SUPREMA SPECIALTIES INC, 424B1, 2000-08-25

SUPREMA SPECIALTIES INC
424B1, 2000-08-25
GROCERIES & RELATED PRODUCTS

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[GRAPHIC OMITTED]

1,200,000 shares
SUPREMA SPECIALTIES, INC.
Common Stock

We are selling 1,100,000 shares of our common stock, and certain selling
stockholders named in this prospectus are selling 100,000 shares through an
underwritten offering. We will not receive any proceeds from the sale of shares
by the selling stockholders.

Our common stock is quoted on the Nasdaq National Market under the symbol
"CHEZ". The last reported sale price of our common stock on the Nasdaq National
Market on August 24, 2000 was $8.75 per share.

---------------------
Investing in our common stock involves certain risks. See "Risk Factors"
beginning on page 6.

---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
================================================================================
<TABLE>
<CAPTION>
No Exercise of Full Exercise
Underwriters' of Underwriters'
Per Share Over-Allotment Over-Allotment
--------- -------------- ----------------
<S> <C> <C> <C>
Public Offering Price .................... $ 8.00 $9,600,000 $11,040,000
Underwriting fees ........................ $ .64 $ 768,000 $ 883,200
Proceeds to Suprema ...................... $ 7.36 $8,096,000 $ 8,684,800
Proceeds to selling stockholders ......... $ 7.36 $ 736,000 $ 1,472,000
</TABLE>

================================================================================

The underwriters named in this prospectus may purchase up to an additional
80,000 shares of common stock from us and 100,000 shares of common stock from
the selling stockholders under certain circumstances. This prospectus also
relates to the offer and sale by other selling stockholders of up to 150,000
shares, issuable upon exercise of warrants, which shares are not part of the
underwritten offering.

The underwriters are offering the shares subject to various conditions.
The underwriters expect to deliver the shares to purchasers on or about August
30, 2000.

---------------------
Hobbs Melville Securities Corp.

Auerbach, Pollak & Richardson, Inc.

August 24, 2000
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
--------
<S> <C>
Prospectus Summary ................................................................... 3
Risk Factors ......................................................................... 6
Use of Proceeds ...................................................................... 11
Price Range of Common Stock .......................................................... 11
Dividend Policy ...................................................................... 12
Capitalization ....................................................................... 12
Selected Consolidated Financial Information .......................................... 12
Management's Discussion and Analysis of Financial Condition and Results of Operations 13
Business ............................................................................. 19
Description of Securities ............................................................ 23
Shares Eligible for Future Sale ...................................................... 25
Selling Stockholders and Plan of Distribution ........................................ 26
Underwriting ......................................................................... 27
Legal Matters ........................................................................ 29
Experts .............................................................................. 29
Available Information ................................................................ 29
Incorporation of Information by Reference ............................................ 29
Index to Consolidated Financial Statements ........................................... F-1
</TABLE>

---------------------
References in this prospectus, and the documents incorporated by reference
in this prospectus, to "Suprema," "we," "our" and "us" refer to Suprema
Specialties, Inc., a New York corporation, and its subsidiaries. We maintain a
website at www.supremachez.com. Information contained in our website does not
constitute part of this prospectus.

---------------------
You should rely only on the information contained in this prospectus.
Neither we nor the selling stockholders have authorized anyone to provide you
with different information. These securities are not being offered in any
jurisdiction where the offer or sale is not permitted. You should not assume
that the information contained in this prospectus is accurate as of any date
other than the date on the front cover of this prospectus.

Suprema Specialties, Inc. and the names of our products are tradenames or
trademarks of Suprema. This prospectus also contains trademarks and tradenames
of other companies.

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PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering, including "Risk Factors" and our consolidated financial statements
and notes to those statements appearing elsewhere in this prospectus and
incorporated by reference in this prospectus.

Suprema

We manufacture, shred, grate and market gourmet all natural Italian
variety cheeses under the Suprema Di Avellino(R) brand name as well as under
private label. Our product lines consist primarily of domestic mozzarella,
ricotta and provolone cheeses, grated and shredded parmesan and romano cheeses,
and imported parmesan and pecorino romano cheeses, including "lite" versions of
certain of these products containing less fat and fewer calories. Our cheeses
do not contain any preservatives, additives, sweeteners, dehydrated fillers or
artificial flavorings. We sell our products to customers in all three groups
within the cheese industry: food service, food ingredient, and retail.

We maintain three primary facilities. We manufacture cheeses at our
facilities in Manteca, California and Ogdensburg, New York. At our Paterson,
New Jersey facility, bulk cheeses manufactured by us or imported primarily from
Europe and, to a lesser extent, South America, are shredded or grated and then
packaged for distribution. Our Paterson facility is also our corporate
headquarters.

We package and sell our bulk cheeses to national food service
distributors, which then sell the products to restaurants, hotels, caterers and
others. We also sell our products to food manufacturers who use our cheese as
an ingredient in prepared foods. We offer many of our products in
shrink-wrapped plastic packaging and in plastic pillow packs which ensure
continued freshness and gourmet quality. In addition to standard sizes, we also
package our products in customized sizes to meet the specific needs of our food
service distributors and food manufacturer customers.

We market our retail product line on a regional basis primarily to
supermarkets and other retail customers, including grocery stores,
delicatessens and gourmet shops on the East Coast and in the Midwest of the
United States. Our East Coast retail presence includes New England, the New
York Metropolitan area, Maryland, District of Columbia, Florida and
Pennsylvania. In the Midwest, our cheeses are sold in the Chicago Metropolitan
area. We offer most of our retail products in convenient, resealable, clear
plastic cups and shakers in order to maximize both freshness and taste as well
as to promote visual appeal, which we believe enhances the gourmet quality and
image of our cheeses. Our cheeses are sold in well known chain stores,
including D'Agostino's, Food Town, Giant, King Kullen, Shop-Rite, Stop'N Shop
and Super Valu as well as BJ's Wholesale Club.

As part of our continuing effort to manufacture and market superior
cheeses and to expand our product line, we have recently enhanced our research
and development expertise. We are currently focusing our efforts on expanding
our product line in two diverse areas: processed mozzarella cheese, which we
expect will have a "shelf-life" of at least six months without the need for
refrigeration yet will have natural mozzarella cheese characteristics, and whey
protein components, which we intend to sell to third-parties for use as
nutrient supplements and ingredients in a variety of products.

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We were incorporated under the laws of the State of New York in August
1983. Our executive offices are located at 510 East 35th Street, Paterson, New
Jersey 07543, and our telephone number is (973) 684-2900.

The Offering

The following information is based upon shares issued and outstanding as
of August 23, 2000. It excludes 1,581,666 shares issuable upon exercise of
outstanding options and warrants at a weighted average exercise price of $4.64
per share, 573,334 shares reserved for issuance upon the exercise of options
available for future grants under our Employee Stock Option Plans, 120,000
shares issuable upon exercise of warrants to be issued to the designees of the
representatives of the underwriters of this offering and 80,000 shares reserved
for possible issuance by Suprema to cover over-allotments, if any, by the
underwriters.

Unless otherwise stated, information included in this prospectus assumes
no exercise by the underwriters of the over-allotment option.

Common stock offered by
Suprema................. 1,100,000 shares

Common stock offered by
the selling stockholders
in the underwritten
offering................ 100,000 shares

Common stock to be issued
and outstanding after
this offering........... 5,755,563 shares

Use of proceeds.......... We intend to use the net proceeds of this offering
to purchase equipment to increase production
capabilities at our Manteca, California facility,
for research and development of new cheese products
and for working capital and general corporate
purposes.

Risk Factors............. You should read "Risk Factors" beginning on page 6
to ensure that you understand the risks associated
with an investment in our common stock.

NASDAQ Symbol............ CHEZ

Summary Financial Information

The following table shows summary historical consolidated financial
information of Suprema. The historical financial information for each of the
three years in the period ended June 30, 1999 has been derived from the audited
consolidated financial statements and related notes included in and
incorporated by reference in this prospectus. You should read this information
together with those financial statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" which is also
included in and incorporated by reference in this prospectus. Summarized
historical consolidated financial information of Suprema for the years ended
June 30, 1996 and 1995 has been derived from audited consolidated financial
statements which do not appear in the documents included in or incorporated by
reference in this prospectus.

The historical statements of earnings and balance sheet data as of March
31, 2000 and for the nine months ended March 31, 2000 and 1999 have been
derived from unaudited financial statements. The financial statements as of
March 31, 2000 and for the nine month periods ended March 31, 2000 and 1999 are
unaudited; however, in the opinion of management, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair presentation of
the financial statements for the interim periods have been made. The unaudited
results of interim periods are not necessarily indicative of the results to be
obtained in a full fiscal year.

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The information under "As Adjusted" in the balance sheet data below
reflects the receipt of the estimated net proceeds for the sale of the
1,100,000 shares of common stock by us in this offering and the application of
the net proceeds as described in this prospectus.

Statements of Earnings Data:

<TABLE>
<CAPTION>
Nine Months
Ended
March 31,
--------------------------
2000 1999
------------- -----------
(unaudited)
<S> <C> <C>
Net Sales ............................... $ 202,268 $127,414
Earnings before Extraordinary loss on
Extinguishment of debt ................. 4,539 2,912
Net Earnings ............................ 4,539 2,912
Earnings Per Share before
Extraordinary loss on
Extinguishment of debt (Basic) ......... 1.02 .64
Earnings Per Share before
Extraordinary loss on
Extinguishment of debt (Diluted) ....... .88 .61
Net earnings per Share (Basic) .......... 1.02 .64
Net earnings per Shares (Diluted) ....... .88 .61
Weighted Average Common Shares
Outstanding (Basic) .................... 4,428 4,542
Weighted Average Common Shares
Outstanding (Diluted) .................. 5,180 4,788

<CAPTION>
Years Ended June 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(In thousands, except for per share data)
<S> <C> <C> <C> <C> <C>
Net Sales ............................... $176,281 $108,140 $88,311 $65,104 $52,109
Earnings before Extraordinary loss on
Extinguishment of debt ................. 4,208 2,417 121 1,409 912
Net Earnings ............................ 4,208 1,406 121 1,409 912
Earnings Per Share before
Extraordinary loss on
Extinguishment of debt (Basic) ......... .93 .53 .03 .46 .32
Earnings Per Share before
Extraordinary loss on
Extinguishment of debt (Diluted) ....... .86 .51 .02 .40 .32
Net earnings per Share (Basic) .......... .93 .31 .03 .46 .32
Net earnings per Shares (Diluted) ....... .86 .30 .02 .40 .32
Weighted Average Common Shares
Outstanding (Basic) .................... 4,537 4,563 4,552 2,768 2,352
Weighted Average Common Shares
Outstanding (Diluted) .................. 4,884 4,745 5,040 3,195 2,369
</TABLE>
<PAGE>

Balance Sheet Data (unaudited):

<TABLE>
<CAPTION>
March 31, 2000
-------------------------
Actual As Adjusted
---------- ------------
(In thousands)
<S> <C> <C>
Working Capital .......................................................... $83,890 $ 91,372
Total Assets ............................................................. 108,050 115,532
Long Term Debt Obligations (including capital lease obligation and current
portion) ............................................................... 68,536 68,536
Total Liabilities ........................................................ 83,927 83,927
Stockholders' Equity ..................................................... 24,122 31,604
</TABLE>

The statement of earnings data for the fiscal year ended June 30, 1998
gives effect to our incurring an extraordinary loss on extinguishment of debt
of approximately $1,773,000 ($1,011,000, net of tax) resulting from our early
retirement of subordinated debt and repurchase of warrants attached to the
subordinated debt.

The statement of earnings data for the fiscal year ended June 30, 1997
gives effect to a write-off of approximately $944,000 of costs related to
marketing service agreements and a charge of approximately $1,259,000
associated with a loss we incurred on a sale leaseback transaction which was
completed during the fourth quarter of our fiscal year ended June 30, 1997.

The statement of earnings data for the fiscal year ended June 30, 1996
gives effect to income of approximately $412,000 related to our payment in full
of a note relating to a licensing agreement.

5
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RISK FACTORS

You should carefully consider the risks described below together with all
of the other information included in or incorporated by reference into this
prospectus before making an investment decision. The risks and uncertainties
described below are not the only ones facing our company. If any of the
following risks actually occur, our business, financial condition or operating
results could be harmed. In such case, the trading price of our common stock
could decline, and you could lose all or part of your investment.

Risks Related to Our Business

We depend on several principal customers, and the loss of one or more of these
customers or our inability to collect accounts receivables from our customers
could materially adversely affect our business.

An increasing portion of our revenues have been derived from a
concentrated customer base. For the year ended June 30, 1999 and the nine
months ended March 31, 2000, sales of cheese products to our five largest
customers accounted for approximately 35% and 56%, respectively, of our
revenues. For the year ended June 30, 1999, one customer accounted for
approximately 18% and for the nine months ended March 31, 2000, three customers
accounted for 15%, 14% and 11%, respectively, of our revenues. We do not
maintain agreements with any of our customers which purchase cheese products
from us pursuant to purchase orders placed in the ordinary course of business.
The loss of certain of our principal customers or delays in collection or
uncollectibility of accounts receivable from these or other customers could
have an adverse effect on our financial condition, results of operations and
liquidity.

Because we are smaller than many of our competitors, we may lack the financial
resources needed to capture increased market share.

Our products compete for consumer recognition and shelf space with cheese
products which have achieved significant regional and local brand name
recognition and consumer loyalty. Many of our competitors such as Kraft,
Sorrento, Sargento and Polly-O have greater financial and other resources than
us. We also compete with other importers of foreign cheese and companies
manufacturing substitute cheese products.

For example, our competitors engage in the following activities, both
generally and in response to efforts by additional competitors, to enter new
markets and market new products:

o Launching extensive print and television campaigns to advertise their
entry into new markets;

o Discounting their products for extended periods of time to attract new
customers and

o Providing enhanced customer service during the initial phases of these
new relationships.

There can be no assurance that we will be able to continue to compete
successfully, particularly as we seek to enter into new markets.

Because we depend on foreign sources of supply and principal suppliers, we may
be unable to obtain adequate supplies.

A significant portion of our bulk cheese requirements are manufactured by
foreign producers located principally in Europe and South America. For the year
ended June 30, 1999 and the nine months ended March 31, 2000, we purchased 18%
and 21%, respectively, of our cheese requirements from foreign sources.
Accordingly, we are subject to various risks inherent in foreign trade,
including economic and political instability, shipping delays, fluctuations in
foreign currency exchange rates, custom duties, import quotas and other trade
restrictions, all of which could have a significant impact on our operating
margins and our ability to obtain supplies and deliver products on a timely and
competitive basis. Parmesan cheese imported from Argentina is currently subject
to United States import quotas and custom duties. There are currently no quotas
or custom duties imposed on pecorino romano cheese imported from Italy,
although there are quotas and duties imposed on parmesan cheese imported from
Italy. Imposition or significant increases in the level of custom duties or
import quotas could have an adverse effect on our business.

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We have an agreement with Allied Federated Cooperatives Inc., which
provides that, subject to specified minimum amounts, we will purchase from them
all of our milk requirements used in the manufacture of cheese products at our
Ogdensburg facility. Allied's failure to provide milk products to us, in the
absence of alternative sources of supply, could have an adverse effect on our
Ogdensburg facility's production and, therefore, our business. We are also
dependent on a limited number of other suppliers for all of our requirements of
raw materials, primarily milk used in the manufacture of cheese at our Manteca,
California facility. For the year ended June 30, 1999 and the nine months ended
March 31, 2000, our three largest suppliers accounted for, in the aggregate,
approximately 42% and 39%, respectively, of our product requirements, with one
milk supplier accounting for 21% and 15%, respectively, of our requirements.

We do not maintain agreements with any of our suppliers other than Allied,
and our purchases of bulk cheese and milk products are made pursuant to
purchase orders placed in the ordinary course of business. Failure or delay by
principal suppliers in supplying cheese and milk products to us on favorable
terms, or at all, could result in material interruptions in our operations. Our
inability to obtain adequate supplies as a result of any of the foregoing
factors or otherwise could render us unable to fulfill our obligations to
customers, which could adversely affect our business.

A default under our secured credit arrangements could result in a foreclosure
of our assets by our creditors.

