As filed with the Securities and Exchange Commission on August 1, 1997
Registration No. 33-___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form S-3
Registration Statement under The Securities Act of 1933
GALAXY FOODS COMPANY
(Name of Small Business Issuer in its Charter)
Delaware 2022 25-1391475
(State or other (Primary Standard (IRS Employer
jurisdiction Industrial Identification No.)
of incorporation) Classification Code
Number)
2441 Viscount Row, Orlando, Florida 32809
Telephone: (407) 855-5500
(Address and Telephone Number of Principal Executive Offices)
ANGELO S. MORINI, PRESIDENT
Galaxy Foods Company
2441 Viscount Row, Orlando, Florida 32809
Telephone: (407) 855-5500
(Name, address and telephone number of agent for service)
COPIES TO:
KENNETH C. WRIGHT, ESQUIRE
Baker & Hostetler LLP
200 South Orange Avenue, Suite 2300
Orlando, Florida 32801
Telephone: (407) 649-4001
Approximate Date of Proposed Sale to the Public: As soon
as practicable after the registration statement becomes effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. "
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the following
box: "
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering."______________________
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
"______________________
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. "
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum Amount of
Class of Amount to Offering Aggregate Registrati
Securities be Price Offering on Fee
to be Registered Per Price
Registered Share(1)
Common Stock 3,557,500 $1.03 $3,664,225.00 $1,110.37
$.01 par value(2)
Total $1,110.37
Registration
(1)Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c). Based upon the average of the closing bid and
ask prices for the Company's Common Stock as reported on the National
Association of Securities Dealers, Inc. inter-dealer quotation system on July
30, 1997, of $1.00 and $1.06, respectively.
(2)To be offered by the Selling Stockholders.
PROSPECTUS Subject to Completion
GALAXY FOODS COMPANY July 31, 1997
3,557,500 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'')
or by pledgees, donees, transferees or other successors in
interest that receive such shares by pledge or foreclosure of a
pledge, gift, distribution or other non-sale transfer. The
Company will realize no proceeds from the sale of any of these
shares.
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 to the
Par Value $.01 Public and Company (3)
Commissions (2)
Prevailing Not Not
Per Market Applicable Applicable
Share.................. Value (1)
(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 July 30,
1997, the closing bid and asked prices for a share of the
Company's Common Stock as quoted on the NASDAQ System was $1.00
and $1.06, 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 funds received by such Selling Stockholder 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 agreement with 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 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. 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 [_______________, 1997].
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. 33-_____), 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 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, 1997 and Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1997, 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.
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 income of
$23,121 for the three-month period ended June 30, 1997
(unaudited) and net losses of $2,033,639 for the three-month
period ended June 30, 1996 (unaudited), $4,331,066 for the fiscal
year ended March 31, 1997, and $6,550,869 for the fiscal year
ended March 31, 1996, or $.00, $.06, $.12, and $.25 per share,
respectively (based on the weighted average number of shares of
Common Stock outstanding during each period). Additionally, for
the three-month periods ended June 30, 1997 and 1996 (unaudited),
and for the fiscal years ended March 31, 1997 and 1996, the
Company's operating income (loss) was $53,049, $(473,323),
$(2,783,937), and $(3,466,649), respectively. Further, until
fiscal 1996, the Company operated since its inception with a
negative working capital position. As of March 31, 1997, the
Company had $4,094,750, in current assets, and $2,263,544, 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 July 30, 1997,
Angelo S. Morini, the Company's founder, President, and Chief
Executive Officer, owned approximately 39.8% of the issued and
outstanding shares of the Company's Common Stock, and held
certain rights and options to acquire an additional 1,141,500
shares of Common Stock. In the event Mr. Morini exercises his
rights and options, and acquires all of the 1,141,500 shares, and
assuming that no other options or warrants are exercised or
granted, Mr. Morini will own approximately 41.6% 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 36.0% 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
July 30, 1997, there were outstanding options and warrants to
acquire up to 9,587,395 shares of Common Stock, including the
1,141,500 shares subject to options held by Mr. Morini, in
addition to the 60,662,202 shares of Common Stock of the Company
issued and outstanding as of that date. As of July 30, 1997, a
total of 24,337,798 shares are authorized but not yet issued and
outstanding, including 9,587,395 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.
