September 6, 1996

United States Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Galaxy Foods Company Definitive Proxy Statement Pursuant
to Section 14(a) of the Securities Exchange Act of 1934

Gentlemen:

Attached for filing is Galaxy Foods Company Definitive Proxy for the Annual
Meeting of Shareholders to be held at the Company's corporate offices on
Wednesday, September 30, 1996.

In connection with this Proxy, the shareholders will be voting to approve the
1996 Stock Plan of the Company. Should the shareholders approve the Plan, the
Company intends to file a Registration Statement to register the new shares
under the Plan. Although Galaxy has not yet determined when such Registration
Statement will be filed, it is the Company's intention to file prior to the
end of calendar 1996.

Sincerely,

/s/ LeAnn H. Davis

LeAnn H. Davis, CPA
Chief Financial Officer

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934

(Amendment No. _______)

__X__ Filed by the Registrant

_____ Filed by a Party other than the Registrant

Check the appropriate box:

_____ Preliminary Proxy Statement

_____ Confidential, for Use of the Comission Only (as permitted
by Rule 14a-6(e)(2))

__X__ Definitive Proxy Statement

_____ Definitive Additional Materials

_____ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

GALAXY FOODS COMPANY, a Delaware corporation
___________________________________________________________

(Name of Registrant as Specified In Its Charter)

___________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the
Registrant)

Payment of Filing Fee (Check the approximate box)

__X__ $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.

_____ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).

_____ Fee computed on table below per Exchange Act Rules 14a-6(i)
(4) and O-11.

1. Title of each class of securities to which transaction
applies:

2. Aggregate number of securities to which transaction
applies:

3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):

4. Proposed maximum aggregate value of transaction:

5. Total fee paid:

__X__ Fee paid previously with preliminary materials.

_____ Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

1. Amount Previously Paid:

2. Form, Schedule or Registration Statement No:

3. Filing Party:

4. Date Filed:

GALAXY FOODS COMPANY
2441 Viscount Row
Orlando, Florida 32809

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MONDAY, SEPTEMBER 30, 1996

To the Shareholders:

The Annual Meeting of Shareholders of Galaxy Foods Company
(the "Company"), will be held Monday, September 30, 1996 at 10:00 a.m.
at the offices of the Company in Orlando, Florida for the following
purposes:

1. To fix the number of directors at four and to elect a
Board of Directors for the ensuing year.

2. To consider and act upon a proposal to to approve the
1996 Stock Plan of the Company.

3. To consider and act upon a proposal to approve the 1996
Amendment and Restatement of the 1991 Non-Employee
Director Stock Option Plan of the Company.

4. To ratify the retention of BDO Seidman as the
Company's independent certified public accountants.

5. To transact such other business as may properly come
before the meeting and any adjournment thereof.

Shareholders of record at the close of business on August 23, 1996
will be entitled to vote at the meeting or any adjournment thereof.

By Order of the Board of Directors

Julie Peterson
Corporate Secretary

Orlando, Florida
August 16, 1996

SHAREHOLDERS ARE REQUESTED TO SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED STAMPED ENVELOPE BY RETURN MAIL. IF YOU ATTEND THE MEETING,
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.

GALAXY FOODS COMPANY
2441 Viscount Row
Orlando, Florida 32809

August 16, 1996

PROXY STATEMENT
FOR
THE ANNUAL MEETING OF SHAREHOLDERS
to be held Monday, September 30, 1996

Proxies in the form enclosed with this proxy statement are
solicited by the Board of Directors of Galaxy Foods Company (the
"Company"), a Delaware corporation, for the use at the Annual Meeting of
Shareholders to be held Monday, September 30th at 10:00 a.m. at the
offices of the Company in Orlando, Florida.

Only shareholders of record as of August 23, 1996 will be entitled
to vote at the meeting and any adjournment thereof. As of August 1, 1996,
54,774,372 shares of Common Stock, par value $.01 per share, of the
Company were issued and outstanding. Each share of Common Stock
outstanding as of the record date will be entitled to one vote, and
shareholders may vote in person or by proxy. Execution of a proxy will not,
in any way, affect a shareholders' right to revoke it by written notice to the
Secretary of the Company at any time before it is exercised or by delivering
a later executed proxy to the Secretary of the Company at any time before
the original proxy is exercised.

All properly executed proxies returned in time to be cast at the
meeting will be voted and, with respect to the election of a Board of
Directors, will be voted as stated below under "Election of Directors". Any
shareholder giving a proxy has the right to withhold authority to vote for
any individual nominee to the Board of Directors by writing that nominee's
name in the space provided on the proxy.

The Board of Directors knows of no other matter to be presented
at the meeting. If any other matter should be presented at the meeting upon
which a vote might be taken, shares represented by all proxies received by
the Board of Directors will be voted with respect thereto in accordance
with the judgment of the persons named as attorneys in the proxies. This
proxy statement and the form of proxy were first mailed to shareholders on
or about August 19, 1996.

In addition to the election of directors, the shareholders will
consider and vote upon proposals to (i) approve the 1996 Stock Plan of the
Company, (ii) approve the 1996 Amendment and Restatement of the 1991
Non-Employee Director Stock Option Plan, (iii) ratify the retention of
BDO Seidman as the Company's independent certified public accountants.
Where a choice has been specified on the proxy with respect to the
foregoing matters, the shares represented by the proxy will be voted in
accordance with the specification, and will be voted FOR if no
specification is indicated.

PRINCIPAL SHAREHOLDERS

The following table sets forth to the knowledge of Management,
each person of entry who is the beneficial owner of more than 5% of the
54,774,372 shares of the Company's Common Stock, $.01 par value
("Common Stock") outstanding as of August 1, 1996, the number of shares
owned by each such person and the percentage of the outstanding shares
represented thereby.
Amount and
Name and Address Nature of Percent of
of Beneficial Owner Beneficial Ownership (1) Class (2)

Angelo S. Morini
2441 Viscount Row
Orlando, Florida 32809 24,429,874 (3) 44.4%

Cede & Co.
Box #20
Bowling Green Station
New York, New York 26,355,230 (4) 47.9%

(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.

(2) The total number of shares outstanding assuming the exercise of all
currently exercisable and vested options and warrants held by all executive
officers, current directors, and holders of 5% or more of the Company's
issued and outstanding Common Stock is 55,025,039 shares. Does not
assume the exercise of any other options or warrants.

(3) Includes options to acquire 141,500 shares of the Company's Common
Stock. All of Mr. Morini's options currently are exercisable at $.50 per
share. The original exercise prices of the options ranged from $2.50 per
share to $3.575 per share. The exercise prices of all Mr. Morini's options
were reduced by the Board of Directors to $.50 per share on August 31,
1993. Options expire as to 50,000 shares on December 4, 1997, and as to
91,500 shares on October 1, 2001. Also includes 5,000 shares owned by
Mr. Morini that are held in a nominee name and 2,000 shares held in joint
tenancy.

(4) Cede & Co. is a share depository used by shareholders to hold stock in
street name. Does not include 5,000 shares beneficially owned by Angelo
S. Morini and held by Cede & Co. in street name.