Substantially all of our assets are pledged as collateral to secure
outstanding borrowings under the loan agreements with our primary commercial
lenders. Any default under the documents governing our indebtedness could
result in our indebtedness becoming immediately due and payable and result in a
foreclosure of our assets by our creditors which would have a significant
adverse effect on the market value of our common stock.

As of June 30, 2000, we had approximately $79 million of long-term
indebtedness outstanding.

We depend on our key personnel, including Mr. Mark Cocchiola and Mr. Paul
Lauriero, and the loss of the services of Mr. Cocchiola, Mr. Lauriero or any
other key personnel or the failure to hire additional key personnel could
materially adversely affect our business.

Our success is largely dependent on the personal efforts of Mark
Cocchiola, our Chairman, President and Chief Executive Officer and Paul
Lauriero, our Executive Vice President. Although we have entered into
employment agreements with each of Messrs. Cocchiola and Lauriero, the loss of
the services of either of such individuals could have a material adverse effect
on our business and prospects. We have obtained "key man" life insurance in the
amount of $1,000,000 on each of the lives of Messrs. Cocchiola and Lauriero.
Our success is also dependent upon our ability to hire and retain additional
qualified marketing, technical and other personnel and there can be no
assurance that we will be able to do so.

If we cannot successfully negotiate a material union contract, we may
experience work stoppages which would negatively impact our business.

Approximately 45% of our workforce is represented by a union. Our contract
with union employees at our Manteca facility expires in December 2004 and we
are currently negotiating the first contract with union employees at our
Ogdensburg facility. Failure to effectively negotiate a material union contract
could result in work stoppages. Although we have not experienced any
significant labor disputes or work stoppages to date, a work stoppage due to a
failure to renegotiate a union contact, or otherwise, could have a material
adverse effect on our business.

Risks Related To Our Industry

We are in a low margin business and our profitability may be negatively
impacted during periods of food price deflation.

The food service distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. We make a significant
portion of our sales at prices that are based on the cost of

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products we sell, plus a percentage markup. As a result, our profit levels may
be negatively impacted during periods of food price deflation. The food service
industry is sensitive to national and economic conditions. Our operating
results also are sensitive to, and may be adversely affected by, other factors
that could affect our operating costs, including unexpected increases in fuel
or other transportation-related costs. There can be no assurance that one or
more of these factors will not adversely affect our future operating results.

Changing consumer preferences or nutritional and health-related concerns may
adversely affect our business.

We are subject to changing consumer preferences and nutritional and
health-related concerns. Our business could be affected by certain consumer
concerns about dairy products, such as the cholesterol, calorie, sodium,
lactose and fat content of such products, and we could become subject to
increased competition from companies whose products or marketing strategies
address these consumer concerns.

Because we sell food products, we face the risk of exposure to product
liability claims.

We, like any other seller of food, face the risk of exposure to product
liability claims in the event that our quality control procedures fail and the
consumption of our products causes injury or illness. With respect to product
liability claims, we believe that we have sufficient primary and excess
umbrella liability insurance. However, this insurance may not continue to be
available at a reasonable cost, or, if available, may not be adequate to cover
liabilities. We generally seek contractual indemnification and insurance
coverage from parties supplying us products, but this indemnification or
insurance coverage is limited, as a practical matter, to the creditworthiness
of the indemnifying party, and their carriers, if any, as well as the insured
limits of any insurance provided by suppliers. If we do not have adequate
insurance or contractual indemnification available, product liability claims
relating to defective products could have a material adverse effect on our
financial condition, results of operations and liquidity.

Government regulation could increase our costs of production and increase our
legal and regulatory expenditures.

We are subject to extensive regulation by the United States Food and Drug
Administration, the United States Department of Agriculture, and other state
and local authorities in jurisdictions in which our products are manufactured,
processed or sold. Among other things, these regulations govern the
manufacturing, importation, processing, packaging, storage, distribution and
labeling of our products. Applicable statutes and regulations governing cheese
products include "standards of identity" for the content of specific types of
cheese, nutritional labeling and serving size requirements as well as general
"Good Manufacturing Practices" with respect to manufacturing and production
processes. Our manufacturing and processing facilities and products are also
subject to periodic compliance inspections by federal, state and local
authorities. We are also subject to environmental regulations governing the
discharge of food waste. We believe that we are in compliance with all material
laws and regulations governing our material operations and that we have
obtained all material licenses and permits necessary for the conduct of our
business. Amendments to existing statutes and regulations, adoption of new
statutes and regulations as well as our expansion into new operations and
jurisdictions will require us to obtain additional licenses and permits and
could require us to adapt or alter methods of operations at costs which could
be substantial. There can be no assurance that we will be able, for financial
or other reasons, to comply with applicable laws and regulations and licensing
requirements. Failure to comply with applicable laws and regulations could
subject us to civil remedies, including fines, injunctions, recalls or
seizures, as well as possible criminal sanctions, which could have a material
adverse effect on our business.

8
<PAGE>

Risks Related To This Offering

The market price of our stock could be subject to fluctuations.

The market price of our common stock could be subject to fluctuations in
response to factors such as the following, some of which are beyond our
control:

o quarterly variations in our operating results;

o operating results that vary from the expectations of securities
analysts and investors;

o changes in expectations as to our future financial performance,
including financial estimates by securities analysts and investors;

o announcements by us or our competitors of major business developments,
such as new products, services or technologies or significant
contracts, acquisitions, strategic partnerships, joint ventures or
capital commitments;

o announcements by third parties of significant claims or proceedings
against us;

o future sales of our common stock; and

o general market conditions.

Investors will incur immediate dilution and may experience further dilution.

The offering price of our common stock will be substantially higher than
the pro forma net tangible book value per share of the outstanding common stock
immediately after the offering. If you purchase common stock in this offering,
you will incur immediate and substantial dilution in the pro forma net tangible
book value per share of the common stock from the price you pay for common
stock. We also have a large number of outstanding stock options and warrants to
purchase our common stock with exercise prices significantly below the
estimated offering price of the common stock for this offering. To the extent
these options or warrants are exercised, you will be further diluted.

842,921, or 14.6%, of our total issued and outstanding shares are restricted
from immediate resale but may be sold into the market in the near future. This
could cause the market price of our common stock to drop significantly, even if
our business is doing well.

After this offering, we will have issued and outstanding 5,755,563 shares
of common stock, including the 1,200,000 shares of common stock we and certain
of the selling stockholders are selling in this offering, as well as 213,370
treasury shares. Of the outstanding shares of common stock, 4,699,272 may be
resold in the public market immediately. The remaining 842,921 of our
outstanding shares, representing 14.6% of our total shares of common stock to
be issued and outstanding after this offering, are restricted from sale under
the terms of the Securities Act and 837,921 of these shares are restricted from
sale for six months from the date of this prospectus due to an agreement the
holders of these shares have entered into with the managing underwriter.
However, the managing underwriter can waive this restriction and allow these
stockholders to sell their shares at any time.

In addition, up to 150,000 shares issuable upon exercise of warrants held
by certain selling stockholders which are not included in the underwritten
offering are restricted from sale for six months from the date of this
prospectus due to an agreement between the selling stockholders and the
managing underwriter. However, the managing underwriter can waive this
restriction and allow the selling stockholders to sell the shares at any time.
For a more detailed description, see "Shares Eligible for Future Sale."

As restrictions on resale end, the market price could drop significantly
if the holders of these restricted shares sell them or are perceived by the
market as intending to sell them.

We also have issued options to purchase 1,326,666 shares of our common
stock under our employee stock option plans. A significant number of the shares
underlying these options have previously been registered and, subject to the
applicable vesting requirements, upon exercise of these options the underlying

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shares may be resold into the public market. In addition to the 150,000 warrant
shares described above, we also have reserved 105,000 shares for issuance
pursuant to warrants issued in connection with a prior financing and we have
committed to issue warrants for 120,000 shares to the designees of the
representatives of the underwriters in this offering. We have granted
registration rights to the holders of these warrants for the shares of common
stock issuable upon exercise of these warrants. Sales of a significant number
of these shares, issuable upon exercise of outstanding options and warrants,
would also have a depressive effect on the market price of our common stock.

Our managing underwriter has limited experience as managing underwriter of a
public offering and its lack of experience may affect this offering and future
trading of our common stock.

Although Hobbs Melville Securities Corp. has engaged in the investment
banking business since its formation as a broker-dealer on October 4, 1993, and
its principals have had extensive experience in the underwriting of securities
in their capacities with other broker-dealers, this offering constitutes one of
the first public offerings for which it has acted as managing underwriter.
There can be no assurance that its lack of public offering experience will not
affect this proposed public offering of our common stock and future trading of
our common stock.

Provisions in our Charter and Share Purchase Rights Plan may prevent an
acquisition of Suprema.

Certain provisions of our Certificate of Incorporation and our Share
Purchase Rights Plan could have the effect, either alone or in combination with
each other, of making more difficult, or discouraging an acquisition of our
company deemed undesirable by our Board of Directors. Under our Certificate of
Incorporation, there are approximately 4,500,000 unreserved shares of common
stock and 2,000,000 shares of preferred stock available for future issuance
without stockholder approval. The Share Purchase Rights Plan, commonly known as
a "poison pill," states that, in the event that an individual or entity
acquires 15% of the outstanding shares of our company, stockholders other than
the acquiror may purchase additional shares of our common stock for a fixed
price. The existence of authorized but unissued capital stock, together with
the existence of the Share Purchase Rights Plan, could have the effect of
discouraging an acquisition of our company.

We do not expect to pay dividends.

We have not paid any cash dividends on our common stock to date and do not
expect to pay dividends for the foreseeable future. Under existing loan
agreements with our principal lender, we are not permitted to pay dividends
without the lender's consent.

This prospectus contains forward-looking statements which may not turn out to
be correct.

This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend the forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements in these sections. All statements regarding our expected financial
position and operating results, our business strategy and our plans are
forward-looking statements. These statements can sometimes be identified by our
use of words such as "may," "anticipate," "expect," "intend," "estimate" or
similar expressions. Our expectations in any forward-looking statements may not
turn out to be correct. Our actual results could be materially different from
those discussed in or implied by these statements, and you may consider these
differences important to your investment decision. Important factors that could
cause our actual results to be materially different include those discussed
under "Risk Factors." You should not place undue reliance on the
forward-looking statements, which speak only as of the date the statements were
made.

We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors described
in the proceeding pages, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should
be aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could materially and adversely affect our
business, operating results and financial condition.

10
<PAGE>

USE OF PROCEEDS

The net proceeds we will receive from the sale of 1,100,000 shares of our
common stock in this offering are estimated to be $7,482,000, or $8,051,600 if
the portion of the underwriters' over-allotment option granted by us is
exercised in full. We will not receive any proceeds from the sale of shares by
the selling stockholders.

We expect to use the net proceeds approximately as follows:

o 75% to purchase production equipment to expand our manufacturing
capabilities at our Manteca, California facility.

o 15% for research and development expenses associated with developing
new cheese products.

o 10% for working capital and general corporate purposes.

We will determine, at our discretion, the amount actually expended for
each purpose. Our future expenditures and allocation of the net proceeds of the
offering will depend on many factors, including the amount necessary for
marketing and promotion, development of technology, our entrance into strategic
alliances and other factors. Accordingly, the actual amount of proceeds devoted
to each purpose may vary substantially from the amount set forth above.

Pending the uses described above, the net proceeds of this offering will
be invested primarily in short-term, investment-grade, interest-bearing
securities. We currently anticipate that the net proceeds received by us from
this offering, together with cash generated from operations and existing cash
balances, will be sufficient to satisfy our operating cash needs for at least
12 months from receipt of the proceeds.

PRICE RANGE OF COMMON STOCK

Our common stock has been traded in the over-the-counter market and quoted
on the NASDAQ System under the symbol "CHEZ" since April 25, 1991. On March 22,
1993, our stock commenced trading on the NASDAQ National Market System. The
following table sets forth the high and low last reported sale prices of our
common stock for the periods indicated below.

High Low
---------- ----------
Year Ended June 30, 1998
First Quarter ................................... $ 4.25 $ 3.25
Second Quarter .................................. 3.88 2.78
Third Quarter ................................... 4.94 3.25
Fourth Quarter .................................. 4.44 3.38
Year Ended June 30, 1999
First Quarter ................................... 4.00 2.81
Second Quarter .................................. 5.00 4.50
Third Quarter ................................... 7.69 4.63
Fourth Quarter .................................. 7.13 4.69
Year Ended June 30, 2000
First Quarter ................................... 9.13 6.88
Second Quarter .................................. 9.75 7.00
Third Quarter ................................... 13.13 7.75
Fourth Quarter .................................. 10.50 7.94
Year Ending June 30, 2001
First Quarter (through August 24, 2000) ......... 10.63 8.75

The closing price of the common stock on August 24, 2000 was $8.75.

As of August 24, 2000, the number of record holders of our common stock
was 67. We believe that this number does not include an estimated 1,000
beneficial owners of our common stock who currently hold such securities in the
name of depository institutions.

11
<PAGE>

DIVIDEND POLICY

To date, we have not declared or paid any cash dividends on our common
stock. The payment of dividends, if any, in the future is within the discretion
of the Board of Directors and will depend upon our earnings, capital
requirements, financial condition and other relevant factors. We presently
intend to retain all earnings to finance the growth and development of our
business and do not expect to declare or pay any cash dividends in the
foreseeable future. Our agreement with our lending institutions prohibits the
payment of cash dividends, other than dividends on shares of preferred stock
whose issuance is permitted under the loan agreement.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000, on
an actual basis and as adjusted to give effect to the sale and issuance by
Suprema of 1,100,000 shares of common stock in this offering having estimated
net proceeds of $7,482,000. The use of net proceeds is as described in the
section "Use of Proceeds." You should read this together with the consolidated
financial statements and the related notes included in this prospectus.

<TABLE>
<CAPTION>
March 31, 2000
Actual As Adjusted
---------------- ----------------
<S> <C> <C>
Long term debt and capital lease obligations (including current portion) ..... $ 68,536,471 $ 68,536,471
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 2,500,000 shares authorized, none issued
and outstanding ...........................................................
Common Stock, $.01 par value, 10,000,000 shares authorized; 4,625,563
issued and outstanding, 5,725,563 issued and outstanding, as adjusted ..... 46,255 57,255
Additional paid-in capital ................................................... 11,365,507 18,836,507
Retained earnings ............................................................ 14,153,052 14,153,052
Treasury Stock, at cost, 213,370 shares issued ............................... (1,442,620) (1,442,620)
------------ ------------
Stockholders' equity ......................................................... 24,122,194 31,604,194
Total capitalization ..................................................... $108,049,657 $115,531,657
============ ============

</TABLE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table shows summary historical consolidated financial
information of Suprema. The historical financial information as of June 30,
1999 and 1998 and for each of the three years in the period ended June 30, 1999
has been derived from the audited consolidated financial statements and related
notes included in and incorporated by reference in this prospectus. You should
read this information together with those financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which is also included in and incorporated by reference in this
prospectus. Summarized historical consolidated financial information of Suprema
as of June 30, 1997, 1996 and 1995 and for the years ended June 30, 1996 and
1995 has been derived from audited consolidated financial statements which do
not appear in the documents included in or incorporated by reference in this
prospectus.

The historical statements of earnings and balance sheet data as of March
31, 2000 and 1999 and for the nine months ended March 31, 2000 and 1999 have
been derived from unaudited financial statements. The financial statements as
of March 31, 2000 and for the nine month periods ended March 31, 2000 and 1999
are unaudited; however, in the opinion of management all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial statements for the interim periods have been
made. The unaudited results of interim periods are not necessarily indicative
of the results to be obtained in a full fiscal year.