Originally, 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 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.'' Between July 1996 and July 30,
1997, 3,389 shares of Series A Preferred Stock were converted
into an aggregate of 5,500,000 shares of Common Stock at an
average conversion price of $0.73 per share. As of July 30,
1997, 611 shares of the Company's Series A Preferred Stock were
issued and outstanding. The Company has estimated that 1,500,000
shares of Common Stock will be issuable to the holder of such
shares the Series A Preferred Stock upon conversion. Therefore,
the Company is registering 3,500,000 shares of Common Stock
comprised of 2,000,000 shares currently held by Advantage Fund
Limited, formerly named GFL Advantage Fund Ltd. (``Advantage
Fund''), together with the estimated 1,500,000 shares issuable to
Advantage Fund upon conversion of the remainder of the Series A
Preferred Stock pursuant to the Registration Statement of which
this Prospectus is a part.
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 July 30, 1997, approximately
32,287,783 shares of the 60,662,202 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. Of the remaining 28,374,419 shares of
Common Stock issued and outstanding, and 9,587,395 additional
shares of Common Stock which the Company is obligated to issue
pursuant to outstanding options and warrants, 2,057,500 shares so
issued or issuable are included for sale pursuant to this
Prospectus.
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 one-year holding
period generally will not begin until the shares underlying such
options or warrants actually have been acquired. After the one-
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 two 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.''
Originally, 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 has 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
1,500,000 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, together with 2,000,000
additional shares of Common Stock currently held by the holder of
the Series A Preferred Stock, pursuant to the Registration
Statement of which this Prospectus is a part. 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 has
been sold and (ii) none of the Series A Preferred Stock issued
and outstanding as of the date hereof are outstanding (such
earlier date, the ``Registration Period'').
Between July 1996 and July 30, 1997, 3,389 shares of
Series A Preferred Stock were converted into an aggregate of
5,500,000 shares of Common Stock at an average conversion price
of $0.73 per share. As of July 30, 1997, 611 shares of the
Company's Series A Preferred Stock were issued and outstanding.
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
Freer label), Borden's, and ConAgra (which produces products
under the Healthy Choicer 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.
Uncertainties Regarding Trademark Protection; No Patent
Protection. The Company owns the trademark formagg, which is
registered in the United States, Japan, Canada, France, Ireland,
Israel, Greece and the United Kingdom, and the trademarks Lite
Bakery, Galaxy, Labella's, Soyco, Veggy Singles and
Soymage, each of which is registered in the United States, and
has applied for registration of the trademarks and Lite ``n''
Less, Health Value Foods, Soy Singles 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
Galaxyr, 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 three-month periods
ended June 30, 1997 and 1996 (unaudited) and fiscal years ended
March 31, 1997 and 1996, the Company had net sales of $5,883,454,
$3,354,980, $17,171,496, and $3,950,455, respectively.
Foodservice Purchasing Co-op, and H.E. Butt Grocery each
represented more than 5% of the Company's gross sales for fiscal
1997, and Foodservice Purchasing Co-op, Dutch Farms, Tropical
Cheese Industries, and H.E. Butt Grocery each represented more
than 5% of the Company's gross sales for the three-month period
ended June 30, 1997 (unaudited). The Company does not have any
contractual arrangements with any of its customers which require
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 three-month periods ended June 30, 1997 and 1996
(unaudited) and for the fiscal years ended March 31, 1997 and
1996, the Company purchased $1,907,635, $685,365, $3,614,421 and
$1,398,230, 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., Van Waters &
Rogers, Archer Daniels Midland Co., Armour Foods, Food Ingredient
Sales, Inc., and Grain Processing Corporation. 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 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.
