per share of Series A
Preferred Stock. Although the Company may authorize and issue
additional or other preferred stock which is of equal or junior rank to the
Series A Preferred Stock with respect to the preferences as to distributions
and payments upon liquidation, dissolution or winding up of the Company,
the Company may not authorize or issue capital stock which is senior in
rank to the Series A Preferred Stock with respect to such rights and
<PAGE>
preferences. The Company has the right to redeem all or any part of the
Series A Preferred Stock at any time subsequent to 180 days after the
effective date of the Registration Statement at a redemption price of
$1,398.60 per share. See "Description of Capital Stock-Preferred Stock."
The Company has no present plans to issue any additional shares
of Preferred Stock.
THE COMPANY
The Company was first incorporated under the name "Galaxy
Cheese Company" under the laws of the Commonwealth of Pennsylvania
in 1980 and was merged into a wholly-owned subsidiary of the same name
organized under the laws of the State of Delaware in 1987. In February
1992, the Company officially changed its name from Galaxy Cheese
Company to Galaxy Foods Company. The Company operates a
comprehensive manufacturing facility at its corporate offices located at
2441 Viscount Row, Orlando, Florida.
The Company's products are marketed to retailers in three
principal markets: retail, food service, and industrial. Customers ranging
from supermarket chains and health food stores, to industrial food
manufacturers which utilize the Company's products in the production of
food items such as frozen pizza, to restaurant chains, to food service
distributors, and to institutions such as hotels, hospitals and schools.
In June 1991, the Company suffered a complete loss, due to fire,
of its sole-existing manufacturing facility located in New Castle,
Pennsylvania. The fire was ruled an arson by the Pennsylvania Fire
Marshall of the Pennsylvania State Police, and the investigation of the
circumstances surrounding the fire is still open according to that agency.
After the fire, the Company used the proceeds of its property and business
interruption insurance to refurbish and equip a comprehensive
manufacturing facility in Orlando, Florida. The Company has relocated its
entire operations from New Castle, Pennsylvania, to its new facility in
Orlando, Florida. In June 1992, the Company resumed production and
shipment of many of its products directly from its Orlando plant to
customers in each of the Company's three principal markets - retail, food
service and industrial. Since that time, the Company has focused its efforts
on increasing its sales by introducing into the market new products and re-
introducing certain products that were originally introduced prior to the
fire, engaging nationwide distributors and brokers in the marketing of its
products, and concentrating its marketing efforts on its nutritionally
superior substitute cheese line of products.
SELLING STOCKHOLDERS
See Appendix A for information regarding the identity of the
Selling Stockholders, their relationship with the Company, if any, the
shares of Common Stock presently owned by each of the Selling
Stockholders, and the number of such shares which are offered by them for
sale hereunder.
PLAN OF DISTRIBUTION
The 8,240,568 shares of Common Stock of the Company offered
hereby are being registered for sale pursuant to the Registration Statement
for the accounts of the Selling Stockholders, and the Company will receive
none of the proceeds from the sale of any such shares. The shares being
offered hereby will not be sold through underwriters. However, the Selling
Stockholders or any broker or dealer utilized by them in connection with
any sales hereunder may be considered "underwriters" as defined in the 33
Act. The Company is bearing all of the estimated $62,000 in expenses
associated with the Registration Statement.
MANNER OF DISTRIBUTION
As of the date of this Prospectus, no Selling Stockholder has
informed the Company that the Selling Stockholder has any agreement,
arrangement, or understanding with any broker or dealer concerning the
distribution of shares of Common Stock offered hereby. The distribution of
the shares of Common Stock by the Selling Stockholders may be affected
from time to time in one or more transactions (which may involve block
transactions) (i) in the over-the-counter market, (ii) in negotiated
transactions, (iii) pursuant to Rule 144, if available at the time of sale, or
(iv) a combination of such methods of sale, at market prices prevailing at
the time of sale or at negotiated prices. As described below under
"Restrictions on Use of Prospectus," in the case of the Selling Stockholders
who elect to effect such transactions by selling shares to or through broker-
dealers, such broker-dealers may receive compensation in the form of usual
and customary brokerage commissions only.
The Company has agreed to indemnify certain of the Selling
Stockholders and their "controlling persons" or "underwriters" (as such
terms are defined in the 33 Act) participating in the distribution of shares
of the Common Stock hereunder from certain liabilities, including those
arising under the securities laws. The Company has been informed that
any such indemnification for liabilities arising under the 33 Act is, in the
opinion of the SEC, against public policy and, therefore, unenforceable.
Certain Selling Stockholders may be considered affiliates of the
Company.
SALES BY BROKER-DEALERS
The Company's Common Stock is covered by an SEC rule that
imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
<PAGE>
investors (generally, institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by this rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the
rule may affect the ability of broker-dealers to sell the Company's
securities, and also may affect the ability of purchasers in this offering to
sell their shares in the secondary market.