12
<PAGE>

Statement of Earnings Data:

<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------------
2000 1999
------------- -----------
(unaudited)
<S> <C> <C>
Net Sales .................................... $ 202,268 $127,414
Earnings before Extraordinary loss on
Extinguishment of debt ...................... 4,539 2,912
Net Earnings ................................. 4,539 2,912
Earnings Per Share before Extraordinary loss
on Extinguishment of debt (Basic) ........... 1.02 .64
Earnings Per Share before Extraordinary loss
on Extinguishment of debt (Diluted) ......... .88 .61
Net Earnings per Share (Basic) ............... 1.02 .64
Net Earnings per Share (Diluted) ............. .88 .61
Weighted Average Common Shares
Outstanding (Basic) ......................... 4,428 4,542
Weighted Average Common Shares
Outstanding (Diluted) ....................... 5,180 4,788

<CAPTION>
Years Ended June 30,
------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales .................................... $176,281 $108,140 $88,311 $65,104 $52,109
Earnings before Extraordinary loss on
Extinguishment of debt ...................... 4,208 2,417 121 1,409 912
Net Earnings ................................. 4,208 1,406 121 1,409 912
Earnings Per Share before Extraordinary loss
on Extinguishment of debt (Basic) ........... .93 .53 .03 .46 .32
Earnings Per Share before Extraordinary loss
on Extinguishment of debt (Diluted) ......... .86 .51 .02 .40 .32
Net Earnings per Share (Basic) ............... .93 .31 .03 .46 .32
Net Earnings per Share (Diluted) ............. .86 .30 .02 .40 .32
Weighted Average Common Shares
Outstanding (Basic) ......................... 4,537 4,563 4,552 2,768 2,352
Weighted Average Common Shares
Outstanding (Diluted) ....................... 4,884 4,745 5,040 3,195 2,369
</TABLE>

Balance Sheet Data:

<TABLE>
<CAPTION>
March 31,
----------------------
2000 1999
---------- ----------
(unaudited)
<S> <C> <C>
Working Capital ................................. $ 83,890 $52,214
Total Assets .................................... 108,050 73,893
Long Term Debt Obligations (including
capital lease obligation and current
portion) ....................................... 68,536 43,182
Total Liabilities ............................... 83,927 54,635
Warrants subject to mandatory redemption ........ -- --
Stockholders' Equity ............................ 24,122 19,258

<CAPTION>
June 30,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Working Capital ................................. $56,265 $43,873 $32,546 $19,374 $11,209
Total Assets .................................... 81,999 62,081 47,043 41,663 27,212
Long Term Debt Obligations (including
capital lease obligation and current
portion) ....................................... 44,125 35,493 23,772 18,482 13,310
Total Liabilities ............................... 61,488 45,387 31,754 27,577 19,811
Warrants subject to mandatory redemption ........ -- -- 1,171 1,171 --
Stockholders' Equity ............................ 20,511 16,695 15,289 14,086 7,401
</TABLE>

<PAGE>

The statement of earnings data for the fiscal year ended June 30, 1996
gives effect to income of approximately $412,000 related to our payment in full
of a note relating to a licensing agreement.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Overview

We are a manufacturer, shredder, grater, and marketer of gourmet all
natural Italian variety cheeses. Our cheese which we market under the Suprema
Di Avellino brand name, as well as under private label, consists primarily of
domestic mozzarella, ricotta, and provolone cheeses, grated and shredded
parmesan and romano cheeses, and imported parmesan and pecorino romano cheeses,
including "lite" versions of certain of these products containing less fat and
fewer calories. Our cheese products are all natural and do not contain any
preservatives, additives, sweeteners, dehydrated fillers or artificial
flavorings. We sell our products to customers in the food service, food
ingredient, and retail markets.

We maintain three operating facilities. Our East Coast production facility
and corporate headquarters is located in Paterson, New Jersey and is equipped
with state-of-the-art equipment for grating, shredding and packaging our
cheeses. Our West Coast facility is located in Manteca, California and is
equipped with state-of-the-art equipment for cheese production, shredding,
packaging and whey processing. Our Northeast facility located in Ogdensburg,
New York, is a cheese production and whey processing facility.

13
<PAGE>

As part of our continuing effort to manufacture and market superior
products and to expand our current product line, we have recently enhanced our
research and development expertise. We are currently focusing our efforts on
expanding our product lines in two diverse areas: processed mozzarella cheese,
which we expect will have a shelf life of at least six months without the need
for refrigeration yet will have natural mozzarella cheese characteristics, and
whey protein components, which we intend to sell to third-parties for use as
nutrient supplements and ingredients in a variety of products.

We record revenues when our products are shipped to customers. Our
customers generally do not have the right to return products that have been
shipped.

Results of Operations

The following table sets forth, for the periods indicated, the percentage
of revenues represented by certain items reflected in our statements of
earnings.

<TABLE>
<CAPTION>
As A Percentage of Net Sales
-------------------------------------------------------------------
Nine Months Ended
March 31, Years Ended June 30,
------------------------- ---------------------------------------
2000 1999 1999 1998 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales ............................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................................ 83.6 82.9 83.0 82.7 83.0
----- ----- ----- ----- -----
Gross margin ......................................... 16.4 17.1 17.0 17.3 17.0
Selling and shipping expenses ........................ 8.3 8.4 8.0 7.4 10.4
General and administrative expenses .................. 2.2 2.3 2.5 3.4 2.5
Interest expense, net ................................ 2.1 2.5 2.5 2.7 2.5
Other expense ........................................ -- -- -- -- 1.4
----- ----- ----- ----- -----
Earnings before income taxes and extraordinary
item ................................................ 3.8 3.9 4.0 3.8 .2
Income taxes ......................................... 1.6 1.6 1.6 3.8 .2
----- ----- ----- ----- -----
Earnings before extraordinary item ................... 2.2 2.3 2.4 2.2 .1
Extraordinary loss on extinguishment of debt ......... -- -- -- (.9) --
----- ----- ----- ----- -----
Net earnings ......................................... 2.2 2.3 2.4 1.3 .1
===== ===== ===== ===== =====
</TABLE>

Nine Months Ended March 31, 2000 Compared to Nine Months Ended March 31, 1999.

Net sales for the nine month period ended March 31, 2000 were
approximately $202,268,000 as compared to approximately $127,414,000 for the
nine months ended March 31, 1999, an increase of approximately $74,854,000 or
58.7%. This increase reflects an increase in sales volume for food service
products manufactured by us.

Our gross margin increased by approximately $11,490,000, from
approximately $21,757,000 in the nine month period ended March 31, 1999 to
approximately $33,247,000 in the nine month period ended March 31, 2000,
primarily as a result of an increase in sales volume for food service products
manufactured by us. Our gross margin as a percentage of sales decreased from
17.1% in the nine months ended March 31, 1999 to 16.4% for the comparable nine
month period in 2000. The decrease in gross margin as a percentage of sales was
primarily due to the lower average selling price for cheese (as a result of the
lower average CME Block Cheddar Market, the commodity index on which bulk
cheese prices are based) during the three months ended March 31, 2000, and, to
a lesser extent, the shift toward lower margin sales associated with the food
service markets, which was partially offset by the increase in the sales
volume.

Selling and shipping expenses increased by approximately $6,176,000 from
approximately $10,698,000 for the nine month period ended March 31, 1999 to
approximately $16,874,000 for the nine month period ended March 31, 2000. The
increase in selling and shipping expenses was primarily due to increases in
advertising and promotional allowances, commission expenses and shipping
expenses in support of our revenue growth. As a percentage of sales, selling
and shipping expenses decreased slightly from 8.4% for the

14
<PAGE>

nine month period ended March 31, 1999 to 8.3% in the nine month period ended
March 31, 2000. The percentage decrease in selling and shipping expenses was
primarily due to the increase in our revenue growth, which was partially offset
by the increases in advertising and promotional allowances, commission expenses
and shipping expenses in support of our revenue growth.

General and administrative expenses increased by approximately $1,474,000
from approximately $2,944,000 for the nine month period ended March 31, 1999 to
approximately $4,418,000 for the comparable period in fiscal year 2000. The
increase in general and administrative expenses was primarily a result of an
increase in personnel and other administrative expenses associated with our
revenue growth. As a percentage of sales, general and administrative expenses
decreased slightly to 2.2% for the nine month period ended March 31, 2000, from
2.3% for the comparable period in 1999, primarily due to the increase in our
revenue growth, which was partially offset by an increase in personnel and
other administrative expenses.

Net interest expense increased to approximately $4,260,000 for the nine
month period ended March 31, 2000 from approximately $3,179,000 for the nine
month period ended March 31, 1999. The increase was primarily the result of our
expanded borrowing requirements necessary for working capital needs.

The provision for income taxes for the nine month period ended March 31,
2000, increased by approximately $1,132,000 as compared to the nine month
period ended March 31, 1999 primarily as a result of increased taxable income.
The effective tax rate was relatively consistent between the periods.

Net earnings increased by approximately $1,627,000 to approximately
$4,539,000 for the nine month period ended March 31, 2000, from approximately
$2,912,000 for the comparable period ended March 31, 1999, due to the increase
in gross margin primarily as a result of increased sales volume, which was
partially offset by the increases in selling, shipping, general and
administrative and interest expenses.

Year Ended June 30, 1999 Compared to Year Ended June 30, 1998

Revenues for the fiscal year ended June 30, 1999 were approximately
$176,281,000, as compared to approximately $108,140,000 for the fiscal year
ended June 30, 1998, an increase of approximately $68,141,000, or 63.0%. This
increase reflected higher sales volume for food service products manufactured
by us.

Our gross margin increased by approximately $11,184,000, from
approximately $18,745,000 for the year ended June 30, 1998 to approximately
$29,929,000 for the fiscal year ended June 30, 1999, primarily as a result of
the increased sales volume. Our gross margin as a percentage of sales decreased
slightly from 17.3% in the year ended June 30, 1998 to 17.0% in the year ended
June 30, 1999. The decrease in gross margin as a percentage of net sales was
due primarily to the higher costs of raw materials during the fiscal year ended
June 30, 1999, as well as the shift toward lower margin sales associated with
the food service and food ingredient markets, partially offset by the increase
in sales volume.

Selling and shipping expenses increased by approximately $6,021,000 from
approximately $8,025,000 during the fiscal year ended June 30, 1998 to
approximately $14,046,000 during the fiscal year ended June 30, 1999. As a
percentage of sales, selling and shipping expenses increased from 7.4% for the
fiscal year ended June 30, 1998 to 8.0% for the fiscal year ended June 30,
1999. The increase in selling and shipping expenses and the increase of such
expenses as a percentage of net sales was primarily due to increases in
advertising and promotional allowances of $2,996,000, commission expenses and
shipping expenses in support of our revenue growth.

General and administrative expenses increased from approximately
$3,636,000 in fiscal year 1998 to approximately $4,421,000 in fiscal year 1999.
The increase in general and administrative expenses was primarily due to an
increase in personnel and other administrative expenses associated with our
revenue growth. As a percentage of sales, general and administrative expenses
decreased from 3.4% in fiscal year 1998 to 2.5% in fiscal year 1999. The
decrease in general and administrative expenses incurred as a percentage of
sales was primarily due to the increase in our revenue growth, which was
partially offset by an increase in personnel and other administrative expenses
in association with our sales growth.

15
<PAGE>

Net interest expense increased to approximately $4,329,000 for the year
ended June 30, 1999, from approximately $2,917,000 for the year ended June 30,
1998. The increase in interest expense was primarily the result of our expanded
borrowing necessary to finance working capital needs.

The provision for income taxes for the year ended June 30, 1999 increased
by approximately $1,176,000 compared to fiscal year 1998, primarily as a result
of increased taxable income.

We took an extraordinary charge on the extinguishment of the subordinated
debt notes net of tax of approximately $1,011,000 during the quarter ended
December 31, 1997. See Note 7 to the consolidated financial statements. The
charge was the result of prepayment penalties related to the early
extinguishment of the subordinated debt and associated fees.

Net earnings before the extraordinary charge on the extinguishment of the
subordinated debt increased by approximately $1,791,000 to approximately
$4,208,000 in fiscal year 1999 from approximately $2,417,000 in fiscal year
1998 due to the reasons discussed above.

Net earnings increased by approximately $2,802,000 to approximately
$4,208,000 in fiscal year 1999 from approximately $1,406,000 in fiscal year
1998 due to the reasons discussed above.

Year Ended June 30, 1998 Compared to Year Ended June 30, 1997

Revenues for the fiscal year ended June 30, 1998 were approximately
$108,140,000, as compared to approximately $88,311,000 for the fiscal year
ended June 30, 1997, an increase of approximately $19,829,000, or 22.5%. This
increase reflected higher sales volume for food service products manufactured
by us.

Our gross margin increased by approximately $3,697,000, from approximately
$15,048,000 for the year ended June 30, 1997 to approximately $18,745,000 for
the year ended June 30, 1998, primarily as a result of the increased sales
volume. Our gross margin as a percentage of sales increased from 17.0% in the
year ended June 30, 1997 to 17.3% in the year ended June 30, 1998. The increase
in gross margin as a percentage of net sales was due primarily to lower costs
of raw materials during the fiscal year ended June 30, 1998, partially offset
by higher costs associated with our Ogdensburg, New York manufacturing facility
and the shift toward lower margin sales associated with the food service and
food ingredient markets.

Selling and shipping expenses decreased by approximately $1,151,000 from
approximately $9,176,000 during the fiscal year ended June 30, 1997 to
approximately $8,025,000 during the fiscal year ended June 30, 1998. As a
percentage of sales, selling and shipping expenses decreased from 10.4% for the
fiscal year ended June 30, 1997 to 7.4% for the fiscal year ended June 30,
1998. The decrease in selling and shipping expenses was primarily due to the
unusual charge associated with the write-off of the marketing service
agreements in fiscal 1997 of approximately $944,000 as such amounts no longer
had continuing value as a result of declining relevance of these product lines,
as well as a decrease in freight expenses due to our Ogdensburg facility coming
on line. See Note 5 to the consolidated financial statements.

General and administrative expenses increased from approximately
$2,181,000 in fiscal year 1997 to approximately $3,636,000 in fiscal year 1998.
As a percentage of sales, general and administrative expenses increased from
2.5% in fiscal year 1997 to 3.4% in fiscal 1998. The increase in general and
administrative expenses was primarily due to an increase in personnel and other
administrative expenses in association with our sales growth.

Net interest expenses increased to approximately $2,917,000 for the year
ended June 30, 1998 from approximately $2,232,000 for the year ended June 30,
1997. The increase was primarily the result of our expanded borrowing
requirements necessary to finance working capital needs, partially offset by a
decrease in capital lease interest expense due to the sale leaseback
transaction completed during the fourth quarter of fiscal 1997.

Other income changed from a loss of approximately $1,259,000 in fiscal
year 1997 to $0 in fiscal year 1998. The loss in fiscal year 1997 was
attributable to the sale of our assets in association with the sale leaseback
transaction we completed during the fourth quarter of fiscal 1997. See Note 4
to the consolidated financial statements.

16
<PAGE>

The provision for income taxes for the year ended June 30, 1998 increased
by approximately $1,670,000 compared to fiscal year 1997 primarily as a result
of increased taxable income and an increase in the effective tax rate from 40
percent to 42 percent.

We took an extraordinary charge on the extinguishment of the Subordinated
Debt Notes net of tax of approximately $1,011,000 during the quarter ended
December 31, 1997. See Note 7 to the consolidated financial statements. The
charge was the result of prepayment penalties related to the early
extinguishment of the subordinated debt and associated fees.

Net earnings applicable to common stock before the extraordinary charge on
the extinguishment of the subordinated debt increased by approximately
$2,296,000 to approximately $2,417,000 in fiscal year 1998 from approximately
$121,000 in fiscal year 1997 due to the reasons discussed above.

Net earnings applicable to common stock increased by approximately
$1,285,000 to approximately $1,406,000 in fiscal year 1998 from approximately
$121,000 in fiscal year 1997 due to the reasons discussed above.

Liquidity and Capital Resources

As of March 31, 2000, we had working capital of approximately $83,900,000,
as compared with $56,265,000 at June 30, 1999, an increase of approximately
$27,635,000. The increase in working capital was primarily due to the increase
in accounts receivable and inventory levels in support of our increased sales
volume, as well as decreases in accounts payable, income taxes payable and
accrued expenses and other current liabilities, partially offset by decreases
in prepaid expenses and other current assets and other assets.

We previously entered into certain capital lease financing transactions to
purchase equipment. As of March 31, 2000, we had obligations of approximately
$1,858,308 under capital leases.