Originally, 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 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 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 preferences. The Company has the
right to redeem all or any part of the Series A Preferred Stock
at any time subsequent to December 18, 1996 at a redemption price
of $1,398.60 per share. See ``Description of Capital Stock-
Preferred Stock.''
Between July 1996 and July 30, 1997, 3,389 shares of
Series A Preferred Stock were converted into an aggregate of
5,500,000 shares of Common Stock at an average conversion price
of $0.73 per share. As of July 30, 1997, 611 shares of the
Company's Series A Preferred Stock were issued and outstanding.
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 the Selling
Stockholders, and the number of such shares which are offered by
them for sale hereunder.
PLAN OF DISTRIBUTION
The 3,557,500 shares of Common Stock of the Company offered
hereby are being registered for sale pursuant to the Registration
Statement for the accounts of each 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 it in connection with any sales
hereunder may be considered ``underwriters'' as defined in the
33 Act. The Company is bearing all of the estimated $17,500 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 Stockholders have 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 effected 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 the Selling Stockholders
and ``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.
The 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 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 Stockholders
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.
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 Company has agreed with the Selling Stockholders
to keep the Registration Statement effective during the
Registration Period, 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, the Selling Stockholders have agreed to
cease any effort to sell any shares of Common Stock offered for
sale pursuant to the Registration Statement and will not so sell
any such shares of Common Stock until the Selling Stockholders
have 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. The Company
has agreed with the Selling Stockholders to use its best efforts
to prepare any such supplement or amendment promptly.
4. The Selling Stockholders 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. The Company has agreed to pay the fees and
disbursements of counsel for the Selling Stockholders in
connection with the Registration Statements of which this
Prospectus forms a part.
5. No broker-dealer selling shares of Common Stock
hereunder shall be compensated at other than usual and customary
broker rates unless such compensation arrangements are disclosed
in a supplement to the Prospectus, to the extent required by
applicable law.
The Company has advised 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 the Selling Stockholders of its
obligation to comply fully with the anti-manipulation provisions
of the 34 Act, including Rule 10b-5 and Regulation M promulgated
thereunder which, among other things, restrict participants in a
distribution of the Common Stock from making bids for or
purchases of the Common Stock, directly or indirectly. The
Selling Stockholders also have 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.
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 Series A Convertible Preferred Stock, $.01 par value.
As of July 30, 1997, 60,662,202 shares of Common Stock were
issued and outstanding and held of record by approximately 656
shareholders. Of the approximately 656 shareholders of record at
July 30, 1997, one was a nominee which held approximately
31,727,941 issued and outstanding shares for its customers in so-
called ``street name.'' As of July 30, 1997, 611 shares of
Series A Convertible Preferred Stock were issued and outstanding.
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.
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.
Originally, 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 shares of Common Stock into which the
Series A Preferred Stock is convertible cannot be sold pursuant
to an effective 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. The
Company originally registered 3,500,000 shares of Common Stock on
behalf of Advantage Fund under a Registration Statement on Form S-
3 which was declared effective as of May 7, 1996. 3,500,000
additional shares of Common Stock into which the Series A
Preferred Stock has been converted or is convertible are being
registered pursuant to the Registration Statement of which this
Prospectus is a part.
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 holder of the Series A Preferred Stock is 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 December 18, 1996 at a redemption price
of $1,398.60 per share.
Between July 1996 and July 30, 1997, 3,389 shares of
Series A Preferred Stock were converted into an aggregate of
5,500,000 shares of Common Stock at an average conversion price
of $0.73 per share. As of July 30, 1997, 611 shares of the
Company's Series A Preferred Stock were issued and outstanding.
The Company has no present plans to issue any additional
shares of Preferred Stock.
LEGAL MATTERS
Baker & Hostetler LLP, 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 incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods
set forth in their report incorporated herein by reference, and
are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated herein
by reference, contains statements that constitute forward-looking
statements. Those statements appear in a number of places in
this Prospectus and the documents incorporated herein by
reference and include statements regarding the intent, belief or
current expectations of the Company, its directors or its
officers with respect to (i) the declaration or payments of
dividends; (ii) the Company's financing plans; (iii) the
Company's policies regarding investments, financings and other
matters; and (iv) trends affecting the Company's financial
condition or results of operations. Forward-looking statements
may be identified by the use of forward-looking terminology such
as "may", "will", "expect", "believe", "estimate", "anticipate",
"continue", or similar terms, variations of these terms or the
negative of those terms.