SHARE OWNERSHIP OF OFFICERS AND DIRECTORS

The following table sets forth, as of August 1, 1996, the number of
shares owned directly, indirectly and beneficially by each executive officer
and each director and director-nominee of the Company, and by all
executive officers and directors as a group:

Amount and
Name and Address Nature of Percent of
of Beneficial Owner Beneficial Ownership (1) Class (2)

Angelo S. Morini
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 24,429,874 (3) 44.4%

Earl G. Tyree
240 North Line Drive
Apopka, Florida 32703 18,000 (4) *

Douglas A. Walsh
607 Tamiami Trail
Ruskin, Florida 33570 18,667 (5) *

Marshall K. Luther
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 124 ,000 (6) *

LeAnn H. Davis
Galaxy Foods Company
2441 Viscount Row
Orlando, Florida 32809 25,100 (7) *

All executive officers and directors
as a group 24,615,641 44.7%

* Less than 1%.

(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.

(2) The total number of shares outstanding assuming the exercise of all
currently exercisable and vested options and warrants held by all executive
officers, directors, and holders of 5% or more of the Company's issued and
outstanding Common Stock is 55,025,039 shares. Does not assume the
exercise of any other options or warrants.

(3) Includes options to acquire 141,500 shares of the Company's Common
Stock. All of Mr. Morini's options currently are exercisable at $.50 per
share. The original exercise prices of the options ranged from $2.50 per
share to $3.575 per share. The exercise prices of all Mr. Morini's options
were reduced by the Board of Directors to $.50 per share on August 31,
1993. Options expire as to 50,000 shares on December 14, 1997, and as to
91,500 shares on October 1, 2001. Also includes 5,000 shares owned by
Mr. Morini that are held in a nominee name and 2,000 shares held in joint
tenancy.

(4) Mr. Tyree, a current member of the Board of Directors, was granted an
option to acquire 15,000 shares of Common Stock on September 11, 1992
for an exercise price of $2.88 per share. This option expires on September
11, 2002. The closing bid price of the Company's Common Stock as
reported on the electronic inter dealer quotation system operated by
Nasdaq, Inc. ("the NASDAQ System") on September 10, 1992 was $2.875

per share. Mr. Tyree was granted an additional option on October 1, 1993
to acquire 1,000 shares of Common Stock at an exercise price of $2.125
per share. This option expires on October 1, 2003. The closing bid price
of the Company's Common Stock as quoted on the NASDAQ System on
September 30, 1993 was $2.00 per share. The exercise price of all of Mr.
Tyree's then existing options was reduced to $2.00 per share on January
31, 1994. The closing bid price of the Company's Common Stock as
quoted on the NASDAQ System on January 28, 1994 was $4.625 per
share. On October 1, 1994, Mr. Tyree was granted an option to acquire
1,000 shares at an exercise price of $2.75 per share. The closing bid price
of the Company's Common Stock as quoted on the NASDAQ System on
September 30, 1994, was $2.875 per share. This option expires on October
1, 2004. On October 1, 1995, Mr. Tyree was granted an option to acquire
1,000 shares at an exercise price of $0.59 per share. The closing bid price
of the Company's Common Stock as quoted on the NASDAQ System on
September 29, 1995, was $0.59375 per share. This option expires on
October 1, 2005. All of Mr. Tyree's options currently are exercisable.

(5) Dr. Walsh, a current member of the Board of Directors, was granted an
option to acquire 15,000 shares of Common Stock on January 31, 1992 for
an exercise price of $3.00 per share. This option expires on January 31,
2002. The closing bid price of the Company's Common Stock as quoted on
the NASDAQ System on January 30, 1992 was $2.50 per share. Dr.
Walsh was granted an additional option on October 1, 1992 to acquire 667
shares of Common Stock at an exercise price of $2.875 per share. This
option expires on October 1, 2002. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on September 30, 1992
was $2.625 per share. The exercise price of all of Dr. Walsh's then
existing options was reduced to $2.00 per share on January 31, 1994. The
closing bid price of the Company's Common Stock as quoted on the
NASDAQ System on January 28, 1994 was $4.625 per share. On October
1, 1994, Dr. Walsh was granted an option to acquire 1,000 shares at an
exercise price of $2.75 per share. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on September 30, 1994,
was $2.875 per share. This option expires on October 1, 2004. On
October 1, 1995, Dr. Walsh was granted an option to acquire 1,000 shares
at an exercise price of $.59 per share. The closing bid price of the
Company's Common Stock as quoted on the NASDAQ System on
September 29, 1995, was $.59375 per share. This option expires on
October 1, 2005. All of Dr. Walsh's options currently are exercisable.

(6) Mr. Luther, a current member of the Company's Board of Directors,
holds warrants to acquire 50,000 shares of Common Stock at a price of
$0.6407 per share. These warrants were granted as compensation for work
per the terms of Mr. Luther's agreement with the Company to serve as
Senior Vice President of Marketing for a term of one year. In addition,
Mr. Luther was granted options to acquire 15,000 shares of the Company's
Common Stock on January 31, 1996, for an exercise price of $.8125 per
share, which option expires on January 31, 2006. The closing bid price of
the Company's Common Stock as listed on the NASDAQ System on
January 30, 1996 was $.7188. All of Mr. Luther's options currently are
exercisable.

(7) Includes options to acquire 15,000 shares of the Company's Common
Stock which were granted to Ms. Davis on December 18, 1995 pursuant to
the Company's 1987 Stock Plan. Such options are exercisable at $0.5156

per share and expire on December 19, 2005. The closing bid price of the
Company's Common Stock as listed on the NASDAQ System on
December 15, 1995 was $0.50. In addition, on May 16, 1996, Ms. Davis
was granted options pursuant to the Company's 1987 Stock Plan to acquire
7,500 shares of the Company's Common Stock for an exercise price of
$1.21 per share. The closing bid price of the Company's Common Stock
as listed on the NASDAQ Quotation System on May 16, 1996 was $1.21.
Ms. Davis has 7,500 options currently exercisable.

PROPOSAL ONE: ELECTION OF DIRECTORS

The directors of the Company are elected annually and hold office until the
next annual meeting of shareholders and until their successors shall have
been elected and qualified. Shares represented by all proxies received by
the Board of Directors and not so marked as to withhold authority to vote
for any individual director or for all directors will be voted (unless one or
more nominees are unable or unwilling to serve) for fixing the number of
directors for the ensuing year at four and for the election of the nominees
named in the following table. The Board of Directors knows of no reason
why any such nominee should be unable or unwilling to serve, but if such
be the case, proxies will be voted for the election of some other person or
for fixing the number of directors at a lesser number.

Officers and Directors

The following table sets forth the current and proposed directors and
executive officers of the Company as of August 1, 1996, and the ages of
and positions with the Company held by each of such persons:

Name Age Positions

Angelo S. Morini (1) 53 Chairman of the Board of
Directors, President, and
Chief Executive Officer
LeAnn H. Davis 26 Chief Financial Officer and
Assistant Secretary
Earl G. Tyree (1) 75 Director
Douglas A. Walsh (1) 51 Director
Marshall K. Luther (1) 43 Director

(1) Nominee for Director. The current directors of the Company are the
sole nominees for election to the Board of Directors for the ensuing year.