RESTRICTIONS ON USE OF PROSPECTUS
This Prospectus may only be used in accordance with the sales of
Common Stock effected hereunder in compliance with the following:
1. A Selling Stockholder may either sell directly to a purchaser or
place for sale any shares of Common Stock with broker-dealers registered
as such with the National Association of Securities Dealers, Inc. ("NASD")
who are in good standing with such organization. In connection with sales
made directly to a purchaser by a Selling Stockholder, the Selling
Stockholder must deliver a prospectus to the prospective purchaser and
must comply with applicable laws of the states in which the purchaser
lives. For sales made by NASD members, the Selling Stockholder shall
deliver to the broker all necessary information to allow the broker to
comply with the prospectus delivery and other requirements of applicable
law in connection with any such sale. The agreement with the Selling
Stockholder's selling agent must contain all usual and customary
provisions, including, without limitation, the obligation to (i) comply with
all applicable rules of the NASD, (ii) provide no additional information
and make no representations other than those contained in the Registration
Statement, (iii) comply with all applicable rules of the SEC and applicable
state Blue Sky authorities, including prospectus delivery requirements, and
(iv) otherwise comply with the requirements for the use of the Registration
Statement and the sale of Common Stock thereunder imposed hereby and
by applicable law.
2. No information or offering materials other than the Prospectus,
as it may be amended or supplemented, may be used by a Selling
Stockholder or broker-dealer in effecting sales hereunder.
3. As the Registration Statement will remain effective by the
Company, if practicable, for up to two years from the initial effective date
of the Registration Statement, it may be necessary for the Company to
supplement and amend the Registration Statement from time to time.
Upon notice from the Company that any such supplement or amendment is
necessary, a Selling Stockholder shall cease any effort to sell any shares of
Common Stock offered for sale pursuant to the Registration Statement, and
shall cause any selling agent to cease all sales efforts, and will not so sell
any such shares of Common Stock until he has received the supplemented
or amended prospectus and delivered a copy of the same to any prospective
purchaser or broker effecting any such sale, as required by law.
<PAGE>
4. The Selling Stockholder will bear all commissions, transfer
taxes, fees and disbursements of its counsel, if any, and all other expenses
directly related to its sale of Common Stock hereunder.
5. No broker-dealer selling shares of Common Stock hereunder
shall be compensated at other than usual and customary broker rates.
6. From and after the time any shares of Common Stock are
deposited with a selling agent for sale hereunder and until the agreement
with such selling agent is terminated and all certificates representing
unsold shares of Common Stock are returned to the Selling Stockholders,
certain of the Selling Stockholders may not sell, make any short sale of,
loan, pledge, grant any option for the purchase of or otherwise dispose of,
such shares, without the prior written consent of the selling agent.
The Company has advised each of the Selling Stockholders of its
obligation to comply fully with applicable securities law restrictions
regarding the sale of Common Stock pursuant to this Prospectus, including
the above described requirements. In addition, the Company has advised
each Selling Stockholder of its obligation to comply fully with the anti-
manipulation provisions of the 34 Act, including Rules 10b-5, 10b-6, and
10b-7 promulgated thereunder, namely not to buy shares of Common
Stock, not to solicit purchases of shares of Common Stock by others, and
not to engage in any stabilization transaction with respect to the price of
the Common Stock to facilitate the Selling Stockholder's distribution
hereunder. Each Selling Stockholder also has been advised to notify the
Company when its distribution is completed.
OTHER OFFERS
The Company may negotiate from time to time with creditors or
claimants to exchange shares of Common Stock in satisfaction of
indebtedness or obligations of the Company. Additionally, the Company
periodically negotiates with other parties for the possible private placement
or public offering of shares. Certain of these negotiations may result in
agreements with such parties. The Company reserves the right, from time
to time, to file additional registration statements, which would provide for
sale or distribution in a manner similar to that described herein, for the
sale of shares of Common Stock or other securities on the open market or
otherwise.
USE OF PROCEEDS
The sale of shares of Common Stock of the Company pursuant to
this Prospectus will be solely for the account of the Selling Stockholders,
and the Company will receive none of the proceeds from the sales of such
shares, or any direct benefit, other than its having complied with various
agreements as described elsewhere in this Prospectus.