Prospective investors are cautioned that any such forward-
looking statement is not a guarantee of future performance and
involves risks and uncertainties, and that actual results may
differ materially from those in the forward-looking statements as
a result of various factors. The accompanying information
contained in this Prospectus and the documents incorporated
herein by reference, including without limitation the information
in the documents incorporated herein by reference under the
heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations," identifies important
factors that could cause such differences. With respect to any
such forward-looking statement that includes a statement of its
underlying assumptions or bases, the Company cautions that, while
it believes such assumptions or bases to be reasonable and has
formed them in good faith, assumed facts or bases almost always
vary from actual results, and the differences between assumed
facts or bases and actual results can be material depending on
the circumstances. When, in any forward-looking statement, the
Company, or its management, expresses an expectation or belief as
to future results, that expectation or belief is expressed in
good faith and is believed to have a reasonable basis, but there
can be no assurance that the stated expectation or belief will
result or be achieved or accomplished.
APPENDIX A
SELLING STOCKHOLDERS
Percentage of
Number of Number of Outstanding Shares
Shares of Shares of of Common Stock
Number of Common Stock Common Stock to be Benefi-
Shares Offered to be Bene- cially Owned
of Common for Sale ficially After Completion
Stock Pursuant Owned Assuming of Distribution
Names of Beneficially to this Sale of all Assuming Sale of
Selling Stockholders Owned Prospectus Shares Offered All Shares
Hereunder Offered
ADVANTAGE FUND
LIMITED (1) 3,180,835(2) 3,500,000 0 0%
CORPORATE STUFF,
INC. (3) 16,666 50,000 0 0%
LeANN H. DAVIS (4) 7,500 7,500 0 0%
TOTAL NUMBER OF SHARES
REGISTERED 3,557,500
FOOTNOTES TO APPENDIX A
(1) Advantage Fund acquired 4,000 shares of the Company's
Series A Convertible Preferred Stock, $.01 par value (the
``Series A Preferred Stock''), in a transaction exempt from
registration under the 33 Act pursuant to 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.'' Between July 1996 and
July 30, 1997, 3,389 shares of Series A Preferred Stock were
converted into an aggregate of 5,500,000 shares of Common
Stock at an average conversion price of $0.73 per share. As
of July 30, 1997, 611 shares of the Company's Series A
Preferred Stock were issued and outstanding. The Company
has estimated that 1,500,000 shares of Common Stock will be
issuable to the holder of such shares of Series A Preferred
Stock upon conversion. Therefore, the Company is
registering 3,500,000 shares of Common Stock comprised of
2,000,000 shares currently held by Advantage Fund, together
with the estimated 1,500,000 shares issuable to Advantage
Fund upon conversion of the remainder of the Series A
Preferred Stock pursuant to the Registration Statement of
which this Prospectus is a part. This Prospectus also
relates to such indeterminate number of additional shares of
Common Stock as may be issued to the Selling Stockholders by
reason of stock splits, stock dividends and similar events
occurring on or after the date the Registration Statement
was filed with the SEC.
(2) The number of shares of Common Stock beneficially owned by
Advantage Fund include those shares which Advantage Fund was
entitled to acquire upon conversion of shares of Series A
Preferred Stock as of July 30, 1997, estimated by utilizing
the average closing bid price for the Company's Common Stock
as reported on the National Association of Securities
Dealers, Inc. inter-dealer quotation system of $1.00.
(3) Corporate Stuff, Inc. holds warrants to acquire 50,000
shares of the Company's Common Stock with an exercise price
of $0.78 per share. Such warrants were granted in
consideration of certain consulting services provided by
Corporate Stuff, Inc. to the Company pursuant to an
agreement dated April 23, 1997.