Each director is elected to hold office until the next annual meeting of
shareholders and until his successor is chosen and qualified. The officers
of the Company are elected annually at the first Board of Directors meeting
following the annual meeting of shareholders, and hold office until their
respective successors are duly elected and qualified, unless sooner
displaced.

Angelo S. Morini has been President of the Company since its inception
and is the inventor of formagg. He was elected Chairman of the Board of
Directors, President, and Chief Executive Officer in 1987. Between 1974
and 1980, Mr. Morini was the general manager of Galaxy Cheese
Company, which operated as a sole proprietorship until its incorporation in

May 1980. Prior to 1974, he was associated with the Food Service
Division of Pillsbury Company and the Post Division of General Foods
Company. In addition, he worked in Morini Markets, his family-owned
and operated chain of retail grocery stores in the New Castle,
Pennsylvania, area. Mr. Morini received a B.S. degree in Business
Administration from Youngstown State University in 1968.

LeAnn H. Davis, CPA was employed by the Company as the Controller on
December 18, 1995 and on January 18, 1996 was elected Chief Financial
Officer and Assistant Secretary. Prior to joining the Company, Ms. Davis
worked as an senior auditor for Coopers and Lybrand LLP in Orlando,
Florida from 1994 to 1995. From 1992 to 1994, she worked for the public
accounting firm of Pricher and Company in Orlando, Florida as a senior
auditor and tax accountant. Prior to 1992, Ms. Davis worked for Arthur
Andersen LLP as a staff auditor. During her years in public accounting,
Ms. Davis was responsible for coordinating and overseeing audits on a
variety of clients including manufacturing, insurance and pharmaceutical
companies, time-share developers and homeowners associations, as well as
not-for-profit organizations. Ms. Davis earned a B.S. in Business
Administration and a BS in Accounting from Palm Beach Atlantic College
in West Palm Beach, Florida in May 1990 and a Masters in Accounting
from Florida State University, Tallahassee, Florida in August 1991.

Earl G. Tyree has been a director of the Company since September 1992.
From 1980 to 1994, Mr. Tyree served as President of Bruce Novograd
Advertising, Incorporated, a company he co-founded. From 1975 to 1979,
Mr. Tyree was President of the John F. Murray advertising division of
American Home Products Corporation and from 1972 to 1975, Mr. Tyree
served as President of Sterling Drug, Incorporated, whose subsidiaries
included the Bayer Company (Bayer Aspirin), the Charles H. Phillips
Company (Milk of Magnesia), and Glenbrook Laboratories. Mr. Tyree
attended the University of Richmond where he majored in accounting.

Douglas A. Walsh, D.O., has been a director of the Company since January
1992. Dr. Walsh has been a practicing physician since 1970, specializing
in Family Practice and Sports Medicine. From 1984 to present, he has
been affiliated with Family Doctors, a four-physician group located in
Tampa, Florida. From 1971 to 1984, he was the Health Commissioner for
Mahoning County, Ohio, and from 1983 to 1985, he was the Clinic
Commander for the U.S. Air Force 911 Tac Clinic in Pittsburgh,
Pennsylvania. From 1985 to 1988, he was a flight surgeon at Patrick Air
Force Base, Cocoa Beach, Florida. Dr. Walsh's teaching appointments
include Associate Professor of Family Practice (Clinical) at Ohio
University and Clinical Preceptor at the University of Health Sciences,
Kansas City, Missouri. Dr. Walsh received a B.S. degree in Microbiology
from the University of Houston, Houston, Texas, in 1965, and a D.O.
degree from the University of Health Sciences, Kansas City, Missouri, in
1970. Dr. Walsh also serves as a team physician for the Pittsburgh Pirates
and as a consultant for the Atlanta Braves.

Marshall K. Luther was elected to the Board of Directors on January 31,
1996. From 1993 to 1995, Mr. Luther served as Senior Vice President,
Marketing of Tropicana Products, Inc. and from 1975 to 1992, he served in
various marketing positions for General Mills International Restaurants.
Mr. Luther received his B.S. in Engineering from Brown University in
1974 and his M.B.A. in Marketing from the Wharton Graduate School of
Business in 1976.

To the knowledge of the Company, no executive officer or director of the
Company is a party adverse to the Company or has material interest
adverse to the Company in any legal proceeding.

Certain Relationships and Related Party Transactions

On August 11, 1993, the Board of Directors approved the issuance to
Angelo S. Morini of an option to purchase 2,400,000 shares of the
Company's Common Stock for a purchase price of $.50 per share in
consideration for Mr. Morini's past services to the Company, the pledge by
Mr. Morini of all then-current shares owned by Mr. Morini to the
Company's principal lender, J&C, to secure loans made to the Company,
and the subordination of all loans made by Mr. Morini to the Company to
payment of sums due J&C. The Board approved Mr. Morini's payment for
the shares issued upon exercise of the option by way of a promissory note
in favor of the Company, payable in full, without interest, five years from
the date of execution. The promissory note used to pay for the shares would
be secured by a pledge of the shares of Common Stock issued to Mr.
Morini upon exercise of this option. On November 4, 1994, Mr. Morini
exercised this option to purchase the shares and executed in favor of and
delivered to the Company the promissory note in the principal amount of
$1,200,000 evidencing the purchase price of the shares and a stock pledge
and security agreement encumbering such shares to secure such note.

On December 6, 1994, Albert Morini, a former employee of the Company
and the brother of Mr. Angelo Morini, the Company's President and Chief
Executive Officer, acquired 21,121 shares of Common Stock for a price of
$1.625. The purchase price for the shares was offset against certain
obligations of the Company with respect to the payment of severance pay to
Mr. Morini on December 6, 1994. The closing bid price of the Company's
Common Stock as quoted on the NASDAQ System on December 5, 1994
was $1.625 per share. The Company has registered all of such shares.

On August 28, 1995, the Company entered into a one year agreement with
Marshall K. Luther for Mr. Luther to serve in the capacity of Senior Vice
President of Marketing. Mr. Luther will be overseeing marketing of the
Company's product as well as identifying new markets and products. He is
a former senior marketing executive with companies such as Tropicana
Products Inc. and General Mills, Inc. Under the terms of this contract, Mr.
Luther received the right to purchase 50,000 shares of the Company's
Common Stock at a price of $0.6407 per share. The Company has also
agreed to pay a standard broker commission to Mr. Luther for any sales
generated by him. Mr. Luther became a member of the Board of Directors
of the Company on January 31, 1996.