<PAGE>
DETERMINATION OF OFFERING PRICE
The price of the shares of Common Stock offered for sale by the
Selling Stockholders pursuant to the terms of the secondary offering
described in this Prospectus will be determined in arm's length
negotiations between each Selling Stockholder and certain parties
interested in purchasing the Common Stock or interested in acting as
brokers for the sale of the Common Stock. Factors which are relevant to
the determination of the offering price may include but are not limited to
the market price for the shares, consideration of the amount of Common
Stock offered for sale relative to the total shares of Common Stock
outstanding, the trading history of the Company's outstanding securities,
the financial prospects of the Company, and the trading price of other
companies similar to the Company in terms of size, operating
characteristics, industry and other similar factors.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue an aggregate of 85,000,000
shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $.01 par value. As of April 29, 1996, 54,759,372 shares
of Common Stock were issued and outstanding and held of record by
approximately 604 shareholders. Of the approximately 604 shareholders
of record at April 29, 1996, two were nominees which held approximately
27,320,179 issued and outstanding shares for their customers in so-called
"street name." As of April 29, 1996, the Company had authorized and
issued 4,000 shares of Series A Convertible Preferred Stock. No other
shares of Preferred Stock have been authorized or issued.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each
share held of record on all matters to be voted by stockholders. All voting
is on a noncumulative basis. The holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available after
provision has been made for each class of stock, if any, having preference
over Common Stock as to dividends. Upon liquidation or dissolution of
the Company, the holders of Common Stock are entitled to receive pro rata
all assets remaining available for distribution to them, after provision has
been made for such class of stock, if any, having preference over Common
Stock to liquidation. The Common Stock has no preemptive or other
subscription rights and is not subject to any future calls or assessments.
There are no conversion rights, redemption or sinking fund provisions
applicable to shares of Common Stock. All of the outstanding shares of
Common Stock are, including shares of Common Stock issuable upon
exercise of warrants (when purchased in accordance with the terms
thereof), will be, when issued and delivered, fully paid and nonassessable.
<PAGE>
PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to determine the rights,
privileges, and restrictions granted to and imposed upon any series of
Preferred Stock and to fix the number of shares of any series of Preferred
Stock and the designation of any such series. The Board of Directors is
thus authorized to permit the Company to issue one or more series of
Preferred Stock with voting and conversion rights which could adversely
affect the interests or voting rights of the holders of Common Stock,
without obtaining the approval of the holders of Common Stock. The
issuance of such stock could also have the effect of delaying or preventing
a change in control of the Company.
Series A Convertible Preferred Stock.
As of April 16, 1996, the Company authorized and issued 4,000
shares of Series A Preferred Stock. The terms of the Series A Preferred
Stock provide that the holders thereof shall have the right to convert such
shares into shares of Common Stock at any time after June 30, 1996 at a
Conversion Price equal to the Conversion Percentage multiplied by the
Average Market Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the date the notice of
conversion is received from the holder by the Company. Under certain
circumstances, the Company may require the holder of the Series A
Preferred Stock to convert some or all of its shares of Series A Preferred
Stock into Common Stock. In no case, however, shall the holder be
permitted to hold, in the aggregate, such number of shares of Common
Stock which would exceed 4.9% of the aggregate outstanding shares of
Common Stock. The number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock is determined by dividing the
Stated Value of the Series A Preferred Stock, which is equal to $1,000, by
the Conversion Price then in effect.
In addition, pursuant to the terms of the Series A Preferred Stock,
in the event that a registration statement registering the shares of Common
Stock into which the Series A Preferred Stock is convertible has not been
declared effective as of June 30, 1996, or if sales cannot be made pursuant
to the registration statement, or if the Common Stock is not listed on the
NASDAQ System, the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX"), the Conversion Percentage of the
Series A Preferred Stock is required to be reduced by such number of
percentage points equal to three times the sum of (i) the number of months
(prorated for partial months) by which the effectiveness of the registration
statement is delayed, (ii) the number of months that sales cannot be made
after the effective date of the registration statement, and (iii) the number of
months that the Common Stock is not listed or included for quotation on
the NASDAQ System, NYSE or AMEX. 3,500,000 shares of Common
Stock into which the Series A Preferred Stock is convertible are being
registered pursuant to the Registration Statement of which this Prospectus
is a part.
<PAGE>
Furthermore, if a holder of Series A Preferred Stock converts
Series A Preferred Stock into Common Stock (the "Conversion Stock"),
and a subsequent event as described above requires adjustment to the
Conversion Percentage prior to the sale by such holder of such Conversion
Stock, the Company is required to pay to such holder, within five days after
receipt of a notice of sale therefrom, an amount equal to the Average
Market Price of the Conversion Stock for the five trading days ending one
trading day prior to the date of conversion multiplied by three-hundredths
(0.03) times the number of months (prorated for partial months) for which
adjustment is required, as described above. Such amount may be paid by
the Company either in cash or, at the Company's option, in Common Stock
based on the Average Market Price of the Conversion Stock for the period
of five consecutive trading days ending on the date of the sale of such
Conversion Stock, provided, that cash must be paid (i) in the event that the
Common Stock is not traded on NASDAQ System, NYSE, or AMEX or
(ii) with respect to such shares which would cause the holder of such
shares to own Common Stock in excess of 4.9% of the outstanding shares
of Common Stock of the Company.