In March 1996, we purchased our Paterson, New Jersey production facility
which we had not previously leased. On March 29, 1999, we refinanced our
mortgage on our Paterson facility for the principal amount of $929,573. The
seven year note, which bears interest at 7.85% per annum, is being amortized at
a fifteen year rate and requires a balloon payment at the end of year seven of
approximately $501,000. As of March 31, 2000, we had outstanding obligations of
approximately $881,163 under the mortgage on our Paterson, New Jersey facility.

We have a bank revolving credit facility that in March 2000 was amended to
increase the banks' potential commitment to $85,000,000 through February 15,
2004. The rate of interest on amounts borrowed under the credit facility is the
adjusted LIBOR rate plus 175 basis points. The interest rate as of March 31,
2000 was 8.65%. The credit facility is collateralized by substantially all
existing and acquired assets as defined in the credit facility, and is
guaranteed by our subsidiaries, Suprema Specialties West, Inc., and Suprema
Specialties Northeast, Inc. and the pledge of all of the stock of these
subsidiaries. Advances under this credit facility are limited to 85% of
eligible accounts receivable, and 60% of most inventory. The credit facility
agreement contains restrictive covenants, including the maintenance of
consolidated net worth and the maintenance of leverage and fixed charge ratios,
as defined in the agreement, and restriction on dividends to common
stockholders. We believe we are in compliance with these covenants. As of March
31, 2000, our total outstanding debt to our lender was approximately
$55,297,000.

Our management believes that, with an increase in our line of credit
facility to $85,000,000, we have adequate working capital to meet our
reasonably foreseeable cash requirements.

In March 1998, we entered into a Loan and Security Agreement with Albion
Alliance Mezzanine Fund, L.P. and the Equitable Life Assurance Society of the
United States as the lenders, pursuant to which $10,500,000 was loaned to the
Company. The loan is unsecured and is subordinated to the revolving credit
facility discussed above. The loan bears interest at 16.5% per annum. Interest
is payable monthly at the rate of 12% with the balance deferred until February
1, 2003 when it is due in full. The principal amounts of the loan is payable in
three installments of $3,500,000 on each March 1, beginning in the year 2004.
In addition, in

17
<PAGE>

connection with the execution and delivery of the Loan Agreement, we delivered
to the Lender a warrant to purchase 105,000 shares of our Common Stock at
$4.125 per share, the market price at the date of the agreement. The warrant is
exercisable until March 1, 2008.

Net cash used in operating activities in the nine month period ended March
31, 2000 was approximately $22,603,000, as compared to $5,444,000 in the
comparable period of the prior year. The use of cash in operations was
primarily the result of increases in accounts receivable and inventories in
support of our increased revenue growth, and decreases in accounts payable,
income taxes payable and accrued expenses and other current liabilities,
partially offset by an increase in net earnings as adjusted for non-cash
expenses, and decreases in prepaid expenses and other current assets and other
assets. The cash used in operations was financed through cash flow from
financing activities, primarily proceeds from existing credit facilities. Net
cash used in investing activities in the nine month period ended March 31, 2000
was approximately $882,000, as compared to $958,000 in the nine month period
ended March 31, 1999, as a result of continued expenditures for fixed assets,
including capital equipment utilized in our manufacturing facilities in
Manteca, California and Ogdensburg, New York. As a result, as of March 31,
2000, we had cash of approximately $356,570.

Foreign Currency

We are subject to various risks inherent in dependence on foreign sources
of supply, including economic or political instability, shipping delays,
fluctuations in foreign currency exchange rates, custom duties and import
quotas and other trade restrictions, all of which could have a significant
impact on our ability to obtain supplies and deliver finished products on a
timely and competitive basis. We have no material unhedged monetary assets,
liabilities or commitments denominated in currencies other than the United
States dollar. We do not engage in foreign currency hedging transactions.

Effect of New Accounting Pronouncements

In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133, as amended by SFAS 137, standardizes
accounting and reporting for derivative instruments and for hedging activities.
This statement is effective for our 2001 fiscal year. Based on an assessment of
current operations, we do not expect SFAS 133 to be have any significant effect
on our financial statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB 101") which broadly
addresses how companies report revenues in their financial statements. We are
in the process of evaluating the accounting requirements of SAB 101 and do not
expect that this standard will have a material effect, if any, on its financial
position, results of operations, or cash flows.

Quantitative and Qualitative Disclosures About Market Risk

The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments. The
carrying amounts reported for revolving credit and long-term debt approximate
fair value because the interest rates on these instruments are subject to
changes with market interest rates.

18
<PAGE>

BUSINESS

General

We manufacture, shred, grate and market gourmet all natural Italian
variety cheeses under the Suprema Di Avellino(R) brand name, as well as under
private label. Our product lines consist primarily of domestic mozzarella,
ricotta and provolone cheeses, grated and shredded parmesan and romano cheeses,
and imported parmesan and pecorino romano cheeses, including "lite" versions of
certain of these products containing less fat and fewer calories. Our cheeses
do not contain any preservatives, additives, sweeteners, dehydrated fillers or
artificial flavorings. We sell our products to customers in all three groups
within the cheese industry: food service, food ingredient and retail.

We maintain three primary facilities. We manufacture cheeses at our
facilities in Manteca, California and Ogdensburg, New York. At our Paterson,
New Jersey facility, bulk cheese manufactured by us or imported primarily from
Europe and, to a lesser extent, South America, is shredded or grated and then
packaged for distribution.

We package and sell our bulk cheeses to national food service
distributors, which then sell the products to restaurants, hotels, caterers,
and others. We also sell our products to food manufacturers who use our cheese
as an ingredient in prepared foods. We offer many of our products in
shrink-wrapped plastic packaging and in plastic pillow packs which ensure
continued freshness and gourmet quality. In addition to standard sizes, we also
package our products in customized sizes to meet the specific needs of our food
service distributors and food manufacturer customers.

We currently sell our retail product line in selected regional markets,
including New England, the New York Metropolitan area, Maryland, District of
Columbia, Florida, Pennsylvania and the Chicago Metropolitan area. We package
most of our cheeses in convenient resealable tamper-resistant transparent
plastic cups and shakers. We believe that our packaging enhances the gourmet
quality and image of our cheeses. We offer our cheeses in a wide variety of
retail package sizes, ranging from 6 ounces to 3 pounds. We use various
techniques to preserve the freshness of our products, including, controlled
atmosphere, heat sealed packaging and a moisture reduction process which
extends the shelf-life of our grated and shredded cheeses. Our cheeses are sold
in well known chain stores, including D'Agostino's, Food Town, Giant, King
Kullen, Shop-Rite, Stop'N Shop and Super Valu as well as BJ's Wholesale Club.

As part of our continuing effort to manufacture and market superior
products and to expand our current product line, we have increased our research
and development expertise. We are currently focusing our efforts on expanding
our product lines in two diverse areas: processed mozzarella cheese, which we
expect will have a shelf-life of at least six months without the need for
refrigeration yet will have natural mozzarella cheese characteristics, and whey
protein components, which we intend to sell to third-parties for use as
nutrient supplements and ingredients in a variety of products.

The markets for all natural, Italian variety and shredded cheese products
have grown substantially in recent years. According to the most recently
published cheese industry report prepared by 1999 Business Trend Analysts,
sales of natural cheese products by United States manufacturers increased from
$10.2 billion in 1993 to $12.3 billion in 1999, and are projected to reach
approximately $18.5 billion by the year 2008. We believe that natural cheese is
widely regarded as high quality and nutritious. Since our inception, we have
sought to capitalize on opportunities arising from all three groups within the
cheese industry: food service, food ingredient and retail. The food service
group is comprised of restaurants, hotels and caterers and accounts for 44% of
industry sales. The food ingredient group, comprised of food manufacturers,
accounts for 16% of industry sales and the retail group, comprised of grocery
stores, delicatessens and gourmet shops, accounts for 40% of industry sales.

Products and Customers

We principally market our cheeses under the Suprema Di Avellino(R) brand
name, as well as under private label to the three groups within the cheese
industry. Our product lines consist primarily of domestic mozzarella, ricotta
and provolone cheeses, grated and shredded parmesan and romano cheeses,
imported

19
<PAGE>

parmesan and pecorino (sheep's milk) romano cheese products including "lite"
versions of certain of these products which contain less fat and fewer
calories. Our cheeses are all natural and do not contain any preservatives,
additives, sweeteners, dehydrated fillers or artificial flavorings.

We sell our cheeses nationally to food service industry distributors and
food manufacturers, principally in bulk. For the years ended June 30, 1999,
1998 and 1997, and the nine months ended March 31, 2000, sales of cheese
products to food service distributors accounted for approximately 91%, 88%, 83%
and 90%, respectively, of our net sales; sales to food manufacturers accounted
for approximately 6%, 6%, 7% and 8%, respectively, of our net sales.

Our retail products are sold to supermarket chains, grocery stores,
delicatessens and gourmet shops. Our customers include well known chain stores,
such as D'Agostino's, Food Town, Giant, King Kullen, Shop-Rite, Stop'N Shop and
Super Valu as well as BJ's Wholesale Club. For the years ended June 30, 1999,
1998 and 1997, and the nine months ended March 31, 2000, sales of cheese
products to retailers accounted for approximately 3%, 6%, 10% and 2%,
respectively, of our net sales.

We generally sell our cheeses upon receipt of customer purchase orders and
fill orders within approximately seven days. Substantially all of our products
are delivered to customers by independent trucking companies. We do not have
long term purchase agreements with our customers. For the nine months ended
March 31, 2000, A&J Foods, Inc., Noble J.G. Cheese Company and Tricon
Commodities Int'l., Inc. accounted for approximately 15%, 14% and 11%,
respectively, of our revenues. For the fiscal years ended June 30, 1999 and
June 30, 1998, A&J Foods, Inc. accounted for 18% of our revenues for each year.
For the fiscal year ended June 30, 1997, A&J Foods, Inc. and Lisanti Foods of
New Jersey accounted for 14% and 10%, respectively, of our net sales.

New Product Developments

Processed Mozzarella Cheese. In May 1999, Cornell University, one of the
country's leading dairy agricultural centers, granted us an exclusive 17 year
license on their U.S. patent for processed mozzarella cheese. Together with
Cornell University, we are developing a processed mozzarella cheese for
commercial distribution that we expect will have a shelf-life of at least six
months without the need for refrigeration, yet will have the natural mozzarella
cheese characteristics of melting, stretching and browning. We believe the
prolonged shelf life of our processed cheese will allow us to offer pizza
chains, fast food restaurants and food manufacturers a consistent
"always-ready" cheese without the concern of spoilage typically associated with
a non-processed mozzarella. This should provide the customer with better
inventory control and flexibility.

We believe that a prolonged shelf-life mozzarella cheese will provide us
with numerous opportunities in the export cheese market. Currently,
non-processed cheeses sold for export are frozen and then shipped overseas.
Because of our product's anticipated extended shelf life and lack of need for
refrigeration or freezing, we expect that our processed cheese will address the
concerns of spoiling and thawing, while maintaining the characteristics of
natural mozzarella cheese.

According to the 1999 Business Trend Analysts report, the size of the
processed cheese market is approximately $7 billion and is projected to
increase to approximately $9.5 billion by 2008. This market consists primarily
of processed American cheese. We expect to become one of the first cheese
companies to offer a processed mozzarella cheese that has the characteristics
of a natural mozzarella cheese. Based upon our current research and development
efforts, we expect to begin commercial production of our processed mozzarella
cheese by the end of 2001. We have applied for, and received "Notices of
Allowance" for two registered trademarks with the United States Trademark and
Patent Office, "Chez" and "Pizza Chez" for use with our proposed new product.

Whey Protein Components. In April 2000, we appointed Professor J.L.
Maubois as a consultant to support our research and development department's
efforts in the field of microfiltration of milk. Professor

20
<PAGE>

Maubois is currently the Director of Research and Development at the National
Institute of Agricultural Research located in Rennes, France. Professor Maubois
is considered a world leader in the application of membrane separation
technology of dairy streams and holds many dairy patents related to membrane
technology. Presently, Professor Maubois and Dr. Reyad Mahmoud, our Director of
Research and Development, are pursuing the application of membrane separation
technology to separate the non-processed raw milk and whey streams in order to
selectively capture components for use in bioactive, nutritional and
pharmaceutical products. We believe these components have many applications and
can be used in various products such as baby formulas, nutrient supplements,
sport beverages and others.

Production

We manufacture all natural domestic cheeses at our West Coast facility in
Manteca, California and our Northeast facility in Ogdensburg, New York. At our
Manteca facility, raw milk is purchased from milk cooperatives and, through our
state-of-the-art equipment and our proprietary techniques, produced into
cheese. The Manteca facility manufactures the full line of our products,
including mozzarella, provolone, ricotta, domestic parmesan and domestic
romano. Our Manteca facility has shredding capabilities as well as whey
processing equipment. Our Ogdensburg facility manufactures mozzarella and
provolone cheeses and also has whey processing equipment. These facilities
serve as distribution points for various geographic markets throughout the
United States. Both facilities are operating at approximately 80% of production
capacity.

We also maintain an East Coast facility in Paterson, New Jersey which is
equipped with state-of-the-art equipment for grating, shredding and packaging
our products. At this facility, bulk cheese from our two manufacturing
facilities, as well as imported bulk cheese, is shredded or grated, packaged
and distributed. We are operating this facility at approximately 63% of
production capacity. Our Paterson facility also serves as our corporate
headquarters.

We employ a Director of Operations at each facility who makes
pre-production inspections and monitors critical manufacturing and processing
functions. We also employ a Director of Quality Control who oversees the
Quality Control Departments at each of our locations. Our Quality Control
Departments are responsible for testing raw ingredients to ensure that they are
free of contaminants, inspecting production equipment and testing finished
products to ensure both quality and compliance with customer specifications. In
addition, we regularly send random samples of each product to outside
laboratories, which perform routine physical, chemical and micro-biological
tests.

Marketing and Advertising

Our Vice President of Sales is responsible for managing and coordinating
our sales efforts and supervising our regional sales representatives and
brokers. We employ regional sales representatives to market our products as
well as a national account representative who is responsible for sales to our
customers who have national operations. Senior management is responsible for
planning and coordinating our marketing programs and maintains a hands-on
relationship with select key accounts. In addition, we engage independent
commission food brokers throughout the United States for marketing to our
customers. To achieve greater market penetration, we continue to strengthen and
expand our sales force and food broker network.

We believe that product recognition by customers, consumers and food
brokers is an important factor in the marketing of our products. We market our
products and brand name through the use of promotional materials, including
full color product brochures, circulars, free standing product displays,
newspaper inserts and various co-op advertisement programs. Our Vice President
of Market Development is responsible for designing product literature and
brochures, as well as identifying and assessing potential new geographic
markets.

Suppliers

Our principal ingredient is raw milk. We believe that there are numerous
alternative sources of supply available to us, including for raw milk which is
currently provided by our largest supplier. For the fiscal years ended June 30,
1999, 1998 and 1997 and the nine months ended March 31, 2000, our largest
supplier, a milk cooperative, accounted for approximately 21%, 25%, 31% and
15%, respectively, of all of our purchases. We do not usually maintain
contracts with our suppliers.

21
<PAGE>

We import certain of our bulk cheeses directly from Europe and, to a
lesser extent, South America. We purchase cheese supplies in large quantities
in order to obtain volume discounts and place orders for imported bulk cheese
approximately four to six months in advance of anticipated production
requirements. For the fiscal years ended June 30, 1999, 1998 and 1997 and the
nine months ended March 31, 2000, approximately 18%, 5%, 7% and 21%,
respectively, of our supply requirements were imported.

Trademarks

In September, 1992, we registered the name Suprema Di Avellino(R) with the
United States Patent and Trademark Office. We have received a notice of
allowance from the United States Patent Office with respect to the trademarks
"Chez" and "Pizza Chez".

Government Regulation

Advertising relating to our products is subject to review of the Federal
Trade Commission and state agencies to monitor and prevent unfair or deceptive
trade practices.

Competition

We face significant competition in the marketing and sales of our
products. Our wholesale products compete on the basis of price, quality and
service with products of companies such as Dairy Farmers of America, Beatrice
Cheese Company and Stella Foods. Our retail products compete for brand
recognition and shelf space with brands which have achieved significant
consumer loyalty, such as Kraft, Sorrento, Sargento and Polly-O, as well as
private label. We also compete with importers of foreign cheese and companies
manufacturing substitute cheese products. Many of these products are marketed
by companies with significantly greater financial and other resources which
allows them to procure supermarket shelf space and to implement extensive
advertising and promotional programs.

We believe the principal competitive factors in the marketing of cheeses
are price, quality, freshness, brand recognition and packaging convenience.
Because our current products are positioned as all natural and gourmet, we
generally price them at a premium to certain competitive products.

We are subject to evolving consumer preferences, nutritional and
health-related concerns. We believe that the absence of preservatives,
additives, sweeteners, dehydrated fillers or artificial flavorings increases
the appeal of our products to consumers. In addition, in response to certain
consumer concerns we have certain all natural "lite" cheese products which
contain less fat and fewer calories. We expect to see increased competition
from other companies whose products or marketing strategies address these
consumer concerns.

Employees

As of August 23, 2000, we had 270 full-time employees of which 16 are
employed in executive capacities and management positions, 22 are engaged in
sales and marketing and administrative capacities and 232 are engaged in
production and operations. Approximately 45% of our total workforce is
represented by a union. We entered into a new contract with our union employees
in Manteca, California which expires in December 2004. We are currently in
negotiations with our union employees at our Ogdensburg, New York facility to
formalize their first contract. As of August 23, 2000, we have not yet reached
an agreement with the union representing these employees. We consider relations
with our employees to be satisfactory.

22
<PAGE>

DESCRIPTION OF SECURITIES

Suprema is authorized to issue 10,000,000 shares of common stock, par
value $.01 per share and 2,500,000 shares of preferred stock, par value $.01
per share. As of August 23, 2000, there were 4,655,563 shares of common stock
and no shares of preferred stock issued and outstanding.

Common Stock

The holders of common stock are entitled to one vote for each share held
of record on all matters to be voted on by stockholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the directors. The holders of common stock are entitled to receive
dividends when, as and if declared by the Board of Directors in its discretion
out of funds legally available therefor. In the event of the liquidation,
dissolution or winding up of Suprema, the holders of common stock are entitled
to ratably share the assets of Suprema, if any, legally available for
distribution to them after payment of the debts and liabilities of Suprema and
after provision has been made for each class of stock, if any, having
preference over the common stock. Holders of shares of common stock have no
conversion, preemptive or other subscription rights, and there are no
redemption or sinking fund provisions applicable to the common stock. All of
the outstanding shares of common stock are, and the shares of common stock
offered hereby will be, when issued upon payment of the consideration set forth
in this prospectus, fully paid and non-assessable.

Preferred Stock

We are authorized to issue 2,500,000 shares of preferred stock. The
preferred stock can be issued from time to time in one or more series which may
rank senior to the common stock with respect to the payment of dividends and in
the event of liquidation, dissolution or winding-up of our company. Our Board
of Directors has the power, without stockholder approval, to issue shares of
one or more series of preferred stock, at any time, and for such consideration
and with such relative rights, privileges, preferences and other terms as the
Board may determine, including terms relative relating to dividend and
redemption rates, liquidation preferences and conversion or other rights. The
rights and terms of any new series of preferred stock could adversely affect
the voting power or other rights of the holders of the common stock or could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of our company.

Our Board has previously designated a class of 500,000 shares of Series A
redeemable convertible preferred stock whose terms provide that it may be
converted at the rate of one share of common stock for each share of preferred
stock at any time prior to redemption at a conversion price of $3.00 per share.
The preferred stock is redeemable at our option at any time after the first
anniversary of issuance, provided that the daily average of the high and low
price of our common stock equals or exceeds $5.00 per share for ten consecutive
days. The redemption price would be $3.00 per share, plus accrued and unpaid
dividends. Quarterly dividends are payable in cash at an annual dividend rate
of 10% and are cumulative. The preferred stock has a preference on liquidation
of $3.00 per share plus accumulated but unpaid dividends. The preferred stock
is non-voting stock, unless we fail to pay dividends on the preferred stock for
four consecutive quarters, in which case the holders of the preferred stock
would be entitled to vote as a class to elect an additional director to the
Board.

Warrants

In connection with a prior bank loan, we issued warrants to purchase
105,000 shares of common stock, exercisable until March 1, 2008, at an exercise
price of $4.125. The shares issuable upon exercise of the warrants are subject
to piggyback registration rights.

In connection with our 1996 public offering, we issued the underwriter
warrants to purchase 150,000 shares of common stock, exercisable until June 20,
2001, at an exercise price of $6.875.

We have agreed to sell to the representatives and their designees warrants
to purchase up to 120,000 shares of common stock at an exercise price of
approximately 140% of the public offering price per share. The representatives'
warrants may not be sold, transferred, assigned or hypothecated for two years
from

23
<PAGE>

the date of this prospectus, except to officers and partners of the
underwriters and members of the selling group, and are exercisable during the
four-year period commencing one year from the date of this prospectus. During
the warrant exercise term, the holders of the representatives' warrants are
given, at nominal cost, the opportunity to profit from a rise in the market
price of our common stock. To the extent that the representatives' warrants are
exercised, dilution of the interest of our stockholders will occur. Further,
the terms on which we will be able to obtain additional equity capital may be
adversely affected as the holders of the representatives' warrants can be
expected to exercise them at any time when we would, in all likelihood, be able
to obtain any needed capital on terms more favorable to us than those provided
in the representatives' warrants. Any profit realized on the sale of the
representatives' warrants or the underlying shares of common stock may be
deemed additional underwriting compensation. Subject to certain limitations and
exclusions, we have agreed, at the request of the holders of a majority of the
representatives' warrants, at our expense, to register the representatives'
warrants and the shares of common stock issuable upon exercise of the
representatives' warrants under the Securities Act on one occasion during the
warrant exercise term and to include the representatives' warrants and such
underlying shares in any appropriate registration statement which is filed by
us during the four-year period commencing one year from the date of this
prospectus.

Registration Rights

Holders of 255,000 shares of our common stock issuable upon the exercise
of outstanding warrants are entitled to certain rights with respect to the
registration of these shares under the Securities Act. The holders of warrants
exercisable to purchase 105,000 shares of common stock have agreed to waive
their registration rights in connection with this offering. The balance of
150,000 shares issuable upon exercise of warrants are being registered in this
offering and made a part of this prospectus but are not included in the
underwritten offering.

If we register any of our common stock, either for our own account or for
the account of other security holders, the holders are entitled to notice of
the registration and to include their shares of common stock in the
registration.

In all cases, a holder's right to include shares in a registration is
subject to the ability of the underwriters to limit the number of shares
included in the offering. All fees, costs and expenses of all of these
registrations will be paid by us, and all selling expenses will be paid by the
holders of the securities being registered. Sales of these shares could have an
adverse effect on the trading price of our common stock.

Listing

Our common stock is quoted on the Nasdaq National Market under the trading
symbol "CHEZ."

Transfer Agent

The transfer agent for our common stock is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004.

24
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market
after this offering, or the perception that such sales may occur, could
materially and adversely affect prevailing market prices of our common stock
and our ability to raise equity capital in the future.

After this offering, we will have 5,755,563 shares of our common stock
issued and outstanding, including 213,370 treasury shares. A total of 4,699,272
of our outstanding shares, including the shares sold in this offering, will be
freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by our affiliates, as that
term is defined in Rule 144, may generally only be sold in compliance with the
limitations of Rule 144, which is summarized below.

The remaining 842,921 of our outstanding shares, representing 14.6% of our
total shares of common stock to be issued and outstanding after this offering,
are restricted shares under the terms of the Securities Act. Restricted shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or other applicable exemption
promulgated under the Securities Act. Giving effect to the lock-up agreements
described below, 837,921 of these shares are restricted from sale for six
months from the date of this prospectus. However, the managing underwriter can
waive this restriction and allow these stockholders to sell their shares at any
time.

In addition, up to 150,000 shares issuable upon exercise of warrants held
by certain selling stockholders, which shares are covered by this prospectus
but are not included in the underwritten offering, are subject to the lock-up
agreements with the managing underwriter as described below. However, the
managing underwriter can waive the restriction of the lock-up agreements and
allow these selling stockholders to sell the shares at any time.

We have issued options to purchase 1,326,666 shares of common stock under
our employee stock option plans. A significant number of the shares underlying
these options have previously been registered and, subject to the applicable
vesting requirements, upon exercise of these options the underlying shares may
be resold into the public market. In addition to the 150,000 warrant shares
described above, we also have reserved 105,000 shares for issuance pursuant to
warrants issued in connection with a prior financing and we have committed to
issue warrants for 120,000 shares to the designees of the representatives of
the underwriters in this offering. We have granted registration rights to the
holders of these warrants for the shares of common stock issuable upon exercise
of these warrants.

Lock-up Agreements

The selling stockholders have signed lock-up agreements with our managing
underwriter under which they have agreed not to make any public sale or
distribute any shares of our common stock or any securities convertible into
our common stock, for a period of six months after the effective date of this
registration statement without the prior written consent of the managing
underwriter.

Rule 144

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:

o 1% of the number of shares of our common stock then outstanding; or

o the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar week preceding the filing of
a notice on Form 144 with the SEC concerning that sale.

Sales under Rule 144 are also subject to specific manner-of-sale
provisions, notice requirements and to the availability of current public
information about us.

Under Rule 144(k) as currently in effect, a person who is not one of our
affiliates at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than one of our
affiliates, is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144. Therefore, unless otherwise restricted, Rule 144(k) shares may be sold
immediately upon completion of this offering.

25
<PAGE>

SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION

All of the shares of common stock to be sold by the selling stockholders
are included in this underwritten offering except for an aggregate of 150,000
shares underlying warrants held by James Carrazza, Richard Woltman and Kaye
Woltman. The table set forth below provides the following information as to
each selling stockholder:

o the number of shares of common stock beneficially owned as of August
10, 2000,

o the number of shares to be sold by such selling stockholders, and

o the number of shares (as percentage of the class) to be beneficially
owned by such selling stockholders after the completion of the
offering.

The selling stockholders whose shares are included in the underwritten
offering are our Chairman of the Board, President and Chief Executive Officer
and our Executive Vice President and Director. The remaining selling
stockholders, whose shares are not included in the underwritten offering, do
not and have not held any position or office with Suprema or have had any other
material relationship with Suprema during the last three years. However, James
Carrazza is employed by Hobbs Melville Securities Corp., the managing
underwriter of this offering.

<TABLE>
<CAPTION>
Shares of
Beneficial common stock Remaining Percent
Selling Stockholders Ownership To Be Sold After Offering of Class
------------------------- ------------ -------------- ---------------- ---------
<S> <C> <C> <C> <C>
Mark Cocchiola .......... 995,636 50,000 945,636 15.4%
Paul Lauriero ........... 675,619 50,000 625,619 10.2
James Carrazza .......... 87,000 75,000 12,000 *
Richard Woltman ......... 37,500 37,500 0 0
Kaye Woltman ............ 37,500 37,500 0 0
</TABLE>

------------
* Less than 1%

Selling Stockholders Included in the Underwritten Offering

If the underwriters exercise their over-allotment option in full, the
number of shares of common stock sold by each of Mark Cocchiola and Paul
Lauriero will increase to 100,000 and the number of shares beneficially owned
and percent of class held after the offering will be 895,636 or 14.4% for Mr.
Cocchiola and 575,619 or 9.3% for Mr. Lauriero.

The shares beneficially owned by Mark Cocchiola include options to
purchase 375,000 shares of common stock owned by Mr. Cocchiola, options to
purchase 3,334 shares owned by Mr. Cocchiola's wife, 1,000 shares held of
record by Mr. Cocchiola's wife and 2,000 shares held of record by Mr.
Cocchiola's children.

The shares beneficially owned by Mr. Lauriero include options to purchase
355,000 shares of common stock owned by Mr. Lauriero, 22,539 shares held of
record by Mr. Lauriero's wife and 45,079 shares held of record by Mr.
Lauriero's children.

Selling Stockholders Not Included in the Underwritten Offering -- Plan of
Distribution

We have agreed to register the public offering of up to 150,000 shares
issuable upon exercise of warrants held by certain selling stockholders and to
pay all expenses in connection with registering these shares. These shares may
be offered and sold by the selling stockholders pursuant to this prospectus but
they are not part of this underwritten offering. None of these shares may be
sold, upon exercise of the warrants, prior to six months from the date of this
prospectus without the prior consent of the managing underwriter. We will not
receive any of the proceeds from the sale of these shares.

26
<PAGE>

The shares to be sold by the selling stockholders not included in this
underwritten offering may be offered and sold from time to time as market
conditions permit in the over-the-counter market, or otherwise, at prices and
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions. These shares may be sold, without limitation, by: a
block trade in which a broker or dealer, so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; purchases by a broker or dealer as principal and
resale by that broker or dealer for its account pursuant to this prospectus;
ordinary brokerage transactions and transactions in which the broker solicits
purchases; and face-to-face transactions between sellers and purchasers without
a broker/dealer. In effecting sales, brokers or dealers engaged by these
selling stockholders may arrange for other brokers or dealers to participate.
These brokers or dealers may receive commissions or discounts from these
selling stockholders in amounts to be negotiated. These brokers or dealers and
any other brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with these sales.

UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and Suprema and the selling stockholders have agreed to sell to such
underwriter, the number of shares set forth opposite the name of such
underwriter.

Number of
Name Shares
------------------------------------------------------ ------------
Hobbs Melville Securities Corp ....................... 500,000
Auerbach, Pollak & Richardson, Inc. .................. 250,000
Girard Securities, Inc. .............................. 75,000
Mercer Partners, Inc. ................................ 75,000
Oberweis.net ......................................... 75,000
Paulson Investment Company Inc. ...................... 75,000
Westminster Securities Corporation ................... 75,000
Westport Resources Investment Services, Inc. ......... 75,000
-------
Total .............................................. 1,200,000
=========

The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Hobbs Melville Securities Corp. and Auerbach
Pollak & Richardson, Inc. are acting as representatives, propose to offer some
of the shares directly to the public at the public offering price set forth on
the cover page of this prospectus and some of the shares to certain dealers at
the public offering price less a concession not in excess of $.40 per share.
The underwriters may allow, and such dealers may reallow, a concession not in
excess of $.10 per share on sales to certain other dealers. If all of the
shares are not sold at the initial offering price, the representatives may
change the public offering price and the other selling terms.

The underwriters have an option, exercisable for 30 days from the date of
this prospectus, to purchase up to 180,000 additional shares of common stock at
the public offering price less the underwriting discount, of which 100,000 may
be purchased from the selling stockholders and 80,000 may be purchased from us.
The underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, the underwriters will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to each such underwriter's initial purchase commitment.

We have agreed to sell to the representatives and their designees, for an
aggregate of $120, warrants to purchase up to 120,000 shares of common stock at
an exercise price of approximately 140% of the public offering price per share.
The representatives' warrants may not be sold, transferred, assigned or
hypothecated for two years from the date of this prospectus, except to officers
and partners of the underwriters and

27
<PAGE>

members of the selling group, and are exercisable during the four-year period
commencing one year from the date of this prospectus. During the warrant
exercise term, the holders of the representative's warrants are given, at
nominal cost, the opportunity to profit from a rise in the market price of our
common stock. To the extent that the representatives' warrants are exercised,
dilution of the interest of our stockholders will occur. Further, the terms on
which we will be able to obtain additional equity capital may be adversely
affected since the holders of the representatives' warrants can be expected to
exercise them at any time when we would, in all likelihood, be able to obtain
any needed capital on terms more favorable to us than those provided in the
representatives' warrants. Any profit realized on the sale of the
representatives' warrants or the underlying shares of common stock may be
deemed additional underwriting compensation. Subject to certain limitations and
exclusions, we have agreed, at the request of the holders of a majority of the
representatives' warrants, at our expense to register the representatives'
warrants and the shares of common stock issuable upon exercise of the
representatives' warrants under the Securities Act on one occasion during the
warrant exercise term and to include the representatives' warrants and such
underlying shares in any appropriate registration statement which is filed by
us during the four-year period commencing one year from the date of this
prospectus.

We have agreed to pay to the representatives a non-accountable expense
allowance equal to 3% of the aggregate public offering price of the shares of
common stock as sold by us and the selling stockholders in the offering,
$25,000 of which has previously been paid as a retainer.

We have agreed not to sell or otherwise dispose of any shares of common
stock for a period of nine months from the date of this prospectus without the
consent of Hobbs Mellville Securities Corp. except for (i) sales to the
underwriters pursuant to this offering, (ii) sales upon exercise of options or
warrants outstanding on the date of this prospectus, (iii) sales of common
stock upon exercise of options granted or pursuant to other stock-based awards
granted subsequent to the date of this prospectus pursuant to our stock option,
stock incentive or other employee benefit plan, (iv) issuances of common stock
in connection with an acquisition by us, (v) issuances of common stock upon
exercise by a lending institution of options or other convertible securities
issued to it by us in connection with a bona fide loan, and (vi) issuances
pursuant to our Share Purchase Rights Plan in existence on the date of this
prospectus.

The selling stockholders have agreed that, for a period of six months from
the date of this prospectus, they will not, without the prior written consent
of Hobbs Melville Securities Corp., dispose of or hedge any shares of common
stock of Suprema or any securities convertible into or exchangeable for common
stock. Hobbs Melville Securities Corp., in its sole discretion, may release any
of the securities subject to these lock-up agreements at any time without
notice. The common stock is quoted on the Nasdaq National Market under the
symbol "CHEZ."

In connection with the offering, the representatives, on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made for the purpose of preventing or retarding a decline in the market price
of the common stock while the offering is in progress.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when the
representatives, in covering syndicate short positions or making stabilizing
purchases, repurchase shares originally sold by that syndicate member.

Any of these activities may cause the price of the common stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on the Nasdaq
National Market or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.

In addition, in connection with this offering, the underwriters (and
selling group members) may engage in passive market making transactions in the
common stock on the Nasdaq National Market, prior to the pricing and completion
of the offering. Passive market making consists of displaying bids on the
Nasdaq National

28
<PAGE>

Market no higher than the bid prices of independent market makers and making
purchases at prices no higher than those independent bids and effected in
response to order flow. Net purchases by a passive market maker on each day are
limited to a specified percentage of the passive market maker's average daily
trading volume in the common stock during a specified period and must be
discontinued when such limit is reached. Passive market making may cause the
price of the common stock to be higher than the price that otherwise would
exist in the open market in the absence of such transactions. If passive market
making is commenced, it may be discontinued at any time.

Suprema and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the underwriters may be required
to make in respect of any of those liabilities.

Hobbs Melville Securities Corp. was organized and registered as a
broker-dealer with the SEC and the National Association of Securities Dealers,
Inc. on October 4, 1993. Although, since its organization, it has engaged in
the investment banking business and its principals have had significant
experience in the underwriting of securities in their capacities with other
broker-dealers, this offering will constitute one of the first public offerings
for which Hobbs Melville Securities Corp. has acted as managing underwriter.

LEGAL MATTERS

The legality of the common stock offered hereby has been passed upon for
Suprema by Blank Rome Tenzer Greenblatt LLP, New York, New York. Certain legal
matters will be passed upon for the underwriters by Stroock & Stroock & Lavan
LLP, New York, New York.

EXPERTS

The financial statements and schedules included and 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 reports appearing elsewhere herein and incorporated herein by reference,
and are included and incorporated herein in reliance upon such reports given
upon the authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC.

Our SEC filings are available to the public over the Internet at the SEC's
website at www.sec.gov. You may also read and copy any document we file with
the SEC at its Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can also obtain copies of the documents at prescribed rates by
writing to the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of its Public Reference Room.

INCORPORATION OF INFORMATION BY REFERENCE

The SEC allows us to "incorporate by reference" into this prospectus the
information we have previously filed with it. The information incorporated by
reference is an important part of this prospectus. We incorporate by reference
the documents listed below:

o Our Annual Report on Form 10-K for the fiscal year ended June 30,
1999;

o Our Quarterly Reports on Form 10-Q for the three month periods ended
September 30, 1999, December 31, 1999 and March 31, 2000; and

o Our Proxy Statement filed October 22, 1999.

You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:

Mark Cocchiola, President
Suprema Specialties, Inc.
510 East 35th Street
Paterson, New Jersey 07543
(973) 684-2900

The information in the documents incorporated by reference shall be deemed
superseded to the extent that more current information is included in this
prospectus or any more recent document incorporated herein.

29
<PAGE>

Index to Consolidated Financial Statements

<TABLE>
<S> <C>
Report of Independent Certified Public Accountants ....................................... F-2
Consolidated Balance Sheets -- June 30, 1999 and 1998 and March 31, 2000 (unaudited) ..... F-3
Consolidated Statements of Earnings For the Years Ended June 30, 1999, 1998 and 1997 and
nine months ended March 31, 2000 and 1999 (unaudited) ................................... F-4
Consolidated Statements of Stockholders' Equity For the Years Ended June 30, 1999, 1998
and 1997 and nine months ended March 31, 2000 (unaudited) ............................... F-5
Consolidated Statements of Cash Flows For the Years Ended June 30, 1999, 1998 and 1997 and
nine months ended March 31, 2000 and 1999 (unaudited) ................................... F-6
Notes to Consolidated Financial Statements ....................................... F-7 to F-19
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Suprema Specialties, Inc.
Paterson, New Jersey

We have audited the accompanying consolidated balance sheets of Suprema
Specialties, Inc. and Subsidiaries as of June 30, 1999 and 1998, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the three years in the period ended June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Suprema
Specialties, Inc. and Subsidiaries as of June 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1999 in conformity with generally accepted accounting
principles.

BDO Seidman, LLP

Woodbridge, New Jersey

August 9, 1999

F-2
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
Years Ended June 30, March 31,
------------------------------- ---------------
1999 1998 2000
-------------- -------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Assets
Current:
Cash............................................................... $ 358,214 $ 489,890 $ 356,570
Accounts receivable, net of allowances of $570,290 and
$470,290 at June 30, 1999 and 1998, respectively and
$570,290 at March 31, 2000....................................... 36,007,542 23,239,810 58,395,077
Inventories ....................................................... 35,918,720 28,511,930 39,287,588
Prepaid expenses and other current assets ......................... 596,023 688,117 540,470
Income taxes receivable ........................................... -- 235,348 --
Deferred income taxes ............................................. 228,000 188,000 228,000
----------- ----------- ------------
Total current assets ............................................ 73,108,499 53,353,095 98,807,705
Property, plant and equipment, net.................................. 7,085,948 6,999,695 7,521,420
Other assets........................................................ 1,804,528 1,728,616 1,720,532
----------- ----------- ------------
$81,998,975 $62,081,406 $108,049,657
=========== =========== ============
Liabilities and Stockholders' Equity
Current:
Accounts payable................................................... $12,123,099 $ 7,469,422 $ 11,371,240
Current portion of capital leases ................................. 550,761 500,964 594,388
Mortgage payable -- current........................................ 49,220 43,457 52,536
Income taxes payable. ............................................. 1,710,000 -- 957,261
Accrued expenses and other current liabilities..................... 2,409,839 1,467,034 1,942,491
----------- ----------- ------------
Total current liabilities........................................ 16,842,919 9,480,877 14,917,916
Deferred income taxes .............................................. 1,120,000 956,186 1,120,000
Revolving credit loan .............................................. 30,441,599 21,262,000 55,297,000
Subordinated debt .................................................. 10,500,000 10,500,000 10,500,000
Long-term capital leases............................................ 1,715,327 2,266,090 1,263,920
Mortgage payable. .................................................. 868,468 921,413 828,627
----------- ----------- ------------
61,488,313 45,386,566 83,927,463
=========== =========== ============
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value, 2,500,000 authorized, none
issued and outstanding
Series A Redeemable Convertible Preferred Stock, 500,000
shares authorized, none issued and outstanding
Common stock, $.01 par value, 10,000,000 shares authorized,
4,598,897 and 4,562,800 shares issued and outstanding at
June 30, 1999 and 1998, respectively and 4,625,563 at
March 31, 2000................................................... 45,988 45,628 46,255
Additional paid-in capital......................................... 11,247,154 11,243,347 11,365,507
Retained earnings ................................................. 9,613,890 5,405,865 14,153,052
Treasury stock at cost, 78,370 and 0 shares at June 30, 1999
and 1998, respectively, and 213,370 at March 31, 2000 ........... (396,370) -- (1,442,620)
----------- ----------- ------------
Total stockholders' equity ...................................... 20,510,662 16,694,840 24,122,194
----------- ----------- ------------
$81,998,975 $62,081,406 $108,049,657
=========== =========== ============
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
Nine Months Ended
Years Ended June 30, March 31,
------------------------------------------------ --------------------------------
1999 1998 1997 2000 1999
--------------- --------------- -------------- --------------- ---------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ............................ $176,281,035 $108,140,007 $ 88,311,454 $202,268,133 $127,414,216
Cost of sales ........................ 146,351,545 89,395,062 73,263,129 169,021,509 105,657,190
------------ ------------ ------------ ------------ ------------
Gross margin......................... 29,929,490 18,744,945 15,048,325 33,246,624 21,757,026
------------ ------------ ------------ ------------ ------------
Operating Expenses:
Selling and shipping expenses ....... 14,045,503 8,024,823 9,175,567 16,873,915 10,698,345
General and administrative
expenses .......................... 4,421,124 3,636,090 2,180,576 4,418,566 2,944,088
------------ ------------ ------------ ------------ ------------
18,466,627 11,660,913 11,356,143 21,292,481 13,642,433
------------ ------------ ------------ ------------ ------------
Income from operations................ 11,462,863 7,084,032 3,692,182 11,954,143 8,114,593
Interest Expense..................... (4,328,838) (2,916,992) (2,231,820) (4,259,981) (3,179,169)
Other ............................... -- -- (1,259,081) -- --
------------ ------------ ------------ ------------ ------------
(4,328,838) (2,916,992) (3,490,901) (4,259,981) (3,179,169)
Earnings before income taxes
and extraordinary item ............ 7,134,025 4,167,040 201,281 7,694,162 4,935,424
Incomes taxes ....................... 2,926,000 1,750,157 80,500 3,155,000 2,023,000
------------ ------------ ------------ ------------ ------------
Earnings before extraordinary
item............................... 4,208,025 2,416,883 120,781 4,539,162 2,912,424
------------ ------------ ------------ ------------ ------------
Extraordinary item -- loss on
extinguishment of debt (net
of income tax of $762,000) ........ -- 1,011,001 -- -- --
Net earnings......................... $ 4,208,025 $ 1,405,882 $ 120,781 $ 4,539,162 $ 2,912,424
Basic earnings per share before
extraordinary items ............... $ .93 $ .53 $ .03 $ 1.02 $ .64
------------ ------------ ------------ ------------ ------------
Basic earnings per share related
to extraordinary item.............. -- (.22) -- -- --
------------ ------------ ------------ ------------ ------------
Basic earnings per share............. $ .93 $ .31 $ .03 $ 1.02 $ .64
------------ ------------ ------------ ------------ ------------
Diluted earnings per share
before extraordinary item.......... $ .86 $ .51 $ .02 $ .88 $ .61
------------ ------------ ------------ ------------ ------------
Diluted earnings per share
related to extraordinary item. -- (.21) -- -- --
------------ ------------ ------------ ------------ ------------
Diluted earnings per share........... $ .86 $ .30 $ .02 $ .88 $ .61
------------ ------------ ------------ ------------ ------------
Basic weighted average shares
outstanding ....................... 4,536,605 4,562,800 4,552,146 4,428,403 4,541,783
Diluted weighted average shares
outstanding ....................... 4,883,685 4,744,919 5,039,995 5,179,986 4,788,054
------------ ------------ ------------ ------------ ------------

</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock Treasury Stock Additional
------------------------ --------------------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings
----------- ----------- ---------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1996 ............... 4,300,193 $ 43,002 -- -- $10,163,537 $ 3,879,202
Net proceeds from underwriters
Over allotment....................... 225,000 2,250 -- -- 1,021,791 --
Exercise of stock options and
warrants ............................ 37,607 376 -- -- 58,019 --
Net earnings ......................... -- -- -- -- -- 120,781
Balance, June 30, 1997 ............... 4,562,800 45,628 -- -- 11,243,347 3,999,983
Net earnings ......................... -- -- -- -- -- 1,405,882
--------- -------- ------- ------------ ----------- -----------
Balance, June 30, 1998 ............... 4,562,800 45,628 -- -- 11,243,347 5,405,865
Exercise of stock options and
warrants ............................ 1,667 16 -- -- 4,151 --
Exercise of cashless warrants from
investment broker.................... 34,430 344 -- -- (344) --
Net earnings ......................... -- -- -- -- -- 4,208,025
Acquisition of treasury stock......... -- -- 78,370 (396,370) -- --
--------- -------- ------- ------------ ----------- -----------
Balance, June 30, 1999 ............... 4,598,897 45,988 78,370 (396,370) 11,247,154 9,613,890
Acquisition of treasury stock
(unaudited).......................... -- -- 135,000 (1,046,250) -- --
Exercise of stock options
(unaudited).......................... 26,666 267 -- -- 118,353 --
Net earnings (unaudited).............. -- -- -- -- -- 4,539,162
--------- -------- ------- ------------ ----------- -----------
Balance at March 31, 2000
(unaudited) ......................... 4,625,563 $ 46,255 213,370 $ (1,442,620) $11,365,507 $14,153,052
========= ======== ======= ============ =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years Ended June 30,
----------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from Operating Activities:
Net earnings ............................................... $ 4,208,025 $ 1,405,882 $ 120,781
Adjustments to reconcile net earnings to net cash used
in operating activities:
Depreciation and Amortization ............................ 876,875 647,946 1,233,080
Provision for doubtful accounts .......................... 100,000 -- --
Loss on sale leaseback transaction. ...................... -- 1,259,085 --
Write-off of prepaid commission/licensing fees. .......... -- -- 943,863
Deferred income tax provision (recovery). ................ 122,000 403,000 (199,500)
Extraordinary loss on extinguishment of debt ............. -- 1,011,001 --
(Increase) decrease in assets:
Accounts receivable ..................................... (12,867,732) (8,572,802) (5,861,207)
Inventories ............................................. (7,406,790) (6,049,509) (5,561,066)
Prepaid expenses and other current assets ............... 92,094 (8,336) 330,945
Prepaid income taxes. ................................... 235,348 685,895 (717,225)
Other assets. ........................................... (371,770) (49,133) 1,403,907
Increase (decrease) in liabilities:
Accounts payable. ....................................... 4,653,677 2,057,944 (1,092,998)
Income taxes payable. ................................... 1,710,000 751,062 (244,413)
Accrued expenses and other current liabilities. ......... 944,619 661,280 236,252
-------------- -------------- --------------
Net cash used in operating activities .................. (7,703,654) (7,055,770) (8,148,496)
-------------- -------------- --------------
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment ................................................ (667,270) (1,039,215) (2,852,287)
-------------- -------------- --------------
Net cash used in investing activities .................... (667,270) (1,039,215) (2,852,287)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from revolving credit loan. ....................... 54,302,599 29,554,981 36,791,000
Repayment of revolving credit loan ......................... (45,213,000) (23,882,837) (28,941,144)
Proceeds from subordinated loan. ........................... -- 10,500,000 --
Proceeds from secondary offering/options ................... -- -- 1,082,436
Deferred financing costs in connection with new
subordinated debt. ....................................... -- (797,584) --
Principal payments of mortgage ............................. (47,182) (39,875) (36,588)
Principal payments of capital leases ....................... (500,966) (436,422) (6,420,125)
Payments to retire subordinated loan and repurchase
warrants. ................................................ -- (6,793,613) --
Proceeds from sale-leaseback ............................... -- -- 9,565,000
Proceeds from exercise of stock options. ................... 4,167 -- --
Costs in connection with sale-leaseback. ................... -- -- (1,088,436)
Acquisition of treasury stock. ............................. (396,370) -- --
-------------- -------------- --------------
Net cash provided by financing activities ................ 8,239,248 8,104,650 10,952,143
-------------- -------------- --------------
Net increase (decrease) in cash. ........................... (131,676) 9,665 (48,640)
Cash, beginning of period. ................................. 489,890 480,225 528,865
-------------- -------------- --------------
Cash, end of period. ....................................... $ 358,214 $ 489,890 $ 480,225
============== ============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest. ................................................ $ 3,774,024 $ 2,669,167 $ 2,403,700
============== ============== ==============
Income taxes. ............................................ $ 830,000 $ 32,070 $ 1,233,187
============== ============== ==============
Noncash investing and financing transactions:
Purchases of property and equipment through capital
leases ................................................... -- 330,000 3,653,262
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------------
2000 1999
---------------- ----------------
(unaudited)
<S> <C> <C>
Cash flows from Operating Activities:
Net earnings ............................................... $ 4,539,162 $ 2,912,424
Adjustments to reconcile net earnings to net cash used
in operating activities:
Depreciation and Amortization ............................ 446,649 431,654
Provision for doubtful accounts .......................... -- --
Loss on sale leaseback transaction. ...................... -- --
Write-off of prepaid commission/licensing fees. .......... -- --
Deferred income tax provision (recovery). ................ -- --
Extraordinary loss on extinguishment of debt ............. -- --
(Increase) decrease in assets:
Accounts receivable ..................................... (22,387,535) (9,795,968)
Inventories ............................................. (3,368,868) (1,665,150)
Prepaid expenses and other current assets ............... (55,553) (261,052)
Prepaid income taxes. ................................... -- --
Other assets. ........................................... 83,996 138,049
Increase (decrease) in liabilities:
Accounts payable. ....................................... (751,859) 1,384,461
Income taxes payable. ................................... (752,739) 1,400,812
Accrued expenses and other current liabilities. ......... (467,348) 10,273
-------------- --------------
Net cash used in operating activities .................. (22,602,989) (5,444,497)
-------------- --------------
Cash flows from investing activities:
Payments for purchase of property, plant and
equipment ................................................ (882,121) (958,434)
-------------- --------------
Net cash used in investing activities .................... (882,121) (958,434)
-------------- --------------
Cash flows from financing activities:
Proceeds from revolving credit loan. ....................... 56,640,001 36,317,600
Repayment of revolving credit loan ......................... (31,784,600) (29,204,000)
Proceeds from subordinated loan. ........................... -- --
Proceeds from secondary offering/options ................... -- --
Deferred financing costs in connection with new
subordinated debt. ....................................... -- --
Principal payments of mortgage ............................. (36,525) (35,297)
Principal payments of capital leases ....................... (407,780) (390,252)
Payments to retire subordinated loan and repurchase
warrants. ................................................ -- --
Proceeds from sale-leaseback ............................... -- --
Proceeds from exercise of stock options. ................... 118,620 --
Costs in connection with sale-leaseback. ................... -- --
Acquisition of treasury stock. ............................. (1,046,250) (349,372)
-------------- --------------
Net cash provided by financing activities ................ 23,483,466 6,338,679
-------------- --------------
Net increase (decrease) in cash. ........................... 1,644 64,252
Cash, beginning of period. ................................. 358,214 489,890
-------------- --------------
Cash, end of period. ....................................... $ 356,570 $ 425,638
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest. ................................................ $ 4,261,904 $ 3,179,282
============== ==============
Income taxes. ............................................ $ 3,943,257 $ 630,896
============== ==============
Noncash investing and financing transactions:
Purchases of property and equipment through capital
leases ................................................... -- --

</TABLE>
s See accompanying notes to consolidated financial statements.

F-6
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND BUSINESS DESCRIPTION

Suprema Specialties, Inc., a New York corporation incorporated on August
15, 1983 and its subsidiaries (the "Company") manufactures, processes and
markets a variety of premium, gourmet natural cheese products.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements include the financial statements of
Suprema Specialties, Inc. and its wholly-owned subsidiaries, Suprema
Specialties West, Inc. and Suprema Specialties Northeast, Inc. All intercompany
transactions and balances have been eliminated in consolidation.

Inventory

Inventories are valued at the lower of cost (determined by the first-in,
first-out method) or market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is being
provided by use of the straight-line method over the estimated useful lives of
the related assets. Leasehold improvements are amortized over the shorter of
the term of the lease, including renewal options that are probable of exercise,
or the useful lives of the assets. Equipment under capitalized leases is being
amortized over the useful lives of the assets.

Long-Lived Assets

Long-lived assets, such as property, plant and equipment, are evaluated
for impairment when events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through the estimated
undiscounted future cash flows from the use of these assets. When such
impairment exists, the related assets will be written down to fair value. No
impairment losses have been recorded in each of the three years in the period
ended June 30, 1999.

Financing Costs

The Company amortizes the deferred financing costs incurred in connection
with the Company's borrowings over the life of the related indebtedness (3-10
years). Such gross costs amounted to $1,677,325 and $1,744,519 at June 30, 1999
and 1998 respectively.

Product Introduction Costs

The Company incurs certain costs in connection with expanding its market
position in the United States. These costs, referred to in the industry as
"slotting" are deferred and amortized over the stated program period, generally
ranging from one to twelve months.

Revenue Recognition

The Company records revenues when products are shipped. Customers do not
have the right to return products shipped.

Advertising Costs

The Company expenses advertising costs as incurred and cooperative
advertising costs when related revenue is recognized. Advertising costs
amounted to approximately $5,860,000, $2,864,000, $3,004,000, in 1999, 1998,
and 1997, respectively, and are reflected in selling and shipping expenses in
the accompanying statements of earnings.

F-7
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

Stock-Based Compensation

The Company accounts for its stock option awards to employees under the
intrinsic value based method of accounting prescribed by Accounting Principals
Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the
intrinsic value based method, compensation cost is the excess, if any, of the
quoted market price of the stock at grant date or other measurement date over
the amount an employee must pay to acquire the stock. The Company provides pro
forma disclosures of earnings and earnings per share as if the fair value based
method of accounting had been applied as required by Statement of Financial
Accounting Standards ("SFAS") No. 123, 'Accounting for Stock-Based
Compensation' (see Note 10).

Income Taxes

Income taxes are recorded in accordance with SFAS No. 109, which requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse.

Use of Estimates

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

Risks and Uncertainties

In December 1997, the Company formalized a two year collective bargaining
agreement with the employees of Suprema Specialties West, Inc. which represent
approximately 50% of the total workforce. The agreement expired on December 1,
1999. The Company considers its relations with its employees to be
satisfactory.

Financial Instruments

The fair value of the long term debt approximates the recorded value based
on borrowing rates currently available for loans with similar terms and
maturities.

Computation of Earnings Per Share

Basic earnings per share has been computed using the weighted-average
number of shares of common stock outstanding. Diluted earnings per share
includes the assumed exercise of stock options using the treasury stock method
that could potentially dilute earnings per share.

F-8
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

Treasury Stock

Treasury stock is recorded at cost. Gains and losses on disposition are
recorded as increases or decreases to additional paid-in capital with losses in
excess of previously recorded gains charged directly to retained earnings.

Effect of New Accounting Pronouncements

In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133, as amended by SFAS 137, is effective for the
Company's 2001 fiscal year. Based on an assessment of current operations,
management does not expect SFAS 133 to have any significant effect on the
Company's financial statements.

Reclassifications

Certain items have been reclassified in the 1998 and 1997 financial
statements to conform to the current year presentation.

NOTE 3 -- INVENTORIES

Inventories consist of the following:

Years Ended June 30,
-------------------------------
1999 1998
-------------- --------------
Raw materials .......... $ 9,110,302 $ 3,640,655
Finished goods ......... 25,848,208 24,046,053
Packaging .............. 960,210 825,222
----------- -----------
$35,918,720 $28,511,930
=========== ===========

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Property and plant ...................................... $ 1,553,859 $ 1,545,900
Equipment ............................................... 5,715,095 4,937,767
Leasehold improvements .................................. 1,173,271 1,182,662
Furniture and fixtures .................................. 202,544 183,075
Delivery equipment ...................................... 48,178 48,178
Construction in progress ................................ 462,164 590,259
----------- -----------
9,155,112 8,487,841
Less: Accumulated depreciation and amortization ......... 2,069,164 1,488,146
----------- -----------
$ 7,085,948 $ 6,999,695
=========== ===========
</TABLE>

In May 1997, the company entered into a sale-leaseback transaction whereby
fixed assets with a net book value of $10,824,082 were sold for $9,565,000 and
leased back under operating leases. In connection with this transaction,
$4,847,382 of capital leases were paid in full. A loss of $1,259,081 resulted
from this transaction

F-9
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT -- (Continued)

which is reflected as other expense. The Company incurred costs of $1,088,436
primarily related to prepayment penalties on the capital leases. These direct
costs have been included in other assets and are being amortized over eight
years, the life of the operating lease.

Included in property, plant and equipment are plant and equipment acquired
under capital leases with an initial cost of $3,419,067 and $3,419,067 and
accumulated amortization of $833,743 and $539,313 as of June 30, 1999 and 1998,
respectively.

NOTE 5 -- MARKETING SERVICE AGREEMENTS

Prior to 1994, the Company entered into marketing service agreements with
unaffiliated third parties expiring at various dates through June 1998,
pursuant to which the Company was provided with certain marketing and program
support services, including the payment of advertising promotional expenditures
by such parties in exchange for commissions based on Company sales of specified
products. In addition, two of the agreements provided that after an initial
period (as defined in the agreements), the Company or the providers of the
marketing services have the right to convert some or all of the remaining
estimated commissions to common stock of the Company at the market price at the
time of conversion. For the year ended June 30, 1997 commission expenses
related to the marketing agreements was approximately $794,000.

During 1994, 1995, and 1996, portions of these agreements were prepaid,
with the 1996 amount being the final settlement of the remaining agreements.
These amounts were being charged to expense over the remaining three years of
the related agreements as the applicable sales revenue was recorded. In the
fourth quarter of 1997, as a result of a review of the Company's retail cheese
business, it was determined the remaining asset amounts, $943,863 no longer had
continuing value. This amount was written off and was included in selling and
shipping expenses.

NOTE 6 -- INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
June 30,
----------------------------------------------
1999 1998 1997
-------------- -------------- ------------
<S> <C> <C> <C>
Current:
Federal ........................... $ 2,243,000 $ 1,145,000 $ 233,000
State ............................. 561,000 202,000 47,000
----------- ----------- ----------
2,804,000 1,347,000 280,000
Deferred:
Federal ........................... 104,000 343,000 (169,600)
State ............................. 18,000 60,000 (29,900)
----------- ----------- ----------
122,000 403,000 (199,500)
----------- ----------- ----------
Provision for income taxes ......... $ 2,926,000 $ 1,750,000 $ 80,500
=========== =========== ==========
</TABLE>

F-10
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 6 -- INCOME TAXES -- (Continued)

The following reconciles income taxes at the U.S. statutory rate to the
provision for income taxes:

<TABLE>
<CAPTION>
June 30,
---------------------------------------------
1999 1998 1997
-------------- -------------- -----------
<S> <C> <C> <C>
Computed tax expense at statutory rates .................. $ 2,425,600 $ 1,416,800 $ 68,000
State taxes, net of federal tax benefit .................. 382,100 262,100 10,500
Travel and entertainment expenses not deductible ......... 34,000 17,000 2,000
Officers life insurance not deductible ................... 5,500 5,400 3,500
Other, net ............................................... 78,800 48,700 (3,500)
----------- ----------- --------
$ 2,926,000 $ 1,750,000 $ 80,500
=========== =========== ========
</TABLE>

Deferred income taxes arise from the difference between book and tax
accounting for depreciation, the allowance for doubtful accounts, financing
fees and product introduction costs.

The net deferred tax liabilities are comprised of the following components
as of June 30, 1999 and 1998:

June 30,
---------------------------
1999 1998
------------ ------------
Depreciation .......................... $ 389,000 $ 279,419
Product introduction costs ............ 6,648 44,913
Deferred sale leaseback costs ......... 326,531 390,427
Financing fees ........................ 397,821 241,427
--------- ----------
1,120,000 956,186
Accounts receivable reserve ........... (228,000) (188,000)
--------- ----------
$ 892,000 $ 768,186
========= ==========

NOTE 7 -- LONG-TERM DEBT

Revolving Credit Loan

In December 1998, the long-term revolving credit facility (the "Facility")
between the Company and a bank was amended to increase the line for up to
$35,000,000 through November 2000 (See Note 16). The rate of interest on
amounts borrowed under the Facility is the adjusted LIBOR rate, as defined,
plus 2% (7.75% as of June 30, 1999). The Facility is collateralized by all
existing and acquired assets of the Company, as defined in the Facility
agreement, and is guaranteed by Suprema Specialties West, Inc. and Suprema
Specialties Northeast, Inc. In connection with obtaining the Facility, the
Company and Suprema Specialties Northeast, Inc. have agreed to pay a commitment
fee on the average daily unused portion of the Facility, equal to 1/4 of 1% per
annum. Advances under this Facility are limited to 80% of eligible accounts
receivable, and 40% of all inventory except packaging material, as defined in
the Facility agreement. The Facility agreement contains three restrictive
financial covenants, including the maintenance of specified total debt to net
worth ratios, minimum levels of tangible net worth, and debt service coverage
ratios, as defined, and a restriction on dividends to common shareholders. As
of June 30, 1999, the Company was in compliance with these covenants.

At June 30, 1999, the Company had approximately $4,501,000 available for
borrowing under the Facility. Borrowings are required to be repaid in November
2000.

In July 1999, the agreement was amended to increase the line to
$40,000,000 (See Note 16).

F-11
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 7 -- LONG-TERM DEBT -- (Continued)

Subordinated Debt Facility

In October 1995, the Company entered into a Loan and Security Agreement
with CoreStates Enterprise Fund (the "Fund"), a division of CoreStates Bank,
N.A., pursuant to which the Fund loaned $5,000,000 to the Company. The loan was
secured by a subordinated security interest in substantially all of the assets
of the Company and was subordinated to the loan of the Company's senior lender.
The loan bore interest at 113/4% per annum. In connection with the execution
and delivery of the Loan Agreement, the Company delivered a Warrant to the Fund
exercisable for nominal additional consideration for 354,990 shares of the
Company's Common Stock. After October 1, 2000, or upon the occurrence of
certain other events, the Fund had the right to put the Warrant to the Company
on a formula basis. The Warrant was recorded at its relative fair value at date
of issue, $1,100,000. The corresponding debt discount was being amortized over
the life of the loan on the interest rate method. At June 30, 1997, the value
of the put option was approximately $1,171,000.

In October 1997, the Company entered into an agreement with another bank
pursuant to which the bank provided bridge financing of $10 million to the
Company. Approximately $6.7 million of the proceeds was used to retire $5.0
million subordinated debt and the repurchase of warrants attached to the
subordinated debt. The balance of the proceeds was used for general working
capital purposes. These transactions resulted in an extraordinary loss of
approximately $1,011,000, net of tax. The extraordinary loss was comprised of
the prepayment penalty of $1,279,000 and the write-off of deferred financing
costs and debt discount of $494,000, net of the combined tax benefit of
$762,000. The fair value of the warrants was determined pursuant to the
contractually agreed value among the relevant parties.

In March 1998, the Company entered into a Loan and Security Agreement with
Albion Alliance Mezzanine Fund, L.P. and the Equitable Life Assurance Society
of the United States (collectively the "Funds") pursuant to which the Funds
loaned $10,500,000 to the Company. The loan is unsecured and is subordinated to
the loan of the senior lender discussed above. The loan bears interest at 16.5%
per annum. Interest is payable monthly at the rate of 12% with the balance
deferred until February 1, 2003 when it is due in full. The principal amount of
the loan is payable in three installments of $3,500,000 on each March 1,
beginning in the year 2004. In addition, in connection with the execution and
delivery of the Loan Agreement, the Company delivered to the Funds a Warrant to
purchase 105,000 shares of the Company's Common Stock at $4.125 per share (the
market price at the date of the agreement). The values ascribed to such
warrants and the related amortization are not material. The warrant is
exercisable until March 1, 2008.