On October 10, 1995, the Company entered into an employment agreement
with Angelo S. Morini. The agreement increases Mr. Morini's base salary
to $250,000 per year from $200,000. Additionally, the agreement details
additional noncash compensation based on the performance of the
Company. The agreement also grants the rights to purchase up to
18,000,000 shares of the Company's Common Stock by Mr. Morini. As of
October 11, 1995, Mr. Morini exercised the option with respect to all
18,000,000 shares of Common Stock. Pursuant to the terms of the
Employment Agreement, Mr. Morini executed in favor of the Company a
balloon promissory note in the principal amount of $11,572,200 to
evidence the purchase price for the shares of Common Stock. The note
bears interest at the rate of seven percent per annum and is due and

payable in full on October 11, 2000, subject to Mr. Morini's option to
extend the note for up to five additional years provided that he pays at least
one-third of the then accrued but unpaid interest, with any remaining
unpaid interest to be added to principal. In order to secure the note, Mr.
Morini executed in favor of the Company a stock pledge and security
agreement pursuant to which Mr. Morini granted the Company a first
priority security interest in all of the shares obtained upon the exercise of
his option. See "Executive Compensation - Employment Agreement with
Chief Executive Officer".

Mr. Morini's brother works for the Company as Vice President of
Marketing.

Compliance with Section 16 (a)
of the Securities Exchange Act of 1934, as amended

Based upon the Company's review of Forms 5 furnished to the Company
with respect to its fiscal year ended March 31, 1996, each of the following
directors, officers or beneficial owners of more than ten percent of the
Company's Common Stock filed a Form 5 reporting previously unreported
transactions which were reportable, or previously unreported holdings
which became reportable, during such fiscal year: Earl G. Tyree, Douglas
A. Walsh and Richard D. Gentile. Each of these directors reported
holdings which became reportable on or before November 10, 1995. All of
the Forms 5 were filed on a timely basis.

Meetings of the Board of Directors and Committees

The Board of Directors met one time during the fiscal year ended
March 31, 1996 and all the Directors were present.

The Board of Directors previously appointed a Compensation and
Benefits Committee to administer the Company's stock plans and make
such recommendations to the Board regarding other compensation and
benefits for employees, consultants and directors of the Company as the
Committee deems advisable. The Committee administers the Company's
1987 Stock Plan, 1991 Non-Employee Director Stock Option Plan and
1991 Employee Stock Purchase Plan. This Committee did not meet during
the fiscal year ended March 31, 1996. As of August 1, 1996, the
Committee was comprised of Messrs. Morini, Tyree and Walsh. On
August 5, 1996, the Board of Directors elected to terminate the
Compensation and Benefits Committee and shall undertake the duties
thereof.

The Board of Directors previously appointed an Audit Committee
to oversee the accounting and financial functions of the Company,
including matters relating to the appointment and activities of the
Company's auditors. The Committee did not meet during fiscal year ended
March 31, 1996. As of August 1, 1996, the Committee was comprised of
Messrs. Morini, Luther and Walsh. On August 5, 1996, the Board of
Directors elected to terminate the Audit Committee and shall undertake the
duties thereof.

The Company does not currently have a standing Nominating
Committee.

Executive Compensation

The following table sets forth the compensation of the Company's Chief
Executive Officer for the fiscal years ended March 31, 1996, 1995, and
1994 (no other executive officer of the Company was compensated in an
amount in excess of $100,000 for any such fiscal years):

Summary Compensation Table

Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Annual Restricted Under- Other
Name and Compen- Stock lying LTI Compen-
Principal Fiscal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs (#) ($) ($)

Angelo S. Morini (1) 1996 227,917 -- 14,704(2) 11,572,200 18,000,000 -- --
Chairman of the 1995 196,999 -- 14,496(3) 1,200,000 2,400,000 -- --
Board of Directors, 1994 192,824 -- 8,257(4) -- -- -- --
President, and Chief
Executive Officer

(1) For the fiscal years ended March 31, 1996, 1995, and 1994, Mr.
Morini was also paid $8,208, $33,577 and $24,535, respectively, for
interest on three loans, aggregating $1,035,652, made to the Company by
Mr. Morini. The interest rates on these loans ranged from 12% to 14% per
annum. These loans were paid in full by June 7, 1995. On October 10,
1995, the Company entered into an employment agreement with Mr.
Morini upon terms and conditions approved by the Board of Directors. In
accordance with the terms of such employment agreement, Mr. Morini was
granted the right to purchase up to 18,000,000 shares of the Company's
Common Stock at a per share price of 110% of the average closing bid
price as reported on the NASDAQ System for the ten trading days
preceding the receipt by the Company of written notice of Mr. Morini's
election to purchase shares. Mr. Morini exercised this option on October
11, 1995, for a price per share of $0.6429 and currently owes $11,572,200
for a note payable to the Company. On August 11, 1993, the Board of
Directors approved the issuance to Angelo S. Morini of an option to
purchase 2,400,000 shares of the Company's Common Stock for a purchase
price of $.50 per share in consideration for Mr. Morini's past services to
the Company, the pledge by Mr. Morini of all of then-current shares owned
by Mr. Morini to the Company's principal lender, J&C Resources, Inc.
("J&C"), to secure loans made to the Company, and the subordination of
all loans made by Mr. Morini to the Company to payment of the sums due
J&C. Mr. Morini exercised this option on November 4, 1994 and currently
owes $1,200,000 for a note payable to the Company. See "Certain
Relationships and Related Party Transactions."

(2) For the fiscal year ended March 31, 1996, the Company paid $9,107 in
lease payments for Mr. Morini's automobile and $5,597 in club dues for
Mr. Morini.

(3) For the fiscal year ended March 31, 1995, the Company paid $9,107 in
lease payments for Mr. Morini's automobile and $5,389 in club dues for
Mr. Morini.

(4) For the fiscal year ended March 31, 1994, the Company paid $8,257 in
lease payments for Mr. Morini's automobile.

The following table sets forth information concerning individual grants of
stock options and freestanding stock appreciation rights ("SARs") made
during the fiscal year ended March 31, 1996, to each of the executive
officers named in the Summary Compensation Table above:

OPTION/SAR GRANTS
For the Fiscal Year Ended March 31, 1996

Individual Grants
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date

Angelo S. Morini(1) 18,000,000 99% $0.6429 8/10/2000

(1) On October 10, 1995, the Company entered into an employment
agreement with Mr. Morini upon terms and conditions approved by the
Board of Directors. In accordance with the terms of such employment
agreement, Mr. Morini was granted the right to purchase up to 18,000,000
shares of the Company's Common Stock at a per share price of 110% of the
average closing bid price as reported on the NASDAQ System for the ten
trading days preceding the receipt by the Company of written notice of Mr.
Morini's election to purchase shares. Mr. Morini exercised this option on
October 11, 1995, for a price per share of $0.6429 and currently owes
$11,572,200 for a note payable to the Company. See "Certain
Relationships and Related Transactions."

The following table sets forth information concerning each exercise of
stock options and freestanding stock appreciation rights during the fiscal
year ended March 31, 1996, by each of the executive officers named in the
Summary of Compensation Table above, and the fiscal year-end value of
unexercised options and SARs:

OPTIONS/SAR EXERCISES
For the Fiscal Year Ended March 31, 1996

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Value
Acquired Realized
Name on Exercise(#) ($) Exercisable/Unexer Exercisable/Unexer

Angelo S. Morini (1) 18,000,000 11,572,200 141,500 0 221,094 (2) 0

(2) The value of the unexercised shares at March 31, 1996 is based on the
difference between the closing sales price of the Company's Common
Stock of $2.0625 on March 29, 1996 and an exercise price of $0.50.

