Galaxy Nutritional Foods on the Block

ORLANDO--Galaxy Nutritional Foods Inc. (AMEX:GXY) has retained Tucker Anthony Sutro Capital Markets as a financial advisor to help the company review "indications of interest," which includes strategic alliances and mergers/sales of Galaxy. Management reported that these indications of interest were unsolicited, and its board of directors thought it in the best interest of everyone involved that they review the interest. Angelo Morini, president, chairman and chief executive officer, noted that Galaxy has successfully expanded its relationships with conventional groceries and food service, and it is a leader in the nutritional food category. "Given the ongoing consolidation taking place in the nutritional food category, we understand the attraction to Galaxy at this time," he said.

Galaxy also placed 72,646 shares of its convertible preferred stock with Canadian-based investment funds BH Capital and Excalibur Capital. The transaction earned Galaxy $3.1 million, which will be used to grow inventory and fund sales and marketing efforts targeting end consumers. The preferred stock has a four-year term, and each share can be converted to 10 shares of common GXY stock. The preferred shares draw a 10-percent dividend in the first year and an eight-percent dividend in subsequent years.

Finally, Galaxy eliminated several staff positions that it said will lead to savings of more than $700,000 annually. Only two names were released. Keith Ewing, chief financial officer (CFO), was replaced by Cynthia Hunter, who will serve as acting CFO. Hunter served as Galaxy's CFO for three years prior to Ewing's appointment last February. Mike Rapport, vice president of foodservice, was let go; John Jackson, vice president of sales, will handle his responsibilities.

The moves follow Galaxy's February release of its 3Q and nine-month fiscal 2001 numbers. After a one-time $2.8 million charge (for a change in accounting systems) taken in the fiscal 2001 third quarter, the company reported a net loss of $1.8 million, or $0.20 per diluted share for the first nine months of fiscal 2001.