Mortgage Payable

On March 29, 1996, the Company purchased its Paterson production facility
which it previously had leased. The purchase was financed through a mortgage on
the property. Proceeds of the loan were $1,050,000, of which $686,250 was used
to pay the remaining obligation to the landlord. The balance of the proceeds
was used to complete the expansion of a 7,800 square foot refrigerated storage
facility. The five year note bore interest at 8.51% per annum. On March 29,
1999, the Company refinanced its mortgage for the principal amount of $929,573.
The seven year note bears interest at 7.85% per annum, is being amortized at a
fifteen year rate and requires a balloon payment at the end of year seven of
approximately $501,000

Principal payments on long-term debt over the next five years ended June
30, and thereafter are as follows:

2000 ....................... $ 49,220
2001 ....................... 30,495,167
2002 ....................... 57,928
2003 ....................... 62,643
2004 ....................... 3,567,743
Thereafter ................. 7,626,586
-----------
$41,859,287
===========

F-12
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 8 -- CAPITAL LEASES

There are various equipment and furniture and fixtures financed under
capital leases. These leases have interest rates ranging from 6.7% to 11.5%. At
June 30, 1999, the Company's future minimum lease payments under capital leases
are as follows:

2000 ............................................ $ 804,333
2001 ............................................ 800,333
2002 ............................................ 642,431
2003 ............................................ 590,629
2004 ............................................ 87,661
----------
Total minimum lease payments .................... 2,925,387
Less: amount representing interest .............. 659,299
----------
Present value of minimum lease payments ......... 2,266,088
Less: current portion ........................... 550,761
----------
Long-term portion of capital leases ............. $1,715,327
==========

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

Lease

The Company rents warehouse space and certain equipment under lease
arrangements classified as operating leases including the equipment in the
sale-leaseback transaction. (See Note 4). The lease for the production
facilities in Manteca, which was renewed in December 1994 expires ten years
from the date of completion of construction of each segment of the facility
with two five-year renewal options. The Company also leases its Ogdensburg
facility. The lease is for five years with three five year renewals at the
Company's option. Rent expense was approximately $2,971,000, $2,400,000, and
$922,000 for the years ended June 30, 1999, 1998 and 1997, respectively. Future
minimum rental payments under non-cancelable operating leases are approximately
$3,110,000 for each year through 2004 and $4,093,000 thereafter.

Contingencies

The Company is a party to legal proceedings arising in the normal conduct
of business. Management believes that the final outcome of these proceedings
will not have a material adverse effect on the Company's financial position.

NOTE 10 -- STOCKHOLDERS' EQUITY

In June 1996, the Company completed a public offering for 1,500,000 shares
of its $.01 par value common stock of which 1,000,000 shares were issued by the
Company and 500,000 shares were offered by selling shareholders upon conversion
of 500,000 shares of the Company's convertible preferred stock at a purchase
price of $5.50 per share. Gross proceeds from the offering was approximately
$4,481,350. The Company received no proceeds from the shares issued during the
offering from those shares offered by the selling shareholders.

In 1997, an additional 225,000 shares of Common Stock were sold pursuant
to the exercise of the underwriters' over-allotment option which generated net
proceeds of approximately $1,024,000.

Stock Option Plan

On February 11, 1991, the Company adopted the 1991 Stock Option Plan. In
December 1998, the Company adopted the 1998 Stock Option Plan (collectively,
the "Plans"). Under the Plans, officers, directors,

F-13
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 10 -- STOCKHOLDERS' EQUITY -- (Continued)

and key employees of the Company are eligible to receive up to 900,000 and
500,000 incentive and/or non-qualified stock options, respectively. The Plans,
which expire in February 2001 and November 2008, respectively, are administered
by the board of directors. The selection of participants, allotment of shares,
determination of price and other conditions of the grant of options are
determined by the board of directors at its sole discretion in order to attract
and retain persons instrumental to the success of the Company. Incentive stock
options granted under the Plan vest evenly over the first three years and are
exercisable for a period of up to ten years from the date of grant at an
exercise price which is not less than the fair market value of the common stock
on the date of grant, except that the term of an incentive stock option granted
under the Plan to a shareholder owning more than 10% of the outstanding common
stock may not exceed five years and its exercise price may not be less than
110% of the fair market value of the common stock on the date of the grant.

Stock option transactions under the Plan are summarized as follows:

<TABLE>
<CAPTION>
Weighted
1991 Average
Plan Shares Exercise Price
------------- ---------------
<S> <C> <C>
Outstanding at June 30, 1996 ............................................. 346,000 $ 3.66
Granted ................................................................. 176,000 3.84
Exercised ............................................................... (13,500) 3.08
------- --------
Outstanding at June 30, 1997 ............................................. 508,500 3.73
Granted ................................................................. 243,500 3.25
Exercised ............................................................... -- --
------- --------
Outstanding at June 30, 1998 ............................................. 751,500 3.58
Granted ................................................................. 134,250 3.17
Exercised ............................................................... (1,667) 2.50
------- --------
Outstanding at June 30, 1999 ............................................. 884,083 3.52
======= ========
Options exercisable at June 30, 1999 ..................................... 529,362 $ 3.65
======= ========
Weighted -- average fair value of Options granted during fiscal 1997 ..... 176,000 $ 2.21
======= ========
Weighted -- average fair value of Options granted during fiscal 1998 ..... 243,000 $ 1.22
======= ========
Weighted -- average fair value of Options granted during fiscal 1999 ..... 134,250 $ 1.79
======= ========
</TABLE>

<TABLE>
<CAPTION>
Weighted
Average
1998 Plan Exercise Price
----------- ---------------
<S> <C> <C>
Outstanding at June 30, 1998 ............................................. -- --
Granted ................................................................. 143,000 $ 4.63
Exercised ............................................................... -- --
Forfeited ............................................................... -- --
------- -------
Outstanding at June 30, 1999 ............................................. 143,000 $ 4.63
======= =======
Weighted -- average fair value of Options granted during fiscal 1999 ..... 143,000 $ 2.66
======= =======
</TABLE>

F-14
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 10 -- STOCKHOLDERS' EQUITY -- (Continued)

The following table summarizes information about stock options outstanding
at June 30, 1999:

<TABLE>
<CAPTION>
Options Outstanding Option Exercisable
------------------------------ --------------------------
Average Weighted Weighted Weighted
Number of Remaining Average Average
Options Contractual Exercise Number Exercise
Range of Exercise Prices ($) Outstanding Life (Years) Price ($) Exercisable Price ($)
------------------------------ ------------- -------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
1991 Plan
2.50 to 4.00 ................ 764,083 7.40 years $ 3.34 412,692 $ 3.37
4.00 to 5.63 ................ 120,000 6.40 years 4.65 116,670 4.63
------- ---------- -------- ------- --------
2.50 to 5.63 ................ 884,083 7.25 years $ 3.52 529,362 $ 3.65
======= ========== ======== ======= ========
1998 Plan
4.63 ........................ 143,000 9.75 years 4.63 -- --
======= ========== ======== ======= ========

</TABLE>

Under the accounting provisions of SFAS 123, the Company's net earnings
and earnings per share before extraordinary item would have been:

<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------------
1999 1998 1997
------------- ------------- -----------
<S> <C> <C> <C>
Earnings before extraordinary item:
As reported ........................................ $4,208,025 $2,416,883 $120,781
Pro forma .......................................... 3,999,219 2,259,454 44,887
Basic earnings per share before extraordinary item:
As reported ........................................ .93 .53 .03
Pro forma .......................................... .88 .50 .01
Diluted earnings per share before extraordinary item:
As reported ........................................ .86 .51 .02
Pro Forma .......................................... .82 .48 .01

</TABLE>

The pro forma effect on net earnings and earnings per share for 1999,
1998, and 1997 may not be representative of the pro forma effect in future
years because it includes compensation cost on a straight-line basis over the
vesting periods of the grants and does not take into consideration the pro
forma compensation costs for grants made prior to 1996.

The fair market value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants: expected volatility of 44% in 1999, 46% in
1998 and 35% in 1997; risk free interest rate of 5.0% in 1999, 5.8% in 1998 and
6.7% in 1997; expected lives of 10 years; and no dividend yield.

Warrants

During 1994 and 1993, a total of 195,000 warrants were issued to
unaffiliated parties at exercise prices ranging from $3.00 to $6.05 per share.
At June 30, 1999, these warrants are exercisable and expire in 2003 and 2004.
As discussed in Note 7, the Company granted warrants in March 1998, to purchase
105,000 shares of common stock exercisable at $4.125 per share through March
2008.

NOTE 11 -- EARNINGS PER SHARE

Basic and diluted earnings per share for each of the three years ended
June 30, 1999, 1998, and 1997 are calculated as follows:

F-15
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 11 -- EARNINGS PER SHARE -- (Continued)

<TABLE>
<CAPTION>
Net Earnings Shares Per Share
(Numerator) (Denominator) Amount
--------------- --------------- ----------
<S> <C> <C> <C>
For the year ended June 30, 1999:
Basic earnings per share ............................ $ 4,208,0254 536,605 $ .93
Effect of assumed conversion of employee stock options
and warrants ........................................ -- 347,080 .07
----------- ------- -------
Diluted earnings per share ....................... $ 4,208,0254 883,685 $ .86
=========== ======= =======
For the year ended June 30, 1998:
Basic earnings per share ............................ $ 1,405,882 $ 4,562,800 $ .31
Effect of assumed conversion of employee stock options
and warrants ........................................ -- 182,119 .01
----------- ----------- -------
Diluted earnings per share. ...................... $ 1,405,882 4,744,919 $ .30
=========== =========== =======
For the year ended June 30, 1997:
Basic earnings per share ............................ $ 120,781 4,552,146 $ .03
Effect of assumed conversion of employee stock options
and warrants ........................................ -- 487,849 .01
=========== =========== =======
Diluted earnings per share ....................... $ 120,781 5,039,995 $ .02
=========== =========== =======

</TABLE>

The earnings per share computation for the year ended June 30, 1999 was
based upon the 4,562,800 shares outstanding at the beginning of the year less a
proration of the 78,370 shares of treasury stock repurchased during the fiscal
year ended June 30, 1999. Also included in the weighted average number of
common shares are the pro-rata portion of 34,430 shares issued upon the
exercise of cashless warrants granted to an investment banker in 1994 in
connection with the private placement of Preferred Stock, options exercised by
an employee, as well as incremental shares attributable to assumed exercise of
options and warrants.

The earnings per share computation for the year ended June 30, 1998 was
based upon the 4,562,800 shares outstanding at the beginning of the year;
569,400 shares issuable under stock options and the warrants were excluded from
the calculation since the exercise price exceeded the average fair market value
of the Company's common stock during the period.

The earnings per share computation for the year ended June 30, 1997 was
based upon 4,300,193 shares outstanding at the beginning of the year, plus a
pro-rated of the 225,000 shares arising from the issuance of common stock
issued upon exercise of the underwriters over allotment option in the Company's
secondary public offering; 286,000 shares issuable under stock options were
excluded from the calculation since the exercise price exceeded the average
fair market value of the Company's common stock during the period.

Stock Repurchase Program

In May 1999, the Board of Directors approved a stock repurchase program to
acquire up to $3,200,000 of the Company's common stock. As of June 30, 1999,
the Company has repurchased 78,370 shares of its common stock for a cost of
approximately $396,370.

NOTE 12 -- CONCENTRATION OF CREDIT RISK

The Company provides credit to customers on an unsecured basis after
evaluating customer credit worthiness. Since the Company sells to a broad range
of customers concentrations of credit risk are very limited. The Company also
provides an allowance for bad debts for accounts receivable where there is a
possibility for loss.

F-16
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 12 -- CONCENTRATION OF CREDIT RISK -- (Continued)

The Company maintains demand deposits with major banks. At June 30, 1999
and 1998, all of the Company's cash was held in one major bank.

NOTE 13 -- MAJOR CUSTOMER

During the fiscal year ended June 30, 1999, the Company had sales to one
major customer of $32,305,000 representing approximately 18% of net sales. At
June 30, 1999, three customers represented 33%, 19%, and 14% of accounts
receivable.

During the fiscal year ended June 30, 1998, the Company had sales to a
major customer of approximately $19,600,000 representing approximately 18% of
net sales. At June 30, 1998, three customers represented 33%, 17% and 14% of
accounts receivable.

During the fiscal year ended June 30, 1997, the Company had sales to two
major customers of approximately $12,125,000 and $9,099,000 representing
approximately 14% and 10% of net sales, respectively. At June 30, 1997, one
customer represented 19% of net accounts receivable, no other customer exceeded
10%.

NOTE 14 -- EMPLOYEE BENEFITS

In July 1998, the Company instituted a 401(k) plan for all employees who
are not covered under the collective bargaining agreement. Under the plan, the
Company matches each eligible employees' contribution up to 25% of the
employees' first 8% of contributions. Contributions during the year amounted to
approximately $40,000 for the year ended June 30, 1999.

NOTE 15 -- QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of quarterly results of operations for the
1999, 1998 fiscal years (in thousands of dollars except per share data):

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1999
Net sales ................................................ $ 35,899 $ 45,652 $ 45,863 $ 48,867
Gross profit ............................................. 6,125 7,925 7,706 8,173
Income from operations ................................... 2,419 2,817 2,878 3,348
Net earnings ............................................. 815 1,041 1,056 1,296
Basic earnings per share ................................. .18 .23 .23 .29
Diluted earnings per share ............................... .17 .21 .21 .27
1998
Net sales ................................................ $ 25,156 $ 26,113 $ 26,407 $ 30,464
Gross profit ............................................. 4,272 4,471 4,725 5,277
Income from operations ................................... 1,450 1,657 1,830 2,147
Earnings before extraordinary item ....................... 478 610 635 694
Extraordinary item, net .................................. -- (1,011) -- --
Net earnings ............................................. 478 (401) 635 694
Net earnings per share before extraordinary item ......... .10 .13 .14 .16
Extraordinary item, net .................................. -- (.22) -- --
Basic earnings per share ................................. .10 (.09) .14 .16
Diluted earnings per share ............................... .10 (.09) .14 .15
</TABLE>

F-17
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 16 -- NOTES TO INTERIM UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS

Basis of Presentation

The accompanying financial statements of the Company have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended March 31, 2000 are not necessarily indicative
of the results that may be expected for the year ending June 30, 2000. For
further information, refer to the financial statements and footnotes thereto
included in the Company's Annual Report for the fiscal year ended June 30, 1999
as filed with the Securities and Exchange Commission.

Earnings per Share

Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period.

Diluted earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding plus the weighted-average
number of net shares that would be issued upon exercise of stock options and
warrants using the treasury stock method. Incremental shares included in the
diluted computation were 751,583 and 246,271 for the nine months ended March
31, 2000 and 1999 respectively.

Inventories

Inventories consist of the following:

March 31, 2000
---------------
Raw Materials ............. $12,437,363
Finished Goods ............ 25,425,825
Packaging ................. 1,424,400
----------
$39,287,588
===========

The Company has entered into an agreement with a supplier for the purchase
of a minimum level of raw materials used in the manufacture of its products. At
March 31, 2000, the Company had fulfilled its purchase commitment under this
agreement.

Long-Term Debt

In March 2000, the Company and its banks amended the Company's revolving
credit facility to increase the banks' potential commitment to $85 million and
extend the maturity date to February 15, 2004. The amendment also redefines
various financial and operating covenants and establishes new levels for
advances on eligible accounts receivable and inventory.

Stockholder's Equity

Stock Incentive Plan

In November 1999, the Company's shareholders approved the adoption of the
1999 Stock Incentive Plan (the "1999 Plan"). Terms of the 1999 Plan allow for
the issuance of stock options, restricted stock, deferred stock or other stock
based awards to employees, directors and third parties. The Company has
reserved 500,000 shares of common stock for distribution under the 1999 Plan.

F-18
<PAGE>

SUPREMA SPECIALTIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)

NOTE 16 -- NOTES TO INTERIM UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (Continued)

Registration Statement

In April 2000, the Company entered into a letter of intent with respect to
the filing of a registration statement under which the Company anticipates
registering 1.2 million shares of its common stock (1.38 million shares
assuming the underwriters exercise their over-allotment option). With respect
to the 1.2 million shares, the Company expects to sell 1.1 million shares to
the public and 100,000 shares will be sold by officers of the Company. The sale
of the officers' shares will not result in proceeds to the Company. In
addition, 150,000 warrants held by certain stockholders and 120,000
representatives' warrants are expected to be registered.

Effect of New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB 101") which broadly
addresses how companies report revenues in their financial statements. The
Company is in the process of evaluating the accounting requirements of SAB 101
and do not expect that this standard will have a material effect, if any, on
its financial position, results of operations, or cash flows.

F-19
<PAGE>

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