Compensation of Directors

Each non-employee director who served on the Board of Directors during
the last fiscal year received a fee plus expenses for his services. The fee
was $500 per meeting for fiscal years after March 31, 1993.

Additionally, each non-employee director of the Company is entitled to
receive on October 1 of each year, options to purchase a number of shares
of Common Stock equal to (i) 1,000 shares, if such director served for a
full year prior to the October 1 anniversary date, or (ii) a pro rated amount
equal to 83.33 shares for each full month served during the year prior to
such anniversary date, if such director did not serve for a full year prior to
the anniversary date. Such options are granted pursuant to the Company's
1991 Non-Employee Director Stock Option Plan (the "1991 Plan") which
was adopted by the Board of Directors on October 1, 1991, and approved
by the shareholders of the Company on January 31, 1992. As originally
adopted, 33,500 shares of Common Stock were reserved for issuance under
the 1991 Plan. Of these 33,500 shares, Dr. Richard Gentile, a former
director, and Mr. Earl Tyree and Dr. Douglas Walsh, current directors,
each received options on each of October 1, 1994, and October 1, 1995, to
purchase 1,000 shares of Common Stock. The remaining 27,500 shares
are available for issuance pursuant to options granted under the 1991 Plan.

Employment Agreement of Chief Executive Officer

As of October 10, 1995, the Company entered into an
Employment Agreement (the "Agreement") with Angelo S. Morini, the
Company's President and Chief Executive Officer. The Agreement has a
term of five years and provides for an annual base salary of $250,000.
Additionally, Mr. Morini will receive an annual bonus in an amount equal
to five percent of the Company's pre-tax net income for book purposes, as
determined by the Company's independent certified public accounting firm.
Other material provisions of the Agreement are as follows:

1. Mr. Morini shall have the right to purchase (the "Purchase Rights") up
to 18,000,000 shares of the Company's Common Stock, at a per share price
of 110% of the average closing bid price as reported on the NASDAQ System for
the ten trading days preceding the receipt by the Company of written notice
of Mr. Morini's election to purchase shares. The purchase price for such
shares may be evidenced by a promissory note executed by Mr. Morini in favor
of the Company, which note shall bear interest at a

rate at least equal to the applicable federal rate established by the United
States Internal Revenue Service. The promissory note shall have a term of
five years. Mr. Morini shall have the option to extend the note for up to
five additional years provided that he pays at least one-third of the then
accrued but unpaid interest, with any remaining unpaid interest to be
added to principal. Any such promissory note shall be secured by a first
priority security interest in all shares purchased by Mr. Morini in
conjunction with the exercise of the Purchase Rights as evidenced by a
stock pledge and security agreement executed by Mr. Morini in favor of the
Company.

2. Mr. Morini shall be granted certain options to purchase Common Stock
upon the Company's achievement of each of the following milestone
events:

Milestone Event Number of Options Granted
Reaching break-even for a 1,000,000
calendar quarter

Annual net operating income 1,000,000
of $1,000,000 or more

Each increment of $1,000,000 1,000,000
of annual net operating income
in excess of $1,000,000

Each of the options granted as aforesaid shall have a term of five years
from the date granted and shall be exercisable in whole or in part upon the
delivery by Mr. Morini to the Company of written notice of exercise. The
exercise price for each of the options shall be the closing bid price of the
Company's Common Stock on the trading day immediately preceding the
Company's achievement of the related milestone event as established by the
NASDAQ System. The exercise price for any such option shares may be
evidenced by a promissory note executed by Mr. Morini in favor of the
Company and bearing interest at a rate at least equal to the applicable
federal rate established by the United States Internal Revenue Service. The
promissory note shall have a term of five years. Mr. Morini shall have the
option to extend the note for up to five additional years provided that he
pays at least one-third of the then accrued but unpaid interest, with any
remaining unpaid interest to be added to principal. Any such promissory
note shall be secured by a first priority security interest in all shares
purchased by Mr. Morini in conjunction with the exercise of the options as
evidenced by a stock pledge and security agreement executed by Mr.
Morini in favor of the Company.

3. The Agreement is terminable by Mr. Morini upon the delivery of
written notice of termination in the event that a majority of the Company's
Board of Directors is at any time comprised of persons for whom Mr.
Morini did not vote in his capacity as a director or a shareholder of the
Company (a "Change of Control"). If Mr. Morini abstains from voting for
any person as a director, such abstention shall be deemed to be an
affirmative vote by Mr. Morini for such person as a director.

4. If the Agreement is terminated, regardless of the reason for such
termination, Mr. Morini shall be entitled to retain all unexercised Purchase
Rights and options granted under the Agreement and all shares of
Common Stock issued in connection with the exercise of such Purchase

Rights and options, and shall receive all earned but unpaid base salary
through the effective date of termination and all accrued but unpaid bonuses
for the fiscal year(s) ending prior to the effective date of
termination. Additionally, in the event that Mr. Morini's employment is
terminated without cause or due to his death, total disability or legal
incompetence, or if Mr. Morini terminates his employment upon a change
of control, the Company shall pay to Mr. Morini or his estate severance
pay equal to three times the amount of Mr. Morini's annual base salary
(before deductions for withholding, employment and unemployment taxes),
and a bonus for the year of termination and the following two years equal
to the average of the two bonuses paid to Mr. Morini under the Agreement.

5. In the event of a change of control, Mr. Morini may, at any time
thereafter, require that the Company purchase up to 1,638,564 shares of his
Common Stock at a purchase price of $.50 per share, subject to adjustment
for any increase or decrease in the number of outstanding shares of the
Company's Common Stock or in the event that the Common Stock is
changed into or exchanged for a different number or class or kind of shares
or securities of the Company, by reason of merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate
structure or the like.

6. The Company extended the maturity date of that certain Promissory
Note dated as of November 4, 1994, executed by Mr. Morini in favor of the
Company in the principal amount of $1,200,000 in conjunction with his
exercise of options previously granted by the Company for two additional
years until November 4, 2001.

7. Mr. Morini has agreed that in the event he voluntarily terminates his
employment with the Company or if he is terminated for "cause" (as
defined in the Agreement), he will not compete with the Company for a
period of one year following the date of termination of his employment
with the Company, whether as an employee, officer, director, partner,
shareholder, consultant or independent contractor in any business
substantially similar to that conducted by the Company within those areas
in the United States in which the Company is doing business as of the date
of termination.

As of October 11, 1995, Mr. Morini exercised the Purchase Rights with
respect to all 18,000,000 shares of Common Stock subject thereto (the
"Purchase Right Shares"). In connection with the exercise of such
Purchase Rights, Mr. Morini executed in favor of the Company a balloon
promissory note (the "Note") in the principal amount of $11,572,200.
The Note bears interest at the rate of seven percent per annum and is due
and payable in full on October 11, 2000, subject to Mr. Morini's option to
extend the Note for up to five additional years provided that he pays at
least one-third of the then accrued but unpaid interest, with any remaining
unpaid interest to be added to principal. In order to secure the Note, Mr.
Morini executed in favor of the Company a stock pledge and security
agreement pursuant to which Mr. Morini granted the Company a first
priority security interest in all of the Purchase Right Shares.