(4) LeAnn H. Davis holds warrants to acquire 7,500 shares of the
Company's Common Stock with an exercise price of $0.81 per
share. Such warrants were granted in consideration of the
performance of certain consulting services to be provided by
LeAnn H. Davis to the Company pursuant to an agreement dated
July 1, 1997.
[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 GALAXY
authorized. This Prospectus does FOODS COMPANY
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 3,557,500 Shares
unlawful to make such an offer or
solicitation in such jurisdiction. Common Stock
Neither the deliver of this Prospec
tus 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 PROSPECTUS
subsequent to its date.
TABLE OF CONTENTS
Page
Available Information 3
Incorporation of Certain
Information by Reference 2
Risk Factors 3
The Company 8
Selling Stockholders 8
Plan of Distribution 9
Use of Proceeds 11
Determination of Offering Price 11
Description of Capital Stock 11
Legal Matters 13
Experts 13
Appendix A_Selling Stockholders 14 [______________, 1997]
Until [_________, 1997] (90 days
after the date of this Prospectus),
all dealers effecting transactions
in the registered securities,
weather 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 allot
ments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable
by the Registrant in connection with the sale and distribution of
the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are
estimated except the SEC registration fee.
SEC Registration Fee $ 1,110.37
NASD Filing Fee 866.42
Blue Sky Fees and Expenses 5,000.00*
Printing Expenses 1,000.00*
Legal Fees and Expenses 5,000.00*
Accounting Fees and Expenses 3,000.00*
Transfer Agent Fees 1,000.00*
Miscellaneous 523.21*
Total $ 17.500.00
* Estimated
Item 15. Indemnification of Directors and Officers.
The Certificate of Incorporation of Galaxy Foods Company
(the ``Registrant'') and the statutes of the State of Delaware
provide for broad indemnification of the officers and directors
of the Registrant for liabilities arising from actions taken by
them on behalf of the Registrant. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the
``33 Act'') may be permitted to directors, officers, and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission (the
``SEC'') such indemnification is against public policy as
expressed in the 33 Act and is, therefore, unenforceable.
Item 16. Exhibits.
The following Exhibits are filed as part of this
Registration Statement.
Exhibit No. Exhibit Description
5 Opinion of Baker & Hostetler LLP, dated July 30,
1997, regarding legality of shares being offered (Filed
herewith.)
23.1 Consent of Baker & Hostetler LLP, dated July 30,
1997 (Contained in its opinion filed as Exhibit 5.)
23.2 Consent of BDO Seidman, LLP, dated July 30, 1997
(Filed herewith.)
27 Financial Data Schedule (Filed herewith.)
Item 17. Undertakings.
The Registrant undertakes to:
(a) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change
in the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the ``Calculation
of Registration Fee'' table in this Registration Statement;
(iii) Include any additional or changed material
information on the plan of distribution;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8,
and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d)
of the 34 Act that are incorporated by referenced in the
Registration Statement.
(b) For the purpose of determining any liability under the
33 Act, as amended, each such post-effective amendment may be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
33 Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion
of the SEC such indemnification is against public policy as
expressed in the 33 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the
Registrant in the successful defense of any such action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the 33 Act and will be governed by the final adjudication of such
issue.
The Registrant undertakes that (a) for purposes of
determining any liability under the 33 Act, the information
omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the 33 Act shall be deemed
to be part of this registration statement as of the time it was
declared effective, and (b) for the purpose of determining any
liability under the 33 Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on
Form S-3 and authorized this Registration Statement to be signed
on its behalf by the undersigned, in the City of Orlando, State
of Florida this 1st day of August, 1997.