The holders of the Series A Preferred Stock are not entitled to
receive any dividends with respect to the Series A Preferred Stock. The
holders of the Series A Preferred Stock are entitled to a liquidation
preference, prior to the payment of any amounts payable to the holders of
the Common Stock, equal to the Stated Value per share of Series A
Preferred Stock. Although the Company may authorize and issue
additional or other preferred stock which is of equal or junior rank to the
Series A Preferred Stock with respect to the preferences as to distributions
and payments upon liquidation, dissolution or winding up of the Company,
the Company may not authorize or issue capital stock which is senior in
rank to the Series A Preferred Stock with respect to such rights and
preferences. The Company has the right to redeem all or any part of the
Series A Preferred Stock at any time subsequent to 180 days after the
effective date of the registration statement referred to hereinabove at a
redemption price of $1,398.60 per share.
The Company has no present plans to issue any additional shares
of Preferred Stock.
LEGAL MATTERS
Baker & Hostetler, Orlando, Florida, has rendered an opinion that
the shares of Common Stock offered hereby are legally issued, fully paid
and nonassessable. None of the attorneys in such firm holds securities of
the Company.
EXPERTS
The financial statements for the fiscal years ended March 31,
1995, and March 31, 1994, that are incorporated in this Prospectus and the
Registration Statement by reference have been audited by BDO Seidman,
<PAGE>
LLP, independent certified public accountants, to the extent and for the
period set forth in their report incorporated herein by reference and are
included in reliance upon such reports given upon the authority of said
firm as experts in auditing and accounting.
APPENDIX A
<TABLE>
<CAPTION>
SELLING STOCKHOLDERS
Percentage of
Number of Number of Outstanding Shares
Shares of Shares of of Common Stock to
Number of Common Stock Common Stock be Beneficially Owned
Shares Offered to be Beneficially after Completion
of Common for Sale Owned Assuming of Distribution,
Stock Pursuant Sale of All Assuming Sale
Name and Address of Beneficially to this Shares Offered of All Shares
Selling Stockholder Owned Prospectus Hereunder Offered
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
ALLENSTOWN INVESTMENT
COMPANY (1) 580,000 580,000 0 *%
706 Ocean Drive
Juno Beach, Florida 33408
LEE CHIRA (2) 75,000 75,000 0 *%
3300 S. Hiawassee Road, Suite 107
Orlando, Florida 32835-6331
DIRECTIONS INTERNA-
TIONAL (3) 50,000 50,000 0 *%
Attention James Won
2329 Coit Road, Suite B
Plano, Texas 75075
FOUR HORSEMEN, LTD. (4) 18,000 18,000 0 *%
Third Floor Murdoch House
South Quay, Douglas
Isle of Man IM1 5AS
DANIEL GALLERY (5) 50,000 50,000 0 *%
3414 Prospect Drive
Castle Rock, Colorado 80104
RICHARD GENTILE (6) 49,250 49,250 0 *%
6505 Market Street, 103
Boardman, Ohio 44512
GFL ADVANTAGE
FUND LTD. (7) 3,500,000 3,500,000 0 5.6%
c/o Genesee Advisors
Attention Neil T. Chau
11921 Freedom Drive, Suite 550
Reston, Virginia 22090
<PAGE>
GFL PERFORMANCE
FUND LTD. (8) 1,337,524 1,337,524 0 2.1%
c/o Genesee Advisors
Attention Neil T. Chau
11921 Freedom Drive, Suite 550
Reston, Virginia 22090
MARK G. HOLLO (9) 676,644 676,644 0 1.0%
101 Park Avenue
New York, New York 10178
J&C RESOURCES, INC. (10) 300,000 300,000 0 *%
96 Walden Pond Drive
Nashua, New Hampshire 03060
J.C. II CORPORATION (11) 300,000 300,000 0 *%
415 Fullerton Parkway
Apt. 1204
Chicago, Illinois 60614
DENNIS JONES REVOCABLE TRUST
U/T/A DATED 03/16/93 (12) 3,333 3,333 0 *%
Attention Dennis Jones, Trustee
262 Carlyle Lake Drive
St. Louis, Missouri 63141
KOI COMMUNICATIONS
CORPORATION (13) 40,000 40,000 0 *%
Attention Mr. Thomas Tedrow
1110 Palmer Avenue
Winter Park, Florida 32789
JACK LAMPERT (12) 45,297 45,297 0 *%
1750 South Big Bend
St. Louis, Missouri 63117
ARTHUR LEVINE (1) 20,000 20,000 0 *%
Arthur Levine & Associates
30 Rowes Wharf
Boston, Massachusetts 02110
LONDON SELECT
ENTERPRISES (14) 219,180 219,180 0 *%
Post Office Box N-8199
Nassau, Bahamas
MARSHALL K. LUTHER (15) 65,000 65,000 0 *%
867 Sweetwater Island Circle
Longwood, Florida 32779
<PAGE>
ANDREA McWILLIAMS (16) 480 480 0 *%
82 Kilburn Road
Garden City, New York 11530
ALBERT MORINI (17) 8,056 8,056 0 *%
1049 Connoquenessing Terrace
Ellwood City, Pennsylvania 16117
MARCIA H. MUSTO (18) 50,000 50,000 0 *%
c/o Fahnestock & Co., Inc.