PROPOSAL TWO: TO CONSIDER AND ACT UPON A
PROPOSAL TO APPROVE THE 1996
STOCK PLAN OF THE COMPANY

On August 6, 1996, the Board of Directors of the Company adopted,
effective September 30, 1996, the 1996 Stock Plan (the "1996 Plan"), and
authorized the reservation of 250,000 shares of Common Stock for
issuance thereunder, all subject to shareholder approval. The 1996 Plan
was adopted to provide incentives to employees, officers, certain directors,
and consultants of the Company by granting certain rights to acquire
shares of Common Stock.

Description of the 1996 Stock Plan

The 1996 Plan provides that options, awards and rights to purchase Common
Stock may be granted to employees, officers, certain directors, and
consultants of the Company. As of August 6, 1996, had the 1996 Plan been
effective, approximately seventy six employees including officers and
employee-directors), two non-employee directors, and no consultants would
have been eligible to participate in the 1996 Plan.

Options granted under the 1996 Plan may be either (i) options
intended to constitute incentive stock options ("ISOs") under the Internal
Revenue Code of 1986, as amended (the "Code"), or non-qualified stock
options ("NQSOs"). ISOs may be granted under the Plan to employees and
officers of the Company. NQSOs may be granted to consultants, directors
(whether or not they are employees), employees or officers of the
Company. Awards of stock may be made to consultants, directors,
employees or officers of the Company and direct purchases of stock may be
made by such persons.

The 1996 Plan is administered by the Board of Directors or a
committee appointed by the Board of Directors of at least two of its
members (the "Committee"), which is authorized to determine the
individuals who receive options and awards and who may make direct
purchases of Common Stock, the number of shares subject to each option,
award and purchase, whether the options shall be exercisable in full at the
time of grant or in installments, and other pertinent terms and provisions,
including the exercise price (which, in the case of ISOs may not be less
than 110% of the fair market value of the shares of Common Stock on the
day of grant, and, in the case of NQSOs, may not be less than the
minimum legal consideration required therefor under the laws of Delaware).
The Committee specifies at the time of the grant of an option
under the 1996 Plan whether or not such option is intended to be an ISO
under the Code. The Committee members are ineligible to receive options
or awards under the 1996 Plan. There is no limitation on the number of
shares which may be optioned to any one person. The term of each option
will be for a period not exceeding ten years from the date of grant (or five
years in the case of ISOs granted to an employee owning stock possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company). Options may not be assigned or transferred except
by will or by operation of the laws of descent and distribution. The 1996
Plan contains terms providing for the exercise of options by or on behalf of
former and deceased employees, respectively.

The Committee has the right to accelerate the date of exercise of
any installment of any option granted under the 1996 Plan. The 1996 Plan
contains, in addition to the provisions discussed above, the provisions
necessary to comply with the requirements of Section 422 of the Code that
the aggregate fair market value (determined at the time an ISO is granted)
of Common Stock for which ISOs granted to any employee are exercisable
for the first time by such employee during any calendar year (under all
stock option plans of the Company) exceed $100,000.

The Board of Directors, may from time to time adopt amendments
to the 1996 Plan, certain of which are subject to shareholder approval, and
may terminate the 1996 Plan, at any time (although such action shall not
affect options previously granted).

The number of option shares granted is subject to adjustment in
the event of a stock dividend, recapitalization, stock split, merger or
similar transaction. Any shares subject to an option which for any reason
expires, terminates or is surrendered unexercised may again be available
for option grant under the 1996 Plan. Unless terminated sooner, the 1996
Plan will terminate on September 29, 2006.

Benefits to eligible participants in the 1996 Plan are not determinable as
of the date hereof. The 1996 Plan does not require, nor
does the Company contemplate, any specific allocation of benefits or
amounts to any individual or discrete group (i.e., executive officers, non-
executive directors, or non-executive officer employees).

As of August 6, 1996, the market value of the shares which were
reserved for issuance under the 1996 Plan, subject to shareholder approval,
was $351,575, based on the closing bid quotation on such date of the
Common Stock as reported on the NASDAQ System. Upon request, the
Company will provide a copy of the 1996 Plan to any shareholder.

Federal Income Tax Consequences

A. Incentive Stock Options. The following general rules are
applicable to holders of ISOs and to the Company for Federal income tax
purposes under existing law:

1. In general, no taxable income results to the
optionee upon the grant of an ISO or upon the issuance of shares to him
upon the exercise of the ISO, and no tax deduction is allowed to the
Company upon either grant or exercise of an ISO.

2. If shares acquired upon exercise of an ISO are
not disposed of within (i) two years following the date the option was
granted or (ii) one year following the date the shares are transferred to the
optionee pursuant to the ISO exercise, the difference between the amount
realized on any subsequent disposition of the shares and the exercise price
will generally be treated as capital gain or loss to the optionee.

3. If shares acquired upon exercise of an ISO are
disposed of before the expiration of one or both of the requisite holding
periods (a "Disqualifying Disposition"), then in most cases the lesser of (i)
any excess of the fair market value of the shares at the time of exercise of

the ISO over the exercise price or (ii) the actual gain on disposition will be
treated as compensation to the optionee and will be taxed as ordinary
income in the year of such disposition.

4. In any year that an optionee recognizes
compensation income on a Disqualifying Disposition of stock acquired by
exercising an ISO, the Company generally will be entitled to a
corresponding deduction for income tax purposes in an amount equal to the
amount of ordinary income recognized, if any, by the optionee.

5. Any excess of the amount realized by the
optionee as the result of a Disqualifying Disposition over the sum of (i) the
exercise price and (ii) the amount of ordinary income recognized under the
above rules will be treated as capital gain.

6. Capital Gain or loss recognized on a disposition
of shares will be long-term capital gain or loss if the optionee's holding
period for the shares exceeds one year.

7. In addition to the tax consequences described
above, the exercise of ISOs may result in a further "minimum tax" under
the Code. The Code provides that an "alternative minimum tax" (ranging from
26% to 28%) will be applied against a taxable base which is equal to
"alternative minimum taxable income," reduced by a statutory exemption.
In general, the amount by which the value of the Common Stock received
upon exercise of the ISO exceeds the exercise price is included in the
optionee's alternative minimum taxable income. A taxpayer is required to
pay the higher of his regular tax liability or the alternative minimum tax.
A taxpayer who pays alternative minimum tax attributable to the exercise
of an ISO may be entitled to a tax credit against his regular tax liability in
later years.

B. Non-Qualified Stock Options. The following general
rules are applicable to holders of NQSOs and to the Company for Federal
income tax purposes under existing law:

1. The optionee generally does not realize any
taxable income upon the grant of an option, and the Company is not
allowed a business expense deduction by reason of such grant.