GALAXY FOODS COMPANY
By:/s/Angelo S. Morini
ANGELO S. MORINI, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
/s/Angelo S. Morini Chairman of the August 1, 1997
ANGELO S. MORINI Board of Directors,
President, Chief
Executive Officer
(Principal Executive
Officer) and Director
/s/Cynthia L. Hunter Chief Financial August 1, 1997
CYNTHIA L. HUNTER Officer (Chief
Financial Officer
and Principal
Accounting Officer)
/s/Marshall K. Luther Director August 1, 1997
MARSHALL K. LUTHER
/s/Earl G. Tyree Director August 1, 1997
EARL G. TYREE
/s/Douglas A. Walsh Director August 1, 1997
DOUGLAS A. WALSH
EXHIBITS
EXHIBITS INDEX
Exhibit No. Exhibit Description Page No.
5 Opinion of Baker & Hostetler LLP, dated July 30,
1997, regarding legality of shares being offered (Filed
herewith.)
23.1 Consent of Baker & Hostetler LLP, dated July 30,
1997 (Contained in its opinion filed as Exhibit 5.)
23.2 Consent of BDO Seidman, LLP,, dated July 30, 1997
(Filed herewith.)
27 Financial Data Schedule (Filed herewith.)
EXHIBIT 5
Opinion of Baker &
Hostetler LLP, dated July 30, 1997,
regarding legality of shares being offered
July 30, 1997
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809
Gentlemen:
We have acted as counsel for Galaxy Foods Company, a Delaware
corporation (the "Company"), in connection with the registration
of shares of common stock of the Company, par value $.01 per
share (the "Shares"), pursuant to the Registration Statement of
Form S-3 filed by the Company under the Securities Act of 1933,
as amended (the "Registration Statement"), and the proposed sale
of the Shares by those individuals identified on Appendix A of
the Prospectus which forms part of the Registration Statement
(the "Selling Stockholders") in accordance with the Registration
Statement.
Based upon an examination and review of such documents as we
have deemed necessary, relevant, or appropriate, we are of the
opinion that (i) those Shares currently owned by the Selling
Stockholders and indicated on such Appendix A as being offered
for sale under the Registration Statement have been validly
issued, are fully paid and nonassessable; and (ii) the Company
has the power to issue Shares to the Selling Stockholders
indicated in such Appendix A as being issuable upon exercise of
options or warrants or the conversion of convertible securities
of the Company and that upon such Selling Stockholders' exercise
of stock options and/or warrants or conversion of convertible
securities of the Company, as the case may be, and the issuance
of Shares, such Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name under
the caption "Legal Matters" in the Prospectus which constitutes a
part of the Registration Statement.
Very truly yours,
BAKER & HOSTETLER
EXHIBIT 23.1
Consent of Baker &
Hostetler LLP, dated July 30, 1997
(Contained in its Opinion filed as
Exhibit 5.)
EXHIBIT 23.2
Consent of BDO Seidman,
LLP, dated July 30, 1997
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Galaxy Foods Company
Orlando, Florida
We hereby consent to the incorporation by reference in the
Prospectus constituting a part of this Registration Statement of
our report dated May 21, 1997, relating to the financial
statements of Galaxy Foods Company appearing in the Company's
Annual Report on Form 10-KSB for the year ended March 31, 1997.
We also consent to the reference to use under the caption
"Experts" in the Prospectus.
/s/BDO Seidman. LLP
BDO Seidman, LLP
Orlando, Florida
July 30, 1997
EXHIBIT 27
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 19384
<SECURITIES> 0
<RECEIVABLES> 2372258
<ALLOWANCES> 60000
<INVENTORY> 2291512
<CURRENT-ASSETS> 4946130
<PP&E> 8656099
<DEPRECIATION> 1728430
<TOTAL-ASSETS> 13801184
<CURRENT-LIABILITIES> 3540847
<BONDS> 0
<COMMON> 585833
0
18
<OTHER-SE> 12772200
<TOTAL-LIABILITY-AND-EQUITY> 13801184
<SALES> 5883454
<TOTAL-REVENUES> 5885762
<CGS> 4769957
<TOTAL-COSTS> 1060448
<OTHER-EXPENSES> 291
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31945
<INCOME-PRETAX> 23121
<INCOME-TAX> 0
<INCOME-CONTINUING> 23121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23121
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
