Galaxy Nutritional Foods, Inc. (fka GXYF)

[zsvq1p]

Wall Street Antiques... Walmart is a non-factor...

We sell to customers throughout the United States and 14 other countries. For the fiscal years ended March 31, 2007, 2006 and 2005, our gross sales were $29,995,729, $41,492,717 and $48,421,384, respectively. Gross sales derived from foreign countries were approximately $4,317,000, $5,158,000 and $4,896,000 for the fiscal years ended March 31, 2007, 2006 and 2005, respectively. These sales represent 14%, 12% and 10% of gross sales in the fiscal years ended March 31, 2007, 2006 and 2005, respectively. Gross sales are attributed to individual countries based on the customer’s shipping address. We have no long-term assets located outside of the United States.

The following table sets forth the percentage of foreign gross sales to each country, which accounted for 5% or more of our foreign gross sales for the fiscal years ended March 31, 2007, 2006 and 2005:

Percentage of Gross Foreign Sales
Fiscal Years Ended March 31,

   
 Country     2007      2006     2005    
 Canada      65.1  %   60.0 %   47.9 %  
 Puerto Rico  14.6 %   22.8 %   33.4 % 

The following table sets forth the name of each customer, which either alone, or together with its affiliates, accounted for 5% or more of our gross sales for the fiscal years ended March 31, 2007, 2006 and 2005:

Percentage of Gross Sales
Fiscal Years Ended March 31,

    
 Customer Name            2007    2006     2005    
 United Natural Foods     13.5%   9.4 %   8.5 %  
 (DPI)                    8.0 %   8.3 %   7.4 %  
 Publix                   7.1 %   6.9 %   5.9 %  
 Kroger                   5.6 %   *     *    
 Wal-Mart                   *     7.4 %   *    
 Del Sunshine LLC           *     *     11.6 % 

* Less than 5% of gross sales for the stated fiscal year

Plus after taking a quick look, It appears Walmart or Del Sunshine, F'd the company in 2005! Which one? My bet it was Walmart.. It would be great to get a hold of this story. Just looking at it.. the former mgr's really screwed that one up.. how the heck do you let Walmart/ Del Sunshine screw you? Revs in 2005 were $44 mil and 11.6% would be $5 mil is revs... yet

$1.6 million increase in bad debt expense (see Del Sunshine LLC under Recent Material Developments for further details) During the fiscal year ended March 31, 2005, we produced certain private label
products for Del Sunshine who then sold the products to Wal-Mart. In the fourth
quarter of fiscal 2005, we reserved nearly $1,760,000 in accounts receivable and
inventory related to Del Sunshine LLC that we believed collection thereon was
questionable. As of March 31, 2006, all amounts owed by Del have been written
off as uncollectible. In the fiscal year ended March 31, 2006, we began selling
these products directly to Wal-Mart instead of through Del Sunshine....In the fourth quarter of fiscal 2005, we reserved nearly $1,550,000
in accounts receivable and $210,000 in inventory related to this customer due to
questionable collectibility.

Del Sunshine LLC

Pursuant to an oral contract manufacturing and distribution arrangement among
our Company, Del Sunshine LLC ("Del"), a Delaware limited liability company, and
Non-Dairy Specialty Foods, LLC ("Non-Dairy"), a Nevada limited liability company
and affiliate of Del, we began manufacturing certain private label products for
Del and delivering them directly to Del's customers, including Del's major
customer, Wal-Mart, Inc. in April 2004. These private label products were
produced using label and packaging trademarks owned by Del. Sales to Del
accounted for 12% of our sales during fiscal 2005, which attributed to 65% of
the increase in sales over fiscal 2004.

On April 11, 2005, we executed with Del a Trademark License Agreement and an
Assignment of Accounts Receivable Agreement. Pursuant to the Trademark License
Agreement, Del licensed to us the rights in certain Del trademarks, which
allowed us to sell products directly to Del's customers, including Wal-Mart,
Inc. and other food retailers, using such trademarks. In consideration for the
license, we agreed to pay to Del a 5% royalty on the net sales of such products.
In accordance with the Trademark License Agreement, we can offset any royalties
that we may owe to Del under the agreement against our account receivable and
other amounts owed to us by Del.

Pursuant to the Assignment of Accounts Receivable Agreement, Del assigned to us
any and all accounts receivable owed to Del by Wal-Mart, Inc. and other food
retailers, plus monies owed to Del under current purchase orders. It was
intended that the assignment of the accounts receivable and purchase order
amounts would offset, in part, our account receivable from Del. We also agreed
not to commence any legal proceedings against Del or Non-Dairy to collect
amounts owed to us by them, excluding defenses and counterclaims against Del or
Non-Dairy made in any legal proceeding brought by them.

The effectiveness of the Trademark License Agreement and the Assignment of
Accounts Receivable Agreement was conditioned upon Del providing us with proof,
satisfactory to us, that (a) Del would be transferring to us under the
Assignment of Accounts Receivable Agreement accounts receivable and purchase
orders in excess of $400,000 and (b) that Wal-Mart, Inc. would consent to the
transactions contemplated under both agreements. Del has not satisfied either of
the foregoing conditions and we do not believe that it is likely that Del will
be able to satisfy the conditions in the future. Although we waived the
conditions as they relate to the Trademark License Agreement, we did not waive
them with respect to the Assignment of Accounts Receivable Agreement. Currently,
we are exploring our options in addressing the issues with Del related to the
effectiveness and continuation of the Assignment of Accounts Receivable
Agreement and Del's payment of our account receivable. On or about June 15,
2006, we ceased selling products under Del's trademarks and we allowed the
Trademark License Agreement to expire according to its terms on September 30,
2005.

In the fourth quarter of fiscal 2005, we reserved nearly $1,550,000 in accounts
receivable and wrote off $210,000 in inventory related to Del based upon our
determination in April 2005 that collection from Del was questionable as of
March 31, 2005. During the first quarter of fiscal 2006, we accrued
approximately $40,000 in royalties under the Trademark License Agreement and
offset them against the receivable owed to us by Del. During the year ended
March 31, 2006, we recorded approximately $279,000 in additional bad debt
related to Del. As of March 31, 2006, all amounts owed by Del have been written
off as uncollectible.

I understand why the old shareholders are pissed at the x-founders and bros exit. After reading that.. those guys should be given the dope awards cutting a deal like that.. Walmart is known for treating there vendors like dirt, they never pay up..