2. The optionee generally will recognize ordinary
compensation income at the time of exercise of the option in an amount
equal to the excess, if any, of the fair market value of the shares on the date
of exercise over the exercise price. In accordance with the regulations
under the Code and applicable state law, the Company will require
employees to pay to the Company an amount sufficient to satisfy
withholding taxes in respect of such compensation income at the time of
the exercise of the option. If the Company withholds stock to satisfy this
withholding tax obligation, instead of cash, the optionee nonetheless will
be required to include in income the compensation income attributable to
the stock withheld.

3. When the optionee sells the shares, he generally
will recognize a capital gain or loss in an amount equal to the difference
between the amount realized upon the sale of the shares and his basis in
the shares (generally, the exercise price plus the amount taxed to the
optionee as compensation income). If the optionee's holding period for the

shares exceeds one year, such gain or loss will be a long-term capital gain
or loss.

4. The Company will generally be entitled to a tax
deduction in the year in which, and in an amount equal to, ordinary
compensation income is recognized by the optionee.

C. Special Rules for Restricted Stock. Officers, directors
and 10% shareholders of the Company may in some instances acquire
Common Stock subject to special rules under Section 83 of the Code
because of certain securities laws restrictions on resale ("Restricted
Stock"). If an optionee acquires Restricted Stock, the amount included in
compensation income (in the case of a NQSO, or of an ISO if a
Disqualifying Disposition of such stock is made) or in alternative
minimum taxable income (in the case of an ISO) generally will be
determined as of some later date, not more than six months after exercise,
and will equal the difference between the amount paid for the Restricted
Stock and its fair market value at that time, unless the optionee files a
timely election under Section 83(b) of the Code electing to determine the
amount of income at the time of exercise.

D. Awards and Purchases. Persons receiving Common
Stock pursuant to an Award or Purchase generally will recognize ordinary
compensation income equal to the fair market value of the shares received,
in the case of an Award, or the excess of the fair market value of the shares
over the purchase price, in the case of a Purchase. The Company will
generally be entitled to a corresponding deduction. When Common Stock
acquired pursuant to an Award or Purchase is sold, the seller generally will
recognize capital gain or loss equal to the difference between the amount
realized upon the sale of shares and his or her basis in the shares
(generally, the fair market value of the shares when acquired) which will
be short- or long-term capital gain or loss depending upon the seller's
holding period. Special rules apply if the purchase price (in the case of a
Purchase) is paid be delivering shares of Common Stock, or if the stock
acquired pursuant to an Award or Purchase is Restricted Stock (as
described above).

E. Capital Gains and Losses. Although capital gain is
generally subject to Federal income tax at the same rates as ordinary
income, the maximum rate of tax on "net capital gain" (i.e., the excess of
net long-term capital gain over net short-term capital loss) is 28%, whereas
the maximum rate of tax on ordinary, income and net short-term capital
gain is currently 39.6%. In addition, capital losses may be used to offset an
equal amount of capital gains, whereas at most, $3,000 of net capital loss
may be deducted against ordinary income each year.

F. ERISA. The 1996 Plan is not an employee benefit plan
which is subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended, and the provisions of Section 401(a) of
the Code are not applicable to the 1996 Plan.

VOTING

ASSUMING THE PRESENCE OF A QUORUM, APPROVAL OF THE 1996 PLAN WILL REQUIRE
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
OF THE COMPANY REPRESENTED IN PERSON OR BY PROXY AND ENTITLED TO VOTE AT THE
ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE 1996 PLAN.

PROPOSAL THREE: TO CONSIDER AND ACT UPON A
PROPOSAL TO APPROVE THE 1996
AMENDMENT AND RESTATEMENT
OF THE 1991 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN OF
THE COMPANY.

On October 1, 1991, the Board of Directors adopted the
Company's 1991 Non-Employee Director Stock Option Plan (the "Original
Plan"). The shareholders approved the Original Plan on January 31, 1992.
On August 6, 1996, effective September 30, 1996, the Board of Directors
adopted The 1996 Amendment and Restatement of The 1991 Non-
Employee Director Plan (the "1996 Restated Director Plan"), subject to
shareholder approval, in order to amend certain terms of the Original Plan.
The Original Plan was adopted to provide incentives to outside directors of
the Company through initial and periodic grants of stock options in
consideration of services rendered to the Company.

Description of the 1996 Amendment and Restatement
of The 1991 Non-Employee Director Stock Option Plan

The 1996 Restated Director Plan provides that options to purchase
Common Stock of the Company be granted to non-employee directors of
the Company, and authorizes the issuance of a maximum of 33,500 shares
of Common Stock, subject to adjustment for capital changes.

The 1996 Restated Director Plan shall be administered by the
Board of Directors (for Plan purposes, the "Committee"). Under the 1996
Restated Director Plan, subject to shareholder approval, each eligible non-
employee director shall receive on October 1, 1996 (the "Approval Date"),
in consideration for his service as a director of the Company during the
prior year, an option to purchase the number of shares of the Company's
Common Stock equal to the number of full months he has served on the
Board of Directors as of the Approval Date, divided by 12 and multiplied
by 2,000 and, if the product is a fraction, rounded to the next highest whole
number (the "Initial Grant"). On each anniversary of the Approval Date,
until the expiration of the 1996 Restated Director Plan on September 29,
2001, each eligible director who has served for an entire year prior to such
anniversary is automatically granted an option to purchase an additional
2,000 shares of the Company's Common Stock (each, a "Periodic Grant").
For each person who is elected to the Board of Directors after the Approval
Date and on an anniversary of the Approval Date following his election has
served for less than an entire year, the number of option shares granted to
him on such anniversary is prorated depending on how long he has served
on the Board during the last year.

The exercise price for options granted under the 1996 Restated
Director Plan shall be equal to the fair market value per share of Common
Stock on the date of grant. Options granted under the 1996 Restated
Director Plan shall be exercisable in full at the time of grant. There is no
limitation on the cumulative number of option shares which may be
granted to any one person, however, in no event shall the number of

options granted to any one person in a calendar year under the Plan exceed
2,000. The term of each option will be for a period not exceeding ten years
from the date of grant, unless a lesser period is specified by the Committee
at the time of the grant. If an optionee ceases to be a director of the
Company other than by reason of death, he may exercise his option as to all
or any of the shares covered thereby within the original term of such
option. In the event an optionee dies, the 1996 Restated Director Plan
provides for the exercise of an option on behalf of the deceased director.
Options may not be assigned or transferred except by will or by operation
of the laws of descent and distribution.

Option holders are protected against dilution in the event of a
stock dividend, recapitalization, stock split, merger or similar transaction.
The Board of Directors may from time to time adopt amendments, certain
of which are subject to shareholder approval, and may terminate the 1996
Restated Director Plan at any time (although such action shall not affect
options previously granted). Any shares subject to an option which for any
reason expires or terminates unexercised may again be available for option
grants under the 1996 Restated Director Plan. Unless terminated sooner,
the 1996 Restated Director Plan will terminate on September 29, 2001.

At the time the options are exercised, the Common Stock account
of the Corporation will be increased by the par value ($.01 per share) of the
shares sold and the remaining portion of the proceeds will be credited to
additional paid-in capital.