Attention Teresa Collins
110 Wall Street
New York, New York 10005
JOHN PERNER (19) 50,000 50,000 0 *%
310 Ledgemont Court
Atlanta, Georgia 30342
WILLIAM RAWLINGS (20) 10,500 10,500 0 *%
11 Old Fort Avenue
Kennebunkport, Maine 04046
SANDS BROTHERS & CO.,
LTD. (21) 676,637 676,637 0 1.0%
101 Park Avenue
New York, New York 10178
THIRD WORLD
INVESTMENTS LTD (14) 60,000 60,000 0 *%
Attention Gordon Mundy
Third Floor Murdoch House
South Quay, Douglas
Isle of Man IM1 5AS
STANLEY TURK (22) 19,000 19,000 0 *%
90 North Broadway
Irving-on-Hudson, New York 10533
EARL TYREE (23) 18,000 18,000 0 *%
240 N. Line Drive
Apopka, Florida 32703
DOUGLAS WALSH (24) 18,667 18,667 0 *%
906 Tamiami Trail
Ruskin, Florida 33570
TOTAL NUMBER OF SHARES
REGISTERED 8,240,568
* Less than 1%.
</TABLE>
FOOTNOTES TO APPENDIX A
(1) On August 8, 1993, the Board of Directors approved the issuance
to Allenstown Investment Company ("Allenstown") of a warrant to
acquire 600,000 shares of the Company's Common Stock at a price of
$0.90 per share. Allenstown has exercised a portion of the warrant to the
extent of 90,000 shares and has assigned a portion of the warrant equal to
20,000 shares to Mr. Arthur Levine, a Selling Stockholder.
(2) Lee Chira was issued 75,000 shares of the Company's Common
Stock in consideration of the performance of certain consulting services
provided by Mr. Chira to the Company pursuant to an agreement dated
March 15, 1995.
(3) Directions International holds warrants to acquire 50,000 shares
of the Company's Common Stock with an exercise price of $0.53 per share.
Such warrants were granted in consideration of the performance of certain
consulting services provided by Directions International to the Company
pursuant to an agreement dated December 29, 1995.
(4) The Four Horsemen, Ltd. ("Four Horsemen"), holds warrants to
acquire 18,000 shares of the Company's Common Stock at a price of
$0.988 per share, and intends to exercise the warrants immediately
preceding a sale. Four Horsemen was granted the warrants in
consideration for introducing to the Company certain foreign investors who
purchased shares of the Company's Common Stock in offshore transactions
pursuant to Regulation S, promulgated under the 33 Act.
(5) Daniel Gallery holds warrants to acquire 50,000 shares of the
Company's Common Stock which were granted in consideration of the
performance of certain consulting services provided by Daniel Gallery to
the Company pursuant to a consulting agreement dated November 6, 1995.
The exercise price of the warrants is $0.59 per share, the closing bid price
of the Common Stock on the NASDAQ System on November 6, 1995.
(6) Dr. Gentile, a former member of the Board of Directors, was
granted an option on June 19, 1993, for an aggregate of 15,000 shares at
an exercise price of $1.25 per share. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on June 18,
1993 was $1.25 per share. Dr. Gentile's exercise price was increased to
$2.00 per share on January 31, 1994. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on January
28, 1994 was $4.625 per share. Dr. Gentile exercised his option as to all
15,000 shares on February 14, 1994. On October 1, 1993, Dr. Gentile was
granted an option to acquire 250 shares at an exercise price of $2.125 per
share. The closing bid price of the Company's Common Stock as quoted
on the NASDAQ System on September 30, 1993, was $2.00 per share. On
January 31, 1994, the exercise price of this option was reduced to $2.00 per
share. The closing bid price of the Company's Common Stock as quoted
on the NASDAQ System on January 28, 1994 was $4.625 per share. This
option expires on October 1, 2003. On October 1, 1994, Dr. Gentile was
<PAGE>
issued an option to purchase 1,000 shares at an exercise price of $2.75.
The closing bid price of the Company's Common Stock as quoted on the
NASDAQ system on September 30, 1994, was $2.875 per share. This
option expires October 1, 2004. On October 1, 1995, Dr. Gentile was
granted an option to purchase 1,000 shares at an exercise price of $0.59
per share. The closing bid price of the Company's Common Stock as
quoted on the NASDAQ system on September 30, 1995, was $0.59375 per
share. This option expires on October 1, 2005. All of Dr. Gentile's options
currently are exercisable.
(7) GFL Advantage Fund Ltd. acquired 4,000 shares of the
Company's Series A Convertible Preferred Stock, $.01 par value (the
"Series A Preferred Stock"), in accordance with Regulation D, as
promulgated under the 33 Act, and pursuant to a certain Securities
Purchase Agreement dated as of April 16, 1996 at a purchase price of
$1,000 per share. The terms of the Series A Preferred Stock provide that
the holder thereof shall have the right to convert such shares into shares of
Common Stock at any time after June 30, 1996 at a conversion price (the
"Conversion Price") equal to 71.5%, which percentage is subject to
adjustment upon the occurrence of certain events (the "Conversion
Percentage"), multiplied by the Average Market Price (as defined below) of
the Common Stock for the five consecutive trading days ending one
trading day prior to the date the notice of conversion is received from the
holder by the Company. Under certain circumstances, the Company may
require the holder of the Series A Preferred Stock to convert some or all of
its shares of Series A Preferred Stock into Common Stock. In no case,
however, shall the holder be permitted to hold, in the aggregate, such
number of shares of Common Stock which would exceed 4.9% of the
aggregate outstanding shares of Common Stock. The "Average Market
Price" of the Common Stock is the arithmetic average of the closing bid
prices for the Common Stock for each trading day as quoted on the
NASDAQ System or, if the NASDAQ System is not the principal trading
market for the Common Stock, on the principal trading market for the
Common Stock, or, if market value cannot be so calculated, the average
fair market value during such period as reasonably determined in good
faith by the Company's Board of Directors (all as appropriately adjusted for
any stock dividend, stock split, or other similar transaction during such
period or between the end of such period and the date of conversion). The
number of shares of Common Stock issuable upon conversion of the Series
A Preferred Stock is determined by dividing the stated value of the Series
A Preferred Stock, which is equal to $1,000 (the "Stated Value"), by the
Conversion Price then in effect. See "Description of Capital Stock-
Preferred Stock-Series A Convertible Preferred Stock." The Company has
estimated that 3,500,000 shares of Common Stock will be issuable to the
holder of the Series A Preferred Stock upon conversion and is registering
such number of shares pursuant to the Registration Statement of which this
Prospectus is a part. In the event that the Series A Preferred Stock is
convertible into a greater number of shares of Common Stock, additional
Common Stock will be registered by the Company on behalf of the holder
of the Series A Preferred Stock.
<PAGE>
(8) GFL Performance Fund Ltd. acquired 1,337,524 shares of the
Company's Common Stock in accordance with Regulation D, as
promulgated under the 33 Act, and pursuant to a certain Securities
Purchase Agreement dated as of April 16, 1996 at a price of $1.4953 per
share.
(9) Mark G. Hollo holds warrants to acquire 676,644 shares of the
Company's Common Stock at a price of $0.74 per share, and intends to
exercise the warrants immediately preceding a sale. Mr. Hollo is the
managing director of Sands Brothers & Co., Ltd., the placement agent for
an offering of the Company's Common Stock conducted pursuant to
Regulation S, as promulgated under the 33 Act, in consideration for
services in connection with such offering. Such warrants were granted
pursuant to a certain Selling Agreement dated February 6, 1995, as
amended.
(10) J&C Resources, Inc. is the holder of 300,000 shares of Common
Stock which it acquired on August 2, 1994, by exercising a warrant issued
by the Company in consideration for certain loans made to the Company by
J&C Resources, Inc. The exercise price of such warrant was $1.375 per
share.
(11) Pursuant to an agreement dated February 27, 1995, J.C. II
Corporation has the right to acquire up to 300,000 shares upon the
achievement of certain sales quotas by J.C. II Corporation with respect to
the Company's products. The shares may be acquired at a price of
$0.68750 per share.
(12) On July 7, 1992, the Company completed a private placement of
certain units to Mr. Lampert and the Dennis Jones Revocable Trust U/T/A
Dated 3/16/93 (collectively, the "1992 Subscribers"), which consisted of
one share of Common Stock and one warrant to purchase one share of
Common Stock ("Units"). The Company sold the Units for $3.00 each.
Under the terms of the warrants which comprised part of each Unit, the
1992 Subscribers had the right to acquire the number of shares of Common
Stock equal to the number of Units purchased at an exercise price of $5.25
per share. On September 7, 1993, the Company granted to the 1992
Subscribers a reduction in the exercise price of the warrants from $5.25 per
share to $1.25 per share, provided the warrants were exercised on or before
September 16, 1993. The closing bid price of the Company's Common
Stock as quoted on the NASDAQ System on September 6, 1993 was $2.00
per share. In addition, the Company also effectuated the placement of
additional shares to the 1992 Subscribers at a per share price of $1.25.
Pursuant to a letter agreement entered into by the Company, the
Company agreed to register with the SEC all of the shares acquired by the
investors in July 1992, and all of the shares acquired pursuant to the
exercise of the warrants which comprised part of the Units sold. In the
event the registration of such shares was not completed within 150-days
from the exercise of the warrants, the Company agreed to issue to the 1992
Subscribers additional warrants, expiring two years from the expiration of
the 150-day period, to purchase the Company's Common Stock at an
<PAGE>
exercise price of 50% below the average trading price of the Company's
Common Stock during such 150-day period. The 150-day period during
which this registration statement was to be effective by the SEC expired on
March 5, 1994. On November 18, 1994, the 1992 Subscribers exercised
such warrants issued by the Company on March 5, 1994, at a price of
$0.85 per share in consideration of the Company's agreement to file a
registration statement in order to register such shares on or before
December 12, 1994. The Company failed to file such registration
statement on or before December 12, 1994 and, as a result, the Company
has agreed to issue to the 1992 Subscribers additional shares at a purchase
price of $0.85 per share. The Company has agreed to register all of such
shares.
The following table sets forth the name of each 1992 Subscriber,
the number of shares acquired through the purchase of Units in July 1992,
the number of shares acquired in 1994 by the exercise of warrants issued in
July 1992, the number of additional shares purchased in 1994, the number
of penalty shares held, and the total number of shares beneficially owned
by each such person as of November 30, 1994:
<TABLE>
<CAPTION>
No. of
Shares/ No. of
No. of Warrants Additional No. of No. of
Shares/Units Acquired/ Shares Penalty Contingent Shares
Acquired Exercised Purchased Shares Penalty Beneficially
Investor Name 1992 (a) 1993 (b) 1993 (c) Obtained (d) Shares (d) Owned
________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Dennis Jones, 3,333 3,333 6,666 9,999 9,999 33,330
TrusteeDennis Jones
Revocable Trust,
U/T/A Dated
03/16/93
Jack Lampert 10,001 10,001 20,002 30,003 30,003 100,010
TOTALS 13,334 13,334 26,668 40,002 40,002 133,341
</TABLE>
(a) Purchased at a price of $3.00 per share.
(b) Purchased at an exercise price of $1.28125 per share.
(c) Purchased at a price of $1.28125 per share.
(d) Purchased at a price of $0.85 per share.
Subsequent to July 15, 1994, Mr. Lampert and the Dennis Jones
Revocable Trust U/T/A Dated 3/16/93 sold certain shares of Common
Stock which they acquired in July 1992, pursuant to Rule 144 promulgated
under the 33 Act and pursuant to a registration statement previously filed
by the Company. The shares referenced in Appendix A above with respect
to each of the 1992 Subscribers represent the remaining shares held by
each such 1992 Subscriber.
(13) KOI Communications Corporation holds warrants to acquire
40,000 shares of the Company's Common Stock which were granted in
consideration of the performance of certain consulting services provided by
KOI Communications Corporation to the Company pursuant to an
agreement dated October 12, 1995. The exercise price of the warrants is
$0.53 per share.
(14) London Select Enterprises ("London Select") was issued warrants
to acquire 279,180 shares of the Company's Common Stock at a price of
$0.988 per share. London Select was granted the warrants in consideration
for introducing to the Company certain foreign investors who purchased
shares of the Company's Common Stock in offshore transactions pursuant
to Regulation S, promulgated under the 33 Act. As of April 29, 1996,
London Select assigned warrants to acquire 60,000 shares of Common
Stock to Third World Investments Ltd. which participated with London
Select in the Regulation S offshore transactions. London Select and Third
World Investments Ltd. each intends to exercise the warrants immediately
preceding a sale.
(15) Mr. Luther, a current member of the Company's Board of
Directors, holds warrants to acquire 50,000 shares of Common Stock at a
price of $0.6407 per share. These warrants were granted as compensation
for work per the terms of Mr. Luther's agreement with the Company to
serve as Senior Vice President of Marketing for a term of one year. In
addition, Mr. Luther was granted options to acquire 15,000 shares of the
Company's Common Stock on January 31, 1996, for an exercise price of
$0.8125 per share, which option expires on January 31, 2006. None of
these options have been exercised as of the date hereof.
(16) In consideration for consulting services provided to the Company,
the Company issued to Andrea McWilliams 480 shares of Common Stock.
The price used to determine the number of shares to be issued to Ms.
McWilliams was $5.625 per share. Ms. McWilliams also received $6,300
in cash compensation and reimbursement for travel and living
accommodations.
(17) On December 6, 1994, Albert Morini, a former employee of the
Company, acquired 21,121 shares of Common Stock for a price of $1.625.
The purchase price for the shares was offset against certain obligations of
<PAGE>
the Company with respect to the payment of severance pay to Mr. Morini.
The closing bid price of the Company's Common Stock as quoted on the
NASDAQ System on December 5, 1994 was $1.625 per share.
(18) Marcia Musto was issued immediately exercisable warrants to
acquire 50,000 shares of the Company's Common Stock at a price of $1.00
per share on February 20, 1994, in consideration of the achievement of
certain sales levels by the Company. On March 15, 1996, Mrs. Musto
exercised warrants for all 50,000 shares of Common Stock.
(19) On January 25, 1995, the Company entered into an agreement
with John Perner pursuant to which Mr. Perner would be granted certain
warrants to acquire up to 50,000 shares of Common Stock upon the
Company distributing its products through retail supermarket chains or
other distributors introduced by Mr. Perner. The warrants are exercisable
at a price of $0.53125 per share.
(20) William Rawlings, a former member of the Board of Directors of
the Company, held options to acquire an aggregate of 20,000 shares at an
exercise price of $2.00 per share, and exercised options as to 10,000 of
these shares on March 7, 1994. Thereafter, Mr. Rawlings sold certain of
the shares obtained in connection with such exercise. Mr. Rawlings still
holds 500 shares and options to acquire 10,000 shares.
(21) Sands Brothers & Co., Ltd. ("Sands"), holds warrants to acquire
676,637 shares of the Company's Common Stock at a price of $0.74 per
share, and intends to exercise the warrants immediately preceding a sale.
Sands was granted the warrants, in addition to receiving selling
commissions and other compensation, in consideration for acting as
placement agent for an offering of Common Stock conducted by the
Company under a certain a certain Selling Agreement dated February 6,
1995, as amended, pursuant to Regulation S, as promulgated under the 33
Act.
(22) Stanley Turk, a former member of the Board of Directors of the
Company, held options to acquire an aggregate of 19,000 shares of the
Company's Common Stock at an exercise price of $2.00 per share, of
which 10,000 options were exercised on March 31, 1994. Mr. Turk still
holds all 10,000 shares acquired on March 31, 1994 and options to acquire
9,000 additional shares.
(23) Mr. Tyree, a current member of the Board of Directors, was
granted an option to acquire 15,000 shares of Common Stock on
September 11, 1992 for an exercise price of $2.88 per share. This option
expires on September 11, 2002. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on September 10, 1992
was $2.875 per share. Mr. Tyree was granted an additional option on
October 1, 1993 to acquire 1,000 shares of Common Stock at an exercise
price of $2.125 per share. This option expires on October 1, 2003. The
closing bid price of the Company's Common Stock as quoted on the
NASDAQ System on September 30, 1993 was $2.00 per share. The
exercise price of all of Mr. Tyree's options was reduced to $2.00 per share
<PAGE>
on January 31, 1994. The closing bid price of the Company's Common
Stock as quoted on the NASDAQ System on January 28, 1994 was $4.625
per share. On October 1, 1994, Mr. Tyree was granted an option to
acquire 1,000 shares at an exercise price of $2.875 per share. The closing
bid price of the Company's Common Stock as quoted on the NASDAQ
System on September 30, 1994, was $2.875 per share. This option expires
on October 1, 2004. On October 1, 1995, Mr. Tyree was granted an option
to acquire 1,000 shares at an exercise price of $0.59 per share. The closing
bid price of the Company's Common Stock as quoted on the NASDAQ
System on September 29, 1995, was $0.59 per share. This option expires
on October 1, 2005. All of Mr. Tyree's options currently are exercisable.
(24) Dr. Walsh, a current member of the Board of Directors, was
granted an option to acquire 15,000 shares of Common Stock on January
31, 1992 for an exercise price of $3.00 per share. This option expires on
January 31, 2002. The closing bid price of the Company's Common Stock
as quoted on the NASDAQ System on January 30, 1992 was $2.50 per
share. Dr. Walsh was granted an additional option on October 1, 1992 to
acquire 667 shares of Common Stock at an exercise price of $2.875 per
share. This option expires on October 1, 2002. The closing bid price of
the Company's Common Stock as quoted on the NASDAQ System on
September 30, 1992 was $2.625 per share. On October 1, 1993, Dr. Walsh
was granted an option to acquire 1,000 shares at an exercise price of
$2.125 per share. The closing bid price of the Company's Common Stock
as quoted on the NASDAQ System on September 30, 1993 was $2.00 per
share. The exercise price of all of Dr. Walsh's options was reduced to
$2.00 per share on January 31, 1994. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on January
28, 1994 was $4.625 per share. On October 1, 1994, Dr. Walsh was
granted an option to acquire 1,000 shares at an exercise price of $2.875 per
share. The closing bid price of the Company's Common Stock as quoted
on the NASDAQ System on September 30, 1994, was $2.875 per share.
This option expires on October 1, 2004. On October 1, 1995, Dr. Walsh
was granted an option to acquire 1,000 shares at an exercise price of $0.59
per share. The closing bid price of the Company's Common Stock as
quoted on the NASDAQ System on September 30, 1995, was $0.59 per
share. This option expires on October 1, 2005. All of Dr. Walsh's options
currently are exercisable.
[THIS PAGE INTENTIONALLY LEFT
BLANK AND UNNUMBERED]
No dealer, salesman, or other person has been authorized to give
any information or to make any representations other than those contained
in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been so authorized. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy such securities in any jurisdiction to any person to whom it is unlawful
to make such an offer or solicitation in such jurisdiction. Neither the
deliver of this Prospectus nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information
contained herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Information by Reference 2
Risk Factors 3
The Company 8
Selling Stockholders 8
Plan of Distribution 8
Use of Proceeds 10
Determination of Offering Price 10
Description of Capital Stock 11
Legal Matters 12
Experts 12
Appendix A - Selling Stockholders 13
Until September 19, 1996 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
GALAXY FOODS COMPANY
8,240,568 SHARES
COMMON STOCK
PROSPECTUS
June 21, 1996
