July 9, 2001
Orlando, FL

Contact
Wilma Williams, Investor Relations
Galaxy Nutritional Foods
407/855-5500 ext. 105
wwilliams@galaxyfoods.com

GALAXY NUTRITIONAL FOODS REPORTS FISCAL 2001 OPERATING RESULTS

ORLANDO, Florida (July 09, 2001) - Galaxy Nutritional Foods, Inc. (AMEX: GXY), a leading producer of delicious and nutritious plant based health-promoting dairy and dairy related alternatives for the retail, foodservice and industrial markets, today announced financial results for its fiscal year ended March 31, 2001.

For the twelve months ended March 31, 2001, net sales increased 11% to $47 million, versus $42 million in the comparable period of the prior year. Net earnings for fiscal 2001 decreased to a net loss of $5.4 million, or $(.57) per diluted share, from a net income of $3.6 million, or $.39 per diluted share in fiscal year 2000.

Angelo S. Morini, Galaxy's Chairman, President and CEO reacted to these results by commenting that fiscal 2001 will be remembered as an exciting but challenging year for the company. Morini stated, " As expected, we saw significant growth in both of our retail sales divisions along with positive trends in our foodservice division. In anticipation of this growth, we tried to prepare ourselves financially and internally to efficiently respond but certain factors beyond our control affected our results. In an effort to expand production capability, Galaxy spent a total of $15.3 million to purchase several state of the art production machines but unfortunately, there was not one piece of equipment delivered to Galaxy in a timely manner as promised by the manufacturers. We were not ready to meet demand as we thought we would be and therefore short-shipped customers. Galaxy was forced to discount its retail prices in order to maintain its dominant shelf space which resulted in a significant increase in marketing expenses. We were forced to seek additional "patch-work" credit that took time to mature. Additionally, our primary lender for the past several years filed for Chapter 11 bankruptcy protection in one of the largest bankruptcies in U.S. history. Lastly, over the past several months, we were forced to pay higher prices for protein, one of our main product ingredients, due to temporary and unprecedented inspection delays by the USDA and FDA. All of these untimely circumstances directly affected our ability to produce the quantities necessary to handle much of our growing business. We would have been able to report much higher sales if we were able to produce and ship the significant increase in orders for our products. Also, greatly affecting our results, were changes to accounting policy related to marketing fees, certain advertising and overhead allocations as well as certain non-recurring expenses relating to the installation and start-up of new equipment."

Morini further commented, "I am now happy to report these challenging issues are almost behind us. During the first several months of fiscal 2002, all of the new equipment recently purchased will be fully operational allowing Galaxy to meet demand for its higher margin product, service its new foodservice opportunities, gain efficiencies from higher speed equipment and realize labor and overhead savings. This should have a positive impact on our income. Also, in an effort to further reduce administrative expenses, we recently made several adjustments in key management, eliminating and realigning positions to become more efficient and cost effective."

Morini concluded, "The future continues to look very bright for Galaxy. Our core retail business is strong and shows no signs of slowing down. In foodservice, we are positioning ourselves for a possible roll-out of our products with two major foodservice chains as we are currently in advanced testing stages in certain markets. For fiscal 2002, Galaxy will introduce several new and innovative products and concepts including the Galaxy Ultra Smoothie™. This product is a nutritious and delicious blend of Tropicana juices and Veggie Milk™, the world's most nutritious milk. The Ultra Smoothie™ will be a major delivery system for plant proteins and will be one of the most nutritious smoothie products marketed today, containing a complete serving of nutrition in one delicious product. Also new for 2002, will be our Veggie Café™. The Veggie Café™ has been developed for schools, colleges, universities, hospitals and numerous other foodservice channels of distribution to address the ever-growing need for our Veggie™ brand dairy alternatives in a fast-food concept. This concept utilizes existing cafeterias and requires no Galaxy investment other than educational tools and point of sale material. It is now being marketed through our present sales organization. We have also started licensing bakeries to sell our Lite Bakery™ desserts using our Veggie™ brand butter, milk, sour cream, cream cheese and other Veggie™ ingredients. These phytonutrient-enriched desserts are not just lower in fat and calories, they are higher in protein, contain no lactose and are saturated fat free. With our category growing significantly every year and our dominant share of market, we anticipate reporting strong sales and a much-improved income statement during fiscal 2002."

On Monday, July 9, 2001 at 11:00 a.m. (ET) the Company will host a simultaneous webcast and conference call to discuss operating results and recent corporate developments. The Company's Chairman, CEO and President Angelo Morini and Acting Chief Financial Officer Cindy Hunter will be on the call.

The live webcast can be accessed by logging onto www.galaxyfoods.com at 11:00a.m. (ET) on July 9. Participants are requested to log on prior to the call's start time for registering and to download any necessary software. A replay of the audio webcast can be accessed by logging onto Galaxy's website (www.galaxyfoods.com) from July 9 to August 10.

About Galaxy Nutritional Foods
Galaxy Nutritional Foods is the leading producer of health-promoting plant-based dairy and dairy-related alternatives for the retail and foodservice markets. These phytonutrient- enriched products, made from nature's best grains - soy, rice and oats - are low and no fat (no saturated fat and no trans-fatty acids), have no cholesterol, no lactose, are growth hormone and antibiotic free and have more calcium, vitamins and minerals than conventional dairy products. Because they are made with plant proteins, they are more environmentally friendly and economically efficient than dairy products derived solely from animal proteins. Galaxy's products are part of the nutritional or functional foods category, the fastest growing segment of the retail food market. Galaxy brand names include: Veggie™, Nature's Alternative, Galaxy™, Soyco™, Soymage™, Wholesome Valley™, formägg®, Lite Bakery®, Veggie Café™ and Veggie Lite Bakery™. For more information, please visit Galaxy's website at www.galaxyfoods.com.

This press release contains "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, or other factors which may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements which speak only as of the date hereof. The company undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect unanticipated events or developments.