Pursuant to the Original Plan, during the fiscal year ended March
31, 1996, options to purchase 1,000 shares of Common Stock were granted
to each then current, eligible non-employee director of the Company,
namely, Dr. Richard Gentile (a former director), Mr. Earl Tyree and Dr.
Douglas Walsh, all at an exercise price of $0.59 per share. Provided that
the 1996 Restated Director Plan is approved by the shareholders at the
Annual Meeting, options under the 1996 Restated Director Plan to
purchase 2,000 shares of Common Stock will be granted on October 1,
1996, to each of Mr. Earl Tyree and Dr. Douglas Walsh. Mr. Marshall
Luther, a current director and Senior Vice President of Marketing of the
Company, was ineligible to participate in the Original Plan until after
August 15, 1996, the date on which he will cease serving as Senior Vice
President of Marketing. As of October 1, 1996, Mr. Luther will have
served one full month as a non-employee director and, based on the Initial
Grant calculation set forth above, will receive options to purchase 167
shares of Common Stock calculated at the rate of equal to the number of
full months he served on the Board of Directors as of the Approval Date,
one, divided by 12 and multiplied by 2,000 and, if the product is a fraction,
rounded to the next highest whole number. See "Certain Relationships and
Related Party Transaction."

As of August 6, 1996, the market value of all of the shares of
Common Stock underlying the options under the 1996 Restated Director
Plan was $47,111.05, based on the closing bid quotation of the Common
Stock on such date as reported on the NASDAQ System. Additionally, as
of August 6, 1996, a total of 6,000 options having an aggregate market
value on such date of $8,437.80 had been issued and are outstanding under
the 1996 Restated Director Plan. Upon request, the Company will provide
a copy of the 1996 Plan to any shareholder.

Amendment of Material Terms
of 1991 Non-Employee Director Stock Option Plan

The 1996 Restated Director Plan materially amends, among other
items, the following terms and conditions of the Original Plan:

The expiration date of the Original Plan as amended and
restated was extended from September 30, 1996, to September 30,
2001.

Generally, the Board of Directors, rather than a committee
comprised of certain members of the Board of Directors, will administer
the 1996 Restated Director Plan.

Various defined terms (i.e., "Non-Employee Director") and minor
modifications and clarifications were incorporated into the 1996 Restated
Director Plan in order to reflect revisions to applicable regulations [Rule
16(b)] promulgated under the Securities Exchange Act of 1934, as
amended.

The share basis for making Initial Grants and Periodic Grants
under the 1996 Restated Director Plan was increased from 1,000 shares to
2,000 shares.

Federal Income Tax Consequences

An option granted under the 1996 Restated Director Plan is taxed
in the same manner as a NQSO issued under the 1996 Plan as described
above. In general, the optionee recognizes ordinary compensation income
at the time of exercise of the option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over the
exercise price, and the Company will be entitled to a tax deduction in the
year in which compensation income is recognized by the optionee. Under
certain circumstances, however, compensation income may be measured
and recognized at some later date, not to exceed six months after the date
of exercise.

VOTING

ASSUMING THE PRESENCE OF A QUORUM, APPROVAL OF THE 1996 RESTATED DIRECTOR
PLAN WILL REQUIRE THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING
SHARES OF COMMON STOCK OF THE COMPANY REPRESENTED IN PERSON OR BY PROXY AND
ENTITLED TO VOTE AT THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE APPROVAL OF THE 1996 RESTATED DIRECTOR PLAN.

PROPOSAL FOUR: TO RATIFY THE RETENTION OF BDO
SEIDMAN AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors has selected the firm of BDO Seidman as
the Company's independent certified public accountants for the current
fiscal year. BDO Seidman has served as the Company's independent
public accountants for each of the last three years. It is expected that a
representative of BDO Seidman will be present during the Annual
Meeting. The representative will have an opportunity to make a statement
if he or she so desires and is expected to be available to respond to
appropriate questions from shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE RETENTION OF BDO SEIDMAN
AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE CURRENT FISCAL YEAR.

SHAREHOLDER PROPOSALS

It is anticipated that the Company's next annual meeting of
shareholders will be held in September 1997, and proposals of
shareholders intended for inclusion in the proxy statement will be
furnished to all shareholdres entitled to vote at the next annual meeting of
the Company, and must be received at the Company's principal executive
offices no later than June 30, 1997, or a reasonable time before the
solicitation is made. It is suggested that proponents submit their proposals
by Certified Mail-Return Receipt Requested.

OTHER BUSINESS

The Board of Directors knows of no business which will be
presented for consideration at the meeting other than stated above. If any
other business should come before the meeting, votes may be cast pursuant
to proxies in respect to any such business in the best judgment of the
person or persons acting under the proxies.

EXPENSES AND SOLICITATION

The cost of solicitation of proxies will be borne by the Company.
In addition to soliciting shareholders by mail of by its regular employees,
the Company may request banks and brokers to solicit their customers who
have stock of the Company registered in the name of a nominee and, if so,
will reimburse such banks and brokers for their reasonable out-of-pocket
costs. Solicitation by officers and employees of the Company, none of
whom will receive additional compensation therefor, may also be made of
some shareholders in person or by mail, telephone or telegraph, following
the original solicitation.

GALAXY FOODS COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
MONDAY, SEPTEMBER 30, 1996

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Angelo S. Morini with full power of
substitution, the proxies of the undersigned to vote all shares of Common
Stock of Galaxy Foods Company (the "Company") which the undersigned
is entitled to vote at the Annual Meeting of Shareholders of the Company
to be held on Monday, September 30, 1996, at 10:00 a.m., local time, at
the offices of the Company located at Orlando Central Park, 2441 Viscount
Row, Orlando, Florida, and at any adjournments or postponements thereof,
with the same force and effect as the undersigned might or could do if
personally present thereof.

1. ELECTION OF DIRECTORS [ ] FOR all nominees below
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(Instruction: To withhold authority to vote for any nominee, draw a
line through such nominee's name.)
Marshall K. Luther, Angelo S. Morini, Earl G. Tyree, Douglas A. Walsh, MD.

2. TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE THE 1996 STOCK PLAN OF THE
COMPANY (The Board of Directors recommends a vote FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN

(continued on the other side)
(continued from other side)

3. TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE THE 1996 AMENDMENT AND
RESTATEMENT OF THE 1991 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN OF THE
COMPANY (The Board of Directors recommends a vote FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. TO RATIFY THE RETENTION OF BDO SEIDMAN AS THE COMPANY'S INDEPENENT
CERTIFIED PUBLIC ACCOUNTANTS (The Board of Directors recommends a vote FOR)
[ ] FOR [ ] AGAINST [ ] ABSTAIN

5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
AND ANY ADJOURNMENT THEREOF

Signature:
Signature:
Date:

This Proxy when properly executed will
be voted in the manner directed herein by
the undersigned stockholder. If no
direction is made, this proxy will be voted
FOR proposal 1 and FOR proposal 2. If
signing as an attorney, executor, trustee
or guardian, please give your full title as
such. If stock is held jointly, each owner
should sign.

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE